dpetrescu

Thanks for the reference, that is pretty impressive long term growth. I have a short list of great companies that I’ve been waiting on, some for years. We’ll see if the previous lows get retested.

I’m not familiar with NVR. Just looked it up, it does have a low PE ratio. Do you feel confident that it will be around and earnings and revenue will continue to increase for the next 30 years? (Assuming home starts average average what it has in the last 60 years. Simpson looks like a strong company, and I agree with you about most home builders, which are too weighted towards levered land speculation. NVR, however, has historically been an exception. It's long-term returns are even better than Simpson's. The earnings of both companies are driven by new home sales (NVR even more so than Simpson). Simpson is trading at 25x 2019 earnings, while NVR is trading at ~15x 2019 earnings. What is the scenario in which Simpson outperforms NVR?

My take on this: 1. Take a look at historic housing starts. We just recently reached about the average since the 1960s, with more then a decade of far below average starts. https://fred.stlouisfed.org/series/HOUST Homeownership vacancy rate has been on decrease since 2007 https://fred.stlouisfed.org/series/RHVRUSQ156N 2. Here’s an interesting interview about millennials 3. With that said, personally I wouldn’t invest in home builders. Just the fact that there are so many - they have no competitive advantage. They don’t have great balance sheets and to me don’t seem to be great 10 year or more holdings. I’ve been investing in Simpson StrongTie SSD for more than half a decade - it’s been between 50% to 70% of my entire holdings. It’s a perfect company - it sells connectors used in wood construction. It has owned about 50% market share for decades in a very specific market with huge barriers to entry, It made a GAAP profit through every year of the Great financial recession (of course much smaller In 2007-2010 but still profitable), no one knows about them - there are no interviews and no comments/discussions on CNBC or online, it has a great dividend, and it has just one other competitor (part of a subsidiary owned by Buffett), they have great margins and profitability, they have such a great balance sheet and can withstand recessions - this is intentional and they talk about this at earnings calls. They announced Q1 2020 with significant earnings increase YOY a couple days ago. With that said there are risks A) keep in mind I’m very biased since this has been a majority long term holding B) about 50% of their profits is dependent on housing starts C) they already recovered quite a bit D) although a great Q1 2020, they did say they had double digit sales decrease in April so far YOY E) US Population growth used to average more than 1%, it is now about 0.5%. https://data.worldbank.org/indicator/SP.POP.GROW?end=2018&locations=US&start=1960&view=chart F) I’m hoping someone can convince me to change my mind

Does anyone know if the webstream will be open to all - will non-shareholders also be able to watch the webcast?

I’ll add a couple thoughts: 1. I think there’s no doubt they did some buying in March. How much remains to be seen. If I remember correctly Buffet typically does the interview rounds the week before the annual meeting. Someone correct me if I’m wrong but typically they announce big purchases or deals before the event (Apple, Burlington) and use the event just for questions. So we’ll find out next week. 2. I roughly remember the quote...there are knowable things worth thinking about and unknowable things not worth thinking about. They might be thinking the next year is just unknowable and it is not worth gambling. Some people argue this is a self-inflicted recession. If someone intensionally shoots themselves in the foot, wouldn’t they suffer the same medical consequences as someone that’s shot unexpectedly by someone without warning? 3. In late 2021, it seems that things are back to being in the knowable general range. If only we knew which companies would not go bankrupt until then.

I thought this deserves a dedicated thread. https://www.google.com/amp/s/www.wsj.com/amp/articles/charlie-munger-the-phone-is-not-ringing-off-the-hook-11587132006 What does everyone think? One thing I can’t reconcile - holding a lot of cash while thinking of the fallout of large government intervention. Ray Dalio had the same thoughts in the recent long interview. Is it a matter of not having an option? Or just a matter of timing?

True it is an upfront investment but it’s inevitable and it is the simplest way to cut budgets long term and remove all the current inefficiencies and slow timelines. I think Ron would approve ... at least in spirit. Well maybe not but Ron’s daughter would definitely approve. On what budget? Once this pandemic is over I wonder how much money any city/state in the US will have to do anything new and non-essential.

Infeisone - not familiar with those companies but it seems like they’ve been growing quite a lot also. My impression of the two you mentioned that the more technology consulting and cloud services? But I might be wrong? Have to look into them. Tyler is interesting because it seems a pretty good pure play on software platforms for city, local and federal departments - software operating platforms (pay parking tickets online, send permit drawings and applications online, receive plan check letters online, etc). Instead of every department (court, permits, licenses, receive RFPs) having their own website, it’s one single platform. Someone on here started a post - what people will do more of longer term after this pandemic is over. He mentions a lot of people will get haircuts on day 1 and then back to normal. Once this pandemic is over I think every city in the US will be accelerating their digitization plans. It allow the cities to make revenues (collect court tickets online) and keep employees during pandemics (review building permits while working from home) without having to lay people off. And it’s just inevitable. Bsk. - That’s right it is extremely expensive. I think there’s a reason why Charlie Munger is taking the daily journal of commerce in that market as competitor. Imagine what an unprecedented market position that market is: 1. City group of departments hires TYL to digitize their operations - this likely takes 5 or more years? 2. TYL now has a contract to service the systems on an ongoing basis 3 thyre going software as a service. See Microsoft, adobe, auto desk 4. Once they digitize a City, seems like they have a better competitive advantage than Microsoft. If a better platform comes out a city would have to undue 5-10 years of commitment and years of progress and all departments would have to agree. Imagine if we learned that there is a better language than English, would anyone switch? 5. I could be wrong about all this and price could collapse, it is expensive 6. Wish I heard about it 10 years ago :)

