Palantir
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Posts posted by Palantir
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Michael Burry?
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I agree. It doesn't really matter -- at least to me (either). But, just looking at the 1985 - 1994 period for Berkshire is telling. Wasn't Berkshire's reported change in book value per share net of corporate tax?
An (leveraged) operating firm's change in book value is totally different from a fund's performance.....
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No, Greenblatt is the authority here. Buffet's only identifiable track record dates back to the 60s.
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As Charlie says, "always invert", so instead of "why spinoffs?" your question should be...................actually, I'm not sure where I was going with that.
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Palantir, just want to say that you are the man! Whatever the methodologies/religions we use, the end goal in investing is always about making money. We have to remember the kind of returns that Buffett was making in his earlier years. He didn't get to where he is from preaching his philosophies, he arrived there through his returns.
Hahaha, thanks. That is the difference between Buffett and John Hussman, one has the results, and the other has very reasonable arguments.
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I have not dropped any of my points. It is still indisputable that going long AMZN was the right decision ten years ago if you had a investment case for doing so, I used "highly likely" to refer to a more general scenario with AMZN as an example.
OTOH, I like that you are slowly coming around to my argument, judging an investment case by the end result. Keep it up.
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No, there is absolutely no way to definitively judge the strength of an investment case.
No, this is badly mistaken. There is no way to definitively prove the strength of somebody's case for an investment. Read the bolded part over and over again until it sinks in. Investing has no built-in feedback mechanism, and an investment case is merely an opinion.
Wrong again.
If I am invested in, say, Fannie Mae, because I believe that the court will reverse the 2012 Amendment that sweeps away all of their capital -- explain to me how there is "no way to definitively prove" whether I was right or wrong. Why would the actual result of the litigation not "prove out the strength of [the investment case]"?
Oh...all this time you spent telling me that using results was the wrong method. But I guess that you're getting around to my view. You realize in these scenarios you're looking at an investment case after the event happened? Markets reflect information that flows into them such as the FNMA court verdict or what TSLA's gross margin will be and that is what drives market returns, they do not simply appear out of thin air. Furthermore all value investors depend on the market recognizing value at some point, and if the market never recognizes the value of your holdings, you will not be a very successful value investor. Frankly, I find your disdain for investing in these names to be pretty amusing, it seems that you think that buying TSLA or AMZN is just throwing your money in a set of random outcomes, and which leads to some random price movements on a screen. I have no interest in correcting this view.
Speaking of pigs, my view is, "why argue with a fool when you can bet against him". I'll be doing that.
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I don't have time to type up a long essay, it's not a slow weekend for me.
Alternatively, we can go down the following path. If you have a legitimate basis for investing in Amazon, that is the only criteria that matters. In other words, if you have a legitimate basis for investing in Amazon, and the operations eventually bear out that legitimate basis, then that is all that matters. The market return may follow or it may not. However, merely looking at the market return is flawed. I believe that the vast majority of the people on this thread have tried to explain just this point to you multiple times -- and, apparently, failed.
No, this is badly mistaken. There is no way to definitively prove the strength of somebody's case for an investment. Please read the bolded part over and over again. Investing has no built-in feedback mechanism, and an investment case is merely an opinion.
However, what can be measured is the end result of making the investment. If you make a reasonable case for long AMZN and it goes up 800%, there is a good chance your case is justified. If you make a reasonable case for shorting AMZN, and it goes up 800%, well...hahahahha.
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Try to see the point. You just assume that your metric of earnings growth is the "correct" metric, whereas the market value is the "wrong" metric. Notwithstanding the fact that you have not established why the market is wrong about AMZN, and now you are passing it off as a fact.
If you use the market price to judge a stock - what are you comparing? Price with price. So what's your analysis? Nothing. Was CYNK a better company at a $10 billion valuation than at $10 million? You don't know if you don't look at the underlying business - you are speculating. Please quit the nitpicking, all Merkhet is trying to explain to you is, if you had bought Amazon for $20 billion, how much cash would roughly have ended up in your bank account after a decade? Probably less than $160 billion. Seen from that perspective (I would say the value perspective) Amazon wasn't a 800% return investment. What the stock did in the meantime is irrelevant for that analysis. Do you really not understand this line of reasoning?
Also, if the market is 'right' about Amazon, why did you buy it? Risk-adjusted return would not beat the market ..
I'm going point out something to you - the valuation of a firm is not just the cash it has generated in the past, but what it will generate in the future. As for the rest, see my response to merkhet.
