Happy

Someone recommended StockMarketEye to me. You can try it 30 days for free and if you like it it costs $100 as a one-time payment (no recurring subscription). It automatically imports price data from Google Finance and/or Yahoo Finance. You can set up multiple alerts for when a stock crosses a certain price or e.g. if the stock moves more than 5% in a day. So far it seems nice. The only thing I don't like is that it when an alert gets triggered, it seems to shows that only in the program and not pop it up to the desktop. I normally avoid checking my stocks every day to foster a longer-term mindset, but without the pop-up I kinda have to check them to see if an alert got triggered.

In his latest talk at Boston College, Pabrai was asked how he goes about cloning in international markets. He said in India the brokers need to disclose anyone who owns more than 1% of a company. You would see that if you look at the individual stocks. For India, he gave the example that Alpha Ideas searches for this information of good investors and publishes it on a quarterly basis. Does anybody know a source that does this in China for funds like Hillhouse Capital Mgmt? A similar service in Europe would also be helpful. Thanks

That's not true for some people (especially all the INTJ's here??? 8) ). They might be much better in making money - like Buffett - than in running foundations, digging wells in Vietnam or teaching kids in Africa. They might not look for having their name on the building, but rather feeling good for paying for the malaria medication or eye surgeries. This is valid approach. And they might not live a monkish lifestyle if their portfolio is way bigger than getting some upper middle class yearly income ($100K let's say). I agree. If investing is your true passion and you probably would like doing those alternatives much less and would be worse at them, why stop doing it just because you don't really want/need to spend the money yourself? Roger Federer probably doesn't play tennis just for the money either.

Holding some cash certainly doesn't kill the record of a great investor. If you could outperform by 10% p.a. being fully invested, but choose to sacrifice maybe 1% (just making up numbers) in long-term outperformance by holding cash while significantly reducing your downside, you'd still have a great record. I guess it depends on how much you worry about that 1 time out of 100 versus wanting to maximize long-term expectation. As you say, to each one the answer he/she prefers.

Isn't the opportunity cost to hold cash is higher the better you are as an investor because the stocks you pick have a higher expected return while cash earns the same for everyone? One could say that the better investor also deploys his cash better later, but if he finds a 4x to me the right consequence then is to be willing to sell your least attractive existing position (even if at a loss) so by being fully invested you don't really have to miss out on those great opportunities (at least in theory). Basically you are earning "extra profits" by being fully invested and those could be counted as "cushioning" the blow when the inevitable downturn comes and you lose more on paper than someone who was less invested. Unless the market goes down fairly early there probably will be a point where your "extra profits" already cover everything you would additionally lose in a downturn so you are better off even when it comes. In the end it seems mostly about risk-preference. If all you care about is maximizing expected return being fully invested should be the way to go (unless you are that very rare investor who can time the market which I can't) but if that feels too risky when the market is no longer cheap it is a perfectly fine choice to sacrifice some expected return for lower volatility. People have different tolerance levels for risk so they should do what they feel comfortable with. I think someone like Klarman so frequently holds cash because he is a) extremely risk-conscious and b) has clients.

For me, it was an eyeopener to learn that Greenblatt was scared of the bubble in 2000 but remained fully invested and returned 100% that year even as the S&P dropped. I checked how other strong value investors did and most of them returned > 20% in 2000 (many even significantly more) and > 20% in 2001 with nobody losing much at all. As 2000 was the most scary time to look at market valuation in history and even then it would have turned out to be a big mistake for these value investors to not be fully invested despite the market dropping a lot, I have concluded for myself that it is just not worth it to try. My explanation for this is the following: The more overvalued the market becomes, the less does its risk profile reflect the risk profile of a carefully selected concentrated value portfolio. So it makes less sense to get scared about your attractive businesses just because most other stocks are expensive. I find it helpful to remind myself that if I could buy part of a good operating business in my town at an attractive price, it would be crazy not to do it because the stock market is overpriced. And buying attractive stocks of good companies is just the same thing. So as long as I can find enough opportunities that seem to meet my hurdle I think that I would just own myself over time and be worse off if I didn't remain fully invested and held a cash position based on my thinking about the market.

