kab60

I don't like the pub business, but JDW is an interesting company. Their CEO is a bit of character and often references Buffett in his shareholder letters. They have quiet a bit of debt but smartly hedged a lot of it from floating to fixed (until 2031 IIRC). They also own most of their land and pubs and renegotiated a bunch of their leases during covid.

Sorry for being unclear, I was talking about interest rates (not insurance rates/premiums).

I don't have a deep enough understanding of their exposures, but I don't see how rebuilding after something like Ian won't be much more expensive than expected not long ago. Building costs are up as well as property prices (though cooling off now). I might be wildly off, it just seems like a lot of folks are focused on their ST bond portfolio and a hard market and perhaps less so potential claims inflation. Which might be right, I'm a total noob and am not into the weeds (but am inclined to like the risk-reward). https://www.fitchratings.com/research/insurance/global-insurance-sector-outlooks-at-risk-from-inflation-rising-rates-15-09-2022 (don't have the full report - perhaps Fairfax is unaffected)

Appreciate the answer, Viking. I think you reasoning is very sound, but I do fear claims inflation, as inflation has run a lot hotter than most expected. While rates have moved up aggressively, they're still far below inflation levels. While that will be reflected in new policies, if inflation keeps running, insurance companies might be behind the ball continually, no? I understand why higher interest rates are great, I'm less sure it's great if inflation doesn't come under control. But this is just high levels thoughts, I know little about analyzing financials not least insurance companies.

So the bull case is pretty obvious. We make a ton of dough if Prem buys higher yielding bonds. What is the risk that he waits for even fatter yields, which never comes? Or they get crushed on insurance costs balloning due to inflation?

I haven't used any specific indicators, but you could take a look at the fear and greed index to keep it simple. And if VIX is really high, there's a good chance people are liquidating for non-fundemental reasons, which is usually a decent time to buy stuff you already know and like. But usually I'm just looking at stocks, and if a lot seems to be smack-in-the-face cheap, I've used up towards 20% portfolio margins at times (like March 2020). When I think they're around fair value, I sell and dial down margin and don't fret about paying taxes (I never joined the #neversell band). I've basically used margin as a cash substitute, but it needs to fit your style and holdings. When I've used margin, I've had a large slug in stuff like Berkshire and tobacco and knew I could take a greater than 50% draw down without breaking a sweat. If I was as smart as @writserand @Hielko and had a large percentage of special sits, even better (I basically have only Twitter atm as it seems so simple that even an idiot can figure out Musk has a poor case). There's no doubt leverage can be great if applied in the right dose and coupled with good stock picking. But, margin increases the risk of blowing up, and it might stress you out, which in turn might result in worse decisions. I think Buffets' general principle of not doing stuff which messes with your sleep is sound. As generalist investors and one man bands, we all have limited mental bandwidth and need to use it wisely. I can see why people would forego margin completely (it's partly why I don't short or trade options - getting the timing right is different than LT investing). A decent savings rate and a LT view should make most of us end up in a fine place (economically) unless we blow up.

Do you understand why the numbers are so much worse than CPRT? I haven't looked into it, but they weren't that far from each other in terms of revenue a handful of years ago. Since then CPRT has grown faster, and margins are just much better. Is there some big structural differences, because it's an interesting industry?

TWTR, FB and FYBR

Financing has long been lined up. I'm not a lawyer but reading the agreement it seems very tight. I'd say funding secured even... I also don't think the board can just 'drop' the deal due to unruly employees. I'd assume shareholders would sue their asses. At $37, it's clear there are risks. But I think people overestimate what Elon can do in this case with the facts at hand (might be famous last words/baggie quotes...).

Ideally I'd like something like 20% of my portfolio in special sits as they should be mostly uncorrelated bets, but we saw during covid how the spreads on deals blew out, so it's not necessarily a good source of cash. I think you need to know yourself and your portfolio to figure out what works best for you. Some like holding cash, I like having something very defensible I'm comfortable borrowing a bit against if things get ugly cheap (like Berkshire, tobacco etc.). I was well setup for the current correction/whatever you call it, as I pivoted a bit late last year/yearly '22 and added to cheap, defensible stuff I owned and liked with inbuilt inflation-protection that didn't seem to cost much despite inflation ticking up a lot (tobacco, oil, auto dealerships). Better lucky that good I suppose, but generally I try to own stuff I have a hard time killing. For me it means I much prefer businesses with good economics and either very stable or countercyclical cashflows (like distributors that release working capital in a downturn). AND I want to pair that with management which have shown an ability to take advantage of whatever gets thrown at them - cheap acquisitions, cheap buybacks etc. It makes for a rather small universe of companies that I'm comfortable with, but it means I'm fine owning them in big size and love when they dip, so I don't need a whole lot of ideas.

