jschembs

Plenty of signs it burst last March

I've begun doing some work on WHG - they've certainly seen impressive growth. What would you say is a differentiator for them in what is an incredibly competitive industry? Also a bit disappointing to not see Susan Byrne or other leaders with more significant ownership - all have consistently sold down their stakes over the years.

Obviously the guy has an agenda, so it seems the debate on that one would be pretty easy. I've learned enormously from Buffett's writings over the years, but don't really care what BRK invests in these days, what his political leanings are, or how he leads his personal life. For most of us on the board, I think the best way to learn from Buffett are to study his early investments and try to internalize his writings over the years. He's often said he would be investing in a dramatically different manner if dealing with a smaller pool of capital (as most of us are), so I personally don't spend any time following BRK or its holdings; rather periodically revisit some of his writings and look at what led him to make substantial bets on relatively obscure situations. I know most of that's sacrilegious to this board, but I'm firmly in the camp of finding an edge, and for me having a smaller pool of capital provides an edge in being able to position a concentrated portfolio of micro/small caps that larger investors can't access. I'm fairly confident Buffett would agree.

I think what he was trying to say was that his portfolio consists of some Japanese net-nets and these four companies. I was confused myself when I read his post. That's correct, as WTW most certainly is not a net net...

Thanks. I don't think there would be free cash flow as our rental price would probably just cover our current principal+interest+property taxes. But maybe I didn't totally understand what you were implying. I'm saying if you run the numbers for 15-20 yrs (or some period of reasonable length), you see the compounding benefit of even 2-3% inflation adjustments on rental income. Presuming you've got a fixed mortgage, the only real variables on the cost side are property taxes, mgmt fees, and maintenance. During that period, you will have also (presuming you've got a good rate on a fixed mtge) paid down a large chunk of your principal, such that if you did ever decide to sell, you've increased the equity value substantially...

Assuming you don't need whatever capital you could extract from a sale, I'd be all for it - run the numbers on what your free cash looks like 15-20 years out on a rental property, it's phenomenal. Also, as I'm sure everyone knows, the transactional costs of exiting a property are egregious. Might as well hold onto what you've got as long as it's not an uneconomic endeavor. If you're only looking to hold onto it for another couple of years, then perhaps it might not make as much sense.

Rory, sounds like you could use more reading. I'd suggest McKinsey's valuation book (http://www.amazon.com/Valuation-Measuring-Managing-Companies-Edition/dp/0470424656). That being said, you want to make sure you're matching the cash flows you're measuring with the appropriate capital structure. In general, my rule of thumb is operating cash flow - stock compensation - capex is a pretty good free cash flow metric (to the firm, meaning both equity and debt holders). If you're just focused on equity cash flows, then of course you need to strip out interest and debt repayments.

I've never seen the early TDY shareholder letters, but here's an interesting collection of TDY and Singleton-related material. Teledyne-and-Henry-Singleton-a-CS-of-a-Great-Capital-Allocator.pdf

Depending on the size of your cash pile and lock up outlook, pretty much any high liquidity instrument (1) will do since interest rates are volatile at the moment. 1. Probably need assets to be interest rate independent, would be nice if inflation independent, and valued in USD. Try BRK if you want higher returns? I specifically pick BRK because Buffett tries to get returns to match IV growth for shareholders. Obviously no guarantees. I wouldn't buy many other stocks as a cash proxy however. Not the best solution but I'm guessing you've heard of the more practical approaches. Are you honestly recommending BRK as a cash proxy? Personally I prefer BRK over cash. When you think about it it's a lot better. Let me list the ways. One, you get to be junior partners to Warren and Charlie. That's priceless. Two, you sleep better than if you just have plain old cash. Three, you get a ticket to the hottest show on the planet and can go and laugh maniacally every time Warren or Charlie say something remotely amusing and hiss anyone who says anything remotely critical. Four, you get to feel superior to anyone who doesn't agree with you. To me, it isn't even close. When framed in that manner, the choice seems obvious!

