jschembs

Wellmont had an interesting tweet today that sparked my curiosity. To the extent you can, isolate the period when you began investing a meaningful portion of your net worth (not simply buying a stock while in high school).

MSFT and GOOG were never PE NA as public companies, and certainly not at this stage in their growth cycles.

Do any of you have a book you'd recommend that synthesizes the history of coding languages? At this point in my life, I'm more interested in learning the history of the languages than trying to code myself.

Great post, I'd echo the idea of also discussing relevant metrics. I find it so difficult to segregate who's good from who's riding favorable industry tailwinds.

Given the current fervor over acquisition stories (sorry, platforms), this is a good read on a bygone conglomerate era: http://www.amazon.com/Ling-Rise-Return-Texas-Titan/dp/1893122301

Just be patient. There is no sense in risking* for yield in this environment. *reaching :)

Love: craft beer, Homeaway (as an owner of a vacation rental property, VRBO is a phenomenal tool). VRBO is one of the few products I've come across where if they raised prices 100%, I'd just grin and bear it. That being said, I'm also testing AirBNB. Hate: Comcast, any near regulated monopoly that treats their customers like shit; most professional service firms

any reason on RVP, other than taking advantage of someone seeking liquidity?

Great find. Those commercials are classics. Great commercials indeed. We do have the Jacob Wohls of the world in this cycle, which may be more pernicious. Main Street could still feel burned from 00 and 08, but if their money has now gone to Mr. Wohl and wirehouse brokers investing in ETFs, is that much different? Obviously my Wohl reference is tongue in cheek, but I do worry about increased ETF activity and the unintended consequences of hot money. A couple of points. First, that we're even comparing this to 99/00 as "it's not as bad as it was then" should give folks pause. Second, I remember 07 as well, and the issue there was moreso related to leverage than initial valuations once shit hit the fan. Buyouts using either internally generated funds or via debt left those companies with little margin for error - and we're certainly seeing the same depletion of cash from balance sheets to fund buybacks today.

I agree in principle, but in reality these factors are not so dynamic such that Chinese inflationary wage pressures can be easily averted over the near term by U.S. importers. Many of the companies I work with that have sourcing operations (either wholly-owned or via third parties) may have backup plans to find cheaper input costs, but those plans would not be easy to execute in the short term. Further, infrastructure in India, Vietnam, and Africa is nowhere near as robust as China.

Can't argue with either of your points. Additionally, I don't think there's much fat on the bone left to cut interest expenses via refinancing. On a separate note, when does the buyback express exhaust itself? Not a margin question, more related to EPS growth and balance sheet strength whenever the cycle turns.

Looking forward to the penis size poll.

I don't think it would be that helpful (and that's coming from a nearly 10-year charterholder). You could get a similar education reading well-written books on the same topics.

Curious how you rationalize currents prices of say, BABA or AMZN? Do you run some sort of DCF out many years, assuming the companies will grow into their valuations and still give you sufficient safety in your investment? I'm not looking to attack, genuinely curious as to the thought process :)

Not only that. I find some stuff that he writes not interesting or useful to me. For example, the first article linked. My approach to my holding stock dropping 10+% would be quite different from what he talks about. In this particular case - unlike the second article - I don't see value in historical data and the way he presents it. It's good to hear that his writing is useful to you. I am not trying to dissuade you or anyone else from reading him. :) He presents historical data and models well sometimes. I just expressed my general attitude towards Mauboussin as a context to comments about the articles netnet linked to. Take care Got it - have you read any of his books? I thought Expectations Investing was particularly useful.

You don't like Mauboussin because he doesn't give you actionable insight? He writes well and teaches you how to think about ROIC, competition, market structure, and a variety of other topics. I'd rather spend time reading that than someone telling me why oil has bottomed or ABC Co is a screaming buy. I've always found the best actionable insight comes from your own conclusions, however you may reach them.

Demography is hard. Makes my brain hurt when I think too much about it. In a way, a lot of the extra growth that comes from higher population growth only goes to create jobs and stuff for those new people being added, right? So if they aren't there, growth being lower doesn't necessarily make things much worse per capita (the pie's a bit smaller, but there are fewer slices, so maybe the surface area of each slice doesn't change that much). And since a lot of what people are spending on now tend to be more intangible and qualitative (media content, IP in things like smartphones, telecommunications, services, better foods, better cars, etc), it's a lot easier to keep increasing consumption per capita than back when most things that people spent on where physical and about sheer quantity of stuff (you reach a hard limit on how much crap you can consumer faster). But I don't know about demography. It's outside my circle, for sure. Certainly seems like you'd rather want fewer healthier and richer people than more poor unproductive people (birth rates falling rapidly in poorer countries as they get richer and more educated aren't necessarily negative for global businesses selling to them). So that's good. As for the US and such, I don't know. Immigration seems like it still has a long runway, and what truly matters is per capita anyway, so this goes back to my first paragraph above. Good points - certainly the missing component from my original comment was the higher quality of life and increases in GDP per capita enabling people to "buy more stuff." But to petec's comment re buybacks, I think we've seen plenty of corporate cash used to retire shares at uneconomic prices over the last 15 years. One view on why that occurs is increased indexing (reducing shareholders questioning logic of rubber stamped buyback programs), and seeming general consensus that buybacks are always good. Think about buybacks in 2006-2007. That cash would've been far more valuable on corporate balance sheets to make massive investments in 2009-2010. I'm not holding out hope management and boards will become disciplined in their capital allocation strategies, but I do think that arguing lower dividend payout rates (particularly when at the expense of buybacks) does much for longer-term corporate growth rates.

