oddballstocks

Uccmal, This is an encouraging post, congrats. There is a lot of disdain on this forum for dividend payers. Everyone wants buybacks, which in theory are more tax efficient and all that. But I've noticed a trend. Successful investors eventually migrate to some form of dividend payers and eventually live off that stream of income. My hope is one day I'll make the same migration and move from growth to a more income phase. To me there is a piece of mind with owning a stable and growing company that can continually fund a dividend.

I've taken a number of personality exams over the years. On these things I consistently come out an ENTJ (or whatever the equivalent is). Beyond Myers-Briggs I've done the Predictive Index and some Emotional Quotient thing. My personality type is consistent across all of these exams, which I consider impressive. I'd say ENTJ is accurate, anyone who knows me in real life would agree as well. Although I'd like to think of myself as more considerate than most of these descriptions imply. Here's a blurb: http://www.16personalities.com/entj-personality I'm not sure I'd agree 100% with this, but much of it resonates with me.

I'd echo KCLarkin's comments 100%. Mobile is great if it's supplementing an existing business. If you're trying to build a business with it you're looking at a task that's 90% impossible and 10% luck. The issue with mobile is discovery is terrible for new apps. Plus no one wants to pay. Users won't pay $1.99 or $3.99 for a game as it's too expensive. It's a very crowded space. The way to make money is sell a B2C software package and tack on a mobile offering. Joe-consumer isn't going to pay $2.99 for something, but a local community bank will happily pay $250k for a new mobile offering. There's a lot of room in the local space. Why not make a dry cleaning app that integrates with a backend dry cleaning system and then sell to local dry cleaning companies? I'm guessing you could sell a decent number of licenses. Users would get a push when dry cleaning is done. There are a ton of other ideas like this. What you want is the mobile to be the end point that's using it, not driving usage. A friend's VC fund backed the NoWait app. That app is incredible as a dining patron. But it's not driven by diners, it's driven by restaurant adoption. They sell to restaurants and the restaurant tells consumers about the app.

I try to aim for 7 hours, but I'm one of those people who can go for months (I've done years) on just 5-6 hours a night. About eight months ago I read some article saying that sleep is a way for the brain to clean itself and that can only happen after seven hours. Since then I've aimed for seven hours. I've found for myself if I exercise I need to sleep less. This is counter-intuitive, but that's how it seems to work. If I'm really pushing my running I'm fine on little sleep. If I take a few weeks off from running 8 or 9 hours isn't enough at night. If I'm moderately rested I naturally wake up after ~7 hours without an alarm.

On the 10% number. In the 1962 Security Analysis Graham goes into detail breaking down market returns. He puts together the following: Inflation + GDP growth + productivity growth + multiple expansion = market returns If you have 2% inflation and 3% GDP growth and flat productivity you're looking at 5% returns or so. I believe in the 90s we were looking at 3% inflation, 3% GDP growth a few percentage points of productivity gains plus multiple expansion. The question you need to ask of a company is why are they growing faster than the country's GDP? Is it because the market isn't saturated yet? If a company is enormous then it's hard to imagine they grow much faster than GDP + inflation. I also had trouble watching this interview, made it a bit further than 5m and bombed out. Skipped around and it seemed more of the same. Is there a great insight or two in there I should be looking for?

Spek, do you still hold QUCT? Yes, and I added a chunk at 1080$ a few days ago. They only publish number since a year and that is it. Last years profit was down, because the costs in the trust business were growing faster than revenues, supposedly a result of a branch expansion. QUCT bought a decent chunk of commercial RE last year for 8M$ (~160M$/ share), but I don't think that this increase GAAP earnings although it my improve intrinsic value over time. They still should have a decent amount of net cash even after this investment. OK, this is probably a value trap, but I don't think I will lose money on that one. I estimate the asset value at least twice the current market value and maybe more, if they indeed would find a buyer for their ranch (I don't think they are looking to sell the ranch actually at this point). Overall, the assets are getting more valuable, the trust business throws of cash and the insiders as far as I know don't rob the company, so I think this illiquid, but safe. Talked with someone a few months ago (you maybe? who knows) who went up to the ranch and got it valued. It is worth more than their market cap at least, potentially a few times over. QUCT is interesting and I think highlights the attraction to some of these companies. They have a valuable asset that could be sold for most of their market cap while the business (trust management) remains untouched.

