Ballinvarosig Investors

I have a good one. We owned close to 1% of a micro cap British company that's listed on AIM (not saying the name as it's still going). We thought the company was cheap, it was growing, was in an ok business (8-12% avg ROE); we liked management, and they were also considering a dividend. It had almost no institutional investors, and with the dividend being initiated and ok growth, it'd sooner rather than later that investors would pile in. It was literally 2 weeks after we got our full position, we learned the CEO was ill and would be resigning. We were a little worried, but decided to hold the course. Needless to say, the replacement CEO that was brought in had a "colourful" past. What worried us more was the long-term incentive plan that the company signed up for to get him on board. He only had to increase the share price by 23% to be granted a chunk of the company for nothing. We eventually got to meet him and within minutes, we just knew he was an oily character, too much promotional talk, too much focusing on the stock price. The alarm bells were ringing at this stage, and when by chance we ended up meeting an old acquaintance of his who told us he was a bad egg, we unloaded our stock. I am almost certain that he is defrauding the company, because the stock price to a literal day managed to stay in the 90 day range above a certain price so his performance options would vest. We thought that he would do something like that to get the options to vest, so probably could have held on and made money.

Acquirers Multiple recently discussed an old interview with Berkowitz from back in 2009. It really illustrates just how much Berkowitz has deviated from his core principles of investing by looking at free cash flow. http://acquirersmultiple.com/2016/08/how-to-pick-good-stocks-by-trying-to-kill-the-business-strategy-bruce-berkowitz/

That is exactly what I was thinking. When I look at Francis' portfolio, I see a few stocks I have owned myself, along with others where I can see why they are in his portfolio. Some are up a little, some are down, but as a whole, he's winning. As you've correctly pointed out, the problem is in over-sized losing positions. My natural assumption as to the reason for this is the same as yours - Francis is doubling down on bad positions. It almost looks to me like he's unwilling to accept a loss, so instead of just cutting the loss, he doubles down his position without paying attention to the deteriorating fundamentals. I mean, when you look at his large positions (Sears, Valeant, the Greek bank), you can hardly say that the fundamentals of these companies were anywhere near as strong as they were when Chou first went into these positions.

Not just the Japanese. http://www.fuw.ch/article/the-fed-is-now-hostage-to-wall-street/ Genius really :o

Buffett cutting WMT is not at all surprisingly. Look at the ROE, look at the net margin, you don't notice it quarter to quarter, but over the years, the squeeze has been relentless. When you look at how Tesco imploded, I am surprised he hasn't cut the position sooner.

Burry shrinks his portfolio http://www.dataroma.com/m/holdings.php?m=sa

You are missing the most important one (of our time). Klarman.

When I say value, I mean in the traditional sense of the word. Buying unloved companies, companies at a discount to underlying value, companies at low PE's, etc.

If you're looking for spectacular returns, I agree. Speaking of imagination/insight, I am reminded on Buffett's purchase of Coca Cola 30 years ago. It was already a large, well followed company with scores of analysts. Yet Buffett was able to make a simple extrapolation that vast untapped markets outside of the US could be opened up to Coke's products. It was a simple deduction that a ham sandwich could have made, yet Buffett was the only one to do so. Anyone care to speculate what in plain site opportunity like KO exists today? My thought would be Bank Of America. You have a CEO that is telling you that the company has $35-$40bn in normalized earnings. you have all the wreckage of the financial crisis now firmly in the rear view mirror, you have a stock that's priced well under book value. I don't think it'll be a 20 bagger like KO, but in 5 years time, I simply cannot see how it will not double from today's price. Incidentally, it ticks the value investing criteria ;D single digit PE, priced under book, in a sector that is hated.

Sorry to pick you out, but that statement actually gives me hope that value investing has a future if anything. I think so many folks have been so badly stung by value (whether it's through permanent capital loss or awful performance) that they're now increasingly embracing growth. It seems to me that the growth story is now so ingrained into investors, that their expectations have become detached from reality. I actually read an article a few days ago that suggested that stocks were actually cheap as their returns were favourable when measured against long term bond yields. It's like no one can conceive interest rates ever going up ever again.

Jeff Matthews wrote the following about Mattress Firm (MFRM) just two months ago, I hope he does not mind me reproducing. http://jeffmatthewsisnotmakingthisup.blogspot.com/2016/06/mattress-fire.html Yesterday, Mattress Firm was offered an all cash buyout of $64 per share; a 100% on the share price as of when Jeff wrote his blog entry. I am not having a go at Jeff (whose work is always illuminating) and I am not really suggesting value investing is actually dead. But the current investment environment has become almost totally bifurcated towards growth rather than value. Even looking at the ideas on this forum, considerable bullish argument is made unicorn stocks with the most extended valuations. You look at the traditional value funds, performance has generally lagged badly. I won't name names, but plenty of people are badly under-performing the market, especially in the 10 year period following the financial crash. With the S&P at all-time highs and the valuations of growth stocks certainly looking frothy at least. Are we finally reaching a stage where value could out-perform growth?

Buffett has a habit of going with companies that he has past history with. Naturally, he's looking to buy at a fair price. This is controversial, but what company ticks that box? Goldman Sachs ;D I am jesting, but for the reputation risk, I think it really would be his kind of company, especially at today's price.

