giofranchi

Of course I do! And I like LUK! Just waiting a little bit longer… ;) Gio

Unfortunately, that is very difficult. Because it is what everyone is trying to do. I will stick with 1 + 2 + 3 + my best ally: time. :) Btw, 3 is price! ;) Gio

Well, that sounds good! Nonetheless, I was not talking about buying some index puts for protection… I hope this is clear. ;) Gio

matts, in earnest I had never witnessed what has happened at Lancashire before… The people I like to partner with usually are true maniacs of what they do… Their flaws usually ensue from a lack of balance… They often run the risk of jeopardizing their personal lives, because of the love for what they do… This is what I usually worry about: they might lose clearness of vision, because too much involved, mentally and emotionally, in what they are doing… Instead, the fact they might all of a sudden quit something they have devoted many years of their working lives to build… well, simply never heard of it before! Until proven wrong again, I will treat what has happened at Lancashire as the exception to the rule. ;) Gio

I don’t think being conservative when others show frothy behavior is “human nature”. I think it is the opposite! Right now I am generally cautious for 2 reasons: 1) I don’t find any true bargain among the businesses I follow and I am interested to invest in, 2) I see frothy behavior almost everywhere (even here in Italy… and, if we get optimistic in Italy, that’s the true sign when you should start worrying seriously! ;D). But I was referring to a completely different thing. And far more important imo! I was referring to the conviction we can muster about the businesses we invest in. If we are in earnest for the long term, to be sure a business is in very capable hands remains an indispensable prerequisite imo. Because in the course of the next 10 years our conviction will be put to the test over and over again. You might say you don’t really care about the long term. Fine. Yet, the long term truly is your best ally. Because the market is most inefficient in estimating the true worth of those businesses that can sustain high growth rates of value creation over the course of many years. You might very well jump in and out of stocks, but by so doing you lose one of the most precious ally of yours. ;) Gio

For the same reason you invested 25% in Lancashire rather than 8% in three different businesses with Lancashire’s characteristics? Given the extreme difficulty finding in the market your four requirements, I just believe (assuming the research is correct and the importance of the owner-manager is overrated) there might be an opportunity buying predictably good businesses after the market reacts negatively to a great owner-manager leaving. These requirements may prove equally productive (if only slightly less difficult to find): 1. A predictably good business (based on early established nonhuman capital assets) 2. A better than fair price 3. A ten year time horizon (however stable, I do assume some culture drift). While I generally prefer the few alternatives that meet your four requirements (BRK, MKL, GLRE, TPRE), I am adding to LUK on this basis. And convinced that Lancashire might play such a unique role in my portfolio that no alternatives exist (thanks in great part to your posts here, Gio), I will consider LCSHF if it falls more significantly. This is a very sensible strategy, and one I think will produce very satisfactory results. But, you see, I have put a great partner at n.1 purposely, not by chance… It is a great partner that truly gives me conviction in a business. Because in times of trouble – and if you have a 10 years time horizon any business might encounter troubles and will have somehow to cope with them! – I find very helpful to know someone truly reliable is thinking how to solve them and working brilliantly towards that goal. A 10 years time horizon is possible only because a great managing partner makes it so. Without him/her I would lose faith in a business, or in my analysis of it, almost as soon as the first difficulties present themselves…Without a great managing partner, “a 10 years time horizon” would be only words, or, even worse, a lie I’d be telling myself. Hey! But that’s me and only me! After all, it is very well known I am a perfect coward! ;) Gio

frommi, each of us has his/her own way to do business. Yours and mine are just two different ways… I have no doubt twacowfca is right and LRE will go on being a great company. If you are interested il LRE, go on reading the posts on this thread: you will realize they don’t waste capital (the exact opposite!), they won’t change radically their portfolio of investments (I guess they won’t change it at all!), and they will go on making a lot of money! What Mr. Brindle has created is a great and very unique business. :) Gio

