giofranchi

Well, I didn’t really mean to argue with your analysis. Except of the fact it considers zero growth for LRE going forward, which I think is a bit pessimistic, you analysis is correct. What I wanted to stress, instead, is the importance of regularly getting a 9% to 12% IN CASH! It is extremely rare to get that, unless you own a private business. Those companies you mentioned, probably retain the majority of their earnings, instead of distributing them. And when they distribute them, they usually do so in a very tax inefficient way… I have tried IEP, OAK and KMI… The amount of cash that was lost because of tax matters was simply outrageous! So much that I had to sell them… And what about an index? Well, you got both problems: an index retains the majority of its earnings and is not tax efficient. No thanks! LRE is the only public company that I look at as a possible replacement of the private businesses I own, when the cash generated by those businesses starts to lose relevance as a percentage of my firm’s equity. And to possess a business, that periodically puts a significant amount of cash in my hands, is something I don’t want to let go… If I have to shift from engineering and for-profit education to LRE, so be it! Because always new ad free cash gives peace of mind and enables to behave opportunistically. I am sure whoever has possessed such a cash machine knows what I mean and agrees with me. Business life gets so much easier! ;) Gio

Well, if you read Mr. Buffett latest letter, you will find that Manufacturing, Service and Retailing Operations, viewed as a single entity, in 2013 earned 16.7% after-tax on the capital they employ. That capital is $25 billion, and Berkshire has paid $53.7 billion for them. Therefore, returns to Berkshire are around (16.7% / 53.7) x 25 = 7.8%. And 12% is much better than 7.8%, right? Therefore, I guess something is missing here… And it is the strategic meaningfulness of possessing a cash machine. If you know a better cash machine than LRE, of course go for it! Mr. Buffett is evidently satisfied with a $53.7 billion cash machine that is less efficient than LRE… Here I am not talking about trading in and out LRE… I am talking about investing in the business for a very long time. Why do you think last year results are more likely to represent future long-term results than a track record of almost 30 years in the same business? ??? Gio

;D ;D ;D No… of course not! But let me explain nonetheless: What I want Mr. Brindle to do is to go on posting ROEs around 19%, or in the high teens, and periodically distribute earnings to shareholders through very tax-efficient special dividends. That’s his job. And I count on him for it. My job, instead, is to judge if LRE at 1.5xBV has a place in my firm’s portfolio of businesses. This is why I said I am the “strategist”… after all, who else should make such judgments for my firm?! And the answer is: provided Mr. Brindle goes on doing those things I count on him for, not only LRE at 1.5xBV has a place in my firm’s portfolio of businesses, but that place is second to no other business. It also comes to my mind Mr. Buffett’s decision to buy BNSF: when that purchase was disclosed, I remember Prof. Greenwald, a very good and renowned value investor, stating that it made no sense, because the price paid for it was way too high… That’s another example of failing to think strategically, because price more often than not is basically all value investors see. ;) Gio

It is precisely those “other areas” I am trying to figure out… what are they? A_Hamilton suggested hard core porn… ;) well, besides that one, which are the plausible “other areas”? Gio

I was thinking about Mr. Rockefeller: building Standard Oil, he very rarely bargained hard to obtain the best price at all costs… Instead, he knew where he was going and was willing to pay up (not to overpay!) to get there. But I was not referring to Mr. Brindle as a strategist… I was talking about ME! ;) Gio

Ok. Now, let’s show the entrepreneur in each of us: If you were in Mr. Biglari’s shoes, what would you do with MAXIM, and how would you use its publishing infrastructure? For $10 to $15 million you got hold of a publishing infastructure already present in 75 countries... now what? Any ideas? Gio

2013 Annual Letter http://www.shareholderssquaretable.com/unitholders_iep/ Gio

Hey! I have already copyrighted that one!! It is very well known all over the world as the "Gio Effect"... And it is a very valuable brand... Now you cannot steal it from me!! ;D ;D Gio

