lathinker

Do people on this board have toughts on Commercial International Bank ? It is the largest position of the "Common Stocks - Mark-To-Market" section with a value of 480m USD per end of 2023. In the annual letter, Prem states that "The key driver of value to Fairfax and other foreign investors in CIB is the stability of the Egyptian Pound." Well, last week, we learned that the stability is a thing of the past since the EGP was devalued from about 30 to 50 per USD and Egypt received an IMF package. Interest rates stand at 28%: https://www.reuters.com/world/middle-east/egypt-raises-interest-rates-by-600-bps-pound-tumbles-2024-03-06/ It is still a small position in relation to FFH and the development may not even harm CIB too much, but it underscores the risks of EM investing.

In that case, you will have paid 3.35$ and get back 5 $ (95-90) for a 50% profit. One way to bump this is a call spread. You could buy a Jan 24 80 call at 8.70 and sell a Jan24 90 call at 3.30. You are investing 5.40. If the deal closes, both options are exercised and you will get 15$ on the C80 yet lose 5$ on C90 for a return. In total you will make 10 on an investment of 5.40. Note that option trades can be very risky, in particular if there is a delay you will lose 100% of your money while the stock is still likely to be worth something.

For idea generation, I like to look at what Rubicon Stockpicker Fund is doing. They have interesting ideas somewhere between contrarian and tech. https://www.langfrist.de/rubicon-stockpicker-fund/ If you are not a German speaker, you can click "Aktuelle Berichte" and open their reports in Englisch. TOP 5 positions make up >85% of the portfolio.

Bought some BMW prefs on Monday @48.50 EUR

Cologne, Germany

This is one of my all-time favourites... One can you think that Varoufakis was not full of shit? The guy promised three days ago on BBC that the negotians would be resumed on Monday "With 100% chance of success" and that "banks will reopen for sure on Tuesday". now that the got what he campaigned for, he just disappeared. Agreed! I am having more fun watching this than Breaking bad or other TV shows. Tsipras promised that if he gets the no vote, he will get a great deal from EU within 48 hours, guaranteed. And this guy Varoufakis also said that if referendum comes out as an YES, he would resign immediately because he cannot play the hide and pretend game anymore. Now he got this NO result and he resigned right away? WTF? Now we will see how this clown Tsipras is going to pull out a better deal within 48 hours. :D It's almost as if you expected them to tell the truth? If politicians were held accountable for their lies, there'd be few left outside of prison. The majority say whatever is necessary to achieve their ends. In this case, both of them said things to help achieve a "No" vote. What actually happens after they get it is in no way tied to what was promised before they had it. I don't know why anybody would put any weight on a promise that requires multiple parties cooperate when those parties aren't controlled by the individual making the promise. That's not say a deal won't get done - it just won't be because it was promised by the PM. Not expecting that, but I think Varoufakis is still a class of his own in terms of bizarreness. This is just four days ago: http://www.bbc.com/news/world-europe-33370592 It would be a great drama to watch if it was not all so sad. Having elderly people queue for hours to withdraw a few € and starting to run our of drugs is not all that funny

This is one of my all-time favourites... One can you think that Varoufakis was not full of shit? The guy promised three days ago on BBC that the negotians would be resumed on Monday "With 100% chance of success" and that "banks will reopen for sure on Tuesday". now that the got what he campaigned for, he just disappeared.

At the time of purchase, I will normally target a 15% return per year and at least 3 years time for Mr. Market to fairly value the security. This brings me to require an MOS of 50% or more. I am fine to hold a bit longer if needed which cuts the IRR. 15% was mentioned by Buffett as his hurdle rate. Now, I think it is a fair discussion whether or when to amend your MOS requirement, in particular in times of zero interest rates. At the same time, I find it quite dangerous water down your return requirement as nobody knows, what interest rates or inflation will be in the future. Therefore, I try to resist purchasing "high quality companies" at lower margins unless I understand their moats very clearly and am confident for them to persist.

This would work from a purely financial perspective. But as the discussion is largely about dignity, pride and self-determination, it is clearly a no-go. Also, not sure if anybody in Europe wants to be too close what Saudis consider their paradise on earth ;) There should be better ways to resolve this.

