Very interesting article on HBR.org: The Case for Activist Investors. The first book highlighted in the article – “Dear Chairman” – sounds like a great read, as it compiles now-classic investor letters to Board members and to the executive teams of companies they invested in.
Quoting Buffett, Munger and Klarman – and others of different areas – is sure to get our attention. When that letter is written by an NBA head coach as a send-off from his job, that is simply impressive.
I have just finished reading Berkshire Hathaway’s 2015 10-K. The letter to shareholders by Warren Buffett (edited by Carol Loomis) is brilliant, as usual. I have written here about how these two “walk their talk” (Buffett and Munger), and this 51st letter to Berkshire shareholders is another fine example. The section on Productivity is mandatory reading, especially so for Brazilians.
I highlight an HBR article called The Overvaluation Trap, about behavioral issues that can emerge when a company’s price is so high that management cannot, “in the absence of amazingly good luck”, be able to perform to such lofty expectations. The resulting decisions can have catastrophic consequences for the companies involved – and for their investors.
In a return of reader-suggested stories – keep them coming! – we explore an specific example of how “some moats are harder to cross” using a Financial Times story on Elsevier, RELX Group’s scientific journal publishing unit. According to the FT, it is “the business the Internet couldn’t kill”.
Stanford GSB professors surveyed 80 managers of Berkshire Hathaway subsidiaries, giving us an up-to-date look into what these executives think about their parent company – and the way their “oversight” works. The consistency in their answers is astounding.
Bovespa’s Corporate Sustainability Index (“ISE”) is about to turn 10 in November and it has outperformed the flagship Bovespa Index. We are firm believers in active, case-by-case, in-depth investigative investing in our fund, but it doesn’t blind us to the potential benefits – for some – of index investing. The devil is in the details of any index’s formation, criteria, balancing and so on. Furthermore, the dangers of an inflexible mandate are well-known.
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.”
My friend and PLD classmate Zia Patel of Wolff Olins just published an interesting interview with Dr. Reddy’s Chairman and CEO, GV Prasad. 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.
McKinsey & Co’s new article on “Confronting corruption” 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? Yes, but any company can mitigate the risk by avoiding incentive systems and a corporate culture that favors “shortcuts”. I mention a Harvard Business School course I attended in December 2013 and link to various sources on this subject.