BG2008

I went by Downtown Brooklyn yesterday again to look at the changes in the Fulton Street Mall. It is amazing to see the neighborhood transform before your eyes. We are at a point where newer shops owned by national retailers are starting to equal the number of legacy shops. The contrast is so dramatic. As you walk along the street, you can notice the quality difference between the old and the new. The legacy shops like Conway, Pretty Girls, etc are just big racks of clothing with very little Cap Ex. The walls are whitewashed, fluorescent lighting, bad carpeting, no store furniture to speak of, and no ambiance to speak, and single digit price points. The new stores like Banana Republic, American Eagles, and Swarovsky put substantial amount of cap ex into their stores. Nice furniture, nice finishes, great layouts, and each stores has its unique feel. My wife mentioned that she recall the Soho (South of Houston) neighborhood going through the same transformation in the late 90s. If you go visit today, take some pictures and then compare it to Google Maps images of the same location. You can readily see the before vs after. Seems like there are 500 share offer this morning at around $46.

I've met with management team during the shareholder meeting. To be totally honest, they are not Sam Zell. They are not the best allocator of capital or at leasing new space. But they have not paid themselves in equity when they easily could have. They also have not made any acquisitions which from my experience tends to dilute away any MOS over time. Mark Greenblatt is accessible. I've spoken with him a few times and he's happy to answer questions. The adage of "watch what they do, not what they say" applies here. G&A is high. They have staff that they definitely do not need which is why the true value is obscured here. They also had a lot of space for admin purposes, but have since cut that in half to lease to their customers. During the shareholder meeting, there were admin type personnel that are excess for a company this size. This is why my estimate of private company NOI is in the 7-8mm range when the AS IS operating cashflow is about $4mm. A Vornado can operating these assets at much lower cost. The CEO owns 47% and is roughly 70 now, so I'm sure there is some estate planning in the works. Long story short, the discount to intrinsic value, the gentrification tail wind makes up for a so-so management team. Although, I don't think they will outright steal from the minority. If they do, the 23% owner will likely act as an advocate for minority.

Yes, the liquidity is a pain.

Yes, I've done a lot of work in the name. It's my highest conviction idea because I've personally seen all the assets except for their Ohio assets. I've been to the shareholder meeting and been inside their buildings. This is an example why the public market is not efficient. In a private market, it is hard to imagine that an owner with broker representation will sell these assets at the current price.

J.W. Mays (Nasdaq:MAYS) - Former bankrupted department store owns 7 seven buildings including 2 prime assets (> half a million sqft) in Downtown Brooklyn. Standalone RE company not married to some struggling dept store/restaurant etc and free to raise rent. Debt/EV is only 8%. Net Operating Income is obscured by public company cost, inefficient corporate structure (not a REIT), and lack of scale in operation. Private owner NOI is 8-9% based on a $38/share price. Current rent is substantially below market. Most importantly, neighborhood is gentrifying and being re-developed. Company owns some prime retail frontage in Fulton Street Mall where rent is rumored to be $300 for prime space. http://www.nytimes.com/2012/08/29/realestate/commercial/national-retailers-discover-fulton-street-mall-in-brooklyn.html?_r=0 They are charging $27/sqft, some discounts needed for larger size and location within the Fulton Street Mall. But still very much below market nonetheless. Hard to screen as the P/S, P/EBITDA does not appear cheap. Also requires some serious digging to figure out all the assets owned by the company. At $38 probably selling at land value of the 2 Downtown assets alone. The As Is Price today is closer to $90/share and as the lease roll off and are replaced with better tenants, value could approach $170/share. Key risk is that management team owns 47% but has not given themselves any equity compensation. There is a 23% owner who will act as an advocate for minority shareholder. Obviously, we're not investing alongside Sam Zell, but management team doesn't seem like they will purposely destroy value. NYC based investors should take the subway to the Fulton Street Mall and see the assets in person 9 Bond Street and 25 Elm Place. Best comparable transaction is the 490 Fulton Street building.