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I don't see a point in continuing this discussion, but I thought I should follow up on this post as you do not seem to understand the point I made and rather are bent on accusing of saying things like "market is always right", which I did not do. I think you need to remember that the whole point of investing is to make money - if you can do it through value investing, great, growth investing, also great. That's it, there is no other reason to be investing in the markets. And in that vein, if you had a legitimate basis for investing in AMZN, you indisputably made the correct decision.
I'm using earnings growth as a proxy for owner's earnings or free cash flow. I am using owner's earnings or free cash flow as a variable for the implicit DCF that goes into a valuation. I am using John Burr Williams' "The Theory of Investment Value" as the "correct" formula for valuation. What part of that line of reasoning do you find objectionable?
You are free to use whatever methodology you want in valuing AMZN. However, that does not mean that the answer you get is correct, nor does it mean that the market price is wrong. All valuation methodologies are based on assumptions which drive the end result, and are therefore opinions, and educated guesses, not fact. Try to understand this point - this means that you cannot definitively prove that the market is "wrong" and your valuation calculation is "right". There is no feedback mechanism that determines the correct answer.
As for the market, I do not believe the market is "always right", and in this case I believe the market is wrong because I think it is undervalued, however, the market has done a FAR better job of understanding AMZN than either you or Warren Buffett.
We've spoken about lottery tickets before (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/what-are-your-least-favorite-investing-quotes/msg182034/#msg182034) Just because something randomly drops a bunch of money in your lap doesn't make your decision to invest in it correct. The question is a priori decision-making not post-hoc rationalization.
Yes we have spoken about lottery tickets before, however if you can find a way to predict lottery results and profit off those, then your result is not the result of chance. The more subtle point I am trying to make is that investing in AMZN is not investing in a set of truly random outcomes - there is a legitimate investment case for AMZN and people have been making it, and profiting off of it for years. If you do not understand this case, then simply put it into your "too hard" pile, and move on instead of critcizing those investors as "investing in lottery tickets".
Also, for some reason beyond my comprehension, you seem to think the burden of proof is on me to prove that the market is wrong. Why is the burden of proof not on you to prove that the market is right? And how would you go about doing so?
The burden of proof is always on the investor to show why you believe the market, which is composed of thousands or millions of investors is wrong whether you are making a long case or a short case.
The market is not always right. See The Dot-Com Bubble, The Ensuing Crash from the Dot-Com Bubble, The Run-Up to the Financial Crisis, the Ensuing Crash from the Financial Crisis. Etc.
This is a pretty poor straw man, but whatever floats your boat.
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Try to see the point. You are assuming that your metric of earnings growth is the "correct" metric, whereas the market value is the "wrong" metric. This is something that you have not established - why the market is wrong about AMZN, and now you are presenting it as a fact.
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Your actual return.
Think about it this way. In 2004, Amazon was worth $20 billion. Let's assume that you bought the entire company for $20 billion. Over the course of the decade, you would have pocketed something along the order of $5 billion -- so a quick back of the envelope calculation shows that you would have earned a compounded at around 2.5% over the course of the decade.
Untrue. On the other hand if you had bought its stock, your actual return would be 800% thoroughly justifying by a wide margin your original long case. An accounting construction like earnings is a very poor measure of your investment.
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I have done no analysis and I never said that I did. I was just pointing out that your argument is results-oriented. If you put $1000 on black and win with roulette, did you make an 'indisputably' correct decision? No - you were just lucky. To judge the decision you have to focus on the business, not the stock price. Hence the CYNK reference.
You said, "The fact that a stock goes up after you decline to buy it doesn't mean your analysis was wrong".
Ok, then what shows this analysis is wrong or right?
We don't know what Buffett's analysis was so we can never know if it was right or wrong, and even if we did we still might never know. That's the unfortunate reality of investing: we can only observe what has happened, but we can't observe what could have happened.
I don't disagree, and I'll point out that I'm not the one who brought up "Bufett vs Palantir". Buffett can do as he pleases, I have no problem with him investing or passing on AMZN.
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I have done no analysis and I never said that I did. I was just pointing out that your argument is results-oriented. If you put $1000 on black and win with roulette, did you make an 'indisputably' correct decision? No - you were just lucky. To judge the decision you have to focus on the business, not the stock price. Hence the CYNK reference.
You said, "The fact that a stock goes up after you decline to buy it doesn't mean your analysis was wrong".
Ok, then what shows this analysis is wrong or right?
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^ Yeah for sure, I think i-retail will be much bigger, but IMO limited in scope internationally as it is fairly US-centric, although they are investing in India. Not to mention their internet services business has such a huge potential market, from infrastructure to applications. I think 10 years from now, I hope they make 20B in FCF, or owner earnings if you will.