Does anyone know much about TYL and TDG? I bought some shares recently but Just a starting position, didn’t have enough time to fully understand the companies. But they both seem to have a competitive advantage with pretty impressive pricing power. TYL just seems to have unusual pricing power, don’t fully understand them. I heard about TYL while listening to a Munger DJC Q&A. He mentioned TYL is the main company digitizing government agencies. The main but larger competitor of DJC and their software plan. Sure, would have been better 10 years ago but federal agencies are slow to change and most have a way to go. I can say this from experience, I’ve been waiting g for my city to digitize permit intake and review for 12 years now. It’s a good competitive advantage and the tide is in their favor for a while.

I’m surprised people are trying to time the market. Do people really think the Dow will be lower than today in 5 years? I llearned a lot lot of lessons from the last great recession. In 2008 when prices were falling, I took a big loss and then ended up doing some short sales as insurance that in the end ended up losing a little bit more. After Warren Buffett’s letter I woke up and closed shorts and just bought and held. I’ve been getting much better since then. I haven’t sold any stocks since about 2016 (with the exception of closing out LEAP options) So I’m just holding onto my core positions and adding...companies with strong moats (60% SSD plus others....STNE, BYD, DEO). I feel OK holding most of these through World War III. I also have a few lottery tickets with far OOM 2 year options for airlines and Six Flags. I’m also not selling these, will likely hold them until 2022, at least the ones that don’t go bankrupt (i’d be surprised if some don’t). Very risky but it doesn’t take a large position for big games if it works out. I am waiting to buy more of my core positions and maybe some “lotto tickets” if we test the previous lows or go lower. If Dow goes 50% lower than today I’ll even use leverage.

Excellent reference, Simpson isn’t without competition. MiTek is a Berkshire subsidiary. But MiTek is a large global company covering more segments. Simpson’s real competitor is USP, which was purchased by MiTek in 2011. MiTek USP clips are in Loews, Simpson clips are in Home Depot. Simpson and USP are the true duo leaders with almost all the market share in The wood connector market. For good reason — a new entrant would need to educate engineers and specifies, build up a catalog of thousands of small low cost clips and provide multitude of testing for each of the thousands, provide building code documentation, etc. But there’s no question Simpson is still the market leader. In 2016 Simpson had a 43% market share in wood connectors, in 2019 Simpson had a 54% market share. There’s a reason for this - call up any Structural engineer and ask them what wood hangers they use and they’ll probably be confused because that’s like asking someone what website you use to search the internet. I’m an architect and when my engineer specifies something else, I’ll need to reconsider it. So far the “google” test has held up for decades. You forget about their biggest competitor - MiTek. In the best of time it's a fierce competitor. But it also has a very rich sugar daddy which can supply infinite capital, don't need to worry about financing. Can do any bolt on deal they want. Can acquire any weaker competitor at cheap prices to bolster their position.

Very dramatic fall since last year. Seems so obvious too, similar to the inevitable fall of Redbox and GameStop.

There’s a variance of opinions on how long the medical crisis will last, how long the economic downfall will last and also how the stock market will be impacted. As a famous philosopher once said: it’s tough to make predictions, especially those about the future. You can predicts what or when but it’s smart to not predict what and where. So I predict that sometime in the near future -next week, next month, next year... there will be an immense opportunity. So what is everyone’s one single big idea? Not a list of ticker symbols - but one single punch you’re waiting to add to your small punchcard. Mine is unchanged from almost a decade ago: Simpson Strong Tie Simple company, easy to understand, has a large market share in a very specific and small market with a good resistance to new entry. This translates to good margins and ability to increase product cost. Downside is it is tied to new home and renovation construction cycles. It’s down a bit but it could be going a lot lower soon. It also has a great balance sheet - a lot of cash, low debt and able to withstand panics.

The initial deadline for airlines to apply for cash grants from the government is today.

Berkshires annual meeting is on May 2. What does everyone think? Will Warren announce something similar to BNSF? Or will he say something he has said in the past, that sometimes you have to admit you’re wrong, change your mind, and move on? There is no doubt that after this is over the fewer airlines that do survive will be even stronger over the long term after potentially even more consolidation. Warren has also said that he periodically sells to stay under the 10%. However, I’m now leaning more towards the latter. Airlines WILL be losing a lot of money over many months to more than a year. I bought a few long 2 year out of the money call options for a few airlines. I realize there’s a good chance they could be worth zero.

