Very long term holding periods

[UK]

On 12/6/2022 at 10:33 PM, Cod Liver Oil said:

This is from Lindsell Train who has an average holding period of 25 years:

https://www.lindselltrain.com/application/files/3516/6981/1044/The_Triumph_of_Experience_Over_Hope_-_November_2022.pdf 

@Gregmaland I sometimes discuss the lure of a permanent portfolio.  @dealrakerand Buffett seem to be practitioners of that dark art.

Thinking very long term probably makes you a better trader in the part of the portfolio that isn't.  Yes, survivorship bias, but companies like

Nintendo, Diageo, Texas Pacific and Bollore are already over 100 years old and may have solid futures. JOE could be fantastic over the next 20 years or climate tail events

could kill it.  What names can you even dare to think about for the next generation?

 

 

I think if I was told not to touch it for more than 20 years, the best way for me, also psichologically, would be to just buy SNP. It would be hard to have high conviction on many individual names for more than 20 years for me, but it woud be mostly the same holdings I own currently: BRK, FFH, JOE, maybe less than I own currently of big tech (currently GOOGL, META, AMZN, some MSFT) and maybe I would add some consumer good companies (which seems like never are cheap enought to buy). And also my favourite individual company to answer this question would be UMG, which I see as durabale consumer business with tech growth characteristics:). But to own for more than 20 or 50 years I would like company to be able allocate capital like BRK. Now a problem with BRK is that 20+ years is also perhaps too long period to be sure how succesful it will be after WB.

 

Edited December 8, 2022 by UK

[Gregmal]

Thought about it some, its always at the top of my buy list but never quite gets bought, but Goldman Sachs? Long term winner, will be around. Brand name that attracts top talent. Cheap. Anyone beg to differ?

[Dinar]

I would disagree re GS.    The business is run for the benefit of employees, shareholders come last, and it would have gone bankrupt in 2008 without Buffett and Fed bail-out in my opinion.  

 

Keep in mind, if under Jamie Dimon JPM could take a $50bn London whale hit, then why not GS?

[SharperDingaan]

24 minutes ago, Gregmal said:

Thought about it some, its always at the top of my buy list but never quite gets bought, but Goldman Sachs? Long term winner, will be around. Brand name that attracts top talent. Cheap. Anyone beg to differ?

 

Come to think of it they should also be a high weight core holding, to allow for swing trades.

The scum is no good if its rubbish, and there's always a need for a good thief! Just always keep an opposing option position so as to also benefit from the funny money 

 

SD

Edited December 8, 2022 by SharperDingaan

[gfp]

6 minutes ago, Dinar said:

 

 

Keep in mind, if under Jamie Dimon JPM could take a $50bn London whale hit, then why not GS?

 

I don't think that was $50 Billion!  Maybe $6 Billion?

[Gregmal]

8 minutes ago, Dinar said:

I would disagree re GS.    The business is run for the benefit of employees, shareholders come last, and it would have gone bankrupt in 2008 without Buffett and Fed bail-out in my opinion.  

 

Keep in mind, if under Jamie Dimon JPM could take a $50bn London whale hit, then why not GS?

My thinking is more along the line of @SharperDingaan. Stories of who went or was going under are greatly exaggerated. Lehman and especially Bear didnt need to go under. Everyone took safety net money. Goldman also happened to make a ton of money on the short trades. Didnt they get AIGs bailouts money to payout their CDS? The cries of Government Sachs that echoed for years are founded in truth. 

[Xerxes]

33 minutes ago, Dinar said:

I would disagree re GS.    The business is run for the benefit of employees, shareholders come last, and it would have gone bankrupt in 2008 without Buffett and Fed bail-out in my opinion.  

 

Keep in mind, if under Jamie Dimon JPM could take a $50bn London whale hit, then why not GS?

 

 

But the fact that unlike Credit Suisse and others they had the right risk management tool to spot first and insulate themselves from the Archegos disaster that must say something.

 

I think that Goldman as an investment bank that is in the business of taking risk/doing-trades on behalf of clients (sometimes exposing its own balance sheet) is probably more focused on risk than JP Morgan that enjoys the stability of its large domestic deposits.

 

As a former commodity trader Lloyd Blakfein was laser focused on risk. He is gone but that focus-on-risk-DNA is probably still there. Cliche, i know, but he liked to say he spends 80% of his time at that 2% tail risk. I really enjoyed this interview when it was aired couple of years ago.

