crastogi

To add to that, the core of his strategy is to invest in "high quality" companies, at a reasonable price. He defines high quality specifically in a value of ROCE (Return On Capital Employed), which is (almost) net profits divided by total assets. This shows the return the company is generating on capital employed (not taking into account long term debt) - i.e. how valuable will the company become if it is not saddled with any debt. He chooses companies with ROCE around 25% or higher. Assuming a company reinvests its profits internally, then he argues that its intrinsic value also increases by 25% each year. Two points he does not answer in his presentations that I have seen, are the effect of debt servicing on this process, and why doesn't the efficient market theory discount this effect (by making the shares correspondingly expensive at the outset). The implicit answers to these two questions are that compounding by 25% per year will deal with the debt problem over the longer term, and that other investors don't understand the long term uplift of this kind of compounding, leading them to value the business in aggregate higher than, but not sufficiently higher enough, than other businesses with a lower ROCE. Edit: Just to say that in the video of the 2020 meeting posted tonight, he explains this strategy at time 16:48 I've been looking into this tonight. Watching the two annual shareholder meetings for FEET (Fundsmith Emerging Equities Trust), for 2017 and 2019, he says that the fund underperformance of net asset value was caused by outflows of money from far east actively managed funds, into far east index funds (ETFs), resulting from general investor sentiment in favour of passive investing, and regional investing. He says that the sectors of the companies he is invested in are under-represented in the main indexes, hence demand for his companies dropped in aggregate, along with the price). It sounds plausible, but might be an excuse of course. time: 50:50 time: 20:00 I think the key is to only invest in companies where you are fairly certain that the returns on capital are not going to trend down to the mean and the revenues will keep growing. That is the only way this works.

But you have to know when the bottom is in :)

I would negotiate commish...after getting a good offer. of course if I get an offer at full asking price I dont negotiate the commish but I haven't seen a full price or bidding war in a couple of decades personally, but one way getting an improved result after the offeror stands pat and the net is lower than you would like is to then simply ask broker to move a bit...and he/she likely will and happily will to cement sale...but dont piss off your broker before getting the listing by trying to discount commish. A little unethical, no?

I would take those returns any day ;)

So, FWIW some time back I had done a spreadsheet for net returns to investor with SP500 historical returns under different fee scenarios. It is attached below. Maybe some will find it useful. The big takeway is that the Buffett model only pays for the manager when you are generating serious alpha. Of course, the traditional hedge fund structure is egregiously expensive for the investor.

Surprising. I thought it was 0/6/25. But the interview states it differently. Thanks for sharing

Thanks Paul

Does anyone have an estimate of costs for starting a partnership? Also, can you have incentive based fees for SMAs?

Thank you for compliling!

That's right, Investmd. And that's why i am baffled. BTW 15% for 5 years is a 2X. However, he is not without some spectacular blowups. Delta financial, compucredit, etc. Clearly after spending a week on this, I cannot come up with a compelling reason. I was hoping someone here could point me in the right direction.

Thanks for the comment. I agree they are dominant and have had sustained excellent ROE/ROC. And that the market for Basmati is growing. And also that there is a trend in India to migrate from buying from Bulk packaged generic to branded. All these are trends are tailwinds for them. However, the management seems promotional. And at a 30 PE, the growth story has to be really good get decent returns. Actually as an aside, I know Pabrai is bullish on Indian stocks, but the valuations in general seem to be high in India, especially given that LT bonds yields are north of 7%.

So Rohit, have you analyzed this? My preliminary analysis indicates a 12-15% ann return for the next 5 years. Better than most opportunities in US but not a slam dunk that Pabrai looks for. Your thoughts?

Thank you! Very nice

Since 99. I have always been a value investor. May be a function of bargaining for groceries in India where I grew up ;) Have held Berkshire since 2001

That was their first choice. Unfortunately recertification in USA is a very involved process. Hence, the search.