BG2008

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.

Packer, This is purely for my IRA account - Less than 10 names, portfolio level returns are based on fund assets as of Dec 31, 2012 Special Situation #1 - 90% gain on portfolio level, 250% gain on the name from inception, currently ~60% of my portfolio, I backed up the truck on this one. Return is totally market agnostic from the point of entry with a ton of margin of safety. Special Situation #2 - ~8% gain on portfolio level, 80% gain from inception on the name Special Situation # 3 - ~13% down on portfolio level, 30% down on the investment - value has stayed the same, price is down, one of the higher upside ideas going forward Special Situation # 4 - ~6% down on portfolio level Special Situation #5 - ~6% gain on portfolio level Awilco Drilling - ~ 6-7% gain for the portfolio, bought in the $14s and sold in the $21 and $24 (to make room for other positions) and received 2 dividends ISLE - ~ 4% gain for the portfolio Digirad - ~4% gain for the portfolio Puts/Calls that expired worthless and other misc gains/losses I've experimented within my IRA in the last few years. I've come to the conclusion that I will concentrate on my best ideas. I am willing to allocate up to 50% toward market neutral workouts and up to 1/3 toward my best "general undervalued" ideas. I am obsessed with market neutral workouts and hedging against a 2008/2009 style market meltdown. All throughout 2013, half of my IRA account is in workouts that will pay a cash distribution within 12 months. Sometimes, they take a bit longer. So, if we get into another 2008/2009 situation, the account value may go down temporarily, but the events will pay out cash when they occur generating market neutral returns and providing cash when I can best put it to work. Hope others share more details on their investment styles. These are great. I'm noticing that there are some SuperInvestors per Warren Buffet's article here on this forum. I would love to learn how people generated 20+% CAGR over 10 years. I would love to hear strategies, any large gains/losses that altered the returns over time, anything that people would do differently if they were to start today. In Buffet's Superinvestors of Graham and Doddsville http://www4.gsb.columbia.edu/null?&exclusive=filemgr.download&file_id=522 The 10-20 year returns at the partnership level is less then 40%. Some of the superinvestors on this forum generate returns that are actually higher than that. I'm wondering what drives that? Higher concentration? Leverage? Smaller AUM? Would love feedback on this topic.

http://www4.gsb.columbia.edu/null?&exclusive=filemgr.download&file_id=522

Share your uploader name on Youtube perhaps?

This is awesome guys!! Keep them coming here's a great Seth Klarman Interview with Charlie Rose http://vimeo.com/32333102

I do long duration cardio during the day (30 min plus) and want to watch investor interviews on youtube at the same time. Please help me curate a youtube video playlist of Buffet, Munger, Greenblatt, and anyone else interesting. Hopefully, I can kill 2 birds with one stone by watching informative interviews while I work out at the same time. Thanks

Yeah, that makes sense. I actually meant to say 2015.

In trying to analyze the 2008/2009 experience come full circle, I want to share something that can hopefully answer the question of "when do you get back in?" He mentioned that when you start seeing net-nets (excluding Chinese frauds) that actually have a good underlining business, it is time to tip back into the market. A good example is Tellular was trading at liquidation value, the company was buying back stock, and the underlining alarm business is a very high quality with recurring revenue. When you can find those for sale, just buy a basket . If there is a drawn out recession/depression, the buyback in shares and the growing cash balance will serve as a catalyst to drive the price higher. There were a handful of companies that exhibits these characteristics during the darkest days.

