Foreign Tuffett

Just my opinion, but I don't think this whole Wall Street Bets things is a lasting paradigm. To steal from some book titles, I would be cautious about believing that this brave new world is the end of history. Imagine all the folks who were talking about a 'new normal' during the tech bubble. I think the story is as much about Melvin Capital's huge blowup as it is about anything else. $2.75 billion is just a huge number for a hedge fund bailout. The infamous LTCM bailout was ~$3.6 billion (not adjusted for inflation)

Yeah, this was the lowest quality and least differentiated part of NOC's business. The rest of the business is all (or nearly all) high tech stuff (space, autonomous and manned aircraft, ballistic missiles, cyber, sensors, etc). I completely agree that NOC making the right move here.

I looked at ELBIT Systems (ESLT) as it trades near its low ($113 vs $110 - 52 week low). I will don’t see it trading at a discount to US defense plays that I think are lower risk. It is a nice outfit they I owned before - I bought it around $30 in 2012 and sold it for more than a double in 2013 (looking back at my records) but it was very cheap back then and trading lower than US defense plays. Maybe people are worried about fallout from ELBIT selling 'suicide drones' to Azerbaijan given the conflict w/ Armenia? https://www.jpost.com/israel-news/israels-elbit-systems-sells-azerbaijan-skystriker-suicide-drone-577053 Just a guess off the top of my head.

Looking at premarket, bank stocks are down, because treasuries are down and pot. no stimulus, I suspect. Luckily I don’t own any. I will get really if my defense stocks are down today You and me both. Just saw this headline: https://seekingalpha.com/news/3631072-defense-sector-shakes-off-election-uncertainty

In what capacity are you associated with "Mechanism Capital" ?

Isamu Paint (4624) Manufactures and sells paints and related products. I believe they specialize in automotive repair paints. Margins in core biz seem solid. Market cap is the equivalent of $51 or $52 million USD. Typical trading volume is very low, maybe a few hundred shares a day. I don't know the extent of insider ownership, but it is probably very high. ~1.75% dividend yield. Grossly overcapitalized, even more so than even the other three companies I have posted. Calculating the discount to NCAV is a little tricky since the company owns a great deal of long term investment securities. If you exclude them altogether then the stock is at maybe a 24% discount to NCAV. If you 'cheat' and treat them as current assets, then the discount to this adjusted NCAV figure approaches 57%. This is the last of the four J-nets I own. If anyone has any thoughts, thinks my #s are wrong, etc, feel free top chime in.

DAISHIN CHEMICAL CO (4629) Manufactures and sells paint thinners and other similar products. Market cap is the equivalent of about $62 million USD. ~2.2% dividend yield. Trades 16 or 17% below NCAV. Market cap / last fiscal year's (ended 3/31/20) operating profit is ~4.3X. I think the core business here is decent, but like all J-nets the company is OVERCAPITALIZED.

Kawagishi Bridge Works (5921) Structural steel fabrication company (for things like bridges and high rise buildings). Like much of the Japanese construction industry, may be controlled by the yakuza. More than twice the size of Nansin by market cap, and more liquid. ~3% dividend yield. Trades at a whopping ~50% discount to NCAV, but something like this needs and will always have lots of current assets. Cheap on an income statement basis too, with market cap / TTM operating profit ratio around 6X.

Nansin (7399) Probably controlled by Saito family. Manufactures and distributes caster wheels and related products. Very small (about $32 million USD market cap), not terribly liquid. ~2% dividend yield @ current stock price. As you would expect, margins aren't great but company is consistently profitable. Trades at about a 39% discount to NCAV. The company has a YouTube channel. Can anyone watch the below video and NOT think the stock is a strong buy? Look how well those carts roll! And that music! https://www.youtube.com/watch?v=FPyP71QwSck&t=19s

Monday’s and Fridays less productive? I would like to know what’s the difference to being in the office then? Liquor supply 25 ft away vs down the block? Hungover on Mondays and half sloshed on Friday afternoons

Where are the memos for the investments that didn't work out?

Pabrai is effectively saying that he is 80% directionally right on each investment. Now the comparison does not hold fully when you consider varying time horizons. But that would be the gist. I still don't get it. How is he able to calculate with any degree of precision that a stock has a 4 out of 5 chance of going up? What would such a calculation even look like? He's not calculating the probability of the stock going up or developing some calculation for that. What he's saying is that 4 out of 5 times, after he analyzes a business and invests in it, the stock will eventually move closer to intrinsic value 80% of the time. And he will be wrong roughly 20% of the time. Cheers! If you are suggesting that he is extrapolating from his past experience as an investor to come to that 80% figure*, then he is just making a basic logical fallacy. Surely that isn't what he means? * "80% of my equity investments in the past have been successful, therefore 80% of my equity investments in the future will be too."

