rjstc

This is a good point about the criteria being a tough filter. Cundill mentioned you couldn't find something that would match the list completely. BUT it would really make you think.

Two people that I got some very good ideas from is 1) reading a lot about Irving Kahn and using his investing checklist. 2) Peter Cundills' book There's Always Something to do. He has a very long list and using it really helps me filter out a lot of noise and has kept me out of a lot of marginal or lousy stocks.

It's interesting to look at YTD vs last 12 months. I bet most are up for last 12 months and happy, vs nervous about YTD record. Question is will this be normal type dip which creates good opportunities, or will it be a real big dip like 2008 that really spooks but also creates huge opportunities? 2008 taught me not to put all my cash to work on normal dips because the trend can keep it going down a lot further.

First, thanks for the Howard Marks link. I enjoyed. I'm a fairly new poster but have been reading for a while. I think the two or three guys who are obviously big fans of LVLT should be able to rant all they want on the "Investment" board on the LVLT thread. I went back a while and found they have been at it quite a while.Almost like a mutual support group. If we don't want to read, then we can ignore. I've posted a few times on that and what I've noticed is if you disagree or try to show a different side you'll be shouted down or ignored. However as long as they stay on that one thread then that's fine with me. Also, I got some very good ideas when I first started reading here. It has seemed that some of the people who I thought were really interesting and provided some real thoughtful insights have either stopped posting or really scaled back. Lately there seems to be less of that and more arguing and sniping. My two cents for what it's worth.

Thanks. Better than me. I have been buying Nestle for about the last six months. I assume ? techs in US and what Energy stocks do you think are good? I own COP now. Sold out a month ago or so of ATPG. Just bought some HRT through Canada. Sold out of BBEP.

I agree. Would you buy now or wait a while? Price you pay determines return. I checked earnings forcast with Schwab and Credit Suisse and they were about $3.70 for 2011. Suisse also mentioned weak dollar vs strong Franc in last month has hurt value by about 8%.

Good article. Thanks

If you had been an investor for 39 years and the first 29 you had been with Century and very pleased but for the last 10 years you had the record that they have posted on their site how much more patience would you say you should have? Could possibly some things have changed that is reflected in the last 10 years record that were not quite the same in the prior 29 years? Would you or they be satisfied with this record if this was Buffett, Berkowitz, Watsa, or yourself doing the investing? Would Buffett hire this firm to manage some of his money? With that said, I really do like many of the stocks he is buying now. He just may turn his recent record around. He is a really decent man. I have talked with him before and he is I believe a really honest and caring money manager. BUT. The proof is in the numbers and for the last 10 years (By their own web site) they don't seem to be cutting it. If you had given him money to invest 10years ago saying he had just started a money management firm would you be still with him?

Just curious. If you were an investor and started investing 10 years ago and had this kind of a record if you would call this very good? Your return net of fees S&P 500 adjusted 10 yrs 5.08% 3.25% 5yrs 0.05% 2.54% 3 yr 1.39% 2.26% 1yr 11.73% 15.29% This was taken from CM Value 1 from the Century Management web site. Irrespective of the great long term history of this firm, have many members of this forum done better than this for the last 10 years? I know I wouldn't have been very happy with myself if this is all I could do.

Been buying MSFT, thinking about HPQ, as an aside also have been buying CSCO, INTC. Hoping the market gets it butt kicked so everything goes back down and I can add to these and others at better prices. I'm about 50% cash and have been waiting for QE2 ending or some other catalyst to drive things down.

Politicians know that with deflation you'll be voted out of office. With inflation everyone will complain but they will still have jobs and the politicians will still have theirs. Inflation will wipe out the debts. Somehow or other the politicians will find a way to keep their jobs. Both here and in Europe.

I recently have done just that.

Aren't there plenty of second and thirds into the game that still make a lot of money? Droid comes to mind as an example.

I agree he sure does and I'm sure as good as he is he'll do well for himself and his investors. I guess my thought is Buffett as an example really try's not to get involved in operating company management and stays in his area of expertise which is capital allocation. For Berkowitz his is stock picking and such. I just wonder if he wishes he didn't have the St. Joe distraction.

Biaggio; Thanks for posting the metrics you saved. That is a great list.

On a recent interview on I think Reuters one of the top commodity guys from Goldman Sachs said that the market had gotten ahead of itself and they feel the price will resume going up within the next 12-18 months if not before.