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Then pray tell, what makes your analysis right? Is it correct if enough fanboys on an internet forum get excited about it? Given that AMZN has been up 800%+ since Buffett bought the bonds, passing on the equity was indisputably the wrong decision. The fact that you put AMZN in the same group as CYNK tells me all I need to know.
As a BRK shareholder, I would have no problems with Buffett buying CRM 10+ years ago.
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With regards to Amazon:Hmm. Warren Buffett vs Palantir. Thats a tough one.
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Given that AMZN is up 800% since Buffett passed on it, Buffett has been dead wrong.
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how do you get comfortable that buffett looked at this and didn't like it? He owned the bonds in 2003. This is basicly a typical buffett company. Right market cap , large moat, and he holds a lot of cash. And I would bet a lot of money that Buffett read all the AR's.
I did not know he looked at it. That being said, I mean, do you think Buffett was correct on passing on it?
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Bought AMZN
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Can we get back to talking about drugs and prostitution?
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Zuckerberg? I doubt in 10 years Facebook will be relevant. It is no longer hip or cool (or whatever term kids use these days). i watched an interesting interview where they interviewed three teenagers - the response was Facebook is what my parents use. I just don't see it lasting the way Amazon or Google will....
What do you think will replace it?
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If they were joined at the hip, people who were good at Math would almost always be good at English. But people who are good at Math are usually good at Physics, which are indeed joined at the hip.
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I think you are getting confused. Value of a company is of course the PV of cash flows, however the analysis to getting to that is very different for different styles of firms, and those that are good at one style (value) rarely can apply the same analysis to another (growth). In the same way, winning a soccer game is about scoring more goals than the other team, however, there are many diverse strategies of getting there, and usually players that fit one style may not fit another.
Again, you are getting tripped up in semantics. Whether or not the value crowd is able to apply the same analysis as the growth crowd is largely irrelevant. They are both, as I stated a few posts ago, trying to lay out less money now than what they would receive in present value from the future cash flows.
I know nothing of soccer, so allow me to use American football terminology. It doesn't matter if you have a running game or a passing game. The goal is the same for every single team. This is what Buffett and Munger mean when they say there is no difference between value and growth.
Teams that depend on a great passing game don't necessarily excel with the running game and are usually exposed when the passing game is cut off. Just ask Peyton Manning.
So it does matter whether you have a passing game or a running game, and being good at one doesn't mean you are good at the other.
If you want to learn the investment case for FB, feel free to peruse the FB thread, and search Google, I'm sure you will find many enlightening things. Given that those who believe in that case have done well, your argument is pretty weak. Unless of course you subscribe to the idea that only investing in certain stocks is "legitimate".
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You're getting tripped up in a semantic problem.
There is a difference between a priori and a posteriori calculations of cash flow. It's incontrovertible that the intrinsic value of a company is the present value of its future cash flows. The answer to your first question is that, for most people, it's not possible to estimate with any degree of certainty even the floor for the future cash flows of these three companies. (Though I think Tesla is probably an easier company to forecast than the other two.) Notably, this is not because value investors can't "see" what other people see. In fact, it is more likely that what other investors "see" is illusory.
I think you are getting confused. Value of a company is of course the PV of cash flows, however the analysis to getting to that is very different for different styles of firms, and those that are good at one style (value) rarely can apply the same analysis to another (growth). In the same way, winning a soccer game is about scoring more goals than the other team, however, there are many diverse strategies of getting there, and usually players that fit one style may not fit another.
There is no difference in the way that you evaluate a company like Tesla versus a company like General Motors. In a general way, it's just a matter of (1) how many vehicles can the company make per year (and get absorbed into demand), (2) what margin can they maintain per vehicle, and (3) what is the likelihood of technological disruption to their business?
There is a significant difference in how you evaluate TSLA vs GM. GM's incomes are far more predictable than TSLA, whereas in TSLA's case each of those above metrics are highly uncertain, it is the same reason that they attract different groups of investors.
And yes, it's possible that there is no legitimate case for investing in Facebook so long as there is no objectively passable way to know a priori the company's cash flow. The fact that it might work out well if Facebook can crack mobile advertising has no bearing on whether it's a good investment. A lottery ticket can pay out as well, but that doesn't make it a good investment.
No, there definitely has been a legitimate investment case for owning FB, and people have made it many times, and have been proven correct given how well those that bought it have performed. And no, a lottery ticket can be a great investment if you find a way to raise your odds of winning.
On the race to the new milestone: $300,000/share!
in Berkshire Hathaway
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I don't doubt that Buffett is likely extremely arrogant, you need to be if you want to do what he does. If you do not believe that you are the best capital allocator in the world, why would you continue to be CEO of Berkshire? I think that most extremely successful people are to some degree...a little bit twisted.