Death, Taxes, and Reversion to the Mean / Michael Mauboussin’s latest paper on reversion to the mean - why high return on capital can’t stay high forever - incorporating reversion to the mean in DCF valuations - “Good to great” and “Great to good”.

I came across Shahin Khezri’s blog a few days ago, and really enjoyed his post “Lessons From Ted Williams“. Shahin talks about Buffett’s comparison of the stock market to baseball. The market throws thousands of pitches a day, but you must decide which to swing at and which to let fly by. The difference between an investor and a baseball player is that the investor never has to swing. Great investors like Buffett don’t swing very often, even if the ball is in the strike zone. They wait for the obvious ones—the fat pitches—that can be hit out of the ballpark almost every time.

Reflections on Value Investing points readers to Authors@Google - a series of talks with respected authors hosted by Google. I’ve only watched the talk with George Soros (which was very good), but many of the other talks look interesting. See also my post on the TED Talk Videos.

Some interesting reading material for the holidays:

Rough Rider / This New Yorker article is a month old, but if you haven’t read it yet I strongly recommend it. Connie Bruck profiles Sam Zell and his history of contrarianism and buying assets on the cheap. Zell has quite a personality, and I think that any investor, businessman or entrepreneur can learn a lot from him.

Be Prepared for A Lot of Bumps /  An interview in Fortune with John Bogle. Bogle talks about current market conditions, his favorite CEOs, “Nobody knows nuthin’,” and his biggest mistake.

Valuing Western Sizzlin / George of Fat Pitch Financials goes over a detailed valuation of Western Sizzlin (WSZL). He concludes that buyers of WSZL are getting the investing skills of Sardar Biglari (a great value-oriented fund manager) for a very cheap price. I would also add to George’s analysis that WSZL also has a new fund management business, that although hard to quantify now, should be very lucrative in the future.

There’s No Money In The Long Tail of the Blogosphere / An interesting article on The Long Tail of blogs - why individual sites have trouble making money - and why companies like Google (GOOG) are reaping all the gains. Especially interesting for other blog owners.

Why Penney Will Perk Up (requires Barron’s subscription) / Retail in general looks very cheap at the moment, and JCPenney (JCP) is one of my favorites. This Barron’s article argues that JCP could be trading at $60-70 a year from now, and currently trades at a 15-year low multiple. Penney’s has great management that knows retail very well and has gone through a successful turnaround over the past 7 years.

Gannon to Barron’s: Berkshire Fairly Valued…As a Buffettless Empire! / A response to Barron’s article “Sorry Warren, Your Stock’s Too Pricey“. Geoff hits the nail on the head, as I had those exact thoughts after reading the Barron’s piece. Basically, based on the value of the operating business and investments, Berkshire Hathaway (BRK-A) is about fairly valued. But that doesn’t take into account Buffett’s capital allocation skills and his ability (and his future successor’s ability) to compound equity at above average rates. I would also add that it was unfair for Barron’s to compare Berkshire’s multiples to that of AIG, Allstate, and Travelers.

Disclosure: I may be long one or more stocks mentioned in this post. This is not a recommendation to buy or sell any securities.

Seth Godin points readers to evidence that there’s real people working at Amazon.com (AMZN). This is just one of the many reasons that great service is sending more and more customers to companies like Amazon.

By doing something that customers don’t expect—Amazon stands out from the crowd. One person has a good experience. They tell their friends, and their friend’s friends. By using money that would have been spent on marketing on a better experience, Amazon gets very sticky customers for a cheap price. Widening the moat, one day at a time. It’s unfortunate that the stock is a little too expensive for my taste.

Make sure to check out the Amazon reviews of the Bic Ballpoint Pen that Seth linked to. Out of all the pens I’ve tried, this one’s the best. As noted, the ink consistency is just right for a variety of different papers. (Click the “Comments” of Matt Williams’ review - I’m glad some people have a sense of humor).

Fachidiot (German): An excessively narrow-minded technical expert. A man with a hammer.

Sears Holdings (SHLD) has recently been the subject of much discussion among the media and investor community. Below are a few quotes from an article in the Chicago Sun-Times discussing the thoughts of Gary Balter, a retail analyst at Credit Suisse.

…Sears could be a $188 stock if Lampert would sell valuable assets such as Sears Canada, Lands’ End, distribution centers, Sears’ headquarters in Hoffman Estates, and brands such as Craftsman and Kenmore.

Yes. And Berkshire Hathaway could be a $250,000 stock if Buffett would sell everything they own except the Acme Brick Company and Buffalo News. The brands mentioned above are very valuable, but they are critical to the success of Sears Holdings as a retailer. That’s right, Sears Holdings is a retailer. It seems as though this revelation has disappointed some investors over the past few weeks.

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