rjstc
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Posts posted by rjstc
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25% Cash
All 10%+
BAC Common
LUK
FRFHF
BDVSY
LRE:XLON
EXOR:MTAA
1-2% positions
BDEV:XLON
AIT Corp:XOSE
MKL
BMW Preferred:Frankfurt
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Congratulations! You have done it the right way!
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Anyone like EXOR?
Hell yeah, my second largest position...behind FIAT
No were talking! What price did you get in i just bought 6 weeks ago but see much more upside. Care to share your thesis?
I got in at roughly €16.
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/exo-mi-exor/
I got in in Dec at about 18.50. Second largest foreign position for me also behind LRE. Also have BDEV:XLON and BYMOF which is BMW Preferred. BYMOF & EXOR I got from Parames from Bestinver. Good writeup on the other thread. Thanks
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Can you comment on what the indexes should logically be priced at? Given the earning power of say the S&P 500 and where we are with interest rates, what is your calculation of the intrinsic
value of the index (or even a broad range)?
And if your answer is that the indexes are overvalued by x, I would ask why that changes your behavior in actively picking individual stocks?
80% or less of total market cap to GDP. Ask yourself what the total US Market Cap to GDP is presently.
It does not change my behavior, but my ability to find undervalued opportunities, as they are fewer and harder to find. Cheers!
109.2% 2 1/2% return including dividends?
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In late 2012 I purchased BARRATT DEVELOPMENTS PLC ORD GBP0.10 for 1.88 pounds. It's now about 3.20.
Great trade, Ron! Congratulations!! ;)
Hmmm… I must absolutely enlarge my circle of competence… the more I read the posts on this board, the more I realize that mine is a minuscule, almost invisible to the naked eye!, circle of competence…
giofranchi
Giofranchi; I shamelessly stole this idea along with EXOR, and BMW preferred from an online value conference held online from Europe late last year. Also one on Japanese stocks where some very good ideas came up that I have taken advantage of. For the largest bulk of my funds I do somewhat like you do. Pick smart allocators, put money with them, then sit back and let them work their magic over a long period of time.
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Thanks for adding some color. How do you explain this? The actual unemployment rate is far lower than 40%, i.e. unreported earnings? I think that's quite common in tourist destinations.
What about cities in Spain which are not tourist attractions and depend on non tourist industries?
The higher the unemployment rate, the bigger the share of the shadow economy. Nobody knows which is the real rate, but I doubt that the average is much higher than 20%, which is already bad enough. This is certainly the worst unemployment situation in Spain's recent history. But many older folks have decent pensions, so they help out with the mortgages, expenses. Without family solidarity this would have been much worse.
In general, anything related to housing is indeed going through a 30's Depression, from former workers to owners underwater. People went from owning a new house and a BMW (or a Porsche Cayenne) to asking for food handouts at the local charity. But the rest of the economy is not doing so badly, and in fact, due to the reforms, some parts of it are actually improving or at least accumulating lots of growth potential once the tide changes.
As bad as some things are such as supposedly in Great Britain, I would say things might actually be improving. In late 2012 I purchased BARRATT DEVELOPMENTS PLC ORD GBP0.10 for 1.88 pounds. It's now about 3.20. For a property owner/developer they seem to be coming out of the "Depression". Prices of homes, profits, sales are trending upward.
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If you don't mind me asking what are some of the cheap stock you like in Spain?
Packer
Well today Repsol came up at the top of my screen. Statistical investing does not work that well with megacaps (the markets are more efficient for them) so I will not probably buy it. But in the last few months I've bought and still hold Adveo, Prim and Duro Felguera, bought and sold Vueling for a nice short term profit and also some Portuguese stocks: Corticeira Amorim and Sonaecom.
No Banco Santader?
Nope. I think they are the safest bank in Spain, but I just don't fish in those ponds.
Any thoughts about Panalpina or Semapa? Also curious about how short or long term gains on stock sales are handled in Spain. Thanks
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Maybe I didn't phrase that right - Their moats are probably fine. It's the lending standards that get out of whack.
Banking is very clearly a cyclical business, including WFC. Every 10 to 15 years the banks underwriting standards and risk control degenerates to the level we saw in California in the early 90s, and them again in 2004-2007. It will almost certainly happen again some day. If you bail at the top of the cycle (probably too early in my case) you can buy them back at steep discounts a couple of years later.
Now I understand and I completely agree. I've done that with C and BAC in the early 90s. Oil stocks when the price of a barrel got down to the mid teens and many people thought the glut would last forever. Also during the rolling depressions in different segments of the economy.
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You guys are mostly on the money.