I didn’t mean that! You should know by now, if there is someone who buys insurance (maybe too much of it!), it is just me! Instead, what I meant is I don’t feel comfortable yet with the “technicalities” of options trading. That’s why I wouldn’t buy or sell options with much capital involved. Gio I see. Well, I can only say that it has been worth it for me to learn about them. It's sort of nice the way you can write the $25 strike call and use the proceeds to purchase two $8 strike puts. This way, you can put 100% of your present capital into the stock at $8 per share during a panic (by either purchasing the underlying common stock, or by flipping each $8 put into an $8 call). So if it goes from $16, down to $8, and then back up to $16 you can double your money even though the stock never appreciated from present levels. And instead if the stock doesn't go into a panic, but rather it goes from $16 to $25 over those same two years, you can make 56%. That's not a horrible thing either way -- panic or no panic. You get to preserve your buying power, and at the same time you don't have miss out on gains if there is no panic. And really it costs nothing at all -- only gets expensive if the stock goes over $25... but if that is to be considered an expense, then you have a much bigger expense if you are instead in cash all that time. Eric, I'm assuming you're talking about Jan 2014 BAC calls and puts. The $25 calls are 10-12 cents and the $7 (no $8) puts are 5-6 cents. Seems like tiny % of the common. Does seem to make sense to sell the upside here. If buying the $7 puts only cost 30bps, seems to make sense to just pay up for them. I really like the strategy of buying the commons and the ATM puts simultaneously. Seems like a great way to sleep well at night knowing that you've paid the cost of the fire insurance on your "house" even if it cost 10% annualized. It allows one to comfortably size a position at 20+% knowing that worst case downside is 2% of AUM. Sizing trades large in a fund is harder to do than in your personal IRA. This seems to resolve that issue. If you want to size something at 20+%, the CAGR on that idea is likley above 10% anyway. If you were to initiate a position in BAC today, which strike would you buy? Would it be the $15, 12, or a mix of both with some deep OTM thrown in? How do you think about the % premium vs OTM and duration? Regarding lending rates for shares like SHLD, can you implement a strategy where you can buy the ATM put and lend at a double digit rate that pays for the put? I recall the cost of borrow for SHLD being close to 100% at one point. Do you recall how much ATM BAC puts cost (% of common) when it was trading close to $5? Great discussion on this thread. I delayed the launch of my fund for 2 years because I couldn't figure out how to hedge a repeat of 2008/2009. I've decided to borrow a page from Buffet by investing in workouts/special sits as an alternative to holding cash. I believe that I can do >10% CAGR regardless how the market performs. But your long commons coupled with long ATM puts is a great addition to my tool box of hedging against 2008/2009.

How did you aggregate all the data? Just a binder with printouts/cutouts? How would you track everything today? Just dump everything into a folder, world file etc? I keep folders of companies that I look at. So, it's good to look over my analysis at a later time. I also will update my analysis/Excel files by naming using a new date. That shows how my thoughts have evolved over time. There are online tools such as basecamp.com that you can use to track all of the notes. Any suggestion of a cloud solution would be appreciated.

Original Mungerville, How did you know that there were impending doom? I think many of us realize that the US RE market exhibited bubble like characteristics. But it was hard to time. Many were too early. Were there particular signs? Was it expensive for you to put on your Russell 2000 put strategy? How much OTM were the puts? How much did it cost at the time? From what I hear about China on the ground, I think it's due for some sort of correction. Overall, there's a prevailing sense of "you can't lose money buying real estate" and the government will save us all. But, I've felt that way since 2009. The kind of euphoria in China now is very similar to the euphoria we experience here in the US when the meatheads at the gym talks about flipping houses for $50k profit.

I think it is very hard to adhere to this principal. In reality, most people tend to allocate their best ideas to their first 20-30% cash. After that, the quality of the ideas tend to decline. It's like 1st 30% - 3x in 2-3 years, 20% downside 2nd 30% - 2x in 2-3 years, 40% downside 3rd 20% - 1.5X in 2-3 years, 50% downside Last 20% - Marginal, coin flip, 50/50 upside vs downside The fact that this is the reality of how most people allocate capital is the reason why it's a good idea to hold cash. If you can adhere to Pabrai's allocation method, then it probably makes sense. The reality is that most people's portfolio are built the way that I illustrated. For example, after 2008, Pabrai has indicated that he thinks about cash allocation in the following manner: 1st 75% cash - 2x in 2-3 years next 10% cash - 3x in 2-3 years next 5% cash - 4x in 2-3 years next 5% cash - 5x in 2-3 years last 5% cash - >5x in 2-3 years

