Saluki
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I just finished reading it. Overall it is worth the read because unlike Berkshire, for which there are dozens of books, there are almost none that mention huge companies that avoid the spotlight like Brookfield. This is about the Toronto branch of the Bronfmans (the sons of the lesser Seagram's founder, who were not allowed to work in the liquor biz) as opposed to the Montreal Branch (the son's of the controlling founder, who worked in the booze business). It covers Brascan, Edper, Hees, and several other affiliated companies. There is an org chart in the back of the book because the web of interconnected ownership is hard to keep track of.
The GOOD: it's a thorough and balanced book. Neither a puff piece, nor a hit job, it's long and well-researched and give a good history of the founding of the Bronfman's empire until the 1980s. If the corporate culture at Brookfield remains like the culture back then, I'm glad i'm an investor and that it's a part of the corporate DNA.
The BAD: because there are so many companies and so many deals, it's hard to keep track of all the players and most of the deals aren't discussed in any depth. Given how large the company is and that the book spans decades, I don't know how to improve that but a deeper dive into a few deals would be nice. There are several side trips into things that don't add a lot (like discussions about their philanthropy and support for the arts), which are okay but not the show I came to see. Also, the book was written by a pair of business journalists, so it's very well researched, but reads like a very long newspaper article.
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I know FFH owns half of Cara but as a non-canadian I wasn't familiar with most of their brands. I ate at a couple of them (Swiss Chalet and I forget the other one) when I was in Toronto for Fairfaxpalooza and they are perfectly fine restaurants but I don't get it. I know that Fast Casual is a growing segment but I don't see what is so exceptional about these brands that Prem wanted to buy 1/2 of it.
As to the malware outbreak, it's much less worrisome than a databreach where customer info is stolen. I think it's just a tiny blip on the radar screen.
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So does anyone have any thoughts on what caused Berkowitz to go from outperforming for many years to the streak of underwhelming performance? I still cannot believe that his best ideas were Sears, St. Joe's, and Fannie Mae Freddie Mac preferreds.
We're all human and we all make mistakes - I think he had a costly anchor bias with Sears. Not sure about other factors.
I agree but I mean all three are investments that just jump out as common sense speculative, to at worst utterly terrible. Sears he'd been wrong for so long he had enough information to can it several years ago, before his performance really slipped. FNMA I get, but it's entirely speculative, will consume a ton of resources, and is way to big an allocation. And JOE is just such a no brainer bad investment I don't really know what to say there either. The fact that ALL THREE of these made/make up the bulk of his portfolio is crazy.
I'm not sure I agree. I didn't buy SHLD because it's losing so much money and I don't think it's easy to turn around a retailer. Ackman's a bright guy and he hired a bright guy to run JC Penney, but couldn't turn it around. But if you're just looking at the numbers, it looks interesting.
Just the back of the envelope:
$10 billion in losses over the years, that could give you , say a $3 billion in value if you use the NOL to shield future income.
$900 million for Craftsman
$400 million for Kenmore (lowball by Lampert)
??? million for DieHard
??? million for the captive insurance co
$2.4 billion in real estate (they have at least another Seritage in there)
the common is selling for ~$120mm now, and at the time Bruce was buying Lambert was a big holder too and controlled enough of the debt that he could decide when it would go bankrupt and block any attempt to ram through any restructuring that was unfavorable to the common.
He bought a house that was burning and tried to get as much furniture out of it before it was too late. The stuff inside was very valuable, it's just that they were using the funds to keep SHLD afloat and turn it around instead of selling off everything and moving on.
As for JOE, I own a lot of this and I think it's qualitatively different from companies like Tejon Ranch or Texas Pacific Land Trust. But I go to florida at least once or twice a year, I own a condo down there and I'm generally bullish on the state as a whole, so take my view with a grain of salt.
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Bump...
I'm almost done with this book. As part of my deep dive into Brookfield I picked this up because it has several deals that involved Brascan (brookfield's predecessor). Prem Watsa and Fairfax also come up in the book and all I can say is I'm glad that Tony Griffiths is on the Fairfax board, he's a great operator and businessman.
