Gustavo Ballvé on January 28th, 2010

In the 1st 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). The objective here is to insist, once again, that price is the ultimate measure. (…) After you’ve done all the homework, 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.

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Gustavo Ballvé on January 26th, 2010

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…

Read more about Nestlé benefits from Kraft’s resolve to buy Cadbury

Gustavo Ballvé on January 25th, 2010

John Mackey, CEO of high-end grocery chain Whole Foods, was recently profiled in the New Yorker mag. 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. 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 about Whole Foods’ surprising CEO

Gustavo Ballvé on January 21st, 2010

The investment mood is definitely optimistic and Merrill Lynch’s January 2010 fund manager survey is as good an indication as any: 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 and we’re prepared for a less ideal 2010.

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Gustavo Ballvé on January 12th, 2010

The AOL – TimeWarner merger’s 10-year anniversary inspires a feature in the NY Times, and the videos are a must-see for the candid opinions of the top execs involved. One must remember that talented fund managers got burned in 1998-1999 shorting AOL at a P/E of 100, 200, 300… only to see it reach 700. Not a typo, that’s the P/E ratio.

Read more about AOL TimeWarner, ten years later

Gustavo Ballvé on January 11th, 2010

Stanford U. is starting a program to advocate against the influence of drug and medical device cies. on physicians, a practice that spins some US$1 billion per year. The problem is that the program is being partly funded by Pfizer. Stanford claims that Pfizer’s support was 100% voluntary and that there are no strings attached. How far can we push the boundaries on conflicts of interest? And if it appears conflicted, doesn’t it defeat the purpose from the get-go?

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Gustavo Ballvé on January 8th, 2010

Our thoughts go out to the families affected by floods everywhere, but this picture had us thinking about the book “Too Big To Fail”. Unlike other books about the financial crisis that shook the world recently, Mr. Sorkin’s book deals with the real-time, day-to-day background discussions and decision-making in the eye of the storm. And decisions made in times of turmoil can lead to less-than-ideal outcomes and a false sense of security.

Read more about When in a flood, seek safe ground

Gustavo Ballvé on January 4th, 2010

Prof. Joe Stiglitz has been on a tear recently, first describing 5 lessons we should learn from the crisis and later presenting a tough message at the American Economic Association. The bulk of the messages: Wall Street ain’t that smart, and it failed miserably to perform on its purpose. Before the reader thinks “well academe didn’t do much better”, he also blames economists for continuing to rely on “rational player” models.

Read more about Stiglitz’s rant

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