Valuebo

Best match ever!

Let's just hit S&P500 2500 and get it over with.

If you make the scale logarithmic and the function is a straight line it means the rise is exponential. It went from 100 to 63k in 4.5 years. Compared with a year ago it's increased nearly 8-fold. https://blockchain.info/nl/charts/n-transactions?timespan=1year&showDataPoints=false&daysAverageString=7&show_header=true&scale=1&address= Hu? Hardly 8-fold and not even close to a double. I don't see why the first 3.5 years are relevant if this growth has vanished over the last year. You would at least expect a few hundred thousands transactions by now to keep up with the exponential growth no?

+1 Don't see it either and didn't bother reading further after glancing over their latest quarter results.

Here you go: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/dhandho-holdings!/

I can understand if you don't short based on valuation alone anymore, to each their own. :) But if CRM has such a wonderful business with amazing software, why is it so hard to make a profit to go along with that amazing growth? (To add to my CRM rant:) That amazing growth is also slowing down as they get bigger and I don't see this changing with competitors stepping up their game. Take this piece from today on seeking alpha: http://seekingalpha.com/article/2209263-why-salesforce-coms-future-growth-is-already-factored-in#comments_header So to come at a valuation between $43 and $65/share, they have to compound revenue growth at almost 25% for 5 years and then grow FCF 15.5% for the next 15 years (we are talking about 2034 here..). Average operating margin will somehow have to pop up to 12.2%. Maybe that will come from scale benefits that you can't have at $4-5B but suddenly appear at $10B? I don't know, just guessing what they are hoping for here... Among other things, I don't see them accounting for future stock dilution either. With organic revenue growth at only 25.7% excluding ExactTarget for financial year 2014, I'm simply not seeing how this is even remotely likely. Seems like a classic case of tweaking the valuation to match the stock price in order to run with the pack. Well, at least they don't assume it's worth even more!

I did think for myself, and it seems if you look at risk/reward ratio, shorting seems almost always irrational. Seems you either have to write calls (taking large downside risk vs limited upside) or buy puts (having to time market) , or outright short a stock (large downside risk vs limited upside)? Im talking about outright shorting one stock you don't own, and not pair trades or things like that. Only thing that seems worth it are buying puts if there is a definitive time limit that is not priced well into put options. The timing aspect should be less of a factor if you buy the longest dated put options. Buying jan '16 now and rolling them over to jan '17 in a few months should give enough time for your thesis to play out given that we would be 8 years into a raging bull market. Sure the market can stay irrational longer than you blabla... Oddly enough some people have no problem buying shorter term bac calls (after a 200% run up) while cloud company put leaps could offer the same returns with the potential to a lot more. Am I nuts? Please confront me! TIA. :)

Tom, please read what I write with carefulness, before you quote and answer my post… Read very well line number 3 of my post and think it over a little bit… I am not only quoting… I am giving you my daily experience… working with many entrepreneurs, engaged in many different endeavors! Then, of course, I am also pleased by the fact that, studying the methods of the best entrepreneurs present and past, I find proof of what I experience every day. ;) You think Mr. Watsa didn’t live up to the test? Well, then put him among those 4 or 5 out of 10 that under delivered! Imo it simply makes no sense at all! Gio Gio, I'm glad that you work with many entrepreneurs but I believe that is true for a lot of people here. I have yet to meet anyone who puts as much weight on management to make an investment decision. I would even argue that it trumps valuation in your assessment of companies. Of course capable people are running companies that are doing well, they wouldn't be there if they weren't talented! Top management generally is at the top exactly because they have a flawless track record. Talk about survivorship bias! You don't think there are many managers capable of running 99,9% of the companies out there if leadership has to be replaced? The world is filled with talented people but we have a tendency to praise those people in successful companies because something called attribution bias. Sorry to say but in the real investing world your daily experience with business people will barely mean anything. What makes you such an outstanding judge of character that millions of others in the field clearly lack? Buffett and a few others are prodigies with a lot of connections so please don't mention those again, I beg you. Also, you would profit a lot from some books on why companies and people fail, not on why they succeed. I have read your posts with great care. If I have to base myself on your reactions, I'm not entirely sure whether you do the same. You have a general tendency to counter every argument with generalities about partnering with good management, looking at the long term, etc. and dropping some heavy quotes (and your daily experience, although I'm not entirely sure what value that has in this context, especially since it is all so vague...). I could go on and on but I honestly just don't see the point if you are unwilling to at least consider some of the counterarguments. Maybe you can find some value in jschembs new topic: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/confronting-behavioral-biases/msg170773/?topicseen#msg170773 I know I will! I hope you don't mind but it's unlikely I will reply often to your posts in the future as it clearly leads nowhere for both of us. Tom

