Packer16

The other relevant question is when the MI included. If recently, then the MI is calculated at fair value and tested for impairment over time. Depending upon how complicated the MI is it can be tricking pulling the data out as in most consolidating statements are not provided. If you can provide more details on the MI you are looking at (is it one MI or multiple and do you have the entity statements the MI is applicable to?) we can give you better guidance. Packer

How many of the skeptics actually looked at the details of some of these producers and seen what types of profit they make at current prices? Attached is spreadsheet to give some color on what it looks like for some Canadian E&P companies with current netback, efficiencies and decline rates. I agree there are many that have negative IRRs at todays prices but there are a few that have positive IRRs and nice leverage if the price returns to $55. In addition to the names here, if you put in the parameters for ARC Resources (ARX), they have positive IRRs. Packer Incremental_Return.xlsx

There is also the effects of the value-weighted index funds that can bid up on average the price of value stocks. Packer

I look on externally managed money as a form of leverage. As such you need to ask yourself if you would you put leverage on a concentrated portfolio. I would not. The only way to reasonably take these risks is with capital is with you own. Even at that most of us have a diversified portfolio of assets including human capital which can create income despite what the market is doing. This guy appears to have super levered his concentrated portfolio without knowing it. An interesting question to the asset manager is how much more leverage would he put on this portfolio. As a side note, leverage adds the most when it can also add diversity to a portfolio because the increased leverage risk is offset by the reduction due to diversification. Packer

The real question is will the MBA provide you the occupation you want? It is interesting that brought up Buffett and Munger. Buffett was an start-up fund manager and Munger a lawyer. Munger became a partner in a law firm and ran a fund and eventually partnered with Buffett. Many here have other occupations outside fund management and use excess funds to invest. That is what I do and is another alternative to jumping into money management for others. The advantage of investing your own money is your constraints are less in terms of investments and gives you a chance to see if you like this type of work and have a continued source of income while you do. Packer

Not necessarily as the value may be less than if you cannot liquidate the assets for BV that is why it is important to look at the details. Typically, you take the greater of liquidation value (marked to market) or an earnings capitalization plus non-operating assets as the value then adjusted for the size of the stake you are purchasing. Packer

You need to provide more details like the nature of the non-operating asset and the profitable (and expected profitability of the business). PM if you would like to discuss. Packer

It depends upon the currency: USD +10.3%, Euro +19.1% & CAD +26.8%. Packer

In USD or CAD or EUR? This year the USD has gained 15% YTD against the CAD and 8% against the EUR. So holding USD assets provided a nice tailwind. Packer

This summarizes my preference of gas over oil. I would add some of the low cost Marcellus players like Antero, Southwestern and Cabot. Southwestern is the cheapest of the group. Packer

I agree with you if you have a high cost position in O&G but if you have a low cost position you can still produce and reduce debt while others are blowing up. There is also an aspect of continuous cost reductions in place like Peyto & Gear where they generate profits not by higher sales prices but by reducing costs in combination with production increases on a economic basis. I was surprised but Peyto is the best performing stock in all of Canada since its IPO based upon increasing cash flow per share more than anyone else. If you look what was started by Don Gray and continued at Peyto & Gear it is really exceptional. Right now Peyto is priced at a well deserved premium to other O&G companies but Gear is not. However, Gear is also in a different market (heavy oil) that some think is high cost but Gear is generating heavy oil at a cost of C$23/boe, pretty low in my book. Packer

Given the stress in the O&G industry the Outsider CEO's should be busy at work. I think Darren Gee at Peyto is an Outsider along with Michael Watford at Ultra Petroleum. Who are your picks in the O&G space? Packer

I have focused on gas plays and the gas price has held steady since the beginning of the year. BXE had a Sr. Debt/EBITDA of 2.7x (based upon 2Q annualized) and 2.1x based upon TTM. The only covenant left in the credit agreement is a Sr. Debt covenant of 3.5x TTM EBITDA, so if feel fine for now. The oil-based cos may have harder time given the recent decline in oil. At today's prices, BXE leverage is 2.8x EBITDA and 4.9x coverage, definately into BB territory. Packer