I agree with most of what you said. But there is an opportunity risk associated with being down a lot even if none of your positions suffered permanent impairment. For example, if you were down 50-60%, you're stuck with those positions as you do not want to liquidate them during the worst condition. My issue is that people put themselves in a position where they have no liquidity/cash to invest when the market is awash with bargains. Berkshire's float and operating companies generate cash that can produce 10% capital to reallocate into very depressed opportunities at the right time. If you're managing a fund, you do not have the luxury of deploying operating cashflow toward investments. Hence, there needs to be some sort of liquidity generator that will pay out during distressed times. I believe that allocating capital towards cash, workouts, bonds etc also means there's less to allocate towards generals. This forces you to focus on your better general ideas.

In Buffet's Superinvestors of Graham-and-Doddsville, I've noticed that many value investors got "slaughtered" in 1973-1974. The S&P was down 14.8% in 1973 and 26.4% in 1974. Walter Schloss was down 8.0 and 6.2% respectively, Tweedy Browne gained 7.5 and 1.5, Sequoia was -24 and -15.7, Munger was -31.9% and 31.5%, Pacific Partners (Rick Guerin) was down 42.1 and 34.4, Perlmeter Investments was down 28.1 and 12.0, Berkshires Book Value grew 4.7% and 5.5%. 1) I'm trying to figure out, why was 1973-1974 so bad? I've spoken to someone who was an investor during that time period and he mentioned high inflation, tough economic environments in general, and oil prices that in essence increased by 10X due to the embargo. Can anyone comment on why that was a perfect storm of a sort. 2) I can understand why Pacific Partner was down so much, due to the fund's use of leverage. But why was Munger down so much? Munger is universally beloved. But, I'm not sure if being down 53% in 2 yeas is acceptable as a value investor. 3) How did Berkshire manage to increase book value during this time period? 4) Does anyone have access to the old investors letters of the funds mentioned in Superinvestors of Grahams and Doddsville

I would it's usually a red flag. Situation A) The company is severely undervalued and they raise capital, management just diluted the existing shareholders Situation B) You believe the company is severely undervalued, management knows better and it's actually the right decision to take advantage of the robust equity market. Well, you're holding an over valued security. There are situations where secondaries are the right course of action, i.e. XPO Logistics, issue equity at 10-13X EBITDA and roll up smaller freight forwarders at 6-8x EBITDA.

1. More concentrated on highest conviction and knowledge of the underling 2. Familiarity with the country, product, industry, also plays a factor. Tend to tip toe into a new situation rather than make concentrated bets. 3. Market Neutral and market dependents plays a role. Generally size investments where I am expected to receive a distribution larger (if less than 12 months) 4. Tail risk - Take a Black Swan approach. Even if everything makes sense, if there is some sort of tail risk that will render the investment to go to zero, then size it smaller than I would like. Examples would include highly levered companies, regulatory risk, blow up risk (rigs), warrants, options, lawsuit outcomes that are binary, etc. 5. More concentrated in PA than fund 6. Sleep well at night test - If a position sizing causes me to lose sleep at night. I tend to trim it down. There's a threshold where even the best ideas can make good investors nervous. Have to admit we are not all Buffet and Munger. #2 and #4 should be considered in situations like this.

WealthTrack with Consuelo Mack is actually pretty good

I know of funds with less than 5% who managed to survive for 10 years.

I also work in the industry and agree with constructive. The market maker space is incredibly competitive and provides no sustainable moats. There are often price wars when new entrants enter the market which drives down returns for all participants. A fund manager that I know who is currently managing double digit million AUM had mentioned that interactive brokers is far better than all the other market makers out there. I trade through IB as well. It does appear that the infrastructure does allow you to do all sorts of trades even with a smallish amount of capital. He firmly believes that IB has a long runway. Thoughts?

This is not an advice on where to put her money. But if her employer matches her contribution, then she should max out whatever the matching is. If the company matches 100% of her contribution, she just did a double her money at the instant she made the contribution.

Bruce Berkowitz has a pretty good checklist. http://www.marketfolly.com/2012/03/bruce-berkowitzs-basic-checklist-for.html It's not a bad idea for each individual to have their own checklist. I like to write out the investment thesis. Buffet had mentioned during an interview that if you can't put it on paper why an investment is compelling, perhaps you have a problem. In the book, the Big Short, the 2 main characters from Cornwall Capital would create Powerpoint presentations for their thesis. This probably works better if you take concentrated positions. If you have a basket approach to value investing, doing so could just be too troublesome.

