siddharth18
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Posts posted by siddharth18
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And the noose tightens...
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In Value Investing, there seems to be a pervasive attribute that whoever has the most pessimistic view at any given time, is the most conservative and hence the shrewdest/smartest investor. Yes Klarman, we get it, that the US is deeply entrenched in trillions of debt and the hole is being dug deeper each passing day. Is he hoping for sort of change that will emanate from his lengthy ramblings or trying to justify his hum-ho returns?
Would've been more flattered if he said something along the lines of "even in the perilous period of the debt fueled economy, there seem to be some sectors/pockets in the market that continue to be attractive."
I came for the micro, but all I got was macro.
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I do remember him from Snowball. Condolences.
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The Professor, the Bikini Model
and the Suitcase Full of Trouble.
Great article! Read it fully, although it's hard to sympathize with someone's plight who has demonstrated an utter lack of common sense from the get-go. And of all people, a theoretical physicist!
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Chilling.
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Of all the people that actually claim to profess the ability to discern the pyramid schemes from legitimate enterprises, I reckon only a minute fraction actually have done the deep due diligence needed to separate the fact from fiction.
After passing the initial barrier of conducting a true litmus test, one then has to calculate the probability of whether anything will come out of the government to disrupt or shut down Herbalife.
Even if HLF does face a regulatory action, the scope of the action remains uncertain (slap on the wrist compared to a full scale freeze and eventual shutdown). And after that, one has to calculate the exactly effect a possible government action would have on the business of herbalife given that only 20% of revenue is based off of USA and that the company itself is incorporated in Cayman Islands.
The materialization of the negative outlook is contingent upon governmental action as the organic growth shows no signs of slowing.
I have no dog in this fight (and am not going to buy/sell/or do anything with the stock), but simply talking about the organic growth showing no signs of slowing is kind of a bad way to look at this. By nature, pyramids are a lot like ponzi schemes in that once enough people get screwed, they move on to the next thing and there aren't people to come back. Bernie Madoff had no signs of bad returns until, well, he imploded. It is very possible that we will look back on this in a manner where the thing couldn't go to hell... It may not be that dissimilar to various RE shorts a few years ago.
Furthermore, if a company loses 20% of revenues- well, bad things generally happen.
Again, I have no position in this and can't see myself having one... I simply find the case fascinating.
Well you might be right.
If I understand correctly, Ackman's main argument is that either one or both of the following will happen:
1. His publicity will force a regulatory agency to inspect HLF OR
2. The "pyramid" will collapse as it will run out of countries
No one can possibly know if #1 will happen. Even if it happens, no one knows what kind of action will follow - slap on the wrist or change in business model or asset freeze/shutdown? The only fact we know is that for over 30 years, HLF has existed and even communicated with SEC/FTC and there has been not a single problem. (MLM industry's lobbying surely must've played some role here? I am just speculating here.)
Regarding #2, the rebuttal it is that HLF has been in USA market for 30+ years and still experiencing growth. Overall rev keep increasing by double digits. Surely if it was a pyramid scheme the distributors/end users would be complaining about losing money right? Yet FTC has received fewer complaints than most companies. The way things are, and the way things have been - for the past 30 years, has not led an outpour of complains as one would expect from a company whose supposed principle business model is to ripping off. There does seem to be a set of population that is attached to the Herbalife brand (either for making money, or for staying healthy via the products/events/nutritional clubs).
Just to be clear - I don't have any position in HLF either. I just feel like if it gets cheap enough, I might initiate a position if it seems like an asymmetrical bet (a 4-5x upside vs 1-2x downside). In which case LEAPs might be a better idea.
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Of all the people that actually claim to profess the ability to discern the pyramid schemes from legitimate enterprises, I reckon only a minute fraction actually have done the deep due diligence needed to separate the fact from fiction.
After passing the initial barrier of conducting a true litmus test, one then has to calculate the probability of whether anything will come out of the government to disrupt or shut down Herbalife.
Even if HLF does face a regulatory action, the scope of the action remains uncertain (slap on the wrist compared to a full scale freeze and eventual shutdown). And after that, one has to calculate the exactly effect a possible government action would have on the business of herbalife given that only 20% of revenue is based off of USA and that the company itself is incorporated in Cayman Islands.
