Value After Hours S06 E02: Tim Travis on options, energy, financials, including $C, $BRK, and $FFH
Jan 22, 2024
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Financial expert Tim Travis joins the podcast to discuss options strategies like covered calls and cash secured puts. They explore investment strategies in choppy markets, Warren Buffett's simplification techniques, the pharmaceutical industry's business practices, and strategies for market crashes. Emphasis is placed on using options for income and risk reduction.
Tim Travis emphasizes the importance of focusing on value in sectors like insurance, banking, real estate, and energy to generate income and reduce risk.
Tim Travis primarily uses longer-term options contracts, typically ranging from six to twelve months, to enhance value in the real estate investment space and generate additional income while retaining upside potential.
Tim Travis suggests that a combination of complacency, contentment, and ample liquidity could be contributing to the current low volatility environment, but anticipates volatility to increase due to upcoming geopolitical disruptions and an election year.
Deep dives
Valuing Options and Financials in Investing
The podcast episode features a guest, Tim Travis, who specializes in options and financials as a value investor. He discusses how his investment strategy involves using tactics like covered calls and cash secured puts to generate income and reduce risk for clients. Tim emphasizes the importance of focusing on value in sectors like insurance, banking, real estate, and energy. He also explains how he incorporates longer-term options contracts, such as calls on real estate investment trusts, to generate income and add to overall returns. While Tim acknowledges the popularity of short-term options trading, he prefers a more long-term approach to investing.
The Impact of Zero-Day Expiry Options and Low Volatility
The podcast delves into the impact of zero-day expiry options and low volatility in the market. Tim Travis, the guest, explains that his investment strategy primarily involves longer-term options contracts, typically ranging from six to twelve months. He provides an example of using options to enhance value in the real estate investment space by layering a call option to generate additional income while still retaining upside potential. Tim mentions that while zero-day expiry options, popularized by platforms like Robinhood, are not part of his approach, he recognizes their appeal to certain investors. Overall, he highlights the importance of managing risk and seeking value in options trading.
Considering Volatility, Economic Factors, and Opportunities
The podcast explores the current low volatility environment and potential drivers behind it. Tim Travis suggests that a combination of complacency, contentment, and ample liquidity could be contributing factors. While he anticipates volatility to increase due to upcoming geopolitical disruptions and an election year, he remains cautious about the overall economic outlook. Tim also discusses the importance of adapting to changing economic conditions and highlights sectors like energy as potentially interesting due to favorable valuations. He concludes by urging investors to maintain a value-focused mindset and exercise caution in an environment that seems preoccupied with high market returns.
The Power of Obviousness
The podcast episode discusses the concept of "obviousness" and its importance in decision making. It tells the story of a young man named Adams who, despite being unremarkable, uses his ability to recognize and act on obvious solutions to excel in the advertising business. The episode emphasizes the need to think clearly and avoid overcomplicating things by focusing on what is obvious and simple.
Market Trends and Cycles
The podcast episode also touches on market trends and cycles, highlighting the importance of recognizing historical patterns and understanding that market conditions can change over time. It discusses various periods of growth and value dominance, citing examples such as the dot-com bubble and recent shifts in favor of growth stocks. The episode emphasizes the need to consider long-term historical data and avoid solely relying on recent market performance when making investment decisions.
Value: After Hours is a podcast about value investing, Fintwit, and all things finance and investment by investors Tobias Carlisle, and Jake Taylor. See our latest episodes at https://acquirersmultiple.com/podcast
We are live every Tuesday at 1.30pm E / 10.30am P.
About Jake: Jake is a partner at Farnam Street.
Jake's website: http://farnam-street.com/vah
Jake's podcast: https://twitter.com/5_GQs
Jake's Twitter: https://twitter.com/farnamjake1
Jake's book: The Rebel Allocator https://amzn.to/2sgip3l
ABOUT THE PODCAST
Hi, I'm Tobias Carlisle. I launched The Acquirers Podcast to discuss the process of finding undervalued stocks, deep value investing, hedge funds, activism, buyouts, and special situations.
We uncover the tactics and strategies for finding good investments, managing risk, dealing with bad luck, and maximizing success.
SEE LATEST EPISODES
https://acquirersmultiple.com/podcast/
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FOLLOW TOBIAS
Website: https://acquirersmultiple.com/
Firm: https://acquirersfunds.com/
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ABOUT TOBIAS CARLISLE
Tobias Carlisle is the founder of The Acquirer’s Multiple®, and Acquirers Funds®.
He is best known as the author of the #1 new release in Amazon’s Business and Finance The Acquirer’s Multiple: How the Billionaire Contrarians of Deep Value Beat the Market, the Amazon best-sellers Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014) (https://amzn.to/2VwvAGF), Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012) (https://amzn.to/2SDDxrN), and Concentrated Investing: Strategies of the World’s Greatest Concentrated Value Investors (2016) (https://amzn.to/2SEEjVn). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law.
Prior to founding the forerunner to Acquirers Funds in 2010, Tobias was an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer. As a lawyer specializing in mergers and acquisitions he has advised on transactions across a variety of industries in the United States, the United Kingdom, China, Australia, Singapore, Bermuda, Papua New Guinea, New Zealand, and Guam.
He is a graduate of the University of Queensland in Australia with degrees in Law (2001) and Business (Management) (1999).
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