When all the 4 requirements above are satisfied, I can have patience and conviction. And I consider patience and conviction among the most important things to have in investing. :) Gio

Why should it be either one or the other? I want and demand both! Give me: 1) A great owner-manager to partner with, 2) A predictable, and therefore good, business (have I ever expressed interest in SHLD?), 3) A fair price, 4) A 15 to 20 years time horizon. I don’t ask for anything more, but I won’t except anything less either. It is a very big world, and if I can find at any point in time 5 to 10 ideas that satisfy both 1, and 2, and 3, and 4, I am confident enough I have done a good job. Gio

;D ;D ;D Gio

Given my most recent track record… just don’t ask me!! ;D What I believe is JAH is still small enough, and Mr. Franklin is still young enough, to go on growing for the next two decades. If, on the other hand, entrepreneurs who have built something extraordinary during the last 10 years, all of a sudden lose interest and start dumping it... well, then I really don’t know what to think nor say. ::) Gio

Thank you very much, twacowfca! And, please, let us know as soon as you hear some interesting news from Mr. Brindle. ;) Cheers, Gio

Thank you very much for posting this one! :) Gio

;D ;D ;D For sure! All the best, Gio

+1 Just bought it! ;) Gio

Ok, let us see: Cash EPS at VRX from 2009 to 2013: 2009: $2.29 2010: $2.05 2011: $2.93 2012: $4.51 2013: $6.24 CAGR of 22.2%. ENDP has an outlook for 2014 of $3.5 Cash EPS, therefore I have paid $57.2 / $3.5 = 16.3. On the other hand, VRX has an outlook for 2014 of $8.5 Cash EPS, therefore I have paid $122 / $8.5 = 14.3. Now let’s suppose ENDP for the next 5 years gets results in line with what VRX achieved from 2009 to 2013: ENDP’s Cash EPS in 2019 will be $9.5. If by then ENDP’s stock is trading at the same multiple of VRX today (14.3), it will be worth $9.5 x 14.3 = $135. That would translate into a 18.8% compounded annual return on my investment. To get a 15% compounded annual return on my investment, the stock would have to trade around $115, at a multiple of $115 / $9.5 = 12. Given the size of ENDP today, and given the fact Mr. De Silva was with Mr. Pearson from 2009 to 2012, I think it could replicate VRX’s success. Of course, I have also added a bit to my VRX position. And I waited a lower multiple, simply because I think the opportunities to move the needle at a $41 billion market cap company are less and harder to find, than the opportunities to make a $6.6 billion market cap company grow. Gio

One regret I have is I was not able to meet with Kraven … Hey, my friend, where were you? Cheers, Gio

No!!!! Please … I know you are joking, but I am a bit touchy about such a thing right now … After Mr. Brindle’s departure from LRE, if Mr. Watsa were to leave FFH too … I guess I would start playing golf and devoting the rest of my life to that wonderful sport!! ;D ;D Gio

;D ;D ;D Sanjeev, You know those gorgeous models hired by The Keg? When one of them handed me the gift card with $25 bucks for free, I didn’t have the readiness to address her this way: “Wow! Now that I have $25 bucks for free, I must surely offer you a dinner!!” … I would have made Kraven proud of me, but I miserably failed the test … I tortured myself for days after the meeting! ::) Cheers, Gio PS Truth be told, I am dating Ginevra right now, and she is gorgeous too! ;)

