Parsad

John Hillery, of Hillery & Associates, passed away from cancer. He was a fantastic investor and a very good friend of Francis Chou's. If you were impressed by the investment acumen of the guys at Fairfax, John had an even better risk/reward ratio the last time I checked three years ago. JOHN DOUGLAS HILLERY Died in the kind and capable hands of the doctors and nurses at the Credit Valley Palliative Care Unit following a two year battle with cancer. John lived a rich and full 64 year life and several times said he was one of the luckiest guys on earth. Beloved husband and best friend of Susan (nee Sheppard) and loving father of Shannon (fiance, Matt Wentzell). John was a twin brother of Elizabeth (Bess) Crawford and an uncle to Bess and Roger's daughter Melissa (fiancé, Jim O'Hare); a younger brother of Robert Hillery Jr. (deceased), brother-in-law of his wife Lucille and uncle to their daughter Tanja (and her son Seamus and daughter Clara) and sons Patrick and Michael; and a brother-in-law of John Sheppard (wife Lenore). John graduated as an Electrical Engineer with honours in 1969 and as a Lawyer in 1972, both from the University of Toronto. He practiced corporate and commercial law at Lash, Johnston, Sheard and Pringle in Toronto following his call to the bar in 1974. In 1976 he joined Indal Limited as Corporate Counsel, VP and Secretary. In 1984 he became VP of Investments at Indal managing a portion of their pension fund until 1989 when he went into business for himself as an investment fund manager. When he retired in 2007 his Hillery & Associates LP hedge fund had 50 partners. In his retirement he was a very active private investor continuing the work he loved so much. We were particularly grateful for the exceptional skill and the kind and reassuring manner of his surgeon Dr. Peter Ferguson at Mt. Sinai Hospital. We would also like to thank John's GP, Dr. James Pencharz and Kamila and Lorianne John's homecare nurses for all their caring and skilled support. John loved spending time at the cottage on the beautiful and peaceful Ahmic Lake with his many relatives and friends nearby. He was an active member of Humber Valley United Church for almost 30 years and served as the Treasurer for eight years and also as Chair of Stewards, Chair of Counting and as a Trustee. Visitation will take place at The Simple Alternative Funeral Centre, 1535 South Gateway Rd., Mississauga, ON L4W 5J1 on Thursday August 19, 2010 from 2 to 4 and 7 to 9 p.m. A Memorial Service will be held on Friday, August 20, 2010 at 1 p.m. at Humber Valley United Church, 76 Anglesey Blvd., Toronto, M9A 3C1 416-231-2263. See www.hvuc.ca for directions. Donations in lieu of flowers to Humber Valley Foundation, 76 Anglesey Blvd., Toronto M9A 3C1 will be gratefully received. John started his fund late in life and several years ago, he just closed the fund. He had 50 partners or so, maybe $40-50M in capital, and said he didn't want any more partners or any more capital. He was happy to work with what he had, and turned away any new interest in his fund. His actions were one of the reasons we decided that we would shut the MPIC Funds down early as well...raise enough capital to do something with, but not so much where you lose the ability to compound it, the passion, and the fire. The last annual letter I have (2006) is attached. Those numbers he produced were done with an average over 50% cash in the fund! A fantastic manager who loved his low profile and just investing capital. Cheers!

I remember very few, if any, articles making the same sort of arguments Prem was making before the credit crisis. Today, you have virtually every article talking about deflation, crash, unemployment, foreclosure, etc. The media reports what is happening, not where the world is going. Cheers!

About 25% of shareholders held a protest vote against Dell CEO Michael Dell. Cheers! http://www.bloomberg.com/news/2010-08-18/dell-fails-to-get-re-election-votes-as-director-from-25-of-shareholders.html

Tim's had some experience and success with Sun-Rype and Humpty Dumpty snack foods. He doesn't do Biglari-type takeovers, but will sometimes work with the management of the companies he invests in. In this respect, that's what he is doing with Rainmaker as well. They've got their work cut out for them, but with Tim and Jeff Stacey on the board, and Francis holding quite a large chunk as well, they could not have a better group of shareholders helping support the business. I truly hope things work out there! Great bunch of guys. Cheers!

Nope, but Glacier is an interesting case. I'm going to stop responding to guesses now. Cheers!

I think that's an admirable goal Bronco! ;D Buffett would be impressed. By the way, no it's not Ricks. Cheers!

Yup! This will set a precedent if Ackman gets control. Cheers!

I should *hope* that someone doing this as a job rather than a hobby can spend more time on the research than I can. Yes, that helps and is an advantage! Granted, I work pretty much 25-30 hours a week for Quantum as well to help pay the bills, so I probably don't have that much more time than most...it's just that I usually read till 1-2am and then back at it again at 6-7am...every day, of every week, in every year...even in the washroom! ;D Probably too much information. Cheers!