Anyone else remember this differently? I think Graham mentioned in Security Analysis that unprofitable net-nets often did better than profitable net-nets No need to rely on memory. I have the book and Jurgis is correct. Graham steers investors towards net-nets that are decent companies as an example of an egregious mis-valuation.

A few reasons: 1) To allow employees, family members, close friends to purchase the stock. This is a driver for many small companies that trade. 2) Beyond a certain number of shareholders a company's stock automatically trades and information needs to be released. Some companies are in this position. 3) Ability to raise capital if ever needed. 4) A legacy thing from years ago. Company might have been bigger, or public when it was cheaper and now they're just content to fly under the radar. For many of these companies it would be more costly to go private compared to just remain public. Banks specifically like having stock as a way to raise capital. The last is that there is a social stigma associated with being a director/exec at a "public" company no matter how small. Ego drives a lot of decisions in business. For many dark companies there are no additional costs associated with having shares trade. SEC filing is about $35k a year to maybe $100k a year depending on the company size.

I really enjoyed the second edition of Security Analysis, by far the best investing book I've ever read. A lot of people get stuck in the weeds thinking about the out of date securities. The key to the book is his framework for thinking and viewing risk. I actually went back and re-read the allegedly most boring chapters (bonds) after someone pointed this out. The chapters jumped off the page, it wasn't the actual bonds I was reading about but the ideas behind looking at them, or how to look at fixed income securities. My contention is that Security Analysis is like all classics. A book everyone claims is important to read but few actually read it. Not surprising considering we live in a world of investing platitudes. You can't read it in a sitting. I think it took me about a month to read the book, but it was well worth it.

longinvestor, Interesting story. I think a difference in taxi drivers (and truck drivers) is they run the vehicles all the time. What kills a car is when it sits unused. A car that is being used constantly will last longer than a car that sits and drives to the grocery store 3 miles a way once a week. Engines are built to run, not sit. For your friend with 450k miles she must use the car a lot. If she drove the standard 12k miles most Americans do then she's been driving the Camry for 37 years or so. And considering it was first introduced in 1982 that's impossible. She proves the point that cars can really last if you push them. My dad routinely gets 200-300k miles on cars. A Camry, a Malibu, a Lumina. All between 200-300k miles when he sold them running. The Lumina is still going at 300k miles. How? He was in sales for years and drove constantly. He put on well more than the average per year but used the cars constantly. He was fanatical about routine maintenance.

randomep, Right, those are good points but don't quite apply. My friend is two years older than me, 35. So to say he wasted his best years would be false. He worked for the company that's powering your computer and now works at an extremely well known industrial in R&D. He's been tasked with reducing the energy for the aluminum making process. The problem is one of specialty. I'm sure there are a number of PhD's on the board and maybe they can related. This guy is very intelligent, maybe too intelligent. He will go a mile or two deep on a specific subject and is clearly an expert. But knowing how ceramic liners for for a single industrial process isn't very transferable. I've talked with him about creating a consulting company and looking at his job from a 30,000 ft view. He overhauls processes. He could easily sell something like that to other companies for a nice price. He gains almost no leverage except he would move from 100% salaried to billable, and billable means he'd get paid for the 70+ hours he works. This board is filled with high achievers and overachievers. It's a community of people who sought out others for help so they could improve themselves. This is rare and I think sometimes our bias shows. The average Joe doesn't care much about improving themselves. They are happy to go to work punch in at 9am and punch out at 5pm. I firmly believe investing is leverage, maybe one of the best types. With the small purchase of shares the efforts of dozens/hundreds/thousands of people are working for your benefit the shareholder. Your course of action is great, get your work done quickly and research stocks. That's a VERY well worn path, and given time and patience results in success. I'd say the large majority of self-retired investors on this board took that path. But this is leverage. You're also building a safety net and in a way proving my point. You're diversifying away your income from a single source to multiple sources. We probably agree more than we disagree on this.

