kab60

This looks really good. It is on my watchlist for some reason even though I've never done any work on it. Will take a look today. BlueToothDDS on Twitter has a good summary, gets you up to speed in 5 min. It is from december, when Fiserv had an investor day.

I agree on your point and actually sold Ulta last week. Quality biz but valuation is starting to look very demanding. With the risk of sounding like a shameless tobacco salesman, MO and BTI are very cheap and inflation and recession resistent. Fiserv also interesting, 75b mcap, 30b FCF towards 2025 per management - a large part of which will be towards buybacks. DD eps growth. Massive buybacks, undemanding valuation and high ROIC organic growth can be very powerful. Ebay also looks interesting actually, but it is more difficult for me to figure out their growth going fwd. If it gets slammed in a broad tech selloff, might be worth to try and dig deeper. It's a cashflow monster.

Why do you sold BAM? To dial down margin, I don't find it particularly cheap. And I can't stand their constant talk about plan value.

Sold BAM, 105% net long now. My US holdings are down to Berkshire, Altria, Berry Global, Asbury Automotive and Fiserv... Resilient and liquid stuff that ESG-investors despise with lots of buyback capacity incoming and a decent counterbalance to my illiquid smallcaps in Europe and Hong Kong... I'm always fully invested, but I'm speculating a bit on macro with buys on margin, and I can't say I like the current environment, so I'm dialing down... Considering how insanely crazy some stuff is priced, and possibly risk of inflation and higher rates, I find it quiet interesting that one can still buy something like BTI at close to a 9 pct. dividend yield with SD expected EPS growth going forward. Altria had a decent run since I got back in, but it's still cheap for one of the best businesses in the world. I have a close to taxfree account which I've stuffed with anti-ESG, high dividend paying stuff like Altria, BTI, WMB, ENB and KNOP. It's basically 50-50 tobacco and NG pipelines/shuttle tankers.

Ulta Beauty, Park Aerospace and some Cast SA, down to 110 pct net long with 32 pct in Brk and MO...

I like these moves. Not sure on Chevron, but oil was cheap in Q4. Things like Verizon, Kroger, BMS all trade around 10x earnings/free cash flow with low-mid digit expected growth. And all three are resilient mofos that shouldn't care too much about the broader economic environment. So it looks like a low-risk way of getting at least a 10 pct. return plus any growth and possible multiple re-rating as a cherry on top. I didn't look closely into Verizon before, but it doesn't look too shabby, and it doesn't seem like one pays too much for the possibility of 4/5G taking some share of home broadband from cable/fiber. I don't live in the states, but I made that shift some time ago as it was both cheaper and faster with mobile broadband, plus I can take it with me to our vacation home, so I don't need two connections.

I doubled down on Airlines, thinking this pandemic was nothing more than other pandemic scares and that things would quickly blow over. Then I sold very close to the bottom. Underestimating external shocks, and their sometimes very real effects on specific Companies, was clearly a mistake. Selling near the bottom was fine, since I found much better risk/rewards elsewhere. I also sat sucking my thumb on Lands End at 4/share, missing a multibagger in a Company in knew well which was already going through what seemed like a successful transition. Not sure it was a mistake though, I found better businesses I was more comfortable with. Anyway, it seems investors often tend to learn the wrong lessons from their mistakes - if they're even mistakes - potentially compounding the problem. Investors often seem to take a couple of data points and conclude that they were either right or wrong, but the sample size is clearly ridiculously small, so it's basically resulting. I think investors could learn a great deal from professional poker players and their emphasis on process instead of outcomes. The recent investment letter by Coho Capital is very interesting in that regard. It's interesting how firms like Saga Partners and Curreen have staged a comeback (Cureen only somewhat...) doing what to me seems a bit like YOLO-trades (but which have worked out). It's a humbling business, and feeling like one has found the magic beans after putting up a tremendous year might be dangerous. I know from myself that I felt a bit stupid during March - being down close to 50 pct. from February highs - despite having high conviction in my ideas. Ending up 45 pct. for the year, and with pretty much every trade working out lately, I've been feeling like a champ and have been inclined to add risk instead of reducing risk. Which, obviously, is a very, very dangerous spot to be in.

