giofranchi

Great piece by Mr. David Hay. I couldn’t agree more! ;) Gio EVA+5.2.2014_NA.pdf

Pete, you know I couldn't agree more. ;) Gio

Q1 2014 Conference Call Transcript + Earnings Presentation Gio endo-international-Q12014-conference-call-transcript.pdf Earnings_Presentation_Q1_2014.pdf

April 2014 Monthly Report + Q1 2014 Letter Gio 2014-04-April-Monthly-Report-TPRE.pdf Third-Point-Q1-2014-Investor-Letter-TPRE.pdf

Though I would love to see FFH purchase such an outstanding business, why do you say “a much better fit”? Gio

A business keeps evolving: without Kami, management will find other ways to keep growing. Therefore, I don’t think the right question is: what is ALS worth without Kami? Instead, I ask myself: how fast can ALS grow without Kami? My answer is: if ALS without Kami grows half as fast as it grew in the past, today we are paying a fair price (no, sorry!, we are paying a great price! ;)). Ok, I know… I am boring… because I keep saying the same things over and over again from page 190 (more or less) of this thread… ::) Gio

As I have already said, too much speculation for my tastes… I like to keep it simple: 1) Do I want to partner with management? My answer, even after the equity offering, is YES. 2) Do I like a royalty business? My answer, obviously, is YES. 3) Am I paying a fair price? My answer, even without Kami, is YES. Today I have bought more. :) Gio

No, I am not adding. I added a few days ago at around $57. Now I am fine keeping my investment in ENDP and watching how the business develops. :) Gio

What I know is that, if the partners in my company were able to get out anytime they don't agree with a decision of mine, I would have been partnerless since a very long time now! Besides, I don't know if a mix of debt and equity is decidedly the wrong choice... I am not so sure about it... As I have said, I am buying more today. Gio

This is very reasonable and I agree. Gio

Ok, they made a poor decision in hindsight. I agree. In my experience some bad decisions are almost inevitable… How is the quality of a business made by a talented and proven project generator (where inexpensive growth is) + a portfolio of royalties (where safe free cash flow is) affected by this poor decision? Is the management less reliable because of this poor decision? My answer to those two questions is that I added to my position yesterday and I am going to add today too. ;) Gio

Gio

Spekulatius, this is precisely the matter: without trusting management, any investment is impossible. Please understand me: you may very well jump in and out of stocks… and you might be able to do it very successfully… But anyone who has ever managed a business knows you simply don’t want to own a business, unless you have not only trust but also admiration in the people you partner with. If you are doubting what Mr. Pearson says… well, everything else is just useless: stay away from VRX! ;) Instead, I trust and admire him. How? Well, by listening at what he says (I highly recommend to read all the transcripts of past conference calls!), and by reasoning about what he does. Listening at what he/she says and reasoning about what he/she does: that’s the way I judge and choose every partner of mine. Gio

CBRL’s management will go on copying Mr. Biglari’s ideas… And taking all the merits… Fortunately, we are not here for the glory, but for the money! ;) Gio PS Bought more BH today :)

;) Gio

http://seekingalpha.com/article/2175923-valeants-low-returns-on-capital-and-other-problems?isDirectRoadblock=false&uprof=25 The longer I read bear arguments on VRX, the more I find myself asking if those people are paid to write, or they truly don’t get it… The author of the article above calculates a return on capital for VRX in 2013 of 12.8%. And complains it is not enough. First: I don’t think an operating return on capital of 12.8% is bad at all. BRK has an operating return on capital for many of its businesses far lower than 12.8%. If you add the increase in value of some well executed acquisitions to that 12.8%, you can easily get to around 20%. Second: VRX is a work in process. A huge business like Bausch and Lomb has been acquired only 8 months ago… How could anyone expect that 2013 cash earnings are what VRX could earn in a steady state scenario? Then the author talks about organic growth, and says it was negative… in Q4 2013… Really??! A quarter??? Who cares!! Have you ever run a business?? … Anything can happen in 3 months!! Clearly, I hope this is not serious… Then again the old refrain: short-term focus causes long-term harm… Mr. Pearson is not against R&D: he is against unprofitable R&D! The author says Mr. Pearson has never provided data to back-up the fact returns on R&D investments are too low: evidently, he missed page 33 of Mr. Ackman’s presentation (or page 45 of the VRX’s presentation)… In a previous article of his the author had written VRX has no pipeline: evidently, he also missed page 30 and page 37 of Mr. Ackman’s presentation (or page 35 to 39 of the VRX's presentation)… Finally, the author talks about “economic goodwill”… My simple answer is a question: which organization do you think has a higher economic goodwill? 1) 80 scientists, with 50 of them who produce no tangible financial results for the company,+ 20 reps, who don’t have the time to follow their clients like they should; 2) 30 scientists, all of them producing tangible financial results for the company, + 60 reps, who have the time to follow their clients closely, + 10 shrewd capital and resources allocators, who decide how many scientists and how many reps are truly justified and necessary to maximize financial results for the long term. Gio

