bonkers

I guess negative interest rates weren't crazy enough. Why should anything in this world have a positive price!? 8)

Concerning managing money as a business, I've read/heard several PMs say that: - Basically no-one (outside people who know you) will invest with a starting manager unless you have a track record - What track record is long enough? Buffett used to say at minimum 3 yrs (even if it's not predictive), Li Lu says closer to 15 yrs (but I guess few people will wait that long) In my own experience, most clients seem to be happy with 4-5 yr track if the outperformance is decent. > 90 % of clients don't care about process/methodology at all (as long as it's somehow credible), they just want to invest with a manager that has (recently) outperformed, the more the better. Having a great process does not help if you have only modest outperformance (esp. if there's any kind of volatility), clients just can't see the differences. However, even without an established brand, clientele and marketing budget, an extraordinary sales person can sometimes sell managers/strategies with shorter and lackluster track records, but mainly to the kind of clients you probably don't want to have. And these kind of sales people are hard to find. Some people also talk about pitching individual ideas to clients. The little I have tried this the clients have not understood the ideas at all. But interestingly, once you have a track record, opinions seem to differ greatly: Here some say that you need to sell all the time, even if you're Klarman or Greenblatt. But some others say that if you perform, clients will find you by word-of-mouth, and eventually you will attract too much money. Pabrai and even Buffett have said this. So what's the truth?

Poor Charlie: So essentially they all lied about their track record? Did you ever follow up on that and ask them about the reason for the discrepancy? - B

Even more useful, please also tell what will be the LOWEST point the DOW will reach before starting its final ascent towards that inevitable 30K. I will be buying then. :P

Muscleman, I believe this is essentially a story of experienced management working their magic on a partially neglected business. So evaluating how much good they get done is harder than in most cases. At least I find their plan quite impressive. I assume you have already reconstructed the financials to reflect the merged entity. My pro forma is something like adj.NI 749, adj.EBITDA 1777, and net debt of 6158. So today it's selling at P/E = 19, EV/EBITDA = 11.5. The comps are trading already higher, around P/E = 26-27, but that does not help if you consider them overvalued. And as you say, growth is very weak, +2-3 % p.a. unless they are going to take significantly market share. However, there are synergies promised to 2020, at least 400 + something in distribution. Also, I believe they have guided EPS of 1.53 in 2020, that times a fair multiple - say P/E = 23 if you think the management is exceptional - plus the cash flow generated on the way...and you get IRR of 20+ % for a few years. The integration will depress profits during first year or two, but the mgmt is well invested to make the plan work.

As most likely no one on this forum got the chance to sit in his class, I just have to share this to stimulate your imagination: It's funny to think he planted a tree we all now sit under. Best, - Bonkers

I think one must clearly separate two things: 1) The growth of fundamental value 2) How that value is discounted to present, resulting in equity returns over time These two might have other elements affecting both (like population growth, savings, amount of money, interest rates, inflation, etc.), but they are separate. As the economy grows, companies invest and grow their total earning power. So the "world economy" gets more valuable over time, assuming no change in profit margins (or return on capital). Only the part of the economy that is stock exchange listed shows in total market value, but let's assume this stays constant as well. During the last century U.S. stock market returns have been very close to real earnings growth + equity-holder yield (+ inflation). Surely, if one could have 20:20 vision of the future, it would make sense for the long-term investors to discount this future value to present with a rate somehow resembling the available alternatives, like the gov. bond rate. But human vision is not 20:20. Few have eternal investment horizons. Human nature with fear and greed has always made the stock market rather volatile. It seems that in order to assume this risk, people have traditionally required a return very much resembling the one stated above. In the short term market prices (and returns) gyrate wildly up and down, but investors end up getting the long-term fundamental return over many, many years (only) as we go along.

WB has at least joked of not being very disciplined ("just making things that make sense to him"), that is why he weighs more than he would like to. I assume he only takes exercise when forced, I've never heard / seen him do any sports. He drives a car, and sits in his chair, reading all day or calls people on the phone. Do you know does he abstain from alcohol? I haven't even thought about the topic. Funny thing is that in his early years he seemed to be drinking pepsi, and switched to coke only later, maybe when he invested in KO. ??? And it seems to vary if he takes a regular (normally) or a diet (sometimes) one.

Is working capital really the one thing you want to ask? Especially, do you think this issue has the biggest impact in making you a better investor?

If it's still possible to propose questions, few more: - How much information to collect / DD to do outside company's own (and competitors') filings - Does he always do full DCF (vs. IRR, market multiples, etc.) - What is his method of position sizing - How often does he track portfolio companies' progress towards thesis (i.e. quarterly, more often, etc.) ???