Jump to content

Yesterday I doubled my capital for the first time


giofranchi

Recommended Posts

Congratulation Gio!

 

Since we are all opening the kimono and boasting, I post my annual performance numbers http://invest.obtusely.com/p/performance.html and it has been quite a ride. The performance is based on no use of debt. The only leverage I have occasionally taken advantage of is BAC warrants, which have underperformed the equity anyway. :)

 

Over the last year or two, I am thinking of switching into the lazy mode for the very long run, much like Cageyone. A market crash would be the opportunity to set the automatic compounding machine running.

Link to comment
Share on other sites

  • Replies 65
  • Created
  • Last Reply

Top Posters In This Topic

Congratulation Gio!

 

Since we are all opening the kimono and boasting, I post my annual performance numbers http://invest.obtusely.com/p/performance.html and it has been quite a ride.

 

Nice job! You might want to post an update on your strategy since your last post is from January 2014. I'm curious to read what you're looking at lately. Thanks for sharing. 

 

Link to comment
Share on other sites

Gio... I see you like smart capital allocators. What stocks are you tracking right now but not yet bought? For example, any thoughts on TDG? I saw you posted there as well. How would you compare TDG with other businesses like VRX?

 

I look at TDG almost the same way I look at VRX: usually, I go for a great entrepreneur in a good business at a good price… But, when I see lots of debt, I pause and demand much more conviction in the moat of the business and therefore in its ability to generate tons of free cash flow whatever happens to the economy in general.

If I have doubts, I just watch from the sidelines, until those doubts are proven wrong. And this is exactly what I am doing with both TDG and VRX right now. Of course, by doing so I run the risk of missing both boats…

 

Gio

 

Link to comment
Share on other sites

I look at TDG almost the same way I look at VRX: usually, I go for a great entrepreneur in a good business at a good price… But, when I see lots of debt, I pause and demand much more conviction in the moat of the business and therefore in its ability to generate tons of free cash flow whatever happens to the economy in general.

If I have doubts, I just watch from the sidelines, until those doubts are proven wrong. And this is exactly what I am doing with both TDG and VRX right now. Of course, by doing so I run the risk of missing both boats…

 

Gio

 

Hi Gio,

 

If I may, I'm curious to know how you think about Malone's use of debt. He uses lots of it, and even seems to use margin in his own portfolio (was a forced seller during the crisis, afaik). Are you comfortable with it because he has a longer track record?

 

Valeant might be more recent - the 2008-2009 crisis was a nice real-world stress test, though they were much earlier in their transformation at that point - but Transdigm has been using the same model pretty much for 20+ years. Of course, they use more debt than Malone (or at least, their peaks are higher, they tend to delever quickly and then lever back up), and I don't think they'll ever have low debt (that's how they optimize their capital structure), but you also have to look at their business. They basically have a bunch of high-margin annuities that even 9/11 and the GFC barely affected. If you don't lever that up, especially when the credit market is so accommodating, you're leaving a lot of money on the table.. And most of their debt is pretty low-cost and on matures in 5+ years.

 

Anyway, just curious about your thought process on use of debt. Cheers.

Link to comment
Share on other sites

Anyway, just curious about your thought process on use of debt. Cheers.

 

Exactly! Imo debt is very useful, until it gets to be harmful… And those instances when debt gets harmful don’t happen very often, but when they do, they tend to be very detrimental to your net worth… Two such instances might be enough to mar a lifetime of successful investing…

 

Therefore, either you partner with people who shun debt altogether, like Buffett and Watsa, or you partner with people who make use of debt, but have a long enough track record to show they had been able to weather comfortably enough hard times in the past. Liberty Media has returned 15% annual from 2002 to 2013 with 2008-2009 in between: volatility YES, overall bad results NO.  Here is something important for me: I have not said “permanent loss of capital NO”, meaning that I am not only looking for evidence of an effective enough protection of capital, but that I want to see a track record of very satisfactory returns over a long period of time through good environments and bad.

