TeddyLampert

I'll be eager to hear what WEB has to say on the aforementioned subject. Part of WEB's appeal to the masses is his folksy insistence you don't need to be too bright to be a successful investor. "Anything over a 160 IQ is a waste..." WEB often says in some way or the other. I'm probably not the only one who has experienced cognitive dissonance when hearing this. There are many times when Buffett has referred to Munger as super-smart and vice versa. There are numerous times when others, such as Meryl Witmer (just as an example off the top of my head) will say that Buffett is wicked smart and smarter than you have even assumed. Schroeder will give examples of Buffett multiplying license plates mentally for fun. I just don't buy it when these two guys, who I have enormous respect for, make these preposterous claims that you just need average intelligence to pull off what they did. Let's just call a spade a spade. A lot MORE value (in terms of making us better investors) could be gained by everyone here trying to debunk WEB/CM myths rather than add to their mystery and mythology. Just my humble opinion. I want to learn from the best (which is what they represent), but I also want the truth.

According to Reuters ;) Peter1234, Thanks for coming to the rescue with your reply! This is a great board for this reason!

Sorry if this has been asked before. In this interview, Todd Combs is asked what they read. He mentions annual reports and other things, but he also mentions something called "delta reports". Does anyone know what "delta reports" are? Thanks!

Hey Teddy I would reference Sardar Biglari (running Biglari Holdings and his private investment partnership, Lion Fund, LP) or Ryan Morris of Meson Capital. Biglari through TLF (the Lion Fund) bought i think around 32% of the shares on a small restaurant chain, Western Sizzlin back in the mid-2000s. He nominated himself to the board, got it, then became CEO after forcing(?) the other members off. He wanted to create value and turn the business around. It's a guess, but TLF only had probably $25mm or so in AUM around that time. Biglari also used Western and TLF to buy shares in Steak n Shake (a much larger company at the time than TLF and Western put together), do the same nomination, got it, then became CEO again. (He only owned about 15% of the shares when all this occurred...but shareholders voted him and Phil Cooley in). Subsequently restructured SNS and renamed it Biglari Holdings. That's a pure play of taking control of a public company. Ryan Morris hasn't necessary "taken control" of companies, but he is on the board of 3 different ones, hoping to influence their business. I believe his AUM are below $100mm too. I hope that kinda answers your question. Biglari played a more activist role, by wanting to create more value for the company he was buying an interest in, and was able to take control to help make the necessary changes, since managements wouldn't listen or try his recommendations. Unlike a passive investment (Buffett back in the day...Solomon CEO, Wesco, Blue Chips) where he nicely(?) assumed the role/control because of his significant investment. I hope it helps!? :-\ Frugalchief, I was only vaguely aware of the Biglari story until you clearly laid it out. Thanks for sharing that! It really got me interested in learning more as I love case studies like this. If there's any helpful sources you can point me to, that'd be great. Otherwise I do plan to read the Biglari thread on CoBF. Many thanks!

Thanks for all the replies ;D Still wondering about the following question: If you manage a small fund of <$100 mm, how do you take control of a public company listed in the US? Thanks!

This topic hasn't been discussed since January, but I wanted to ask a relevant question: If you manage a small fund of <$100 mm, how do you take control of a public company listed in the US? I was looking at the history of Blue Chip Stamps, and it seems that Buffett was acquiring unlisted shares of BCS mostly through the BRK vehicle. In other words, it was a public company acquiring another public company; that makes sense. But are there important differences or considerations if it is done through a fund vehicle?

He responded rather quickly that he knows Jack Ma (which rolled out of his mouth) and then he started to say he was familiar with Alibaba before trailing off in his praise for it. We all know WEB is a Dale Carnegie Man, never wanting to criticize, condemn, or complain, so his long, windy path to saying Alibaba was just a "remarkable" company was telling. This is just my two cents. None of this really matters. I was merely pointing out the kind of silly hot-topic questions this interviewer was throwing at someone who (she should have known) has an aversion to investing in tech!