I have a couple of sell regrets. I bought Leaps in SBux, AXp, and a couple of other companies in March of 2009, at their generational lows. Had I just converted the Leaps rather than selling I would have made more on those two stocks than the others I have bought since.
Now, my reasons for selling were likely related to the macro environment at the time, being unstable. SBUX, I bought leaps just under $10 - its a moat. AXP, I bought leaps at the very bottom - the stocks on both are up 5 to 6 fold in 4 years.
I am determined to keep some of my deep value moat, or weak moat stocks going forward.
I have managed to hold RBS preferreds that are yielding around 16-18% dividend on purchase price.
Seaspan is yielding around 12% on pp, so far. Not likely to sell anytime soon.
As to BAC, WFC, And JPM, I see these as return to value/ weak moats. I will hold them until the overall market is very clearly frothy, they are bringing in obscene profits, and we are hearing about
some sector where ridiculous lending is occurring. That should be an obvious point and is still very far away.
Aig I will hold until it is trading on par to other "good" P&C insurers - 1.2-1.3 book at this moment in time, which would be around $80 per share.
Its really hard, patient work to develop good positions. I am more hesitant than in the past to trade what I have gotten to know for something I dont know. I am working on the premise it takes me a couple of years to get to really know a company - this is the area where my greatest all time hits have been. My biggest gains have never come from Graham stocks except where Graham and Buffett merge.
I like your thinking however have one question. WFC. Buffett seems to think of this as a wide moat. Why do you think of this as a weak one.
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Rent the house you own and pay the rent downtown with the money you get from it.
+1 - In the SF bay area in this mornings SF Chronicle there was an article about housing sales. A year ago the medium time to sell was 33 days. Now it's 12 days. Many multiple offers and a number selling within 24hrs. If it hasn't already started in Austin it will soon. It might be a nice payoff soon with rental income in the meantime
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Ditto all the great comments everyone has been making. This is a great site!!!!
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Maybe I'm not thinking about this in the right way, but depending on how you finance this deal, you might be able to make a good return and grow nicely.
It costs $900,000 to buy and if you can get away with only putting up $100,000 cash and have the seller finance the remainder of the down payment and you make $100,000 a year and you can reinvest that in another hotel and then two more... extrapolating out a few years, you might own a few hotels and be making a good chunk of change every year.
Maybe your hotels wouldn't have the best margins or occupancy rates, but if you can make 5x your money in five years and do that multiple times you'd be doing nicely in life. Just a thought.
Morgan,
This is what I was thinking as well. I'm currently a owner/operator in a wellness office. It does well but, it requires me to be there all the time. I was looking to get into something more passive. The wellness office requires me to sell a lot and always be on "stage". I literally have to be "on" every moment to gain the trust and rapport with my clients. Also its not really a scalable business. Reading everyone's messages it seems the only way to make this work is to do it the patel way. Going all in and using the cash flow from the property to put a down payment in other ones. Keep rinse and repeating. I don't have the network that patels have like their family and relatives. Only way to make this work would be to use management services which would give me a rate of return of about 6 percent :(.
Thank you for all the suggestions guys! This board is awesome!
I was attracted to your comment of looking for a passive investment. I can't think of any better passive investments with more stable long term attributes for putting $1000000.00 than BRK, FRFHF,LUK,BDVSY, or maybe a few others mentioned on this board. Or hire an honest, shareholder oriented manager to run your money. I think maybe the founder of this board, or Francis Chou,or a few others.
I think you'd sleep better, worry less, and profit pretty decently.
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my 2c. I've known people that have owned hotels, & motels. Be very sure you are looking at clean books. If the profits aren't good enough to really pay management well and you can't be around much then watch out. Like small bars they are easy to skim from. Then it becomes a real headache. Who is going to be able to spend the time to clean things up if you can only be there 2 days a month?
Require that management has “skin in the game”. The people who work with me know that, if services are not delivered in time, they won’t get paid, if (big) mistakes are committed, they won’t get paid, if 20% of all the revenues that come in don’t stay in the company for me to invest, they won’t get paid.
Of course, even this way, I check on them every day! ;)
giofranchi
“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
how did you build that expectation into your culture ??
Well, a few reasons:
1) First of all we are small: practically, I give work only to professionals, who do all the work: we have no secretaries (except one, who works half-time), and I do all the accounting (with a little help from a friend of mine, who is an accountant).
2) Through “unpleasant” examples: in the beginning I had to fire a few people who weren’t aligned with my way of seeing and doing things. Others left soon afterwards. Those who remained are a great team and still happy to work with me.
3) Through incentives: they are almost completely free, and enjoy very flexible work hours. They just know the quality of the work they have to deliver and its time schedule. It is up to them to manage their time and work. If they are able to deliver a higher quality work, in less time than it is required, they enjoy economic benefits accordingly.
