LongHaul

I think China goes into a severe bust from the real estate bubble, too much credit growth, etc. I think Australia and a lot of other emerging markets follow. Anyone have great ways to play this? I have looked quite a bit and have not put anything on.

Thanks Dazel!

Rainwater was nice enough to meet with me one time so I could learn from him. He was generous with his time. Seemed like a very independent smart investor. It was sad to read about his disease and death. Dazel - where did you read about Rainwater losing money when he first started with the Bass'? I saw it on Wikipedia but would love to read the original source.

It is a great question of why Buffett sold XOM. XOM is a very well run company overall. I would love to know his thought process as well. My guess is that he saw that Shale oil had changed the game for a long time and XOM was overvalued with the new supply.

Why are European Companies allergic to buying back stock? A lot of U.S. companies buy back stock as a capital allocation option. It seems like European companies hate buybacks and rarely engage in them. Why is this? A European perspective would be helpful.

I took a quick look at Cabot. #'s according to Morningstar. ROE average between 2009 and 2014: 7.3% Sales up 2.5x from 09- 2014. I find it totally irrational that mgmt has expanded this much with bad ROE's. Why did they expand with such a bad ROE? Using $5.19 in book (no intangibles that I see) the stock is at 4.3x book. That a is extremely high price to pay. I would pay significantly less than tangible book.

I have personally had zero success speed reading and i have tried it a bunch of times. Perhaps it is just me but I find I miss stuff when reading faster so i just go at my own pace. I think it is critical to focus on primary information rather than secondary sources. You would be surprised how many people don't seem to touch 10-K's. It is hard working getting through it but important. This is for overview purposes not a detailed valuation. It takes me ~1-3 hrs to read a 10-k. I try to do one maybe 2 a day. I will generally read the business section of the 10-k to figure out what the company does and think about it. Then I will turn to the segment breakout to see which segments are big or high margin. Then I will read the MDA, financial statements and notes. I skim the risk section, skip the governance on foreign annuals, etc. If it was something I was going to invest in i would spend more time on the entire 10-K.

The 15 count of Mach3 razors were ~$24 on jet. $29 on Amazon. Not sure why, but there were some additional discounts above the $15 in my cart for the basket of products I ordered.

Looks like Jet.com has partnered with Yahoo to give $15 off the first $50 order. I saw it on Yahoo's front page. Code: YAHOOJET I literally ordered ~$80 of stuff for $35. The $80 being the lowest price for equivalent AMZN stuff. I guess JET.com will make up their losses with volume :) Jets business model makes no sense at all.

Excellent point on bad guys trading Jurgis. Thanks for starting this post Boilermaker.

This one baffles me. I would think enclosures would be more commoditized and have much lower margins. The margins suggest this is a differentiated product that is critical to customers. Any help appreciated especially from someone who is familiar with their product. Technical Products Group (32% of total sales)[10] Pentair's Technical Products Group designs and manufactures enclosures that house and protect sensitive electronics and thermal management products. Products include metallic and composite enclosures, cabinets, cases, subracks, backplanes, heat exchangers, and blowers.[11] The Technical Products Group sells it products for applications in industrial machinery, data communications, networking, telecommunications, automotive, medical, security, defense, and general electronics. The Technical Products Group distributes its products through electrical and data contractors, electrical and electronic components distributors, and original equipment manufacturers. The Technical Products Group generated 2009 revenues of $229 million, an increase of 9% over the year-ago period. The increase in sales was caused by strong sales in the industrial, infrastructure, and general electronics markets. The Technical Products Group encompasses the following brands: Hoffman, Schroff, McLean Cooling Technology, Calmark, Birtcher, Aspen Motion Technologies, and Taunus.[7] Breakdown of Technology Products market and geographic distribution. Breakdown of Technology Products market and geographic distribution.[7]