Your reasoning is sound if BRK is the only stock you would buy. As intrinsic value grows at a decent rate it is better to buy than to speculate it will drop first because it goes higher. But for those that want high returns and have a lot more stocks to choose from, it seems better to buy it only when BRK is clearly cheap and try to find something cheaper the rest of the time. As Buffett follows a lot of companies, he doesn't have to buy it back at a higher premium.

Thank you!

I think Buffett started out with 0,4,25% and 0,6,33.3% , and 0,0,16.7% as his fee structures. He only switched to 0,6,25 because he wanted to combine them all into the same structure and wanted to be superfair and not leave anyone thinking that his old fee structure could possibly have been better. So if one starts today with only one fee structure, shouldn't one actually use one of the terms he started out with rather than with his "concession" to existing partners? Historically very low interest rates and the high market valuation would also lead me conclude that 0,4,25% might be fairer than 0,6,25% when starting a new fund today.

When I go to http://phx.corporate-ir.net/phoenix.zhtml?c=76556&p=irol-reports and download the annual reports of Davita from 2001-2013, the reports from 2003-2012 include a letter of the chairman but the reports of 2001-2002 and 2013 do not. Is it because the listed 2013 report is in form 10-K and the more extensive annual report is not done yet so it will be added later? If so, why are there no letters for the earliest years?

Buffett explained at an annual meeting that he has looked at every company in the US big enough that he could possibly invest in it to the point that he either won't understand it well enough or has done so much work on it that he won't really get any further with more research (only on a superficial level). So he can now make a decision on most of them in a few minutes because he immediately knows he doesn't understand them well enough or has already spent many hours researching it.

1) Intelligent Investor 2) The Little Book that beats the Market 3) The Making of An American Capitalist 4) Buffett's shareholder letters 5) Poor Charlie's Almanack

I agree that you can decrease your volatility and particularly the "worst case risk" by holding some cash the more expensive the market becomes. But I would note that the year 2000 must have looked far scarier in terms of the overall market than it does today and most top value investors actually racked in great performances as the market dropped (e.g. Greenblatt was up +100% in 2000). It's true that back then the discrepancy in valuation between "cheap stocks" and "expensive stocks" was probably at its extreme, but I learned from it that it's not a given fact that your portfolio has to decline with the market. These guys would have been far worse off had they not bought their good opportunities because the general market looked extremely overvalued. I guess the more overvalued the market, generally the bigger is the discrepancy in valuation to your portfolio (at least if you invest in 12 stocks or less) and thus the worse the overall market risk will serve as a proxy for the risk of your portfolio. So I will have a more careful attitude when the market is high than when it is low, but as long as I do find that 50 cent dollar I will buy it and not worry about the valuation of all these other businesses. If you lived in a town and someone you know offered you a part interest in a business that you were familiar with and where you thought the deal was very favorable to you, should you not take it because the stock market currently is at a high level? Charlie Munger once said at an annual meeting that the idea basically is to grow rich enough (by fully exploiting the value of your opportunities) to be able to stomach the inevitably higher losses (that will arise at some point from being fully invested in not too many positions). Unless you get unlucky right away by the time the feared decline comes you may already have earned enough extra money to be better off even at the worst point of the decline and it is extremely likely that you will do better this way over a very long period. That thought reasoned very well with me, but I can understand if people are afraid of "being unlucky before the aggressive approach starts to pay off".

The market seems slightly overvalued to me, but I would definitely buy without fear whenever I find a compelling opportunity. Buffett said that he they never would dream of having an asset allocation meeting like going to 65/35 stocks/bonds and that they don't even think that way at all. The cash depends on the opportunity set in front of them. If their cash is piling up, it is because they haven't found any compelling opportunities. If they find one, they just stick their money into it. In my opinion all this thinking about the general market was one of Graham's weak suits. He probably would have been better off if he hadn't thought about this at all. Keep in mind that Graham was one of the two (along with Buffett's father) that advised Buffett to wait starting his partnership until the Dow drops below 200 again (which it never did).

