beerbaron
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Posts posted by beerbaron
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How about just mortgaging the hell out of your house using a long-term rate instead? If nominal rates increase as a result of inflation, you'll get a similar benefit....and it's easy to do and there's no margin calls.
If he lives in the US he can do it but in Canada 30Y fixed do not exist. Best you can get is 10Y and for a huge spread.
BeerBaron
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Of course they are levered, but that leverage could work both ways.
I can't recall is it BV/share, BV or ROE they target at 15%?
Anyway, would'n long term BV/Share growth and ROE go hand in hand if the reserves estimates are proper.
BeerBaron
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I'm really floored at people's reaction to my comment that mid-teens (or 15% returns as I stated originally) return expectations seem "silly" for a large money manager like Longleaf who has $25+ billion under management. Now, I realize the past decade was a tough one, but to put into perspective how difficult this feat has been over the past decade, exactly 1 manager in Morningstar's list of All US Diversified Stock Funds (3325 funds) with a 10 year history has a return greater than 15%- CGM Focus (17.39%). The average return is 2.39%, and as we all know, there is survivorship bias in 10 year fund numbers.
I know a lot of people on this board have put up fantastic returns in their PAs, but between market impact in trading, institutionalization of purchase and sell decisions, skid from the delays due to the instiutionalization of idea flow, etc, these types of returns are just fantastical as a return expectation for a large money manager, especially when the market is trading at or above its historical averages as it appears to be today. They come out with this as their Q1 2009 letter, "Ok," but today? Ain't gonna' happen.
FFH also stated they were aiming at a 15% ROE and their portfolio investments are 22B...
BeerBaron
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If you look at their ROE it's quite honorable. There are been some talks about their capital allocation skills but I think they deserve credit. They invested their money pretty well. Gates still has enough shares to stop anything stupid.
It looks like IBM in 1993, every started to think about it as an old firm without any future... 80% stock price appreciation within 1 year.
BeerBaron
For fun, I decided to look back at IBM vs the s&p 500. According to Morningstar, the stock has underperformed the market since 01/31/1962 by a huge margin. Anyone else realize that? Click on "compare" and then in the benchmark click on the s&p500.
http://quote.morningstar.com/stock/chart.aspx?t=IBM®ion=USA&culture=en-US
Of course, that shows to show that great stock could or could not be great investments. It just depends on your entry point.
BeerBaron
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If you look at their ROE it's quite honorable. There are been some talks about their capital allocation skills but I think they deserve credit. They invested their money pretty well. Gates still has enough shares to stop anything stupid.
It looks like IBM in 1993, every started to think about it as an old firm without any future... 80% stock price appreciation within 1 year.
BeerBaron
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Unbelieveable, MSFT is in the top 50 of Magic Formula. When I look at all the balloon valuations on small cap out there and MSFT in the Magic Formula I wonder what is going on in investor's heads!
I'm not long MSFT yet but...
BeerBaron
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In Canada we have the equivalent of deposit insurance for brokers. IB is not part of this deposit insurance, doesn't that make some people cautious?
BeerBaron
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SJ, how do you tell the =GoogleFinance function to return a canadian stock if there is a comflicting ticker between US and Canada?
BeerBaron
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Parsad, maybe you can help me on this one. What's the upside for this kind of trials? Do you know if there is there any jurisprudence on any such case?
The quality of the analysts following Overstock went down.
BeerBaron
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Here are a few:
When you value an P/C casuality company, how do you establish that the reserves are accurate?
Do you know how P/C and Life insurers would fare a long term low bond yield? (Japan example would be good)
How long do you foresee the tail before the insurers adjust their rates for the low yields?
How do you determine if an insurer is over-concentrated?
What are the main "colibri in the mine" points every investor should look for in an insurer?
Thanks
BeerBaron
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The batteries Mr. Wang is referring could be called by the following names:
LiFe
Lithium Ferrite
LiFePO4
Lithium Ferrite Phosphate
Lithium-Ion Ferrite
The thing you need to remember is that they are all talking about Ferrite/Iron electrodes. There a huge number of players in the LiFe batteries, I can find 20 Chinese manufacturers of those batteries. For some reasons the patents seem to be easily bypassed, it's probably because a small change in the formulation does constitute a patent infringing.
