Gustavo Ballvé on July 4th, 2013
Corporate Governance, Corporate Strategy, Food for thought, Home, Investment Themes, Mental models, Portfolio Management, Quotes, Risk management

Joseph Calhoun of Alhambra Capital in the US reminds us of the basics of Value Investing, in a quick post with some funny moments (see below). Worth the read if only for the laugh.

The follow-up regards Zynga, profiled here for the first time on Dec. 31st 2009. After that initial post I’ve come back to discuss the company before and after its IPO. I’ve also done the same with Groupon after a larger, initial post (you can see all the posts with this link). Zynga has just followed the path of Groupon and the founder CEO has left the post after a collapse in share prices (Fred Wilson also had an interesting post about it). In Zynga’s case, the company is bringing in a senior executive at Microsoft who was responsible for the Xbox360. Another striking difference is that . Both companies once represented highly-innovative technologies and/or services that created business models that seemed very interesting. Both models still seem very interesting, although both were over-hyped into the “disruptive innovation” realm to which they clearly don’t belong. Both companies’ IPO processes also suffered from excessively-optimistic assumptions, below-average corporate governance and strong leadership figures that, when the difficulties arose, became catalyzing figures for a lot of negative press – no doubt some of it deserved, some not so much.

I will always keep an eye out for innovative technologies – reading about it is both hobby and necessity, and it isn’t in any way restricted to IT/online – but I will also always be extremely careful not to get carried away if considering investing in these types of companies. It is easy to over-estimate one’s ability to “understand” where innovative technologies are going and, even if one is right, then it is easy to ignore innovations in adjacent industries and/or companies.

As promised, the best moments of Joseph Calhoun’s post:

“Lots of strategies look good on paper but if the only way to make them work is to find a broker willing to work for free, well then good luck with that.”

“(…)  momentum always seems to be something that exists in a stock right up to the moment I process a buy order.”

“One day Apple is cool and the next it’s getting mocked in commercials as unhip. That’s probably another reason I’m not a momentum investor – I haven’t been cool for a long time (…)”.

“The investing game, like most contact sports, is won on defense.”

Finally, the best one:

“Value investing to me is not a style or method; it is just investing.”

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