Rebound Capital just crossed 25,000 subscribers!

I was inspired to start RC after reading the speech Buffett gave at Columbia Business School in 1984. His argument was simple yet compelling: a group of super-investors had outperformed the market for decades running.

What's interesting is that there was no common thread among them. Some went to the best educational institutions on the planet. Others never went to college. Some ran extreme concentration while others held dozens of stocks to diversify. They bought and sold in very different market conditions and industries.

The only thing that tied all of them together was that they searched for discrepancies between the value of the business and the price you pay to get a part of that.

Nowhere is this more true than with stocks in a drawdown. Just in the last five years, Netflix was down 73%, Nvidia 66%, and Meta 77%. Every time a stock drops, analysts cut their price targets, FinTwit stops talking about the company, and investors avoid it by calling it a falling knife.

Ironically, this is the best time to enter the company. Netflix at $73 now offers a much better risk-reward than when the company was trading at $130 a year earlier. It’s the same principle we used to identify Google, Eli Lilly, Birkenstock, and many more companies over the last year.

The Rebound Portfolio, built when everyone was chasing AI, is now outperforming the S&P 500 by ~4%.To put this in context, 79% of all active large-cap U.S. equity funds underperformed the S&P 500 last year.

Last week also gave us a sneak peek into why quality matters. While the Semiconductor ETF SOXX was down 16%, Constellation Software was up nearly 20%, MELI was up 4%, and Apple was up 5%. Quality companies will outlast all market cycles.

Substack has been exceptionally kind, giving incredible reach to analysts like me. The quality of discussions and readers here is 10x that of any other platform!

This is just year 1 of my life’s work. I can't thank all of you enough for supporting and following along. I'll leave you with the same words Buffett left his audience more than four decades ago:

Some of the more commercially minded among you may wonder why I am talking about value investing . Adding many converts to the value approach will perforce narrow the spreads between price and value.

I can only tell you that the secret has been out for 50 years, ever since Ben Graham and Dave Dodd wrote security analysis, yet I have seen no trend towards value investing in the 35 years I have practiced it. There seems to be some perverse human characteristic that make easy things difficult. Ships will sail around the world but the flat earth society will flourish. There will continue to be wide discrepancies between price and value in the marketplace, and those who read their Graham & Dodd will continue to propser.