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Yesterday I doubled my capital for the first time


giofranchi
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I started my company in 2004 with 25,000 Euros in equity. Until the end of 2010 operating earnings were much larger than investments. At the end of 2010 investments reached 1 million Euros for the first time, and truly started to matter. I have zero debt.

 

Yesterday the value of my firm’s investments exceeded 2 million Euros for the first time. Little more than a 20% cagr during the last 3 years and 10 months.

 

I am particularly satisfied by the way I have reached such a goal. Always behaving very conservatively and keeping as detached from stock market gyrations as possible. 30% of my capital has always remained invested in Fairfax, and another 20%-30% always in cash.

 

On the contrary, of course, if I had been more aggressive, by now I would probably be at 2.5 or 3 million Euros! ;)

 

Cheers,

 

Gio

 

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Have you continued adding operating earnings to your investments or is that pure investment return?

 

Yes, of course I have continued adding operating earnings to my investments! But since 2011 operating earnings and investment returns are of comparable amounts. ;)

 

Gio

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What I'd be even more interested to kbow, is how you went from 25k to 1m in 6 years. That's a phenomenal performance.

 

Well, that is easy to answer: good luck!! Two operating businesses that require almost no capital and generate very satisfactory levels of free cash flow. :)

 

Gio

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I'd be interested to know your biggest winners and positions.

Also, I'd love to know your portfolio today :)

 

I have at least doubled the capital invested in VRX, ENDP, and Third Point Offshore. I have made a lot of money with LMCA and OAK. I also have more than 150k Euros of capital gains in Fairfax, with 30k Euros more received as dividends. I have made some money with GLRE. Most of all I have lost practically no money (with the only exception of LRE, which took me by surprise…).

 

My portfolio today:

33% Fairfax,

15% LMCA + LBRDA

15% BH (way undervalued imo!)

9% GLRE

28% very short term US treasuries

 

Gio

 

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Question for you - you are out of VRX because you are concerned that Pearson and Ackman may overpay for Allergan?

 

No… Thinking about it, I really don’t know why I am out of VRX… In retrospect I think it will prove to be a very dumb decision…

 

I have sold it because of its debt level and because I think there is not yet evidence enough the organic growth of the companies Pearson acquires keeps being strong enough, after the acquisition and the changes implemented by Pearson and his team.

 

A high debt level without a crystal clear track record is something I am not comfortable with… But, again, I sincerely think I am making a mistake here.

 

Gio

 

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I've asked this before on here (and don't think you've answered), but what type of business(s) do you own? Care to share the name/websites? I'm interested in checking them out.

 

You may find the websites of both just below my avatar! :)

 

1) Civil Engineering Services: www.agenziamilanostrutture.it

 

2) For Profit Higher Education: www.masterpesenti.polimi.it

 

Cheers,

 

Gio

 

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Is your family actively working in these businesses and why did you choose to accumulate capital in the business instead of getting it out via income?

 

My parents are still involved in 2), my sister runs her own medical clinic! :)

 

Actually, I have a third company through which I gather all the earnings of 1) and 2) and invest them in the stock market. I think this solution is very tax efficient. Surely much more efficient than if I were to take out earnings as an individual via income.

 

Gio

 

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altius is quite down after you sold your Shares, when you will buy it again?

 

Thank you, Phil!

I keep following Altius with great interest. And I liked Dalton’s latest letter to shareholders. If the Liberty Broadband spin-off pays off, I will probably cash in some gains and reinvest the proceeds in Altius. We will see. ;)

 

Gio

 

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I think this solution is very tax efficient. Surely much more efficient than if I were to take out earnings as an individual via income.

 

Sounds good, i thought about a similar structure for my business some years ago. But i have thrown that idea away because of the additional work/costs involved with a second company and i thought that the advantage in germany is rather small because i pay around 25% on all capital gains/42% income tax as an individual and the company would have to pay around 26% on all the earnings. And my thought was that when i want to pull the money out of the company i get taxed a second time. But perhaps there was a flaw in my thinking or are the numbers in italy so much different?

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