giofranchi

Ok. Then, I have misunderstood… I beg your pardon! :) Gio

I really don’t understand why some people like to make fun of other people’s point of view… I guess it is because it makes them feel right and/or important… I am not here to feel right and/or important… instead, I am here to know and understand other people’s point of view… Let me tell you it is so much easier to know and understand your point of you, if you don’t make fun of mine. Gio

Hi Zorro, let me just ask: how do you look at Mr. Biglari’s compensation? a) A cost that unfortunately is not cut to the bone b) Some sort of ominous sign Mr. Biglari is not a great entrepreneur and therefore is going to make big business mistakes in the not too distant future If the answer is a), I agree with you. And what can I say? As long as BVPS keeps growing handsomely, I will just pretend I don’t know it could grow even faster! ;) If the answer is b), what can I tell you? As I have already said, I will deal with the evidence as it comes. My crystal ball is definitely broken! ;) I am reading and interesting book: [amazonsearch]Compelling People, The Hidden Qualities That Make Us Influential[/amazonsearch] The authors suggest the two most important things we communicate to other people, and that they use to judge us, are: STRENGTH and WARMTH. Really compelling people are those who know how to convey both an impression of being strong and an impression of being warm. Other two findings imo are interesting: 1) Strength and warmth tend to be mutually exclusive… even from a biological point of view: strength is associated with testosterone, warmth with oxytocin: high levels of testosterone and high levels of oxytocin in our bodies are mutually exclusive 2) The Halo Effect: people tend to think that those who are very strong should also be very warm, and vice versa. Of course, 1) is nature, 2) is only a bias. I have found many people on this thread believe 2) in reverse: because Mr. Biglari is so poor at conveying warmth, he should also lack strength… well, imo also 2) in reverse is nothing but a bias. ;) Gio

Andy, I am not saying Clarke won’t be a very good investment… It probably will, and I respect Dazel’s ideas very much… Btw, I also think LRE will probably be a wonderful investment, and I respect twacowfca’s ideas very much… All I am saying is that I know very well what I am looking for, a number of requisites must be satisfied and, if something is missing instead, I just prefer to let the opportunity go and look for something else… that’s exactly what I have done with LRE as well! ;) But here I stop too: don’t want to bother Myth too much! ;D ;D Gio

Yeah! LRE pays almost no taxes at the corporate level, because it is based in the Bermuda, and my dividends were not double taxed, because they were coming from England… It was a very special exception to the rule! ;) Hey! There are always exceptions to the rule: I have a large investment in LMCA, although it doesn’t generate any fcf by itself! Gio

By the way, no wonder Mr. Buffett has always said he doesn’t like dividend paying stocks very much, instead he loves to purchase whole businesses (which generate lots of fcf) even more than investing in the stock market! ;) Cheers, Gio

Andy, I think there is a great difference! Think of this: if you like dividend paying stocks (I don’t! But let’s suppose that you do…), the free cash (ah! By the way, of course the definition of “free cash flow” itself is cash that remains after all maintenance capex!) you have at your disposal is: a) If you generate fcf yourself: dividends received + the fcf you generate by yourself b) If you don’t generate fcf yourself: dividends received I much prefer a) than b) for two reasons: 1) Quantity: dividends are double taxed, therefore the free cash at our disposal in b) is less than in a) most of the times 2) Quality: we usually have much more control in a) than b), therefore the free cash in a) is of a higher quality, meaning that it is steadier and more predictable, than in b) 0.8 x BV of course is a wonderful price… But, you already know by now I am seldom attracted by a wonderful price… Instead, I am very often attracted by a wonderful business… Because, if you want to invest in a business for the very long term, like I do (I think it is difficult, but I think the market is the most inefficient at valuing the prospects of businesses for the very long term… And I want to stay where the market is the most inefficient at! ;)), your investment returns will mirror much more the “wonderfulness” of the business than the “wonderfulness” of your entry price. Gio

I have been following this thread for quite a while now. And congratulation to all of you for the very handsome gains! ;) Anyhow, I have never pulled the trigger… The business I really like and look for is headed by a smart and reliable entrepreneur, and generates steady and predictable free cash flow, for that entrepreneur at the helm to invest. The fcf it generates doesn’t need to be “abundant”… It just needs to be “safe”. It could come from franchise contracts (BH), or royalty contracts (ALS), also float would be fine (FFH, GLRE, TPRE): if float costs nothing, underwriting profitably, and grows over time, instead of shrinking… it actually functions as fcf! Even if risk profiles are quite different… Why do I look for such a business? Because over the long term I have experienced first-hand how much easier it is to make investment decisions, when you are supported by a flow of free cash regularly coming in. Investment companies, even if managed by smart and reliable entrepreneurs, unfortunately lack the second feature I always look for. Gio

Thank you, ItsAValueTrap! Always good to know your views! :) Cheers, Gio

Yes! Of course! Though a source of ideas this board will always be, even for someone who stops actively posting his/her views. ;) Gio

