investmd

There was a thread or two in the past. I am interested in talking about Angel investment opportunities. However, there are issues: - For a lot of Angel investment opportunities, information is not openly available. It's possible to share info between friends, but it's harder to post information on public forum. There can be multiple parties upset about it. - As you may have seen on CoBF it's difficult to talk about companies managed by people who read/post on CoBF. This is an issue talking about Angel investment opportunities. From my experience even in non-recorded public meetings people usually tip-toe around the negatives of startup companies - nobody wants to offend and nobody wants to be kicked out of future contacts, allocations, board seats, etc. This is again magnified by posting on public forum. Jeff Bezos does not care what we say about Amazon on CoBF. Joe StartupCEO might care a lot. - Unlike public companies, the opportunities to invest into a startup are only open to qualified investors and only for certain amount of time. So there might not be much interest in companies that are not raising money currently. And for companies raising money currently, see my points above. - Edit: Point above is exacerbated for foreign investors. Not sure if you're in US or Canada, but cross-border angel investing AFAIK is even harder to discuss and accomplish. Anyway, I'm willing to try somehow, feel free to start thread(s), feel free to PM me if you want to talk in private. BTW, there's an Angel investing event on Wednesday that netnet posted about: https://www.cornerofberkshireandfairfax.ca/forum/events/life-science-investor-meeting-sept-2-and-sept-9/ You can ask netnet if it's OK to talk about the companies that present afterwards. (I may have to miss part of the event :( ) Jurgis, thanks for bringing up good points around posting publicly about Angel investments as one does want to remain cordial. I've generally tried to stick with categories of "Strengths" and "Areas of Concern/to work on" when giving opinions on startups. I've signed on the link you kindly shared for a healthsciences event next week. Will take you up on offer to connect via PM. Thanks. Best,

To double click on the idea of "adjust to the world around you" and metric of value, I've been thinking of this idea that in tech with proven earnings a P/E of 30 might be the equivalent of P/E of 10 in traditional industries. Reason: In proven tech companies with earnings, the total addressable market (TAM) is unknown because they open new markets. This does not happen with traditional commodities & industries - ie a pulp producer is unlike to evolve to clothing apparel retailer. With tech, a computer company (like Aapl) can become a music company and then a services company and then may become a health company. So if Aapl, Goog, FB are ever trading at a PE of <30, could be the equivalent of traditionally buying at PE of 10. Does that make some sense??

Agree. What I'm learning is that perhaps driver for value inflection point should be clear at time of purchase. Concept of "value will out over time" is not good enough.

In my years of reading this Board, this is the first time that I've come across an Angel Investment thread. I've always thought this was a space for exchanging ideas on the public markets. I now wonder if there would be interest in starting an Angel Investment/Private investments title under General Category? I know Sanjeev is planning on some website changes. Would there be interest in discussing private investments on the new website?? If so, I'd love to contribute. Best,

Learning Machine: I'll add my 2cents as an Angel Investor and echo sentiments posted causing you to think carefully about the investment: 1) Pharmacy can compete on Speed, Price, Service, drug quality/safety - NowRx seems to be focused only on speed 2) https://www.goodrx.com competes on price 3) As an Angel investor, I presume you have a portfolio of companies ? The investment should be one company out of at least 10-20 companies in your startup portfolio 4) Investing at Series B level is usually for larger VCs that can help the company on path to IPO. Upside is not huge, but there is substantial de-risking. Individual Angel Investors likely want to buy in earlier. 5) I'm not familiar with Seed Investor, but it seems to take >7% of your investment in fees plus takes equity from the company. 6) Mike Maples from Floodgate talks about whether founders are "living in the future" or merely addressing an existing problem. As an Angel Investor you may want to seek out the former. 7) Their stated strategy of use of data to make an impact in future seems weak and purely theoretical at this time. They have not elucidated a thought through data strategy. Best,

In general, if you do poorly for 15 years then it means simply one thing, you are making mistakes in figuring out how much cash business will produce for owners. Agree. However, plethora of value investors have not done as well as expected for past 10-15 years including Prem Watsa and FFH whom this board is v. familiar with. Thus, there have been a group of v. intelligent, astute and respected deep value managers that have not performed as well as expected over a relatively long time frame of 10-15 years. Changing understanding of future cash flow generation likely required to change outcomes going forward.