Interesting comments on here. A few thoughts 1. My intent wasn't just financial leverage, but leverage of all types. This seems to be missed by a few calling my thoughts some segue to getting rich quick. Leverage is the concept of being able to do a lot with a little. You move a large object by using a lever and smaller amount of power. You move a lot of money via a small amount etc. 2. Asymmetry - This was a point that was implied. Look at my shoe factory example, you spend $1m for a machine with the potential for 10s or 100s of millions of earnings. How is that no asymmetry? Operating leverage is asymmetrical, but just because something is asymmetrical doesn't mean loss isn't possible. 3. On a job. If you have a job in a hot market it might be easy to get another job. But what if you are specialized or are over 50 etc? Have a friend who is a ceramics engineer. Extremely specialized and he's been looking (while working) for more than a year. There are only a handful of openings a year. Many of the openings are at companies he has worked at in the past and left. Not everyone is a Java programmer or Financial Analyst or Accountant that are hired by the thousands. 4. My post was specifically about financial success. I wholeheartedly agree with whoever posted that a person can be successful without money. 5. I've thought of one example that runs counter to my thought: a high paid executive. There are a few top students who somehow climb the corporate ladder and pay themselves extravagantly. They have a typical job yet outsized pay. I'd put many US corporate execs in this bucket. These are the guys getting paid millions to drive companies straight into the ground. For 99.9% of the population these jobs are unobtainable and my post applies. But for the .1% this might be a good path to wealth.

Tom, Good points. I've had a few comments related to survivorship bias and here are my thoughts on it. This thing is riddled with survivorship bias, but that's what we want to look at, the survivors. Not everyone who tries to start a business succeeds, but everyone who succeeds has some leverage. Is it luck that caused success? I don't know, I'd say for any venture luck plays a larger part than anyone would admit to. Most people want the safe path in life. But I'd argue that working a job for a company is actually the riskiest path. Say you have a business mowing lawns. You mow 100 lawns a week to make ends meet. On a given Friday you're in a bad mood and mess things up, maybe you lose 3-5 customers. It's not the end of the world, your client base is diversified. Working for an employer is like diversifying your entire portfolio into a single stock. The problem is how well you work or how hard you work doesn't always matter. A friend told me recently the best person in his department was fired because a new manager was hired and their personalities didn't match. That best worker didn't have a choice in who was hired, and it wasn't like they could change their or the new boss' personality. They were 100% concentrated in a stock and ended up on unemployment, yet they were the best. Where people kill themselves with leverage is by financing depreciating things or not looking for margins of safety. That sounds too platitudish, but I think it's true. There are a LOT of simple scalable things someone could do on the side. Look at self publishing on Amazon, or even just writing a blog about something that interests them. Maybe this idea is similar in nature to the Graham & Doddsville thing. Was it value investing that caused all of those investors to do well? Maybe it was something psychological. The fact remained that all of those investors all learned under Graham, and Graham was this common thread. I'd argue success and leverage are the same. Is it the leverage itself? Maybe it's how risk is managed when leverage is present. I don't know, but I can't get away from the thought that when I read and look at success stories both individual and in business leverage (or some aspect of scalability) is involved. Is it a cause or effect? Someone with zero leverage would be a worker who saves for retirement in a 100% cash account. Investing in a 401k or on the side introduces a small amount of leverage that through 20-30 years of investing grows large.

Nothing nefarious in their motives, so the "red-flags" issue is irrelevant. They've taken a teaching approach in their presentations...to share the knowledge they've garnered from their experiences...and it just means a lot of exposure to a lot of students. Cheers! I have not watched this one yet but have seen many of Mohnish's presentations. It's good that they are spreading the message but I am not sure whether they do a complete job. For example in terms of following 13-Fs, which is a main idea that Mohnish has been recommending for a long time, he needs to do more explanation in terms of the challenges for this approach. He makes it sound like it is piece of cake sometimes but in fact it is more complicated than that. If they choose to have more public attention, unlike some other value investors, that means they have more responsibility in terms of providing the full picture all the time... Also their views/approaches evolve from time to time as well like the level of concentration he had several years a go vs. now. That also is another challenge in terms of the teaching approach I think. I'd say I agree except that this comment doesn't apply to this video much. They talked about getting into the business and a lot of details around starting a business. I don't really like Mohnish's talks on his stock picks. But I think he's brilliant as a businessman. His evolution as discussed in the video going from running a company to running a fund to buying a company again. To me he really excels in business, and I think owning the insurance company is going to hit his sweet spot again.

