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He talks about a portfolio of 7 positions. So I suppose that's the 6 American positions we know and Fiat. Which by the way will soon too be an American listed position. And $70m of cash or about 10%. Although the main themes of his speeches are always about the same, there are always interesting snippits that make it worthwhile to watch. Thank you for posting the link, Parsad.

And now a company suggestion. Because of the specific business model, I prefer the pure palmoil producers, instead of the integrated groups or refineries. A company I would suggest is Anglo Easten Plantations. It's a company with a long history listed in London, which owns palmoil plantations, principally in Indonesia. It's a family owned business (55% I think from the top of my head), the same family behing Genting by the way (cfr. biography "My Story" from Lim Goh Tong for more information). They are also about the best operators in the industry. So that's good : a very stable, well operated company in a great business. But the best of all : the shares are cheap. From whatever angle you look at it, they are cheap. First : cash flow. Over the last 5 years, they produced an average of about 92p a share of cash flow. These years contained some very good years, but also the last 2 years which were not so good. The share price is about 675p at the moment and they have about 125p of net cash. So the E.V. is 550p a share. This gives a E.V./cash flow of about 6. But, about 30% of their plantations consist of relatively young trees which are not mature yet. The investments have been made, but are not productive yet. These will start to produce over the coming years so that we can expect cash flow to grow by about 50%. Remember : this extra cash flow doesn't require any extra capital, so basically all cash flow can be considered as free cash flow! (cfr. the specific business model of palmoil plantations explained above). That reduces E.V./cash flow to about 4 in a few years, and the P/FCF to 5, or a free cash flow yield of 20%. And that with very low risk since they are in a net cash situation. Second : from an asset basis. They own about 60.000hectares. At their current E.V., this means that a hectare is valued at about 6.300US$/ha. If you know that these types of plantations are traded at about 15.000-20.000US$/ha, it's clear they are undervalued. And remember these are hectares that are very well operated and mostly in their prime life. So, if anything, they should deserve a premium instead of a discount. A hectare of mature palm can generate a free cash flow of about 1.250US/ha, so this explains something of the valuation. The reason for the undervaluation in my view is the listing in London, where the company is less well followed or understood and where palmoil is diabolized in the press. If they would list in Indonesia or Malaysia, they would immediately be valued at the mentioned 15.000-20.000US$/ha. So we've got a family controlled company, well operated, in a good business, with good prospects for the sector they operate in and with a very cheap share price. A nice combination, I'd say.

Groups like Wilmar indeed got big, starting with palmoil. But currently are no longer a pure palmoil play. There are a lot of other activities as mentioned in the article. There is indeed a indirect China factor because Asians seem to prefer palmoil instead of other types of oils. China, India, Malaysia and Indonesia together already consume about 55% of total palmoil production. As their populations become more affluent, palmoil consumption is considered to grow, even as opposition grows in the EU (which consumes about 10%). Now there are 2 important factors I see over the coming years which could have an impact on the palmoil market, one positive and one less positive. Let's start with the less positive : about 10-15% of the vegetable oils is used for the production of biofuel. Personally I find it stupid and immoral to burn food in engines, but that's how it is. Once the environmentalists and politicians come to the same insight, or if the oil prices take a dive, the use and production of biofuel could lower, causing an oversupply of vegetable oils and palmoil. Now the positives : in Malaysia and Indonesia (the major producers of palmoil) there is a strong vested interest in the palmoil sector and its refineries. With their biofuel policy, they can balance the palmoil market so that palmoil prices stay firm. Over the last two years there was a kind of oversupply of palmoil, so they passed regulation so that fuel now has to contain 10% biofuel. The oversupply got burned off immediately so to speak and palmoil prices stabilised. Secondly, as I said, there was a kind of oversupply because of major expansion investments in the period 2002-2007, between the Asian crisis and the Lehman debacle. These trees grew into maturity over the last few years and are now producing at their maximum. But since 2008, there was at first the financial crisis which impeded strong expansion and thereafter environmental regulation got a lot more restrictive. So expansion since 2008 has slowed a lot. Now that the trees from the previous expansion period are mature, production growth is expected to slow considerably from 2015 on. The combination of these factors could lead to considerable higher palmoil prices in the future.