GE makes a lot of sense, if he is comfortable that there are no hidden nukes. Energy, healthcare, aviation are good to great businesses with a lot of staying power. It would also be a win-win since the backing of Berkshire would be a big vote of confidence and lower GE's cost of capital. The possible dealbreaker is a rotten culture ala WFC and getting comfortable Culp can change that which might be too big a leap of faith. But between BHE and Castparts he should be able to get som insights. I don't see him entering the military complex through Boeing, has he ever invested in something with a defence component?

I think Verdad does some good and unique research - they have some thoughts on the current climate: Investing in a Bubble Spotting Bubbles is Easier than Investing through Them By: Ahmed Elbakari, Tom Macky, and Igor Vasilachi The S&P 500 index soared 38% in 1995. This sharp increase, following four years of steady gains, made some of the smartest investors on Wall Street begin to grow wary of a bubble in the making. Over the past few months, we studied what today’s most famous investors were saying during the years leading up to the dot-com bubble. We referred to investors’ letters to shareholders, online databases such as LexisNexis, and business books to collect their quotes, building a database of every piece of macro commentary we could find. We found that the investors we studied almost all perceived the market to be in a bubble, but almost all of them were too early in making the call. It’s easier to predict what will happen, it turns out, than when it will happen. “I think we're approaching a blow-off phase of the U.S. stock market,” Ray Dalio told Pension & Investments in 1995. “Price acceleration on the upside is preceding a significant correction—20% beginning over the next 18 months.” Peter Lynch echoed Dalio’s concerns in an article in Worth Magazine in 1995, warning that “not enough investors are worried.” It didn’t take long for more of the world’s top investors to start worrying along with Dalio and Lynch. In 1996, the S&P 500 soared another 23%, defying Dalio’s predictions of a quick correction. Describing the frenzied stock trading in 1996, Howard Marks wrote, “Every cocktail party guest and cab driver just wants to talk about hot stocks and funds.” And in his end-of-year letter, Seth Klarman expressed his concern with the public obsession with owning mutual funds and internet stocks: “We know the current mania will end badly; we do not know when.” But US stocks continued their upward trajectory, with the NASDAQ rising 22% and the S&P 500 rising a whopping 33% in 1997. George Soros had seen enough, persuaded by the same fact pattern Lynch, Dalio, Marks, and Klarman had all observed. He decided to put on a significant short trade against US technology stocks. By the end of 1998, Soros had lost $700m betting against internet firms, the fledgling titans of the new industrial revolution. Quantum, the flagship fund of the world's biggest hedge fund investment group, was suffering its worst ever year after a wrong call that the "internet bubble" was about to burst. Instead, companies such as Amazon.com and Yahoo! rose to all-time highs in April. Shawn Pattison, a group spokesman of Soros’s fund, said: "We called the bursting of the internet bubble too early." In the five years from 1994 to 1999, the NASDAQ returned about 40% per year. The type of value investing practiced by greats like Howard Marks and Seth Klarman had been left in the dust, with annualized returns for the large-cap value index of only 24%. Warren Buffett’s Berkshire Hathaway had lagged the NASDAQ by 15% per year since 1994, forcing Buffett to explain why he didn’t hold AOL, Yahoo!, or any of the other hot technology names. He told CNN in 1999 that he “can't 'see' what technology businesses will look like in 10 years or who the market leaders will be.” The broader public didn’t share Buffett’s concerns. In 1999 and 2000, there were 819 IPOs, day trading became a hot activity, and the NASDAQ rose 86% in 1999 and another 15% in the first months of 2000. But in March 2000, five years after Dalio and Lynch first warned of a bubble, the NASDAQ turned a corner. What started with an announcement of rising interest rates by then Fed chairman Alan Greenspan—raising serious questions about the dot-com darlings' valuations and ability to repay debt—trickled into a market selloff, scandals of bad accounting practices, and major bankruptcies. By October 2002, the NASDAQ had fallen 75% from its peak, giving up all of its gains in the bubble and returning the index to 1996 levels. Dalio, Lynch, Marks, Klarman, Soros, and Buffett had all spotted the bubble and warned investors of the dangers. But their foresight came too early. From 1995 until the peak in 2000, investors who favored international stocks, value stocks, bonds, or commodities had all lagged the NASDAQ by more than 20% per year. The below table shows the annualized returns of major stock indices, value indices, bond indices, and commodities from the first warnings of a bubble to the market’s peak in 2000. Figure 1: Annualized Returns from First Bubble Warning (1995) to Peak (2000) Source: Bloomberg, FRED, Ken French Data Library, Verdad But by October 2002, two years from when the bubble burst, the picture looked dramatically different. Value emerged as the winner after the bubble, as a result of investors’ flight to safety to more traditional businesses, while 10Y US Treasuries ended up