I have approached the O&G issued by looking at the low cost producers including those who are spending dollars in lower cost fields to bring down their actual production costs. Most of these held up relatively well and include PEY.TO, AR, EQT, RRC & SWN, they have a moat. One that is more of the later (drilling in lower cost fields) is BXE. BXE has been hurt like most other higher cost producers but all of its new drilling is at industry low F&D and ops costs, BXE is building a moat. UPL is another one that I have not dived into yet but does have low cost and has been hit with the other higher cost producers. Packer

This a good book. A unique aspect is the historical narrative of his investment diary (which is about half of the book). It provides some nice historical perspective on the times and how John's value investor framework was applied. Packer

In terms of set and forget, index funds are pretty hard to beat. The main issue I see with even a compounder portfolio is manager risk and the research involved in this. Many of us here like to doing this kind of thing so the incremental cost is small but for those who do not the cost and risk can be high. Index funds also are the cheapest and this can make a big difference over time. Once you are set on index funds you still have alot of questions to ask. First is how much bonds do you want in your Roth? This should be based upon your volatility tolerance for your total portfolio and what portion your Roth is of your total portfolio. Second is US vs. International. US is great for innovation and shareholder rights but maybe not as much growth and international is opposite. International will also cost you more. Finally, whether you want to a tilt (an example is small and value stocks versus the S&P 500). Tilts will in general cost you more than non-tilts but that is not always the case, the Vanguard SCV has an expense ratio of 8bp and has beaten most funds in its SCV peer group. In terms of funds, I would start with Vanguard funds and compare any other funds to Vanguard in terms of costs. They key parameter I see here is cost so it is pretty easy to compare the commodity products to each other buy the cheapest. Packer

Gio, I do not know much about Italian history but how did Italy unify successfully from a group of city-sates to a country with a wide variance of saving/investing cultures (North vs. South) and can the EU get any lessons there? Packer

This may have been Washington's ideal but 1 is weaker than most countries today (states/localities have alot of power/say) and it has taken over 200 years for the federal government to obtain the power it has and it is a very controversial issue today. The last one is due to in part the compromising nature of Americans. IMO Europeans will get there it just takes time. Packer

I would put OUTR and Cimpress into the quality pocket, only Sony was a true turnaround. But in general he seems to favor businesses with high RoIC and insider ownership/management qualities. But i may be wrong, perhaps he can answer that himself, i think he is a reader of this board. :) Maybe I should clarify quality as compounders. Cimpress maybe on the edge of that but it is in a pretty tough business. Outerwall is clearly in a declining industry which IMO would not be included in the compounder camp. Packer

But doesn't Mecham invest in companies like Bank of America, Cimpress, Sony and Outerwall, more turnarounds versus quality growth? It would be interesting to see an attribution analysis to see returns from these versus more quality names. GMO Quality has actually trailed the S&P500 for 5 & 10 years. Packer

Thanks for the study references but I am interested in real world portfolios as there is usually alot of slippage between study and realizable returns. Packer

This approach has some nice appeal versus buying cheap stuff but I have no idea about what the performance of this approach versus lets say the S&P 500. The only market benchmark I know of is MOAT. MOAT did well when it started but has been lagging recently. Does anyone have 5-yr + performance examples of this type of approach. Thanks. Packer

One area I would add to above is a focus on a particular segment of the market so you can understand valuation and the key value drivers in that segment. If you study the areas under distress you can find some interesting companies. HK-based real estate companies are an areas like this now. Some interesting ideas to get you kicked off are Shun Ho Resources, Asia Standard and Keck Seng. I like the first two over the later but at today'e prices I think they all will do well. Packer

Happy Birthday & thanks for a great board! Packer

One indicator of nationalizations is the number of external defaults in the 20th century. Greece only had 1 (1932) but Russia had 3 and Turkey 5. So on a relative scale Greece is better. BTW Germany and Austria had 2 each. Packer