The materialization of the negative outlook is contingent upon governmental action as the organic growth shows no signs of slowing.
I personally think LEAPS are a better bet if one has a bullish thesis on HLF since the existence of the company is in question (meaning the LEAPs would just be as worthless as common stock in the worst case scenario) but the upside would be magnified if Herbalife returns to its pre-contentious glory.
Being short the stock, in essence acts as an option because as time passes by without any word of regulatory action, the perception that HLF will survive - increases and the likelihood of it reaching its intrinsic value also increases.
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Sanjeev you deserve a lot of credit for creating and maintaining this board. You charge no fees and impose no requirements for one to participate in this community of like minded individuals. . Although I'm rather new to this board and in the earlier stages of mastering the art that is value investing, I am mindful of the value (no pun intended) this board provides to all its participants. Thank you - I really mean it.
Cheers!
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When either:
1. The thesis for investing becomes invalid (in order to preserve your capital)
OR
2. You find better risk-adjusted opportunities for your capital (opportunity cost principle).
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LeapFrog seems like it was a turnaround in-the-making and much progress has been made. Any thoughts?
Check out the Investment Ideas board I started a LeapFrog thread there.
Thanks! I actually searched using the search box for "LeapFrog" but that didn't show your thread...weird.
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An attractive 16 yr old girl saying the words "overbought, oversold, technicals".
Not too shabby.
Not bad for a 16 yr old. She better hope it doesn't end badly. Lemmings are the first to get crushed in a stampede caused by speculative frenzy!
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LeapFrog seems like it was a turnaround in-the-making and much progress has been made. Any thoughts?
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Anyone know Pabrai's annual performance in 2012?
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she shuns speculation and yet that's exactly what she does. hmm...wtf?
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Sorry if it's been already posted before - but couldn't find it.
http://www.bloomberg.com/video/one-on-one-with-bruce-berkowitz-f7ly_oVuSpeEDzVyggRbdA.html
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In-N-Out is probably the most conspicuous example of "Go for a business that any idiot can run -- because sooner or later, any idiot probably is going to run it."
Even before I read Buffett was interested, I saw In-N-Out's business model and was convinced that it, coincidentally, had all the qualities that Buffett had wanted in a business.
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Full Q&A Link http://www.anderson.ucla.edu/course/asam/WBQA.htm
Seems like formatting is off, but still readable. Way too many to list them all here. Some of them are obvious to us, some aren't, for instance:
This one jumped out to me:
Would love to own Traders Joe's or In-N-Out Burger. Would prefer Trader Joe's and will give a finder's fee to whoever brings him the deal.I know that both Trader Joe's and In-N-Out Burger are highly efficient, have pricing power and have cult-like following.
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@BargainValueHunter: Thanks for the thread!
@QLEAP: Thanks for the .mp3 version!
"What I've learned is that to do well in life you have to be extreme at what you do."
Completely agreed with him on that.
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Wow guys, thank you for being so generous! ;D
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Got about 2% in deep OTM puts that will pay off enormously in event of systemic failure. On the other hand if there is a 10-20% drop they're probably worthless.
Regarding your Puts - Klarman does this too, right? From June 25, 1998 Baupost letter:
We also have substantially increased our position in disaster insurance (out of the money U.S. equity market put options, as well as various protections against rising interest rates and fluctuating currencies.) We continue to be willing to give up a portion of our upside to protect against serious downside exposure. -
What's the story behind Mega Bloks? Turnaround in progress?
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Thanks for the info guys! Just ordered both.
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Isn't one of the salient points of Buffett's teachings that one should make investment decisions only on micro factors and NOT on macro factors?
"I make no attempt to forecast the general market - my efforts are devoted to finding undervalued securities.-Warren Buffett, February 11, 1959
I suppose you could say that securities that fall into your circle of competence are overvalued and you are simply waiting for their prices to fall back to earth.
% of port invested in AIG
in General Discussion
Posted
It may be a screaming/no-brainer buy for the veterans, but if I don't understand something, I just won't buy it. I've got to ask - many of those that are long AIG can truly digest the 350+ page annual report?
Hence, I just stick to the micro/small caps.
Regarding macro - Dr. Mike Burry has a pretty good track record of understanding it.