outperforming the once-raging growth equities. The table below shows annualized returns from the first bubble warning to the market’s 2002 trough. Figure 2: Annualized Total Period Return and Drawdowns from First Bubble Warning (1995) to Trough (2002) Source: Bloomberg, FRED, Ken French Data Library, Verdad Value investing turned out to be the best strategy over this full period, according to our research. The bursting of the tech bubble restored the reputations of the great investors we studied, who generally outperformed the broader index by large margins from 1999 to 2002. But it took courage—and the ability to stick to a strategy despite lagging the market by wide margins for years—to achieve these outcomes. That persistence and conviction might have been one of the key reasons for those investors’ long-term records and famous reputations today. But tolerating years of underperformance and missing out on big mark-to-market gains in a hot sector can be very painful. “Fear of missing out” is as powerful a force among investors as it is among social media influencers. In such environments, money managers face two critical hurdles. On one hand, a manager has a hard time convincingly denouncing an upcoming bubble when investors only see a market that is continuously creeping up. On the other hand, predicting a bust too early could result in adverse effects if the money manager is too wary. Investors do not want to pay fees to get their money parked for years while retail investors are riding the market and generating superior returns, even if the bubble is bound to burst at some point. So what are investors that face these pressures to do? Would there have been a way to profit from the 1990s tech bubble but also get out before the market turned? Trend following offers one possible quantitative answer to the question. The idea of trend following is simple: own the asset as long as it’s going up, but sell and go into cash or bonds the minute the price falls below the 200-day moving average. Then buy the asset back again when the price moves above its 200-day moving average. The chart below compares the annualized returns from the first bubble warnings in 1995 to the peak in 2000 and to the trough in 2002, as well as max drawdowns, for the NASDAQ, S&P 500, small value, trend-followed NASDAQ, trend-followed S&P 500, and a 50%/50% combination small value and trend-followed S&P 500 and NASDAQ. Figure 3: Annualized Total Period Return and Drawdowns from First Bubble Warnings (1995) to Peak (2000) and Trough (2002) Source: Bloomberg, FRED, Ken French Data Library, Verdad Trend following the major indices produced returns in line with small-cap value and significantly reduced the underperformance and drawdowns. Blending trend-followed indices with small-cap value produced similar results. Trend following worked effectively to follow the bubble up and get investors out before the full impact of the crisis was felt. Blending trend-followed indices with small-cap value produced an even smoother ride. What are the lessons for investors today? It might seem that everything is different this time around. Warren Buffett now owns Amazon shares, and Howard Marks has referred to the bull market of the past decade, and growth stocks in particular, as “the new normal.” However, history shows that, much like gravity, market cycles are constant and can bend even the most resilient bull runs. With a stock market that has been growing unhindered since the aftermath of the global financial crisis, chances are high that the cycle might soon end, and investors should prepare. Some are voicing their concerns already. Bill Gross, who retired from active investing in 2019, is one of them: “An investor, not day trading on Robinhood, should begin to play defense,” he said in his investment outlook letter. He is joined by Jeremy Grantham, who stated in a recent interview with CNBC that he is more convinced than ever of a bubble in the stock market, adding that “the more spectacular the rise and the longer it goes, the more certainty one can have that you're in the 'Real McCoy' bubble.” We don’t know who will end up being right, but we know that the markets are overvalued, and the conditions are present for a large selloff. In his letter to investors in 2018, Jeremy Grantham said, “We can be as certain as we ever get in stock market analysis that the current price of the market is exceptionally high. However, classic examples of the great bubbles of the past are not just characterized by higher-than-average prices. Price alone seems to me now to be by no means a sufficient sign of an impending bubble break.” This ratio of growth to value valuations has already reached 1999 levels and is trending towards dot-com bubble levels. While this is not a definitive sign that we are in a bubble that is about to burst, it is yet another in a growing number of red flags. And while we believe value will prevail in the full sweep of history, those who want to participate in the bubble’s upside might want to consider implementing trend-following rules that might help cushion the fall if the large-cap technology market turns. Acknowledgments: Ahmed Elbakari and Tom Macky interned with Verdad this fall. Ahmed is in his 2nd year at Stanford GSB and is looking to go into public market investing after graduation. Tom is a rising junior at Harvard studying economics. Igor has been working with Verdad since graduating from Stanford GSB in June, prior to which he worked at McKinsey & Co.