Depending on the size of your cash pile and lock up outlook, pretty much any high liquidity instrument (1) will do since interest rates are volatile at the moment. 1. Probably need assets to be interest rate independent, would be nice if inflation independent, and valued in USD. Try BRK if you want higher returns? I specifically pick BRK because Buffett tries to get returns to match IV growth for shareholders. Obviously no guarantees. I wouldn't buy many other stocks as a cash proxy however. Not the best solution but I'm guessing you've heard of the more practical approaches. Are you honestly recommending BRK as a cash proxy?

What are some examples of sites where sellers are eliminating brokers/agents? As a Z short, this is a very interesting topic :)

Indeed. Unless you're an entrepreneur, working 80-90 hrs a week because that's what the firm expects is a horrible idea. I'm of the mindset no one can really be productive working that many hours, and (particularly in banking) most of it ends up being wasted hours showing your face at the office because that's what is expected.

Thanks, that is a great read. Very Mungerian. I've become a huge proponent of this as well. In the last couple of years I've deemphasized finance and valuation books for anything under the sun that helps deepen or broaden understanding of a given subject. Here's a good starting point: http://mungerisms.tumblr.com/tagged/Munger-Pick.

Good luck folks - I finished in 2006, and while I found much of the L3 focus geared towards wealth management, the L1 and L2 financial statement analysis and accounting was invaluable for me to form a baseline with which to build.

IMO depends on the ongoing nature of that relationship. If A/R needs to stay that high as a result of their customer payment patterns, I wouldn't count that as cash. If it's more one-time in nature, perhaps that's a reasonable approach.

Here's the link (in Lewis's article) to the hour long program. http://www.thisamericanlife.org/radio-archives/episode/536/the-secret-recordings-of-carmen-segarra

The problem with many share repurchase programs is they are executed with little to no consideration of the stock price. In recent memory, NFLX buying back shares during the period from 2010-2011 (largely to offset dilution) was an egregious use of shareholder funds. The link below is a great read on stock buybacks, with particular emphasis on Henry Singleton of Teledyne, who is celebrated as one of the most shrewd allocators of capital, particularly during the 1970s. http://www.scribd.com/doc/65650082/Teledyne-and-Henry-Singleton-a-CS-of-a-Great-Capital-Allocator

"Saying we're not in another bubble because it's not as high as 1999 is like saying that Kim-Jong-Un is not evil because he's not Hitler." Great quote, and refreshing to hear it from one of the leading VCs. It's been mind-blowing to me that this line of thinking exists so prevalently in this market.

It'd be helpful if you could provide tickers. I honestly haven't heard of any of those companies, which I think is a good sign.

At some point (no idea when, but wouldn't be surprised if it was sooner rather than later), this will be valued on the projected future cash flows of the business, which for a capital intensive car company that currently sells to a small niche consumer, probably aren't what most current investors expect them to be. Okay, you can open the floodgates to ridicule my myopic viewpoint that lacks vision of what Tesla can become.

Thanks Kyle - that's their older report. I was assuming (hoping) he had some updated slides.

I'd be interested in seeing Citron's Zillow presentation as well, which doesn't appear to be posted.

Congrats to board member Tim Eriksen for his spot in the lineup!

Not sure how you could measure this, unless an account is solely invested in the security in question. If you've bought five stocks on 50% margin, how would one determine which is their leveraged bet?

Hahaha, thanks. That is the difference between Buffett and John Hussman, one has the results, and the other has very reasonable arguments. AMZN's returns over the last decade in my opinion are more the result of luck rather than skill. Yes, AMZN the business has continued to grow, but what case could be made for AMZN's current valuation 10 years ago? The company certainly has achieved growth rates at least in line with the most bullish of projections, so if based on those revenue growth projections, your thesis was also that the company in its current size would be valued at 150x free cash flow, then you have a crystal ball that is very valuable.