DaVita makes kidney doctors sign non-compete agreements. DaVita has been accused of giving doctors equity ownership in their dialysis centers, which is illegal. The problem with kidney doctors owning dialysis centers (or portions of them) is that they may refer patients to their own dialysis clinic, even if the quality of care is subpar or if there are more cost-effective alternatives elsewhere (e.g. other dialysis clinics, at-home dialysis, etc.). Other countries have much higher rates of at-home dialysis, which allows patients to hold normal jobs. DaVita has also faced many, many accusations of defrauding Medicare. Defrauding Medicare is something that scales. - Intentionally wasting drugs so that drug manufacturers make more money and give kickbacks/rebates to DaVita. - Overdosing patients on EPO so that the EPO manufacturer makes more money. (One of the side effects of EPO is death.) - Gaming the quality of care metrics by using their own blood testing clinics and by overstating the number of patients with fistulas. 2- DaVita also makes high returns in legitimate ways. Their culture is unique and has been described as "cult-like". Regardless, their culture seems to be good for morale. They measure their dialysis clinics on various metrics, to ensure that their clinics are well-managed. They also have various initiatives such as their fistula first program. 3- DaVita used to have international operations and exited those markets shortly after Kent Thiry turned the company around. If you compare the US healthcare system to other countries, you'll quickly see that the US system is horribly messed up. Other countries: - Push at-home dialysis - Have lower costs - Do not re-use dialysis filters. Re-using dialysis filters require staff attention in cleaning the filters. There is a small risk of things going wrong if a staff member does not clean the filter properly. Re-using filters can "save" DaVita money because they can simply overwork their staff. Staff time has a cost, but if you overwork the techs then their time is "free". Part of the reason why there are barriers to entry is because there is a very limited supply of kidney doctors, and because dialysis patients do not want to drive 2-3+ hours to a dialysis clinic and 2-3+ hours back for something they have to do frequently. The kidney doctors tend to band together into practice groups. It's cartel-like. Informative response ItsAValueTrap. Much appreciated. Tenet Healthcare was making good margins back in 2001 and prior or so until they were caught overcharging medicare and then their high margins evaporated. I think the CEO at the time was a ex investment banker. The overcharging would explain some of it - that has multiple levels of risks for an investor. The kidney doctors have a lot of power. Interesting point. I would think that the doctors would extract more in pay if they have so much power. Perhaps they are but still with that high cost input Davita is able to charge a lot. I can imagine it is cartel like also with 2 big guys. Are they just tacitly colluding to keep prices high which will evaporate with time? Industry after industry consolidates, jacks up prices too high and then competition comes in to bring down returns on capital - perhaps this is one. Looks like the the 2 big guys have 75% - 80% of the market. That is huge. I would curious if there were any challengers out there who are taking a ton of share from the 2 big guys. Just kind of funny if you follow the link

Anyone understand how Davita can make 30% ROIC on tangible capital in their Dialysis segment? Why don't doctors and others with capital come in and drive that down? Seems like there are no huge barriers to entry.

I totally agree with you 50cent. People have gone absolutely nuts on a lot of stuff. They seem to have forgotten that 2+2 still equals 4. I used to get frustrated by these bubbles as they make no sense whatsoever but they keep happening over and over and over. The last 200 years is a history to booms and busts in all types of asset classes. There are always plausible sounding stories why it is different now but the truth is it really isn't and prices come down to true value eventually. At this point I just laugh and think it is ridiculous. The tech bubble we are in is especially funny because this just happened back in 2000. Check out Jet.com - they are trying to beat Amazon on price! I guess they will make up their loss on each unit with volume. It is not just a tech bubble right now - but also a real estate bubble in many countries, China, Emerging market, etc. Bond Bubble, High yield bubble, commerical real estate bubble in many places, Emerging markets credit bubble and who knows where else. It is a classic credit cycle boom that will end in an especially nasty bust. It is time to be prudent and stay conservative and get ready for a major bust. The timing is uncertain though.

What what the best business in the town you grew up in and why? I went thru this mental exercise and found it helpful. I think the best business where I grew up was a private parking lot for train commuters. Simple business with excellent pricing power because the only competition were the city spots with limited spots and then there was no room for expansion. The parking lot couldn't be expanded because it was surrounded by a highway, railroad and river. Biking, parking ~1 mile away or walking from home were really the only substitutes. Incidentally the owners never went to college and got very rich off this parking lot.

Poll on how much of an issue fake/biased reviews are on Amazon.

I heard from a friend that in the Iron Ore Mining industry the driverless trucks were a huge improvement vs humans. Zero accidents, better mpg and higher productivity. I can't predict when cars will be on the road but I imagine driverless cars to be much safer than humans when perfected. Then a mix of private and fleet driverless cars will likely be options. I'd love to ditch my car for a fleet. I also think it would be great to set the car for a 10 hr drive, sleep and wake up at destination. Driverless Trucks and Mining "Driverless" already functioning in Nevada.