I just read through the letters, and it was delightful. Some takeaways: 1) we often hear Munger quoted as saying that he'd just own maybe 4-5 businesses max in a portfolio. That's what he's done within Blue Chips 2) the spreadsheet was really helpful in illustrating in the most simple way what a "float business" looks like. It provides an extremely powerful form of leverage. BC had very little debt otherwise 3) BC achieved ROEs close to 15%, after, Munger admits, making a lot of errors. Later he admits that Buffalo Evening News might have been a mistake, depending on how you look at it. For 5 years after purchase, Buffalo made losses for a variety of reasons (weekend paper war, labor, legal injunction, etc), but the final outcome was ok since the competitor folded and Buffalo jacked up its circulation. Munger wisely says not to judge this investment by the outcome (which ended positively) but look at all the risks it took to get there... maybe not such a great investment after all. In any case, 15% ROE with this big drag... still pretty good returns 4) purchased Precision Steel for 11x 1yr forward P/E 5) Garrett Hardin Princinple for the soft sciences: bad ideas are born good. Even back then, Munger was showing his interest and knowledge of the psychology of misjudgment. Few sentences later, he makes a reference about cognitive dissonance (this is in 1981) 6) very focused on businesses that generate a lot of cash and have low reinvestment needs (reflects worries about inflationary environment) 7) articulates that BC is adamantly opposed to issuing new stock, which would dilute shareholders --- Some questions for all of you: 1) Anyone know what the business model for Blue Chips actually is? In other words, how does it make money? What are its costs? The letters mention Blue Chips has customers like supermarkets and gas stations. The letters mention "revenue from the trading stamps segment". I've never really understood how this business works. 2) Anyone know off the top of their head, how Munger or Buffett got control of Blue Chips? Is it simply a matter of buying up a bunch of shares in the open market? I'm not a lawyer or a P/E guy, so I just want to understand how an individual or a fund can get control of a company, such that they can control an important aspect of the business such as its float. 3) What small / mid cap float businesses exist today?

Max, this is a gem and an outstanding effort. Thanks for doing this and sharing!

BG2008, Fascinating comment. Do you recall Greenblatt talking about how he was able to maintain positive annual returns (which were incredible) despite the large monthly drawdowns?

The interview was interesting to watch. Reminded me about what Alice Shroeder once said: Buffett is very literal in what he says and writes. With that in mind, it was interesting to hear WEB stop short of calling Alibaba a great business. Instead he trails off in praising the company and eventually calls it a "remarkable" business. Maybe that's just reading too much into it, but I thought it showed his "literalness" and how sparing he is in just dropping the "great business" moniker on just anything, even a company as hyped as Alibaba at present. WEB is clearly a little uncomfortable or not enthused about this interview. Reminded me of the story in Snowball where he's taken to the 5th avenue apartment of the head of Sony by K Graham and he's squirming because the dinner is sushi. WEB is clearly not a xenophobe or racist (cf. resigning from country club story), but it's just interesting to see how he's really an old fashioned American male who finds foreign things a little perplexing and disconcerting and maybe anxiety producing. He's clearly not the same jolly person here as he is when he's being interviewed by a blond CNBC vixen. The interviewer doesn't ask a lot of questions that reveal anything insightful about investing. It's a lot of the same generic and elementary questions that someone who hasn't really done a lot of homework would ask a successful businessman. Where is the economy headed; would you invest in China; why not invest in China; would you invest in Alibaba, etc. Interesting but disappointing.

Help. Could some brilliant mind please explain the following example that was in this Denali presentation? It's the election merger between Precision Drill and Greywolf. In the presentation, it says to short the target (Grey wolf) and hedge Precision. I couldn't figure out why and now it's become a brain teaser that's bothering me! http://www.grahamanddoddsville.net/wordpress/Files/SecurityAnalysis/Special%20Situations/kevin_byun_denali_investors_columbia_business_school_2009.pdf Thanks