There are 3 general types of rechargeable lithium on the market:
Li-Ion
Li-Polymer
LiFe
LiFe is the way to go for the consumer product market unless size is critical. LiFe batteries do not explode making product manufacturer more inclined to use them. They have more charge cycles then the other 2 technologies. They are a bit cheaper then the other two. They can sustain a heavier electrical load then their counterparts.
BeerBaron
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So, were you successful at finding the undervalued part of the security you analyzed?
BeerBaron
EXXI is the one that I've spent the most time on. They are a GOM gas and oil production company that Baupost bought a small stake in in Q210. The value opportunity on this one was basically due to events in the gulf with the moratorium, etc. It is up 60% since then...
Sweets congrats
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I have also spent some time looking at Baupost's purchases/ holdings.
If you listen to Klarman's interviews (few though they are), he talks about one of the advantages at Baupost as the ability to decipher very difficult situations or to spot hidden value where others do not (or will not spend the time to do so).
He is more of a "balance sheet" value investor as opposed to Buffett (and most of those who try to emulate him), who is more of a "cash flow" value investor. The latter is much easier to reverse engineer because it's all there in black and white. My observation in "balance sheet" value investing is that the trick is to accurately assess the value of corporate assets and then put your money where your mouth is based on that assessment. This won't necessarily be reflected in the SEC filings.
So, were you successful at finding the undervalued part of the security you analyzed?
BeerBaron
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In my experience Baupost is hard to follow. In my experience I could not see where he got it's huge margin of safety.
Last time I reviewed a company called AOI, they are the 2nd largest tobacco processor.
I believe the thesis was that you just could not reproduce a second largest tobacco producer for 300M$, therefore it was worth more. Highly levered company so if there is liquidation you might end up with more then what you initially paid.
So after 20 hours of research and re-reading Margin of Safety I still could not be sure exactly why he bough it.
BeerBaron
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OSTK is much easier to understand then Level 3. It's a turnaround story, Watsa just bough a bit too soon.
BeerBaron
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From the report:
The excess of the fair value of net assets acquired over the purchase price in the amount of $83.5 recorded on the acquisition of GFIC is primarily attributable to the TIG Note being non-interest bearing except in periods, if any, when there is significant inflation in the United States."
from page 15:
On August 17, 2010, TIG Insurance Company (“TIG”), an indirect wholly-owned subsidiary of Fairfax, completed the acquisition of all of the
issued and outstanding shares of General Fidelity Insurance Company (“GFIC”), for total consideration of $240.2 comprised of a cash payment
due upon closing of $100.0 and a contingent promissory note issued by TIG (the “TIG Note”) with an acquisition date fair value of $140.2 (the
“GFIC Transaction”). The TIG Note is non-interest bearing (except interest of 2% per annum will be payable during periods, if any, when there is
an increase in the United States consumer price index of six percentage points or more) and is due following the sixth anniversary of the closing of
the GFIC Transaction. The principal amount of the TIG Note will be reduced based on the cumulative adverse development, if any, of GFIC’s loss
reserves at the sixth anniversary of the closing of the GFIC Transaction. The principal amountwill be reduced by 75% of any adverse development
up to $100, and by 90% of any adverse development in excess of $100 until the principal amount is nil. The fair value of the TIG Note was
determined as the present value of the expected payment at maturity using a discount rate of 6.17% per annum due to the long term nature of
this financial instrument. Fairfax has guaranteed TIG’s obligations under the TIG Note. Following this transaction, the assets and liabilities and
results of operations of GFIC have been included in the company’s consolidated financial reporting in the Runoff reporting segment. The
purchase price of $240.2 is comprised of net assets acquired of $323.7 less the excess of the fair value of net assets acquired over the purchase price of $83.5 recorded in the consolidated statement of earnings. GFIC’s assets and liabilities as summarized in the table below is preliminary and may be revised when estimates and assumptions and the valuations of assets and liabilities are finalized within twelve months of the purchase date.
GFIC is a property and casualty insurance company based in the United States whose insurance business will be run off under the management of
Fairfax’s RiverStone subsidiary.
Sounds like a complicated accounting fiction to me, and not the runoff having better than expected development.
My head hurts! Hopefully Watsa will explain in English what this is tomorrow.
BeerBaron
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What is this? Is it a gain on the Run-Off they bought las quarter?