It's an interesting read about some companies that aren't written about a lot and worth a read. My only critique is that Bronfman entities (Brascan, Jonlab, Edper etc.) are a complicated structure and he doesn't go into detail about them before discussing the deals. The Brass Ring, however, has a good description about the background and even a chart in the back that shows the numerous Bronfman entities and thier interconnected ownership, if you're interested in that.
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There is a great 6 or 7 episode podcast called Startup School by Seth Godin. Basically, it's a seminar he held for entrepreneurs that he edited and turned into a podcast. It's a great listen and gives you things to think about when structuring your business and positioning it in the market. (are people buying this because it's the cheapest? because it's organic? because it's artisanal? each one requires you to make different choices about operating the business and marketing).
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There is a program that I started watching on Amazon called Inside the Storm. It's several episodes, each a mini documentary about the failures at Lehman Brothers, Kodak, Barings Bank and Kingfisher airlines. Very good so far, I thought you all would appreciate it.
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The author was interviewed on a podcast this week. The link is below:
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The Nutella Billionaires: Inside The Ferrero Family’s Secret Empire
https://www.forbes.com/feature/ferrero-candy-empire/#605f8a296c49
Nice article! I think, besides the oil industry, no industry has as many colorful characters as the candy industry.
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I had no idea there were 2 Gurdon W Wattles. Nice catch!
FWIW, I did find something on the Omaha Wattles in a book on the history of Omaha. Basically, someone accusing him of being dishonest and not paying his debts. Also, when he got elected to a political position where he approved and hired teachers that he "debauched" several of them and got one pregnant.
At least I know now which of the four Gurdon Wattles I should be focusing on!
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I like "The Only Investing Guide You'll Ever Need" by Andrew Tobias. It has a lot of practical advice (If wine is on sale at 1/2 off, and you buy a year's worth that's a great investment because there is no stock that's guaranteed to give you a 50% return in a year, but being frugal does guarantee that) and some great explanations about different financial products and how they work. FYI, Astrid buys coke for Warren by the case when it's on sale!
I saw the ridiculous title and flipped to the index to decide if it was worth a read. I saw that futures and options were a page and a half and I wondered how someone could explain derivatives that briefly so I thumbed to the pages in question. It explained briefly what they were and how they work, then said (paraphrasing) "now that you know what they are and how they work, you should never invest in them." The perfect answer! I bought a copy.
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This investor was mentioned in Alice Schroeder's "The Snowball" as a person whose investing style Buffett cloned in the early years. She described it as Russian nesting dolls (gain control of a company that's undervalued, use that to buy control of another company that's undervalued, and use that for another company etc, like a pyramid). Does anyone have any resources on him?
I read "The Autobiography of Gurdon Wallace Wattles" and it was damn near useless, since it was about his life, but not much reference to his investing ideas. (e.g. paraphasing "our bank was doing well so we decided to open another one".).
Since the Oracle had to have found out about him from somewhere, what were his source materials? Does anyone know of any books or magazine articles that reference him and what he did?
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Someone published a bootleg version a while back. I see it pop up periodically on Ebay. Looks like the original, including the cover, but the binding is different, so buyer beware!
I have heard him say that he may one day update it and reprint it with the proceeds going to charity. I'll buy several copies if that day ever happens.
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I think the Sokol presentation at the investing presentation the day before the Fairfax annual event was very informative and impressive.
Does anyone have notes or a copy of the presentation?
A copy of the powerpoint is here if you scroll down:
https://www.ivey.uwo.ca/bengrahaminvesting/events/2018/04/2018-value-investing-conference/
It doesn't look like they posted the talk though.
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This list hasn't been updated in a while, so I'll throw a couple of logs onto the fire. Here are some that I listen to on my commute when I don't get on the metro can't read a book.
1. HOW I BUILT THIS. Really Interest podcast interviewing founders of businesses (Atari, Dell, Lululemon, Linkedin)
2. WE STUDY BILLIONAIRES: this is lumpy. The roundtable and interviews are good, the rest is just okay.
3. BOSS FILES: This is a podcast by a professional journalist and has a surprising number of big name CEOs (Howard Schultz, Sara Blakely, Jamie Dimon)
4. THE PITCH: Basically it's Shark Tank.
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I noticed another thread on Brain Exercises (to prevent cognitive decline) but I was wondering if anyone uses visualization exercises for their trading?