Yes but WHY can you not convert this to cash. The thesis for all the value guys in sears wasn’t based on the operating business. It was based on the assets Deadspace, you may have struck a chord when you say that traditional value investing focused on assets but not possibility of generating cash from the assets. Some of the error was in expecting that assets to be re-valued but not understanding the inflection point that will cause the re-valuation. Some have simply believed that over time "value will out".

rranjan, Yes makes sense. How then do you explain Chou Associates 15 yr compound return of 1.6%? Are you saying that value investing community is not able to fairly assess how much cash the business will generate in future.

Much discussion as to why results from Value Investing have been poor for > a decade. Covid and 2020 has further highlighted the gap between value & growth investing (mostly tech). In Francis Chou's 2020 semi-annual letter, he argues that value investing works but he his valuations have been wrong - gave too much emphasis to assets and not enough to operating side of business for companies in trouble - mistakes of commission. On the other hand, mistakes of omission were undervaluing profitable companies and potential for growth. Not sure how he would change the valuation for growing companies - accept a different P/E? The following is Francis' write up on Does Value Investing Work? : "With the lackluster returns by value funds in recent years compared to growth and index funds, there is some doubt as to whether value investing can still work in the current market. We hold the view that value investing certainly works, but only when executed properly. Sometimes it is easier to blame the market environment than to admit our own faults. Although factors such as low interest rates, the popularity of passive investing and elevated market valuations played a role in blunting returns for value investors, we also accentuated the problem. The key to value investing is appraisal. If that is not precise enough, everything falls apart. We tend to fish in troubled waters, and what caused the biggest problem in recent years was that our appraisal of troubled companies was off the mark. When we thought a company was worth 100 cents, it was actually worth closer to 60 cents. We tended to give much higher weight to asset values and not enough weight to the value of the operating company. We used the asset value as a huge security blanket and became blind to the deterioration of the worth of the operating company. That was a mistake of commission. We also made a bundle of mistakes of omission. Over the last 30 years, roughly half our portfolio was in troubled companies and the other half was in good companies. So, we are well acquainted with investing in both types of companies. But what happened over the last few years was that we spent most of the time undervaluing the good companies. When our assessment showed that the investments were worth 100 cents, they were more accurately close to 150 cents, thus causing us to miss most of those opportunities. These “omissions”, though they are unseen mistakes, are nevertheless as real as mistakes of commission. In summary, although the markets have been less kind to value investing, we exacerbated the problem as practitioners." The full letter is publicly available at http://choufunds.com/pdf/SEMI-AR%202020%20%28English%29.pdf

Re 35x forward earning being v. expensive. Makes sense for traditional valuation metrics. However, recently have been wondering if big tech is "different" because one doesn't know the TAM. Unlike brick and mortar companies where there is a known market with a growing pie, big tech tends to evolve and add new pies. So Aapl is expensive today if their TAM is computers, iPhones, AirPods, iWatch & services. However, if they add "health" or "?" then their valuation today may not be expensive. In the past 25 years Aapl has gone from being a computer company to something new every few years. Each time they add a product it creates network effects that strengthen the other components. In some ways Amazon is similar. One could value it 25 years ago if one looked at the online books sales market. However, one couldn't envision retail sale and 3rd party sales and web services.

KFS, I admire your conviction and comfort in holding FFH long term with no plans to sell. Two questions: 1) I understand buying cheap when it is well below book value. However, how do you square your statment of holding it long term with no plans to sell with with fact that folks who said the same thing 10-15 years ago, have not had returns and paid the price in opportunity cost. 2) Whilst cheap today, are there catalysts you see to get back to fair value? or is it a question of "value will out" with time? I'll go on the record here and say that in the past few weeks I've made FFH into my largest investment ever at an average price that just happens to be pretty close to Prem's recent 150M purchase. A couple years ago, I called FFH "statistically cheap" when it was selling at slightly below 1.0 x book and made an initial investment. I would have considered a fair, reasonable value to be around 1.3 or 1.4 x book. Today, at 0.7 x book, this has easily entered the "stupid-cheap" category. I look forward to revisiting this post in 5-10 years and reflecting on Mr Market's extreme depressive outlook on FFH during this time. I view this as a long-term investment and have no plans to sell.

