Ballinvarosig Investors

http://fortune.com/2016/11/22/surprise-warren-buffett-turns-out-to-be-more-prescient-about-stocks-than-politics/ So Buffett was completely wrong in his prediction, the DOW return was 5.9%, not the 6% he predicted.

So I've done a bit of further reading on COTY to try and understand what's going on. I found a good article on Seeking Alpha. http://seekingalpha.com/article/4008144-look-procter-gamble-company-coty-inc-exchange-offer This looks like one that is definitely worth monitoring for now. It appears that a lot of PG shareholders who received COTY stock have been dumping it, causing the share price to fall. Relative to the market, it looks too expensive to me. But if it got down to about $16, then I could see the potential for this to double if management met the expectations they set out when the merger was consummated. COTY investor presentation - http://phx.corporate-ir.net/External.File?t=1&item=VHlwZT0yfFBhcmVudElEPTUyMzY2Njl8Q2hpbGRJRD02NDQ4MDI=

It's almost certainly Tedd and/or Todd, the position sizes are tiny.

True, but the Hostess Brands pick is interesting.

Latest 13F. http://www.dataroma.com/m/holdings.php?m=sa Portfolio shrinks to just $35M and now Burry has gone long Twinkies. His largest holding (COTY) makes no sense to me whatsoever on a traditional valuation metric.

Ackman is trying to make the best out of the situation he's in. With Trump in, it appears to may have a shot at making some money with Fannie/Freddie. Can't say I have a problem with that. It's not as shameless as Bruce Berkowitz abandoning the Democrats before the election by funding Trump in a desperate attempt to make his Fannie/Freddie position come good. We know that this sort of backscratching is endemic in politics, but I really thought Berkowitz was supposed to be one of the good guys. For him to get his hands grubby in an attempt to save an investment just seems wrong to me.

I didn't know Buffett personally holds 2M shares in WFC.

You guys gave Pabrai a bit of stick in the last thread, but I thought this video he did for Peking University was interesting.

I agree, and I did make these points! But what have facts got to do with anything when it comes to elections? He made the promise that he will stop manufacturing jobs going abroad. Whether it happens or not is irrelevant, the people of the rust-belt believed it and voted accordingly.

For a start, I wasn't talking about the US population as a whole. Lots of places in the US have done quite nicely since the financial crash. I was talking about places like the rust-belt states. Electorates that were traditionally Democratic states that ended up swinging the election by voting for Trump. Plenty of struggling, disaffected people there who ended up determining the course of the election.

Pretty insulting comment you've made there. If you're involved in manufacturing in America's rustbelt, you have probably lost your job or seen a decline in benefits and wages. You've watched the hollowing out of America's manufacturing base by successive generations of Republican and Democrat governments over the past few decades. This free trade, lassiez faire doctrine has been economic mantra since the days of Reagan. Sure, you've seen the benefits of cheap imported goods, but the devastation reaped on middle America has hit the rustbelt hard. When you look at living standards, particularly in the rust belt, they've gone nowhere since the financial crash. As a corollary, you see corporations and the 1% growing fatter and fatter off the inflated assets prices driven by QE. Is it any wonder people are fed up with the disparity in wealth that has only widened through Democratic government? The first person who has drawn a line in the sand and said enough is enough has been Donald Trump. You can debate the merits of free market economics or protectionism if you want. The reality for the electorate is that if they're suffering, they won't care. They just want someone to come in and improve their lot. Therefore, I think to label struggling people as "jackasses" shows an incredible lack of hubris. Whether you're in Europe or the US, people on this forum who manage capital (whether their own or others) have seen huge benefits from economic/monetary policies of the last decade. We should be pragmatic enough to realise that we live in a democratic system, and we can't simply continue to reap a windfall while others out there are suffering. For the record, I am not suggesting that Trump is the man who can help make change for middle America. I think he is just a reaction to a Democratic party that has completely lost its way, a party that should never have gotten into bed with the big investment banks, hedge funds, etc.

I am not being smart, but if there's one thing that makes me tremble when coming to evaluate a supposed value investment, it's the words "patent portfolio". Motorola, Nokia, Nortel, a whole bunch of companies that ended up imploding were supposedly value at some point because of their portfolio of patents. It feels that when you start evaluating a company on past achievements, the future really must be bleak.

Death spiral seems too strong a term. Aeropostale was heavily bleeding cash for 3 years before it went under, its brand was nowhere near as strong, it had no international exposure worth speaking about, gross margins were poor. Abercrombie is a much better business and a stronger brand. The positive free cash flow has only just went negative this year.

