LakesideB

5yr starts end of 2019 - ie, valuations unaffected by COVID yeah? Markets starting tanking early 2020 with bottom in April/May and recovering ferociously so not affecting the starting valuations but sure any idiot can outperform S&P500 over that time period net of fees without owning any Mag7.

As of 2024 end, on a 5yr basis, Pif3 is up +21.4% net of fees vs S&P up by +14.5% an outperformance of +6.9%. Pif 2 is 14.6% vs 14.5%. Since inception, over 25 years, he has outperformed the index by 5.6% in Pif2. For Pif3, since its inception in 2002, the outperformance is 3.1%. I scrolled up the thread and see his Q1 numbers have been released and its down 25%. I avoid looking at quarterly numbers for such an insanely concentrated fund. Quarterly numbers are more noise than signal. For example, Reysas is a massively significant top position. Late in 2024, the Reysas CEO comes out on Bloomberg TV and states earnings will double in 2025. Yet, Reysas is down 30% YTD. Why? Who knows. It's noise. I am just saying on a 5yr basis ending 24, you have S&P whose top 7 names have hit it outside the park and are currently 35% of the index weight. At the start of the year, S&P500 traded at one of the highest multiples. History hasn't been too kind for prospective 10year returns to anyone investing in S&P 500 at its highest multiples. Yet you have Pifs, who have done well against S&P despite not having any exposure to the magnificent 7 and underforming coal bets. The portfolios trade at mid to high single digit P/Es. Probabilistically high likelihood of one outperforming the other over the next 5 to 10 years. I am out from this discussion. I have watched in amusement over the years the discussions on this thread and the previous, now closed, threads on him. I purposefully stay away as it can be a tremendous time suck. The amount of misinformation, especially regarding fees etc, was just too much to take. Good luck to all!

The discussion here seems so one-sided. It feels like whenever there is underperformance, certain individuals respond strongly. There is a lot of misinformation in this thread. These individuals know some of the details are wrong, but choose to keep quiet. To Vish_ram's point, yes, he is underperforming on the 20-year number. The underperformance is 1.7% in Pif 2, but is matching S&P500 in Pif3. The concentrated coal bets have been hit hard. Focusing on 5-year performance is instructive as it captures his evolution as a manager, for I believe he has become a better investor with time. On a 5yr basis, the performance matches to outperforms S&P500, depending on the fund. These numbers include the heavy coal bets, which were about 30% of the portfolio and are down some 50-60%. With enough time, these coal bets will likely rebound significantly, lifting the 20-year number - a significant value add to ~$1 billion in assets. Once it becomes positive, I am confident there will be no screenshots and detailed Excel analysis of his performance by individuals like Vish_ram. Looks like response is only warranted when things look good for one's agenda. There are some completely inaccurate comments, such as the person who mentions that he continues to charge a 1.5% management fee or that Buffett instructed him and Guy to charge zero fees. He started Pabrai funds in 1999 with a zero-fee model from the beginning. He met Buffett for the first time at lunch in 2007. After the blowups during the GFC, unlike the majority of managers, he kept operating for a decade+ with zero fees after the great financial crisis and only started earning fees when clients were above the high watermark. Vish_ram knows all this and can easily correct the misinformation, but chooses to stay quiet. Pif4's performance is worse than others as he couldn't include some of his best ideas due to restrictions. For example, it doesn't hold Reysas, which he invested at $16m valuation and has recently traded at $1 billion market cap. It is a restricted portfolio and a subset of his best ideas, and not one where most of the assets are. At the end of the day, he runs a highly concentrated portfolio. Some might think having 10-15 names is concentrated, but his top 2 names are more than 50% of the assets, with 4 to 5 positions doing nearly all the work. At certain times, he may seem like a poor investor, while at other times, he may look pretty good. Yes, the 20-year performance varies from an underperformance to matching s&p500, depending on the fund. There were significant blowups during the GFC, with the funds down 65% or so, as mentioned by him in several videos. All these are reflected in the 20-year number. But what happens in 2028, when the blowups from GFC aren't in the numbers any longer and coal has rebounded? Attacking him when things don't look good and remaining silent on misinformation being spewed, and when things do look good, tells me more about one's integrity. Folks saying Charlie didn't give him money to invest as some sort of negative is amusing. Never mind the fact that Charlie actively chose to become friends with him late in his life, despite being inundated with marketing finance types throughout his life. I can understand folk's frustration here. But I think instead of selectively attacking someone's work, it would be more productive to clone someone like him to try to make this world a better place.