It’s a true pity… As far as I am concerned, the effort I put in trying to contribute to this board is an integral part of the whole process I follow while investing my firm’s fcf. If I can write down clearly why I am making an investment, chances are my ideas are sound enough. And consequently the risks I run are small enough. Furthermore, if I get thoughtful feedback from other sophisticated investors… well, that’s just great! ;) But I simply guess Dazel in the money management business has many other means to achieve the same results, people to talk to, and partners to exchange views with, than me… a simple wannabe or "pretend to be" entrepreneur, who works daily with and is surrounded by people who don’t know something like ALS even exists…! ;D All the best my friend! It has been a real pleasure and a great honor to make your acquaintance! And to learn from you! I take a bow. Gio

No, no, no!!!! I just needed such a great answer as yours, and the share price to stay depressed for a very long time! ;) Thank you so much! Gio PS I am buying more today :)

New presentation to refute Allergan's misleading statements. Gio Allergan_0623.pdf

Dazel, I know there might not be an easy answer to my question… so many shades of grey!… just curious to know your view about it anyhow! ;) Gio

Thank you very much, Dazel! You already know I agree. ;) But you also know how much relevance I attach to an owner/manager who should be both very skilled and very reliable… Therefore, as the most knowledgeable person about ALS that I know of, I’d really appreciate if you'd share with us your view on ADV’s management. Specifically: Cheers, Gio

Dazel, I have no doubt the portfolio of royalties part of ALS business is just great! That’s the reason I became interested in ALS in the first place. Instead, I have asked your view on the PG part of ALS business: won’t you please answer my question and tell us what you think about it? I would like to know your thoughts and the reasons behind them, before adding more today. :) Cheers, Gio

--Michel De Montaigne, Complete Essays Gio

Well, either it is complicated… or I am too stupid to understand! Probably, the latter… Therefore, please explain: You are saying that ALS PG business model is to discover UNPROFITABLE mines, and to book a big gain thanks to the fact it does joint ventures with SHADY people, who then publish presentations through which they make the public believe those mines, if built, might be very profitable instead?! And you are saying I shouldn’t be concerned about that?! Dazel, please, could you let me know what you think about this? It’s paramount to me: does ALS deal with ethical people? If your answer is yes, why does ADV’s management insist on saying Kami's cost of production will be around $43 per ton? Why do they insist on saying Kami’s iron ore concentrate is among the best in the world, if it is not so? Thank you very much as usual! :) Gio

I think jouni1 said something a bit different: no matter how much reliable and trustful Mr. Dalton really is, he will be forced to deal with shady people nonetheless… because that’s just how it is, when you generate new projects in the mining industry! This imo adds a layer of risk to ALS business model I hadn’t thought about until now. Gio

Ok, you are right! It is still the second part of my last post, the one in bold type, that bothers me the most… Gio

To tell the truth, I am not worried at all about how much profitable the deal for ALS will be: if I am not mistaken, ALS invested little more than $2 million in 2004 to develop the Kami project… If a deal materializes, whatever its terms might be, ALS will see a spectacular return on the capital invested, and also their subsequent efforts will be spectacularly rewarded! We just need a deal, what kind of deal imo is much less relevant. Instead, I don’t like to think that ALS in its PG business is somehow "forced" to deal with "shady people", like jouni1 has suggested… it is something I hadn’t thought about and is news (actually, bad news!) to me… it’s just something that I had missed. Simple as that! And would appreciate very much to hear what other board members think about it. Gio

Can someone please explain with very simple words what management thinks ADV could achieve in the end by lying? Thank you, Gio PS Don’t tell me a transfer of money from gullible financiers to crooked managers… because that is a fraud! If ADV is a fraud, ALS is 20% responsible of a fraud. If you are 20% responsible of a fraud, you are a 100% fraud yourself… Lacking another example in ALS’s history of enriching themselves at the expense of gullible financiers, read another fraud, why should ALS have become a fraud all of a sudden?!

Yeah! Of course! All I am saying is, when a smart guy doesn’t find what he was looking for, he usually cuts his losses short and looks somewhere else, for some other opportunities! And a PG that is good at its business should know this better than almost anyone else! Therefore, why to stick with Kami, once the evidence has proved it is not what you were looking for? Or, worse yet, it is not even profitable? If you find something different from what you were expecting, but it might be still be profitable, well that’s fine! Keep on working on that project, even if it has become somewhat different from what you thought in the beginning… But to go on working on something destined to be unprofitable?! I am not saying it doesn’t happen all the time… I am only saying this kind of mistake and the idea an entrepreneur is in the 99th percentile don’t go along together well. Do you mean that ALS owns 20% of ADV, but cannot change ADV’s management if Mr. Dalton thinks they are lying? It might be… but surely it sounds strange! Gio

Therefore, I guess also page 21 of their June 2014 presentation is misleading… because it seems they are saying the exact opposite: “Value-in-use proposition of Kami concentrate offsets freight disadvantage”. And they show how Kami Concentrate is better than its Brazilian, Australian, and Chinese counterparts… Moreover, its phosphorus and alumina contents are by far the lowest… Sincerely, it seems a bit strange that everything is a lie… Gio

Yes! I understand. My experience: Every time I had a bad, or a not so good year, it has never been because of cash, but always because my investments did poorly. On the other hand, running a concentrated portfolio, cash has been useful more than once, when a good opportunity has come along at the same time my investments were doing poorly. ;) But I guess this is not the place to start talking about asset allocation... Gio