Saluki

I've traded in and out of Douglas a few times. There wasn't a lot of snow last year, and we're heading into spring/summer. Is there a reason that you think it will turn around soon?

A little FRPH today. I had some resting bids for shares at just under 60, 59, 58, 57 and someone hit the bid on the higher one today.

Does the exchange clear trades themselves or do they have a clearing house? Generally the largest members are clearing members and they have to make up a shortfall if a member goes bankrupt. So it's the members interest to only let financially sound entities be clearing members and have a lot of capital as a cushion. But most of the exchanges that I'm aware of have their trades executed on the exchange and settled/cleared through a separate cleaning house.

That's surprising. The stuff that they use for ships, bunker fuel, is literally the crud that is right above the asphalt in a cracker when they break petroleum into other stuff. It's literally a solid at room temperature, so it's hard to think that it could be even lower quality than that.

Sold the small position I had in NEP for about a 20% profit since the end of last year. The dividend is yielding 12% and if interest rates go down it could do really well. But if they don't, the new solar projects will be more costly and they will have to finance them at a higher interest rate, so I took the quick win and added to my other positions.

I've heard the author say that you should look for the next outsiders from the people who worked there with the current outsiders. Bruce Flatt at Brookfield came up under the Brascan guys, for instance. In that vein, I was very impressed with David Sokol's turnaround of Atlas. One of Buffets three Ts (Ted, Todd and Tracy) started a VC firm, but haven't heard from her since. Did Singleton have any underlings?

It's great to have all the side events in one place so you can plan your trip well. I enjoyed going the previous two years but I don't know if I can make it this year. The money for the Dilly Bars sold downstairs are going to charity so if I'm not there please eat two or three on my behalf. Take one for the team!

That's fair. Shipping is a terrible business and as SFL is probably the leper with the most fingers. Very long streak of paying steady or increasing dividends and long term contracts are a good buffer from the wild swings up and down of many shipping companies that are exposed to spot rates and use the volatility to make money off the "tourist" investors. I don't plan to hold forever but as the new ships get delivered and more earnings come in it should be fine. Dividend is good but, if I had to pick a reason to Avoid it besides it being a shipping company it would be the price. Even with a growing dividend I always feel like a sucker if I pay more than book value for anything that floats or writes insurance policies. I like to refer to shipping companies as "floaters" to remind myself that they are turds

I wonder if this will be a winner take all (or most) like other tech. MSFT is the winner take most in the business software (word, outlook, excel) and AMZN is the winner take most in online sales and cloud, NVDIA is the winner take most in AI chips, and GOOG and META are the winner take most in advertising. GOOG and MSFT seem to be the frontrunners in AI and Apple trying to license the tech rather than build their own seems to be acknowledgement of the idea that it's better to license the best one than to make a pretty good one. If that's the state it is now, and AI works best with more users, more data, and more iterations, then maybe the lead will grow bigger over time and the lead will eventually be like what Alphabet has with Google. Someone can spend $100bln on Bing for a single digit market share. https://www.neowin.net/news/microsoft-says-it-spent-100-billion-on-bing-and-is-stopping-google-from-having-a-monopoly/#:~:text=In the hearing%2C Nadella mentioned,in terms of market share. If that's not proof of an incredible moat, then what is? And a search engine is a lot easier to make than AI. Search engines have been around since the internet has been around. Maybe if more people start using GOOG's AI than MSFT's or vice versa, then the learning and constant reiterations will make it so that you can't catch up. I.e. if you kept using the crappier AI it would get better, but you won't because it's like BING. So the better one just keeps getting better.

Small adds to CPNG, NTDOY and ATEX with some dividends that came in.

I have a small position in SFL, a shipping company founded by the guy who started Frontline. I'm up about 20% on it this year, but the dividend is still almost 8%. It's safer but with less upside than most shipping companies. They operate like Aercap (or ATCO before they went private) in that they don't do spot contracts, they buy ships when they have a customer who commits to a long-term contract. There isn't a post on COBF about them, and when I start a post on something it tanks, so I won't start one. But they own a little of everything (containers, drybulk, VLCCs and product tankers). I think the earnings and dividends will continue to grow because they are about to take delivery of a few more Ro-Ro ships and two product tankers under long term contracts. They are dependent on debt so if rates stay high it may stunt growth in the future, but for the next couple of years it should grow when the new ships start earning. Product tankers are getting great rates now because of the low order book and the shipping nonsense in the red sea. And Ro-Ros are an oligopoly business, and whenever I've looked at the pure play Ro-Ro companies they are pricey, so this gets you some exposure to that which is specialized and not prone to new entrants like dry bulk.