Tom, I focus more on ownership + management, than on management alone. I do so because I experience in everyday business life the difference it truly makes. And, as I go on studying the methods of great entrepreneurs of the past, I find they had very similar experiences about the importance of partnering with great people. Have you read my last quote on the thread about George F. Baker? ;) Be sure that also Mr. Buffett agrees! 3 out of 8 great entrepreneurs profiled in “Outsiders” he invested with, a fourth was he himself, a fifth, Mr. Singleton, came just a little bit too early! ;) This doesn’t mean you will do awesomely all the times… No one knows the future, right? But if the people you partner with truly deliver what they can achieve 5 or 6 times out of 10, we might get very rich indeed! ;) Cheers, Gio My whole point is that Prem, who you label as a great business man, hasn't lived up to the expectations and has a history of overpromising and underdelivering instead of the opposite (which you value highly!). You are simply choosing to ignore those facts and are guided by hope. You can't just throw around some quotes and show how Buffett (only one of the very best investors and business men ever with a wide stable of connections!) did well by picking great people to prove your reasoning. Of course anyone will agree that this is a sensible way to go if one is able to pick those people as needles out of a haystack! The hard part is being right on who those great people and not being late to the party. In Prem's/Fairfax' case, you might be way to late if you're goal is to compound capital at 15%. Honestly, am I the only one thinking like this? :o Sorry for being so blunt about it. I simply think it's a shocking way to think about investing and business, no offense. That doesn't mean I deem it entirely unlikely that Fairfax does indeed do very well in the future. Given history, I just don't rely much on specific return guidance anymore.

They paid more than two times book value on the assumption that the good times would continue forever. Yes, Prem did make some big mistakes back then but anyone who was buying at such a multiple was betting on returns that far exceeded market returns. Prem did relatively ok despite these errors but that just wasn't good enough to justify the '97-99 stock price. Therein might lie a valuable lesson for people like Gio, who focus on management. Prem has always been very willing to show off the superb results of fairfax, which of course hasn't helped in tempering investor expectations. Take this example from the 2000 letter: I've heard Gio talking about underpromising and overdelivering management in the VRX thread. Well, this seems to be quite the opposite! If this doesn't shake your beliefs, I don't know what will! If his target was 20% annual return back then and it's 15% now (since some time I might add...), I'm truly wondering whether he'll even get close over the next 10 years. Given this, I would be selling now at 1.25xBV, expecting to do better myself.

Garychen17: Prem's responsibility is value, not price.

They (the shareholders you are asking) like the price if they choose to hold (unless they do so only for tax savings). Otherwise, it's all too easy to sell and go to cash. Just as easy in fact as having cash and buying the shares at the same price. So how is that any differnt? Buying vs holding? Other than taxes and psychology, they are the same bullish sentiment. Having cash and buying is basically the same vote of confidence as holding and not selling to raise cash (other than taxes and psychology). This imo makes no sense at all… there are a lot of reasons why someone might just hold a business. In fact the great majority of business owners just hold their businesses. But you are traders… Ok! Yet, I still believe the more you trade the more mistakes you will make in the end. So, please go on: jump in and out of FFH! Good luck to you! :) Please, consider this: if the markets are in for a correction, FFH BV will explode (today’s BV multiple basically won’t matter!); if the markets keep getting more and more expensive, FFH will be a mediocre investment. Therefore, why won’t you keep some funds invested in FFH and some other funds invested elsewhere much more correlated with the stock market? Are you so sure about what the market is going to do next?! ;) Gio Huh? How are you deducting that they are traders because they think that holding a stock equals buying it in terms of sentiment towards said stock? There is only one rational reason to hold a business and that is because you assume it will be a profitable endeavour (by increase in IV or pay out of earnings). If you hold a business at a certain price that indirectly means you believe it's at least worth the price it is trading at. If you do not believe that, you should sell it. Re FFH: No one is sure what the markets are going to do, which is exactly why some will argue that you shouldn't hold FFH simply because it could have additional value IF the markets crash. Some deem it more intelligent to buy those businesses that are already trading at a discount to IV and are not dependent on market events. It's an endless discussion.