This is a great thread that I just discovered. I hope we can get it to continue. A couple things: 1) Does anyone have an update on who on VIC you would recommend following now? Lot of the old posts suggest VIC members who are no longer active. 2) 'Constructive' made a comment about Pabrai having a record that surpasses even some of the people he copies. That's actually intriguing. I'm not a snob about where I source ideas from and even Buffett has said that he copies from others (Jay Pritzker being a great example with the cocoa bean arbitrage). Funny thing is that Pabrai has said when he comes up with his own ideas, he loses (e.g. Japan net nets), so he just sticks to cloning (in contradiction to what Constructive wrote about Pabrai maybe being a great investor on his own). In any case, Pabrai mentioned in some MBA talks that he uses VIC as well. Anyone know if he has a username? It would be somewhat ironic if he wasn't actually a member and still achieved his record with a 45-day guest delay! He has said that his filter is: 1) circle of competence, 2) 100% upside in 2 years, 3) "can I get to "no"" -- meaning, he tries to kill the thesis through process of elimination. Pretty smart and simple process if you ask me. 3) My own two cents on cloning: -I stick to investors who I know are generally long-only or I know do minimal shorting. This is important since with 13-F's you can't see their short book. Joho is a good example of a concentrated fund that also shorts, so I am not eager to follow what they are doing (also, there's some international exposure that does not get reported which also skews our perception of their levels of concentration) -They are super concentrated with fewer than 20 names, rough ballpark -They have low turnover, so this excludes Tepper and Druckenmiller, folks who are known to have more of a trading mentality and who's 13-F will not reflect the current portfolio -To my point earlier, they are US focused and don't invest in internationally listed equities much -I have direct knowledge about the investment process and how deep it goes. I really need to know how much diligence they do and how deep they go. I cannot just assume that because someone is concentrated, that they have done their homework to a degree that I would be comfortable with -The investor/fund is not run by committee, i.e. there's a single person at the helm who's calling the shots. While this is draconian, I assume that even with big multi-billion dollar funds, if a position is large as a % of AUM I assume that the head of the firm has approved the investment and is actively involved in its oversight. The above criteria results in a very small list of funds that I track. Just to give one example, Lou Simpson would fit this well. Another example would be Buffett, Ted and Todd. I know it's popular to list Klarman as well but some of this equity investments have turned out to be real dogs, which is made up for by some multi-bagger winners. Someone please enlighten us if you have better insight into Klarman. The other thing I find ironic is that all the stuff he writes about in Margin of Safety hardly shows up in his portfolio. Instead you get a lot of biotech and pharma royalties. --- I've really enjoyed listening to all of Meryl Witmer's discussions about the stocks she owns and why she owns them. Granted, the stocks she pitches have already gone up a fair amount and the remaining upside seems to be dregs of 20-40% from the examples I can recall. Nonetheless, she's clear about the story and provides earnings numbers. The general valuation framework seems to be 14x free cash flow per share. It gets interesting to me when she discusses spinoffs and post-bankruptcy reorg equities. --- My biggest winners thus far have involved the following combo: 1) Superinvestor ownership 2) VIC write up (a high quality write up, not just any) 3) Clear and straightforward industry tailwind (such as better pricing environment due to industry consolidation) and benign competition 4) A clear thesis why the company in question will benefit, quantified through FCF per share estimates that show low future valuation

I had emailed the fine people at Dataroma to add Abrams, and it looks like there was enough interest in including him. I'm intrigued by the non-equity holdings in the portfolio of guys like Baupost and Abrams. Does anyone know if it is possible to look up their debt holdings? Could anyone also recommend a book (similar in genre to You Can Be A Stock Market Genius) that walks through the type of analysis you'd have to do and the investment process? Thanks

A BIG thank you for pulling this up. It answered one of my questions: does Abrams short? The answer is no, or rather, very selectively. "We're pretty much long only." "We'll buy debt, we'll buy equity, try to be open minded, try to steal good ideas from other people. A lot of my best ideas have been stolen from people in this room. And other than that just try to make it through the difficult times, and find something intelligent to do from time to time, and it's kind of amazing how it works out over time." That was a very insightful comment. I give Abrams a lot of credit for the courage to be intellectually honest and admit he's cloning other people's ideas. Reminds me a bit of the Pabrai Funds approach, except there's more going on (distressed debt, basically). Thanks, this board is an amazing resource!