I was talking to a friend who works for a large company and he said that when the CEO's spin is annoying on the outside it is far worse on the inside because people know the CEO is full of baloney. I was curious what other people's perspectives were. Does external spin to shareholders translate into internal spin to employees, etc? and is the opposite true. Is a CEO who is a straight shooter with shareholders straight internally?

The Chinese love to gamble. First is was real estate then when real estate prices in China declined people jumped on the stock market. It's striking that the Chinese are such wonderful savers then allocate their capital to bubbles.

All that you listed is way too much information. I might kill spending so much time with WSJ. I think you have to invest to time with what will fit your strategy. Here are my thoughts on reading. Read 10-K's. Almost all the other stuff is secondary information and generally nonessential. I do read generally to try and acquire knowledge but the 10-k's are the critical thing along with the key drivers of a business. BG2008: Very helpful recommendation on Pomedoro method. Has it been productive for those who have tried it?

4. I found a new hobby. I have just started getting into woodworking. After spending 50 hours a week at a keyboard and moving things around that are not tangible I enjoy the feeling of woodworking. This spring I just built a new outdoor dining table. Is it perfect, no but I spent a few hundred dollars on tools, a few hundred in lumber and saved some money. More importantly its something that I am proud of. My wife had been eyeing a new dining set and new bedroom furniture. Instead I am building those and it will probably take a year but I will save money and my kids think its pretty cool to help. Not a time savings but a monetary savings and a time that I spend with my children that I will never forget. Not really related to time mgmt but +1 on the tangible hobby. I have found fixing things around the house to be really fascinating and you can step back and look at what you have accomplished. You also learn by doing new things which can be relevant to investing. Youtube is awesome for figuring out how to do tons of stuff.

A lot of good suggestions. Thanks for the advice. I try to skim the WSJ but after Rupert Murdoch bought it I think he gutted the in depth business stories that I enjoyed and learned a lot from. Any thoughts on just not reading the WSJ at all?

There are a lot of really smart people on this board and I am curious what people do to save time. You can always make more money but time is more precious. Once past it is gone. Please post any time saving ideas you have, however small. Even 10 minutes per week saved is almost 9 hours per year. In 10 years that would be ~87 hours. Some things I do: 1. Check email 1x per day on most days. 2. Monotask (vs multitask) 3. Dashlane is a great password program. 4. I now speed up youtube and other digital content to 1.5x or 2x to get thru quicker depending on content. Another COBF member told me this great suggestion. 5. I drive 95 mph everywhere. Just kidding about the last one.

So, what you are saying is that every investment banker and PE executive that uses EBITDA all the time don't know what they are doing??? :o The reason they use EBITDA is that it is a useful figure that serves as a proxy for the cash flow power of the business before the impact of capital structure and tax rates. Since it is part and parcel of the way professionals in the financial services industry speak, they know what EBITDA is and isn't. If one doesn't like it, go ahead and use Net Income, Cash Flow from Operations or whatever other metric you'd prefer. As to the "insane" adjustments that you refer to, I would argue that I would much rather know what all of these individual line items are and decide for myself if they should or should not be backed out as I conduct my analysis. Hard to argue that you are hurt by knowing what these expenses are. And as to the adjustment the CD&R guys were making, I assume that as part of their credit agreement, they needed to maintain certain leverage ratios as measured by "Adjusted EBITDA". If you worked for this company, presumably you'd prefer that they did NOT trip their debt convenants? :) Yes, The PE guys, Investment bankers, etc are stupidly using a generally totally useless measure of business earnings by using EBITDA. It reminds of the salesman that sells a bunch of BS to everyone then ends up believing it himself. It is not right because a lot of people use it, it is right because it is logical. EBITDA leaves out 2 very important items - maintenance capex and tax costs. Both are different depending on the specific business and location of pretax profits. Depreciation is generally a close proxy to maint capex. Think about it - when someone says this business is trading at 5x EBITDA what does that tell me? When I hear EBITDA I wonder if the toothfairy is going to pay for capex.

That was so funny! I good laugh aloud. Actually I am just using revenue multiples now these expenses are too complicated!