I own lots of CRM puts and a handful of WDAY and LNKD puts. Also had some puts on some others but those are either sold or expired worthless. I'm already well in positive territory but expect these names to ultimately trade at a fraction from where they are now.

Sold some WDAY puts for a near 10-bagger. Still hating that I didn't get those other puts last week. Bought some short term Linkedin puts around opening with fraction of profits. Glad someone finally stepped on the sell button on CRM. N earnings tonight could move it another way quickly however.

Hehe no worries oddballstocks, I was just poking fun at our latest forum habit of almost randomly posting quotes of great thinkers. Sometimes correctly and within context, something completely off (IMO). I saw your post as a way to lengthen the silliness of this topic! ;) Great weekend to all!

Telling what buy or sell on any given day can be informative and spark discussion. I must be missing the joke here! "Invert, always invert." Right guys? Right?

Sold more of my OTM WDAY puts today. I bought some more earlier last week but was too soon. Further orders didn't fill. :( Still holding some. Netsuite earnings on monday...

Yes, it was Outliers. Good book. He even talks about how the day you are born has a decent effect (10-12% difference from worst to best) on your school results.

"Twice a silly price is not twice as silly; it's still just silly." Good point! But it does increase your potential return greatly! Interesting to see that he has taken a short on the momentum stocks as well. I wonder whether he took it before or after the recent little plunge. What is interesting is that despite there is "general consensus that we are witnessing our second tech bubble in 15 years", short interest on all those stocks is the lowest it has been in the last 5 years (and possibly even since the dotcom bubble!) There is definitely fear in the market but just on the short side!

Thanks. Another one to watch in the fitness! (Yes I'm serious. I started doing cardio on a bicycle and instead of watching mindless tv shows I watch youtube interviews on my samsung s3. I get the occasional look but hey, it saves a bunch of time! It also forces me to do much longer workouts.)

Ha, reminds me I bought the book in Thailand for 125 bath. Still have to read it. I actively lessened the amount of time I look at management and just focus on business and numbers more because there are too many biases and other irrational thoughts that can distort your objective view on a company. This leads to picking stocks for the wrong reasons, overpaying, confirmation bias (meaning you'll ride it all the way down), ... Thing is, the (management) world is filled with capable and intelligent people so it's very hard to detect who will come out on top and why. A good chunck is luck anyhow.

Mine was a rhetorical question…! There is no doubt it is better to have cash, which has not depreciated, than to use a currency which instead has depreciated, like the price of my 4 investments… and a market correction hasn’t even begun! Anyway tombgrt, listen, I don’t jump in and out of stocks. I want to increase my holdings of those 4 investments of mine over time, not decrease them. And at the same time I want to be able to seize any great opportunity that comes my way. To hold some cash makes it easy to achieve both goals. If on the other hand you think you can “move around the level of portfolio concentration and leverage and focus on certain stocks depending on market conditions”, well… then good for you! I have some difficulties even to understand exactly what you mean, let alone implementing it! That’s why I don’t like math in investing, even if I am an engineer and I have always loved math and always been very good at it: because I want to keep it as simple as possible, in business I have yet to find something difficult that works well in the end. ;) Maybe you are right about VRX. But you also know that, when the price is a fair one, I pull the trigger. Then, if I get the chance to, I average down as long as I might. I will start buying around $100-110, and go on buying to the $60-$70 range. Gio Well Gio, that's what the whole discussion on holding cash and timing has been about no? The whole point is that you can't know what the stock market will do. So while you hold cash, other guys are shifting resources from more expensive to cheaper things and making a killing. If a correction comes they will suffer more but they will just keep allocating to the cheapest things they can find. When the market tanks they do the same as the one who has cash to deploy, getting a better expected return on their portfolio. Difference is that they do it all the time which is not a bad thing to do as cash has a very high opportunity cost in the stock market. Btw, I really don't get your fixation on keeping every share of your main holdings. If I'm not mistaken there also isn't any capital gain tax in Italy? Yes, those shares are pieces of real businesses but I'm in business of getting wealthier, not in the business of collecting a virtual museum.