I'm halfway through this very interesting book that has nothing and everything to do with investing, in the same way that "Fearless Golf" does. He grew up with a mom who was a Jehova's Witness and a Dad who was a police officer. After relentless bullying in school he realized that his church teachings of non-violence weren't doing him any favors (even the principal told him that he needed to fight back) he stopped turning the other cheek. Thorton opened one of the first MMA gyms in the US and trained with the first person who brought Brazilian Jiu Jitsu to the US, Fabio Santos. When Fabio left for California to help the Gracies try to get UFC 1 off the ground, he trained under Rickson Gracie (the Muhammad Ali of jiu jitsu). He has gyms all over the world and many successful MMA fighters, including Conor McGregor. There are lots of endnotes and the assertions he makes are based on data, not philosophy, which I appreciate as a numbers guy. I appreciate the reality based approach to risk and probability instead of the usual snake oil salesmen peddling fear. My dry cleaner is a retired policeman and after car jackings and murders more than doubled last year he told me numerous times that I should get a gun if I am going to be walking my dog at night. So I looked at the data, and decided that what I needed right away was...more fire extinguishers. Your lifetime odds of being in a house fire are 1:10. So I decided to start there. He takes a similar approach and criticizes the "grossly out-of-shape paranoids" who go to self defense seminars (some are hand-to-hand but many are involving guns and unrealistic situations like clearing rooms in a house like John Wick) to train for the improbable without focusing on the obvious. If your concern is personal safety, you are attempting to survive so that you can live longer. If longevity is the goal, then you don't need another gun or a few Krav Maga lessons. You are better off being in shape, eating healthy, wearing a seatbelt when driving, and quitting smoking and excessive drinking or drugs. There's an old joke that was going around when River Phoenix died and it fits here. He was a strict vegan but when he died the autopsy found massive amounts of several drugs in his system. The joke was that found everything but red meat in his system. What difference does being a vegan make if you do other things that are much worse than eating red meat? A lot of the other points are obvious but usually overlooked or not talked about at all. You won't learn to fight in one four hour seminar on a Saturday. That will take years. What you can do is learn to focus on situation awareness and to make conscious decisions to reduce the odds of something bad happening. A former co-worker of mine was killed in a car-jacking recently in broad daylight in the part of town where all the office buildings are. He was waiting to pick up his wife from her office and the car-jacker opened the passenger door, and got in and shot him. If he had been waiting with the door locked, or noticed that someone stepped off the sidewalk and was heading to his car, that might have bought him enough time to drive off. The title of the book is terrible. My better half said it sounds like the memoir of a serial killer. But it's an interesting book and the discussion reminds me of when I hear Sam Harris talking about jiu jitsu.

Thanks @gfp, this was an interesting read. I remember looking at Chicago Bridge and Iron, another EPC company a few years ago and I was not comfortable with the fact that deciding whether a project is 30% or 40% done involves a lot of subjective decisions and thus they can decide how much to report and it would be too easy to manipulate earnings. The float like aspects of the upfront payments and what you get to do with the money didn't even occur to me. Sometimes looking at things a different way will give you a better appreciation for the value of something. When Amazon bought Whole Foods, some people wondered why they bought a struggling high end retailer. I remember Prof G (Scott Galloway), who predicted it, saying that it one move Amazon bought refrigerated distribution centers in every major US city. @ValueArb I have Jason's book sitting on my boookshelf and I haven't cracked it open, but I will.

This was exactly the issue in the Blue Chip Stamps litigation involving Berkshire many years ago. The issue was favoring one group of shareholders vs another and long term greedy vs short term greedy. I'm no expert on Canadian corporate law and how it differs from Delaware corporate law, but there is some value in not having sharp elbows when it comes to dealing with people. Every big bank or insurance firm does a lot of trades on exchanges and bilaterally with other big players. There are people in every firm that deal with "out trades". You call for a bid on a forex transaction, for instance, and unlike most trades (dollar/euro, dollar/yen, dollar/ swiss franc, dollar/kroner ), you want to trade the British Pound, but you forget that it is always quoted the other way GBP/Dollar and you give the wrong price. You verbally confirm the trade and realize that you quoted the price wrong. Or some trainee makes a fat finger trade for 1000 lots of something instead of a 100. If the other guy holds your feet to the fire and says "a deal's a deal", then you win that round and did good for your clients. But there aren't many huge firms, and they keep trading amongst each other like a weekly poker game, so after a few rounds of that behavior you may find that people won't trade with you any more. Knowing what you know about how people behave, would you sell your office building on handshake deal to Sam Zell or Trump? Would you rather sell your family business to Berkshire or to Bain Capital? Looking at it the other way, if Prem is making decisions for FF India and he takes the better deals for FFH and dilutes them at the bottom, then he'll never be able to offer another separate publicly traded vehicle like this. If he ensures it does well and the shareholders make money, then he can launch more of these. Maybe put the Kennedy Wilson and other real estate, like the Toys R Us assets, into a separate JV that is publicly traded and focused on Real estate. Maybe the Shipping stuff can be spun out with other logistics or infrastructure assets? Who knows.

