The stock market closes today for 10 years what stocks would you consider?

[AzCactus]

Mere months ago this list would have also included LRE.  :)

 

If Brindle is gone, I am gone! ;)

 

Gio

 

 

But my understanding of the thread is you can't sell the company for 10 years. What happens if Malone, Biglari, Watsa, and Einhorn are all in a plane crash together next year? These are all businesses that rely heavily on their leader.

 

DCG----My idea when creating the thread was that the companies couldn't be sold for ten years.  We have all heard Buffett/Lynch say buy a company so good that any idiot could run it because sooner or later one will.  Basically that implies that if a company has a large enough moat they would still earn decent returns on capital.  Obviously, the four guys mentioned above maybe superior at allocating capital and managing an organization and they would also add value. 

[Uccmal]

No offence, but the premise is ridiculous. 

 

Its a little like getting a terminal illness, and having your body put into cryogenic hibernation until a cure is found.  You have to trust that a cure will be found, ; that other diseases wont evolve in the meantime that no one thinks to inoculate you from; that your provider pays the power bill; that your freezer company stays in business; that they remember to revive you; that the hill under which you are frozen doesn't get blown up, confiscated, or otherwise taken over; that the software that manages your freeze doesn't get hacked or otherwise glitch up. 

 

In this premise you are trying to predict the future which cannot be done, as we all know.  Guns, ammo, people I trust, and our own compound, with solar panels, windmills, and heat pumps for power.  I thought of a stream for hydro but that can be easily diverted. 

 

[rkbabang]

No offence, but the premise is ridiculous. 

 

Its a little like getting a terminal illness, and having your body put into cryogenic hibernation until a cure is found.  You have to trust that a cure will be found, ; that other diseases wont evolve in the meantime that no one thinks to inoculate you from; that your provider pays the power bill; that your freezer company stays in business; that they remember to revive you; that the hill under which you are frozen doesn't get blown up, confiscated, or otherwise taken over; that the software that manages your freeze doesn't get hacked or otherwise glitch up. 

 

In this premise you are trying to predict the future which cannot be done, as we all know.  Guns, ammo, people I trust, and our own compound, with solar panels, windmills, and heat pumps for power.  I thought of a stream for hydro but that can be easily diverted. 

 

 

But if you are about to die anyway the cryofreeze is better than the dirt nap.  A 1E-10% chance is still better than 0%.

 

 

[AzCactus]

No offence, but the premise is ridiculous. 

 

Its a little like getting a terminal illness, and having your body put into cryogenic hibernation until a cure is found.  You have to trust that a cure will be found, ; that other diseases wont evolve in the meantime that no one thinks to inoculate you from; that your provider pays the power bill; that your freezer company stays in business; that they remember to revive you; that the hill under which you are frozen doesn't get blown up, confiscated, or otherwise taken over; that the software that manages your freeze doesn't get hacked or otherwise glitch up. 

 

In this premise you are trying to predict the future which cannot be done, as we all know.  Guns, ammo, people I trust, and our own compound, with solar panels, windmills, and heat pumps for power.  I thought of a stream for hydro but that can be easily diverted.

 

I respectfully disagree.  I mention ten years, not 200 or something.  Some of the best investors have held onto investments for  close to and occasionally ten years, especially Buffett.  Furthermore, and as an aside---feel free to mention some of the qualities that you would look for in a business that you would consider holding for that time frame.

 

David

[Kraven]

No offence, but the premise is ridiculous. 

 

Its a little like getting a terminal illness, and having your body put into cryogenic hibernation until a cure is found.  You have to trust that a cure will be found, ; that other diseases wont evolve in the meantime that no one thinks to inoculate you from; that your provider pays the power bill; that your freezer company stays in business; that they remember to revive you; that the hill under which you are frozen doesn't get blown up, confiscated, or otherwise taken over; that the software that manages your freeze doesn't get hacked or otherwise glitch up. 

 

In this premise you are trying to predict the future which cannot be done, as we all know.  Guns, ammo, people I trust, and our own compound, with solar panels, windmills, and heat pumps for power.  I thought of a stream for hydro but that can be easily diverted.