FIRST: --2012AL Besides, look at the numbers at 2013 year end: $48 billion of cash, or 21% of equity; $29 billion in bonds, or another 13% of equity; they also have businesses that bring in almost $24 billion of new cash each year, or 11% of equity. Have you ever tried to put together a portfolio that yields 11% in cash and still can grow in value over time? I have! And have come to the conclusion that without leverage it is almost impossible! When people say “I am in Buffett’s camp”… My first reaction is to think: “No! You most definitely are not!” ::) SECOND: In business I experience quite often that it is much better to do nothing, rather than to embark in any venture that presents itself at any time. In business there is certainly no such thing as “a constant flow of good opportunities”… I have just an extremely hard time to believe that the stock market, which is a market of businesses, works so much differently from business itself, and always has to offer some good opportunities. ??? THIRD: Presently I run a very concentrated portfolio: FFH, LRE, ALS, and BH. They have all come down and I think they all are cheap. Yet, VRX and ENDP, which I like, have come down much harder and are approaching my target price for buying more and do so aggressively. If you were in my shoes, would you prefer to have some cash on the sidelines to purchase VRX and ENDP, or be forced to sell some of my 4 investments, even though they also have come down and I think they are cheap? ;) Gio Easy: being invested fully! You just move around the level of portfolio concentration and leverage and focus on certain stocks depending on market conditions. You are NOT doomed to underperform someone who has cash on hand even if he times the market perfectly. That's why I prefer not to own say GM WTB now if normal stocks give me the same upside but better downside protection. I can always sell a normal stock position for a big loss only to buy something leveraged (like GM warrants) at even better prices. It's exactly what many here have done in times of market distress. There are no extra points given for holding core holdings no matter what. Psychologically it can also be easier to load up on things if that money is already in the market anyway. Btw, If you believe even half of what Prem has to say I would hold on dearly to my FFH shares and hope to pick up VRX much much lower. No need to rush things as it is one of those stocks that could drop much further. Don't expect it to sit on $100/share if you think the S&P500 can see the 1500-1600 level. Just my two cents.

Interesting. I'm wondering how conservative those numbers are. Even if they are bullish you still stand to make a fortune through warrants/leaps unless we see a severe market downturn.

Uh oh. What we have seen the last few months: new stock market highs, big mergers, record week for IPO's since 2007 market peak, bubble territory in specific sectors (now coming down but still!), forum members (! not your average joe right?) talking about cheap ways to leverage, margin debt (logically correlated with market levels but still) at peak, Berkshire holding ~$50B, ... This year one relative finally decided to jump into the market through a fund after sidelining for most of his life. This person didn't even have stocks in '07-'08 and generally only put money in savings accounts, very risk averse. Sure, this is a very selective data point but I just see it as another sign given how extreme this decision is considering his personality. Guys like Hussman and Watsa aren't idiots either. They still have great long term results and as always these guys are likely to regain past glory. I'm not so sure about guys like Bill Miller! I'm not saying that I believe a huge correction is coming but at some point we will at least see overvalued parts of the market correct fiercly (a hell of a lot more than we have seen until now I mean), bringing all else down a bit as well. What we have seen until now is just a skittish but still very greedy market IMO.