Pretty interesting political situation indeed but also nerve-wrecking if you are invested. Need a good stomach for this. My perception over the last few days was that Grexit likelihood was rising. Basically, Greece was granted an extension but obliged to vote an some structural reforms and work out other measures which did not happen. Instead, there was a lot of media war including lenghty and fruitless discussion on who did what five or two years ago. Felt like both camps preparing for the blame game. More recent impression is that Germany is defo ready to compromise with Greece: Merkel, Hollande and others are meeting Tsipras tonight and Tsipras accepted Merkel's invitation to Berlin on Monday. Forget all the Schaeuble/Varoufakis pre-show, Merkel and Tsipras are the ultimate senior decision makers. Merkel downplayed any hopes for results tonight and said there will be enough time to find an agreement, reflecting Greek complaints about time pressure. Just watched a political talk show on German TV with the chairman of Merkel's parliamentary group (Mr. Kauder) who is usually well-informed. He was more open to compromise than ever before, in terms of extension, another aid package and changes to the current program if reforms get moving again. Asked if a Grexit is coming, he said "I don't think so". Kauder was also understanding of the law passed by Greek parliament ("emergency help for the poorest") Also, it was mentioned in the show that geostrategic terms, the EU does not want to lose Greece which is a NATO country, located next to Turkey and very close to Russia. Not worth creating a new Putin ally for a few billions. In essence, I think Europe (at least Germany) is prepared to give in much more than they said so far. I am less clear about how the Greece government will act. They have a good chance to get something from Europe if they return to structural reforms. What could that be? Potentially an investment program, potentially a debt restructuring. Question is if they are clear where they want to go. Slightly more optimistic than 24h ago.

Two bloggers I read, Alphavulture and Wertart Capital, recently outlined their investment thesis on Italian closed-end real estate funds. These funds own mostly Italian commercial real estate. They have a fixed maturity, in some cases with a grace period to allow for additional time to sell their real estate. Many of the funds trade at sizeable discount to their NAV, in some cases 50% or more, and can be traded at the Borsa Italiana in Milan. Given Italian real estate prices have been tanking in the last few years, the funds had to report decreases in the value of their property. While I am not a friend of most closed-end fund structures, the discounts look very big to me. See here for the http://alphavulture.com/2015/03/02/italian-real-estate-liquidating-cefs-at-a-50-discount/ http://wertartcapital.com/2015/02/03/increase-allocation-to-italian-reifs/ I would be interested to know if anybody takes a view on the real estate market in Italy. I think that the Italian economic policy has improved considerably and the government is following a reasonable course. Italy will be one of the countries to benefit from the ECB QE and of a broader European recovery (if it materializes). I also think that low rates will help the property market at some point. Are closed-end real estate investment funds a good way to play this? Are there listed companies levered to it (one firm I could think of was MOL.IM)? Generally interested in what people think here. LT

How do you guys determine when to sell these stock bought on a quantitative basis? Do you just exist after you made 30, 100, 200%? Do you have a target PE, EV/EBIT or PB ratio? To me, it occurs less straightforward to assess the companies' businesses if bought by the numbers. It would make sense to exit on a quantitative basis aswell, but I would be interested to learn how others go about it.

Noteworthy discussion of several Berkshire Letter topics on one of my favourite blogs: http://valueandopportunity.com/2015/03/01/18-observations-from-berkshires-2014-annual-report/#more-10547

Buffett has rightly said that retail is incredibly tough, but on the other hand Berkshire owns See's, Borsheim, Nebraska Furniture Mart (he might like IKEA if it was for sale ? ;) ) . Berkshire has been a long term investor in Wal-Mart. So it would be wrong to say they don't do retail. As for "cosmetics", let's rather say strong-brand consumer goods. Berkshire did own Gillette and does own Coca Cola.

As the recent acquisition proves and Buffett has stated, Berkshire is hungry to buy good European businesses. Buffett has cracked "Code Germany", so there may be more to come. I wanted to ask people (in particular the European members of this forum) if they have an idea which businesses might fit for Berkshire, both listed and unlisted. Most people will know the definition BRK target: wide and lasting moat, high return on capital, industry he can understand. Maybe the discussion results in some actionable investment ideas. A few starters from Germany: Listed: - Fuchs Petrolub - German version of Lubrizol - Rational - kitchen equipment - Pfeiffer Vacuum - special machines (vacuum pumps) - Henkel - cosmetics - Beiersdorf - cosmetics - Fielmann - Glasses/lenses - Axel Springer - media/newspapers Unlisted: - Haribo - iconic candy/sweets - Bertelsmann - media - Fischerwerke - screws, screw anchors,... - Aldi/Lidl - supermarkets Also, a reading recommendation on German "Hiden Champions" for those looking to understand better how these companies operate: http://www.amazon.de/Hidden-Champions-Twenty-First-Century-Strategies/dp/0387981462

