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In his latest post, Tom Barrack of Colony Capital writes about some similarities between a big wave surfer and a successful investor. While we would be even more conservative in general, we agree with most the “credos”.
Another interesting thing is that he alludes to a then-current state (he wrote this on January 17th 2010) of “don’t stress the distress”, that is, there was then a state of artificial “calm”. Well, judging from the last two days, the sea is no longer flat.
Tags: foodforthought, mentalmodels, riskmanagement, surfing
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We said in our Q4 2009 report that we were uncomfortable with implied expectations going into 2010 and that it would be highly unusual for 2010 to repeat the same level of positive factors. We also said that we were increasing the percentage of cash in our funds.
Enter Greece and other European “peripheral” countries. Investors are finding it hard to simply exit “crisis mode” after the traumatic events of 2007/ 2008. We won’t fall into the trap of discussing Macro issues – not our core skill anyway – because the main issue here is that volatility, that friend of the long-term investor holding a lot of cash, is on the rise. This post collects some very interesting articles by the Financial Times on the subject of Greece’s (and Europe’s) woes, just as food for thought. Read more »
Tags: contagion, Europe, globalfinancialcrisis, macro, portfoliomanagement, riskmanagement, sovereign
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In this speech to University of Florida MBA students Buffett was particularly expansive regarding his processes and methods, and this alone makes this video worth the time (some 90 minutes). The fact that it was October 1998, a pivotal time in the dot-com boom and just after the LTCM imbroglio makes it even more interesting. And there’s a download link to guarantee this doesn’t go away anytime soon, but you can watch an embedded version right here if you read on. Read more »
Tags: analysis, berkshire, BRKA, buffett, lessons, moat, portfoliomanagement, riskmanagement, speech, valueinvesting
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In the first Buysiders article inspired by a reader’s suggestion, we’d like to propose “anti-portfolios”. It’s a vital lesson in humility: our activity involves a certain degree of failure, of missed or simply wrong ideas. Recognizing that we are going to make mistakes over time is extremely important in order to mitigate risk as we define it (the permanent loss of capital). Acting on such inherent limitations is something we discussed in our Q1 2008 portfolio report. The objective here is to insist, once again, that price is the ultimate measure. Once you realize how hard it is to do what we do, and after you’ve done all the homework, then you still have to demand a price that implies a large margin of safety – and keep analyzing the position everyday with the same skepticism you had before you bought it. Read more »
Tags: antiportfolio, bessemer, corporategovernance, humility, multiples, portfoliomanagement, price, riskmanagement, valueinvesting
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Kraft’s all-out effort to acquire Cadbury involved a “side deal” in which Nestlé bought Kraft’s frozen pizza division. One company had cash on hand and served as “white knight”, the other had a pressing need and none other than Warren Buffett applying pressure. We think it’s safe to assume that Nestlé got a sweet deal…
There was also an interesting (but misguided) issue raised about Buffett’s stance in this deal versus Berkshire’s bid for Burlington – see inside.
Tags: buffett, Cadbury, corporatestrategy, foodbeveragetobacco, KFT, Kraft, m&a, NESN, Nestle
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John Mackey, the CEO of high-end grocery chain Whole Foods Corp., was recently profiled in the New Yorker magazine. Habits and idiosyncrasies aside – he is known for putting his “personal foot in his professional mouth” – the guy is not what one would expect: he’s a libertarian capitalist at heart and digs Ayn Rand. “Right-wing hippie” was the not-so-great label the New Yorker writer came up with. Very importantly, it goes to show that “doing the right thing” as a corporation and earning profits – the more, the better – are far from incompatible. Read more »
Tags: corporatestrategy, CSR, johnmackey, retail, socialresponsibility, WFMI, wholefoods
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We refer you to “part 1″ below for an introduction to our post on IP’s Q4 2009 report. In this “part 2″, we highlight excerpts from both funds’ “Perspectives” sections. It’s no accident that they address the same theme and mention the same measures we’re taking. Read more »
Tags: ipreports, report, riskmanagement, yellowstone
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In the latest post of our series on IP’s reports, we discussed the current investment environment in the Q4 2009 letter. We liken the current optimism and false sense of security to the sensation some visitors to the Yellowstone National Park feel: they’re awed by the place and how beautiful it looks, but forget or don’t know that a large area of the park is in the very crater of one of the world’s largest super-volcanoes.
It was also in this report that we first mentioned Buysiders.com to our clients, and we hope you all enjoy it.
Tags: ipreports, report, riskmanagement, yellowstone
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The investment mood is definitely optimistic, one could say even giddy. In that regard, Merrill Lynch’s January 2010 fund manager survey is a nice indication: low cash balances, increasing exposure to equities, increasing appetite for risk. Some numbers are back to pre-crisis levels. As we point out in our Q4 2009 report (English version in the works), it’s hard to expect two consecutive years of out-sized returns – especially now that we’re starting from a much higher price level – and we’re prepared for a less ideal 2010 (to say the least).
Tags: expectations, perspectives, portfoliomanagement, riskmanagement, signal_or_noise
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The New York Times has a feature on the deal’s 10-year anniversary, and the best part by far are the videos where Gerry Levin, Steve Case, Dick Parsons and Robert Pittman (the former COO) are very candid, more than we would imagine. From the interviews, found in the “Interactive Feature” link, it seems that the guys from AOL knew what they were doing (using the admittedly expensive AOL stock to secure value). To hear Ted Turner describe the “other end” of the deal is almost painful.
One must remember that some seriously talented fund managers got burned shorting AOL at a P/E of 100, 200, 300 or 400 – only to see it climb to the now-absurd level of a 700 P/E ratio.
Tags: AOL, dotcomboom, internetboom, multiples, newyorktimes, riskmanagement, TimeWarner