giofranchi

Well, of course also the quality of management matters... And I highly doubt the average pension fund is managed by someone of the caliber of Watsa & Company! They could do many things... They can increase the equity percentage of their portfolio, and Bradstreet is not exactly the average bond portfolio manager, right? They will go on buying entire businesses, etc. Most of all a 6% for a pension fund is... 6%, for FFH it means 15%... Put whatever multiple to BV you want on that, but I don't think 1 is the right choice! Gio

Maybe… But those insurance operations are here to stay. Actually, they are getting bigger and bigger (the majority of operating companies they have bought recently are in fact insurance companies). And the truth is they have $24 billion in assets with only $8 billion in equity, and a Total Debt / Total Capital ratio of merely 25%. And a 15% increase in equity is achievable with just a 6%-7% return on their portfolio of investments. This is a result of their insurance operations. Gio

Unfortunately, what happened during the last 10 years won’t help you very much to understand what will probably happen during the next 30 years. Insurance operations: During the last 10 years they had to deal with burdensome legacies of the past. Watsa has often posted a slide in his AM presentations, in which he underlines how contracts written during the last 10 years have constantly and reliably been profitable. CRs over 100% were caused by unsound policies written before FFH acquired those companies. Now all of that is almost over. Under the general supervision of Barnard, if the huge success of Odyssey Re is any guide, we will probably see insurance operations solidly profitable for many years to come. Investment results: --Prem Watsa, Q2 2014 Conference Call So, they have been too conservative over the last 10 years. Ok, we all know that. Now the only thing that matters is: what comes next? Easy money either leads to asset bubbles… or it does not. In a 2 or 3 years time we will finally know for sure. If bubbles inflate then burst, 3 years from now we will be here singing praises to Prem & Company; if instead we muddle through, there will be no more reasons to behave so cautiously and it will be business as usual once again… well, not exactly: it will probably be much better, with much stronger insurance operations than before and with some operating companies they are starting to acquire. Gio

Imo a business is nothing but a machine to generate earnings. If those earnings are retained, they go to increase equity. And at the end of the next 40 years all that matters is how much equity will have grown. What will be the source of those retained earnings that go to increase equity is irrelevant – IMO. Gio

I guess "Wtf" means something not very polite... Anyway, the multiple over BV you should be willing to pay both for FFH and for BRK depends on the rate of BV growth they will achieve during the next 40 years (more or less). What do you think will grow faster: A) an $8 billion company led by a 63 self-made billionaire, who is still very motivated and planning for the very long term... With an equity portfolio hedged for the next 2 or 3 years; B) a $300 billion company led by a genius like Warren Buffett... For the next 10 years. If your answer is B, well then I think you might be right... Unpolite, but right... My answer is A! Gio

Yesterday FFH closed at $447.5, while BVPS at the end of Q2 2014 was $386.77: a multiple of 1.157, below the 1.2 x BVPS Buffett is willing to buy back BRK shares. If FFH has made some money in Q3 2014, that multiple today is even lower. From Q2 2014 Conference Call: --Prem Watsa So, here we have a great entrepreneur, who has already built an $8 billion company, who is among the most reliable CEOs in North America, and who is thinking and planning for the next three decades… Don’t you agree with me it is worth more (much more) than 1.15 x BVPS? Cheers, Gio

Someone once posted (maybe gio?) that Buffett follows Martin. If he's good enough for Buffett, I figure it's good to check in on him every once in a while. Yes, it was me. Though results are very important, I don’t think we should dismiss good ideas simply because they are uttered by someone who has failed to perform recently. I guess what we should do is to understand those ideas, become very aware of the warnings those ideas contain, and then look for investment opportunities that leave us comfortable notwithstanding such threats. I simply don’t see how to drive blindfolded might turn out to be a good idea… ;) Gio

Lol!! ;D ;D ;D Gio

Well, I don’t know much about LINTA… But since I have first invested in Liberty Media, I have seen Malone taking many value enhancing initiatives, from which I have handsomely profited, and I hope I will see many more before he finally retires. For me it is that simple, and I don’t like too “esoteric” or elaborate reasonings when it comes to do business… I am sure that, when Malone finally retires, I will be able to find another good business, led by a good entrepreneur, and offered to me at a good price… I will most surely sell Liberty Media and buy that other business. Btw, why do I always say “good entrepreneur” instead of “good manager”? Because I know a lot of entrepreneurs and a lot of managers: looking at their different behaviors is almost like looking at the difference between lions in a zoo and lions in the wilderness. Imo when it comes to our financial success, we’d better keep company with “wild beasts”! ;) The difference I see between Malone and Maffei is the difference I see between a great entrepreneur and a great manager. Gio