CONeal, I'm sorry to inform you that you're going to have to turn in your value investor badge. You know the one, the badge that was printed on a dot matrix printer (to save money of course) and laminated by hand. While you're turning in your badge you might consider giving up some of your corduroy blazers as well as any plaid sport coats with elbow badges. Supply is limited, they just don't make clothes like that anymore. There are hoards of value investors waiting to pay cash for those items. I heard a few might even consider trading in their penny loafers (penny included) in gently used condition. I realize this is a sad day and it's probably a shock. But we just can't pollute the value investor pool with those who *gasp* pay for new things. Best of luck in your new ventures buying high tech stocks and trading options....it's been fun

I could agree with this for older wealthy members of the board. But consider someone who's younger, and it seems there is a lot of youth on the board these days. Say a car costs $20k, that's about 40% of the median American household income. Maybe this board is better off and makes double, so a car purchase is equal to 20% of a person's pay. I'd say purchasing anything that's 20% of your salary should be thought over and considered and is not irrelevant. Saving a few grand is a lot for most on here. Sure, if you have $10m then it doesn't matter, but according to most of those polls that's not the case.

Yup, yesterday. Can confirm it is gold.

Thanks, this is good. I'd also recommend the OCC's books on the subject: http://www.occ.gov/publications/publications-by-type/comptrollers-handbook/index-comptrollers-handbook.html and http://www.occ.gov/publications/publications-by-type/comptrollers-handbook/ots/ots-exam-handbooks-capital.html These books are how regulators look at bank capital. And at the end of the day the only thing that matters is how a regulator views a banks capital.

A friend sent me the book a year or two ago, it's a great read. I'd highly recommend it, very easy and quick to read. Dennis is great, in many ways he says what other wealthy people might not. The trade-off in a sense is that going after wealth means you end up giving up something else. Maybe it's family, or friends, or something. He had a few hundred million I believe. He notes at one point he wishes he would have stopped at $10m or $20m and enjoyed life. I found some wisdom in the book in the sense that he gets to the top and has the introspection to realize it isn't as great as everyone thinks it is. That the ideal we think of isn't true. I don't know if this is something a lot of other wealthy people realize and keep inside, or if some never realize it. I don't know. The perspective is refreshing. There are a lot of tips on how to run a business or negotiate. Dennis had a period where he was heavily into drinking and drugs. He spoke of it some and I'm not sure what his view on it was. My sense was that money gives you access to things that might not necessarily be good for you. If you're making $100k a year you don't have to worry about supporting a half dozen mistresses and blowing millions on drugs. To innerscorecard. After reading your post I'd say maybe it's worth introspecting for a weekend or two on your life goals. If your goal is to be wealthy you'll never reach it and never be satisfied. Wealth is a moving target. You'll always be just a bit shy of what you want and where you want to be. Like something in your field of vision but just out of reach. A good friend point out to me years ago that contentment is a secret to life. If you are content with a little you can be content with a lot. But if you're never content and always want something different no matter what you have will never be enough. Maybe a different way to phrase the goal (if this is truly your goal) is to not have to work for someone else. Or have enough saved you can pay yourself for a few years. Or have a flexible schedule. For myself I found that all thoughts of financial freedom or being rich went away when two things happened. 1) I learned to be content 2) I was able to get a flexible schedule. The flexible schedule is key. When in a cube farm I'd yearn to be outside. Now I can just take a walk anytime. I don't have to be rich to do that, and I enjoy my work more. While I walk I think about work sometimes. Flexibility and contentment solve a lot. Would I love a few hundred million...sure, but I'm not sure my life would be different. I'd probably have more stuff, but stuff is just that, stuff. More money couldn't cure the stomach bug my boys had last night etc. The Dennis book hits on some of this in a roundabout way. I believe he had a realization about contentment much later in life and wishes he would have had it earlier.