I'm from Denmark which has a very poor equity culture in that very few retail investors participate. But it seems everybody is talking about stocks at the moment. It's so stupid how after markets have moved up, people are lured in. I know few that go shopping right after holiday sales are over. My collegues, who knows nothing about stocks, talked about Tesla and Shopify and Apple last year. My neighbour, who couldn't read an income statement if his life depended on it, have made good money buying EV stocks. Another mentioned how he overhead two grocery clerks talking about what a waste it was to work, when one could just trade penny stocks at home: They always go up! I'm still very long and think most of my stuff is very cheap to fairly valued, but it's crazy at the moment. With high taxes on realized gains I've come to accept the volatility and always stay fully invested, abd I can't seem to figure out a clever pay to play this, but still I've found myself looking at various hedging strategies. This is definately not going to end well for a lot of people.

Are any of you looking at shorting corporate bonds as a general hedge - perhaps just the ETF's? While many stocks are trading at nosebleed levels, I think the same can be said for a lot of HY bonds. It won't be quiet as explosive if things unravel, but at the same time downside should be much less. Something like HYG had an equity-like drawdown in March.

How are people thinking about timing? It might be late by then, but wouldn't it make sense to way for all the stimmy checks to arrive and perhaps even for spring to come around? When people are all vaccinated, inflation starts picking up, and the economy is perhaps still in the doghouse, it's easy to see a change in narratives. But I'm crap at this game, so don't listen to me. :)

Often these folks have 100 pct. of their net worth tied up in one place, like having 100 pct. of your portfolio in one idea, so selling reduces risk, takes off a lot of pressure and gives them the opportunity to exchange an illiquid stake into cash. Which can be used to improve the quality of life and/or be invested more broadly and decrease concentration risk. It's not very oftent that founders sell 100 pct. of their business and stay on for a long time and if they do hang around it's often because they have some of the payment locked up in a 3-year earnout or something like that. Often when they sell to PE, founders keep 30 pct., which gives them skin in the game but also makes them more willing to take risk and expand, since they already took a lot of money off the table. So I'd say it makes a ton of sense for most people, and that it's fairly unusual founders stick around for a very long time when they sell 100 pct.

Sold the rest of ADS. Has been a drag on performance for years and got absolutely killed in March. Couldn't kill the biz though, so I bought more which worked out nicely. There's definately a case to be made for it to double, but in this environment I prefer to take off exposure in the US and deploy in better ops internationally. Also sold a third of Ulta Beauty.

-20 pct. But quiet a bit of equity in bricks of which some should be converted to cash during the year.

He must be tempted by GE. Aviation, healthcare and power - with a big focus on renewables - should all have extremely good long term tailwinds. He usually doesn't do turnarounds, but perhaps they've already turned enough (in that they haven't blown up) and what's left can be tackled with good execution while temporary headwins (like in aviation) lifts.