That is great thinking. Have you looked at how companies with non-recourse faired during the 2008 crisis? Anyone know of good companies with majority of debt as non-recourse? Looked a bit but couldn’t find much information, which is probably a good sign.

Here’s my prediction: In 10 years, all of us will still be in here looking for things to invest in. Will stock prices will be higher or lower in 2030 compared to today? Market tops and bottoms don’t exist in real time, they only exist in retrospect. I’m willing to guess prices will be a whole lot higher and that 10-20% will be barely noticeable. I’m also willing to guess most of the appreciation will be mostly due to a handful of random days. I’ll also guess we shouldn’t be surprised that prices will be lower in the next month or so than today. The only conclusion I come up with is keep buying and holding, don’t trade the volatility. You miss one or two days and you miss out. The only question is how to raise funds and how to manage the buying based on the funds you have and how long should you buy heavily?

In developing news, a pre-emptive quarantine has been announced for Mars. A strict 6 foot separation has taken effect for the entire population on Mars. When outside, astronauts are now required to wear spacesuits to avoid spreading the virus.

The way I see it, it’s long overdue for a 30% to 40% market correction from the top along with an official recession call at some point. With that said....I just bought some 2 year calls on a few airlines. Figure I can buy more for every next 10% drop. Also got some Disney. Would get more Simpson if it fell more. Thinking about Google. Any other 30 year, large-moat investments people recommend?

1. SSD - Simpson 50% This is my main idea for the last few years. Such a plain and simple company. Everything I've learned from Buffett I found in this company. Not planning to sell for many decades. 2. GOOG - Alphabet ~18% Who am I to say if its overvalued but what an unprecedented moat. 3. IBM leaps This is more of an investment in Warren than IBM. I generally stay away from turnaround stories. 4. GM discount bin 5. ADSK - small position Software company with good moat and just recently moved from sales to subscription like Adobe. 6 other - VZ Verizon, short CAT, short RIO, LEE Enterprises 7. TBD - I'll have a lot of cash available in January with a bunch of long term options expiring so looking for more ideas. Great discussion. (Although it would be nice for everyone to include the 10 word summary for the few key holdings)

CAT and RIO, the usual suspects.

Thanks Sternalot. This really helps. I'll look through their SEC filings and get some more information when I'm back from my vacation in Nappa. I just like the company because of their market dominance. I would like to keep my investing simple and only invest in near monopolies or companies that have a sustainable competitive advantage. So far I own Verisign and Verison, both good examples. Its tough finding others. I don't think I will hold GM for decades.

True their stock has decreased in last 10 years. But, during this time, their book value doubled and tangible book value is up by 62%, even with the housing near depression in the middle of that period. I've read some quarterly and yearly report and listened to a couple conference calls and feel better about their expansion outside of the US and into truss products. When pressured to expand and make more acquisitions the CEO stated that their main focus is on differentiated products and not products/markets that are price sensitive. Compare this low competition market with the carpeting or roofing which is much more competitive. They are a very focused niche company. I would love to own it at a good price. I also understand all of their products very well, have specified their connectors. I'm not sure about valuation, I need to do some more research and number crunching. I purchased a small amount because of the big fall in stock price while I learn more.

Good find about thier competitor USP connectors, USP is the #2 in the industry and only real competitor. prior to 2011 USP was part of ROCK. ROCK's gross margin 2005-2011 was very consistently in 20% range while Simpson's was consistently 40% range (currently 45%). USP is making some headway, they're now exclusive at Lowe's while Simpson is Home Depot. Simpson's ROIC is 18-20%, it was consistently 25-50% from 1995 to 2006 before the recession. ROIC has always been above 14% since 1995 with the exception of 2009 at the recession bottom when it was about 7%. Return on equity and assets is similar because of practically no leverage, it's about 7% now, has been steadily growing since recession. 1995 to 2006 ROA was consistently 10-20%. They are making steady recovery. They are running at 60% utilization so they have potential for operating leverage as long as housing starts are steady and increasing. Increased construction in Multifamily housing or seismic and hurricane zones will have the most impact on earnings.

I just found another lifetime punchcard company: SSD Simpson. Could everyone punch holes in this investment idea? Why this is a special company: - great balance sheet. No debt. Some liabilities in amounts due - they are a near monopoly in the residential light commercial market - The "Simpson" name is like Google. ask any contractor or structural engineer friend, what products they use for metal connectors. They will respond "Huh? Ohh you mean Simpson clips". - Their near monopoly is self-reinforcing due to scale. A construction project will use hundreds or over a thousand clips and fasteners and a great amount of types. Engineers and contractors want a single source with the brand name to buy or specify in bulk. they won't buy post base clips from competitor because it is cheaper. - large percentage of shares still owned by Simpson , the original founder from 1950s - income and revenues fairly steady in direction Cons - they are expanding into non-consumer markets, not sure if they can keep their edge - intangible assets grew in recent years from some acquisitions - stock is not bargain cheap - performance is tied to residential construction I think Berkshire would love to own this company for ever.