rick_v

Parsad with all due respect, I don't need you to "save me some pain" as its quite clear I manage way more AUM than you and I have been in the game longer as well. What you are misconstruing is an attempt to refocus young investor's minds in seeking alpha (which means out performance btw) as opposed to buying and holding the cult stocks which goes against the very principles of value investing. Further, your effort to try and rationalize everyones performance into one type of scenario proves that you have yet to fully grasp the power of value investing, and experience the results first hand by riding such plays, I don't think anything that I have said on this board would allow you or anyone to think that I am some gung ho investor throwing 100% of my capital in any one play. I manage a family fund which exceeds $100M in permanent capital, comprised mostly of my family's net worth. I have built this fund over two decades from single millions by focusing on out of favor companies trading at a deep discount to intrinsic value. In addition my family and I are always on the search for young and gifted managers to deploy our capital with. We have capital with Greenlight, Third Point, and other gifted managers. Something I thought I could find here. I am originally from Hong Kong. Finally, I wasn't trying to convince anyone of anything, I merely said how disappointing it would be if the young or professional investors on this board were constructing their portfolios with FFH and BRK forming the majority as that is 100% not the way to generate alpha (again for those who are not familiar alpha = out-performance) With regards to spotting small cap value plays, they exist and each and every year I find at least a handful. That doesn't mean my entire portfolio is running at 100-200% per year, naturally there are capital allocation decisions and in my case I only contribute a small amount of our portfolio to such plays. But on average, they generate significant returns and in my earlier days I did bet larger on each individual play because I had to. Here are some Examples: DTG 2008-2010 JMBA 2008-2010 XJT 2009-2010 VG 2009-2010 TA 2008-2010 There are many, many more and we have made millions of dollars on these plays. Before this period there were even greater opportunities. Frankly, this part of my portfolio didn't even get hurt that bad in the "great crash" the part that got hurt were the larger capitalization companies. I guess this also has to do with what type of an individual you are as well. If you are a leader you naturally gravitate towards generating your own investment ideas. Otherwise you just follow others... Buffet, Prem and all your other idols are all leaders. I think this is somewhat of a wake up call to some of you. Its reminiscent of the Li Lu lecture at Columbia when he couldn't believe the students had all this data and knowledge but couldn't damn put it all together. If you are truly seeking to master the concept of value investing and have a permanent base of capital, you should be generating your own ideas. Good Luck to All! After seeing Coc's second post I have decided to no longer post on this board. Coc I am 100% certain you are an academic. Best!

Shalab, you cannot compare Buffet using net cash to invest all his worth outside of BRK, and BRK which is a compounding machine which incorporates a form of leverage (float) and is his ultimate canvas. What I am trying to prove is that with his personal funds he continued to seekout value type plays such as FAST and even Diversified retailing is a good example, he also owned the Illinois Bank personally. At some point I am sure buffet made enough personally to be satisfied and I know that going into the crisis he had mostly treasuries. I don't think he looked at his personal cash hoard as the fuel for his net worth, rather the cash he had he would continue to deploy in value type plays where he saw fit. Also, BRK 40 years ago is not the same BRK and Buffet himself will tell you that. The bottom line is this. Unless you are running your own public vehicle that incorporates some sort of leverage, generating 8-10% per year annualized is not going to make you rich. Lest not forget that the only reason he had 18m$ in this first place in the 1970's was due to his out of this world alpha generation in the previous 15 years. By doing exactly what I am preaching here. Being young, agressive, following the concepts of Graham to seek out value. There was no such thing as BRK yet, BRK as you know is a mistake it is just a manifestation of value investment strategies with extreme focus multiplied over time. I don't want to discount the quality of this board, it truly is of great quality. But there is a difference between the passive investors who have a full-time job or are retired looking to just grow their net worth at good rates and following the scuttlebut for fun and general hobby, and the young or professional investors who are passionate about utilizing value investment techniques in order to replicate or emulate their idols. I am in the second camp. And I think there are many of you here who are also in that camp. So for those that are, I Am simply proving and its black and white, there is no room for debate here: buying BRK or FFH and expecting to generate substantial alpha or to get rich or build a unique track record is simply not going to happen. Seeking out value in your own plays, specifically plays under $250M is the way to go. As you manage more capital you can look at under $1b companies as well. But to truly generate significant alpha you are gonna have to go there. And when I say significant alpha I am not even talking about 20-30% per year, I am talking about finding the 10 baggers, the 5 baggers, the 20 baggers. The ones that can be found with a lot of work, permanent capital, and patience. Good night!

