Palantir

This is why I love investing in IT firms. Low CapX, high switching costs, high FCFE. yummy.

Fairholme? Goodhaven is a good option too.

+1, there is a lot of dreaming here and minimal ideas. Ha, I was not being sarcastic, I was 400% serious. I think that for these web startup type firms, the idea is not really that important, many of the ideas already exist....all about putting something really good together IMO.

In all honesty I want to start the next twitter or instagram or the next great web startup and become Steve Jobs and Warren Buffett rolled into one. Lemme know if anybody has ideas. Seriously.

I see a serious market opportunity for an Indian food chain in the vein of Olive Garden.

I think the true "value" guys in this space are Valencia - *in recent years* they have built their success on finding talented players before they become famous and selling them after they do. In addition they buy talented players that are "out of favor". David Silva, Mata, Albiol, and Jordi Alba were in the first category. Fernando Gago, Roberto Soldado, Sergio Canales, are in the second. I'm biased as a Valencia supporter, but their strategy has clear value elements.

I would disagree with your comment on Microsoft, Steve Ballmer is a major owner, and very much did play a crucial role in building Microsoft, furthermore BillG does wield considerable power given his stake and his role as Chairman, so he is still ultimately responsible for what goes on there. Furthermore, even in non "fast changing" industries, there is always the risk of empire building, poor strategic decisions (that no one can question), and ego-fuelled misadventures, along with poor capital allocation.

In my opinion, the real problem with banks, and something I don't believe Taleb quite addressed, is that their employees are the primary value creators. This is not the case with say Coca Cola or Google or Nike, where the overall system is what creates a profit, and you can have different employees and it will still be operationally sound. A bank on the other hand, especially an investment bank, the revenue is dependent upon star employees, and if they leave, the firm will be badly hit. In a sense, an investment bank is more like a law firm or a medical clinic or a tutoring service (or even a brothel!)- revenue drivers are a set of skilled professionals who provide a commoditized service, and are housed inside that institution, and if these professionals can do better on their own, they will do so. This is not the case with JNJ or HP, where the product is a differentiated service resulting from the firm's institutional knowledge.

Dell is run by an owner-operator as was Yahoo....as is Kingfisher in India. MSFT has been run by owner operators and they havent moved out of 24-30 trading range in ten years. All I can think of is that owner-operated companies will tend to be more conservative and fixed in their thinking. Furthermore, they may not be willing to pursue all capital allocation decisions equally - for example hesitant to pay dividends because their owners will get a huge tax hit. Owner-operators can be good, but you are also subject to their whims and their egos, and the fact that they might not always be right. Personally, I think of owner operated as a neutral characteristic....but I could be totally mistaken.

market has "dividend fetish".....pretty much the only justification then...

^ I think it should be seen as purely a capital structure decision when it borrows money to pay dividend. I wouldnt mind if some cash rich companies with stable business streams did that (MSFT, GOOG, etc...).

Given that HY performs similar to equities, perhaps like a low risk equity, if you see a HY bubble crashing, would you make the same prediction for equities then? Essentially, I don't see that they are in a huge bubble as their performance has very much been in line with Large Caps. But I could be wrong I suppose, in which case, there should be a nice buying opportunity...

Ok.....anybody have any links on articles that tell you how to analyze banks? I really have no idea, never look at the financials sector.

Does anyone know why BNSF's financials are still published? I thought once it was taken out, they would be consolidated into BRK. http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000015511&owner=exclude&count=40&hidefilings=0

Funny poll. I see your point though. When I first started investing 1-2 years ago, I went in with the intention of being a hardcore microcap investor. I was going to buy obscure, illiquid stocks trading at massive discounts to IV, things below 50M. But when I actually start investing, I find myself gravitating towards large and megacaps. They say micros and smalls have the best opportunity as they have lots of "room to grow", but large caps have better quality, they have huge established customer bases, distribution chains, institutional knowledge, brand names, and inertia! Even if organic growth slows, they can rapidly juice returns by buying back stock or growing the dividend, so there is no real lack of opportunity, and even a fast growing 50B company can double, triple, and quadruple in size. Given that I am more of a "moat" investor, I'd rather invest once, and watch a company compound value for years and years. But I'm still on the lookout for small cap moat firms - currently invested in Reed's and Neustar.

I am not expecting much growth out of GRI, but a lot of dividend payouts, on the order of 4 pct. or greater. Plus according to their statements, market share is growing so there is moderate upside as well. As for valuation these guys are generating 2m of FCFE on an EV of like 8m.

I don't know if this is an appropriate question, but if you are so inclined, would you mind posting a short position you are invested in or have been in the past?

Awesome sir! Hope you keep posting your letters. These are always very interesting to read.

George Risk Industries - RSKIA makes home alarm systems...

I think of software firms with high switching costs as good companies, because they are very capital light, and have long contracts with recurring revenue. Currently I am invested in Red Hat and Microsoft. I think Google is similarly a great firm because it is a natural monopoly, capital light, and psychological switching costs. It is in many ways like a consumer staple of tech.

I don't do TA, but I do like to pay attention to momentum. If I think a stock is cheap....but it has surged to a high, or if it is falling rapidly....I avoid. I've started experimenting with stocks that have surging momentum (FB). But it is better to take diversified positions. Furthermore, with many high quality growth stocks, if they dip from time to time, they may be slightly above your target value, (I want to buy at 46, IV at 60, but it's trading at 48) I think it might be a good idea to forget about your IV if a high quality growth stock comes "close", how close is a judgement call.

Ok fair enough, I must have been looking at the wrong ticker. That being said....where do you see growth here?

I appreciate the idea, but where do you see that you bought it for cash? Google says they have 2M in cash for a 20M cap firm. Oddball has inspired me to find growth stocks in the sub 100M space. One I found, unfortunately already has had a huge runup, but it is a moat/growth firm, so there could be plenty of upside in the future if op results are good....I will post it after I initiate a position.

In an earlier post you noted that PA performance would not be meaningful to an investor as it is not subject to the many constraints of running public money. I'm a little confused reconciling the first statement regarding PA's with your recommendation from Prem, "start with what you have and build a track record". Isn't that the same thing? Just for clarification, when you started your fund with 400k, was that with OPM or was that your own PA?

What is a good way to show a track record? Would brokerage statements suffice, or is there a more formal way of doing it? Do you mean for your personal account or a fund? Cheers! For a personal account. I have a brokerage account, at some point I'd like to be able to post my results in the same way.