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Financial analysis and non conformist thoughts from Bruce 

21
Jun
2020

A quick thought on Wirecard

On 18th June Wirecard announced: Wirecard AG’s auditor Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Munich, informed Wirecard AG that no sufficient audit evidence could be obtained so far of cash balances on trust accounts to be consolidated in the consolidated financial statements in the amount of EUR 1.9 billion (approximately a quarter of the consolidated balance sheet total). The share price...
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10
Jun
2020

Recurring revenue and moats

A friend on twitter, Andrew who runs https://www.fundhunter.co/ asked an interesting question: is recurring revenue a “moat” in itself?  That is, do all companies that have recurring revenue / customers who stay for years, have competitive advantages (and by implication report high returns on capital).  After thinking about it for 10 seconds I replied with an unambiguous “NO!” * I...
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25
Apr
2020

Analysing uncertainty – TMI

“These days everyone has the same data regarding the present and the same ignorance regarding the future.” Howard Marks   I’m fascinated by this talk on Three Mile Island (TMI) and analysing different stories around what caused the disaster. Please do watch the whole thing. You’ll thank me I promise! Who, or what, was to blame for TMI? Our minds...
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9
Apr
2020

Sailing into the unknown

Not many things seem obvious at the moment. But one thing that does, is the likelihood that companies will need more cash from shareholders. Historically, the stockmarket was a mechanism for raising capital for uncertain trade ventures into uncharted territory. Starting with the Muscovy Company, the first Joint Stock Company in 1553 expedition round the top of Norway to find...
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11
Feb
2020

Quant Winter

According to this recent article in FT just 15% of quant funds beat the US stockmarket index last year. Cliff Asness, head of AQR, which employs over 80 phDs and manages $186bn, has called it a “quant winter”. However, the “quant winter” has now lasted a couple of years. Old fashioned “active” portfolio managers have been losing assets to quant...
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31
Dec
2019

Soap on the water

Inspired by Gregory Zuckerman’s book on Jim Simmons  I thought that I’d try some Markov Chain analysis on company announcements. Although it is not entirely clear what Simmons does to generate consistently high returns year after year, it seems to be something to do with Markov Chains, or hidden Markov Processes. Markov chains assume the outcome of one event depends...
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22
Nov
2019

Just parsing through

Previously I had been using the programming language “R” to parse through company announcements and comparing them for clues on future performance.  I’ve been using decision trees and random forests to see if companies that have performed well over the last 5 years use similar language.  Linguistic comparisons between companies are interesting, but the same company can often shift from...
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29
Oct
2019

The high price of certainty

I am currently doing some consulting projects for AxiaFunder , which is a litigation finance platform that connects High Net Worth Individuals and sophisticated investors with pre-vetted court cases.  As an early investor in Burford Capital, I’ve long been fascinated by litigation finance, and the value of uncertain, intangible assets with asymetric returns. Below is something I’ve written on the...
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