How would I actually go about benefiting from this (or at least protecting myself) in case this happens? Can I just short Japanese 5-year government bonds? I have never shorted anything in my life, but this situation really seems unsustainable to me and both the downside and annual carrying cost seem extremely low if the bonds hardly yield anything. If Japan were to monetize its debt to keep rates down, the currency should depreciate. So one probably would also buy options on the currency or short the currency as well. Any advice on how to actually do this would be appreciated. I read some time ago that Interactive Brokers is a good option for shorting.

Good point. Sounds to me like it shouldn't be added to Net Income. Buffett and Munger repeatedly said that stock options are a real expense and that it is wishful thinking to treat them as anything else.

Buffett defined owner earnings as follows: "These represent (a) reported earnings plus (b) depreciation, depletion, amortization, and certain other non-cash charges...less © the average annual amount of capitalized expenditures for plant and equipment, etc. that the business requires to fully maintain its long-term competitive position and its unit volume. (If the business requires additional working capital to maintain its competitive position and unit volume, the increment also should be included in ©. However, businesses following the LIFO inventory method usually do not require additional working capital if unit volume does not change.)" My question is what exactly he means with "certain other non-cash charges"? For exampe, if I look at the 2013 AR of Microsoft, what should be my end result? CASH FLOWS STATEMENTS (In millions) Year Ended June 30, 2013 Operations Net income 21,863 Adjustments to reconcile net income to net cash from operations: Goodwill impairment 0 Depreciation, amortization, and other 3,755 Stock-based compensation expense 2,406 Net recognized losses (gains) on investments and derivatives 80 Excess tax benefits from stock-based compensation (209 ) Deferred income taxes (19 ) Deferral of unearned revenue 44,253 Recognition of unearned revenue (41,921 ) Changes in operating assets and liabilities: Accounts receivable (1,807 ) Inventories (802 ) Other current assets (129 ) Other long-term assets (478 ) Accounts payable 537 Other current liabilities 146 Other long-term liabilities 1,158 Net cash from operations 28,833 Investing Additions to property and equipment (4,257 ) Acquisition of companies, net of cash acquired, and purchases of intangible and other assets (1,584 ) Does "certain other non-cash charges" include all of the operating cash flow items so that I arrive at "net cash from operations" or do I need to make adjustments / exclude items? If if were just Op. CF - Maintenance Capex, why didn't he write it simpler (I read somewhere that the accounting was different back then)? My result would be $ 28,833 - $4,257 = $24,576. (I know you should take the average maintenance capex over multiple years, but let's leave that aside for now). And if I wanted to calculate "Owner Earnings / Enterprise Value" instead of "Owner earnings / market cap", would I have to further adjust that number? As far as I know you can't use Net Income / EV as one is after debt/taxes and the other isn't, I guess that applies here as well. Thanks

I'd like to read it.

Some points: - He might be able to meet his higher return requirement even in years where the market doesn't drop. It seems very tough to make realistic assumptions how often the cash is (not) invested. - If you have some cash left, you might work harder to find something. Before this he just looked for 2x in 2-3 years and that was it. By patiently looking for the really fat pitches whenever he has some cash the quality of his positions might improve considerably improve over time. - As the fund manager, his approach might make sense long-term because Pabrai's drop would have been far less severe and he would have made it back much quicker. If that lowers the volatility, it makes his fund more attractive and an increase in AUM could make it up for Pabrai even IF his returns should turn out slightly lower because of the cash. For clients it may make sense because they are less likely to leave at the wrong time (protecting them from themselves). - Assuming equal returns per year (just +15% and -15%) might not be fair because the cash is less likely to be deployed after the market has shot up and more likely when it went down. So the less volatile your model, the worse cash does I would assume.

I am looking for a list of all upcoming and recent spinoffs, in Europe and/or the US. Is something like this obtainable for free or does one have to pay for it? Thanks.