"Success in investing doesn't correlate with I.Q. once you're above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing."
-- Warren Buffett
I've also heard Peter Lynch say that if you can add 8+8 and come up with a number close to 16, you have enough brains to be an investor, but what you need need is the stomach for it.
What I found to help my jitters when I competed in jiu jitsu was to do visualization exercises. I wondered if the same thing would work in investing. So far it's helped me.
Step 1. For most of my positions I have a 1 page Value Line Summary that I write on the back of. I write why I think the stock is undervalued in a few sentences.
Step 2. I sit at my computer and I close my eyes and pretend I'm looking at the computer and the stock is down 20% (for some reason that doesn't invalidate my hypothesis)
Step 3. I pick up the paper, look at what I wrote and pretend to buy more.
Step 4. Repeat for 30% drop, 40% drop etc.
Does anyone else do anything like this? Is there a resource that you can recommend?
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I'm trying to understand the economics of the credit card industry a little better, so as part of my deep dive I picked up this little gem. I'm not finished yet, but it's been very informative so far. It's like a history textbook and a business textbook had a baby. It starts with the history of charge cards and their relationship to merchants and goes through changes in the industry and lawsuits leading up to what we have today. Sometimes a few minutes of history is very helpful in understanding how we got to where we are today (why do we have mastercard and visa if most banks offer both and merchants take either?). Although the version I have ends in the 1990s there is a 2nd edition that ends in 2005, I believe.
I don't think you'll get any great life-altering insights from the book, but if you are looking at investing a credit card company like I am (or banks that have exposure to consumer credit) it's worth keeping a copy of this on your nightstand and reading a few pages everyday before bed.
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I also study failure to avoid it. I thought "What I learned from Losing a Million Dollars" was good. I have Jared Diamond's "Collapse" on my bookshelf, but haven't gotten to it yet. If you like the cable industry, Cable Cowboy and A Curious Discovery about John Malone and John Hendricks have happy endings but both were always teetering on insolvency in the early days.
The Smartest Guys in the Room and Conspiracy of Fools were great books about the Enron collapse. And I thought it would be tough to beat "Too Big to Fail" but I think "All the Devils are here"by Bethany Mclean edges it out.
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I don't know who's crazy enough to invest in the equity, but I wouldn't even want the debt. They don't own the buildings, most of their locations are leased, so if your bonds don't pay you can repo the leases and do what? Make more payments?
And $35 billion? I need to come up with an old idea with no moat, but market it with some tech buzzwords because if WeWork is worth $35 billion then I'm in the wrong business.
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According to GuruFocus, Prem has sold out his IPI shares at about $4.60. Given that he purchased at $1.20 less than a year ago, it seems like a great score. Where did this info come from though? He won't have to file his 13f for a couple of months, so what filing are they getting their info from?
They are getting their information from the SEC ->
https://www.sec.gov/cgi-bin/browse-edgar?CIK=IPI&owner=exclude&action=getcompany
The recent SC 13G/A filings show Fairfax reducing to zero.
Before they reduced their holdings below 10%, there were also more detailed Form 4s showing the trading prices ->
https://www.sec.gov/Archives/edgar/data/915191/000094787118000382/xslF345X03/ss90975_4.xml
https://www.sec.gov/Archives/edgar/data/915191/000094787118000394/xslF345X03/ss91496_4.xml
Thanks GLOBALFINACEPARTNERS, I didn't realize they were a 10% owner and had to file 3 days after selling.
Thanks DARTMONKEY. My understanding was that some plants need K, some don't, and some are indifferent, which is why the price drop coincided with falling natural gas prices when fracking became widespread. If that's not the case, I'll do more research on this and see if the investment thesis still holds up.
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According to GuruFocus, Prem has sold out his IPI shares at about $4.60. Given that he purchased at $1.20 less than a year ago, it seems like a great score. Where did this info come from though? He won't have to file his 13f for a couple of months, so what filing are they getting their info from?
https://www.gurufocus.com/news/693037/prem-watsa-cashes-in-on-intrepid-potash
I'm up about 70% on this (albeit a very small position for me) but I think it's still got room to move up, so I'm holding for now. The water sales should hit $30+ million with 90%+ margins so even at a 10X multiple, it should be worth at least $300mm for the water part of the business.
