WhoIsWarren

Here's the latest Tilson / Forbes interview (from end-June.....sorry if it's been posted already). http://www.forbes.com/sites/steveforbes/2013/06/27/whitney-tilson-wisdom-on-value-artists-like-buffett-and-klarman/ From this I'd highlight the following: Forbes: You’re going to bite out of Apple? Tilson: Are asking do I own Apple stock? I do. I got back into it just before they reported earnings a few weeks ago, a little under $400 a share. Added a little more after earnings. My feeling about Apple is: I’m not sure what to think about it long term, but I think it’s likely to do well in the next six monthsor so simply because I think they’re in a new product launch. And later he talks about JC Penney..... Tilson: I actually am back in it just in the past month or so......I think the stock is a quick ride into the mid-$20s. And then again, then I’ll have to decide if I believe in the long-term turnaround or not. And then the interview ends with this: Forbes: Finally, what’s the best money advice you ever got? Tilson: I would say Warren Buffett, years and years ago (he’s repeated this many times when he meets with students) has always said, “The best way to think about investing is you’re coming out of business school or you’re coming out of college now. And you have a card, and it has 20 punches. And every time you make one investment, you have to punch that card, and that’s all you get for your whole life. Not for the month, not for the year. That’s your life. You can make 20 investments.” 20 punches, eh?? ::)

Nice presentation. FCNCA is one of my holdings.....

OP, A subset of HY is distressed debt and if you're interested in this you could probably start by reading a book like this: http://www.amazon.com/Distressed-Debt-Analysis-Strategies-Speculative/dp/1932159185 Around two years ago or so I had an idea that I could study and eventually know enough about distressed debt to begin investing in it. My background is in equities and I figured, well, a lot of the same skills must be applicable. I never got very far because I realised quite early the huge amount of work that would be involved. It seems to me that distressed debt is a full time role -- not a tag on to an already full day. The front cover of the book linked above has a picture of a chess board -- an illustration of the complexity involved. Without proper experience or knowledgable contacts I reckon I would make many, many, expensive mistakes. While the intricacies of distressed debt are far more complex than high yield in general, I still think you need to do dedicate a lot of time and effort and gain experience of a lot of different situations. Else you'll surely play the role of the patsy? Just some random thoughts of caution. And where we may or may not be in the 'cycle', well that's some more for you chew on ;D

I've gotta ask -- did you beat them?? :)

Thanks claphands, that's interesting, will check Dental Town out. Do you have any sense for how 'rep-free' sites such as Dental Town are? A lot of the time it feels like responses are from dental implant sales reps who are posing as dentists.

Hi, See below a link to an article exploring the competitive advantages and barriers to entry in the dental implant industry, which some of you may be familiar with through two Swiss companies, Straumann and Nobel Biocare. On the surface it would appear the barriers are high; on further inspection it's not so clear. I genuinely think this is an excellent article for anyone considering investing in this industry, but I also believe there are broader lessons to be learned. Most companies' moats are "Roman Candles", not "Eternal Flames". If anyone has good insights into the dental implant market that can help us better understand this puzzle we'd genuinely love to hear from you. http://www.valueinstitute.org/viewarticle.asp?idIssue=1&idStory=127

+1 ;D ;D ;D Brilliant!

Perhaps a better way to phrase my question is: why did Berkshire go all the way to Israel to buy Iscar (first acquisition outside the US) rather than buying KMT? Any help here appreciated. I really believe this is a fascinating little sub-industry. Cheers. Iscar owners called Buffett. He didn't go to Israel to buy a tool business, they came to Omaha and offered it on a silver platter. This is Buffett's dream scenario, I'm sure he wishes it happened a little more often. Right dartmonkey, thanks. That probably explains it. I'm still looking to see if there's an angle. An industry source my buddy spoke to (an Iscar distributor) claimed that Iscar were the most innovative and best run in the industry. [i'll speak to him about it again and if I get more insights I'll repost next week]. That source was biased of course, so I'd like to see if anyone else has an alternative or confirmatory view. Interestingly, this source felt that Iscar could / should buy Kennametal. Anyone else had this thought and how likely is it?

Anyone know if the 1999 Allen & Co. Sun Valley speech was recorded? I have the transcript (it's in the Tap Dancing to Work book). A video of it would be amazing!