ItsAValueTrap, like I said yesterday, I don’t play that game. Period. Therefore, this is what interests me: Do you think ALS is a bad company? I don’t. Do you think ALS is overvalued? I don’t. I ask you the same questions for FFH and VRX. And I give the same answers. ;) Gio

I agree. But, as you also say, it is very difficult to verify a business that is constantly evolving… From the bulls I get some numbers… From the bears, instead, I get completely different numbers… Which ones are right? Both and none… Simply because they are too rapidly changing! Two basic things I do believe, though: 1) the pharma industry is still plagued by burdensome and unnecessary costs, 2) the returns on R&D investments have been very poor for more than a decade now. Mr. Pearson (and others, he is not the only one!) is trying to address those two problems, and until now he has done so successfully. It is also true he has attracted many detractors, who are more than willing to attack him and VRX business model… but I guess success very rarely is treated differently, right? Cash Earnings last year were $2 billion, which is a return on assets of 7.4%. With a leverage of 2.7x you get a ROI of 20%. A diversified portfolio of durable products, with characteristics very similar to consumer products, might justify such a leverage. Because it produces a large and safe stream of cash on a regular basis. At least until interest rates stay low, and VRX doesn’t have to pay too much for its debt. Gio

SD, even if this doesn’t come close to happen… you have been so much fun!! ;D ;D ;D Many many thanks to you too! Cheers, Gio

What you say makes sense, as always. Let’s just say you engage in buying and selling stocks much more frequently than I do... And I would leave it at that! ;) Cheers, Gio

I obviously didn’t know that, but I pride myself on recognizing “the best in the world” when I meet them. Thank you very much for everything! :) Gio

That’s my definition of mediocre management… certainly not “the best in the world”! ;) Anyway, I do agree, and I am clearly not advocating to avoid thinking about a business… It is “overthinking” that I often see, and I am wary about. Gio

Thank you! +1 Great job! :) Gio

Anywhere between merely very good to phenomenal. My bet is on the latter. Best, Ragu As I have always said, ragu doesn’t lack conviction in his ideas! ;) Gio

Too much speculation in the ALS thread for my tastes… ItsAValueTrap, I usually like your posts very much, really! But I don’t understand your rationale with ALS… Sorry! If future growth is half what past growth has been, ALS even without Kami is clearly undervalued. No doubt about it. It’s simply math. If Kami will not be built, don’t you think they will find other opportunities for growth? On the other hand, if Kami ends up being built, future growth might be on par with past growth: in this case, obviously, ALS is even more undervalued today! You say: I don’t know mining well enough to make a reasonable projection about future growth… But do you really think you understand LMCA’s industry much better?! Personally, I know I don’t. That’s why we try to partner with the best in the world: because they are the ones truly knowledgeable about their own businesses. Tell me: what’s the point of partnering with them, and then questioning every choice of theirs?! Sincerely, I don’t understand. Issuing of shares: I cannot really know the true reasons why Mr. Dalton has decided to issue shares. You suggest because ALS shares are overpriced… others suggest because they already have debt and they want to keep a liquid balance sheet… Who is right? I cannot know for sure. But what I know, instead, is Mr. Dalton has the best interest of ALS, and therefore ALS’s shareholders, always in mind, and will do what’s best to maximize value over the long term. Gio