Monstrously environmentally destructive : that's indeed what some environmentalists try to make us believe. Also in Europe there is a politically inspired movement away from palmoil with the environment as argument. However I suspect the French have other considerations as well : they prefer to subsidize their rapeseed farmers instead of buying Indonesean or Malaysian palmoil. Unless we all agree to stop using vegetable oil (which I doubt, even for the environmentalists), I think that palmoil is about the most green oil there available. For 1 ton of palmoil, you need 2500m² of farmland. If you stop using palmoil, but choose to use soy oil instead, you need for the same ton of oil 25.000m² of farmland, or 10 times as much land to deforest! There is indeed a movement right now to produce green and ethical palmoil : RSPO palmoil. Unilever also signed a charter to only buy palmoil with such a label.

Camellia is indeed an interesting company, but has no palmoil activities. They do al kinds of other crops like tea mainly (India, Kenia, Malawi, Bangladesh), also pistachios and citrus in California, soya in Brazil, macadamia's in Malawi, grapefruit & timber in Kenia, wine in South Africa,... No palmoil. You're correct that it's undervalued and that management isn't interested in closing the gap.

I just gave some sector background. If there is any interest from the other board members, there are some interesting companies to be discussed in the sector.

there are other interesting aspects : Whereas soy, corn or wheat are crops that have to be produced each and every year, starting from bare land, palmoil comes from a nut that grows on a tree. The trees mature in about 8 years. The first crop is to be expected after 4 years, but full production comes after 8 years. This means that palmoil is by definition quite capital intensive and requires a major investment in the first year to buy the land, clear it, build infrastructure, plant the trees,... Thereafter, there are only maintenance costs which are in comparison very low for the rest of the trees life (25years). The business model thus mirrors the toll-bridge model. One major investment, and thereafter 20 years of high margin cash flow. Inflation or currency effects thus only affect the original investment in the balance sheet, but the cash flows themselves are inflation protected. This means that the return on equity is indexed and inflation protected. Which coincidentally is exactly what Buffett describes as a good business.

I know there are some investors here interested in commodities. It surprises me a little to see that one of the most interesting sectors of the commodity sector gets barely any mentioning here (I mean North America) : the palmoil sector. However, it's a sector that is well known in Indonesia and Malaysia and also in the UK, Belgium, France & Luxembourg, because of historical reasons (colonialism). Why is it so interesting? Well, as we know, to have a moat in a commodity business, you need to be the low cost producer. The producer with the lowest structural costs is the long term winner. And that's exactly what palmoil is. Palmoil is a vegetable oil that competes with soyoil, rapeseed-oil, olive-oil, sunflower oil,... These vegetable oils are a necessary commodity and largely interchangeable and thus compete with each other for the world vegetable consumption. The thing is that palmoil is way more efficient to produce than the other oils, because of the productivity of 1 hectare : coconut : 0,35tons/ha cottonseed oil : 0,15tons/ha sunflower : 0,5ton/ha rapeseed : 0,75ton/ha soybean oil : 0,4ton/ha palmoil : 4 ton/ha So the productivity of 1 ha of palmoil produces 5x as much oil as a ha of rapeseed and 10x as much as a ha of soybeans. Logically, it's way cheaper to produce a ton of palmoil than a ton of competing vegetable oil. The consequence is that over the last several decades, palmoil has taken a larger and larger share of the world vegetable oil production/consumption to about 30% now. The other consequence is of course that palmoil is about the most profitable crop to be produced. The world palmoil price is protected by the higher production costs of the other vegetable oils and so the palmoil crop is as good as always cash flow positive, even in the worst crisises. Cash flow margins of 20-30% are no exeption. So palmoil production is definitely a "good business".

Thank you Learner, I'll have a look again at that presentation.

I'm not sure about Viacom. They started buying it in Q1 of 2012, just like GM, and that's about when Ted started. That's no argument of course, but I seem to remember that Mohnisch Pabrai mentioned it once in one of his speeches. However, I can't find it back, so I don't know for sure. The extra 18m shares in USB is interesting. I noticed Lou Simpson also bought quite some shares in the latest quartes.

Thank you all for the help. Does anyone has an idea what to think about the investments in USB and BK?

That explains the USG position then, which confused me somewhat. Thank you.

Thank you for your response. I thought they bought Verisk in Q2 2011, after Todd was hired, but before Ted. PSX was indeed acquired as a spin off from COP. USG was Buffett, but in Q4 2013, about $250m extra was invested, not really a Buffett kind of investment. The same goes for USBancorp and Bank of New York.

