Sequoia Fund Investor Day Transcript

[undervalued]

Thanks for posting the transcript. I guess the lesson here is to remind everyone Bernard Baruch saying ―nobody ever went broke taking a profit. And that during downturn, stock price went crazy to the low side where you can really outperform over the long term.

[benhacker]

is the reason they don't/won't do the fees after performance due to the 1940 investment act?

 

Mostly yes, but also it's a terrible feast / famine business (the RIA) if it's 100% performance based.  I think most rational investors wouldn't generally support a pure performance fee if they want longevity in their investment manager (some will of course).

[intothebreach]

The one question I would have like to hear about did not get asked: If the directors that resigned did so over the VRX concentration, were they not doing their job of governance, and thus of looking out for investors? If so, has Sequoia considered or will Sequoia consider asking them back? Probably never going to happen due to politics or burned bridges, but still would have liked that as a question...

 

[John Hjorth]

The one question I would have like to hear about did not get asked: If the directors that resigned did so over the VRX concentration, were they not doing their job of governance, and thus of looking out for investors? If so, has Sequoia considered or will Sequoia consider asking them back? Probably never going to happen due to politics or burned bridges, but still would have liked that as a question...

 

Totally agree with intothebreach here. After reading the transcript, exactly this question was for me unanswered.

[VersaillesinNY]

2016 Annual Report

 

http://www.sequoiafund.com/Reports/Annual/Ann16.pdf

Ann16.pdf

[educatedidiot]

Ruane, Cunniff, Goldfarb filed their 13-F.  Looks like they bought Priceline and Credit Acceptance: http://www.rocketfinancial.com/Holdings.aspx?fID=370

[VersaillesinNY]

2017 Second Quarter Shareholder Letter

http://www.sequoiafund.com/Sequoia-Q2-17-letter.pdf

 

May 19th, 2017 - Investor Day Transcript

 

http://www.sequoiafund.com/Reports/Transcript17.pdf

[educatedidiot]

Sequoia bought SPS Commerce and Appfolio in Q2.  Added to Fiat Chrysler, Omnicom, Visa, Interactive Brokers.  Sold their Perrigo stake.

http://www.rocketfinancial.com/Holdings.aspx?id=370&fC=1

[Jurgis]

Partially OT: Rocketfinancial people should figure out that there's no LMCK anymore...  ::)

[constructive]

"The principles underlying our investment strategy were handed down to us from Benjamin Graham."

 

and yet

 

"The P/E multiple for Sequoia is about 10% higher than it is for the Index right now."

 

Much more so than Buffett, Graham was quite orthodox about investing in companies with low multiples and not paying much for expected growth. I don't agree that they are really following his principles.

[TorontoRaptorsFan]

The Valeant debacle burned them really badly that they're now spreading their bets around instead of concentrating their positions.

Guess the investment committee is around to do checks and balances...

[Guest]

I'm afraid that this mistake in VRX may turn them into an ordinary mutual fund. It'll stop them from being different to avoid "risk."

 

It would be nice if they'd cut their fee. It's above average. And their 15 year performance is below average...very below (bottom 94%).

 

It's kind of crazy when you look at it year by year though.

 

Up 34.58% in 2013

Up 7.55% in 2014

Down 7.29% in 2015

Down 6.90% in 2016.

 

 

Not terrible but the drawn down from the peek is a little over 31%.  Considering from high of 2007 to low in 2009 it dropped about 40%, I can see why folks are angry.

 

I do wonder what their long term performance would be if one excluded the berkshire stake. Would they still have beaten the market for 40 years?

 

 

[Jurgis]

A lot (all?) of their outperformance before VRX debacle was due to their VRX position. In other words, if they have not invested in VRX, likely they would have underperformed too. (Ideally they would have sold most/all VRX near the top or even within 2/3 of the top. Of course it's all coulda shoulda).

[fareastwarriors]

Are there any mutual funds worth investing for the long haul anymore?

[Jurgis]

Are there any mutual funds worth investing for the long haul anymore?

 

I'll assume you mean "US stock mutual funds" (If you mean "bond", the answer is yes. If you mean "international", the answer is likely yes).

 

It's a tough question. Last time I looked, you still could find non-super-situational (e.g. not just bio/tech only) mutual funds that outperformed indexes for last 10 years. And you can definitely find value mutual funds who underperformed and who argue that the things will change sometime soon (this is the whole long discussion on various threads if value managers are kaput or just having bad time in hugely bull market, etc.).