I think that it makes perfect sense that BRK would buy business in Europe and especially in Germany. Furthermore I disagree that there's nothing cheap in Germany. Maybe not for you and me, but not for BRK. There are tons of great businesses in Germany that have fantastic operations but the capital allocation is atrocious. Once BRK relieves the management of their capital allocation burden, then the value of those business should increase significantly. I think the issue here is not the valuation but whether BRK will find willing sellers. rb Trying to relieve (local) management from capital allocation in German businesses is a non-starter in my experience working for /with businesses there. I agree that some of those decisions may turn out to be atrocious but get management to part with capital allocation? There is much pride and joy involved. Have heard stories of biz owners defending their capital allocation decisions all the way to BK and even beyond. Langfristig Omaha perhaps can assist with capital allocation decisions on tuck-ins, but captive organic capital allocation, likely not. +1 I agree with you. Some of the owners easily think beyond their generation so they do not really care about the short-term. This may sometimes be overcautious but it is not necessarily a negative. Take Rational (RAA.DE), a listed market leader of cooking systems, as anecdotal evidence. This is one of the finest businesses listed in Germany and they have been growing strongly for decades. Back in 2009, despite risings earnings the founder (Mr. Meister) decided to cut the dividend from 4,50 EUR to 1,00 EUR. The company was financially strong, it had enough cash, their earnings rose in both 2008 and 2009, still Meister simply decided that if all businesses are going to die, Rational should be among the last ones. It made no sense in terms of capital allocation, analysts hated it and the stock collapsed from 150 to 60 EUR. After things had stabilised, they paid an extra dividend in 2011 and that was it. Poor capital allocation at the time? Probably yes. Conservative? Yes. Bad for the long-term investor? Not really.

As reported first by the FT, Berkshire has bought Detlev Louis: http://www.ft.com/cms/s/0/f8faf4f6-b6f1-11e4-95dc-00144feab7de.html?siteedition=uk#axzz3SHyFal1x Louis (https://www.louis.de/en) is a retailer for motorcycle accessories such as clothing, helmets and service parts with more than 70 outlets across Germany. Berkshire is reported to pay 400mm EUR. The company has so far been private, it has been around for 75 years and has around 1600 employees, generating 270mm EUR in revenues. Interestingly, Buffett calls the deal a door-opener to Germany. The acquisitions is tiny compared to Berkshire's usual size. So let's see if Buffett will become active in Europe/Germany. In fact, there are some excellent businesses in this country, but it is tough to find anything cheap.

One aspect to be mentioned which might rightly scare people is the announcement of reversing privatization plans for Piraeus Port Authority. This is clearly negative as more private investment capital is needed in Greece and their efforts so far of selling state-owned companies have been fairly disappointing. This appears unlikely to improve with this government. writster, I agree that it is tough to buy certain stocks. I normally buy through limit orders on German exchanges, well aware that I only get filled when the respective specialist can arb me... Long Eurobank (painfully), Autohellas and Metka at this point.