Does anyone has a clear view on the portfolio's of respectively Todd Combs & Ted Wechsler. I tried to put something together and came to the following : Todd : - DirecTV - Chicago Bridge & Iron - National Oilwell Varco - Verisign - Precision Castparts - Suncor - Wabco? - Visa - Deere - Mastercard - Verisk Ted Wechsler : - DaVita - DirecTV - GM - LMCA - Viacom - Liberty Global? - Liberty Starz - Media General & Lee enterprises : has something to do with the acquisition of the 60+ local newspapers? Then there are 3 holdings in the Berkshire portfolio that date back historically, but where there have been additional investments. But in view of the size of the additional investments, I'm not sure if they are Buffett's decisions : - US Bancorp - Bank of New York - USG corp Does anyone has a view on this?

Storage levels now a third lower than last year! They are at the moment lower than at their lowest point last year, and we still have some winter weeks to go... http://ir.eia.gov/ngs/ngs.html

a Merry Christmas and happy and healthy new year to everyone!

Damn Right is great. Even greater is Poor Charlie's almanack, but these two aren't the easiest kind of books to start with. There is simply to much wisdom in it to get it in one go. The snowball is easier to digest I think. But the best for a business student is the raw stuff itself : the Buffett shareholder letters.

I just tried re-doing this where the year before the market as a whole goes down. e.g.: Year 1: 15% Year 2: 15% Year 3: 15% Year 4: -15% Year 5: 15% where in years 1-4 in x% cash, year 5: 100% allocated. This makes the idea work a bit better. If you assume this occurs every 5 years, with the above returns, your extra cash only has to make 45% the fifth year to match the returns. At 6 years: 67%, at 7 years: 78%. That starts to be similar to Pabrai's rules, assuming he can pull off those big returns on the down years. However, note that the % cash does not matter. If the rule holds, then you should just be 100% in cash in years 1-4 and then 100% in at the high returns on year 5. Thus, I haven't seen anything where having a low percentage of cash is better than a high percentage, it either breaks the threshold or it doesn't. Have you tried to simulate more volatile circumstances? In your example (+15,+15,+15,-15,+15), your fully invested result after 5 years is almost 50%, actually 48,7%. Consider the following, more volatile, series : +10, +35, +0, -50, +100. The fully invested end result after 5 years is also about 50% (48,5%). But if you would have kept 20% cash until the crash and then be fully invested in the last year, your total result would have been 58,8%, and this with less volatility. The system works better with higher volatility, and the incremental system from Pabrai is even better than this simplified example, because the last 20% of his investments won't generate the 100% from the last year, but 200% for example, due to his higher return requirement for his last 20%. This way he would end up with a total return of 78,8% after 5 years in our example. Some people here suggest that holding cash is akin to trying to time the market. This is not what Pabrai suggests. He suggests to up your return requirement as you invest your cash balance. You require a higher return on your last 5 or 10% of investment than on your first 80%. Due to the volatility of the markets, this only has a indirect effect of timing the market, but timing the market in not the purpose per se. In fact, the same can be said about value investing. By insisting on buying value and getting a margin of safety, you are indirectly timing the market, because there is simply more value available at the bottom of the market than at the top. Market timing here again is not a purpose, but a side effect.

I also like to have some cash around, even if it hurts my short term performance. The cash helps you to stay detached and opportunistic. If you're fully invested, you partly loose that optionality, because you have to be right. Things have to play out as you expected, any other scenario will disappoint you. If I have some cash around, whatever happens is all right. If things go as expected, I earn some money, if not, I have the flexibility to adjust. It makes me think about the "Rich Man, Poor Man" analogy from Richard Russell. There's a lot of thruth in it : "In the investment world the wealthy investor has one major advantage over the little guy, the stock market amateur and the neophyte trader. The advantage that the wealthy investor enjoys is that HE DOESN'T NEED THE MARKETS. I can't begin to tell you what a difference that makes, both in one's mental attitude and in the way one actually handles one's money."

In my view Chanos fund has to be considered as a service, not an investment. There is a market demand for short exposure, and he provides that service. That's all there is to it. He has carved out a niche in the fund management business and his service has a good reputation. I would be very supprised if he invested all his personal net worth in short investing. But that wouldn't be contradictory, because Chanos is not really investing and aiming the highest possible absolute return, he is providing a service, fulfilling a market demand. And he's good at it. Actually, if he would invest his personal net worth into long situations only, that would be a perfect hedge with his fund activities.