 

It is very hard to say whether you can pick mutual funds that will do well in the future. IMO, this is possibly as hard as picking stocks ... and very different from picking stocks. So in some sense CoBF is a bad board to ask. People here are either great at picking stocks or think they are great at picking stocks or at least have spent a lot of time and effort to pick stocks. Very few people here spent much time at picking mutual funds. And people who invest into mutual funds here mostly do that because they somehow "know" the management of the fund, i.e. they've read the books, watched the CNN/youtube/Bloomberg, they've met them at BRK/whatever events, etc. Which might not be the greatest way to pick mutual fund - or maybe it is - but who knows...

 

Edit: if you're asking for concrete suggestions, I don't have any. Some time ago I looked a bit at finding good mutual funds to invest into, but I did not spend a lot of time and pretty much gave up. Currently I have no suggestions.

[gjangal]

Are there any mutual funds worth investing for the long haul anymore?

 

You can take a look at AKREX. Chuck Akre is a great investor who understands growth and value

[thowed]

I'm not smart enough to pick stocks, but I spend a lot of time researching funds globally.  I think Jurgis is right that not many people here do it, which is a shame, as I'd love to have more people to have nerdy fund discussions with.  Having said that, 99% of funds are pointless, so it's a pretty ridiculous endeavour.

 

Akre is great, though he's old, and I don't know what'll happen if he retires.  Broadrun are similar (they're his old team) and do mandates and a mutual fund with Hennessy.

[Jurgis]

I'm not smart enough to pick stocks, but I spend a lot of time researching funds globally.  I think Jurgis is right that not many people here do it, which is a shame, as I'd love to have more people to have nerdy fund discussions with.  Having said that, 99% of funds are pointless, so it's a pretty ridiculous endeavour.

 

Akre is great, though he's old, and I don't know what'll happen if he retires.  Broadrun are similar (they're his old team) and do mandates and a mutual fund with Hennessy.

 

Feel free to start a discussion and maybe people would be interested and will get involved. :)

 

For example, apart from the ones you mentioned, what are in the 1% of funds that you don't think are pointless? Maybe by different areas?

 

We could start a mutual fund thread or resurrect one so we don't OT Sequoia thread too much.

[Jurgis]

2017 Second Quarter Shareholder Letter

http://www.sequoiafund.com/Sequoia-Q2-17-letter.pdf

 

May 19th, 2017 - Investor Day Transcript

 

http://www.sequoiafund.com/Reports/Transcript17.pdf

 

I finally read through these and I am pretty impressed. If I was not picking stocks myself, I might just buy SEQUX.

 

1% fee is a bit high.

[Mephistopheles]

What is a typical fund fee if 1% is high? I was under the impression that it's about average if not low

[Guest]

According to morningstar, at 1% in 2016, the fund was "10 basis points greater than its group median for no-load large-cap funds. However, the April 2016 prospectus shows an expense ratio of 1.03% and puts the fund in above-average fee territory."

 

Now the expense ratio is 1.07%. And they've underperformed the category averages (not the mention the market )over the past 10 and 15 years.

[abitofvalue]

This is probably unfair to them but I legit lol'd at their talk of culture and how their committees work so well that 1+1+4=>6. Like umm I think maybe Sharon and Vinod would disagree...

 

But it seems like they get it and they acknowledged that talking about culture is all just talk.. 

[Liberty]

Just want to point out that the URL has changed and the transcript is now at:

 

http://www.sequoiafund.com/assets/pdf/Transcript17.pdf

[educatedidiot]

Sequoia's Q3 13-F is out.  They bought BMC Stock Holdings, Cars.com, Cable One, and Graham Holdings:

http://www.rocketfinancial.com/Holdings.aspx?id=370&fC=1

 

Anyone here take a closer look at Cars.com?  With Cars.com and CarGurus coming public, and TrueCar already being listed, this industry has seemingly very suddenly come under the spotlight of the public markets.

[VersaillesinNY]

Q4 2017 - Investor Letter

 

http://www.sequoiafund.com/assets/pdf/Q4%202017%20Letter.pdf

 

That is what a famous Omaha-based investor had in mind when he wrote the following to the clients of his Buffett Partnership back in 1965:

 

What is one really trying to do in the investment world? Not pay the least taxes, although that

may be a factor to be considered in achieving the end. Means and end should not be confused,

however, and the end is to come away with the largest after-tax rate of compound. Quite

obviously if two courses of action promise equal rates of pre-tax compound and one involves

incurring taxes and the other doesn't the latter course is superior. However, we find this is rarely

the case.