Corporatestrategy
Mr. Druckenmiller has over 30 years’ experience, his Duquesne Capital manages $12 billion and since 1986 never had a down year (although it is down 5% YTD). He worked with George Soros (while still managing Duquesne!) and was there for the famous British pound trade. So why quit? Interestingly, he’s “frustrated by his failure in the past three years to match returns that had averaged 30 percent annually since 1986.” Why, in his opinion, did it happen? “Managing more than $10 billion seems to challenge my long-term standard for investment performance.” A fund manager’s mandate is all about investment performance and not AUM growth – the opposite is not just wrong, it can also be self-defeating.
Interesting way to improve funding costs, while also pleasing the banks involved. Oi, the Brazilian telecom giant, also happens to own a lot of real estate – for instance the spots in which they have antennas. It’s transferring 263 properties to an SPC, for which Oi will pay rent. At the same time the SPC raises money to pay for the property by selling these rent receivables as CRIs, the portuguese acronym for “certificates of real-estate receivables”. The flip side for banks is that they get to invest their savings accounts regulatory requirements in a “better-quality” CRI. For Oi, through the cost of this debt and the tax benefit of paying rent, they get to secure a lower cost of funding than that achieved in their recent (May ’10) bonds issue.
The 1st one regards AB-InBev and the fact that it’s still hard for “foreigners” to fully grasp it. Yesterday’s LEX column on the company has flattering but less than enlightened comments and puts way too much weight on the P/E ratio. The 2nd one is about Netflix, and this NYT story sheds some (more) light on the company. It’s about creative destruction stimulated by the company itself. It doesn’t guarantee Netflix will win as the technology shifts continually challenge its business model, but it gives the company a fighting chance. Again, such a shifting business model is probably not the best playground for investors, but Netflix is still worth tracking for all the other reasons.
As we blog and try to become more transparent for investors, potential investors and even invested companies, we’re aware of the dangers of over-exposure and “posing”, as these two NY Times pieces highlight. We feel we’re safe because 1) Transparency has always been our culture: we pioneered fund reports in Brazil, then annual investor meetings, and now this blog – and more to come; 2) We’re aware of the risks and have built our processes and incentive systems accordingly; and 3) We tend to assume we’re wrong – meaning we’re conservative. Since we recognize we’re learning as much as everybody else is, we will prefer to err on the side of omission.
The WSJ had an interview in late June with Carlos Brito about his plans for Anheuser-Busch Inbev. The video inside is focused on the corporate culture aspect, and it’s always refreshing to watch. That said, we wonder if the video registers for foreign investors as much as it registers for investors who have been exposed for so many years to the effects that Brahma’s/ AmBev’s/ InBev’s and now ABI’s culture really has over time.
McKinsey Quarterly recently had a series on strategic decision making called “Seeing Through Biases in Strategic Decisions”, of which we highlight two articles and link to one by Harvard Business Review. Taken together, it’s great food for thought when you try to apply this line of thinking to investing and even marketing and advertising.
The brazilian management of AB-InBev is surprising even americans for their fiercely-enforced operational efficiency measures. Their surprise is, well, surprising to us in light of what the same people did in Europe at Interbrew, and highlights the advantages of looking at companies globally.
The question in this article is: “who said that Strategy and Execution must be dealt with separately”? They don’t. It reminded us of the old Value vs. Growth debate, to which Buffett always replied that growth is a component of value. In fact, we probably wouldn’t point readers to this article if it wasn’t for the link to a free, 143-page e-book with a selection of the best Harvard Business Review articles on Strategy and Execution. Enjoy!
We’ve discussed crowdsourcing and Netflix more than once. That it works for some uses better than for others is pretty clear… But Netflix has apparently messed up the database used in the original contest and that allowed some contestants to identify the actual people behind the movie choices, despite the promise of privacy. Needless to say, the FCC wasn’t too happy about it – and Netflix had to cancel its “Contest 2.0″, at least for now. Doesn’t mean that the tool doesn’t work, it just means that you have to be careful using it.
Judging by the recent troubles in Belgium and the article at Valor (in portuguese), the love-hate relationship with InBev in Belgium has gone to hell. And there’s the “socialism vs. capitalism” conflict in Europe again. If it weren’t for the image deterioration risk – and it seems that they’re handling it by going as far as they can, but no further – the union representative’s words would be music to shareholders’ ears.
