Parsad

How much of your overall portfolio would you feel comfortable allocating to a single sector like tech? Other than options, we don't buy any position that is less than 4-5% minimum. If it is a solid idea, then we can go all the way up to 25% in one idea, but that is very rare. In MSFT's case, our position is through in the money call options...nominal value is 3%, and notional value would be 20%...so we are pretty long! If the price gets hammered, then we will step in and buy equity. The reason being is that discounted prices can last years, but heavily discounted or absurd prices, usually don't last that long and the long-term survival of the business becomes less important. Markets will correct a significantly undervalued opportunity rather quickly, whereas moderately undervalued businesses can remain that way for years. This occurs because the severly undervalued opportunity tends to get recognized much faster by the investing community. Cheers!

Parsad, do you ever sell puts as a way to enter a stock? John Templeton allegedly would keep outstanding limit orders on the stock market at very low prices, knowing that if the market ever did tank that he might not have the courage to execute what would be a very favorable trade. Taking Intel as an example, I can sell the $17.50 Jan 2013 put for $137. If the put is called, I get an effective purchase price of nearly $16. Otherwise, I get a guaranteed 5 percent annualized return on my money. I would only contemplate this for a bedrock company like Intel, however. No, but that is a very good idea. We keep it simple...average in when the price is in your range, and average out as it moves back up to intrinsic value. Unfortunately, our timing stinks usually. We are almost always early in and early out due to our conservative nature. The number of investments where we gave up huge gains in the last year...LUK, WFC, RRGB, WINN...we were out on all a good 15-25% early! The only one we got dead on was MKL...we were in at $330 and out between $405-415. I am delighted to know that Sanjeev. Always good to know you are not on the other side of my trades. Except that I believe MSFT is not the only large cap that ridiculously undervalued in tech. I agree, but MSFT is the one with the best balance sheet, cash flows and earnings, and trading at the greatest discount relative to those metrics. Cheers!

Patrick Walsh and Oak Street Capital have done a terrific job bringing attention and focus to Red Robin. Congratulations to them and anyone who was a Red Robin shareholder...closed at well over $34 today! Unfortunately we sold in the early 20's to buy another restaurant chain. Cheers!

Go to page 59 to see a short case for CRM, also long case for MSFT starting on page 40. It's classic Templeton right now! Go long the most undervalued and unloved security, and go short the most hideously overvalued. We have exactly the same position. We are sooooo long MSFT right now it isn't even funny, and we think CRM will fall to more reasonable valuations. We haven't owned Microsoft in quite a while, but we think valuations in the tech sector are exactly as they were in 1999...except Microsoft is now unloved Berkshire, and the cloud computing stocks are now the internet darlings. As Microsoft goes down...back up the truck! Cheers!

Sanj, How do you get comfortable with the premium implied in the puts (is it too high or low) and where relative to the current price have you typically purchased the puts? Thx for sharing this idea and concept. With puts, we generally buy out of the money, usually 20-30% higher than what we feel is fair value for the stock price. We'll then see if there is anything out of whack in the bid/ask in that range, and buy where we think we have a bit of an advantage. For calls, we generally buy in the money calls, so that our cost is nearly identical to the current market price, or at a very low premium. Again, we'll see where we have an advantage...if any. Buying puts and calls brings another risk factor into the equation...time arbitrage. We don't do it often...only when we feel valuations are really out of whack. We've never actually bought a put on a single stock until now. CRM's price is ridiculously stupid! Probably one of the worst overvaluations I've ever seen. The business is good, it will be around for some time and has an excellent balance sheet...but the valuations are just plain dumb. Investors would be better off putting the money under their mattress at these prices! Cheers!

