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Thomas Russo Lecture at Google: October 2015


NormR
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"I consider myself to be a farmer—not a hunter. And I think most people on Wall Street are hunters. They like to fell big beasts and I’m very comfortable planting a few rows and just tending to them carefully.”
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Thanks for posting, Norm :)

 

Liberty, at 58:00, I ask Russo about his third largest position, Mastercard and how it compares to Visa.

 

Very good! I haven't had time to listen to the whole talk yet, but I'm looking forward to what he has to say about that. Thank you for asking the question!

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I watched the video. A lot of my style is based on Russo and others in the same genre of value investing. This was one of the better Google value investing videos, because examples are used liberally.

 

I find many such productions to be pretty glib and superficial, relying on the same stale circlejerks we've all become accustomed to in this community. This one was a notch or two above, at least in my opinion.

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Thanks for posting. Tom Russo's earnest approach is endearing. His focus on the "gut" of any issue (rather than the mundane) is rather remarkable. Capacity to suffer for example. The absence of this is so dominant all around us. The world is numbed.

 

I fully share his view of the poor (diluted to the point of non-existent) ownership interest that pervades the typical large publicly run corporations. Stock options don't do it, this is my personal experience as well. Oh well, just stay away from them!

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In the video Russo said that his strategy of investing in global consumer companies expanding in emerging markets worked for 20 years until the recent couple of years.

 

Does anyone have any thoughts on whether the recent slowdown in EM is temporary or secular?

 

In the past decade when China was growing, it seems all EM countries were growing with it. With China slowing and commodities not doing well, most of them (except perhaps India) have faltered as well.

 

On one hand, the EM per capita consumption is low for most consumer products. On the other, most EM countries have failed to move beyond middle income and become truly successful.

 

Clearly Mr. Russo is assuming the long-run growth of EM consumers.

 

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Hey all,

 

Russo often talks about how these companies invest so much for the long-term which is at the expense of short-term results? What exact results is he talking about EPS? quarterly FCF? I guess i'm kind just trying to better understand how the financial statements would capture if a company is investing more than it's peers and if it is really earning good returns on its investment.

 

I guess it could be a number of things 1) lower margins, due to higher depreciation and amortization of ppe and intangibles 2) low free cash flow due to higher growth capital investments.

 

open to ideas and suggestions for reading as well!

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Hey all,

 

Russo often talks about how these companies invest so much for the long-term which is at the expense of short-term results? What exact results is he talking about EPS? quarterly FCF? I guess i'm kind just trying to better understand how the financial statements would capture if a company is investing more than it's peers and if it is really earning good returns on its investment.

 

I guess it could be a number of things 1) lower margins, due to higher depreciation and amortization of ppe and intangibles 2) low free cash flow due to higher growth capital investments.

 

open to ideas and suggestions for reading as well!

 

Both EPS and FCF. An example that I am involved with is Cimpress. They are opening a new facility in Japan, which has the following impacts:

- decrease in revenue while they temporarily halt sales in Japan

- CapEx for new factory

- operating losses as they scale up

- working capital as they scale up

- marketing expenses when they re-launch

 

Cimpress has disclosed the expected impact of these investments, so you can normalize FCF.

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Thanks for posting, Norm :)

 

Liberty, at 58:00, I ask Russo about his third largest position, Mastercard and how it compares to Visa.

 

Very good! I haven't had time to listen to the whole talk yet, but I'm looking forward to what he has to say about that. Thank you for asking the question!

 

Finally had a chance to listen to the whole thing. His answer to your question was very interesting, and it certainly makes me look at the difference in margins between V and MA in a different light. Now what I'd love to find out more about is how effective the reinvestment at MA is, which seems to be a hard thing to judge from the outside...

 

Again, thanks for asking the question.

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Interesting talk.  I agree with the general philosophy espoused - "capacity to suffer" and reinvesting capital for long term growth in spite of current earnings.

 

However, can anyone provide the long term investment track record of Russo?   

 

Edit: (paraphrasing) The top 100 people in Illinois that work for Kraft speak 0.9 languages, per Russo. 

 

Good luck with discounting 3G. 

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