He needs a valid reason to walk - he can't just make up excuses and pay 1B. I think this sums it up pretty well: https://yetanothervalueblog.substack.com/p/twitter-the-circus-will-have-a-happy?utm_source=%2Finbox&utm_medium=reader2&s=r

That's not how these things work. He can't just pay 1B and walk away.

I don't do merger arb, but I bought some Twitter. Musk gets away with a lot of crazy shit, but I don't see how he'll be able to break a deal where he waived due dilligence and whined about bots before, during and after closing.

The regulatory capture of Big Tobacco is pretty great...

More FB

More IPCO the other day...

Some FB. There are risks, but I think valuation takes care of a lot of those.

To tax it? Not sure, politicians seem to do that easily. As for Health Studies, you have some pretty formidable health data in Sweden, and as I understand it (I was told by an Economist friend of mine at Novo Nordisk, so take it with a grain of salts) there are pretty much no negative health consequences from Snus/Nicotine Pouches when you look at cohorts of users through decades. We can agree that nicotine isn't beneficial, and being addicted is generally bad, but for a lot of people nicotine pouches substitutes cigarettes which are just terrible, obviously, for your health.

Yeah, I think it's inevitable that nicotine pouches will eventually be taxed meaningfully. Not due to health concerns, but simply because continued declines in cigarette consumption will leave an increasing whole in public budgets. Hopefully, politicians are sensible enough and realize that nicotine pouches might be one of the greatest things to happen for public health. But one of the attractions for me in investing in MO (apart from being perhaps the greatest business ever) is that they seem to have a tremendous amount of regulatory clout. It's pretty sad for society and public health, but it's great for shareholders. Despite increasing taxes, I think SWMA will do well. I've been smoking a cig once in a while when going out since I started 'drinking' and have almost completely switched to nicotine pouches. It's just a better product, not least as you aren't banned to standing outside, AND the health benefits are tremendous. I hope we do well, Spek!

Maybe. I wrote Swedish Match regarding the PMTA process, as I'm not 100% on the risks. Will see what they say. They don't really mention it in their annual report risk section, so I might be seeing ghosts. As for politicians, it's always a risk in this space. But if common sense prevails, they won't oppose nicotine pouches. The health benefits compared to tobacco are immense - you can't really compare the two types of products. While nicotine isn't healthy, it doesn't kill you unlike all the small particles and tar you inhale into your lungs when smoking. This might be of interest:

Nah, I agree. It's one of my best GARP ideas. If the development in the states gets to resemble Northern Europe, it's gonne be a huge winner. My fear is Altria and BATS somehow has enough FDA clout to sabotage Zyn!, though I have no idea how they'd do that.

It's a growth stock. Long duration cashflows. Multiple compression! Which is awesome, as they - unlike the knobheads at Big Tobacco - buyback shares meaningfully. But yeah, a bit surprised with the price action considering BATS seems to have thrown in the towel somewhat in the US with regards to nicotine pouches, and Swedish Match absolutely crushed it.

Me too!

Daytraded some APPS yesterday, bought some IPCO today. Portfolio down to two old hucksters, auto dealerships, nicotine and now a bit of oil and cash. Off to a good start in 2022.

I've always been on Team Gregmal, thinking it was idiotic to hold cash as a private investor as I always found stuff to do. And I probably still am, but for like the first time since I started investing, I'm raising some cash. Mainly by selling positions, which had a good run, and might be trading above fair value (I'm selling the flowers). What's happening with oil is fascinating. Every single public producer is focused on ROIC and returning cash to shareholders - not expansion. Oil stock prices probably still have to double, before their cost of capital is appropriate for chasing growth. So it doesn't seem unlikely that oil stays here, or even goes higher, increasing the cost of a lot of stuff. You've got inflation running hot, and you've got rates hikes coming. You have a ton of investors who's gotten complacent thinking that the FED will bail you out. But I wonder if an equity crash won't be better for the real economy. The number of people quitting their jobs, or thinking about quitting their jobs, probably due to wealth effects, is pretty incredible. I think most likely inflation peaks and then returns to a more usual average, while FED hikes and equity mkts do fine as higher rates are also a function of higher growth, so everything will probably be fine. But, for the first time since I started investing, this time does feel different (don't say the words!). I don't like taking directional bets (espescially not on macro, and I'm probably more in camp deflation LT anyway), and it's not like I'm going long canned foods and selling all my stocks (mostly holding Big Tobacco, Berkshire and auto dealers), but I feel okay being a bit on the sideline and seeing how this plays out. Perhaps I'm also becoming a bit of a pussy after a good run. If I don't do dumb shit, I can probably "retire" at age 35.