I was wondering what people are making of the situation in Greece. Things appear to be moving quickly. Situation as I see it: -Anti-austerity coalition government formed and appointed by radical left Syriza (Tsipras) and right-wing populist Independent Greeks (Kammenos). They have 162 votes in parlament of a total 300 (149+13). It is noteworthy that they formed a government in just one day (fastest coalition-forming I am aware of). - New finance minister is Yanis Varoufakis, an economic professor. You can read his ideas on his blog: http://yanisvaroufakis.eu/ . Varoufakis is clearly anti-austerity but not anti-European. - Everybody stated that they are willing to negotiate even though the euro group/Germany underlined that current contracts are binding ("pacta sund servanda"). - EU commissioner Dimitris Avramopoulos appears to be favourite candidate for the vancant post of president of Greece. This would be a sign of reconciliation and a candidate likely to be elected. What is the perspective from here: In my view, if politicians are willing to negotiate, the outlook might not be too bleak. Tsipras is clearly not going to get it his way in all respects and heisnot going to keep all he has promised. However, if he changes a few things to the better, there is a chance for him to succeed. Chances he has are: - achieving some easing in terms of Greek debt obligations (extensions, lower interest rates) - securing a European investment program in areas such as infrastructure, creating as European Marshall Plan. These measures might counteract austerity. - define a path for the exit of the troika which is much-hated in the Greek population. - cutting corruption In order to achieve these goals in negotiations with the euro group, he may have to sacrifice other promises, in particular hiring a lot of public servants and undo all laws passed by the last government. Tsipras has some leverage after the result but is in no case able to dictate his terms. This situation might help negotiators to achieve a balanced agreement which might end up as a win-win. Market view: - Greece stock market sharply lower post-election, mainly bank stocks suffering. Greek governtment bond yield increased and the yield curve is heavily inverted (3y bonds at 13%, 10 year bonds at 9.5%), signaling stress in the markets. - Some Contrarians (notbaly Robert Shiller) calling to buy: http://www.bloomberg.com/news/articles/2015-01-27/nobel-prize-winning-economist-says-it-s-time-to-buy-greek-stocks

In my humble view, a lot of things have been done right in Europe, in particular in countries like Ireland, Spain and Greece which have gone through very painful and bitter process of adjusting their economies. They have cut social security spending, cut red tape, dismissed a lot of public workers. These countries are much more competitive than they used to be five years ago. Unfortunately, these steps have not been accompanied by an investment programme (Marshal plan/ERP like) which is a major reason why demand is so weak. It was Germany's major mistake to not understand that necessary cuts should have accompanied by reasonable investments. Still, a lot of things are moving to the right direction. Also, the European banks have made a lot of progress in terms of writing down bad debt and raising capital. It is correct that the action action was less decisive and much slower than in the US, but in my view we are roughly there in terms of capital raising as was also evidenced by the last eCB stress test which was fairly credible. In consequence, European banks are among the most interesting recovery play in my opinion. As a negative, political risk has increased as we are seeing from Syriza in Greece.

So Autohellas is runnig the Hertz franchise in Greece, Bulgaria, Serbia, Cyprus and Montenegro. They have run the franchise in Greece since 1974 and have long-term contracts in place with Hertz. The company is dominated by Theodore Vassilakis, one of the most successful Greek businessman. Looking at the numbers, Hertz has amarket cap of around 102mm EUR and a book value of 177mm EUR, almost all of which is tangible. Like many Greek firms, Autohellas was on expansion course until 2007. Since then, they have reduced their debt financing and their total assets. Gross financial debt peaked at 270mm EUR and is now at 150mm EUR. On the other hand, assets are mostly vehicles Autohellas owns. I have not found their accounting of cars particularly aggressive and to my knowledge, they have not had to impair them even throughout the crisis. Autohellas owns a few participations which I consider non-core, most notably an 11.5% share in Aegean Airlines which is worth around 60mm EUR. Aegean is also controlled by Mr. Vassilakis. I want to underline that I am not fond of airline investments, however a listed asset worth 60% of the market cap is not to be ignored. The "other profit" you have seen may come from appreciation of this share. Autohellas gets their revenues mainly from two sources, corporate clients and tourism. Greece has been experiencing a 1929-type of recession and corporate fleets have been shrinking for some time, so this part of the business has been very difficult. Tourism has come back over the last two years. Over the first nine months of 2014, the posted net earnings of 17 mm EUR (excluding gains from Aegean). Cash Flow was negative as they invested into their fleet. If the economy comes back, I think one can argue for the car rental business alone to be worth 10x earnings which might be 150-200mm EUR plus the share of Aegean and some smaller non-core assets on top. Though owner-controlled, they have been quite good at paying dividends and returning capital to shareholders. That should be enough to start, happy to answer questions from here.

mjohn, I agree with you that Greece is one of the most interesting markets these days. Thank you for posting the Flexopack idea, I will take a look at that. I do own some shares of Autohellas which operates the local Hertz network. A company somewhat similar is Eltrak which distributes/services Caterpillar and Firestone/Bridgestone in Greece. Among the larger cap Greek companies, Metka has the potential to be interesting - they are mainly enginering Gas Plants in all kinds of scary regions (Syria, Algeria...). David Einhorn has been publicly promoting his investments in two Greek banks, Alpha Bank & Piraeus Bank. Would be great to discuss this further.