There is a lot to respond to and I truly don't have the time so I will just cover it in broad strokes... 1) For the guy that mentioned the LEAPS, come on are you seriously going to put a significant part of your net worth or capital in a FFH LEAP? thats not a sensible strategy, sure you have generated some alpha on a small insignificant amount of capital through LEAPS but you are not going to take 100% of your net worth and put it into a portfolio of FFH LEAPS. 2) For the other guys touting the FFH or Hamblin Watsa stock picking performance I would say you too are missing the point as that has no bearing on the stock itself. If you look at the actual FFH equity it has generated 8.78% annualized in the last decade. This is not how you get rich in life. Sure if you have a retirement nest egg or you are a passive investor that will satisfy your needs, but not Buffet nor Watsa would get off on such a return in their early days investing. Remember when you start to manage billions of dollars your priorities change, you are looking just as much at capital preservation than to generate alpha. I personally would not be happy with a 9% annualized return compounded. I have done that DCF for the remaining years of my life.. I would rather just go fishing or play golf. One more thing Bronco, I am 100% certain Buffet wouldn't be investing in BRK and this is due to the fact that I know what he has done with his personal net worth outside of BRK. He has been super agressive turning the cash he had outside of Buffet Partnership minus the BRK stake of around $18M in 1970 to over $500M today. Do you know what buffet's largest personal stock holding was in the last 10 years, it was a company called Fastenal. The ones who disagree with this point are truly academics. And have yet to deploy serious capital. People like Prem or Buffet didn't get to where they are by being passive investors looking for 8-9% a year. I respect that for some investors this is a world and more. But if you are a young and passionate value investor or a fiduciary that has represented your skills to partners, it is completely pathetic to buy and hold BRK or FFH and think you are going to generate any alpha, or get RICH for that matter. You need to be working 16-18 hour days researching and finding the next play based on the principles that the market is a voting machine in the short-run and a weighing machine in the long run. You do that and you will get rich or generate alpha. With regards to providing examples, I have shared more ideas on this board than I am honestly comfortable with. I am 100% confident they will outperform as a basket FFH. Just one stock I was heavily ridiculed for (APP) we are up over 60% in less than a month and only about 10% of the restructuring has been initiated. It's not easy but to find good plays bur for an inquisitive mind that is constantly on the lookout for plays plenty exist, and to quote munger: " why should something be easy that if done right once can make your family rich beyond belief forever" Cheers!

Stanely, Pabrai's performance is OK imo. It's not fantastic but I do believe he is a good stock picker. His main fund has returned 15.5% annualized since inception (2001) His offshore fund has returned 10.6% annualized since inception (2002) The issue I have with his performance is how terrible it has been ever since he has managed a decent amount of money... For example, the offshore fund is still underwater (has not breached its high water mark) since 2006... ouch And the same goes for the main fund, capital invested in 2006 would still be underwater... And in 2006 is when he really started to manage a serious amount of money... So actually if we really get a little tough on Pabrai, most of his carried interest was derived (in terms of net dollars) during years in which he had not so good performance but managed a lot of money. Since then he has lost a few hundred million dollars of investor money but since he had already distributed his carry he is still ok personally. Sure his stake is down but it's dis-proportionate to the investors. Mathematically it works like this: Year 1 AUM $100M generates a 23% gross return = $5.75M in Carried Interest Year 2 AUM $200M generates a 15% gross return = $7.5M in Carried Interest Year 3 AUM $400M generates a 34% gross return = $34M in Carried Interest These are the good years, remember he charges a very steep 25% over 6. Now lets look at the following years: Year 4 AUM $500M generates a negative return of (32%) loses $150M in partner capital but his Carry is still worth $30M Year 5 AUM $350M generates a negative return of (25%) loses another $87.5M in partner capital but his Carry is still worth $22.5M Year 6 AUM $250M generates a positive 43% gross return = $107M , partner capital is still significantly lower but his carry is now worth about $30M So if we look at it from an absolute money in money out perspective he has made $173M in the good years, but took home about $50M of that so (120M net) , then lost about $130M net in the following years. So essentially in 6 years the partners have lost together $10M in capital but he has gotten rich through the good year carry. Now this isn't anything personal about Pabrai because this is the hedge fund model. Its just surprising he still has a 9 figure AUM with this performance and I attribute that to the cultist Biglari style following he has carved out due to all the Buffet copycatting. I am much more impressed with an Einhorn than a Pabrai. Just my thoughts.