François Rochon is still in charge there. He introduced David Poppe as a new partner at the last annuel meeting. With Valeant he just managed the portfolio prudently, selling shares to not let it become a too big part of the portfolio contrarly to Sequoia. The more debt they took the more he reduced it. The thing with Giverny is that they have compounded consistently at close to 15%. From 2010 to 2019 they outperformed the S&P500 by approx 4%/yr. From 2000 to 2009 they outperformed by close to 4%/yr. From inception to today, they have outperformed S&P500 by close to 4%/yr. That is a crazy good record. I wish I had discovered them earlier.

I would echo comment above about stubbornness: Watsa has been steadfast in saying that his LONG TERM shareholders have done very well. However 10 year return is flat- zero. Both 15 year return and 20 year returns are under < 5%/year before dividends. His defn of Longterm seems to be only since inception. I wish he would give credit to shareholders who have stayed with him for 10-15 years, bought regularly and underperformed the market. They too are long term shareholders and the company has underperformed in the long term. If he accepted the mistakes, acknowledged, learned and moved forward situation would be more palatable. Any return from here is a win for short term investors. Those who have held long term have lost compounding power.

The subscription fee is only for those that want the upgraded services above and beyond the message board. Otherwise, they would have full access and use of the message board as they do now. So nothing would change for the majority of users or new users. Cheers! Good that subscription is actually a "freemium" model and doesn't deter more voices from being on the board. Sanjeev, you've done a great job with this Board and I've often wondered about the "why" behind all the effort spent. If one can align incentives for participants and for organizers, there will be a path forward. Monetizing it means it will be sustainable. Otherwise, volunteer efforts whither away and quality decreases.

Parsad, I support the move to monetize the site. Otherwise it is not sustainable. However, charging for a subscription probably doesn't get you that many $s . Risk is that it dramatically decreases engagement amongst current users and proves to be a barrier for entry to future users. It's not even the $ amount - just the fact that it's not readily available. CEO of Shopify recently said that good businesses take things that are already possible and make it 10x easier - ie reduce friction. Don't have an answer right now as to how to monetize but will think about it.

Agree, not easy when one isn't conforming to how the rest do it. Basic principle is the truth will always be easier - just stick to it. If you want to add some humour and shock people, it's still ok to stick to the truth: "I made a lot of money in the markets, and retired at 37" - that will impress some and force them to move on. However, it sounds like you are in transition. Apparently, transition is about getting from you are to where you want to be. So make the jump. Figure out where you want to be in 10 years and start incorporating that in your language today.

Recorded conversation with Francis Chou and Mohnish Pabrai at a Harvard business class :http://chaiwithpabrai.libsyn.com/mohnish-pabrai-lecture-at-harvard-university-april-7-2020 ‪Neat to see evolution of thinking in Value Investing as Chou moves from philosophy of picking cheap stocks to picking companies that are actually growing. Prediction is returns for investors in his fund will be better over next decade than past decade. ‬...long podcast - 2 hrs....Chou has bought Appl & Google...They both speak about a transition in philosophy of buying companies with growing earnings rather than looking for companies that are only trading at a discount to intrinsic value.

Any explanation why FFH.TO close up >9% on a day when the TSX was up just over 3% ? Can't be the AGM as the stock was down yesterday...time for people to digest the news from AGM that they bought corp bonds at 4%, insurance is doing well and they dipped into XOM & GOOG? Buybacks?