 

What you say about Transdigm might be very correct.

 

So, let me clear this a bit: I suffer from a sort of inertia that makes me stay with or even add to businesses that I already own and know very well, instead of buying new businesses that I don’t know as well. Therefore, for me to make a new investment, it is not enough “a great entrepreneur, a good business, and a good price”… Probably I need “a great entrepreneur, a good business, and a great price”… Surely a far better price than the one a business I already own is offered for at the moment! And right now Transdigm seems to me more pricy than Liberty Media, not less… Therefore, I concentrate my funds in Liberty Media, instead of splitting them between Liberty and Transdigm.

 

Maybe this has nothing to do with debt, but I wouldn’t be so sure: if Transdigm had less debt, I would feel more secure about investing in it… therefore, the price I’d require would probably be less “great”… Though I don’t know if this is clear or makes any sense at all… ???

 

Gio

 

Link to comment
Share on other sites

Anyway, just curious about your thought process on use of debt. Cheers.

 

Exactly! Imo debt is very useful, until it gets to be harmful… And those instances when debt gets harmful don’t happen very often, but when they do, they tend to be very detrimental to your net worth… Two such instances might be enough to mar a lifetime of successful investing…

 

Therefore, either you partner with people who shun debt altogether, like Buffett and Watsa, or you partner with people who make use of debt, but have a long enough track record to show they had been able to weather comfortably enough hard times in the past. Liberty Media has returned 15% annual from 2002 to 2013 with 2008-2009 in between: volatility YES, overall bad results NO.  Here is something important for me: I have not said “permanent loss of capital NO”, meaning that I am not only looking for evidence of an effective enough protection of capital, but that I want to see a track record of very satisfactory returns over a long period of time through good environments and bad.

 

What you say about Transdigm might be very correct.

 

So, let me clear this a bit: I suffer from a sort of inertia that makes me stay with or even add to businesses that I already own and know very well, instead of buying new businesses that I don’t know as well. Therefore, for me to make a new investment, it is not enough “a great entrepreneur, a good business, and a good price”… Probably I need “a great entrepreneur, a good business, and a great price”… Surely a far better price than the one a business I already own is offered for at the moment! And right now Transdigm seems to me more pricy than Liberty Media, not less… Therefore, I concentrate my funds in Liberty Media, instead of splitting them between Liberty and Transdigm.

 

Maybe this has nothing to do with debt, but I wouldn’t be so sure: if Transdigm had less debt, I would feel more secure about investing in it… therefore, the price I’d require would probably be less “great”… Though I don’t know if this is clear or makes any sense at all… ???

 

Gio

 

Thanks Gio.

Link to comment
Share on other sites

Are you still planning to start an investment newsletter?

 

Actually I am writing it... But no cash flowing from that endeavor until now...  :(

 

Gio

 

How can I become a reader of this newsletter?

 

Your first step should probably be to learn Italian.

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/adding-a-new-business-investment-newsletter/msg137387/#msg137387

Link to comment
Share on other sites

Are you still planning to start an investment newsletter?

 

Actually I am writing it... But no cash flowing from that endeavor until now...  :(

 

Gio

 

How can I become a reader of this newsletter?

 

Your first step should probably be to learn Italian.

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/adding-a-new-business-investment-newsletter/msg137387/#msg137387

 

Brilliant! I always like challenges.

Link to comment
Share on other sites

Are you still planning to start an investment newsletter?

 

Actually I am writing it... But no cash flowing from that endeavor until now...  :(

 

Gio

 

How can I become a reader of this newsletter?

 

Your first step should probably be to learn Italian.

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/adding-a-new-business-investment-newsletter/msg137387/#msg137387

 

Brilliant! I always like challenges.

 

;D ;D

 

Cheers!

 

Gio

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now



×
×
  • Create New...