4) Though I am not sure about that, I cannot rule out it also helped the fact that in Italy we have been through 5 recessions during the last 10 years… And the professional man was hit particularly hard! So, it might have been easier than usual for me to find the very few people aligned with my way of seeing and doing things.
giofranchi
“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Thanks
That took some capacity for our suffer in the beginning. But I think freedoms key also those that left or fired are not worth anyone's time. I think your incentive structure build quite brilliantly and would have worked in any environment. Maybe a bit harder in a good environment with the temptation of money. But who love what they are doing would value freedom more than compensation and will take most importantly take pride in the what they do. In the end doing good work and contributing to society.
How did this emerge? Or did you just think about this for some time and just applied it?
Also how did you do compensation?
Well, I don’t really believe in business plans… It just emerged through trials and errors. I knew from the beginning that my goal was to extract as much capital as possible from a “poor” and “unpredictable” business, then to deploy it into “great” and “very predictable” businesses (at good prices). Every time I encountered something useful to achieve my goal, it stayed with me. Every time I encountered something that hindered my goal, I threw it as far away as possible. Something got shaped out of this process. And it is still reshaping itself every day!
Compensation is very easy: we have two bank accounts, the first I call the “bank account for operations”, the second I call the “bank account for investments”. Every time a client pays us, he/she deposits money on the “bank account for operations”, right afterwards I shift 20% of that sum to the “bank account for investments”. If I cannot find anything sensible to do with that 20%, it stays in cash. But: once on the “bank account for investments”, it will NEVER go back to the “bank account for operations”. Of course, all costs must be managed through what’s left on the “bank account for operations”. If costs are less than what’s left on the “bank account for operations”, then we are all happy, and the surplus will be distributed among the company and the professionals who work with me. If costs are higher than what’s left on the “bank account for operations”, the professional who work with me will receive a lesser compensation, and will have to wait for a better month, when the company will be able to refund them. Truth be told: the second instance, fortunately, has happened very rarely.
Sounds silly?! Well, you asked…! ;D
giofranchi
“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
I like it. Everyone knows the rules ahead of time. It's open to see. Disciplined. Fair to everyone. The only question I would have is if someone leaves, what happens to their portion of the 20% in the investment portion. I'm sure you have a good system Gio. Just curious how you handle retirements, etc. ron
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my 2c. I've known people that have owned hotels, & motels. Be very sure you are looking at clean books. If the profits aren't good enough to really pay management well and you can't be around much then watch out. Like small bars they are easy to skim from. Then it becomes a real headache. Who is going to be able to spend the time to clean things up if you can only be there 2 days a month?
One other thought here. Does the net include the current owner/manager salary? If his salary isn't shown in expenses non on site owners net will not be 120-150000.00. Also will be pretty hard to re-sale I'll bet. How long did current owner have property? I look at least 4-5 years tax returns. In Calif. I also look at property taxes to get an idea what they paid for property by working back from their current property taxes you can get a ballpark idea of what they paid.
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my 2c. I've known people that have owned hotels, & motels. Be very sure you are looking at clean books. If the profits aren't good enough to really pay management well and you can't be around much then watch out. Like small bars they are easy to skim from. Then it becomes a real headache. Who is going to be able to spend the time to clean things up if you can only be there 2 days a month?
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Parsad; I am not able to make it. Just wondering if there are videos of any of these that are taken that can be gotten?
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+1. For the most part that's the way I've evolved also. Stick with good people, BRK,MRK, etc. Also I've found that ideas by TWACOWFCA, Parsad, Ross812, and a few others on this board have been really good with egos not getting in the way, just good rational, (About Stocks) ideas and discussions. Gio I include you too about great thoughts and discussions.
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txitxo " Well, you have García-Paramés, but he is from Galicia, the Spanish Celtic fringe (where people are famously tightfisted)".
They seem to have done pretty well using Graham/Buffett style. You seem to have knowledge of them so are they good in your estimation?
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Think of the market as a zero sum game like a coin flipping contest. Your portfolio is $200, half in cash and half in market index fund. Frictional costs and interest income are small and disregarded. Mister Market flips heads and the stock portion of your portfolio doubles. You now have a portfolio value of $100 cash +$200 index fund = $300, and you rebalance to 50:50 by selling some of your index investment. You now have $150 in cash and $150 in index fund.
Mr Market's next coin flip is tails. The index fund and your $150 investment in the index loses half its value. The value of your index fund investment is now $75. The value of your $150 in cash is unchanged. The value of the market index is now back to exactly where it was before the coin flipping game began, but the value of your portfolio is now greater, $75 + $150 = $225 , compared to the $200 portfolio value when the game began. You rebalance to $112.50 cash and $112.50 in the index fund and wait for the next coin flip.
