Rod

I will bet you $1 million this is not your last post.

Turtle Creek's strategy is reminiscent of Allan Mecham's--both of them carve out a group of superior companies from the market. In the case of Mecham, I believe it's about 100, and with Turtle Creek it's 25. Going by memory, Mecham tries to own the cheapest 10 or 15 from his universe at any given time and rotates them as valuations change, while Turtle Creek owns their whole universe, but adjusts the weightings. The Turtle Creek approach is essentially the same as Mecham's, but less bold. I think the concept of identifying a universe of superior companies, following them long term, and getting to know them intimately is a great strategy. For individual investors it would be enough to find 10 or less and then just own the cheapest 4 or 5. And as a small investor, you could dredge up your own Top 10 from amongst the smaller and illiquid companies so you are not dealing with the well-followed, large cap compounders like Costco, for example.

1) Understanding probability and how to apply it in daily life 2) Compound interest 3) Understanding sources of bias and misjudgement 4) Doing what you enjoy

I suspect he may be leaning too heavily on book value as a measure of intrinsic value, something that I think worked pretty well 20 years ago, but seems to have fallen apart in more recent times. Nowadays relying heavily on Price/Book gets you involved in a lot of value traps. Chou may have been a one trick pony in this regard. I say this without any real insight into his process, except for looking at what he owns. I've read some of his reports and I don't feel that he's telling me much about what he's doing and why.

Chou gets a lot of credit for being a "nice guy", etc. But it's possible he's also a really bad investor.

Yes, but they are too cash constrained to continue buying right now, hence the idea of getting a loan against the value of their DPM shares and using that to make a more substantial bid

I like the Dundee prefs (DC.PR.B/D--$15). I suspect Dundee will soon announce a substantial issuer bid for them. They are in the process of obtaining a loan, and their stated #1 capital allocation priority is buying back prefs. The logic of doing so is rock solid. An SIB announcement would likely see them bounce by $1 or so. I also think they are a good long term bet.

+66% due to an insane degree of concentration and a great year by my biggest holding Dream Unlimited (DRM-T)

Are you sure that you've captured all the damages the world would suffer if temperatures rose, say 3 degrees Celsius? Or are even in the ballpark? Admittedly, I'm relying on the UN scientist report, so I'm not trying to calculate all damage -- that's in my too hard box. Per the 2018 IPCC report, released every few years by the UN, the total damage was estimated between .2% and 2% I believe. and that was like 60 or 100 years out. So, 2% of global GDP was the worst-case scenario. Do you have a link to this UN report? Have you read it?

Are you sure that you've captured all the damages the world would suffer if temperatures rose, say 3 degrees Celsius? Or are even in the ballpark?

Were most of your no brainer ideas in real estate? No, just Dream Unlimited and Morguard. Though there have been some really good microcap real estate bargains over the years. Those weren't long term holds, however.

The wrong thread to ask, but what do you think of the the Dream Global transaction and the seeming move away from third-party asset management (Dream Office restructuring, Dream Global deal, and increasing DRM ownership of Alternatives), which I thought I was the best part of the business? That transaction surprised me. I didn't realize that DRM had such a large embedded incentive fee in Dream Global. They also have the same deal with Dream Industrial, 15% of gains on properties sold. Industrial trades at $14 now with a book value of $9.40. If you assume the market value of their buildings is reflected by the $14 price, then DRM has about $100 million of embedded incentive fees in Industrial, or about $1 per DRM share. I don't know if Industrial will get bought out, but that $100 million is a real asset for DRM and it's growing. I think they are having some trouble growing the asset management business through the publicly traded REITS at the rate they would like, so they are going to pivot to private equity funds like Brookfield does. I think they have a good shot at this, given their performance track record is good. If they can build up private equity funds then I expect their asset management earnings can grow for a very long time.

Out of curiosity, what ideas have fallen into this net since you switched? How long has it been? No need to give current ideas if you don’t want to share them, older ones are fine. I've been investing in stocks for 25 years, usually owning 5 to 7 at any one time. This level of concentration was not by design, but by having a pretty high bar for what I would invest in, usually 1 or 2 simple ideas per year would pass the hurdle. I focused almost entirely on small and obscure Canadian stocks, often special situations. My performance during that time was at or close to 25% per year, with a success rate of about 85% on the ideas I bet on. I can't remember if that ridiculous performance number includes leverage because I did leverage up after the two crashes in 2000 and 2008. Most of the time I was debt free. I don't pretend to be as good as those numbers suggest. I just think the area I was prospecting in--small and obscure Canadian stocks--has been able to offer up just enough really easy deals over the time I've been looking that I could get a good one once or twice a year if I searched enough. I'm sure I could have just kept doing that, but about 3 years ago I decided to reduce the amount of time I was devoting to stock research. It struck me that over the 25 years I've been doing it, I have identified about 7 or 8 "no-brainer" ideas (one every 3 or 4 years) that I would put 20% into. All of them put up excellent 10 year+ records after that, whether I kept them that long or not, often I did keep them. More "average" ideas I would put in 10 or 15%. I realized that if I had simply stuck to those 7 or 8 "no-brainers" ignoring everything else, and put maybe 30% into them when I found them and held on, I would have done about as well or better than I did investing in the much larger number of "average" ideas I got into. So, in the interest of reducing time spent I've been experimenting with high-grading my ideas to invest in only the no-brainer ones over the last 3 years. Performance during this three year period has been about 25% per year. My biggest holding by far right now is Dream Unlimited (DRM-T), a diversified real estate company. I bought it at various prices starting around 3 years ago. I think it's worth more than $20, currently trades close to $12, was $7 earlier this year. My average price is about $8. I expect to hold this one for at least another 7 years to make my total holding time 10 years or more. This one big, long term investment will probably replace 10 or 15 more average deals I could have done, so that is where the big time savings will come from.