While reinvesting more of their cash back into the business would seem to generate higher growth per academia, don't you need to consider the demand side as well? Unfortunately, I have a feeling demographics (not just domestically; look at slowing growth rates in the higher fertility countries) is working against us with respect to longer-term demand growth across a range of industries. Good point on the composition of indices (and the general economy) over time. I would agree these asset light businesses certainly tend to generate higher margins and ROICs over time. I still struggle with how sustainable that is, since in theory asset light removes a significant traditional barrier to entry, and therefore could make these margins and ROICs less stable. Of course, we're seeing more "network effect" type businesses with substantial barriers almost irrespective of capital, but those tend to be winner take all situations. I suppose we're seeing that these days with the FBs of the world. That probably gets into a different discussion of wealth (in)equality.

Have you heard the phrase, "We eat our own cooking"? The point that Buffett made is that unless David Winters can earn his keeps with his own performance to earn his fees, he should not be go picking a fight with the KO board and drag Buffett in. I was in the room in the audience when David made his plea with Buffett, and Buffett had said to David and everyone that he had told the BOD of KO of his thoughts on the compensation and that was that. I have met David at a few times in Omaha and at Wesco; I think he is a very mild manner, good guy. I just think his activism with KO took to another level that turned the switch on Buffett. Actually "eat our own cooking" typically relates to someone fully invested in the fund they're managing. I don't know much about Winters, and again I don't really care either way - he could be totally off-base in his critique of the KO situation - but it was an odd aside in the interview.

Scared me, I thought you were buying Lumber Liquidators. I would be scared to be short. one of the smartest stock pickers in the world just bought a big position. I saw that, and everyone's favorite whipping boy Tilson has made a very loud short case. I don't have a position, but if I had to initiate one here it'd be short. Gross margins at all time highs, bulk of the remodeling done by the Blackstone's of the world to build the world's largest rental pool, and the business still only generates $40 MM in FCF (less than 2% FCF yield). I just don't see how you get significantly much more upside in the stock. Sorry for digging this comment chain up from the grave, but 60 Minutes apparently did a piece on Lumber Liquidators confirming they have been selling flooring with levels of formaldehyde above legal limits: http://www.cbsnews.com/news/lumber-liquidators-linked-to-health-and-safety-violations/ I actually looked into the company but passed for this reason (although it was only a rumor at the time - but my carpenter neighbor confirmed LL sold the cheapest "wood" he had ever seen). Thanks for reminding me of trades I should've held with conviction!

For all of these years that I have followed Buffett, Buffett chooses his words VERY, VERY CARFULLY. He would never take shots like he did unless the facts are there to back him up. Read btw the lines of what Buffett said. Do you think Buffett didn't do his homework on David Winters' performance before he spoke up? So what? You could make those statements about the lion's share of active managers - doesn't mean anything about the validity of Winters's complaints about KO. Buffett didn't say this to defend KO's management compensation but to criticize shareholder activists – and especially Winters. Of course this was also a kind of revenge for Winter's making his critique personal and for keep on going after having lost his fight. Hasn't Winters been a thorn in his side vis-a-vis KO? This helps to make Winters seem less credible without directly refuting anything Winters has said. I have no dog in this fight, so I don't really care, I just thought it was an odd attack.

For all of these years that I have followed Buffett, Buffett chooses his words VERY, VERY CARFULLY. He would never take shots like he did unless the facts are there to back him up. Read btw the lines of what Buffett said. Do you think Buffett didn't do his homework on David Winters' performance before he spoke up? So what? You could make those statements about the lion's share of active managers - doesn't mean anything about the validity of Winters's complaints about KO.

From the article: "Before 1982, when John Shad, a former Wall Street CEO in charge of the Securities and Exchange Commission loosened regulations that define stock manipulation, corporate managers avoided stock buybacks out of fear of prosecution." Apparently Henry Singleton didn't get that memo.

The problem in my mind is that many buyback programs (while never explicitly stated) largely are conducted (a) to offset stock option dilution and (b) irrespective of stock price. I had a debate with a running buddy (who works in finance) about buybacks, and I think he generally views buybacks as always good...

Plenty of signs it burst last March I didn't notice. Pull up charts of FEYE, ZU, P, N, WDAY, YELP Who knows, maybe March 2014 was just a bump in the road, and I agree with Nate that many of these companies have business models far superior to what was proffered up in the late 90s (WDAY in particular in that bunch), but I wouldn't be surprised to see March 2014 as a peak for many of these names (at least for a long, long time).