 

I respectfully disagree.  I mention ten years, not 200 or something.  Some of the best investors have held onto investments for  close to and occasionally ten years, especially Buffett.  Furthermore, and as an aside---feel free to mention some of the qualities that you would look for in a business that you would consider holding for that time frame.

 

David

 

There's a huge difference between holding something by choice and holding because you have to.  This question reminds me of those stunts by guys like David Blaine where he is sitting in a glass enclosed case in NYC suspended in the air without food or water for 3 days or whatever it is.  He comes down and says "see, I did it!"  Of course anytime throughout the process he could have pounded on the wall and asked to be taken down.  Big difference between that and being put in that cage without any ability to come down until the end of the event. 

[CorpRaider]

Maybe the question should be based on buying with a 10 year voluntary lock-up period.  I think that gets you through the intellectual exercise without making you watch Doomsday Preppers right before going to bed for the night.

[AzCactus]

Maybe the question should be based on buying with a 10 year voluntary lock-up period.  I think that gets you through the intellectual exercise without making you watch Doomsday Preppers right before going to bed for the night.

 

CorpRaider-I think that's a great idea if anyone wants to answer the question in a way that allows for more flexibility I think that would be awesome and also maybe a good way for people to feel a bit less threatened by the title.

[CorpRaider]

Oh yeah.  I'm sure the question is fine.  That's how WEB words it. I just wanted to mention Doomsday Preppers.  That show is awesome, man there are a lot of crazy people out there.  Did you that know they can vote, trade stocks, and buy assault rifles?  'Merica!

 

My answer is: MKL, probably many of the stocks held by VIG.  The steady and growing divvy checks would keep me occupied.

[Kraven]

Maybe the question should be based on buying with a 10 year voluntary lock-up period.  I think that gets you through the intellectual exercise without making you watch Doomsday Preppers right before going to bed for the night.

 

CorpRaider-I think that's a great idea if anyone wants to answer the question in a way that allows for more flexibility I think that would be awesome and also maybe a good way for people to feel a bit less threatened by the title.

 

Whew!  I did feel pretty threatened by it all so am glad we can talk about it in a slightly different way.  I was really stressed while eating my lunch and didn't enjoy it as much as I might have otherwise.

 

I think phrasing it as a 10 year voluntary lockup is good though.  It really gets to the heart of the matter.  I will maintain, however, that there isn't a soul who would take that trade.  Buffett would say he would, but that he can't because of insurance regulatory issues.  If but for that.  For all those who believe that there are legions of people waiting to lock up their money for 10 years voluntarily they should talk to any of the thousands of hedge funds who practically go to war on 1 year or so lockups.  I know, I know, value investors are a different breed. 

 

I would think there are any number of investment banks and hedge funds who would gladly enter into a trade where they get your money today and provide you the economics on one of these stocks 10 years from now.  You should ask around.  You could get your wish.

 

[oddballstocks]

Oh yeah.  I'm sure the question is fine.  That's how WEB words it. I just wanted to mention Doomsday Preppers.  That show is awesome, man there are a lot of crazy people out there.  Did you that know they can vote, trade stocks, and buy assault rifles?  'Merica!

 

My answer is: MKL, probably many of the stocks held by VIG.  The steady and growing divvy checks would keep me occupied.

 

This is a total tangent but it's such a cool story I'll share anyways.  Had a friend who was a survival trainer in the Air Force for years.  He was intense, loved that stuff while he did it and left the military probably 10 years ago.  Owned a coffee shop with this wife, normal life stuff, very normal guy.

 

About two years ago he wrote a book.  Now this guy is not a writer.  He writes terribly, misspellings, bad grammar, everything. He essentially told a fictional story meshing his experiences in the Air Force with some doomsday scenario.  The book went nuts, completely nuts.  Sold like crazy on Amazon, became a prepper favorite.  He said he expected his family and a few friends would buy copies, was blown away by the response.  So this book catapulted him to a minor prepper status position.  He knew what he was talking about from the military training, and now he'd written a book.  So he and his wife took full advantage.  They sold the coffee shop and he opened a prepping consulting company.  He is busier than ever, helping people build bunkers, buy guns, buy food supplies.  He's writing another book and is doing a TV show.

 

He happened to be very lucky and have the intersection of a few skills.  He had the survival experience, wrote, and is very entrepreneurial.  He saw his opening and jumped in.