Right, thank you longinvestor. Interesting you say that KMT has suffered. You think that's an ongoing issue or something they've corrected? If you wouldn't mind, could you give your take on some bigger industry questions. I can see how the high end of the market is pretty consolidated and that there are high barriers to entry (is that true??). But amongst the big three it would appear that profitability differs quite a bit (don't have info to hand, but that's my memory). So I guess, what makes one carbide company superior to another? From what I understand, each of KMT, Iscar and Sandvik produce equally good products (according to an industry source, they all copy each other, patents or no patents!), but maybe that's an oversimplification. Is an efficient manufacturing process difficult to achieve? How important is distribution to their success and how important is it to own your distribution network (which I think Iscar broadly does) versus having "tied agents"? Perhaps a better way to phrase my question is: why did Berkshire go all the way to Israel to buy Iscar (first acquisition outside the US) rather than buying KMT? Any help here appreciated. I really believe this is a fascinating little sub-industry. Cheers.

Aha, so somebody with hands-on industry knowledge? Do you have strong views on Kennametal? It's one I've been eyeing for a while but just can't get over the line. KMT is trading on an undemanding valuation on the face of it. However, look at margins, which are ball-park twice their historic average. The company line is that they've exited the commoditised end of the market, which may be true but even at that I have my doubts about their acquisition policy. Plus they take "one off" restructuring charges, which I believe are more of a regular cost of doing business (in which case should some annual charge should be factored in). All of which leads me to conclude that I'd like to buy it.....but maybe at a price in the $20s and not the high $30s. Any thoughts?

Well the 2006 transaction valued Iscar at $5bn. The current carrying value will be different to the extent that they've retained earnings or raised additional equity.

I think Andy's comments on underwriting were for me the most interesting take out from the AGM. He said something about wanting the underwriting side of the business to be as well-regarded for excellence as the investment side. And that he expects underwriting results to be better....potentially significantly better. These weren't the exact words used, but I think are close. I take that to mean much more than just an over-the-cycle 100% CR. Then Andy asked a number of the individual insurance heads up, starting with Doug Libby at C&F who outlined how the business 5 years ago (or so) was 15% specialty and that now it's 85% specialty, which I interpret as less competitive and hopefully more profitable over a cycle. Unfortunately the rest of the insurance heads were not nearly as insightful, but my impression is that there's a plan in place to focus on more profitable over-the-cycle niches. Anyway, if Andy and his team manage to implement their plan there is enormous upside for the stock. As this was my first Fairfax AGM, I'm particularly interested in hearing from the 'old heads'. Is Fairfax prone to perpetually talking up their underwriting potential? Thanks

Doh -- I actually searched for a NOV thread and couldn't find one. Sorry! Thanks for your thoughts compoundinglife. I think the way you are approaching their earnings power, as unscientific as it is (and I mean no disrespect here), is probably the best one can do i.e. they have a tremendous moat, and there will be growth in industry spending, which will lead them to "earn reasonably more 5 years from now". I look forward to hearing from others. Thanks

Compoundinglife -- can you elaborate a bit more on NOV? I've taken a look at the company and it looks very interesting. However, I struggle with trying to come up with a (rough estimate) of NOV's earnings power. You know, just dealing with the meteoric rise in profits over say the last 10 years -- a more than 10-fold increase -- is a bit daunting. Also, I notice that while gross and operating margins are very high, the company's RoE is less impressive (10-12% 10-year average). Presumably the reason is the goodwill created by their acquisitions, which would seem to have enormously helped in creating their pre-eminent position in the industry. However it begs the question whether they've overpaid for deals and whether they feel a need to continue the acquisition strategy for years into the future. What are your thoughts on that? Finally, everything you read about NOV mentions their high market shares (NOV = No Other Vendor). Have you been able to do any channel checks or to speak to any industry guys? I'd be really interested to know whether this is just company spin, or whether there truly are high barriers for competitors? [sorry, not trying to hijack this "What are you buying today?" thread. Anyone want to volunteer starting a NOV investment idea thread? I'm sure there would be lots of interest in it.] Thanks

Yes, I echo the above-mentioned positive sentiments. In particular Sanjeev, thanks for going out of your way to introduce me to Roger Lace in the foyer after the AGM, really appreciated!

Link to audio book of "The Dancing Lu Wi Masters" by Gary Zukav, mentioned in the article. I'm a chunk of the way through and it's enjoyable, very interesting. http://www.youtube.com/watch?v=MroBJsi9y6g

Yeah, great read. The more things change, the more they stay the same! So much of what we talk about is the same stuff he was writing about 30 years ago (and perhaps a number of decades before him). I love the story about Dr. Fox.