Pabrai is effectively saying that he is 80% directionally right on each investment. Now the comparison does not hold fully when you consider varying time horizons. But that would be the gist. I still don't get it. How is he able to calculate with any degree of precision that a stock has a 4 out of 5 chance of going up? What would such a calculation even look like?

I know very little about blackjack, but any casino game in which the 'house' is your counterparty is nearly always going to have a negative expected value. Have their been some exceptions in the past? Yes, but they almost prove the rule since (a) they are so notable that people talk about them for years on end (b) they usually rely on the house making mathematical errors, which is rare. The writer known as "Bob Dancer" (a pseudonym) supposedly made a mint back in the day because one or more casinos screwed up the expected payouts on some video poker machines. Don Johnson (not the actor) made millions because a few casinos screwed up big time by allowing him to negotiate special blackjack rules so that the the odds were actually in his favor. https://www.theatlantic.com/magazine/archive/2012/04/the-man-who-broke-atlantic-city/308900/ Pabrai didn't say anything in the interview about how his blackjack "system" actually works. He did mention he uses a $100 subscription service to decide when and where he will play to maximize his odds. Can I believe he won some money playing blackjack in Vegas? Yes. Do I think he figured out some magic formula to win? Nah. Finally, I would love to hear an explanation of his statement that "in the equity markets I can make bets where the odds are 80%." In what meaningful sense can he (or anyone else) precisely calculate the odds of a particular equity investment being successful? Hopefully someone more knowledgeable about blackjack will chime in..

Worth mentioning that GD's Bath Iron Works workforce just wrapped up a two month long strike. Yes, HII builds big boats and not (Dr Evil voice) "frickin' laser beams" like some of the other defense contractors. Of course, the same objection could have been made when the company was spun off from NOC and was trading at $30 or $40. You are trading low margins for (1) very high revenue visibility (2) a strong competitive position (3) a biz that doesn't change very quickly. The risks are that (a) margins deteriorate* and (b) US Navy moves away from big boats. Long term, I think margins will be OK, and (for reasons that are too lengthy to get in to here) I also think the Navy will continue to build big boats. If Newport News lays off 50% of its workforce as soon as CVN-81 is delivered in 2032 then I will have been wrong about the latter. * We saw this in Q2, largely due to COVID Yes, HII was very cheap when spun off, but so were most defense peers at that time. I see that the 2021 earnings projection for HII is $11.2/share down from $14.5. Any idea why earnings for next year are projected to fall that much? I don't know what inputs were used to get to that 2021 EPS #. Midpoint of preliminary 2021 guidance has shipbuilding and technical solutions* revenue and margins all up modestly Y/Y. * ex UPI and San Diego shipyard to make it an apples-to-apples comparison

Worth mentioning that GD's Bath Iron Works workforce just wrapped up a two month long strike. Yes, HII builds big boats and not (Dr Evil voice) "frickin' laser beams" like some of the other defense contractors. Of course, the same objection could have been made when the company was spun off from NOC and was trading at $30 or $40. You are trading low margins for (1) very high revenue visibility (2) a strong competitive position (3) a biz that doesn't change very quickly. The risks are that (a) margins deteriorate* and (b) US Navy moves away from big boats. Long term, I think margins will be OK, and (for reasons that are too lengthy to get in to here) I also think the Navy will continue to build big boats. If Newport News lays off 50% of its workforce as soon as CVN-81 is delivered in 2032 then I will have been wrong about the latter. * We saw this in Q2, largely due to COVID

Well, that mainly just gets back to the whole size issue. It is difficult to allocate $100+ billion in an intelligent way. I disagree about only selling something if you have a superior investment alternative lined up. Hypothetical: An investor owns a position in a stock that he believes to be ridiculously overvalued, but he also doesn't have any good ideas at the moment. You think that person should continue to hold the stock instead of selling?

I have been eating similarly (low carb verging on keto, periodic fasting of up to 48 hours, black coffee in the morning) and my thoughts are nearly identical. The amount of time fasting frees up is incredible. My experience has been that response to carbs is very individual, and can vary widely even among immediate family members. I tolerate carbs poorly and have been eating low carb almost continuously since way back when Dr Atkins was still alive.

