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Yesterday

2015-08-22

  • vgm commented on Grahamites's article 08-22 11:48
    Seeking Disconfirming Evidence in Investing Research
    “And one of the great things to learn from Darwin is the value of extreme objectivity. He tried to disconfirm his ideas as soon as he got ’em....
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    vgm 08-22 12:48
    • Thanks Grahamites. A couple of comments if I may:

      1. Based on your description, I'd conclude that Kyle Bass (Trades, Portfolio) was careless and superficial in his analysis of FCF. That's arguably different from doing extra DD to look for disconfirming evidence. (For what it's worth, it surprises me since I think of him as being one of the more rigorous people in the business.)

      2. Yes, Buffett's comment about GM buybacks was equivocal. He said 'If I was deciding, I'm not sure if I'd do it or not.' To be 'disconfirmng evidence' I'd want a much stronger statement:

      http://video.cnbc.com/gallery/?video=3000358348

      3. Some people do a 'pre-mortem' - that is, mentally going 2-3 years into the future when a stock has theoretically failed and describing what happened and why. Bruce Berkowitz (Trades, Portfolio) has one of the most rigorous approaches: he invites experts to come and purposely try to "kill" his ideas.
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