Any study of Graham would conclude that he would not be buying a stocks at the moment -- the margin of safety is just not big enough. Schloss "liked to buy stocks below book value" -- do you know how low the market would have to go in order for quality companies to be trading below book value. The margin of safety currently offered by Mr. Maket is not near enough for Schloss either. We own three stocks under book. In fact, our largest holding is a small-cap company that is relatively well-known, yet not a single person on this board, or its predecessor, has ever talked about it from my recollection. It trades at about 8.5 times earnings and less than 0.85 of book...and book is undervalued! Cash flows are consistent, little debt and it's been around a long time. Yet not a single person has ever talked about this company. Schloss would be buying stocks today...but that's because he would be doing more legwork and research than everyone on here. Cheers!

Hi Rick, Not to scare you off the investment, but I would be careful. Again many assumptions being made here and I am going to stop posting about APP I was merely surprised at the relatively unsophisticated level of rebuttals that really have nothing to do with past performance or the issues at hand. I would strongly disagree with you here. I think it's probably more of function of opportunity cost. What benefit is there in responding to a post where they may not have interest in the stock. This board on a percentage basis, probably has better ideas than any other value investing board out there I know of. I would say we probably have a better batting average than even the Value Investor's Club. Tariq, I went and took a look at this after watching the posts and I have all the same issues as you. - They will be in default of their covenants by September 30th. - They have only about $22M available under their revolving line of credit and they blew through $29M in the 2nd Q. - They've yet to file their 2nd Q 10-Q, and they've struggled numerous times in the past three years to get their reporting right. - Deloitte's resigned, while AAP rehired the same auditors they fired a year and a half ago. - The related party transactions are a bit of "oh-oh" notation in the financials...especially having his father in it. - Burkle's investment is miniscule when compared to his total assets under management. A few months ago, D3 walked away from 33% ownership of Mexican Restaurants (CASA) and took a huge loss on their investment. It too was a small portion of their total assets under management, and they are also known for being somewhat active with some of their positions. BOA & Lion Capital are in the driver's seat. They may let these guys default, forcing them into Chapter 11, and then restructure the whole thing with them getting the controlling equity stake...most likely scenario here. Charney's 53% stake would probably be reduced to something like 5% of the new recapitalized company, so that would at least keep him working, while shareholders would have to fight to retain any portion of the company. Now getting back to the point I made in an earlier post regarding the reason for Deloitte's resignation. You can have a minor disagreement about how to treat something on the accounting statement, and that would force the auditor to resign if the company does not agree with the auditor's assessment. But according to the MD&A in the 1st Q 10-Q and today's press release, there seems to be several issues with the controls implemented by AAP. These include the treatment of inventory costing, deferred tax assets and leasehold improvements. What else this entails, I'm not sure. But their previous accounting firm, the one they just rehired after Deloitte's resignation, also stated that the company had various internal control issues. So we still have no idea the depth of the problem, except that they've been subpoenaed and the company keeps saying that they think their unaudited financial reports are accurate! Yeah, ok! ;D If you are investing in this company, it's a speculative bet, since you don't know if the numbers are legitimate. You could end up being ok and make a killing, or you could get wiped out...I don't know. But I'm in the business of not losing capital, so it's not something I would buy. Best of luck. Cheers!

Ironically, one guy who did it completely right is John Linnartz and the guys from Farnam Street with OI Corp. John sold 51% of Mustang Capital to Western Sizzlin, and at the time he was accumulating a large position in OICO. Today the company is humming along with good management, John and Farnam's proxy acting as Co-Chairmen, and they've got a good team of executives running the company as well as on the board of directors. No bad blood, no notorious reputation...just did it right and for the good of his partners and OICO's shareholders. Cheers!

Dine Out's info is primarily in Chanticleer's 10-Q's and 10-K. It's just the holding company for Shaw Ppty's and Chanticleer's interest in the South African Hooter's restaurants, but trades on the Frankfurt exchange. You can go to Yahoo.com's finance site and get a quote on it. Like I said, I have no idea who would buy Dine Out's shares at current prices, but there are people out there buying, and it would give Chanticleer's interest alone a paper valuation of over $5M. Cheers!

Don't know. I think HOA has more than enough cash flow to pay back the $5M, but they may want to extend it out again. We'll have to wait and see. Cheers!

Yup, looks like the Hooters Inc deal is dead. No news anywhere on what is happening with HOA. There were media articles discussing that HOA would have to be sold or seek an equity partner, but nothing yet. Chanticleer still has the right of first refusal in any HOA deal. Also, the SA restaurants are held within the Dine Out company trading on the Frankfurt exchange. The value of the shares owned by Chanticleer would worth somewhere around $4M. Don't know who is paying those prices for those shares, but they are getting it, as it looks like they are selling small portions...in total 6% sold according to the latest 10-Q. Cheers!

I like that one! I think that's a keeper. Cheers!