 

Watch Life After Goldman: Front Row With Lloyd Blankfein - Bloomberg

 

 

Edited December 8, 2022 by Xerxes

[Cod Liver Oil]

Train's "Money Masters" books are great. He has looked closely at Buffett,  Fisher and Templeton etc.... Interesting guy. I just realized that Train Lindsell only manages about $100mm so there is not a huge retail appetite for his ultra long term, cerebral kind of investing. When you think very long term you need to look past the current cast of character actors running the business because their careers will end before your investment horizon does.

@Dinar I think Goldman is like Harvard, its too culturally and politically enmeshed to go away but yes it is run for the partners and the public stub will never get a multiple.  If you squint past all the political bs at DIS, it will survive and thrive eventually IMO. UMG is very interesting and I have thought a lot about it lately as a toll road but my conversations with people in the music business are not satisfying. The SPOT/UMG tug of war seems unsustainably one sided at the moment.

Edited December 8, 2022 by Cod Liver Oil

[dealraker]

In recent years, that's the last ten or so, I've bought things like NDAQ, ICE, VMC, MLM, WM, RSG, and PGR about every time the stocks have had run downs.  Methodically they gain traction over time and I have more than invested.  There are a slew of these type things available, but they are not often anywhere close to cheap.

 

I also generally tend to add to the defense contractors, all of them, in times of stock price declines.  As mentioned here recently, which I'd forgotten about, I bought BA and GE for the first time in my life.  Same with drug stocks.

 

That's my style.  Most are obsessed with beat-the-market while I could care less.  I have a hard time believing that Boeing and GE awill sell for less than the high 60's over a long period of time.

 

Just rambling, mentioning that over time this model of investing has had a positive outcome not only for me but for a whole bunch of people I know or have known.

 

Buying some Medtronic today.

[Dinar]

@dealraker, I had a conversation with someone today who claimed that reinsurance pricing is going up 25-50% depending on the line.   So, have you by chance heard something similar or different?  Also, any particular reinsurers or reinsurance brokers that you either own or would consider owning/respect?  Thank you.

[treasurehunt]

5 hours ago, Cod Liver Oil said:

I think Goldman is like Harvard, its too culturally and politically enmeshed to go away but yes it is run for the partners and the public stub will never get a multiple.

 

This criticism of Goldman is fairly common, but how deserved is it? Goldman has traded at large premiums to book in the past, although not so much since the financial crisis (GS did trade at 1.5 times book in Q3 2021). So it seems bold to say that the public stub will never get a multiple.

 

I also took a look at the returns of the big US financials since Goldman's IPO in May 1999. I ignored dividends since I was just looking for a rough comparison. The table below has the summary. I hope I accounted for stock splits correctly.

 

	Price
	05/05/99	08/12/22	Split-adjusted	Split Ratio	Total Return
GS	$69.13	$358.08	$358.08	1	417.98%
MS	$41.17	$88.69	$177.38	2	330.85%
C	$363.66	$44.69	$8.94	0.2	-97.54%
BAC	$35.47	$32.44	$64.88	2	82.92%
WFC	$21.94	$42.58	$85.16	2	288.15%
JPM	$53.46	$132.88	$199.32	1.5	272.84%

 

Not a bad result for shareholders, especially if the company is being run for partners. 418% over almost 24 years is just over 7% a year; adding dividends should get the total annual return over 8%. A respectable showing, I think.

 

[dealraker]

50 minutes ago, Dinar said:

@dealraker, I had a conversation with someone today who claimed that reinsurance pricing is going up 25-50% depending on the line.   So, have you by chance heard something similar or different?  Also, any particular reinsurers or reinsurance brokers that you either own or would consider owning/respect?  Thank you.

Dinar, my investment club met last Tuesday.  We have 2 insurance brokerage owners/operators in the club and we always at least briefly discuss the business.  Yes rates are apparently going up as per what they say or said, but I'm not familiar with precise numbers like 25-50% and I'd have thought that would have been mentioned given the signficance.  

 

The years pass and I tend to appreciate owning a lot of AJ Gallagher and Markel.  The issue of course is the big "when" to buy and that part is not something I can state that isn't particularly my specialty or frankly anyone else's in the industry that I am aware of.  Markel isn't cheap...but should it be?  AJ Gallagher is firmly priced and honestly with its history it should be firmly priced, not cheap.  

 

But I own all the brokers except Ryan and Goosehead and have no plans to buy either of those--- and am delighted with all the others - Aon, Marsh, Willis, Brown and Brown, and BRP (a new holding).  They are all good, I almost added to Willis when it stalled out recently, noticed that Seth Klarman bought precisely when I almost bought...and of course it was a good buy and showed why he is successful.