--Ben Franklin Tom, You know what I find interesting in running a Master School inside a large University? It is the fact you get to know really a lot of entrepreneurs! Because each one of our alumni must spend the second half of the year with us working in a company. Any single company generally opens 1 or 2 stages, our students are more or less 130, every year we meet with new companies, therefore you see that I come in touch with a lot of different enterprises, and of course with the people who run them. My experience is that I have yet to know a business which doesn’t depend on its master. And here I am not saying a group of people, a committee. I have used and underlined the word master purposely: because I mean one person. You see how they react to success, how they keep calm through difficulties, how they take decisions rationally, the discipline and at the same time the passion they show. … And in other instances you see the exact opposite … Don’t have many doubts about which businesses will be most successful! Of course, I am not saying JNJ, KO, PG, XOM, WFC, AXP and others won’t be successful even without a great CEO … Mr. Buffett clearly thinks so! But here we are talking about CRs around 70% … Something the whole insurance industry almost do not even long for … because, what’s the point in longing for something that seems impossible to achieve anyhow?! My feeling is that the companies I invest in are much more similar to the companies I come to know through the management of our Master School, than to JNJ, KO, PG, XOM, WFC, and AXP … And this is true for LRE too. This being said, like I have just written, no one knows LRE as well as twacowfca. If he is positive LRE will do very fine even without Mr. Brindle, you all should heed his advice and keep your investment! ;) Me, I must stick to what I think I know and understand. Gio

original mungerville, I know what you mean. But I don’t think much in terms of what I gain and what I lose. Instead, I think in terms of how much I am right and how much wrong. … And my thesis about LRE has turned out to be wrong … I still can remember WhoIsWarren often asking twacowfca ‘what if Mr. Brindle resigns?’, and I remember me always thinking ‘Come on! People don’t worry about Mr. Buffett retiring, who is 83, and should I worry about Mr. Brindle retiring, who is just 50?!?!’ … And I was convinced I was right and WhoIsWarren was worrying about nothing really serious! Well, it turned out he was very right, and I have been very wrong … Today I am buying small positions in Liberty Media, Greenlight Re, Third Point Re, Valeant Pharma, Endo International, and Jarden Corp.. The rest stays in cash for now. Gio Gio, Regarding Brindle's commitment, I asked the question because I felt less certain than others that he would be around forever. Unlike Buffett and Watsa, Brindle never made a song and dance about making Lancashire his legacy. And while he's extremely influential, he didn't control the company through a majority ownership or super voting shares. But for me the Brindle question was just part of the puzzle. There were just so many factors to consider. So I acknowledged this 'key man' risk and bought stock. And over the last number of months I have tried to better understand the specialty insurance industry and what it is that Lancashire does that is so special. I strongly suspect that Lancashire is not Brindle the person, but the culture and brand he created. Therefore, there is a good chance that his record will be his successor's future. There are concerns and questions however -- like the ones mentioned on earlier posts. I am keen to get to the bottom of these, or at least as best I can. Meanwhile, I am holding onto my shares. Anyway, I'm not here to convince you one way or the other. You've clearly got a decisive personality and a game plan that you stuck with. Fair play! Good perspective. I shall remain a minority of one who thinks that Brindle's departure is not necessarily a bad thing. I have nothing more to add. :) For what little it's worth the minority is two. I agree with you. Well, no one knows LRE better than twacowfca and WhoIsWarren, also Ron has been following the company for a very long time now. If they think it will do fine, I have little doubt it is going to be so. Mine is not a judgment about LRE. It simply is a judgment about what I am comfortable with. I think you all saw me averaging down aggressively with LRE. I know I won’t be able to do that anymore. It is just that. Simple and definitive like that. Now, what I am really curious and exited to know is where Mr. Brindle is going next: I will most surely follow! ;) Gio

I would also add that I like consumer products: they are generally a very predictable business, which provides Mr. Franklin with very predictable cash flow. :) Gio

Q1 2014 Commentary Gio Q1_2014_Commentary.pdf

I think the March 2014 presentation in attachment speaks for itself. A forward P/E of 14 is a good entry point for something that might still grow very rapidly. And, as always, I will seize any opportunity to average down and increase my investment in JAH. Mr. Franklin is a great entrepreneur and is still very young. He is exactly the sort of manager I like to partner with. Not much more to add. :) Gio Investor-Presentation-March-2014.pdf

I have just bought some! ;) Gio