Wow, very impressed. Have you taken a look at STRP? Thanks. STRP just hosted a conference call and they mentioned that they are expecting a settlement soon. I like the asset like approach that the company is taking to monetize the patents and the spectrum. They estimated that the current cash balance can last 5 years with a $3mm annual cash burn. The NOL will shield income for over $100 million. The separation from IDT Corp is critical to make sure that the defendants don't go after IDT Corp.

I second this opinion

Most IB analysts work more than 12 hours/day. Not everyone could be a Michael Burry who was posting on investment forums during his medical residency

Ever look at Straight Path Communication? It is a spinoff from IDT Corp. They are litigating against some of the biggest names in the tech space based on their patents related to communication over the internet. I've spoken with the CFO and it is obvious that the patent litigation has near term catalysts. I like the way how they structured the spinoff and outsourcing their litigation expenses on a contingent basis. Their philosophy is to minimize cash burn. Over $100mm of NOL will shield any patent litigation rewards and spectrum licensing revenue.

Yeah, I recall that Autodesk is the goto software for the drawings. Is there a price point where people say I'll try something different? Kind of like what's happened with Gillette's razors? What do you think is separating them from the #2 and #3 guy in the space? Is it kind of like Excel for investment bankers? You're not going to send your clients a file in google docs Excel.

Forgot to add HVAC Engineering

I want to see if I can aggregating the industry background of people on this forum. I feel like I can't look at as many ideas due to the lack of industry contacts/experts. My hope is that if enough people volunteer their information on this website, we maybe able to create a directory of industry contacts. I'll start with myself - Real Estate (with specialty in the NYC area), finance (investment banking) and the restaurant business. Through contacts, insurance brokerage and life settlements. For example, it would be great if people can volunteer that they've worked in the freight forwarding business for 30 years. For example, I'm looking at a company called Columbia Laboratories and it would be great if someone knows about Crinone 8%, a progesterone gel to help treat infertility. Thanks in advance. Also, did anyone save any of the sellside primers? There was a link that was taken down. Sometimes, it's a pretty good starting point for industries that we don't understand.

Does anyone have videos of industry interviews? For example the Malone interview was great.

I think it is important to learn from others who have dramatically outperformed. It would probably help to go back in prior years (particularly in 08/09) and see how their strategy fared. And then you further calibrate it by trying to figure out whether their performance is due to getting 10 heads in a row or they were truly 98% odds that you'll make 2x your money done over many years. Regarding jealousy and envy. I believe that one should naturally be curious why others are earning 50-100%. Is it rising tides lifting all boats? Or are they onto something that you never contemplated in the past. Eric's strategy of going long the stocks and buying an ATM put is brilliant. It's essentially a call option, but it is tax efficient and it makes it easier to size the position properly since you can size up the long position as a X% of total assets fairly easily. Let's say you discovered a 20 punch card opportunity tomorrow. Why not go 30, 50, 100% and buy an ATM put that cost 10% premium for 1 year? By definition, a 20 punch card opportunity has at least a 3x upside. Buying the ATM put hedges against market risk and maybe some analytical risk against your miscalculation. I would've never thought to structure my trades this way until Eric mentioned it. In short, be motivated and curious about how others did it. Invert. Learn. If you feel like there truly is nothing to learn or others' strategy just don't suit your personality whether it's extreme volatility (you need to withdrawal for living expenses), high debt loads, etc. then just stick with what you're comfortable with. Good luck to everyone going into 2014.

I want to start aggregating a list of top managers in their respective industries Cable/Content/TV - John Malone Asset Management - Buffet, Munger Real Estate - Stuart Tanz - Retail Opportunity Investment Corp (ROIC) Oil and Gas - The team at Awilco Drilling Fashion and Apparel - Phil Knight Retail - Sam Walton Industry Rollout Specialist - Bradley Jacobs (XPO Logistics, United Rental, United Waste Systems)

Why shooting so low? You should aim impossibly high so that even if you miss by a mile you still do great. So I'm setting a goal to make billions by compounding at 200% yearly for only 7 years. See, that way, even if I only make 1/8th of my goal every year that is still 25% CAGR, if you make 1/8th of your goal you'll barely beat inflation, thus you have to come much closer. I think aiming to compound at a certain rate could be problematic and lead to entering into investments that backfire. It's akin to Munger's "Man with a hammer" approach. If you know what you're good at and what you're psychologically suit for, then you concentrate on your best ideas and the returns kind of takes care of itself.