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bonkers

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  1. I guess negative interest rates weren't crazy enough. Why should anything in this world have a positive price!? 8)
  2. This meetup is now FULLY BOOKED, thank you. 8) Some people have PM:d me outside of this board, so now I have a list of 10 people. More people will still fit in the bar, of course, but our corner has a limited amount of chairs. Those are now taken. If still more people want to come, please let me know so I have some idea. - bonkers
  3. If people still follow this thread, check out the NYC CoFB meetup on Friday, Jan 26 (coming fairly soon): http://www.cornerofberkshireandfairfax.ca/forum/events/nyc-csima-conference-(jan-26)-related-cobf-drinksdinner/ - bonkers
  4. This year's CSIMA conference at Columbia features Joel Greenblatt and Seth Klarman. Unless you go, you can't call yourself a value groupie! http://www.csima.info/conference/ The conference runs from 8:00 AM through 5:30 PM on Friday, Jan 26. To get started with the real discussion, I've booked a venue for drinks and some food after the seminar. Our place from last time has closed down, so this time head east over the South Lawn - take a look at the dome - and continue some 150 yards over to Amsterdam Ave (and W 116 St.). There you will find the legendary Arts & Crafts Beer Parlor (Morningside Heights) http://www.artsandcraftsbarnyc.com/ We will start around 6 p.m. If you'd like to participate, let me know. Locals not participating the seminar are welcome as well (right by the 116 St subway st.). See you there! ;D
  5. Time to get organized in Boston! Welcome to value investor meetup on Friday, Oct 6 starting at 6:00 p.m. The selected venue for food and drinks is Blue Dragon right over the Fort Point Channel https://www.ming.com/blue-dragon.htm If you'd like to participate, let me know. There is a reservation for 6, but it can be increased if more people come. The location has been selected to be close to BOMN annual meeting next day (right next door), if people stay in hotels close by. For others it's not a terrible walk from South Station. :D - bonkers
  6. 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?
  7. 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
  8. Hello to all knickerbockers! If you already feel for another CoFB meetup, check out this one, coming in 2 weeks' time (Friday, Feb 3): http://www.cornerofberkshireandfairfax.ca/forum/events/nyc-csima-conference-(feb-3)-related-cobf-drinksdinner/ - bonkers
  9. This year's CSIMA conference at Columbia features David Abrams and Mohnish Pabrai. http://www.csima.info/conference/ The conference runs from 8:00 AM through 5:30 PM on Friday, Feb 3. I'm going, and hoping to meet some of you there! To leave more time for discussion, I'm organizing first beers and then a dinner after the conference at Bernheim & Schwartz across the street from 6 to 10 PM (first hour is a happy hour). If you'd like to participate, let me know. You can naturally also join for drinks/dinner even if you didn't go to the seminar. ;D
  10. 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
  11. For those of you who have to communicate to external clients/partners, I want to share my perspective on reporting returns: If you run a (super-)concentrated fund like Pabrai, the stocks are very volatile (but you are sure of their IV), and you have not run the fund for many decades (as few people have)...the stock quotations of the last year or two can have a big impact on your total returns since inception. Of course you always have to state clearly also the latest number, i.e. fact. And this is heavy evidence. However, I also think it is fully acceptable and even beneficial to state your opinion of your expectations, like "I'm pretty sure I'll get it back" vs. "I'm not sure at all if I'll get it back". This is because external observers typically only look at returns, and cannot know what is behind them (i.e. the investments, and maybe a process) that only the fund manager knows (or at least hopefully knows). Furthermore, over time a good investor can develop a correct self-image of his/her skills. After observing market for a long time (and making investments) you can say that "I know I can make 10 %, 15 %, 20 % (or whatever) if you just give me a few years". No matter what the latest numbers show, I know better. Buffett said he could make 50 % a year with small sums. He knew he would. He could promise it. Is that really so much different from Pabrai having a certain expectation?
  12. 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.
  13. 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
  14. 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.
  15. I have had several multibaggers, but no quick ones, so each one has taken several years to play out. In none of the cases has the IV increased faster (after first year or two) than the stock price. So I consider the original question a very rare case. If the position has been originally of appropriate size, there has been no reason to add. As some other positions in the portfolio have also done ok (albeit with lower returns), they have thus "slowed down" the relative growth of my best positions. But in the end, I have ended up trimming most big winners - some of them several times over the years - before finally selling out. I have often felt sorry for trimming too soon, but I still think it is sound risk management. Same with selling out, but this might be biased due to the length and extent of recent bull market. I might think differently if we'd just had the 1930s or 1970s. As always, I should have kept some of the positions (or parts thereof) to this day, and I would have done better. Buffett and Munger are pretty rare in how much concentration they could take: 25 %, even 40 %, Buffett has mentioned up to 75 %. Not going to Soros, even these guys have not promoted going to 100 %. I think there is always the left field, and some opportunity cost. However, as some people noted, also my current thinking is that it's most of all the safety of the business (assuming you've analyzed it properly) - not valuation (e.g. simplistic "P/E x5") - that determines the upper limit for position sizing. Valuation is only secondary, as it is even at best an overly simplified projection of the outcome. If you give me a highly levered oil exploration company run by a drunk at P/E x1, I will not put 100 % of my money in it. In fact, I would not put even 10 %. So the real question is not what has happened to valuation, but what has happened to the business. If the risk has materially declined (rare for established companies, where risk is pretty constant, or might even increase over time), then you might even add (assuming little change in valuation). But always have a limit: Even Buffett capped Amex (safe, great, and cheap) at 40 %. Then there is always the psychological limit: No matter what your business analysis and valuation say, if you can't sleep at night, you should trim or sell. As a final note, especially if you also manage (large proportion of) other people's money, you need to have stricter limits than what e.g. Kelly would propose. With my own money I might be willing to adopt larger position sizes, less trimming (i.e. riding theses all the way to the end), and higher portfolio volatility. With others' life savings not.
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