I'm fully invested right now, but starting a position in FRPH slowly as I get dividends or sell other very small positions that I was using a placeholder . I read the entire COBF thread and realized that I had looked at it years ago when it was Florida Rock and while I was sucking my thumb the offer from Vulcan came in and I missed the boat

I owned this more than 15 years ago and made some money on it, if I remember correctly. If it's the same one that I'm thinking of, I was impressed with how they made money in commodities, which are generally a terrible low-margin business, and that they had their headquarters in a small unassuming two story building with no frills. It reminded me of early Walmart or the stories about Tom Murphy of CapCities. Some things that made me uncomfortable was that it was hard to find information about them. They didn't do interviews or investor presentations, and the 10Ks put out the information that was required by the SEC and nothing more. At the same time they were always buying back shares. I had the impression that eventually they would just take it private. But Buffett likes to put as much info as possible out there regarding berkshire so that if his shareholders/partners want to sell, they will do so making an informed choice, knowing that he might be the buyer, so he doesn't want them to feel cheated. It always seemed to me that the Seaboard people didn't mind if you happened to make money, but they were looking out for themselves.

Good points! Yes, I was probably overcomplicating it. FCF makes the most sense. Unlike a subscription, there is no pro-rated refund for cancelling, and you get the money up front, so if you minus the overhead (they had 80+ people in the head office, last time I checked), there should be no depreciation expense because it's more like a brand than a factory that wears out. In retrospect, the setup on ATEX looks better now than when I first initiated a position 3.5 years ago and posted about it. I notice a LOT of great idea/great technology small caps and most of them don't go anywhere. There is a YouTube channel called PlanetMicroCap, which has a lot of these story stocks. They are interesting, but 90% of them don't make any money. If I knew someone who needed to get rich fast, I would tell them to find a confident straight white guy with a full head of hair, buy him a new suit and have him go on there as your CEO and you will get a lot of money with an idea and a pitch deck. If you wait until they are cash flow positive, that cuts out about 80% of them with a single filter. If I used that filter, I would have come in later to Coupang. I think they turned positive earnings at around $16 instead of $27 when I first started buying it. I'm very impressed the tech at Enovix, which I first noticed at $14, and is now below $8, so I'm glad that I only bought a tiny amount of shares to keep an eye on it instead of building a position. So although ATEX is about where I started buying it, if I had waited until more cash was coming in than going out, that cash could easily have been a double in the SP500 and it would be a better process which cuts out a few winners, but also gets rid of every loser. Maybe this is another decision that I should add to the Atul Gawande investment checklist?

I think it's been mentioned before but you have to trade the way that fits your personality. I was addicted to video games when I was younger so I don't want a strategy that would involve lots of trades and looking at the screen constantly. Some people have all their net worth in one or two stocks, and some won't buy anything but an index fund. Both work if you know what you are doing and why, and do it consistently rather than switching strategies. "Consistency beats intensity". If you can't do Cross fit every day, then don't. Find something that works for you over time.

Trimming a little Scorpio Tankers. I added 10% to my position about a year ago between $40 -$44 when it looked like a good setup. (I mentioned it on the STNG post at the time). I'll keep the earlier/cheaper shares but trimming this back to my original position.

@hasilp89 if you are curious about it, @gfp guessed it. Thanks for the input guys. Yes, the FCC licenses would be worth about twice the market cap if they were used for their original purpose, rather than the current use, for which they had to obtain FCC permission. Kind of like rezoning a property from commercial to residential. So I don't think the value to a third party is relevant because you can't use it for the original purpose unless you shut down the business, and now that you started getting contracts, it's kind of hard to undo. If I buy industrial land, pay to have it cleaned up and put up condos, I can't change my mind half way and put a refinery next to it. They are way behind on their pace, where they thought they would have $1bln in contracts by 2023. They are about a 1/3 of the way there. But if that can happen, which is a big if, then if we make some simplifying assumptions like that you are getting 5% on that, that gets you $50mm a year coming in, with no growth and a very small office overhead. As a quick and dirty rule of thumb (I don't remember where I learned it), I think you shouldn't pay a PE more than double the growth rate. So a 10% growth rate should be no more than a 20 PE, roughly speaking, for most businesses. I don't know what I would pay for something that COULD take in a $1bln and then not grow. I'm sure when the contracts are up, if all goes well you should be able to renew them in 20 years and it should be an inflation adjusted number that mimics the original deal. So maybe price it like a 5% bond (on whatever the revenue is) with a 20 year duration? But if they do buybacks with the money, then a 10% a year reduction in the share count would be like getting 10% growth, and if you pay 10-20x earnings on that, that would get you to between $500mm and $1bln. So in terms of enterprise value, it's on the low end of that range of reasonableness, but not a screaming buy or sell. Especially if getting to that range of reasonableness requires some events to occur which are still in the works. Just thinking out loud here, but thanks again for the input.