 

Underwriters/reinsurance is a field I am not all that comfortable with and try to avoid if possible.  That said I do own of course Berk and MKL and small stakes in a slew of them such as: Partner; Transatlantic; Arch; WR Berkley; and some other big insurance co's that have some reinsurance divisions.

 

I'll mention something that I've always found interesting:  We have had several people in my club in the insurance business over the years, several from the two largest agency/brokers in our area.  Basically I can tell you that none of them have ever been interested in investing in the publicly traded stocks of the sector----- as least as per our lengthy discussions through the years.  

Edited December 8, 2022 by dealraker
clarity

[UK]

18 hours ago, Cod Liver Oil said:

UMG is very interesting and I have thought a lot about it lately as a toll road but my conversations with people in the music business are not satisfying. The SPOT/UMG tug of war seems unsustainably one sided at the moment.

 

I understand there are natural tensions, but what specific risks are you seeing, especially from UMG point of view? SPOT is great and largest service, UMG cooperates with them and I believe even owns some shares, but there are other distributors and some new players are emerging (Tiktok). Labels could still do well with or without one of them, but no major distributor could do well without labels or even one of them, becouse conumers expect all music to be available. So I think the balance of power is obvious, and distributors could also still grow and do well enought under current arangement?

[SharperDingaan]

16 hours ago, treasurehunt said:

 

This criticism of Goldman is fairly common, but how deserved is it? Goldman has traded at large premiums to book in the past, although not so much since the financial crisis (GS did trade at 1.5 times book in Q3 2021). So it seems bold to say that the public stub will never get a multiple.

 

I also took a look at the returns of the big US financials since Goldman's IPO in May 1999. I ignored dividends since I was just looking for a rough comparison. The table below has the summary. I hope I accounted for stock splits correctly.

 

 

	Price
	05/05/99	08/12/22	Split-adjusted	Split Ratio	Total Return
GS	$69.13	$358.08	$358.08	1	417.98%
MS	$41.17	$88.69	$177.38	2	330.85%
C	$363.66	$44.69	$8.94	0.2	-97.54%
BAC	$35.47	$32.44	$64.88	2	82.92%
WFC	$21.94	$42.58	$85.16	2	288.15%
JPM	$53.46	$132.88	$199.32	1.5	272.84%

 

Not a bad result for shareholders, especially if the company is being run for partners. 418% over almost 24 years is just over 7% a year; adding dividends should get the total annual return over 8%. A respectable showing, I think.

 

 

Thieving everywhere depends primarily on the economic tide; when the tide is rising everyone will do well, but if you also own the best thieves in the biz ... the results are spectacular! - even when the thieves are stealing you blind! However, when the tide is falling ... even the best thieves will have a sh1tty year. 

 

Hence ..... to own a GS is to BOTH own a very good thief, AND to own the changing economic tides. Volatility, and the need to swing trade around a core position, to fully benefit from the exposure. Shares for the economic cycle, and tactical put options for the inevitable periodic 'misses'. 

 

Of course, if along the way you should become even just half as good as they are

.... that's bonus  

 

SD

 

 

 

[Spooky]

Interestingly enough there has recently been some pretty heavy insider buying of Amerco, Uhaul's parent company, to the tune of ~$48M.

[ValueArb]

Buffett was never a long term holder until his portfolio got too large to nimbly move in and out of positions. Before that he spent 20 years as almost entirely a value trader, and those were by far his highest return years.

[Cod Liver Oil]

@ValueArbgreat point. I was thinking about Disney and Buffett in that regard. 
He has been in and out of it a few times even though he is bros with Iger. Right now the film library is being valued at zero but it may be the DNA of the company and the key to its longevity.

[ValueArb]

3 hours ago, Cod Liver Oil said:

@ValueArbgreat point. I was thinking about Disney and Buffett in that regard. 
He has been in and out of it a few times even though he is bros with Iger. Right now the film library is being valued at zero but it may be the DNA of the company and the key to its longevity.

I wonder if he is as bothered by the lack of focus and investment in non core low moat assets (ESPN, Hulu, streaming) as I am?

 

if I owned Disney all I would want to keep is content production and the parks, and focus on quality over quantity. It’s likely I just don’t understand the business anymore since everyone wants to do the opposite of that.

[Cod Liver Oil]

@UK since your post of 3 years ago, we have bought at various times  a ton of UMG, Bollore and Odet. Spot has tripled in that time period and the UMG variants have had decent but not spectacular IRR.  I think you are right about the toll road and persistence but as the elephant, UMG may be suffering from incumbent syndrome, lack of motivation and half-assed innovation. Ek, in the meantime has proven he has price levers that no one spreadsheeted. What do you see happening now and the next couple of years?

Edited 1 hour ago by Cod Liver Oil