By: Tim Melvin
Have you read the book There's Always Something to Do by Christopher Russo-Gill?
If not, it should move right to the top of your summer reading list. It is the accumulated reflections of Peter Cundill. A Canadian value investor, Cundill used the Graham Deep Value Approach to return a little more than 15 percent, on average annually, to investors for almost 30 years.
Cundill once described his approach as looking to buy dollars for $0.40, and he focused almost entirely on the balance sheet. He once commented that he did liquidation analysis and liquidation analysis only. He wanted to buy stocks in companies that traded below where he estimated they could be profitably liquidated.
1. Things To Do
Cundill looked all over the world for ideas, and felt that most of the time he could find enough bargain issues to get his funds invested in such bargain issues and provide above average returns. However, he was not afraid to hoard cash when he could not find enough true bargains to get fully invested.
Value investors today, however, find themselves facing a situation where it is very difficult to get fully invested, because of a lack of opportunities in the aftermath of a five-year rally in global equities. There are a few things to do, however, even in an overheated market.
The most obvious opportunity for those who favor a deep-value approach is the U.S. community banks. Many of these smaller banks face challenges that will push them toward the inevitable conclusion: they need to sell to a larger institution rather than go it alone. The avalanche of regulations is pressuring the bottom line as compliance costs spiral out of control and make it difficult to earn sufficient profits to justify independence.