Andy Dufresne

ROFL ... unlikely Kraven - I've heard WEB speak (though not in person) and I'm still here! I was actually enthused about WEB going about this investment decision as he likely does for any other, regardless of size - doing his own work and trusting in his own judgement ... PS I guess there are worse ways to go out, though an Octogenarian doesn't figure into my plans ;)

Wonderful! Bravo Liberty! +1

Good discussion. I guess the answer is an amalgamation of what everyone has said - it's a simple fee structure where "true' outperformance is rewarded. I also think that the 6-7% is the long term natural growth rate we've had over the past 100-150 years, with 2-3% coming from inflation and the balance coming from growth in the labor pool + growth in labor hours/effectiveness, with the latter two parts making up the real portion of growth (I'm no economist so I hope this makes sense ). To re-emphasize what I said in earlier post, since WEB grasped the power of compounding early, I think that as long as he found a business that could give him a good chance to beat the LT general rate, he knew that holding is over 20+ he'd do well with his investments ...

From what I was told by a mentor who worked directly for WEB and CM in the 80s due to them coming into the Salomon Board, the hurdle rate WEB used/uses is 9% - 3% inflation and 6% real return; in any case, IMHO WEB doesn't really attribute much value to the discount rate - if he can find a business that has pricing power, he knows he can pass on most if not all of the inflation ... so all that is left is to find a business where you can earn a decent RoE. WEB's disadvantage compared to individual investors is size, but with the CFO from dozens of strong businesses he can easily optimize the capital structure of any subsidiary easily (i.e. optimize the debt/equity ratio), and while individuals can leverage, they will tend to pay higher interest and they have fewer uncorrelated sources of CF. Hope this helps!

Thanks jouni1! Definitely something to think about, though I fear that Putin will not really be moved by the lack of steak ....

jouni - where did you get this interesting statistic? Also, while some people are accustomed to quality, I can tell you from first-hand observation that 99% of Russians don't get Finnish quality, and the 1% that does is likely too indebted to / scared of Putin to argue. The oil & gas exports are, undoubtedly, the main point as they constitute 70%+ of Russia's exports

TBH, I don't think you are ready to invest like a sloth. It really is that simple (but not easy). Buffett's top four holdings are all 100 year old companies. To pull off this strategy, you need to be boring and have low expectations. It's okay to spice things up but you need to be honest with yourself. It's relatively simple to build a sloth portfolio that can return 8-12%. If you are expecting 15-20%, the sloth portfolio won't work for you. It is a mathematical fact that, in aggregate, traders will underperform the "market". Trading costs and capital gains taxes ensure this result. Buffett has a wonderful essay on this: http://money.cnn.com/2006/03/05/news/newsmakers/buffett_fortune/ And remember, this only works with great companies: "If the business earns 6% o­n capital over 40 years and you hold it for that 40 years, you're not going to make much different than a 6% return even if you originally buy it at a huge discount. Conversely, if a business earns 18% o­n capital over 20 or 30 years, even if you pay an expensive looking price, you'll end up with a fine result." - Charlie Munger at USC Business School in 1994 KC - thanks for the informative article and the CM quote. Even better for doubting my ability to be slothful - WEB and others have said many times that people either "get" value investing or don't - I wonder if the same might hold true for the slothful investment style ... from the informal comments in this thread I would assume that most members would think it is a learnable trait.

Thank you all for your thoughts! I tried to procrastinate in answering all of you .... he he ... but if I try to quickly synthesize some of the major themes, they would be: 1. Get a life :) ... agreed, but a balance must be struck between involvement in the practice of investing, especially when you are starting out and trying to build up your database. Uccmal - thanks for the dopey suggestion, but I'm not a smoker of anything :) LC - fantasy is not my thing to read, but I am currently visiting Russia :) I warmly recommend Bulgakov's (The) Master & Margarita if you want some truly outstanding fantasy! Vrubel's paintings are also good! 2. Think like a business owner / get to know your companies intimately ... I am well aware of this - I am a FCF yield guy rather than an E/P guy; for me the crux of it presently is finding honest & able managements, that will communicate with shareholders; with respect to moat & competitive positioning - that is definitely the hardest part and I think that WEB & CM tend to simplify it too much by saying "oh, we need to visualize what the company will do in 5 to 10 years ..." 3. Buy & hold should work going forward, but nobody really knows / Trading generally leads to lower returns ... In theory this should give me comfort, but in practice this has no effect on me whatsoever; I tend to disagree with any widely held belief and I am still at the stage where experimenting is possible and likely of some value - I have no clue what will happen in the future but I am skeptical of any statistical analyses, whatever they might suggest :o More feedback and suggestions are appreciated!