I'm about 80% BRK, the highest I have ever been. Edit: and I am continuously writing puts on BRK, usually a week or less from expiration. Kab and Boiler, good posts. I'm thinking and acting the same as you. Currently 70% BRK. It's a safe place to harbor for awhile and the coming growth should be nice. It's probably not gonna be earth shattering good, but it's difficult for me to find a better risk/reward. They're well-positioned to all kinds of different environments, so I'd say it's safer than almost all corporate bonds but with equity-like returns. I have a 20 pct. position which is basically what makes me around 120 pct. net long. It has been a real drag on my returns, but underlying performance has been good-to-great and just increases the value of their buybacks, so it's difficult to see how one loses unless their operating businesses start sucking - but that doesn't really like it's in the cards. It's even more interesting, since consensus seems to be, that Warren sucks, and valuation doesn't matter anymore. Hope he gets the last laugh before passing on the baton.

If not for taxes from selling winners, and an ambition to do better, I could be tempted to put 100 pct in Berkshire and go to the beach. Set a notification in the event of a 20 pct plus market drawdown and then either scour the market for potentiel multibaggers to buy on a bit of margin or just add to Berkshire with borrowed funds. Never bought options due to taxes, but has anyone been looking at long dated calls? Seems like a prett good bet, and from my understanding the low vol usually makes option pricing pretty cheap? Think the market might be surprised.by the amount of buybacks in Q4.

2020: 45 pct. 2019: 23 pct. 2018: -7 pct. 2017: 19 pct. 2016: 45 pct. 2015: 13 pct. I feel like I'm getting better, but I also reckon most might just be luck and a small sample size. Was approx. 115 pct net long going into March, dialed up and down during the year to a max around 120 pct before the presidential election. Got absolutely clobbered in March with positions in (among other things) Spirit Airlines, Alliance Data Systems and AMA Group and no tech apart from a microcap in France. Down 50 pct at one point from February high. Averaged down in all three before realizing how bad it would be for Airlines with fixed and operating leverage. Took my losses in Spirit and deployed into better risk/reward situations. Did a ton of buying and selling, never seen so many good spots to pick from, but ended up with a portfolio looking a lot like it did going into the year with a lot of Berkshire, Linamar, Altria, Ulta Beauty, Clipper Logistics and Cambria Automobiles among the biggest. Made some costly mistakes like averaging down in Spirit, and not swinging at some stuff right in my wheelhouse, but overall satisfied. Returns are in euro, and the dollar was obviously a large headwind. Sorry for your loss, John. Best wishes for the new year my fellow Dane.

Berkshire seems like the biggest no-brainer and with minimal risk, but since I have no idea on timing I'd probably pick something in the UK for 2021. That market has been lagging badly, but now brexit has fallen in place, vaccines are being rolled out, so I'd probably go with Cambria Automobiles and S&U Plc (subprime auto finance) which has been lagging US peers badly and are both too cheap (disclosure: long both).

No idea on FX, but there are still quiet good bargains in UK smallcap land that might be due for a rerating since clouds have now been lifted. My investments have done fine in the UK, but they're still too cheap despite executing well during brexit. It is quiet interesting how some similar businesses have fared very differently between the US and UK.

PE sponsor recently launched offer for Applegreen, a gas station and food Court company. I believe Alimentation Couche Tard, or one of the other large operators, expect lower gas demand to increase fuel margins. Then it's also debatable whether or not recharging, which takes longer, will increase sales of food, beverages etc. I haven't made up my mind, but Alimentations track record is quiet formidable and they're experimenting in Norway, where EV penetration is relatively high, so that might be worth to follow.

Small position in SUS:LN based on like 30 minutes of reading, this guy did a great writeup: http://lewissrobinson.com/

Tracking stock, ala Malone? Doesn't really fit the profile & I'm largely ignorant of such issues. Yeah, there are definately lots of ways to surface value here, but he's not really playing that game, and I prefer it that way. Either way I think massive buybacks, even at fair value, is the way forward. The old man can't really defend hording more cash, and it's difficult if not impossible for him to find better risk/reward elsewhere.

I definately see your point, and it might get a higher mark that way, but I'm not sure public investors would care much for a Utility Company that doesn't pay dividends, and it would make it harder to shift capital allocation quickly (say BNSF saw an interesting expansion opportunity and wanted to retain all capital one year - not that it's very likely). Mostly though, I think it would require additional management focus and possibly public scrutiny. Don't see it happening under Warren, maybe later.