Bireme Capital
  • Home
  • Blog
  • CIO Corner
  • In the news
  • About us
  • Contact
  • Store

Buying Facebook (again)

3/11/2022

 
We took a substantial position in Facebook this week after it fell to less than $200 per share. 

It is not our first go-round with the company. We originally bought the stock in 2018. At that time, we thought it was strange that such a high-quality company had fallen to less than 20x earnings. In our 4Q18 letter, we wrote:
We have watched Facebook from afar for some time. We have long been impressed at the pace they have grown the business, with revenues increasing from $5 billion to about $55 billion over the past six years. That growth has fallen to the bottom line as well, with profits multiplying from $1 billion to $20 billion.

For much of that time, Facebook was richly rewarded for this growth, trading at nosebleed valuations of 60 to 100 times earnings. Thus, it was with some surprise that we watched the mounting scandals drag down the stock over the past six months. But despite the move in price from $220 to $140, we believe the bad press is not material to the long-term health of the business.

​This analysis turned out to be accurate. 
​

Read More

4Q21 FV Quarterly Letter

1/31/2022

 

Fundamental Value had its best year ever in 2021, returning 48.5% net of fees vs 28.7% for the S&P 500. The strategy has now compounded at 25.9% net of fees since inception in June of 2016, beating the market by 800 bps annually over more than half a decade. While this level of absolute returns is unlikely to be sustainable, we are as confident as ever in our ability to significantly outperform a still richly-valued equity market.1

Market commentary

It was only four months ago when we published Part III: Apex of a Bubble. We said that the US capital markets were mired in an “everything bubble,” presaging real returns that investors would find severely disappointing – and likely negative – for many years to come. And we predicted an imminent top and a proximate cause:

Read more

3Q21 FV Quarterly Letter

10/29/2021

 

Fundamental Value was up 9.1% net of fees in the third quarter, handily eclipsing the S&P 500’s return of 0.6%. FV has had a spectacular first three quarters of the year, returning 38.6% net vs 15.9% for the S&P. FV has now generated a net return of 25.6% annualized since inception in 2016, outperforming the S&P by 9.2% annually.1

Market commentary

In our last letter, Part III: Apex of a Bubble, we warned that an “everything bubble” had emerged in financial assets in response to decades of increasingly reckless fiscal and monetary policy. Valuations are at historical extremes in every corner of the US equity and fixed income markets. These extreme valuations presage real returns that investors will find severely disappointing -- and likely negative -- for many asset classes over years to come. Our warning remains as urgent as ever.

Despite the dismal return prospects for the bond and equity markets as a whole, we believe Bireme clients are well positioned to outperform.

Read more

Part III: Apex of a Bubble

9/21/2021

 

Fundamental Value returned 27.0% net of fees for the first half of 2021, handily besting the S&P 500’s 15.2% gain. The strategy has now returned 24.9% annualized since inception, outperforming the S&P 500’s 17.2% return by 7.7% annually.1


The first part of this series, Part I: Birth of a Bubble, marked the bottom in value stocks. The second part of this series, Part II: Anatomy of a Bubble, marked the top in the most speculative growth stocks. We believe this third part will mark the top in the market as a whole.

Since our last letter, a bubble restricted to the most speculative securities has morphed into a bubble in all financial assets. Today, valuations are at historical extremes in every corner of the US markets: value stocks, growth stocks, Treasuries, corporate bonds, real estate. These extreme valuations presage real returns that investors will find severely disappointing -- and likely negative -- for many asset classes over years to come.

Read more

A 6.5x PE in today's market??

7/14/2021

 
Picture

​Elevator pitch

​At less than 6.5x earnings, Imperial Brands -- a UK tobacco firm -- is one of the cheapest stocks we have ever seen for a company with consistent profits. The stock has declined by about 50% since 2017 despite flat EBITDA and profit figures. We believe this is due to Imperial’s underwhelming operational performance combined with the market's infatuation with growth and ESG stocks, two themes which do not include Imperial.