Sanjeev, Do you mind sharing the duration and strike of your puts? Can't comment. You'll know by 2013 if we made money or lost! ;D I'll take the opposite position just to add some flavour to the idea (figuratively - I'm not going to put my money for or against CRM). Actually, I'll state further that I have an inherent fear of short positions so I'm usually game for arguing the long side. I agree with you 100%. We don't short, and this is the first time we've bought puts on a single stock. I was dead on the money with Nortel back in early 2000 and I didn't buy puts on the company. This time the valuation is even more out of whack, and I thought a small bet that expires in January 2013 was worth the risk. What you've stated regarding CRM's growth is completely accurate. They are spending their way to market share, and they will have to do this for quite a while, as SAP is going to come at them hard and fast...as well as others. We are already seeing the impact this quarter, as their spending is way up to generate revenue, and nothing at all is trickling to the bottom line. They are playing accounting games when reporting results, and that is a real red-flag that the business is doing everything they can to sustain their market valuation. Insiders have been selling and continue to sell. Eventually people wake up, and unless they can truly translate their growth to cash flows and earnings, the bubble will burst. The ones left hurting are the small retail investors who jumped on the band wagon too late. Cheers!

Say hello to the new Nortel...Salesforce.com! The renewal of proforma non-GAAP accounting is an intriguing study...ten years after the implosion of Nortel. We have puts on Salesforce.com, so that should be some disclosure on where we stand. They just reported their Q1 report, and they made nothing in Q1 under GAAP. Under non-GAAP earnings, which is what the media is reporting, they made 28 cents. So exactly what does their non-GAAP earnings exclude: - $48M in stock compensation - $10M in intangibles - $3M in interest on their convertible senior notes and warrants Exactly how are these three items not applicable to earnings...GAAP or otherwise! At over 280 times earnings, 9 times revenues, 14 times book, 36 times operating cash flow, investors better be sure that this sucker grows earnings and cash flows at better than 25% annualized for the next 5 years minimum! How much you want to make a bet they don't? Cheers! http://finance.yahoo.com/news/Salesforcecom-Announces-prnews-2179209151.html?x=0&.v=1

WTM sold Esurance for $700M and the sale will increase book value by $80/share. Stock is up 15% today. Cheers! http://finance.yahoo.com/news/White-Mountains-to-Sell-prnews-4038252346.html?x=0&.v=1

Story in Bloomberg about Vancouver house prices. I thought there was a bubble 4-5 years ago, and it has only gotten worse since! Cheers! http://www.bloomberg.com/news/2011-05-16/chinese-spreading-wealth-make-vancouver-homes-pricier-than-nyc.html

I agree with everything you said Carl, but there are other resources for specific issues such as politics. Another idea as Myth suggested is starting a blog specifically to tackle subjects that would be deemed inappropriate for an investment message board. Your desire to confront certain issues comes at the expense of someone else. And before you go on charging about how Patrick Byrne has tackled these miscreants head-on, you should remember that Patrick has 100 times the resources I have, and his blog is partially paid for by the shareholders of Overstock.com. There is always a cost! Unfortunately in the United States, freedom of expression isn't always free. Cheers!

There is U.S. court precedent protecting the same miscreants who use their lies-free speech-to disparage companies and management teams on message boards. One needn't go further than Yahoo Finance's message boards for consistent libel based upon innuendo, ignorance even, which occurs there daily and incessantly by example. Not that one would want to use that zoo as the standard, however. Yahoo has unlimited resources to foot their legal bill when utilizing that precedent. They can have 1,000 people sue them every year, and they can go to court and fight every one of them. Carl, are you going to foot my legal bill, since I do not have unlimited resources? It's easy to say that there is a precedent set...you still have to hire a lawyer to stipulate that your freedoms are protected under a previous case, as well as all court filing fees, administrative costs and support staff if required. It's either members control their comments, I boot them off when they don't, or we shut down the message board. You have a choice! Cheers!

Cwericb, that's exactly the reason. I'm not interested in being sued, or seeing any boardmembers sued because we can't control our emotions or comments. If any boardmembers slander or libel someone, they could sue me to release a member's IP address and any other info I have on them. I'm not interested in seeing anyone go to court by posting on a message board. So everyone has to be careful about what they say, especially conspiracies, name-calling, etc. Steve Cohen may not be everyone's favorite hedge fund manager, nor the President of the IMF, but the litigious nature of the United States court system says that someone can sue us if they feel they've been slandered. I will boot people off permanently if they can't follow that rule...plain and simple! Cheers!

