jay21

Road to Character and How to Win Friends

Anyone read any good books lately?

Dream Big is the book on them. Im half way through and think its solid. Few good parts but most of it is just OK.

Libs - Didn't look but I am guessing on pt 1) its the preferred dividends.

Well, in my opinion, if one really wants to learn to invest - one can't say I am going to pick some stocks and then forget about them for the next 10 years. He explicitly said the following: "Do you think these companies are worthy of holding for a decade or two? I don't want to switch/monitor them all the time." Unfortunately, buy and hold does not mean buy and forget. If you really want to buy and forget, then a low cost index fund is a reasonably good choice that is as good as (or better than) anything else. If I want to learn to invest, then that's a separate thread. I would not start by trying to pick winners I can hold for a decade and be unwilling to monitor them. Isn't it? I think having a portfolio like this is probably best when starting to invest if you track it closely. Most of your time will be spent reverse engineering some the best investors/businessmen's ideas.

Dont think its fair to compare hedge funds with mutual funds. The more I think about mutual funds, the more I hate them as an investment vehicle. Almost impossible to generate outsized returns.

I agree. I don't understand the poker point (2nd best to what? the nuts, pre-flop, etc) or the industry point. It really doesn't make sense imo.

6. Deferred tax adjustments Probably some others as well

I would just analyze the public co's that operate as PE. EG: Liberty entities, CFX, DHR, TDG, etc. What people call platform or outsider companies.

Contact ValueAct: http://www.valueact.com/contact.pl

Not that I disagree but no one has the data to support this. For every networking/blogger/pitch success story, how many failures are there? MBA guarantees a switch with 1-3 years effort with the drawback of a steep price tag. If you want to do big name IB or PE, gl getting it through alternate means.

Discussed a little bit here: http://www.cornerofberkshireandfairfax.ca/forum/strategies/gmatmba/

Thanks - will he let you share his screenname? It would be good to put a face to it

You think the mean reverting ROE is 5%? Crazy, no one would deploy capital at those levels (in an inflationary environment).

Thought about it a little more and 15% is too high because of their cash drag. I think all of their assets might do 15% but if they have 10% in cash then the return is 10%*0% + 90%*15% = 13.5% 12% to 13% is probably a reasonable high point with a low probability they do above this but they would need a healthy amount of financial engineering/leverage to do it either from acquiring with debt or levered PE investments or warrants.

It depends on what happens. If BRK only buys shares with retain earnings, the IV/BV will start to greatly increase. Obviously this is a low probability. It also depends on how acquisitive BRK is. Bigger and more recent acquisitions make IV/BV ratio converge to 1 as buys will be at ~IV. It's hard to predict. I think the best way is to still go business by business starting with the biggest and come up with a value for each.

How does the MV decline of a wholly owned sub impact BV? Also - highly doubt BNSF equity is financed with 1:1 debt/equity.

MBS are one of the best values in the fixed income space.

Have thought about TSI quite a few times. http://www.morningstar.com/cefs/XNYS/TSI/quote.html

It probably has something to do with "barriers to entry" as well. No one thinks they can walk into a hospital and become a doctor. They know they need to go to school, get trained, etc. Those barriers do not exist in some fields like gambling, and investing. Anyone can walk into a casino. But I guess that is somewhat the point. To do something professionally, people should have the attitude that it takes years of study and training to do. Also - I don't think most Average Joe's are trading a little money to learn. They think they can win right away. It's a big psychological difference.

What I Learned Losing A Million Dollars is a great read. "One paradox I often pose to my audiences in talks about the elements of successful trading concerns the dichotomy in human thinking as it relates to trading versus everything else. Specifically, I use the following example: No sane person would walk into a bookstore (assuming you could still find one these days), go to the medical section, find a book on brain surgery, read it over the weekend, and then believe he could walk into an operating room on Monday morning and perform successful brain surgery. The operative word here is “sane.” Yet how many people do you know who would think that it is perfectly reasonable to walk into a bookstore, go the investment section, find a book with a title like How I Made a Million Dollars Trading Stocks Last Year, read it over the weekend, and then start trading Monday morning and expect to beat the professionals at their own game. Why this dichotomy in thinking?"

I must have expressed myself badly then. :) What I was trying to say is that alpha may require more than just knowledge of value investing and accounting. There is skill (talent?) factor that might not be easy to learn. Anyway, this is not directly related to this thread. Congrats on good returns. Take care. Jurgis - I want to expand on/restate what I think is your point because it is important (correct me if I am wrong). Forums/Clubs/Twitter that focus on individual security selection do not reveal how good of an investor someone is. Anyone can post a great analysis or have a stock produce >20%, but these have little to do with your portfolio's return. Sizing matters. The other securities in your portfolio matter. Selling in and out the position that produced the handsome gain matter. The tragedy of games of probability and volatility is that poor long term performers will produce spectacular short term results from time to time only to go broke in the long run. This is, in fact, a necessary condition of the game. it keeps the poor performers coming back to be exploited by the better performers. They fool themselves into thinking they just might in fact be winners. This isn't to denigrate this forum (I think it can be pretty good). It's to remind people to be cognizant of the factors of investing that are (necessarily) missed by forums like this.

Point 1: KO is borderline irrelevant to BRK, they only have ~10b of equity allocated to it after adjusting for deferred taxes. On a >300b value it is <3% probably. Much more important are BNSF, PCP, etc, which have great outlooks. This is why BRK is so great. The money flows to the best opportunities. Think about the KO position more deeply. You have an asset that started out as ~1.5b and grew to ~15b. As the MV increases, he gets to write more float against the asset and redeploy those funds elsewhere. So while he hasn't sold, allocating more funds elsewhere has lowered the impact on growth. Also, deferred taxes keep increasing, which also leverages the position. Point 2: I think T&T will do fine as deal makers. They already have done ResCap, PCP, PSX asset swap, etc. Point 3: It's tough to say exactly what the returns are going to be going forward but high single digits would be my low end and 15% my high end.

Gio - I couldnt tell from the article what his track record was. Has he taken an orphaned drug and made it a success yet? How big of a sample size is needed to prove that he can do this consistently? The strategy seems to be buying lotto tickets. Maybe he has an edge but the burden of proof should be really high imo.

But not 3G?