I would like to begin a discussion about the psychological demands required to hold positions for a long period of time and how to gain competence in following this difficult practice. As WEB wrote to the shareholders of BRK in his 1990 letter: "Lethargy bordering on sloth remains the cornerstone of our investment style" While I admire and rationally believe in Warren and Charlie's style of investing, I will begin by freely admitting that the tumult of the market has a siren-like effect on me - one that I struggle to defeat daily. In my not-too-scientific observation, many others struggle quietly and desperately and I would greatly appreciate the wisdom of more experienced Board members in helping us more impetuous souls on our journey to slothfulness 8) Personally I am trying to understand both my impulses to do rash things and the situations that create these failures. I understand that some of these invariably come from my previous high-paced life experiences and that I need to set up both better habits (e.g. checklists, a separate room without electronic devices a la Guy Spier) and some external controls to improve my decision making. If anyone else has anything to add in terms of questions, thoughts or reflections, I would be very happy to begin a vigorous discussion! Many thanks in advance to all!

I am really enjoying this thread ... however, IMHO the title of this thread and the pursuant discussion are somewhat misleading because the "expected return" depends on why the position was initiated ... For me the basic answer is "it depends (on my thesis going into the position)" - is this an event driven position? activist driven? cyclical? hated sector? compounding machine? There are lots of options but I think it is conducive to try to go in with a clear IV or timeline (if relevant) and re-asses candidly if the timeline does not work or events change - e.g. I got out of Oi twice based on external news - first that they would be merging with Portugal Telecom and a few months later because PT likely lied to Oi about debt ... neither of these were on my radar when I went long ... I will however begin another thread with respect to the psychology (and difficulties) of holding a position :)

Sanjeev I'm far away in Russia at the moment, but a very happy birthday and many many happy returns!

Closed my OIBR long. Lesson learned - when a company's leverage after issuing equity is still large, the chances of a second dilution must be taken into account when buying, if at all...

OK - thanks, will look on the thread!

Anything specific made you sell ALS? Margin of safety is a lot higher in PKX and i didn`t really like the news gamble. But i wish everyone good luck with ALS. frommi - can you elucidate what you believe is the MoS in Posco exactly? Thx!

LOL - you think taking it in school is nerdy ... I began studying it by myself! LC - reversion to the mean is indeed a powerful thing! Now can we please have a nice juicy correction so that we spend more time finding wide-moat companies with excellent brands trading for 1X FCF ... pretty please?!?!

wachtwoord - "re" is a preposition essentially meaning "about" or "with respect to" of course (here comes the nerdy part) its etymology is derived from the ablative singular of the Latin "res" meaning "thing" or "matter" from which we also get the word republic :) LC - you'll surely find this one familiar ... Multa renascentur quae iam cecidere, cadentque quae nunc sunt in honore vocabula :)

Parsad is absolutely right, and in this case, WEB is also in the wrong ... consider he admitted during the KO compensation debacle that in his many years on 17 Boards he never ONCE saw a compensation plan NOT approved ... I felt sick when I heard this ... makes me admire Richard Kinder all the more

I value invest not because I love the process but because I love the results. I value invest because I'm competitive and value investing is the best, easiest process for me to use to produce above-average results. In terms of the question "Do I have enough"...I would interpret this similarly to how I would expect Buffett would. I will keep my competitive drive for more long after recognizing that I have enough. For me having enough is only part of it. I want to do the best I possibly can and earn the most I possibly can, and see how well I can do. I will probably end up donating much of it in the end of life (similar to Buffett), but I still have a competitive drive to see how well I can do in the interim...And viewing the results of a NW poll is part of measuring how well I am doing so far. Well, not everyone can be as competitive and successful as you are… I started my company 10 years ago with $25k. Through savings, investments results, and operating earnings, my firm’s equity right now is worth $2.38 million. I am 37 years old. How would you judge me?… I tell you: just an average guy! That’s the plain truth. Period. But I guess most people are in my situation (that's the definition of "average guy" after all, isn't it?! :) )… though we cannot boast great achievements… we can certainly enjoy what we do on a daily basis, and we can try to get better and better at it… And you know what? I don’t envy all the multi-millionaires out there, precisely because I tap-dance to work each morning: any cure for envy that truly works shouldn’t be overlooked! ;) Gio Poca favilla gran fiamma seconda .... (tr. A mighty flame followeth a tiny spark) Forza Gio!