Thanks all for the posts so far. Ron

I agree. Sometimes they go outside their main expertise though. I think there are enough pure plays that he is better at than St. Joe. Ron

. I hope this isn't a stupid question but is the "price per user" metric generally considered a useful way to look at acquisitions? The last time I remember seeing it used was back in the days of the dotcom bubble. That period traumatized me so much I've stayed away from tech stocks ever since. Nah it's not a stupid question. The metric is useful because there isn't a more useful metric. Generally speaking, some metrics are really powerful indicators of intrinsic value, like earnings power or book value, but in many cases these metrics don't apply. This is especially true with nascent high-tech businesses; most of the value is captured in things like IP (which has a book value of zero, ignoring patents and acquired goodwill) or other intangibles like users, audience, etc. Users can be a useful comparison because an active user base is the foundation for generating revenue. We can intelligently use these metrics to our advantage. Or, we can be idiots and repeat the same mistakes from the dotcom era. Clearly, applying revenue stats from AdWords to Skype is going to result in unrealistic expectations - this is a terrible match. Indeed, comparing Facebook's valuation to Skype's based on user count is also a weak comparison. However, applying YouTube revenues and stats to Skype will probably reveal much more about the earning power of this asset. Today, YouTube brings in about $1bn in revenue for Google. The form of this revenue is primarily in advertising - preroll ads (15-30 seconds before the video starts) and overlay banner ads. There are other forms of advertisement included in this number which I can't tease out, so we'll say $800mm of that is attributed to these forms of advertisement, both of which are both applicable to Skype (at least the video calls). So assuming similar click-through rates and advertising interest that Google sees, we can value Skype's earning power from advertising today based on the number of minutes people spend on Skype. For Google it's something like ($800mm / 365) / 2bn minutes per day = $0.00219 / minute. About 1/3rd of Skype calls are video calls, so our proxy for Skype's potential revenue there is $0.00219 / minute * 207bn minutes / year * 33% = $151mm / year. Adding to that the $860mm they make to date on non-ad services and we get to a base revenue potential of about $1bn / year on current usage. I didn't really set out to try to value Skype when I started writing this... I just wanted to illustrate that valuation from non-dollar metrics can be pretty useful. Of course, now that I've done all the work, I kinda like the result. A greater % of calls will be video based, and assuming Microsoft can add context to the user or the call, then we can expect CTRs that are better than what YouTube enjoys (they suck). The other point worth noting is that Google has to shell out for all of the bandwidth for all of those videos. Skype, being P2P, does not. Because of this, Skype has the potential to be significantly more profitable than YouTube. VAL thanks for putting some numbers and thoughts on what my question of May 10th was asking also.

Cashisking; Don't know numbers. Way over my head, but this is a little more info from Business Insider. It's not often that a post on a government blog could be considered "actionable" for investors, but this is interesting... The Treasury Department has put up a post about the politics and cost of a repatriation tax holiday -- letting companies move a bunch of cash from overseas accounts back to the US without paying a ton of taxes on it. The general tone is negative, that such a tax holiday would be costly, and with little benefit, but Citi's Steve Englander detects some important wiggle room. We sent this trade recommendation out, recognizing that we might be early to this trade, but also feeling that some political momentum was beginning to emerge that favored HIA, either as the Administration prefers, as part of comprehensive corporate tax reform, or as US House of Representatives’ Republican Majority Leader Cantor suggested recently, as an interim measure while broader tax reform was debated. Today's comments on a Treasury blog by Treasury Assistant Secretary Mundaca were viewed by many as a hardening of the Administration line but his conclusion reiterates the Administration's willingness to deal: "The tax treatment of overseas earnings could be considered as a part of broader corporate tax reform, but as Secretary Geithner has said, it would not be sensible to consider a repatriation holiday outside of that context." As a footnote, the Bush Treasury was no more enthusiastic about HIA-1 in 2004 than the Obama Treasury is about HIA-2 now, and on largely the same grounds. However, it was very attractive to the broad business community, caused direct pain to no one and had considerable Congressional support. If this does happen, the potential impact for investors could be significant. The tech industry has a ton of cash parked overseas that it's just sitting on for lack of good investment opportunities (think: aging giants like Microsoft, Cisco, and Intel). Folks have been clamoring for them to pay more in dividends, noting their huge cash piles, but the tax repatriation issue is an impediment. Take away this barrier, and suddenly a world of dividends, buybacks, and acquisitions opens up. Read more: http://www.businessinsider.com/treasury-blog-post--repatriation-tax-holiday-2011-3#ixzz1M9KOjTAg

Plynch; I agree he is one of the best. I've been with him a long time and been very happy. Same with Mason Hawkins.