You would be taking a significant risk investing in American Apparel. The investments success would be predicated on a few crucial outcomes: 1) The financials aren't worse than just a restatement...no material deficiencies, fraud, etc. 2) Somebody is going to step in and inject capital 3) That the brand would retain its cache with consumers as the recovery progresses - I suspect #2 will happen, but there is no guarantee. - #3 is a finicky aspect of fashion. Brands come and go, and maybe AA has will soon wear out its desireability. - #1 is a serious concern if Deloittes completely bailed. Cheers!

I have another quote that will become famous one day: "When your next door neighbour becomes your stock market analyst or your economist, then you probably should move." - Sanjeev Parsad, 2010 Cheers! ;D

I'm guessing most of you still haven't seen the Schloss presentation. ;D Cheers!

Walter Schloss, one of the greatest investors in history, spoke at the Richard Ivey School of Business. I would recommend that investors and investment managers alike read his comments. There seems to be a very large contingency of investors focusing on macroeconomic issues on the board these days, and I thought this would be a terrific refresher on the core points of Ben Graham's theories of intelligent investing. There is also the full audio of the presentation available at the Ben Graham Resource Center. Cheers! http://www.schloss-value-investing.com/2010/07/walter-schloss-presentation-at-the-benjamin-graham-center-for-value-investing/#more-70

I wouldn't be so certain. The investment approach sounds like one based on the assumption that a greater fool will always be willing and able to buy, which is fine until the music stops. Problem is that no one knows when the music stops and those left without a seat get destroyed. Nothing to do with greater fool theory, but it does have to do with fools following herd mentality. Further, remember that when Buffett was delivering outsized returns early in his career, he was buying boatloads of companies at 3-7x earnings (with the earnings growing) -- the broader public had truly given up on the stock market. We are nowhere this type of environment, although I suspect we'll see something similar in the future. Buffett has paid significantly larger P/E's for various businesses over the years, including when he ran the Buffett Partnership. Think See's Candies, the rest of GEICO, Coca-Cola, Dairy Queen, etc. I'm not saying to overpay for assets, but that investors should buy the best investment relative to its risk profile...sometimes that is stocks, sometimes bonds, and sometimes that means remaining in cash. At present, my point is that large-cap, high-quality stocks offer relatively better value than fixed income instruments. Now, let's make something clear...that doesn't mean every large-cap stock is cheap or a great deal, but if you compare quality large-cap stocks to various subsections of the investment market, they are relatively cheap. Cheers!

I believe Dash lost primarily due to his previous relationship with Steak'n Shake, which was used to dissuade shareholder opinion by the existing board. Thus, doing Biglari-style takeovers may not be as desireable as we may perceive. Cheers!

Carl, That is not Charlie Munger, I assure you. Cheers!

Article discusses Berkshire, Soros', Paulsen's and Ackman's holdings at quarter end. Cheers! http://online.wsj.com/article/SB10001424052748704868604575433871575927394.html?mod=WSJ_hpp_LEFTWhatsNewsCollection

You might get a "trade" if capital move from treasuries to large cap stocks (but who can predict with any certainty). It's a certainty. Institutions will have to move into these assets because their yields will diminish over the next year or two. How is a property casualty company or life insurer going to be profitable in such a low-yield environment? Underwriting? You can have a few companies with better standards surviving on their underwriting culture, but the broad industry does not behave that way. They will have to take more risk and seek higher income investments. What about endowment funds and their constituent expenses? Hedge funds with their operating expenses? Baby boomers entering retirement? All of these institutions and investors will have to move their cash hoard into higher yielding investments. Taking the perspective of Buffet and assuming I buy IBM (or a basket of large caps) with the intention of holding forever, the current economic return wouldn't be much better than 7% -- that's fine for Berkshire Hathaway but I'd rather sit on my cash and wait for a much better risk/return and ideally come across a lollapalooza, in the words of Charlie Munger. 7% would be a hell of a lot better than 10-year treasuries yielding 2.8% or 30-year treasuries yielding 3.8%. 7% would allow any insurer to be completely profitable. under this scenario, the earnings don't materialize as currently anticipated and stocks in fact are not cheap on any basis and decline Corporations in general are operating at terrific levels of efficiency. Even if we run into another period of decreased consumption like we saw in late 2008 and early 2009, corporations don't have the same level of overhead. You may see a slowdown, but businesses are adapting better, and they have much better balance sheets. Unemployment went from 5% to 10% between 2006 and 2009, and business is slower today than two-three years ago, yet corporations are generating profits nearly on par or better than 2006 and 2007. Cheers!

Prem fixed his salary at $600K per year many years ago, not unlike Buffett's fixed salary. Several years ago, Prem decided to institute a small dividend, so that both he and the many executives at Fairfax, could receive an annual salary based on the economic growth of the business without having to ever sell their shares. The compensation structure would also be equitable for every shareholder as well. It's not the most tax-efficient structure, but it is equitable and will increase their income by modest amounts over time. While Prem lives a frugal life and has the resources outside of Fairfax to meet all his living needs, some of the executives were probably not quite in the same position. This was his way of making sure they retained their shares instead of selling any of them. Cheers!