Eric, I'm particularly interested in how you were positioned heading into the storm given that you often use LEAPs. It would be great if you can share the answers to the following questions and share how concentrated you were between LEAP/Options and outright common stock positions going into 2008/2009. 1. How were you positioned going into 2008/2009, % cash, leverage, what were you holding? 2. How did you shuffle your portfolio during 2008/2009? Were there liquidity constraints? Were you able to swap into better ideas? 3. Any permanent impairments? 4. How did you emerge from the crisis? 5. Would you do anything different? Personally, I spent 2 years searching for ways to hedge or partially hedge a 2008/2009 style event. I've tried shorting and buying OTM puts. I don't think either works well. The shorts are just too distracting. Ultimately, I believe that I have found the best solution in Buffet's early partnership letters. Buffet allocated about 1/3 of his portfolio into workouts and special situations. His workout portfolio actually did about 20% CAGR over the life of the fund. Given that the IRR on merger arbs isn't what it use to be and tenders are more efficient. I think that workouts and special sits will probably be a 10% CAGR in this low interest rate and more efficient market today after accounting for the fact that you'll never be 100% invested at all times. You kind of switch between special sits and cash from time to time. If you allocate 1/3-2/3 in special sits and workouts, it can certainly mitigate a lot of the down turn. Also, it forces you to focus your capital on your best ideas in the 1/3-2/3 in the "generally undervalued" category. Nygren had 16% in Washington Mutual. Kaput! Back up the truck when the market is .... Greedy? For the record, i was an apologizer -- but out of lack of confidence i hid out with FFH. And Nygren is a better investor than me, but still gets a little playful ribbing for being bold when braver men were hiding.

I am fascinated by the 2008/2009 experience. Every year that goes by, it seems like people are forgetting what an extraordinary time that was. At the time, I was working at Citigroup as a real estate investment banker. When Citigroup reached $3/share, they decided to get rid of my group entirely. I only had my 401Ks in the market and no personal portfolio. When the market tanked, I started buying net nets and great franchises at 4-5x FCF. I would like to hear some feedback on what people's 2008/2009 experience were like. 1. How were you positioned going into 2008/2009, % cash, leverage, what were you holding? 2. How did you shuffle your portfolio during 2008/2009? Were there liquidity constraints? Were you able to swap into better ideas? 3. Any permanent impairments? 3. Did you have permanent capital or did you need the capital for personal expenses or fund redemption? 4. How did you emerge from the crisis? 5. Would you do anything different? I spoke with someone who manage a fund. In short, he was down 50% peak to trough. Big picture: 20% Brk and Fairfax - drop by 20-30% 40% small cap quality ideas - no liquidity, drop by 50+% 10% - total impairments - drop by 90+% 30% large cap quality ideas - some liquidity, drop by 40% In short, he swapped out of BRK and Fairfax into other more attractive ideas. He in essence utilized the proceeds to invest in special sit and workouts. He made about 100% on that 20% (now 14-16% of a original AUM). He mentioned that the special sit and workout were important in case the market dropped more. The cash in and cash out allowed him to earn a decent return that was market neutral at the time. He was stuck in the small cap quality ideas - It was illiquid and selling would've been the wrong thing to do. Some of the ideas did come back, some of the businesses could not earn its pre-crisis peak earnings The total impairments - no way out and no way of coming back 30% large cap - he swapped out of some of the large cap ideas and started buying net-nets and generally undervalued securities When you're down 50%, it takes a 100% fund return to hit your previous high water mark. This took a few years rather than being down 30% and being up 42% to come back. the stress from LPs from being down 50% was also enormous. In hindsight, he would probably have hold more cash, bought more puts, or invested more in special sit/workouts. Please share your 08/09 experience. Especially those that were down a bunch and how you managed to come back.

Plato, That's pretty impressive with that much cash. I'll bet you sleep quite well at night. If you're doing 40%/year, you can afford a few points a year given your ability to sleep at night. During 2008/2009, did you go from holding cash to fully invested? What's the composition of your invested capital going into 2008/2009? There was a lively thread about the merit of holding cash versus not holding cash. If you were to average all your returns together, did holding cash help or hurt in the long run?

104% in my IRA YTD 2014, 24% CAGR in my IRA since June 2009 For 2014, mostly concentrated market neutral workouts and special situations.

I couldn't tell if you were being serious or sarcastic. I'd like to fully understand why the 2% absolute return is valuable to an investor. Why not buy short duration treasury rates? I'm genuinely trying to see the value that Chanos provides.