giofranchi

Agreed...if international was separately listed it would trade at >2x bv imho and it's always worth adjusting FFH's equity for that. +1! ;) And that’s basically what I have been saying for some time now… But I am not voting: MKL and FFH are both great companies led by outstanding leaders imo, and great companies led by outstanding leaders tend to surprise, and surprises by definition are not predictable… I am just content thinking those surprises will mostly be on the upside! Gio

Actually I am writing it... But no cash flowing from that endeavor until now... :( Gio How can I become a reader of this newsletter? Your first step should probably be to learn Italian. http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/adding-a-new-business-investment-newsletter/msg137387/#msg137387 Brilliant! I always like challenges. ;D ;D Cheers! Gio

Actually I am writing it... But no cash flowing from that endeavor until now... :( Gio

Exactly! Imo debt is very useful, until it gets to be harmful… And those instances when debt gets harmful don’t happen very often, but when they do, they tend to be very detrimental to your net worth… Two such instances might be enough to mar a lifetime of successful investing… Therefore, either you partner with people who shun debt altogether, like Buffett and Watsa, or you partner with people who make use of debt, but have a long enough track record to show they had been able to weather comfortably enough hard times in the past. Liberty Media has returned 15% annual from 2002 to 2013 with 2008-2009 in between: volatility YES, overall bad results NO. Here is something important for me: I have not said “permanent loss of capital NO”, meaning that I am not only looking for evidence of an effective enough protection of capital, but that I want to see a track record of very satisfactory returns over a long period of time through good environments and bad. What you say about Transdigm might be very correct. So, let me clear this a bit: I suffer from a sort of inertia that makes me stay with or even add to businesses that I already own and know very well, instead of buying new businesses that I don’t know as well. Therefore, for me to make a new investment, it is not enough “a great entrepreneur, a good business, and a good price”… Probably I need “a great entrepreneur, a good business, and a great price”… Surely a far better price than the one a business I already own is offered for at the moment! And right now Transdigm seems to me more pricy than Liberty Media, not less… Therefore, I concentrate my funds in Liberty Media, instead of splitting them between Liberty and Transdigm. Maybe this has nothing to do with debt, but I wouldn’t be so sure: if Transdigm had less debt, I would feel more secure about investing in it… therefore, the price I’d require would probably be less “great”… Though I don’t know if this is clear or makes any sense at all… ??? Gio

I look at TDG almost the same way I look at VRX: usually, I go for a great entrepreneur in a good business at a good price… But, when I see lots of debt, I pause and demand much more conviction in the moat of the business and therefore in its ability to generate tons of free cash flow whatever happens to the economy in general. If I have doubts, I just watch from the sidelines, until those doubts are proven wrong. And this is exactly what I am doing with both TDG and VRX right now. Of course, by doing so I run the risk of missing both boats… Gio

Hey! I have realized only now Andy put me in the best of leagues! ;) I don't deserve it, but thank you very much anyway! And I look forward to reading your 1000th post! :) Cheers, Gio

Wow!! Amazing!! Cheers, Gio

Yes, of course! Don’t you remember we had a discussion about his latest album “Popular Problems” just a few days ago? ;) Cheers, Gio

Your track record is impressive! :) Cheers, Gio

The publication of The Bootleg Series Vol.11 a few days ago is an event to celebrate and to flavor by all lovers of popular music and all lovers of culture in general. One of the most influential and deep thinker of last century at his very best. Not to be missed! :) Cheers, Gio

Yeah! This is one side of the coin… The other side follows: the yield of 10-years US Treasuries will fall to the France level, if not the German level, if not the Japanese level, giving Fairfax substantial capital gains. If that happens, it will be surely accompanied by lots of distressed debt situations. And Fairfax will redeploy its capital gains into those distressed debt opportunities. In the meantime also stock prices could have come down and equity hedges will no more be in place. Which side of the coin will happen? I think no one knows. Gio

I generally agree with your perspective Eric (7% investment returns is not a low bar - it's hard) Well, I have never said 7% on their portfolio is easy, nor I said it is difficult… The truth imo is no one knows… Because I believe they are opportunistic and constantly on the lookout for something undervalued… How to predict they will find undervalued things from now on? I don’t think anyone can. Instead, I just said that 7% is far below the historic average return on their portfolio (9%). That’s all I have said! Now, of course, you might accuse me I invest with a rearview mirror… ;) Gio

Yes, definitely! ;) Gio

Way too kind! Thank you very much! :) Gio

Being this board essentially about stock market investments, I meant I have doubled my capital for the first time since the stock market investments of my firm truly started to matter. How I went from 25k Euros to 1 million Euro is another story, one mostly of very good luck (and perhaps of a bit of hard work and dedication on my part too…). Cheers, Gio

Mmm… I have never really counted the hours I devote to supervising the team of people who help me running the businesses vs. the hours I spend thinking about my investments… But I guess it cannot be too far from the truth if I say 50-50… In the first half of my time I would also put the work I devote on taking strategic decisions for my businesses. It depends… the most of the buying I do is in companies I already own! So, very little time required there… I just look at the price! ;) New investments are rarer, and therefore might take longer… But if I find what I like and look for, I initiate a relatively small position very soon, with the hope of getting the chance of averaging down in the future. Gio

Not now. I sold out to raise capital for the BH rights offering and the LBRDA spin-off and rights offering. As right now I don’t want to decrease significantly the percentage of cash I hold. I surely plan to buy it back later. ;) Gio

Not at all... Our family real estate holdings have nothing to do with my firm, nor its equity, nor how it has grown over the last 4 years... Gio

Exactly! ;) Gio

frommi, I think you are right, but a company has ways to defer the payment of taxes an individual doesn’t enjoy. That’s basically why I prefer this solution to distribution of earnings via income. Gio

Thank you, Phil! I keep following Altius with great interest. And I liked Dalton’s latest letter to shareholders. If the Liberty Broadband spin-off pays off, I will probably cash in some gains and reinvest the proceeds in Altius. We will see. ;) Gio

Thank you Packer! Let’s just hope I won’t find a way to screw things up!! ;D Gio

My parents are still involved in 2), my sister runs her own medical clinic! :) Actually, I have a third company through which I gather all the earnings of 1) and 2) and invest them in the stock market. I think this solution is very tax efficient. Surely much more efficient than if I were to take out earnings as an individual via income. Gio

You may find the websites of both just below my avatar! :) 1) Civil Engineering Services: www.agenziamilanostrutture.it 2) For Profit Higher Education: www.masterpesenti.polimi.it Cheers, Gio

No… Thinking about it, I really don’t know why I am out of VRX… In retrospect I think it will prove to be a very dumb decision… I have sold it because of its debt level and because I think there is not yet evidence enough the organic growth of the companies Pearson acquires keeps being strong enough, after the acquisition and the changes implemented by Pearson and his team. A high debt level without a crystal clear track record is something I am not comfortable with… But, again, I sincerely think I am making a mistake here. Gio