I have owned Fairholme since he first started the fund and Larry Pitowski and Keith Trauner were with the firm and they had less than $1Billion in their fund. I am bothered that Berkowitz is going from a tried and true record of good stock picking only, to getting into an operating company (St. Joe) situation. I don't like him getting bogged down that way even if he says he's backing away now. There are some good thoughts on this board. What are some on what's been going on lately. Thanks

Val; Thanks for your thoughts. I'm not the greatest with numbers. Would need a CPA or someone smart in this area. This generally was what I was suggesting might be some of MSFTs rational. Rather then just reacting negatively about the purchase price and the fact that Ballmer is an airhead I was trying to ask what some other dynamics might be behind all of this. Most everyone (not just on these boards) seem to be gagging over the price. It does seem high but maybe this makes it seem a little more palatable. Of course in the long run only time will tell. It may turn out to be a stupid purchase or maybe not. But even if they end up writing off the whole deal it doesn't seem to me that it kills Microsoft. In fact if it doesn't work maybe they get rid of Ballmer and put someone in who will do a better job. Maybe that would be positive. I have to believe there is a lot of serious private money invested in this company that would start putting a lot of pressure on people if he really screws this up. By the way. I do have a big position in MSFT that I have recently purchased but before this announcement. Here is some of what I was trying to ask such as subscriber aquisition costs or possible tax implications and reasons. (1)From Business Insider 5/11/2011. Big news yesterday was Microsoft's acquisition of Skype for a striking sticker price of $8.5 billion. Most people stopped at the price, expressing surprise that Microsoft could spend so much money for a company that had recently been spun out at a $2.5 billion valuation. But here are two numbers that explain the logic behind the deal: $14.7 and 50. What do they mean? $14.70 is what Microsoft paid per user for Skype, according to Atomic Inc. When eBay bought Skype back in 2005, they paid $45.60 per user. So Skype's price went up, but its price per user went down. Another way to look at it is that when Microsoft invested in Facebook at a $15 billion valuation, a move then viewed as an act of desperation and now recognized as a masterstroke, the social network had less than 100 million users, which works out to more than $150 per user. Comparatively, Skype is a bargain. 116 is the number of days until Microsoft makes the money back in operating cash flow. Microsoft had $26 billion in operating cash flow last year. So $8.5 billion works out to around 116 days of cash flow for Microsoft. That money would have been rotting on the balance sheet anyway. Given the possible synergies between so many of Microsoft's products--Windows Phone 7, Kinect, Lync, etc.--that's cheap. Of course, it's all up to good execution whether those synergies can be accomplished, but even the option on them is worth that kind of money. (2)US stocks rallied on Tuesday, and some folks tried to draw a connection between that rally and Microsoft's acquisition of Skype, based on the whole "Animal Spirits" notion, that big deal activity is generally a bullish sign of confidence. That argument may be flimsy, but there is a fundamental aspect to consider, which is that Microsoft used $8 billion of the $42 billion in cash it holds overseas, as noted by Eric Savitz at Forbes. Cash held overseas by US multinationals is a big deal, as it can't be repatriated or used as dividends without a huge tax being paid. There's been a lot of talk about a tax "holiday" that would allow companies to repatriate cash, but for the most part the Treasury Department has resisted this, instead preferring some sort of comprehensive reform to the system. So the fact of the matter is that if companies start deploying their foreign cash for acquisitions, then at least at some level that's cash being turned from an asset that's just sitting there, into a productive asset for the company. Now, bear in mind, it's not necessarily so simple for companies to just use their foreign cash this way. The only reason Microsoft was able to do this is because Skype is actually headquartered in Luxembourg, as WSJ explains. But surely it's not the only foreign-based company that will look juicy to a US multinational. Suddenly, for all these big, lumbering companies sitting on mounds of cash, investors realize they have one path for deploying it. Read more: http://www.businessinsider.com/microsofts-use-of-foreign-cash-to-buy-skype-2011-5#ixzz1M6s0AWMB

Shalabs had a link a while back from Bloomberg where there was some discussion of the "Deadly D" where part of the US tax code on US Corps can help reduce taxes on foreign acquisitions with money overseas. What would the tax implications have been on $8.5 billion brought back into this country to pay extra dividends? Does this look like maybe from the investors standpoint that your cost in effect at this point is less for something that has some potential at least. If one of their potential opponent/ bidders had to pay that $4.? would that have been after tax which would mean obviously 1/3 higher or so pretax? Also, how much does this turn out costing per subscriber even assuming 15-20% are not even using it that much so you can't count them as active compared to what they would have had to pay for obtaining new ones including the cost of building the new infrastructure? Just curious what peoples thoughts are.

As to one possible thought of what to do with this investment. What if You put an ad which shows up when you first log into Skype. How much revenue could be generated with that? The infrastructure is already in place. Anything else could be extra. Newspapers ran losses on operations for years and made money on advertising. Microsoft looks to have overpaid but with this many Skype subscribers it seems possible there are a lot of potential synergys. Also it's not like they have permanently harmed the company. It's like what 2/3 yearly cash flow which is a one time event. If they gave Skype away for free they still have the cash flow coming in like they did before if they do nothing else. Skype isn't making money yet but it isn't losing hugely either. Many companies have one time events that temporarily hurt profits but are one time events like this. Maybe a dumb waste of money but only time will tell about that. One of those cup half full versus cup half empty situations.