This is my thought as well. They already have a cash problem. Why add to it? I disagree for two reasons: First, I don't think this is a good reason to own an overvalued security. Assuming of course WB thinks Apple is overvalued. Secondly, I don't think they have a cash problem. Having loads of cash isn't a problem, the problem is WB did not use it a few months ago. So if you think they should hold Apple today, then you must also think WB made an error in Mar-Apr not diving into equities head first. I agree with LC. Needing cash (or not needing cash) isn't a good reason to make buy or sell decisions. Imagine running your own portfolio that way. I know multiple people who took cash out of 401Ks during the Great Recession because they lost their jobs and needed cash. This kind of thing is the polar opposite of value investing. The fact that arguments like this about Berkshire (shouldn't sell possibility overvalued positions because marginal value of additional cash is low given how overcapitalized and cash generative the company is) make some intuitive sense speaks to Berkshire's size being an issue. There are three connected issues really: - Selling appreciated stock in taxable account is always a high hurdle, since any alternative (cash or other position) would have to outperform taking into account tax hit - This is further aggravated by existing and increasing cash position - This is further aggravated by very limited universe of investment options due to the size I think all those points hit on why AAPL position, assuming the stock is fairly valued* at the current price, should be valued at a significant discount to market price. * I recognize that this is a big assumption, but this discussion is probably better off not veering into "where should AAPL trade?"

This is my thought as well. They already have a cash problem. Why add to it? I disagree for two reasons: First, I don't think this is a good reason to own an overvalued security. Assuming of course WB thinks Apple is overvalued. Secondly, I don't think they have a cash problem. Having loads of cash isn't a problem, the problem is WB did not use it a few months ago. So if you think they should hold Apple today, then you must also think WB made an error in Mar-Apr not diving into equities head first. I agree with LC. Needing cash (or not needing cash) isn't a good reason to make buy or sell decisions. Imagine running your own portfolio that way. I know multiple people who took cash out of 401Ks during the Great Recession because they lost their jobs and needed cash. This kind of thing is the polar opposite of value investing. The fact that arguments like this about Berkshire (shouldn't sell possibility overvalued positions because marginal value of additional cash is low given how overcapitalized and cash generative the company is) make some intuitive sense speaks to Berkshire's size being an issue.

1) Buffett turns 90 later this month. What happens when the greatest capital allocator in human history is gone? Honestly, I think Buffett's successor will have a difficult time of it unless (a) the company can be broken up and/or (b) a dividend can be put in place. Berkshire has become so large and unwieldy that I struggle to see it outperforming the S&P 500 with a mere mortal making the capital allocation decisions. It needs to be cut down to a more reasonable size. 2) Berkshire's AAPL position is now valued at over $100 billion. How is everyone thinking about this position in the context of valuing Berkshire?

"Seth Klarman Says Fed Is Infantilizing Investors in ‘Surreal’ Market" https://www.bloomberg.com/news/articles/2020-07-30/klarman-says-fed-is-infantilizing-investors-in-surreal-market

Re: Discussion about unmanned surface vehicles L3Harris getting some work in this area https://insidedefense.com/insider/l3harris-reports-growth-maritime-business

Everything HII builds is either a monopoly or one half of a duopoly Newport News Only shipyard that can build, refuel, or decommission nuclear aircraft carriers Duopoly with GD's Electric Boat on the building of nuclear subs Ingalls Duopoly with GD's Bath Iron Works for the building of Arleigh Burke class destroyers (only Large Surface Combatant (LSC) ship currently being built for US Navy) Only builder of San Antonio-class Only builder of America-class Only builder of Legend class cutters for Coast Guard Reading between the lines a little bit, shipbuilding (particularly large ships) for US Navy is so highly consolidated that the Navy is determined to (and has little choice but to) feed its remaining builders steady work to avoid having its industrial base erode away. https://www.maritime-executive.com/article/u-s-navy-puts-industrial-base-first-fleet-size-second

Baupost has (for some time) reportedly been involved in a complex deal to: (1) acquire (or gain control of) the Downtown Las Vegas facility known as "Cashman Field" with the idea that the 62 acre plot could be redeveloped into a new soccer stadium + some ancillary stuff (2) acquire the "Las Vegas Lights FC" and convert it to a Major League Soccer (MLS) expansion team https://www.reviewjournal.com/news/politics-and-government/las-vegas/las-vegas-expects-soccer-stadium-deal-to-move-mls-pursuit-forward-1946892/ https://www.espn.com/soccer/major-league-soccer/story/3865428/las-vegas-mls-plan-includes-indoor-stadium Klarman also owns personal interests in the Fenway Sports Group and a horse racing outfit. Seems like he is bullish on sports.