Spekulatius, interesting comment on CVNA. Superficially can see why CVNA : large amount of debt + no free cashflow + prior actions of senior Garcia. Curious to know if you had an opportunity to look under the hood and you found something that gave you a pause or you hold that sentiment due to the above mentioned factors? Txs.

Wow! On other hand, Bruce Flatt is going diametrically opposite with cash hoard!

My bad, I mistook what you meant. Agreed.

A 1% to 2% move is non-trivial. On a 30yr it translates to a -19% to -28% return due to its approx 19yr duration. The 30bps to 35bps move in US 10yr and 30yr in the past two days is a huuge move with much higher implications on actual returns. The other issue is for a P&C, the investment leverage is always >1 and in FFH's case, its around 3x, so the implications on ROE for FFH are even more dire due to this. Kudos for him to have had the sense to come out of them.

Look its pretty straightforward. If you think Trump wins two adverse things will happen that will affect US treasuries : decreased corp tax rate and increased infrastructure spending. Prem says as much. Decreasing corp tax rate to 15% and decreasing highest individual tax rates and lowering number of tax brackets means decreased tax revenue for the gov. I have seen estimate of lost tax revenue of upwards of $9 trillion by 2026. Increased infrastructure spending (military, infrastructure - building of Wall, etc) will be financed by huge bond auctions. When you suddenly triple the size of bond auctions to finance the increased deficit, what do you think happens to IR? Who has the appetite to come for a bid in today's environment (the last time that high a deficit as a % of GDP that needed to be finance was in 2008 ... and everyone participated due to safe heaven status of treasuries during those times)? Avg duration of 30yr treasury is 19 years, so 1% moves results in 19% loss. He wants to take the risk off in-case Trump get elected. Given the depth of US treasury market, he can easily do that and he can always come back in once he has certainty. Trump getting elected may result in other 'un-intended' events which he can capitalize on with his newly acquired $10b+ cash war chest. Makes perfect sense with what he did.

Could anyone post a pdf file of the transcript? Thank you! :) Gio FFH_Buys_Brit_Transcript.pdf

from transcript "We have partners who in the past have been – have suggested that they would like to be partners with us and – in these insurance operations, and we may consider that, if it's a partner that we're really comfortable with. And all of that just to say, in terms of our common stock, we think our common stock with a book value of $400 a share and a stock price – with a market stock price to book value of about 1.3 times, we think is inexpensive. We're selling – we had a very good year last year. Our earnings are well protected. Our underwriting is – and our insurance operations are very good. Our investment portfolios are very conservative, as you know. We went through it last week. Our equities are hedged. We got 25% cash, low corporate bond. We've got deflation swaps. So we just think that we have many ways of financing this, and one of the last alternatives will be a stock issue."

I agree and that's why the current FCF is depressed in my mind. Although I am curious to see that capex this quarter was probably the highest in the last 8 quarters with very little debt repayment. In fact they used cash to buy additional RE (I believe a nicer office building near their location). Somehow, I don't see the urgency to attack the debt that aggressively. Either they have a good visibility on how things will progress from here on or they are being extra confident about things. In the end however, I have confidence in what they are doing and believe this mgmt. Without this belief you would probably stay clear as a 25% FCF number is meaningless if you have a liquidity crisis.

Early part of this year they thought their investment in Post Media would start paying off. Its been a hole for them with close to 0 ebitda to show for. The investment in that asset continues and these dollars could have been spent growing their 'essential information' business. So a huge opportunity cost as well. This acquisition has been a disaster so far. For all the leverage the company took, it has very little to show for it. But I guess that's the reason why the opportunity exists ... so in a perverse way its good all this is happening. You have to believe in the mgmt at the end of the day.

They are well aware the circumstances they are facing. You can see it that this quarter they have started selling some non-core real estate to repay some of the debt. The problem is the rapidly dropping EBITDA has the potential to breach covenants before they have the opportunity to sell their RE. Also if u notice, Q3 and Q1 are the weakest quarters due to cyclicality of the business. So the next quarter will be very important in accessing how things are progressing.