A gain of $83.5 million on the excess of the fair value of net assets acquired over the purchase price of General Fidelity Insurance Company
BeerBaron
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Anybody noticed Google Finance does not give FFH quote anymore?
BeerBaron
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Has anyone on here spent much time in China?
I've toured 4 cities, but hardly understand it.
The more you try to understand it, the less it makes sense.
What do you want to know exactly? I deal with them daily and went there twice.
BeerBaron
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Baron,
I appreciate what you are saying about ivory tower vs industry innovation, but it appears BYD has developed some interesting battery technology in-house and likely have more ideas coming...At least I hope so...A few tid-bits...
Parent company BYD, which is the No. 1 supplier of lithium-ion batteries for cell phones, is now able to produce a high-performance ferrous-based lithium-ion battery on an industrial scale, company Vice President Lian Yubo said. Yubo said that with this battery, BYD has overcome three of the major drawbacks of lithium-ion batteries: high cost, low capacity and danger of explosion. The battery pack in the F3DM is low cost, high capacity and won't explode when exposed to fire, he said. The battery pack can be recharged using a home power plug in nine hours, the company claims. But with a special industrial charging equipment, it takes only 15 minutes to bring the capacity up to 80 percent. BYD claims that the battery pack has a life of more than 2,000 cycles, a range exceeding 320,000 miles or a life of up to 10 years, whichever comes first
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Mr. Wang says BYD's batteries use a new technology that makes them safer than other lithium-ion models. He also says cheap abundant labor helps keeps his costs down, another factor that could sway consumers. In China, the F3DM is priced at 150,000 yuan, or $22,000, and BYD expects it to sell for a similar amount in the U.S. The Chevrolet Volt, by contrast, may be priced at $40,000 or more when it hits the market in late 2010.
Mr. Wang says BYD's lithium-ion battery uses an iron-phosphate technology that is chemically stable and thus "inherently safe." He says it doesn't overheat to the point where it can catch fire. The technology is similar in design to that developed by A123 Systems, a U.S. start-up battery maker led by a group of scientists from the Massachusetts Institute of Technology. GM is using their technology to power the Volt. Individuals close to A123 say the company plans to take apart BYD's battery cell to see if BYD has infringed on any of its technology. Officials at A123 declined to comment.
The Chinese company says it has spent more than 10 years developing its own iron-phosphate-based lithium-ion technology without infringing on others' intellectual property. "Sometimes foreigners think every Chinese company is stealing technology and design," says Luo Hongbin, a senior BYD engineer. But, he says, "we have been researching electric vehicles for so many years."
I love Lithium-Ferrite batteries, even used them in one of our retails products. They are everything BYD or A123 says and will be a perfect fit for cars . I'm affraid the capacity won't be there for a 500km car tough. What I expect by breakthrough is something to bring the electric car up to par with gasoline/diesel engine.
BYD is an interesting growth story, no moat, but great tailwinds.
BeerBaron
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Anybody knows what's Fairfax cost on Overstock.com?
BeerBaron
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I'm ok with BYD for the long haul too...but for a very different reason...If my memory serves me well the company has around 10,000 engineers. That's a huge number and a large number of them are working on new battery technologies. A breakthrough here could be huge...That said, my investment is in a similar proportion to BRK's.
Isn't it more likely that a breaktrough would come from the academic side? Companies usually direct their energies toward applied research as opposed to universities. A few exceptions come to mind like the White LED by Nichia in the 90s, but even then the inventor was a rogue scientist that continued it's research even when it's boss told him to stop. Batteries have been under INTENSE researches for the last 20 years but so far no breakthrough, just good advances each year.
BeerBaron
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I wonder why the eInk readers are so expensive? There is almost no computing power needed and it trades at about the same price per square inch then a LCD.
I have two theories:
-Main patents are still active
-Low supply of producers
BeerBaron
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Francis and Tim McElvaine are the two nicest and most genuine people I know in this industry. My family knows that if I get hit by a bus tomorrow, call Francis and Tim and put the money to work with them...then go and enjoy your life! Plus don't sell the Fairfax shares! ;D Cheers!
I recall Biglari was also on your list... good thing he showed it's true colors before your family needed him.
BeerBaron
Commodities historical prices
in General Discussion
Posted
I'm looking for a site that can provide me with historical commodities prices (1990-Today) for commodities like corn of soy beans. Anybody has this kind of site?
BeerBaron