WhoIsWarren, you already know how I see this thing: imo a 19% ROE at 1.5xBV is a very good investment. But let’s suppose ROE is coming down… LRE for me still is a “strategic investment”. And, studying great entrepreneurs of the past, one of the lessons that is very clear to me is they never were too cheap, when a strategic investment was involved. They were always willing to pay up for a strategic investment. Why LRE is strategic? Because you want to possess a cash machine. And because LRE has scale, at least if compared to the equity of my firm. I own two cash machines, but they both lack scale. And, as the equity of my firm gets larger, the relevance of the cash they will provide me will gradually shrink. Not so with LRE: all I have to do is to purchase more shares. Therefore, what I ask myself follows: is there a public company that will distribute to its owners more cash than LRE, and which enjoys a better tax regimen than LRE? As long as the answer is no, and as long as LRE share price comes down, I will keep on buying. :) Gio

Thank you, WhoIsWarren! Much appreciated as usual! :) Gio

Q4 2013 Conference Call Transcript http://seekingalpha.com/article/2060593-endo-health-solutions-ceo-discusses-q4-2013-results-earnings-call-transcript?isDirectRoadblock=false&source=email_rt_article_readmore&uprof=25 Gio

Thank you guys! Always funny, helpful and very kind! I appreciate it so much. :) Cheers, Gio

Hi guys… This is really hard to admit… But there is no point in hiding it… I have just been officially dumped… Therefore, I will come to Toronto alone. And, Sanjeev, you can give away the second ticket I had bought to whoever you’d like. I know with such a failure I must be leaving Kraven seriously down… But perhaps part of the fault is also yours… After all, you had given me a lot of PUAs’ tricks and routines… but no strategies to manage a relationship!! ;) Jokes aside, it is not a good day for me… Gio PS Until a few days ago I was thinking: “Ok, I am bad as an investor, but I must be a good lover indeed! Just look at my girlfriend!” … Now, it is a true race: am I worse as an investor, or as a lover??!! ;D ;D

But who cares?! Mr. Loeb has an 18 years track record of compounding capital at 21.1% AFTER FEES, EXPENSES AND INCENTIVE ALLOCATION. Furthermore, on this kind of extraordinary results you, as a shareholder of TPRE, don’t have to pay taxes! ;) Gio

Don’t forget we are buying a Canadian asset when the Canadian Dollar is weak. This translates into the opportunity of buying a larger share of the pie, than we would have been able to do, if the Canadian Dollar were strong. :) Please, see the file in attachment. Gio EVA+2.28..2014_NA.pdf

If this is the case, well then I have still a lot of room to average down! And I’ll welcome lower ALS stock prices! :) Cheers, Gio

Well, we have almost never got single investment discussion by Mr. Marks before. And there is no reason to expect him doing so in the future either! If that is what you meant. As far as I am concerned, I always like to hear where he thinks the pendulum is standing at each point in time. That’s basically why I continue to listen to him and to pay attention to what he has to say with interest. :) Gio

I don’t know Maxim, but I don’t like magazines in general… let’s hope he has paid a very low price… ;) ragu, any comment? Thanks, Gio