Sorry rogermunibond, I was just joking -- my attempt at humour obviously struck a dud note! I really like Grantham and I enjoyed the Charlie Rose interview, though he strikes me as someone who is very definite in his views, whereas the world is probably much more complex than he or any of us realise. I'll check out the Allan Savory presentation, thanks for highlighting.

Brilliant rogermunibond, I hadn't looked into Ridley's past -- good spot. Touché! Doom and gloom it is!! How about this youtube clip instead? (Background - a p*sstake of an Irish radio host "agony aunt"-type Joe Duffy; you may not get the accent or some of the jokes.......but you should get the drift.....): http://www.youtube.com/watch?v=C9oiO6RVKrU

Not exactly a repost to Grantham, but an interesting and well-delivered 10 minute presentation by Matt Ridley on why there is grounds for optimism http://www.ritholtz.com/blog/category/video/page/2/

Late and all as it is, here are 12 parts of the interview, though not sure if that's the full lot. (Courtesy of Santangel's Review). Part 1 http://video.cnbc.com/gallery/?play=1&video=3000151490 Part 2 http://video.cnbc.com/gallery/?play=1&video=3000151794 Part 3 http://video.cnbc.com/gallery/?play=1&video=3000151793 Part 4 http://video.cnbc.com/gallery/?play=1&video=3000151814 Part 5 http://video.cnbc.com/gallery/?play=1&video=3000151816 Part 6 http://video.cnbc.com/gallery/?play=1&video=3000151795 Part 7 http://video.cnbc.com/gallery/?play=1&video=3000151815 Part 8 http://video.cnbc.com/gallery/?play=1&video=3000151817 Part 9 http://video.cnbc.com/gallery/?play=1&video=3000151825 Part 10 http://video.cnbc.com/gallery/?play=1&video=3000151796 Part 11 http://video.cnbc.com/gallery/?play=1&video=3000151818 Part 12 http://video.cnbc.com/gallery/?play=1&video=3000151797

Is the Noah - ark analogy really that suitable? How about thinking about the investment portfolio as a (proper) long-short fund. Fairfax has shown an ability to add "alpha" in the past; I'm happy to bet they'll deliver similar results in the future. Perhaps this will 'only' be a couple of percent (or maybe less), but that's ok by me. Meanwhile, their hedge gives them optionality (in the same way that cash does) to take advantage of a fall in the equity market. The value of this optionality of course won't be captured in an accounting sense, but conceptually it could be added to whatever 'alpha' is generated to calculate the total return on the investment portfolio.

That's an extra $21 / share, I realize that due to GAAP they can't include it, but would you guys include it in your analysis? They won't have accrued the offsetting tax on this.....so more like $14 per share uplift net of tax. I'd include it alright, but no big deal either way, right?

A couple of interesting things from the CNBC interview. In relation to Heinz: "3G is a good operator, too. as evidenced by -- they weren’t actually the owner of Anheuser-Busch, but it's the same -- it's the same managerial group. I don't think I've ever seen a better developed management group than the one that Georgy Paolo has done developed over the years, in Brazil. He has been incredible." And later he was asked: "Do you expect to use Heinz or does 3G expect to use Heinz as a rollup vehicle? They've done this now in the beer industry, will they try to do this with other brands?" Yeah, well i would say this. Georgy Paolo and I are very good friends. We've talked about the deal and neither he nor I like to think of this as our last deal. I mean, we will be -- we will be buying things. He generates cash. We generate cash. I love being partners with him. And, it's certainly possible that, you know, there's nothing in mind -- no plan in mind now. Certainly in terms of anything specific but I would hope that over time that we would be adding to this." So Georgy and his team is great (anyone for Burger King??) and we really should expect this story to grow legs. Separately he was asked about the recent speculation linking him to NYSE. "Well, I guess the answer is I didn't see anything because i was…..never contacted personally in any way, I never had a phone call, e-mail from anybody in connection with the NYSE. There was some contact from somebody else at the office but like I say nobody, nobody from investment banking firm ever put a phone call in to me or e-mailed me, and, and when they prepared the proxy nobody checked with me." Q: And would you have been interested? "No." The answer unfortunately wasn't expanded on, but I'd love to know why Buffett was flat out not interested in NYSE. I have to say that I was surprised to hear the story that they had bid, because in my view there is so much change and potential for change in that business when I look out 20 years or so. Reminds me of Buffett's letter exchange with a Microsoft executive back in the mid-90s or so -- true, Microsoft had a near monopoly position and had great pricing power, but the PC industry was at risk of major change as Buffett looked out 20 years. Then again, maybe he said "no" because the price was too high.....