Gustavo Ballvé on July 29th, 2015
Home, Signal or Noise

Just read this Financial Times LEX piece on how GM is an “opportunity” for Buffett right now.

Yes, GM.

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Corporate Strategy, Food for thought, Food, beverage and tobacco, Home, Investment Themes, Portfolio Management

By now anyone on Earth minimally interested in business and finance has heard about the Heinz + Kraft deal.

Buffett went on CNBC to speak briefly about the deal and said especifically about Berkshire and 3G (actual quote): “We look at everything. There is no finish line in either Berkshire’s investments or 3G’s investments.”

Another analysis here, but I’m not sure I agree with the inflation-hedge theme (at least not as a “boon from heaven” truth) – and the rest of it reminds me of a post I wrote in 2013, about how foreigners still didn’t “get” 3G. They’re catching on as 3G becomes an inevitable “case study”…

Finally, if you haven’t ever watched the Carlos Brito talks at Stanford, my 2010 post is a good starting point to understand 3G’s culture.

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Gustavo Ballvé on March 12th, 2015
Corporate Strategy, Food for thought, Home, Mental models

My friend and PLD classmate Zia Patel of Wolff Olins just published an interesting interview with Dr. Reddy’s Chairman and CEO, GV Prasad. It begins with a lovely quote: “Management is doing work through people, whereas leadership is developing people through work.”

There’s more, of course, but more importantly the story leads to a report called “Impossible and Now” that is extremely interesting and really worth the time. It condenses insights on leadership from 43 interviews with CEOs and surveys of over 400 employees at those companies.

I also liked the format – you can comment on any section, answer questions and see other comments. It seems like a conversation, which this topic invites and about which we all should discuss more – especially here in Brazil, nowadays.

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Gustavo Ballvé on February 25th, 2015
Food for thought, Home, Portfolio Management

Another article to foster even more anticipation – as if we needed any more reasons to read the letter.

We’d love to guarantee that we will read it with the normal independence and skepticism, but we’d probably be lying – it is too big a landmark for the world’s most interesting company.


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Gustavo Ballvé on February 12th, 2015
Corporate Governance, Energy, Food for thought, Home, Risk management

There isn’t one foreign friend of ours – from inside or outside the investment community – that hasn’t asked us “the Petrobras question(s)”.

We are sorry to say that we don’t have an answer and probably never will. Call us superstitious, but state-owned companies have a knack for causing the occasional investment disaster. We put them in the “too conflicted” box and move on.

It doesn’t mean we don’t spend time looking at governance and incentive structures – much to the contrary, that’s a significant use of our time. The Petrobras case, if taken solely in this regard, is very interesting – if unsurprising – and will be taught in business schools around the world for the next 10-20 years.

In the meantime, we point to Prof. Aswath Damodaran’s musings on Petrobras. It should be very clear that, by linking to the article, we imply neither agreement nor disagreement with his valuation exercise.

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Gustavo Ballvé on January 22nd, 2015
Corporate Governance, Corporate Strategy, Food for thought, Home, Risk management

Interesting article on McKinsey’s website called “Confronting corruption” – it seems tailor made for the current Brazilian news cycle.

How about avoiding corruption? It is impossible for a huge company to control every worker everywhere and all the time, right? Even Warren Buffett has said that “Berkshire has 300,000 employees and someone, somewhere is doing something wrong” (H/T: Mason Myers Blog).

I don’t disagree, but any company can mitigate the risk by avoiding incentive systems and a corporate culture that favors “shortcuts”. I had posted twice about an interesting framework for managing corporate risks by HBS professor Robert Kaplan (here and here), until I finally decided to attend his superb course at Harvard Business School called Risk Management for Corporate Leaders. This one-week course is absolutely great and I highly recommend it for investors – but it is even better for corporate executives. It goes into the subject of fraud and corruption with great detail. I’ll highlight a few other sources for discussing this kind of preventable risk inside (click on Read More), and I definitely intend to write a deeper story into this – someday…

Having said all this, back to the “investor-only” hat: always remember that you can choose the types of companies you buy for the long term. If they look shady, are in shady sectors where political influence is a large part of the value generation drivers, or if this analysis is almost impossible to get right at any given time: be careful. Or, even better, choose to stay out. Read more »

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Gustavo Ballvé on January 13th, 2015
Corporate Governance, Food for thought, Home, Portfolio Management, Risk management

Back in early 2014 we published our 4Q13 management report containing a special, 10-page text discussing Proxy Advisory Firms. It was motivated by further research following a June 2013 post on called “Proxy Advisory firms: use with caution”. In the original post I highlighted “the dangers of “outsourcing research” – be it in Corporate Governance, people, financials, business models, competition, whatever – and the temptation of trying to systematize/quantify an investigation that is, by nature, subjective and case by case.” In the excerpt (inside) we addressed this part in detail but also mentioned “the fundamental choices we should make in terms of capital allocation (be it financial or human).”

We can choose how we do our research and in what processes we rely on, and we should choose wisely. For us the choice is clear.

A very important event that took place after we wrote our text: Institutional Shareholder Services, Inc. (“ISS”) was sold by MSCI to Vestar Capital Partners. Please keep that in mind when we discuss potential conflicts of interest in the text.


Read more »

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Gustavo Ballvé on January 7th, 2015
Food for thought, Home, Mental models, Science

I apologize for getting repetitive at times, but this is the number one issue at my mind at any given time: how do I know if and when I know something? How to distinguish superficial from deep knowledge – and what to do to get from one to the other? Yes, I have posted this before and allude to it every now and then, and so does the brilliant Shane Parrish at uber-source Farnam Street Blog (in our Blogroll for ages). His post on Richard Feynman’s famous TV special focuses on the part of truly knowing something. In an older post about the multidisciplinary approach, I posted the entire 50-minute special from which this clip was extracted – very, very much worth the time.

The name of the TV special? “The Pleasure of Finding Things Out”.

I couldn’t think of a better name.

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Gustavo Ballvé on January 5th, 2015
Corporate Strategy, Diversified financials, Food for thought, Home, Portfolio Management, Risk management

A Financial Times story today highlights what is certainly a top-3 item on value investors’ wishlists (up there with “temporary availability of cheap, great companies only I know enough about”): raising permanent capital. The compliance, corporate governance and incentives challenges are immense, but every investor thinks at some point that they could make it work for them and their clients – as the potential benefits of a truly long-term investment horizon could outweigh the risks/ unintended consequences incurred. Even so, the Berkshire Hathaway comparison is as unfair as it is potentially dangerous for less-humble managers and for unprepared companies.

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Gustavo Ballvé on December 30th, 2014
Food for thought, Home, Signal or Noise

This LEX piece on sell-side research reflects several old, recurring and ever more vital themes I try to address at conflict of interests, incentive systems, the power of brands, halo effects and whatnots – and ultimately how hard it is to actually KNOW something when it is so hard to filter out the noise.

All this is more evidence that trustworthy, independent analysis is growing in value by the second.

And yet, other recurring themes comes to mind when you notice the last time I posted something here: time management, shifting priorities, long-term goals.

All point towards a better year for this site next year. I hope you will stick with this blog, and I will strive to make it worth your time.


Happy New Year!

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