So I was re-reading Buffett's 1991 Notre Dame speech and thought this part was interesting for this discussion: Yes! Interesting indeed! :) Thank you, Gio

I would also mention [amazonsearch]Building a small business that Warren Buffett would love[/amazonsearch] I think it is well written and easy to understand. Gio

--Warren E. Buffett Like people on this board already know, I am not looking for a) a good business, or b) a good entrepreneur, or c) a good price… I am looking for a) and b) and c). I demand those three requisites together, otherwise I look somewhere else. In other words, I don’t like to run risks when the free cash of my firm is at stake! ;) What is then the only risk I run? Well, obviously the so-called “concentration risk”. The number of companies, that at any given time satisfy both a) and b) and c), might be very small indeed. If I am wrong about any single investment of mine, some pain will surely be felt… Needless to say, I prefer to run this “concentration risk” than to accept the risks of a competitive threat, of a mediocre manager, or of holding a business at too high a price. Gio

By the way, I don’t follow much his other companies, but as far as Liberty Media is concerned, it is selling around NAV… Therefore, it doesn’t really seem to be much “Malone premium” in the share price today. Probably, it is because people think they are late to the Malone party by now… My hope is they are wrong: are 15 years too many? Perhaps… But also 10 years in his company might do great things for your financial well being, and 10 years from now he will be Buffett’s age. Buffett is still pretty at the top of his game, isn’t he? ;) Gio

Common sense by Seth Klarman http://www.viewfromtheblueridge.com/2014/09/12/common-sense/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+viewfromtheblueridge%2FJkgK+%28The+View+from+the+Blue+Ridge%29 Gio

Malone is 10 years younger than Buffett. Many think Buffett can be at the helm of Berkshire for at least 5 more years… Therefore I hope to keep company with Malone for another 15 years… If Malone is gone, so I am too… No matter what happens to the stock price then. Gio

Sorry! I hadn't checked, but David already started a thread about this book... ;) Gio

[amazonsearch]Seeing What Others Don't - The Remarkable Ways We Gain Insights[/amazonsearch] --Gary Klein Highly recommended! Cheers, Gio

[amazonsearch]How to Read a Financial Report: Wringing Vital Signs Out of the Numbers[/amazonsearch] by John A. Tracy Cheers, Gio

In any investment of mine I require always both a great entrepreneur and a good business. I regard a chain of fast-food restaurants and fast-food franchising to be good businesses, but of course the fact I admire what Biglari has accomplished until now as an entrepreneur is also very important: I wouldn’t invest, for instance, in CBRL… But, let’s say, Biglari at the helm of an obsolete technological company? It surely wouldn’t interest me either. Gio

Well, I guess that is exactly what I meant when I said the worst part of a 2 + 20 compensation plan is imo the 2 by far... You just used different words! ;) Gio

shalab, you asked to comment, so I will do it: I am not interested in this subject at all. As I have said I judge Biglari to be a star at what he does. The only thing I am interested in is that he goes on doing what he does best, taking entrepreneurial decisions, for as long a time as possible. How could I be interested in this subject? If Biglari is forced to leave the company against his will, I will surely be gone too! BH would simply cease to be what I look for. And I will be looking somewhere else. Why should I be interested in what happens to BH afterwards? The only other thing I am interested in is that BH stock price stays near BVPS for a very long time, so that I can go on purchasing more and more! ;) Gio

Compensation is the only argument by the bears that really interests me. But even about the compensation topic we have different views. As they say, to each his own! Cheers, Gio Just to be clear: The part I like the less in a 2 + 20 compensation plan is the 2… by far! This notwithstanding I invest in GLRE and in TPRE, because they both have a long track record of outperforming the S&P500… AFTER FEES… That’s to say after their 2 + 20 compensation plans are carried out. If to that you add the benefit of float… well, nothing is for sure, but the potential there is certainly very enticing! Now: with BH you don’t have to pay the 2. This is how I think about compensation. And the argument “but he had promised to work for free!” doesn’t seem very convincing to me. PS I would also add that, though I admire Einhorn and Loeb very much, I like what Biglari is doing even better! Gio

Ahahahahah!!!! You think how you type your annual report is a shenanigan?! Come on, Tom! You know to do something else, besides talking about cognitive dissonance?? Gio

Compensation is the only argument by the bears that really interests me. But even about the compensation topic we have different views. As they say, to each his own! Cheers, Gio

adesigar, sincerely I think I have contributed more than enough to the BH discussion on this board… if you are really interested to know my view about the company and about Biglari, there is a whole thread to read… Long story short: show me someone who might convince me he/she has the opportunity and the capability to create as much value as Biglari for the next 30 years, and I will start to treat Biglari less like a star… But if I think someone is a star, and I treat him like a star, and you don’t understand why a star should be treated like a star, than the problem is yours, not mine! Gio