One of my biggest mistakes (plural, I have a collection) was one of stinginess. Back in the first quarter of 2009 I was steadily buying some incredibly cheap stocks. One stock was quoted at a P/E of about 1. However, my first investment in the security was made at a P/E of about 4,5 in the first half of 2008 and although I thought I had a margin of safety, the stock went lower and lower. So during the slide, I did some extra purchases. At a certain point, I put an order in the market to buy an extra amount that would have augmented my position with 50%. The market price was at about 61 at that point and I put in a limit order to buy it at about 60,5 for a nice prospective P/E of 1). With the daily volatility, I was certain that the order would be filled, but alas the opposite happened. The order never got filled. In the 2 years that followed, the stock multiplied by about 30 for a cool annualised return of more than 500%/y! Of course, I had a good investment with the established position, and the cash got invested in interesting other situations, but the cost of this lost opportunity is quite huge after some years.

It depends on whether you want to make a career in the firm. If that's the case, you simply don't have much of a choice. If you refuse such a "request", you can shelve your ambitions in the firm or even more broadly the firm's industry (the world can be very small in certain circles). If you don't intend to stay indefinitely with the firm or in the industry, you're free to choose. However be sure to have an alternative then.

My experience is that marketing in this type of job is less important. If you have a decent track record and you have a reputation of integrity and honesty, the money comes automatically. Money tends to attract more money. I honestly never marketed our partnership, but over the years, people came asking by themselves if they could join. Psycologically that's very important, because that way, they don't feel like they were being sold anything. They were the asking party and were convinced of the investment strategy beforehand. I also select people so they mentally fit in in our partnership. 3 years ago I had someone interested and his investment could have grown my AUM with 50%. However I turned him down because he told me he couldn't stand volatility. I knew I couldn't guarantee him this, thus it made no sense to start pretending. A partnership on such a pretext would never have worked, and although it was tempting, I wouldn't have done myself or my partners a favor by letting him in. Of course, you grow somewhat slower this way, but the money that comes in, tends to stay. This allows me to truly invest and think on a long term basis. Over the last 10 years I only had 3 partial redemptions for a total of 0,4% of current assets, although partners can exit every quarter. In 2008, I had no redemptions at all. On the contrary, the existing partners invested an extra 30% although (or because) 2008 was terrible.

That's commendable-- I have a lot of respect for that. Same for you Parsad! Thank you, JBird. Sanjeev says he couldn't have done it with a spouse and children. I think I couldn't have done it without my wife. That's why I talked about "we" instead of "I". She has no interest whatsoever in investing, but makes everything possible by taking care of the family, while she also has her own business. I think that's a way greater achievement (combination of big family with business) than a man who combines 2 jobs.

I like the idea of a manager who is already financially independent. Because if he has a track record that is worthwile, he'll be already a long way towards financial independance. Secondly, as a partner, you don't want your manager to be pressured to take unnecessary risks because he needs the fee money to survive. For an investor, patience is no luxury, it is a neccessity, and if your manager is being pressured by debt or by income problems, the first thing to go is the patience, and with it the rationality and prudence. This is the current reality, the only people who can get into investment management either are young and have no expenses, or those who are older and already made enough money that day to day expenses aren't an issue. This eliminates anyone who decides they'd like to have a family, which is probably why working all of the time is lauded for investment managers, they're either young or beyond kids. Why would someone who's financially independent take on someone else's money to manage? Managing money for someone else is not the same as managing your own money, it's much more stressful, with more responsibility. If you are well off why add that to your life. If I were financially independent I would not be managing outside money as something fun, I would probably manage my own money and spend time on things I wanted to do like skiing, biking etc. The way for someone to manage money who has a family on their own appears to be as a RIA who builds a considerable book of business and earnings a straight fee, or for someone who's wealthy parents/relatives bankroll their living expenses while they build up AUM. The second route is all about connections, if you come from a wealthy family I'd imagine it would be easy to collect assets which means you wouldn't need to live on your parents money for long. There is actually a third way, as suggested by Pabrai : you can combine a day time job with investing for some years until you have the needed funds. That's the way we did it. We are not from wealthy families, haven't been supported, didn't have a financial background, we never inherited anything and we now have 4 children to support. But after some 10 years of combining a day time job with investing, we could choose to do whatever we wanted. I agree with you however that it wouldn't be as easy to replicate this if you already have the kids. We could combine my day time job with managing the partnership and my wife's job until the 4th child came. Then I had to choose and give up my day time job.