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Interesting interview with a great investor, Pierre Lassonde


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For those of you who don't follow the mining sector,  Pierre Lassonde is one of the greatest investors of the last 40 years. (In 20 years  his public vehicle Franco-Nevada grew >38%.)  He and Seymour Schulich ran Franco-Nevada, which Lassonde bought back from Newmont and runs now.

 

This article was mentioned in the Altius discussion (hat off to Williams406).  Even those who stay away from resource stocks should read this.  (hint, Great skills in investing translate across industries and in reality, his business, royalties are not the mining business, which he calls the height of speculation.)  It would be interesting to ferret out what his other investments are, one of which is in high tech.

 

He has patiently invested in companies with:

[*]A great CEO

[*] A great business model

[*]A bullet proof balance sheet

[*]An ability to opportunistically seize opportunities when others can't

 

He is looking in the mirror, but that's alright.

 

http://www.mining.com/web/pierre-lassonde-franco-nevada-very-few-get-this-but-its-worth-so-much-money/

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Lassonde owns shares in ESL.TO.

 

I've read Lassonde's book on gold.  It was underwhelming.  It also had terrible timing... had you listened to the book and bought gold, your investment would have gone sideways for several years.

The Gold Book: The Complete Investment Guide to Precious Metals (Financial Times Personal Finance Library)

 

Lassonde understands very well that you can make money by selling overpriced stock to investors.  To some degree he talks his book; he wants people to overvalue his company.

 

I never put in the work to figure out how much of his returns were due to skill and how much to luck.  If Franco-Nevada didn't find gold then obviously its returns would not have been as good.

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Lassonde owns shares in ESL.TO.

 

I've read Lassonde's book on gold.  It was underwhelming.  It also had terrible timing... had you listened to the book and bought gold, your investment would have gone sideways for several years.

The Gold Book: The Complete Investment Guide to Precious Metals (Financial Times Personal Finance Library)

 

Lassonde understands very well that you can make money by selling overpriced stock to investors.  To some degree he talks his book; he wants people to overvalue his company.

 

I never put in the work to figure out how much of his returns were due to skill and how much to luck.  If Franco-Nevada didn't find gold then obviously its returns would not have been as good.

 

I agree, it just seems like a lot of promotion over what is a combination of luck and a massive gold bull market.  Not to say he didn't have at least some element of skill in the process.

 

It reminds me of those internet links "12 THINGS YOUR DOCTOR DOES NOT WANT YOU TO KNOW."  Really?  No other natural resource CEO knows about royalities?  In fact they do cost something.  You can get a perpetual royalty but we are talking a very small percentage of the total production.  The cost is in the inability to get more than a couple percent of the production.

 

You can aggregate 100 different royalty streams, sort of like a tail risk investment, and hope a couple make up for all the losers.  He mentioned a couple so it seems he managed to get his hands on those.

 

Overall, 6/10 - IGN.  Interesting fellow though.

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What do you mean "luck" and a gold bull market?

 

I am no expert, but I think his career was built from the early 1980s to the early 2000s with the original Franco. So gold went from something like $800 an ounce to under $200 by 2000 or something along those lines. Meanwhile, in this huge bear market for gold, Franco compounded at 30-40% annualized or something.

 

I may be off, but my understanding is he made huge absolute returns even in a huge gold bear market over about 20 years.

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Well, like he said if you buy an asset for 2 million and extract 1 billion from it over 20 years, you are going to do very well. I'd say luck is important in finding the right, opportunistic deals, but the skill part is in knowing a) that a great business model excels over an average one and b) a skilled ceo enhances returns on all levels, even in finding those lucky deals and managing for best returns. Even if you never found the 100 bagger, a combination of A and B can still give you a great return. I'd add a 'C', if you have a choice don't invest with people you don't know, don't know what they're doing or going to do, or don't like what they say or write. Much better to invest in yourself (your own business or job skills) than in a stranger. Of course if you can get to know them and find out they are something very special, then go for it!

 

 

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He made his money in a flat to declining market gold market, but the gold he really discovered was the royalty business.  One of the best business models ever.

You can aggregate 100 different royalty streams, sort of like a tail risk investment, and hope a couple make up for all the losers.

Not sure what you really mean to say.  That is not how you buy royalty streams.  You aren't really buying losers. 

 

Anyway, I am not a Lassonde acolyte, I did not like his gold book, but  he is a sharp investor with a great record.

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He made his money in a flat to declining market gold market, but the gold he really discovered was the royalty business.  One of the best business models ever.

You can aggregate 100 different royalty streams, sort of like a tail risk investment, and hope a couple make up for all the losers.

Not sure what you really mean to say.  That is not how you buy royalty streams.  You aren't really buying losers. 

 

Anyway, I am not a Lassonde acolyte, I did not like his gold book, but  he is a sharp investor with a great record.

 

I guess what I mean is most of the royalties are not going to give above average returns.  But you end up with a few (like he mentioned) that provide the lion shares of returns across all your investments.

 

I take back what I said, he seemed to have a good handle on what he was doing during a period of weakness in gold.  I think the hardest part in investing can be to hold onto something forever.  Sometimes being smart or dumb enough to hold onto something forever can make the difference between an average and above average investor.

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