All of these articles and quotes imply that a great business needs to be run by a rocket scientist. Here's an observation I've made. ALL business is run by fools. There are few rocket scientists running companies, and if they are they only run it for a short while. The intelligence needed to run a company is different than the intelligence needed to be a doctor/scientist/engineer. A successful CEO needs to know how to manage people not fiddle with Excel. Sometimes in the investment world CEO's are held up as these all important genius type people. I've met a lot of people, from CEO's on down to the worker bees doing the work. Maybe there is a brand of CEO I've never met, but my experience has been that CEO's are great with people, great knowing a lot of topics, and great knowing how much they need to know. But if you want to get deep in the weeds the raw intelligence is usually stored in a cube far away from the windows. The smartest execs know this too. If asked a very pointed question they will respond with a "You need to talk to xyz." I don't know why we got into this hero worship thing of CEO's, they're just people. Look at Buffett, his genius is that he doesn't manage (supposedly). How much intelligence does that take? He buys a good company and then does nothing. Literally any fool can do that. His genius is in knowing which business to buy. If BRK were to just run forever without every acquiring another company I dont see why anyone on this board couldn't run it. Hire excellent investment managers, ignore the underlying business and call it a day. I'm exaggerating to an extent to make the point, but think this through.

In college I knew someone looking for a guitar player for a band. I asked what level of talent he wanted, he responded with something I won't forget. "I'd rather have someone who's confident and not talented verses someone talented and not confident." I've seen confident people will things to happen because they believe in something so strongly.

On a previous thread someone was asking about raising money. Tilson is a great case study. No one here knows his record, yet he has a "small" fund with only $100m. If he's doing the old 2/20 thing he's doing well on just the 2 even if he never gets the 20. Someone whispered some numbers on Value Investor Insight as well, and I know for a fact he can live very well on his portion of that alone. Love him or hate him he has made a name for himself and that's attracted assets. I believe I have his track record buried in my email somewhere. If I remember correctly he did fairly well before becoming T2. During the T2 period it was terrible and now that the other T is gone he's back. I've heard of him helping others as well. Seems like a decent guy, someone I'd want to grab a beer with and actually talk to. My impression of most other investors who are on TV/radio/news as much as Tilson have this attitude that they couldn't imagine mingling with the plebs. I don't get that vibe from Tilson.

I'm going to be the one to disagree here. If you put up great numbers in a cave no one will know. Also great numbers only attract investors who want high returns. Marketing is highly underrated. I've learned this myself in my own business. If you have a great story but no one knows the story isn't great. You need to tell others what's happening, why the product is worth purchasing etc. If the storyline proposed above is true then why are there dozens (hundreds?) of startup fund managers who raise a lot of money without a track record? And why are there hundreds of struggling fund managers who have great returns but no funds? If you're competing against everyone else on returns there is no edge. There is no market differentiation. As a manager you need to segment the market, find a niche and sell to those investors in that niche. You want to sell something differentiated to your customers, this is how you get sticky customers. Maybe you have a different investment approach, or look at stocks differently. Sell that process or angle. Maybe you provide exposure to a sector that doesn't get much exposure, sell that. Don't sell returns though. Look at Buffett and Watsa, they are both doing something different. The funds have performed well, but it's the process, how they look at stocks, the connections they have. It's these reasons that investors stick with them even when results are bad. And better investors are defending them in down years. That's what you want, you want customers who will defend you in a down year because they believe in your process and product. I know my opinion probably isn't popular with the ramen-eating fund manager crowd but I think most businesses could really help themselves with more marketing. Tell your story!

Liberty, Thanks for posting the direct link. I enjoyed talking to Fred. I enjoyed it so much I said I'd like to do another podcast in the future. If anyone has any questions from this podcast, or something related/un-related feel free to ask. Nate

We'll see what happens but I have instructions with my broker to mail all annual reports. I've received the BRK one in the mail reliably in the past. If they are going to not send them to shareholders anymore I think's an issue in itself. For a company that's supposedly very shareholder friendly erecting a barrier to the annual is an issue in my mind.