[yadayada]

I love how doomsday preppers are always overweight. You would think the first huge thing to increase your odds of survival would be to lose weight and be mobile.

[pocoapoco]

To hash out my answer further, I think for someone not managing multi-billions, the best way to guarantee great returns for the next decade is to invest in a local private company.  Invest in a boring company, something with a niche.  A small manufacturing or service company with nice margins, good earnings and low capex requirements that pays out a portion of earnings as dividends.  I've talked to a few people who've done VERY well for themselves owning positions like this that pay 7-10% (or more) in dividends per year.  It's not hitting it out of the ballpark, but it's steady returns, and they're more predictable compared to figuring out which large national brand will endure.

 

Nate, what types of local businesses would you recommend?  Where I grew up, there was almost nothing of any scale except retail.  That, and an absolutely incredible ice cream shop chain.  So I've got nothing to go off of.

 

(Off topic, I always thought it would be fun to own that place, because I'm positive it's a See's-like business in every way you can think of.  It's too bad it's named Whitey's.  I'm guessing that might limit it's scalability...)

 

I think too many people are looking to "kill it" on a business and would pass over something decent that doesn't have eye-popping numbers.  A family member works for a manufacturing company, they have maybe 100 employees, most likely a 5% net margin or so.  Given the numbers I've heard the owner is taking out $250-500k a year and leaves a little for reinvestment.  Is that a money printing machine, nope.  But anyone who can make $250k-500k in the Midwest can live like a king.

 

There are a lot of light industrial companies, or just small companies in general that aren't very profitable, but pay the owner nicely.

 

Ice cream stands can do well.  A former co-worker's neighbor lived in a solidly middle class neighborhood on the back of the earnings from his ice cream stand.  He works all summer and takes the rest of the year off.  Sure he doesn't have a house in the Hamptons, but it is only working about five months as well.

 

There are a lot of local business ideas that can generate a nice income but don't scale.  So you have to settle with being comfortable rather than rich. My guess is not many on this board would make that trade, too many trying to the top.  For the rest of us it spells opportunity.

 

Nate, I appreciate your input and you bring up a great point about, rather than investing in stocks, investing in local private businesses (or perhaps a bit of both).

 

Do you see in your area opportunities to invest in local "small manufacturing or service company with nice margins, good earnings and low capex requirements" that pay 7-10%.?

When I look at local businesses that are for sale I see restaurants, laundrymats, gas stations, mini-markets, and more restaurants.  I'm not seeing a lot of solid businesses of the kind you describe at the multiple you describe.

 

Maybe you are saying one should start a business, but that's not really apples to apples.  Sure I'd love to build a business and take home 250-500K a year.  No I don't need a mansion.  But is that really a fair alternative to buying shares of stocks?  I think that's a different beast and presumes the skills and opportunities (and a little luck) to do so.

 

So, I'm inspired by your comments and your advice, and I'm a willing buyer of local businesses at those levels.  How do I find sellers?

 

 

[oddballstocks]

To hash out my answer further, I think for someone not managing multi-billions, the best way to guarantee great returns for the next decade is to invest in a local private company.  Invest in a boring company, something with a niche.  A small manufacturing or service company with nice margins, good earnings and low capex requirements that pays out a portion of earnings as dividends.  I've talked to a few people who've done VERY well for themselves owning positions like this that pay 7-10% (or more) in dividends per year.  It's not hitting it out of the ballpark, but it's steady returns, and they're more predictable compared to figuring out which large national brand will endure.

 

Nate, what types of local businesses would you recommend?  Where I grew up, there was almost nothing of any scale except retail.  That, and an absolutely incredible ice cream shop chain.  So I've got nothing to go off of.

 

(Off topic, I always thought it would be fun to own that place, because I'm positive it's a See's-like business in every way you can think of.  It's too bad it's named Whitey's.  I'm guessing that might limit it's scalability...)

 

I think too many people are looking to "kill it" on a business and would pass over something decent that doesn't have eye-popping numbers.  A family member works for a manufacturing company, they have maybe 100 employees, most likely a 5% net margin or so.  Given the numbers I've heard the owner is taking out $250-500k a year and leaves a little for reinvestment.  Is that a money printing machine, nope.  But anyone who can make $250k-500k in the Midwest can live like a king.

