Walter Schloss: Apropos of that, while I was at Graham-Newman, a man called up and said he'd like to speak to Mr. Graham. Because he was out of town that day, I asked if there was anything I could do in his stead. He said, "I just wanted to thank him. Every 6 months Graham-Newman publishes their portfolio holdings. And I've made so much money on the stocks that he had in his portfolio, I just wanted to come by and thank him. That was one of the reasons I decided never to publish our holdings. We work hard to find our stocks. We don't want to just give them away. It's not fair to our partners.
Thursday, March 13, 2014
Wednesday, March 12, 2014
Bubble Question
Klarman index - Yes
Prem Watsa - Yes
Buffett - Purchases decreased dramatically
From all the other places such as Shiller P/E (James Montier), Hussman Weekly, Tech multiples, it is quite clear that there is a bubble in the tech sector and in general the market is overvalued, interest rates are artificially low atleast in the developed markets.
clearly, US markets will drive the Indian markets elections notwithstanding - FII money tends to exaggerate the impact; Therefore the way to deal with this is to have a tight leash on investable opportunities and play arbitrage only for 2 years. Question then is do you buy long dated puts? how do you hedge the rest of the portfolio at least cost?
Prem Watsa - Yes
Buffett - Purchases decreased dramatically
From all the other places such as Shiller P/E (James Montier), Hussman Weekly, Tech multiples, it is quite clear that there is a bubble in the tech sector and in general the market is overvalued, interest rates are artificially low atleast in the developed markets.
clearly, US markets will drive the Indian markets elections notwithstanding - FII money tends to exaggerate the impact; Therefore the way to deal with this is to have a tight leash on investable opportunities and play arbitrage only for 2 years. Question then is do you buy long dated puts? how do you hedge the rest of the portfolio at least cost?
Sunday, March 9, 2014
Buffets mistakes - Things to learn
Biggest Losers
Q: I read that when you look at an industry, you look at the most miserable failures of that industry to see whether you will invest in it. Can you talk a bit about that?
Li Lu: It goes back to understanding the business. Once you have that understanding you can extend it to understanding an industry. A certain industry might have characteristics that make it different than others. In certain industries you might have better prospects than others. Find the best of the players in the industry and the worst players. And see how they perform over time. And if the worst players perform reasonably well relative to the great players — that tells you something about the characteristics about the industry. That is not always the case but it is often the case. Certain industries are better than others.
So if you can understand a business inside out you can then eventually extend that to understanding an industry. If you can get that insight, it is enormously beneficial. If you can then concentrate that on a business with superior economics in an industry with superior economics with good management and you get them at the right price — the chances are that you can stay for a very long time.
Bruce Greenwald: Do you want me to give you the answer to that? In the 1960s, their return on capital was 46%. In the 1970s their return on capital was 28%. In the 1980s it was 9% in the 1990s it was 6%. You want to guess how negative it is now?
Li Lu: So that is really fascinating. If you have that data, the amount of insight that would yield would be astonishing. So instead of just accepting the conventional wisdom that the auto business is bad — that is just not true. Or if you say well those guys just unbelievable money machines — that is not true either. So if you can really examine those statistics and understand it that will give you an advantage for analyzing new situations like in China and India. That is really what turns me on. Understanding this gives you a tremendous leg up.
Meeting with Managements
Almost everything we learn is from public documents. I read Jim Clayton's book, for example. There is adequate information out there to evaluate businesses. We do not find it particularly helpful to talk to managements. Often managements want to come to Omaha to talk, and they come up with all sorts of reasons, but what they really hope is that we become interested in their stock. That never works. The numbers tell us a lot more than the managements. We don't give a hoot about anyone's projections. We don't want even want to hear about it.
- Airlines - US air
- retail stores
- Paper producer - Champion intl
- Brokerage - Salomon
- consumer franchises
- newspapers
- television
Q: I read that when you look at an industry, you look at the most miserable failures of that industry to see whether you will invest in it. Can you talk a bit about that?
Li Lu: It goes back to understanding the business. Once you have that understanding you can extend it to understanding an industry. A certain industry might have characteristics that make it different than others. In certain industries you might have better prospects than others. Find the best of the players in the industry and the worst players. And see how they perform over time. And if the worst players perform reasonably well relative to the great players — that tells you something about the characteristics about the industry. That is not always the case but it is often the case. Certain industries are better than others.
So if you can understand a business inside out you can then eventually extend that to understanding an industry. If you can get that insight, it is enormously beneficial. If you can then concentrate that on a business with superior economics in an industry with superior economics with good management and you get them at the right price — the chances are that you can stay for a very long time.
Bruce Greenwald: Do you want me to give you the answer to that? In the 1960s, their return on capital was 46%. In the 1970s their return on capital was 28%. In the 1980s it was 9% in the 1990s it was 6%. You want to guess how negative it is now?
Li Lu: So that is really fascinating. If you have that data, the amount of insight that would yield would be astonishing. So instead of just accepting the conventional wisdom that the auto business is bad — that is just not true. Or if you say well those guys just unbelievable money machines — that is not true either. So if you can really examine those statistics and understand it that will give you an advantage for analyzing new situations like in China and India. That is really what turns me on. Understanding this gives you a tremendous leg up.
Meeting with Managements
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