market folly

We're posting up notes from the 2014 Value Investing Congress in New York. Next up is Guy Spier of Aquamarine Fund who presented long POSCO.  Guy also recently released a book: The Education of a Value Investor.


Guy Spier's Value Investing Congress Presentation

The investment process:

Recognize that you're not Buffett and that you're not rational. Recognize that you can't have all the knowledge. Recognize that most "data" is noise (keeps Bberg off). Recognize own biases (presenting an idea leads to a commitment, also vividness, authority, etc.)

Build a more robust investing process: don't look at the stock price, don't buy what's sold, don't talk to management, gather research in the right order (from QnA: read hte SEC docs first because they are legal), check with others, don't trade, and if a stock drops after you buy it, keep it for two years, don't talk about your holdings. 


The idea: POSCO 

Saw it in several places so that was a check (Manual of Ideas, Munger's DJCO 13-F, Corner of Berkshire and Fairfax, SumZero competition)

Started looking at the industry: looks like it's doing poorly

Since 2004, the NI margins of the major players have been declining. Now only POSCO and Bao are above 0%.

Some irrational competition due to employment goals by various governments

Ore is getting cheaper and is very abundant in part due to new discoveries and in part due to Chinese slowdown

POSCO appears to be a low cost producer

POSCO has own port and a very large complex in Korea

POSCO has a new steel-making method that does not require coking coal (but the other ingredients matter, it's like cooking)

Solid financial performance over 20 years.  Thinks 2-3x potential

Catalysts: new CEO, divestitures, new India operation with the new technology  

 Q&A: Sold CHK because it might not be the low cost producer, not smart enough to judge


Be sure to check out Spier's new book: The Education of a Value Investor.


And also make sure to read the rest of the Value Investing Congress presentations here.