American Apparel Announces NYSE Amex Acceptance of Plan of Compliance Business Wire LOS ANGELES -- September 17, 2010 American Apparel, Inc. (NYSE Amex: APP), a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel, announced that it received a letter from the NYSE Amex LLC (the “Exchange”) that the Exchange accepted the company’s updated plan of compliance and, pursuant to such plan, has granted the company an extension until November 15, 2010 to regain compliance with its continued listing standards. As previously disclosed on August 23, 2010, the company received a letter from the Exchange stating that the company’s timely filing of its Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (the “Form 10-Q”) is a condition for the company’s continued listing on the Exchange, as required by Sections 134 and 1101 of the Exchange’s Company Guide, and that the company’s failure to timely file the Form 10-Q is a material violation of the company’s listing agreement with the Exchange. The letter from the Exchange provided that the company must submit to the Exchange by August 31, 2010 any supplemental information addressing how the company plans to regain compliance with Sections 134 and 1101 of the Company Guide by no later than November 15, 2010. On September 13, 2010, the company received a letter from the Exchange stating that the Exchange completed its review of the company’s updated compliance plan and granted the company an extension until November 15, 2010 for the company to file the Form 10-Q. The company will be subject to periodic reviews by the Exchange during the extension period. Failure to make progress consistent with the plan or to regain compliance with continued listing standards by the end of the extension period could result in the company being delisted from the Exchange. Although no assurances may be given in this regard, the company currently expects to complete the preparation and review of the financial statements and related disclosures for the Form 10-Q, and file the Form 10-Q as soon as practicable, but in any event by no later than November 15, 2010. About American Apparel American Apparel is a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel based in downtown Los Angeles, California. As of September 15, 2010, American Apparel employed approximately 10,000 people and operated over 280 retail stores in 20 countries, including the United States, Canada, Mexico, Brazil, United Kingdom, Ireland, Austria, Belgium, France, Germany, Italy, the Netherlands, Spain, Sweden, Switzerland, Israel, Australia, Japan, South Korea, and China. American Apparel also operates a leading wholesale business that supplies high quality T-shirts and other casual wear to distributors and screen printers. In addition to its retail stores and wholesale operations, American Apparel operates an online retail e-commerce website at http://www.americanapparel.com. We are up 60% on our APP position as of today's close on big money... Happy Weekend!

Here we go guys its happening! From today's 8K: On September 13, 2010, Energy Conversion Devices, Inc. (the “Company”) entered into an exchange agreement with a certain holder of the Company’s 3.00% Convertible Senior Notes due 2013 (the “Notes”) whereby the Company agreed to exchange an aggregate of principal amount of up to $10.0 million held by the holder of the Notes for up to 1.458 million shares of the Company’s common stock, with the amount of stock and the amount of the Notes to be exchanged to be determined based on a formula agreed with the Company. Under the formula, if the Note holder fails to sell the Company’s common stock or if such sales are below a specified threshold, it is possible that the Company may not exchange any stock for the Notes. The Company may, from time to time, conduct exchanges for additional Notes. Each of the exchanges is exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 3(a)(9) thereof. IF ENER Converts the majority of the 240M in note outstanding the company would strengthen its capital structure significantly and increase profitability by reducing interest expenses. Again, even a flat or so so year for ENER would translate into the stock appreciating from here because of the industry its in. I forgot to add, the notes are currently trading at a 30% discount to PAR and it seems that ENER is respecting that discount. This means the company really could extinguish 240M in debt with 170M in newly issued equity. At these levels the company would have a market cap of 400M with 220M in cash and 600+ in Equity

I suggest everyone watch this.

I truly hope that all you guys mentioning stakes of 20-30%+ in Fairfax are either passive investors or older in age. I think its a shame for a young or professional value investor to have such a large percentage of their portfolio in a stock like Fairfax. Afterall, even if Fairfax doubles in a few years that is not how you are going to generate alpha or get rich for that matter... As a young or professional value investor you should be studying Fairfax and Buffet's performance to identify your own value plays. Thats where the alpha will come from. It is very easy with permanent capital to find securities which will outperform the market when you are looking in the 0-250m range. This range is not looked at by Prem, Buffet, and most of the other major value investors anymore due to their size. As such it represents where I see most of the opportunity for up and coming value investors. Just my thoughts...

Yup, it wouldn't be right to allow them to foreclose with the roughly 40m they put into the trade.. did anyone read "Confidence Game", great read re: Bill Ackman. Overall Bill Ackman is an awesome investor...