Packer, that's an interesting comment for a couple of reasons. One is that B&L notoriously underinvested in the contacts business. Basically all the market share COO has picked up over the past 5 years came at the expense of B&L. The new Zeus lens is B&L's first major launch in 10 years, while the other heavyweights have been rolling out new lenses every few years. Part of this is no doubt due to B&L's status as a PE portfolio company, but the point remains. The second reason I think it is interesting is that Brent Saunders left B&L after the deal and went immediately to FRX to implement basically the same strategy. Not sure if you spoke to him or to Solomon. It is undeniably true, however, that manufacturing contact lenses is a capital intensive business that can often be fraught with FDA challenges. Hopefully VRX management isn't penny-wise and pound-foolish in this regard. Thanks for your input, Packer! VRX has $13B of intangilbes. They will be writing this down for some time. If they stop acquisitions today, will the future earnings on the current products be sufficient to pay it back plus make a reasonable return? If so, they will be sitting on a pile of cash that they can use to pay back their debt + the shareholders for the equity they have put in the company ($25.5B). If the earnings are less than $25.5B they are destroying value and if it is more, they will be creating value. How much value will they create and how long will it take to materialize? What risk are associated with the future stream of revenue? What premium do you want for deferring the repayment of your investment? Hi Phoenix, thought I might could provide some answers to a couple of your questions. First, since Sunbeam and probably before, investors have been rightly concerned with rollups as 'smoke and mirrors' plays that will one day blow up. There are a few reasons to think Valeant is not one of those. First is that ValueAct, who hired Mr Pearson, has maintained a board seat (and a large investment) for the duration of Pearson's tenure. Second, Pearson's pay is structured in a very unique way (see below link) that does incentivize him based on stock price. However, as part of his employment agreement (see most recent proxy) he can't sell any shares except for de minimis amounts to cover taxes until 2017 (and probably longer if he extends his employment agreement). So Pearson can't play a shell game and cash out before the jig is up. Further, the board reviews every significant deal against the deal model on a quarterly basis, a practice I'm not aware of at any other public company. Of all the large deals done by this management team (by my count 17 through 2012, 2013 deals are too early to evaluate) management has stated in an 8-K (don't want to knowingly lie in one of those) that all or on par with or ahead of the deal model from a cash generation perspective. Remember that their models target "at least" 20% cash-on-cash returns before considering tax synergies. As for the sustainability of cash flows, VRX faces no more than a 2.5% headwind from genericization in any of the next 5 years. Everything else is either OTC, generic, devices (contacts, etc), or patent protected for longer than 5 years. Additionally, no individual product makes up more than 3% of sales. So relative to the average pharma firm that typically depends on 1 or 2 major blockbusters to drive the vast majority of profits, VRX would appear to have a more stable asset base. Finally, I take small comfort in this, but others find it more important. The following are large owners of Valeant: ValueAct, Glenn Greenberg, Lou Simpson, Ruane & Cuniff, and Lone Pine. Not exactly a list of suckers, and frankly I don't know of any other stock that has such a well-thought-of group of fundamental-research-driven investors. However, like I said, I put much more credence in our own work and logic than I do the holders list. Hope this helps! http://online.wsj.com/news/articles/SB125106931496352353 Thank you, Bagehot! Very interesting observations! :) I have only a question for you: why didn't you include also me in the list of fundamental-research-driven investors?! ;D ;D ;D Yes, I know, I can be very funny if I want to! ;) Cheers, Gio

Just purchased more Altius. :) Gio

Q4 2013 Earnings Call Transcript http://seekingalpha.com/article/2055563-valeant-pharmaceuticals-international-management-discusses-q4-2013-results-earnings-call-transcript?isDirectRoadblock=false&source=email_rt_article_readmore&uprof=25 Gio

Mr. Charles Gave on "How To Think About Deflation" Gio Daily+2.27.14.pdf

Yes! Of course. But you also know that is just an accounting gimmick. As long as Mr. Pearson hasn’t made bad decisions, the value of those intangible assets might very well increase in the future, not decrease… And, as long as Mr. Pearson hasn’t overpaid for them, the return they generate will be satisfactory enough! Well, I don’t think you have to wait until your retained earnings approach the equity put in the company, to say the company is creating value… Every year Cash Earnings declared, as a percentage of the capital put in the company, are higher than its cost of capital, the company is actually creating value. Gio

LC, I think you are right. But I would also acknowledge that the pharma business is a wonderful business! And its only Achilles’ heel is the uncertainty around the development of new drugs and the wasted capital that uncertainty might lead to… Therefore, in VRX you have a wonderful business, this time with no evident Achilles’ heel, and you have the chance to partner with shrewd businessmen. What more can you ask for? A low price? Ok, I agree! ;) Gio

Just waiting for some cash to buy more. Probably next monday. :) Gio