buylowersellhigh

Thanks everyone for the information. Much appreciated.

Do most American investors on the board own FFH.TO or FRFHF? Any guidance on whether a taxable account or tax deferred is better? ADR fees, etc. TIA, BLSH

DWDP calls

Katherine Graham's autobiography is pretty good. Just finished it.

What securities do u like in India? Any suggestions? Not set up for trading in India yet.

Any good forums/websites to discuss stocks on India's Stocks Exchange?

Is there a gathering of CoBF members before the Fairfax Annual Meeting? Usually I see a message posted. Or too early? TIA, BLSH

any takeaways from Fairfax India's AGM?

Does anyone have a sense of spreads on RE loans from late 2014 to Sept 2015 or thereabouts? Obviously, this is a broad brush question. Did spreads tighten 200-250 bps? Is there any data out there to corroborate or refute this? TIA, BLSH

So is the credit quality of the portfolio the main reason a portfolio's value of floaters would go down?

Could you have a scenario where discount rates used to value such a portfolio move from ~4% to 7% without deterioration in credit quality? So if risk free rates move up or credit spreads move up or combination of both, correct? The value of the portfolio would go down, but credit quality might be okay.

CofBF, How does one go about valuing a portfolio of loans whose cash flows are based on a floating rate index? So a bunch of commercial loans based on LIBOR plus a fixed spread. What is the methodology to determine the discount rate in this instance? Does the spread on the underlying loans have any reflection on the discount rate used? TIA, BLSH

Rishig, What do you think of FFH here? TIA, BLSH More on this topic:

Scott, Why MAR? What is your thesis? Curious, as you like long-term compounding machines... BLSH

Are you a buyer of KRFT?

This statement may apply to me. Guilty as charged, if I understand you correctly! But do I understand you correctly? Would you be saying the same if you hadn't evolved into a more GARPish style? In terms of value investing gurus, would you say you're less Ben Graham (of whom I am more of) and now more Phil Fisher/Peter Lynch? Anyway, thanks, Scott, for this unique and most refreshing thread. No, I wouldn't be. My statement there comes down to efficient allocation of capital. What does having free cash flow mean? That cash is piling up in the bank, essentially. That cash can be used for a number of different things - dividends, share repurchases, acquisitions, debt repayment, and so on. That sounds unambiguously like a good thing, and generally it is. The trouble comes when you have very high quality businesses that can invest at high rates internally. For example, Chipotle Mexican Grill has amazing unit economics. Their restaurants have something like 27% operating margins on over about $2.5 million of sales each. It costs Chipotle something like $843k to open a new restaurant, so, the returns there are pretty damn amazing. Somewhere in the mid-to-high double digits That's a crazy amount of money, and each store provides Chipotle with a lot of cash flow. That's great. What isn't so great is letting that sort of money pile up when CMG can reliably earn returns stock investors can only dream of by putting it to work opening new stores. Ideally, Chipotle would have no free cash flow because it would be able to continually reinvest with those economics. Unfortunately, we don't live in Candyland, and there are major bottlenecks towards opening new stores. They have to scout locations, train employees to ensure the quality is what consumers expect, and so on. So they can only allocate a portion of their cash flow to new locations each year. But if they could get away with it, they'd be nuts not to spend as much as possible on new locations so long as they can continue scaling. And here's the thing. That would make the company's financials look ugly. There'd be no cash flow. Sure, they'd be generating profits, but none of it would make its way to the bank. And that'd turn a lot of investors off. But really, if that were to happen, they should be salivating over the returns their capital is earning. For an even better example, look at Netflix. I haven't looked at it in a while, but they were acquiring customers for somewhere between $30 and $40 just a few years ago. And those folks stay with them for a long time, delivering, generally, multiples of that value back to the company over the life of their subscriptions. And those subscriptions? They can last for years. All of the hundreds of millions they're throwing at acquiring customers? It's expenses on day one, as advertising typically is. There are narrow exceptions to this granted, but as a rule of thumb, advertising is expenses. It's not amortized. Think about that for a moment. They're buying members, many of who stick around for years. But the ad spend shows up as an expense entirely in the first year. What are the implications of that for Netflix as a business? It means that, so long as the company keeps growing, its income statement will lag the true economics the company is generating. That's true of all subscription businesses, and is why looking at profitability and free cash flow alone for them is absurd. They're buying a stream of cash flows. A stream. More money for years. And that ad spend makes each year they grow look like shit, but what do they care? They're creating a lot of lifetime value for their business by doing it. Put it more simply... if I gave you the opportunity to shell out $100 for income streams that would pay you $50 per year indefinitely, would you snap at it? Think of how that translates to GAAP, though. If you had to expense that like Netflix does its advertising, you'd show a loss. And if you doubled the amount of income streams you bought each year, you'd keep showing losses. Even though you'd be creating a ton of wealth for yourself, you'd be showing losses and negative cash flow. In other words, your financial statements would be completely divorced from economic reality. This happens in business more often than most people think. It can be in land acquired long ago, or it can be in things like Netflix, SaaS companies, or any other growing business that is creating long term customer relationships that require money upfront to create. And these can be enormously profitable for shareholders over time, regardless of what the financial statements say. This is why, for many businesses, I'd rather they not generate cash flow. Because if they earn great economics and can scale their concept nearly infinitely (Amazon) they'd be insane to do so. Not only will they take a tax hit on earning profits, they'll be letting good money sit idle and lose out on some amazing compounding magic. That's basically what I meant. No opinion on any of the stocks mentioned, except Amazon, which I own. As for Ben Graham vs. Phil Fisher: maybe? My style is my own, and adapts concepts from Warren Buffett, Peter Lynch, John Malone, Jeff Bezos, and my employers (the Gardner brothers), among others. Most of my insights come more from great business creators than great investors, to be honest. Happy you find the thread interesting. Scott, What are the reasons you don't own any CMG or NFLX? Blsh

Ross, What is your thesis on CHEF? TIA I have a gtc buy order in for 17.5 on CHEF. Rinse and repeat on this one. The $23 month out options were going for $1.3 in March. I couldn't resist...

PRAA today and BOBE yesterday

GOOG & PRAA

ENTA.....biotech, nuff said

GILD and SSW

Packer, Do you generally use the settlement currency as US dollars? Or do actually keep $HK?

Anybody look at CBI recently?

Surprised he sold so much of BAC.

Bought some LMCA on Friday. Anybody buying any BAC common or KMI warrants?