Ok Folks, the noise on the board has decreased significantly in the last week, and I think we are getting back to normal here. So certain topics, such as the post related to the IMF President's transgressions, will be locked once I think the thread has worn out its welcome. This is a value investing board, so let's try to keep it somewhat investment related...for example IMF thread is locked...whereas the Ireland post that has some real resonance to the macro-environment is fair game and won't be locked. Make sense? Cheers!

Sanj, Isn't that the other way round? i.e. when the CDN $ is strong, it helps import-related businesses (cost us less to import) and when it's weak, it also help our exports (the demand for our products rise)? Whoops! Thanks for catching that Alek. Cheers!

I am not saying that speculation is not playing any role (and that oil should not be lower at this precis point in time), but I also believe that peak (cheap) oil is very real and calling an equilibrium price is kind of fake. I don't think it's fake at all. Perhaps, not completely accurate, but his point was that oil's current price is being driven primarily by speculation, and not supply and demand. I can tell you for a fact that a strong Canadian dollar is actually detrimental to the Canadian economy. That the Canadian economy is happiest when the dollar is somewhere between 90 cents and 98 cents or so. Is that fake, or is that an accurate supposition? The reason behind my statement is because we have both a resource-heavy/export economy, and a tourism/manufacturing/import economy. If the dollar becomes too strong, it hurts tourism, manufacturing and import-related businesses. When the dollar weakens significantly, it hurts our resource, export economy. So, I can provide some idea of what a happy-medium would be for the Canadian dollar without being exact. In terms of peak oil: They were talking about peak oil 30 years ago. The world got spooked and they became more efficient consuming half as much per capita 30 years later. The same thing will happen now. We will consume less oil per capita another 30 years from now, extending the life of oil reserves and oil that can be retrieved. The free market will force consumers to make hard choices, and governments to enact change. I'm a firm believer that in that, and that capital will flow to areas of science that will make us more efficient, as well as find alternatives that will become more prevalent. In the meantime, you have such periods where panic sets in, and the price of a commodity is driven signficantly higher than what actual supply and demand would dictate. Currently the world believes that China will endlessly consume the world's resources...that prices will rise uncontrollably, and China will continue to consume. As if rising prices will have no effect on China. I've seen it and heard it all before. We've had numerous commodity booms and busts in the last 150 years in North America. This will be no different. Cheers!

In this case the same can be said about Tillerson! He's saying that oil should be lower, so how is that the same? He's actually saying something that would reduce his longer term profits. Cheers!

Yeah but OPEC thinks the price should be $100+. That's like asking your barber if you need a haircut...to quote Buffett! Cheers!

Something I've said since 2007. I'm glad the head of one of the largest oil producers agrees, and we both agree on who is responsible for the elevated prices. Contrary to Wall Street's consensus view, I think alot of the volatility we witness in markets and commodity prices are due to high frequency traders and speculators. Cheers! http://blogs.forbes.com/robertlenzner/2011/05/14/exxon-mobil-ceo-says-oil-price-should-be-60-70-a-barrel/

Looks like Patrick Byrne's allegations that the SEC was compromised was correct. The former head of enforcement for Texas is being investigated! Cheers! http://www.cnbc.com/id/43029661

Contrarian call? If Cramer says they won't get indicted, then that means there is a 95% probability they probably will get indicted! ;D Cheers! http://www.cnbc.com/id/43023600

A Buffett acolyte and value investor was profiled in today's Globe & Mail. Cheers! http://www.theglobeandmail.com/globe-investor/investment-ideas/features/me-and-my-money/a-devoted-value-investor/article2021857/

There are some changes...perhaps small...but still they are changes: Abitibi: +3.8M shares Boston Property: Preferred notes gone Citigroup: +30K shares Creseud: -200K shares JNJ: -1.7M shares Old Republic: +10K shares Stewart Enterprises: -3.2M shares Cheers!

The U.S. Funds are new. I think Francis has a signficant portion of his net worth in his Canadian funds. You would have to contact him for that number. Cheers!

Francis is one of the few people I would trust with my life. He will always do the right thing for investors, and always ahead of his own interests. It's why Prem holds him in such high esteem. I'm proud to call him my friend! Cheers!

Could also be his kids were brats. We'll never know. Cheers!