 

There are a lot of light industrial companies, or just small companies in general that aren't very profitable, but pay the owner nicely.

 

Ice cream stands can do well.  A former co-worker's neighbor lived in a solidly middle class neighborhood on the back of the earnings from his ice cream stand.  He works all summer and takes the rest of the year off.  Sure he doesn't have a house in the Hamptons, but it is only working about five months as well.

 

There are a lot of local business ideas that can generate a nice income but don't scale.  So you have to settle with being comfortable rather than rich. My guess is not many on this board would make that trade, too many trying to the top.  For the rest of us it spells opportunity.

 

Nate, I appreciate your input and you bring up a great point about, rather than investing in stocks, investing in local private businesses (or perhaps a bit of both).

 

Do you see in your area opportunities to invest in local "small manufacturing or service company with nice margins, good earnings and low capex requirements" that pay 7-10%.?

When I look at local businesses that are for sale I see restaurants, laundrymats, gas stations, mini-markets, and more restaurants.  I'm not seeing a lot of solid businesses of the kind you describe at the multiple you describe.

 

Maybe you are saying one should start a business, but that's not really apples to apples.  Sure I'd love to build a business and take home 250-500K a year.  No I don't need a mansion.  But is that really a fair alternative to buying shares of stocks?  I think that's a different beast and presumes the skills and opportunities (and a little luck) to do so.

 

So, I'm inspired by your comments and your advice, and I'm a willing buyer of local businesses at those levels.  How do I find sellers?

 

There was another thread about this, not sure the title.  In short the best opportunities aren't advertising with business brokers or on lists.  The best approach is to talk to a few local CPA firms, or some business valuation firms.  Let them know what you're looking to buy and see what's out there.  There are plenty of smaller companies that aren't actively shopping themselves, but given the right situation they'd sell.

 

Another popular route is to be a capital provider for a portion of the business.  Say a manufacturing company needs capital, you inject some for equity with the intention to take over a portion of the company in a few years.  We had a family friend growing up who did this a few times.

[rkbabang]

I love how doomsday preppers are always overweight. You would think the first huge thing to increase your odds of survival would be to lose weight and be mobile.

 

No, no, you don't understand. If food becomes scarce for a short amount of time, they can live off of their body fat.  While skinny people have to carry or store their fuel externally, exposing it to possible theft or spoilage, they have fuel tanks built in.

 

[CorpRaider]

Oh yeah.  I'm sure the question is fine.  That's how WEB words it. I just wanted to mention Doomsday Preppers.  That show is awesome, man there are a lot of crazy people out there.  Did you that know they can vote, trade stocks, and buy assault rifles?  'Merica!

 

My answer is: MKL, probably many of the stocks held by VIG.  The steady and growing divvy checks would keep me occupied.

 

This is a total tangent but it's such a cool story I'll share anyways.  Had a friend who was a survival trainer in the Air Force for years.  He was intense, loved that stuff while he did it and left the military probably 10 years ago.  Owned a coffee shop with this wife, normal life stuff, very normal guy.

 

About two years ago he wrote a book.  Now this guy is not a writer.  He writes terribly, misspellings, bad grammar, everything. He essentially told a fictional story meshing his experiences in the Air Force with some doomsday scenario.  The book went nuts, completely nuts.  Sold like crazy on Amazon, became a prepper favorite.  He said he expected his family and a few friends would buy copies, was blown away by the response.  So this book catapulted him to a minor prepper status position.  He knew what he was talking about from the military training, and now he'd written a book.  So he and his wife took full advantage.  They sold the coffee shop and he opened a prepping consulting company.  He is busier than ever, helping people build bunkers, buy guns, buy food supplies.  He's writing another book and is doing a TV show.

 

He happened to be very lucky and have the intersection of a few skills.  He had the survival experience, wrote, and is very entrepreneurial.  He saw his opening and jumped in.

 

That's pretty neat.  Yeah I've often been amazed at what some of those people must be spending on that stuff.  Inlcuding many who don't seem to be thriving otherwise, with massive and expensive arsenals.  I suppose, to each his own.