I would argue that the second you pick more than one hedge fund that package as a whole is a Fund of Funds. Buffet isn't stupid I recall him saying that he wanted Protege to reflect what a typical HNW investor would do. Naturally they wouldn't just allocate capital into one fund. GS for example is notorious for doing this. When I was a client, they would keep showing me the various asset class funds which generated returns for the previous year. It would be all dolled up with power points and colors indicating the return for each respective asset class. The one from 2007 is incredible.. 100% wrong on every assumption they made. Good think I never allocated any capital to those funds. Buffet wants to see the net return a Fund of Funds investor would see over time and his argument (which I agree) is that over time because the fees are screwing up the compounding of capital a diversified portfolio of hedge funds (fund of funds) will underperform an index fund. This is a very sound thesis and I hope its proven right. Funds of Funds guys are typically type A Harvard or Yale people who can't choose stocks for shit but are social with all the good stock pickers. They sell access to fund managers basically. Their existence in my opinion is completely unnecessary.

No Twacow the bet is against "Funds of Hedge Funds", if it was purely against hedge funds I would argue that there are several managers that could consistently beat the index. I don't find it too hard myself... But when you add another layer such as the Fund of Funds, Buffet argues that you are really over-time not providing any service because of all the added fees. Protege is not a bad Fund of Funds either, they have good contacts and some of their capital is deployed with great managers. I still think Buffet has a chance here.

I love buffet's frugality, gee I wonder who's idea this was: "The money involved in this bet is $1 million -- sort of. That qualification is necessary because of a present-value factor. Each side originally put up $320,000 as its wager. The total funds of about $640,000 were next used to buy a zero-coupon bond that will have appreciated to a value of $1 million at the end of 2017, when the bet concludes." so buffet... compound interest baby I am with Buffet on this one.

Does anyone remember a few years back, Buffet bet a certain hedge fund that in x years they would not outperform the indices. I am trying to find that bet I think it was for one million dollars. TIA

Packer, come on man. They have debt which is backed by assets totaling $301,060,000. Your EV calculation is irrelevant, besides if the debt would be converted to equity at these levels, my god the company would be generating almost 64m$ in EBITDA. The company has 353 in current assets vs. 77.3 in short-term liabilities, so roughly 280M in working capital. The actual debt is ONLY 240M and it is convertible into shares already, they just have to toggle the conversion price a bit. The remaining liabilities include (warranty liabilities of 29.0M), The company CARRIES NO GOODWILL AT ALL these are all Tangible Assets which I would even argue to be undervalued because of accounting laws. Go build a US BASED Solar Panel business like ENER With $234M which is today's market cap... oh and end up with about that much in cash... I don't think you could. Shareholder Equity is $298M and I believe it is fair. In terms of catalyst, with these types of investments, I look at it differently, whether I think the probability of ENER losing its way into oblivion is a possible scenario. In this case I believe the answer is NO. FSLR trades at 20x (TODAY!) and almost 7x Equity (which includes a bunch of goodwill). This is a Growth Industry, if you believe Solar will be bigger in 10 years than it is today in the USA, than ENER is a good bet. Finally, this isn't a typical value play (geez I find myself saying this all the time on this board) but I just thought I would share it after watching Charlie's extremely bullish position on Solar which I think is quite right. I should add that ENER Debt is trading at a YTM of 18% and has been creeping up over the last 4 months.

Do risk disclosures always scare you this way? You do realize, they are pretty standardized for a public company with losses and debt? Look at the latest, quarter year or year, look at their working capital, note the very low historical market cap, most of their loss is generated because of large debt servicing which I believe can be restructured. This is a growth industry in the USA and will be heavily subsidized as well. You are getting the business for free today, The net cash burn last quarter was only about 7m$ the rest were one time costs and non cash items. Again here is how I see it: A wonderful, US based Solar Energy company trading at cash, generating over $300M in annual sales even in this environment, based in heavily subsidized Michigan burning an amount of cash which they can handle until things pick up. The business, which on a net cash basis is generally OK, is being given away for free. However, the intrinsic value of their technology and durable competitive advantage in the space and in the US is not being reflected in the financials. Will this company be around in one year? Sure. Will this company be around in two years? probably. In that time frame, if things get better or the Solar industry continues to grow, will the shares continue to trade at these levels...? Definitely not. Again, do not forget that in a normalized economic environment the major growth areas will be solar. In such environments ENER traded heavy volume at $70-80 a share. The stock is bottomed in my opinion and represents a good opportunity here. There aren't many good publicly traded solar stocks thats why they generally command a huge premium. Actually, the last time ENER traded at these levels was in 1998 when it had $28M in sales and $26M in Equity. From 2005 until late 2008 the market cap had been consistently over $1b and even 2 and 3 billion. This is not due to 100% hype, in a normalized environment ENER commands a large premium.