A whole pile of companies in the apparel business are getting smashed up. Nike and Under Armor have hit 52 week lows while Abercrombie & Fitch is at an unbelievable 16 year low. The latter seems pretty unbelievable. This was the pre-eminent brand when I was at college 15 years ago, yet here it is seemingly at risk of going under. The stock price decline is all the more startling when you consider it is has gone from 92M shares outstanding to just 68M outstanding today. I would have thought this was normally a good thing, but just ask Aeropostale shareholders if they thought the same about their stock buy back binge. It doesn't seem all bad for Abercrombie though, gross margins are still relatively strong, and despite the strong dollar, growth seems to be continuing internationally (just over 1/3 of revenue), with the US stores leading the declines. Having said that, the real worry is the US store sales are the leading indicator here. With $3.5B in sales, I do have to feel that this thing is worth more than $1B current market cap to someone out there. Thoughts?

Or even just look at the blended tax rate on his income. $11.5M income, $1.8M in income tax.

Can people debate this lifestyle stuff in a separate thread please?

You are not the only one. My brother works for a large multinational that is trying to disentangle itself from IBM. He said the reason why the IBM mainframe business is so profitable (and hated by customers) is the fact that customers are charged on a MIPS (millions of instructions per second) basis. Historically, they have been willing to pay this cost due to the stability (and some inertia) that a mainframe platform provides. Technology has moved on though and the upstarts at Facebook, Google, and other companies have developed technology (that's open source and can be run on commodity hardware) that allows customers to scale applications horizontally. This has left IBM selling a solution that's obsolete and too expensive, little wonder customers are leaving. The process isn't all or nothing though, and it is being staggered. If a company has just bought a lot of IBM mainframe hardware, they will want to get the full life from it before upgrading. This is why IBM are able to manage the decline. Make no mistake though, this part of the IBM business is dying. Of course, people will say look at the free cash flow yield. It looks great, and if you believe the story that products and services outside of the mainframe (the other cash cow) can take up the slack, then IBM is a screaming buy. I asked my brother about this one too, and he actually said that not only is his company trying to get off the mainframe, they are trying to stop using other IBM products and services too (people are less willing to spend $200k on a fully loaded IBM web server when you can configure environments on Amazon for much cheaper). Again, like the mainframe, a lot of the benefits that IBM were able to provide for a price is now free and much of this technology is still in varying ways of early adoption. That leaves me wondering, what products do IBM actually have a genuinely competitive advantage in? What I will say about IBM is that they are doing right by shareholders and are managing the decline reasonably well, so there is the possibility to buy it if it's cheap and sell when it's dear.

Not going to list everything I own because I have lots of tiny positions, so here are my main ones. FYI - cash the biggest position by far at ~40%. Generals UNIQA Insurance Group (Austria) Karelia Tobacco Company (Greece) Brainjuicer (UK) Yahoo Japan (Japan) Eni (Italy) Lloyds Banking Group (UK) Wells Fargo (USA) Special Situations LXB Retail Properties Plc (UK) Bowleven PLC (UK)

I would have thought Biglari was the most successful one out of any of them. With very little money down, he has effectively managed to make a $1bn company his own personal piggy bank.

This has shades of Bob Goldfarb and Sequoia all over again, selling down good positions to keep bad ones. Are Sears, Fannie/Freddie, and St Joe really so good to sell Berkshire and AIG in order to keep? Personally, I just can't see it, if these positions were so good, they would have worked out by now. That's the one thing I have learned in investing - the good ideas are the one that don't need years to come good. So I have no idea why he is engaging in this strategy of doubling down on losers, especially considering the investment vehicle that he runs (a mutual fund that is likely to have a lot of unsophisticated investors). If he is getting redemption's, then he really has no one to blame but himself. One thing that disturbs me about Berkowitz is just how disingenuous (whether it's accident or not) he's being about Fairholme's current position. He keeps talking about how this is like the time in 1991 when he had 35% of his assets in Wells Fargo. I have to call BS on this. Firstly, I don't think that Wells Fargo ever fell by 50% during the real estate crash of 1990. Looking at the share price over the period it's more like a 35% decline. Even at that, within a few months of the trough, the share price just went up and up smashing new highs with each month. Operationally, the real estate crash really only caused Wells to wobble for a few quarters. Just look at that 1990/1991 annual reports and you'll see that what Wells experienced was really only a hiccup that the market over-reacted to (but rapidly corrected). I have to wonder are there any vulture hedge funds out there looking at Berkowitz's very public book and desperate liquidity position in order to engineer some sort of attack on his fund.

http://www.bloomberg.com/news/articles/2016-09-27/eight-cent-eggs-consumers-gobble-cheap-food-as-grocers-squirm Very interesting article on competition within the grocery sector.

Not sure it's been mentioned before, but it looks like Parsad has himself a new website. I noticed there's a new section with annual reports which I will be devouring. http://www.cornermarketcapital.com/annual-reports.html Cheers ;D

Is it time to stage an intervention for Berkowitz? Almost nothing of what he says these days has any basis in reality. It's crazy how someone who has been so insightful in the past has just lost their way so badly.

Anyone got the full letter? The editing at Value Walk is awful and often misses out good bits.