[Rainforesthiker]

Some of you are taking this question too literally, or maybe you are just having fun with it.  I think the point of this question (originally set forth by Buffett) and this post is to crate a "thought experiment".  I view the question kind of as " What investments offer the greatest safety of principal in combination with the best growth prospects over a lengthy time period (10 years)."

[Uccmal]

No offence, but the premise is ridiculous. 

 

Its a little like getting a terminal illness, and having your body put into cryogenic hibernation until a cure is found.  You have to trust that a cure will be found, ; that other diseases wont evolve in the meantime that no one thinks to inoculate you from; that your provider pays the power bill; that your freezer company stays in business; that they remember to revive you; that the hill under which you are frozen doesn't get blown up, confiscated, or otherwise taken over; that the software that manages your freeze doesn't get hacked or otherwise glitch up. 

 

In this premise you are trying to predict the future which cannot be done, as we all know.  Guns, ammo, people I trust, and our own compound, with solar panels, windmills, and heat pumps for power.  I thought of a stream for hydro but that can be easily diverted.

 

I respectfully disagree.  I mention ten years, not 200 or something.  Some of the best investors have held onto investments for  close to and occasionally ten years, especially Buffett.  Furthermore, and as an aside---feel free to mention some of the qualities that you would look for in a business that you would consider holding for that time frame.

 

David

 

All facetiousness aside.  Every example in Buffett's arsenal can only be seen in hindsight.  Buffett searches for companies that he can hold for a long time - he never defines the time frame.  When the economics change, such as WP, he gets out.  He needs markets to sell into. 

 

The world is no longer so simple as it was, if it ever was. All companies require management that is competent and capable now.  I would think that Philip Morris has the safest moat of all.  And look at what is going on there.  While they are busy spending hundreds of millions on safer cigarettes part of their lunch is being eaten by upstarts in electronics. 

 

Every example that Gio posted above is key man (men) dependent.  We have seen over and over that key man is not a reliable premise.  Gio is sensible because he has diversified his key men. 

 

Look at all the key men we have seen leave or get ousted: Bill Gross, El Erian, Hank Greenberg, Robert Gozuieta, come to mind quickly.  With due respect to Prem Watsa, What if he is diagnosed with Alzheimer's, or dementia next week after the markets closed today.  (Think that is not possible: Malcolm Young (ACDC) is in a Nursing home near Sydney).  In one month there is an earthquake in NYC, and California, and there is a Tsunami that hits the US East Coast.  FFh is toast, as is would be MKL, LRE, GLRE, if they lost their key man.  The key man in each of these companies is the one with the relationships and skills to raise capital when all the odds are against them.  FFH survived in 2005 because Prem had a relationship with The Markels, and Peter Cundill. 

 

This is always fodder for a good argument but I for one dont think Berkshire survives Buffett intact, certainly not ten years.  Creative destruction is happening at an ever greater pace.  10 years is far too long to commit in the face of this onslaught.  My longest holding right now is Seaspan - but it has only been held in hindsight.  Basically I have not sold because the story keeps getting better. 

[Guest longinvestor]

Hi Dshachory,

Thanks for starting this thread, especially like the straightforward title. It is, to me at least. Because I can answer the question.

 

BRK.

 

And it is no thought experiment or some other form of intellectual masturbation. I bought BRK in 2008-09 with this exact thought of holding until I need the money. At the time, it was for over 10 years. It still is for over 10 years. Only that I have no new investment capital coming in, so no new buying.

 

And oh, btw, I'm hoping that all of the doubts over Berkshire stay very alive until 2018-19, because I will be deploying some more capital and like to buy below fv.

 

May the internet message boards, portals, NYT, WSJ, Forbes et al keep that urban myth alive. May Warren Buffett lead for another 20 at least just to mess with them.

 

 

 

[Rainforesthiker]

BRK would also be my top choice.

[sys]

without putting much thought into it - just stuff i already own, never really check or look at, and have every intention to own basically forever - bam, cb & pm.

 

not sure if it is in the spirit of the thread or the board, but the same would be true of the various index funds in my 401k.  it's probably hard to find something you can be confident will outperform over ten years.  but it doesn't seem that hard to me to find places you can confidently put money with little worry that you won't do ok.