Float is a big part of the growth story for Berkshire and Fairfax, but I'm wondering as a thought exercise how you would value it in other companies that have characteristics that resemble insurance float. For instance, if I buy an airline ticket for my vacation on July 4, I pay now but the flight doesn't happen for a few months, then after the flight happens, they pay for the fuel and salaries etc. Some companies like Walmart sell product quickly and pay suppliers slowly, so they have free use of that money to build new stores. Apple and Amazon, last time I checked have similar qualities. Just thinking out loud here, If it's a fast grower like early Amazon, I guess you can value that float based on the rate of return on their invested capital. With insurance companies, it's based on what financial instruments they can invest it in. But with both those options, you have to give the money back. There's a company that I've posted about before, and I won't mention the name because I'm the only person keeping the post active and I'm not trying to pump the stock, just get some input on valuing something. If they get a 20 year contract for $20 million, that income is recognized at $1 million a year. But if you get all of the money at the beginning of the contract (assume it's a patent or license or trademark) and you don't have any opportunities to reinvest in growing your business, then what is it worth? It's not really float because you don't have to pay it back. And discounting that last $1 million from 20 years to today doesn't make sense either because you don't wait twenty years to get it. You get it now, and you get to use it and never have to give it back, so from an accounting standpoint it's not income today, but from a practical standpoint it is. If they don't have any possibility of reinvesting it in the business and you assume that it gets invested in fixed income, then would you value it like a bond? I assume you would ignore the fact that you recognize $1mm a year as income as the contract progresses, because it would be double counting? If this is the correct way to value it, then let's a wrench into it. What happens if you buyback shares? Do you value the effect of the buyback based on the value of the license/patent if you sold it off completely to a third party? Do you value the buyback based on what you paid for the patent/license, i.e. book value? Do you value it based on the stream of income vs the stock price and whether it's accretive to shareholders? Or is there some other method that would be better?

CPNG a 2.5% position currently, and I wouldn't mind taking it to 3 or 4 at the right price. NTDOY is just under 3% and ATEX is 1% now and I'm taking it to 2%. I'm trying not to touch my biggest positions BRK (20%) GOOG (~20%) JOE (~15%) and FRFHF (10%). I don't discuss the bigger positions as much as the smaller positions because I've already done all the research and decided to hold them for a long time, so there is nothing to discuss. I think it boils down to what is your circle of competence and risk aversion. I like CPNG a lot, but I hate retail, so I don't know if I would ever go over a 5% initial position on it. I've held BRK and GOOG for over a decade so I wouldn't mind adding more even if they are big positions already. ATEX (telecom) and JOE (florida real estate) might be in the too hard bucket for some people, but they aren't in mine. Other favorites on here have made people a lot of money, but are in my too hard bucket and always will be. It would take years for me to learn about pharmaceuticals or biotech starting from scratch, but people can get rich on lots of things, so as my coach used to say "this isn't gymnastics, no one gives you extra points for doing things the hard way."

I think this is the rationale. If I recall Razzle Khan and her accomplice tried various ways to convert their stolen crypto to cash, but eventually you have to have an exchange and bank to send the cash to, and a person with an ID for the account. Although if you read "Number Go Up" you realize that KYC is not taken as seriously in some countries. If it's a gift card, it can used or sold for cash and the links to the original criminal are evanescent.

Sold a few very small positions that I had, which I usually buy to remind me to look deeper into a company, and made some small adds to CPNG, NTDOY and ATEX.

It's incredibly difficult to develop a two-sided market. If you are already using Uber/Lyft and switch from one to the other based on prices or wait times when you need it, then what would make you use a new competitor? Lower prices and wait times? If they lower prices for you they will have more customers than drivers and higher wait times. For drivers to handle the customers paying less than Uber/Lyft, you need to entice them with a bigger share of the commission. So you will be getting squeezed on both ends. And Uber/Lyft already have customers and drivers, so for a new entrant, they would need to do a lot of advertising. They are also taking steps to make it harder for a new entrant to gain a foothold by targeting a smaller niche and building on that. Lyft has a lower price tier if you're willing to wait a few minutes. They also have larger vehicles (UberX), green vehicles, and pet taxis and have branched into food delivery and bicycle rentals. Other than ferrying medical out patients (ambulettes), I don't know where a new entrant would see enough meat on the bone to try to take a bite.