I remember when I first started listening/reading the Fairholme conference calls over ten years ago, cash flow used to be 1, 2, and 3 on his list of priorities. For whatever reason, he seems to have abandoned this strategy by investing in cash flow poor companies like Sears and St Joe. Their performance has been dreadful, and wrecked a pretty handy record that he had up until the financial crisis. I can't help but feel if he had stayed within his circle of competence, he wouldn't be in the trouble that he is in now.

The Guardian did a good article on Vancouver property prices, apparently up 30% in just a year? Is that true? https://www.theguardian.com/cities/2016/jul/07/vancouver-chinese-city-racism-meets-real-estate-british-columbia

Hold on here, Soros only shorted Deutsche Bank the day after the Brexit vote, it's only slightly down since then.

Crikey, what a couple of days. I am absolutely delighted to have been wrong on the Brexit thing. I have been struggling to put money to work, and now at last am seeing opportunities.

Bought some Bank of Ireland at 18c. Tangible book value will be about 25c, it will earn about 2.5c for 2016, a price/earnings multiple of just over 7x. Bought some Barclays at £1.31, the Brexit will provide a short-term shock and probably hit H1 results. Selling at less than 1/2 tangible book, expecting about 15p of earnings for 2016. As the Brexit fears get shrugged off, those earnings are going one way. Bought some Aviva at about £3.60 and kicking myself I didn't have a limit order as this one went as low as £3. Trading at a forward nice multiple going into what looks like a slightly harder market.

http://www.oddschecker.com/politics/british-politics/eu-referendum/referendum-on-eu-membership-result not sure if that will work for folks in the US.

You can put a fork in Brexit, because it's done. Bookies have slashed odd for a remain down to 1/10. I suspect the result won't even be close, my guess would be 57%/43% in favour of remain.

Up until the the 16th of June, the Leave campaign had been steadily gathering momentum and at that point the vote looked to be on a knife edge. However, that day the British MP, Jo Cox was murdered by an anti-EU extremist. That was a turning point that in my opinion was decisive. Campaigning by both sides was suspended, and the wind was taken out of the sails of the Leave campaign. The fact that it was a Leave extremist that murdered the MP left a serious taint on the Leave campaign - undecided/swing voters almost certainly will jump to the Remain side because of it. With the momentum gone and only two days remaining, there is no time for the Leave vote to recapture the initiative. Remain is all but a done deal. I question how significant the murder was (especially because while the man was clearly an extremist, he also has a long history of mental illness). I think we were always going to vote remain (sadly). I've been watching this far too closely. I agree, that this murder should have no bearing upon the result whatsoever, but yet it has. Look at Sterling, look at the FTSE for the last week. Since the murder, both have strengthened significantly since the event. The same happened a few weeks back when Boris made his gaffe about the bendy bananas and the comparison of the EU to a Nazi super-state. Sterling and the FTSE went on a huge tear on the back of that as the Leave campaign faltered. It's not remotely logical, I know, but I think the swing voters will always shy away from the controversial and choose a safe option.

Up until the the 16th of June, the Leave campaign had been steadily gathering momentum and at that point the vote looked to be on a knife edge. However, that day the British MP, Jo Cox was murdered by an anti-EU extremist. That was a turning point that in my opinion was decisive. Campaigning by both sides was suspended, and the wind was taken out of the sails of the Leave campaign. The fact that it was a Leave extremist that murdered the MP left a serious taint on the Leave campaign - undecided/swing voters almost certainly will jump to the Remain side because of it. With the momentum gone and only two days remaining, there is no time for the Leave vote to recapture the initiative. Remain is all but a done deal.

The relief rally is already here. The insurer I started buying on Thursday is up 10% already. One of the British banks I bought is up 15%. Sterling strengthened significantly.

I think the rise/gains in the stock price will be baked in before the result is announced. Today for example, the gap between the Remain/Leave sides with bookmakers is the narrowest it has ever been in the entire campaign - FTSE stocks have already tanked in the last two days on that news. The market is already pricing the Brexit in. Companies like Goodwin which don't have a heavy exposure to the UK won't go down too much regardless of what happens. On the other hand - financials and insurers are already being absolutely clobbered and are looking very interesting. Aviva is an insurer I thought I missed the boat on a few months back at £4 - the market is now giving me a second bite which I am taking.

I don't really buy that angle. No one is going to beggar themselves just to land a blow on a political rival. I think the issue is that so many of the major oil producing nations are running deficits. When you're a dictator and you've bought the support of the nation through high public spending, then you have no choice but to keep that taps on, otherwise you are literally dog meat.

The people involved in betting against sub-prime don't count. While their actions were clearly insightful and well-informed, they were none the less speculative. Anyway, as others have pointed out, many of those folks have under-performed the market since. If you're analysing performance over the decade of 2010-2019, then for the period so far, you'd probably have Warren as the benchmark. Berkshire have returned about 13-14% in the period by my rough calculations. Prem Watsa and Fairfax would be in that range too, the figure would be less if you're converting to US Dollars. I have no idea what Pabrai has done in the 10's, but I would suspect the performance is much worse - he's lost money in the last 2 years, right? I have been impressed with Patient Capital Management run by Vito Maida. He doesn't have the out performance that is sexy to a lot of investors, but he was one of the few to side-step the Financial Crisis. It's remarkable despite all the disadvantages that Berkshire have, they still manage to beat most of investors. One investor who I have never seen mentioned on here who has outperformed most in the last year is Terry Smith in the Fundsmith team. His fund is coming up to 6 years in operation now and has blown the doors off with a 17.6% CAGR.