What I'm about to say is probably useless to you given that you like broad diversification, but here goes: In recent years I've been owning fewer and fewer stocks to the point where I now will usually own only three or four. I made a conscious decision to focus only on "no-brainer" ideas. The kind of idea that I might find only once every three or four years. By "no-brainer" I mean a stock that is a great company or very solid infrastructure like asset that is selling for one-third or less of my estimate of intrinsic value. Waiting for no-brainers means letting a bunch of good ideas go by. When I find the no-brainer idea I will put 30% or more into it. The fact that the undervaluation is so extreme means I can hold it for many years and make high returns the whole way. I usually think in terms of making 10x in 10 years. A single idea like that can replace 10 or 15 more typical value ideas because I'm putting maybe 3x more money into and holding it 5x longer. So I've found it to be a huge time saver on research. It's also more fun in my opinion to focus on only your best ideas and hold them long term. So far, it's working very well.

Libertarian Science The belief that any scientific finding that suggests the need for government regulation cannot be true.

I think your premise is wrong--> asking random people on an investment website about scientific questions. A LOT of work has been done in the scientific community regarding the effects of climate change on sea level rise, ecosystems, agriculture, etc., etc. Seek that out instead.

I'd rather they sell it. The chance that TauRX has commercial value is very low, like all drug development. If it does have value it will be worth a lot. So, it's more of a lottery ticket. I don't think Dundee should be owning lottery ticket investments. They need to focus on more sure bets and rebuild their balance sheet.

I think the biggest problem with supply in Toronto are the restrictive zoning policies in the urban neighbourhoods. So much of the older parts of the city are zoned for single family homes, which is outdated given how much the city has grown. What's needed is low-rise apartment buildings and townhouses. It's been called the "missing middle". A lot of people are pushing for change so maybe something will happen.

The idea that telecommuting thanks to the internet will cause large relocations out of cities has been around for many years. I wonder whether it's actually happening? It seems that many companies are actually moving jobs downtown. And young people increasingly want to live and work downtown as well. The urbanization trend seems only to be getting stronger. And the biggest cities seem to be the ones gaining the most new jobs.

I guess the question is what does "restrained supply" actually mean? If there is a mad rush to buy homes as fast as possible and the owners of raw land are slow to sell then you will have restrained supply regardless of the regulatory environment. You could also ask what is the capacity of the homebuilding industry to build new homes in the Toronto market? There is always going to be some kind of bottleneck somewhere in the production process. There is a limit to how many homes can be built in one year given the amount of construction labour you can draw on and other constraints. My understanding is that there is close to a record number of homes being built in the GTA now.

Also don't discount the supply side. The people who own the development land may be reluctant to sell as long as they believe prices will continue to rise. So you can have speculation on the supply side restricting supply as well as speculation on the demand side. If/when the speculative mentality breaks, I wouldn't be surprised to see all kinds of land coming on stream.

I'm contemplating taking some steps toward considering the option of potentially purchasing some more shares based on this news. What's with the over-hedged language? It's seriously taken them an entire quarter to get to progress to this point? The language on the conference call was much clearer. They are going ahead with a NCIB of the B and D prefs. They see it as a way to retire debt with a par value of $25 at a very large discount. They acknowledge that volumes are low in the prefs so it will be hard to buy in bulk, but they think more volume will appear if they bid up for them. So, I would say that is all very bullish for the prefs. A SIB is something they are considering for the future if and when more cash becomes available.

Looks like a buyback of B and D preferred shares is coming: (from news release) “During the second quarter, we improved our capital structure and lowered our future interest expenses with the successful conversion of our Preference Shares, series 5 to Class A subordinate voting shares of the Corporation” said Mr. Goodman. “Going forward, we will continue to look at ways to optimize our capital structure, lower interest payment obligations and reduce our overall expenses.” “As part of this, we are taking steps to consider the implementation of a normal course issuer bid and possibly a substantial issuer bid for our Preference Shares, series 2 and series 3. After careful consideration, we believe this provides the Corporation and its stakeholders with more benefits than taking similar action for the Class A subordinate voting shares, which was previously considered by our board of directors,” added Mr. Goodman.

I think it would make more sense for them to buy back preferred shares. That would be immediately cash flow positive in a way that a common stock buyback would not be. Reducing cash outflow and maintaining a strong balance sheet are likely higher priorities than a stock buyback for management IMO. Their strategy of investing in junior mining companies is long term and won't produce cash in the short or medium term, so they will have to be particularly careful with their cash.

I own BPO.PR.N, which is very similar to the P. The basic case is you are getting equity-like returns or better in a preferred that is, as far as I can see, much less risky than an equity. On an after-tax basis, the dividend is worth about 1.3x compared to interest. I think the market for Canadian preferred shares is retail-dominated and prone to irrational moves.