I agree to your statement. Simply put, that is one of the biggest difference I find between this and the fate of yellow media. I should also state that the land is about $16m on their balance sheet or about 15% or so of mkt cap . The BV of that land is truly outdated. I recon the land value in itself is about half the the market cap.

I agree to your statement. Simply put, that is one of the biggest difference I find between this and the fate of yellow media.

This could be it. Although the company did get very close to breaching its covenant on its debt. They have quiet a few levers to avoid a run by the banks however: real-estate, further cost cutting (although its CEO runs a very tight ship). It seems that they are sort of facing a perfect storm : they levered the company up to buy Post Media asset and it hasn't worked off as they expected ... plus you have weakness in the national advertising creating all sorts of issues for them. Additionally, they have a potential $20-$25m tax hit due to dispute with CRA. If they didn't have a ton of debt, things would have been much easier to navigate. CEO and mgmt owns abt 33% .. .so they have a huge vested interest to make this work. My sense they will eventually pull it off. Berkshire AR 2012: Newspapers continue to reign supreme, however, in the delivery of local news. If you want to know what’s going on in your town – whether the news is about the mayor or taxes or high school football – there is no substitute for a local newspaper that is doing its job. A reader’s eyes may glaze over after they take in a couple of paragraphs about Canadian tariffs or political developments in Pakistan; a story about the reader himself or his neighbors will be read to the end. Wherever there is a pervasive sense of community, a paper that serves the special informational needs of that community will remain indispensable to a significant portion of its residents. Charlie and I believe that papers delivering comprehensive and reliable information to tightly-bound communities and having a sensible Internet strategy will remain viable for a long time. -CM I got to read that quote above when I was looking into this business. The local adverts in the community newspaper make majority of their revenues and they are quiet resilient. However, National advertising is still about 10% of their community newspaper business. Since the newspaper business is mostly fixed cost, what happens to national advertising has a disproportionate impact on the company's profitability. National advertising is paramount for their community business due to the operating leverage in this business. Some of the national advert cycle is cyclical and some of it is structural as advert dollars flow to the digital medium. Their other half of the business - 'essential information' is a terrific business with growth in it. If you combine all the debt and put a reasonable number to the pending CRA judgement the margin of error is that much narrower. Its a straightforward thesis, if you think they can avoid breaching their covenants, this could be a blockbuster opportunity as its trading at 25% fcf yield on a depressed free-cash flow number. They could do thinks like sales lease back of their RE or sell parts of their non-core RE to avoid disaster (which they did this quarter) or cut costs a lot more aggresively.

This could be it. Although the company did get very close to breaching its covenant on its debt. They have quiet a few levers to avoid a run by the banks however: real-estate, further cost cutting (although its CEO runs a very tight ship). It seems that they are sort of facing a perfect storm : they levered the company up to buy Post Media asset and it hasn't worked off as they expected ... plus you have weakness in the national advertising creating all sorts of issues for them. Additionally, they have a potential $20-$25m tax hit due to dispute with CRA. If they didn't have a ton of debt, things would have been much easier to navigate. CEO and mgmt owns abt 33% .. .so they have a huge vested interest to make this work. My sense they will eventually pull it off.

I guess the float is not really free if you pay a multiple > 1 to acquire it. Its free to the extent you can get it a discount to the face value. So agree with Jays numbers. Max bid of 999,999,999. My bad here!

Okay I;ll take a crack at the first one .... From what you propose this float seems like a zero coupon perpetual liability. Because of this it essentially means its worth nothing to the bond holder. So if I invert this proposition ... this effectively means this is a source of equity to me. Assuming I have a 10 year ten horizon and I think I could compound this equity at 15% in a 10% risk free environment ... using 12% discount rate (10% real + 2% inflation) ... i would be willing to bid 1.3 times equity ... ie roughly $1.3billon. The answer to second question would probably elongate the time horizon to 100 years ... and the critical assumption would be how much you can compound your capital by ... if you think 12.5% over 100 years .. @12% discount rate the equity is probably worth 13,500 x. From this you subtract the initial payment of $1b of libility so its likely worth 13,499 x. So 13,499 * $1billion. is $13.49 trillion. Given world's total wealth is about $300 trilion ... i effectively need to come up with 10% of world's wealth!!! The answer to second question is largely irrelvant .... is purely a match exercise. I would still probably bid $1.3b to $1.5b. Option 1 is probably a little easier to think about. You will get $1b that you don't pay back. So in other words you get $1b dollars. Why would you pay anything more than $1b to get $1b? You wouldn't. Your first thought is one the right track. If it's worth nothing to the holder, its worth face to you. Sure ideally would love to get this at 1 times book.... but since free leverage has value there will be other players who would be willing to pay a multiple of book depending on what they think they could do with it. I just thought if I can compound this equity for the next 10 years at 15% ... I would be willing to pay 1.3 times book. so $1.3 billion. I guess I am looking the future utility at this free float and PVing its usefulness today.

