alpha231616967560

The folks from Longleaf talked about BNY Mellon in the last OID, and even Tweedy Browne bought some in Q3. I especially like their global custody business - it is a cash cow with a substantial moat, and require almost zero capital input. They had a crap year last year and that put the stock on sale, which is a classic Buffett purchase. They are also an industry leader trading at 12.5 earnings.

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...

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.

I've read dozens of books on valuation and investing. One that I happen to be reading now is "F Wall Street" by Joe Ponzio. While the title and marketing for the book are not attractive to me, the content is actually quite good. Ponzio steps through how to arrive at Owner Earnings (Warren Buffett's view on earnings that is cash-based and so the results as you would see them were you the owner of the enterprise). He also steps through how to estimate the intrinsic value of a company (also a WEB reference to the discounted cash flow model), which is a rational alternative to just "going with your gut". He actually gets both of these approximately right (which is more than you can say for many such attempts at emulating Warren Buffett). I think that you could do much worse than this book as a starting place for thinking about how to value a company. He gives a few examples also, which is always necessary for me to truly internalize a concept. Happy reading! alpha23

This is the link for the new symbol: http://www.google.com/finance?q=FRFHF

I was slightly surprised to find myself coming away from watching that interview thinking that Geithner and company are not flying blind, and that they are actually doing about as well as can be expected despite the inevitable criticism from the masses. To say that this administration has a difficult job is an understatement.

I came across Geoff Gannon's podcasts recently and they're pretty well thought out. People call in with questions and leave them on Geoff's voicemail and he does his best to answer them. Mostly about value investing. http://www.investorquestionspodcast.com

China has little choice but to make an example of companies like BYD who build on land designated for agriculture. There are few things more dear to the Chinese than arable land now, and the Central Govt. is acutely aware of this. As it is, they are going to be a huge net importer of food, oil and other natural resources in coming years, but their current arable land is down to the level that it is a national security issue, so the BYD situation, while it seems harsh, is not surprising. I have to say that I'm a bit surprised to hear the reaction to Charlie Munger's remarks. I think that he is simply a person who sees the situation from a perspective of what's rational, and I have to agree with him that the Chinese government has behaved much more rationally than our own in recent years. Learning from what works (regardless of borders) is always a sensible strategy. Just my $.02.

I came across the snip of an interview with Warren Buffett that precipitated my initial comment in this discussion: "...When Charlie Munger and I talk about buying something, we don't spend 10 seconds on macro factors..." - From Buffett's recent interview with Carol Loomis (at about 37 minutes) (http://money.cnn.com/video/news/2010/10/05/n_buffett_MPW.fortune/)

I think that EBIX has this sort of potential and is still at a "reasonable price". I have posted about it a few times here along with others. Price/ fair value is not as low as it was a couple of months ago, but the forward valuation is quite low. They are building an awesome moat, have high quality management, all business trends moving in the right direction, and they grew substantially during the recession. The CEO is actually a big fan of Warren Buffett and sometimes refers to his rationale in interviews. If EBIX is not the main player in this sector (enterprise insurance software/ SAAS) in five years, it seems likely that someone else will be the major player because of the way that insurance exchanges work (network effect, etc.), and there is nobody else that is really even doing what EBIX is doing now.

Bingo. That MOS doesn't *ever* come from the macro economy. That's the point.

You're focused on the macro picture to the exclusion of individual companies. It's no wonder that you're talking about being mostly in cash. The margin of safety applies to companies and individual situations, not to the economy as a whole. This is why Buffett can often be heard echoing Benjamin Graham in saying that he spends no time thinking about the macro environment when evaluating an investment. If you think that you can time the macro economy, you're fooling yourself.

Thanks for sharing this link Munger - it is a timely one. The real point of this article (for me, anyhow) is this: "Besides, stocks are probably still the best of all the poor alternatives in an era of inflation - at least they are if you buy in at appropriate prices." If you look at what Buffett has *done*, it is exactly that. He has purchased businesses and/ or stocks at bargain prices and held on to the them for a long, long time. I don't think that Buffett's point was to criticize the "lemmings", but instead to highlight the precarious investment environment that inflation creates and to point out the folly of trading in and out of the market in equities with a mind to outwit inflation, which is near impossible. His actions since have advocated buy and holding equities (aka businesses) at the right price, which is the positive counterpoint to this cautionary tale. To me, that is a more useful focus since it is something that can be *done*, and not something simply to be feared (fear is not actionable).

I've been looking at the SUNH spinoff of RE assets into a REIT. Looks promising, but I haven't had a chance to read all of the past 5 yrs ARs yet, so have not pulled the trigger. The stock seems to be performing well this week, and there is even a Guru Focus article that pegs the current price at 1/2 intrinsic value after spinoff.

I am currently reading Moneyball by Michael Lewis (author of The Big Short). I am reading it because Seth Klarman described it as being "about value investing". It is about value investing, but from the perspective of the Oakland A's finding "value assets" for their team. It is fairly hilarious, and fairly instructive as a mental model (but don't expect to read about Warren Buffett or a DCF model in it haha). I've never really been much of a baseball fan, but this book compels my attention for certain.

Currently at 13%

Thanks for posting this. Engrossing interview. It is useful for me to note that Charlie Munger spends all of 30 seconds talking about the macro economy and most of that to explain that he and Warren are in agreement that an opinion on the macro economy is not a suitable foundation for any investment decision. That, in my mind, is the real gem in each of these men's opinions, that the macro situation is forever changing and too variable to predict to any useful end, so *forget it* and focus on business fundamentals - or *don't forget it* at your own peril!

haha I sure hope not. This situation seems almost entirely predicated on mass mutual deception, uniform corruption across pretty much every level of culture, and a general acceptance of these things by the Greek public / government. While the US has some significant problems to deal with, I don't think that these are among them (excepting local Chicago politics!). Lewis' article talks about 100% of the Greek senate fudging their tax numbers, wide-scale tax evasion as the norm, and only about 20% of actual government spending ever having made it on to the books. It is really a very sad commentary on the demise of a civilization that is responsible for so much of the way that the rest of the world lives today.

Mint.com is a very cool site. It does basically what ERICOPOLY asked for (aggregates portfolios from several different accounts and slices/ dices the data), and it is free. Personally, I would like to see some additional tools that look at intrinsic value. Smartmoney.com has a good one at http://www.smartmoney.com/pricecheck/ and of course gurufocus.com has a DCF calculator as well. I think that there is a lot that can be done to get the analysis to the starting gate with fundamental metrics. These are fairly cursory tools though.

EBIX - they meet all requirements as far as I can tell.

I use both of these with some frequency. I actually found a coupon code that gave me 80% off the already discounted restaurant.com gift certificate here: http://www.retailmenot.com/view/restaurant.com - so I ended up paying $.80 for a $10 gift certificate (with minimum spend of $25 at the restaurant) for a total of 37% off the dinner ticket!