For those not on the call, here is a summary of what I took away from the call: • Prem remains very optimistic • Fair and Friendly culture are the deep value pillars of FFH that will see it through bumps • Lots of focus on results over 34 years of company existence and being part of the 1% to increase share price by >15%/yr • Value investing has not done well over past 10 years but over 50+ years it has and will come back in vogue • Admitted disappointed at what Covid19 crisis has done to FFH share price • Nil to acknowledge 10 & 20 year results below index ( I think Watsa considers these shareholders to be shorter term holders) • Insurance business is doing well and has tailwinds • Equity portfolio will perform better going forward than when Watsa managed it • Due to large spread, have sold treasuries to buy high quality corp bonds yielding on average 4% with duration of 4 years • Buy backs: FFH is undervalued and buy backs are good but to me it appeared that Watsa suggested they were a 3rd level priority after ensuring the financial position was solid and taking advantage of opportunities in insurance markets. He did say they do buybacks and will continue to do so but are not going to telegraph when. • Insurance is the crown jewel in the holding company • During Covid19 downturn, FFH bought some XOM at a dividend yield of 10% and bought Alphabet

Does anyone know timing of FFH AGM this year? Was originally scheduled for April 16th. Their website says it will be webcast but no further details as how to sign up or time of event. Would like to block the time off on my calendar. thanks,

I'm advocating for people to be strict about social distancing and help "Bend the Curve". If your work is vital to stopping the pandemic, thank you for what you do - whether it's front-line healthcare or keeping grocery stores open for us to eat. If your work is not VITAL to helping stop the pandemic, please be strict in social distancing and help Bend the Curve so that hospital system is not overrun. If hospitals can just run at full capacity and not be overwhelmed, healthcare can take care of people. If overrun, so many people don't get access to care.

Yes, distribution of Covid is very heterogeneous currently in the US. I also know that Salt Lake City for example has very few cases admitted. However, the fact that Jacksonville or Salt Lake City doesn't have a big problem right now, doesn't diminish the problem in NYC and the threat. As of last night, the US now has the largest number of reported Covid cases in the world! at over 81,000. By the end of the day today, it will be likely over 100,000. The whole world is thinking of only Covid. I'd advocate that we as individuals think of what we can do to help with the crisis. There are frontline healthcare workers taking best care of humans, others are working to keep grocery stores open for us to eat, bus drivers are taking emergency workers to frontlines....I would not want to diminish the good of anyone's career. However, If the work you do is not VITAL to fighting the epidemic, what we as individuals can do to help contribute to society is SOCIAL DISTANCING to help BEND THE CURVE.

Cherceza - You are correct that thousands die annually from the flu. We know that resulting pneumonia is one of the largest Cause of Death for the elderly. The point you are missing here is how contagious COVID 19 is and the effect on the healthcare system. The worrisome aspect is healthcare systems being overrun. When that happens, normal lifesaving treatments for heart attacks, strokes, cancer etc... are compromised. In order to create capacity for Covid patients, hospitals across N. America have cancelled non emergency surgery - so if you are waiting to have heart bypass surgery - you will wait rather than having treatment. The only way currently to stop the system from being overwhelmed is to social distance.

I was on a conf call today with a surgeon from Brooklyn who said their one hospital has 180 Covid patients admitted with 90 of them on a ventilator in the ICU - their previous capacity for ventilated patients was 60 prior to emergency expansion. Means that other sick people just won't get care. There's 2 things people can do: provide emergency services (healthcare, fire, police, stock grocery stores so that people can eat) or do your part to help society by "bending the curve" and be strict in social distancing. If one can change the doubling time from 5 days to 7 days or 10 days or longer, it will prevent the entire healthcare system from being overrun. Currently most hospitals in N. America are not doing elective surgeries - keeping the beds open for the oncoming onslaught - which has arrived in NYC already.

The problem isn't the mortality rate, it's the virulence - how many people get infected and how fast. If current doubling time in your part of the world is 4-5 days (number of cases double every 4 to 5 days), in approx 6 weeks there will be roughly 1024x more cases (10 doubling times) . So if your region has 500 cases now, in 6 weeks it will be 500,000. Some people will die. Some young people will die too. However, the point is that the hospital system will be overrun. That means people who need usual life saving type treatments (heart attacks, strokes, cancer therapy....) won't be able to be accommodated. Article on the math of pandemic - by using simple math and data available in the news the author concluded on March 12 that social distancing was mandatory to flatten the curve: https://medium.com/@Jason_Scott_Warner/the-sober-math-everyone-must-understand-about-the-pandemic-2b0145881993