Okay I;ll take a crack at the first one .... From what you propose this float seems like a zero coupon perpetual liability. Because of this it essentially means its worth nothing to the bond holder. So if I invert this proposition ... this effectively means this is a source of equity to me. Assuming I have a 10 year ten horizon and I think I could compound this equity at 15% in a 10% risk free environment ... using 12% discount rate (10% real + 2% inflation) ... i would be willing to bid 1.3 times equity ... ie roughly $1.3billon. The answer to second question would probably elongate the time horizon to 100 years ... and the critical assumption would be how much you can compound your capital by ... if you think 12.5% over 100 years .. @12% discount rate the equity is probably worth 13,500 x. From this you subtract the initial payment of $1b of libility so its likely worth 13,499 x. So 13,499 * $1billion. is $13.49 trillion. Given world's total wealth is about $300 trilion ... i effectively need to come up with 10% of world's wealth!!! Do a reasonableness check. Do you really think that a scenario were you pay back the $1b is worth more than a scenario were you don't pay it back? Do you really think option 2 is worth $13 trillion? Sorry I amended my comment later on to say that it was largely a match exercise and that the bid essentially remains the same ...

1. 999,999,999.99 - arbitrage 2. 999,925,000 ish - proceeds minus PV of $1b liability plus profit (theoretically should be 1 cent profit for arbitrage). I guess stealing the money from the widows and orphans who own the float is a Madoffian form of arbitrage. Ditto on these numbers. (Sorry, I misinterpreted your arbitrage comment. :-[) The reason you shouldn't pay more than $1B is that you should be able to earn the same return on your own money as on someone else's money. Therefore if you pay $1.5B you are giving up earning $150M risk free in order to earn $100M risk free. Well if I can earn more than the risk free and can get free leverage .. .the levered returns to me will be magnitudes higher as my own equity will be smaller portion of the total capital in question. The question is how much higher than risk free and how much I need to bid to get the free leverage.

Okay I;ll take a crack at the first one .... From what you propose this float seems like a zero coupon perpetual liability. Because of this it essentially means its worth nothing to the bond holder. So if I invert this proposition ... this effectively means this is a source of equity to me. Assuming I have a 10 year ten horizon and I think I could compound this equity at 15% in a 10% risk free environment ... using 12% discount rate (10% real + 2% inflation) ... i would be willing to bid 1.3 times equity ... ie roughly $1.3billon. The answer to second question would probably elongate the time horizon to 100 years ... and the critical assumption would be how much you can compound your capital by ... if you think 12.5% over 100 years .. @12% discount rate the equity is probably worth 13,500 x. From this you subtract the initial payment of $1b of libility so its likely worth 13,499 x. So 13,499 * $1billion. is $13.49 trillion. Given world's total wealth is about $300 trilion ... i effectively need to come up with 10% of world's wealth!!! The answer to second question is largely irrelvant .... is purely a match exercise. I would still probably bid $1.3b to $1.5b.

Hey Packer ... do you have a link to where Tim provides the post mortem of the under performance? I can certainly think of one of his names 'Galcier Media' that comes to mind that qualifies for the leveraged company in a flat/declining industry'. Although it does have a very strong business information business and is owner operated (>30% ownership). The stock is just getting pummelled ...

so guns ammo and mobile security? ;) wellmont lets keep your massive blackberry love to the BBry thread ;) ?

While they benefited tremendously by being able to deploy large amount of capital to take advantage of 40%+ drop in valuation levels, its the time it took to reach from 800 to 1050 that caused to them to become concerned about the legitimacy of the recovery. While the stock market basks in sun is reaching all time highs, the US GDP languishes even after Fed has spent all its bullets. So yeah they are concerned something is a definitely amiss here .... and best thing to do is to protect your capital and back your skill to add value well and over the market returns in the long run.