This is a very pleasant game to play. :)
The reason, why I hold twacowfca is such a high esteem, is that he has the rare gift of making you see things under a light you have never seen them before. I guess it is the trait of a true teacher, the one only a few people, like Mr. Buffett, Mr. Munger, Mr. Kahneman, Mr. Taleb, Mr. Herbert Simon, Mr. Michael Lewis, Mr. Malcolm Gladwell, Mr. Dan Ariely, and few other authors, can truly claim to posses. :)
giofranchi
You are too kind in your remarks. The truth is more like the scene of the appearance of the Old Guy waxing his car with circular motions in the movie, The Karate Kid, when the student is ready: "Karate is really simple. Wax on. (clockwise motions) Wax off." (counterclockwise motions) , demonstrates The Old Guy.
When wisdom is ready to be received, it will appear. "Seek,and you will find." Knock, and the door will be opened. Ask, and it will be given." :)
Sounds a lot "Being Rational". Which is where you want to be when investing & where I think twacowfca excells.
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I loved the new name of Benny (Bernanke) & The (Ink) Jets!!! Describes our central bank perfectly. Thanks for posting Giofranchi
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:P
I understand. I have a brother who is an engineer in the wood products industry. He built plants for CZ, then Plum Creek. Smart, smart guy. But he gives you a blank look when you are discussing something other than MDF business etc.
Well, I guess it was in “The Forgotten Man” that I have read Mr. Mellon disliked Mr. Hoover because: “He is too much of an engineer.”
Engineers might be very smart and very good technicians, but to invest successfully you must first of all be “wise” and be a “deep thinker”. I know very few engineers who qualify…
Of course, enoch01 and I are wonderful exceptions!! ;D ;D ;D
giofranchi
Absolutely!! ;) :o ;)
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I would also point out that Marks has described the current market as neither high nor low. In any case, I have cash incoming for any drops in market prices, so I can be full in without too much of a concern for them.
What kind of entity tricks its citizens into paying higher and higher prices to buy stocks?The Baupost Group on the morality of the Fed
Fortunately, my firm also generates fcf that I can go on investing, whatever happens to the stock market. But, its yearly fcf is just 12% to 15% the capital I have invested in the stock market. I believe my firm’s investments will do significantly better than the market, should any correction come. But a 30% decline in general prices would anyway mean that the fcf generated by the work and efforts of an entire year will be wiped out… Not so sure my partners will enjoy the ride…
giofranchi
And yet that would be the perfect time to add to your positions. I think a perfect example to point out to your partners is as bad as it was a few years ago look what a buying opportunity it also turned out to be if you had cash available. Are the partners family or private investors? Sophisticated or not?
Both family and private investors (mostly friends). And not very much sophisticated... they are all engineers... ;D
Really, I have control on my company… that’s not what worries me! I just don’t like to be “all in” all the times! Do you know of any Poker player who plays that way?! ;D
Dry powder is important. Cannot believe otherwise…
giofranchi
I understand. I have a brother who is an engineer in the wood products industry. He built plants for CZ, then Plum Creek. Smart, smart guy. But he gives you a blank look when you are discussing something other than MDF business etc.
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I would also point out that Marks has described the current market as neither high nor low. In any case, I have cash incoming for any drops in market prices, so I can be full in without too much of a concern for them.
What kind of entity tricks its citizens into paying higher and higher prices to buy stocks?The Baupost Group on the morality of the Fed
Fortunately, my firm also generates fcf that I can go on investing, whatever happens to the stock market. But, its yearly fcf is just 12% to 15% the capital I have invested in the stock market. I believe my firm’s investments will do significantly better than the market, should any correction come. But a 30% decline in general prices would anyway mean that the fcf generated by the work and efforts of an entire year will be wiped out… Not so sure my partners will enjoy the ride…
giofranchi
And yet that would be the perfect time to add to your positions. I think a perfect example to point out to your partners is as bad as it was a few years ago look what a buying opportunity it also turned out to be if you had cash available. Are the partners family or private investors? Sophisticated or not?
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I forget. And I'm only 66.
Do you hedge currency exposure for foreign stocks?
in General Discussion
Posted
Like Oddball I own Japanese stocks thru their exchanges, Great Britain stocks thru their exchanges and German and Italian stocks via the Euro. I personally don't hedge any and have done all right.
For instance in GB one stock is up 60+% and one is up 2% since I bought not counting dividends. German stock up about 17% not counting dividends, Italian stock up 20%, Japanese one off 15% and one doubled. So in my case currency fluctuations I don't believe have hugely impacted me. Also except for LRE they have all been held for less than a year.