3 Paths to Finding Value in Stocks by John Huber

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3 Paths to Finding Value in Stocks

John Huber Brief Bio
• Founder, Portfolio Manager at Saber Capital Management, LLC
• Author of the Blog BaseHitInvesting.com, where I discuss my investing ideas
• Saber is a Registered Investment Advisor (RIA) that manages separate accounts for clients using a value investing approach
• Saber emphasizes aligned incentives (John Huber invests alongside clients)

Saber’s strategy is to make investments in high-quality, well-managed businesses at attractive prices.
Qualities I Look For:
• Businesses I Understand
• Growing Intrinsic Value (High ROIC)
• Durability (Predictable Cash Flow)
• Shareholder-friendly Management
• Margin of Safety (Value)

Three ways to locate value in stocks:
1. Information Advantage
2. Analytical Advantage (Thinking Differently)
3. Time Arbitrage

More details in http://sabercapitalmgt.com/wp-content/up...a-2016.pdf

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John Huber has shaped and corrected many of my heuristics over the years. There are still a lot (of heuristics) left that I hope to correct in the future, as capital gets more while the time to grow it gets less. As Lao Tzu said that it astutely two thousand years ago - When the student is ready, the teacher will appear.

Investment Evolution or Flexible Tactics?

I think people overstate Buffett’s “evolution” and assume he once bought cheap stocks and now only buys quality stocks.

Not all of these investments were big winners. My point in highlighting these is just to show that Buffett doesn’t box himself into any style box. He simply wants to find investments that will grow his capital in a safe manner.

When I started Saber a dozen years ago, great quality companies (today what are commonly called compounders) were all reasonably priced; some were downright cheap. Apple and Microsoft traded at 10 P/E at times.

Next Decade’s Opportunities: In short, I think they’ll come from special situations, bargains, and high quality (even if lower growth) companies that spit off cash and are buying back shares.

Today the opportunities are more in the camp of the 15% FCF yield example I outlined above. Cheap stocks that are using their cash to buy back shares. If we get even a small amount of growth, that’s an added bonus. And we don’t need the market to increase the valuation if we buy at such a low starting multiple.

The next great investments may come from high quality, but will not all come from the stocks that are today defined this way. I think a flexible mindset is required.

https://basehitinvesting.substack.com/p/...r-flexible