, and the potash operations are a bonus. There are some nice NOLs in there, and it's impossible to kill this company because it's the low cost potash producer.
Canada produces more than 30% of the worlds potash and the 2 big companies in Canada sell it worldwide through a government sponsored cartel.
The Canadian producers, have to pay a royalty to the provinces and ship it to the US. The price they produce it at is a blended rate of their costs from producing through conventional mining and solution mining (pumping water in, taking out the brine and drying it out)
IPI doesn't do conventional mining any more and only uses solution mining, but whereas the Canadians have to dry out the brine by boiling off the water using natural gas, IPI's mines are in the Utah and New Mexico desert, so they just throw it on the floor and let the sun do the evaporation for free.
Shipping is an issue too. Potash prices fell off a cliff (from ~$900 a ton to ~$180) so it's less likely that you'll get people from Russia shipping there stuff halfway across the world to compete with you on price. The prices fell because of fracking (you can make an imperfect substitute for potash using natural gas to make ammonia then ammonia to make fertilizer). Although some crops do okay with other fertilizers, some crops like Corn and lots of fruit need potash because of the potassium, so it will always be around no matter how cheap natural gas is.
Potash prices are over $200 now consistently, and since no one can make potash cheaper than IPI, I feel like this is the cockroach that can survive anything. Anyone have any thoughts on this one?
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at $500mm, it looks like its now their second biggest equity position (a few million behind Blackberry).
I think the Sokol presentation at the investing presentation the day before the Fairfax annual event was very informative and impressive. They've announced a willingness to invest more in infrastructure like ports (Vancouver, I believe) which seems more promising that the shipping part.
As far as the shipping goes, with their recent merger and newer fleet I think it bodes well if the industry is consolidating. After the Hanjin fiasco I think people will be more likely to look towards well financed operations with newer fleets (lower fuel costs, and no one was eager to lend money to Hanjin when the collateral they had was a fleet of rust buckets). So the growth prospects look good over the next few years if we avoid a trade war and global recession.
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Klarman's Margin of Safety is a really well-written book. The price is outrageous, but you can borrow it from the library.
Running Money by Andy Kessler
FIASCO by Frank Portnoy
Boomerang by Michael Lewis
are all very entertaining
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The Snowball: Warren Buffett by Alice Schroeder
A Curious Discovery by John Hendricks
The Richest Woman in America: Hetty Green by Janet Wallach
The Match King: Ivar Kreuger by Frank Partnoy (author of FIASCO, a Munger recommendation)
Ponzi by Donald Dunn
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Sometimes I do a "deep dive" into an industry and read several books on it (I've read about 15 on the oil industry, including a couple of textbooks). I've read two books so far on the candy industry, this is the better of the two and a really fun read.
I read "The Chocolate Wars", written by one of the Cadbury heirs first. It was an interesting story about the birth of the Chocolate industry, but focused mostly on England and the Cabdbury and Rowntree families. And the strange link between the early chocolatiers and religion (most of the big names in chocolate, except for Mars, were deeply religious and some saw chocolate drinks as a way to keep people from drinking alcohol).
Emperors of Chocolate focuses mostly on Hershey (a wonderful man who donated his fortune to the orphanage) and the fascinating and secretive Mars clan. How secretive is the Mars clan? When the founder, Forrest Mars Sr died, not only did they not tell people about it, when reporters called the headquarters, they wouldn't even confirm that he had ever worked there.
There are no great business insights in this book, but it is remarkably well researched and well written. I thought I would gain some insight into Berkshire's purchase of See's candy by reading up on the chocolate industry, but it's not that kind of book. Still, very interesting and a short read.
Value Investor Videos
in General Discussion
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A couple of days ago Ivey Business School uploaded a bunch of videos of value investors (Klarman, Pabrai, Watsa, Walter Schloss, Francis Chou etc.) to their YouTube page. They used to be online but didn't come up in search (In other words, you could see them if you had the link, but couldn't find them by looking for it). I don't know why they unhid them, but it's a great gift to the value community. Enjoy:
https://www.youtube.com/user/iveybusiness