We think investors excluding Imperial on these grounds are falling prey to social conformity bias, which means they are simply aping their peers. At Bireme Capital, this is exactly the type of mistake that we seek to exploit in our Fundamental Value strategy.

In contrast to our investor peers that see a no-growth, unsavory business, we see a company with stable cash flows, beloved brands, and high returns on capital, not to mention the ridiculously cheap earnings multiple. Due to the company’s 8.5% dividend yield, we expect Imperial’s stock to provide satisfactory investment returns regardless of where the stock trades in the short term.
Read More

Cogeco: Undervalued Canadian Cable Co

3/12/2021

 
Picture
Elevator pitch
 
Cogeco Cable is an undervalued Canadian cable company, with shares of Cogeco Inc. trading at about 10x free cash flow and 7x EBITDA. For these multiples you get a company with a near-monopoly on high-speed internet in its Canadian footprint as well as significant exposure to US cable customers.
 
Cogeco has more than doubled sales, EBITDA, and FCF since 2008, all without growing the share count.
 
Long term, a strategic buyer is likely to purchase these assets at a significant premium, as Altice and Rogers attempted in the summer of 2020.

Read More

Part II: Anatomy of a Bubble

2/23/2021

 

After struggling during much of 2020, Fundamental Value enjoyed a phenomenal fourth quarter, soaring 47.1% net of fees compared to a gain of 18.3% for the S&P 500. FV finished the year with a gain of 29.8%, outpacing the S&P by 11.5%. Since inception, FV has returned 23.5% annualized vs 15.6% for the S&P 500.1


Part II: Anatomy of a Bubble

Read more

Part I: Birth of a Bubble

10/22/2020

 

In the first half of the year, Fundamental Value struggled, giving up years worth of outperformance in two quarters. In the third quarter, FV outperformed slightly, but not nearly enough to claw back its losses. FV is down -11.8% net of fees in 2020, compared to a gain of 5.5% for the S&P 500. Since inception, FV has returned 12.3% annualized vs 13.5% for the S&P 500.1

Our performance this year has been very distressing. However, it has not been demoralizing, for there is a silver lining: we believe that the prospects have never been better for value investors than they are today. Read much more below.


​Part I: Birth of a Bubble

Read more

Fundamental Value 1Q20 Quarterly Letter

5/20/2020

 

In Q1, FV had its worst result ever, down -26.4% net of fees. It is of little solace that the broader market was down as well, with the S&P 500 falling -19.4%.

Since inception, FV has returned 8.7% annualized vs 7.5% for the S&P 500.1



The catalyst for the drop in markets was of course COVID-19, which continues to wreak havoc on the world’s health and economy. Perhaps the most dramatic illustration of the pandemic’s impact in the US is the near 19 million Americans who filed a new unemployment claim in April -- an unprecedented figure five times higher than the worst month of the Great Recession. Some businesses have been hit harder than others, with restaurants, hotels, events, travel, and financial stocks among the most impacted.

Value investing came under particular assault, with the S&P 500 Value Index falling -25.4% and the Russell 2000 Value Index falling -35.8%. In recent quarters, we have written ad nauseum about the historic relative attractiveness of value names. Yet...

Read more

COVID-19: Maintaining equanimity and hope

3/19/2020

 
In our last letter, ​I tried to convey a sense of urgency while remaining calm and hopeful during this difficult time. However, I have found that sustaining that positive mental state is easier said than done for me personally. Some clients have told me they are struggling as well. Below are some thoughts I wrote for them on maintaining equanimity and hope, both for their investment portfolio and for their health. I hope it is valuable.

Read More
<<Previous
Forward>>

      Follow our blog.

    Subscribe

    Schedule time with me!

    Follow @evantindell
    Tweets by evantindell

Telephone

813-603-2615

Email

info@biremecapital.com

Disclaimer

See here for important disclosures and see here for our fees.
  • Home
  • Blog
  • CIO Corner
  • In the news
  • About us
  • Contact
  • Store