giofranchi

Gio

Hi Ross! I have no doubt ValueTrap is an excellent analyst and good investor! And I am trying to follow his discussion with Dazel, though sometimes it gets a bit confusing… I mean: is a royalty business a good business? Yes. Will the mining business be subject to some kind of disruptive change in the foreseeable future? No. Then, long-term investment returns depend exclusively on the quality of the owner / manager. Is Altius in good and capable hands? I think so. Besides price, but no one thinks Altius is overvalued (not even ValueTrap, otherwise he would not hold a significant long position in the company), what else do I really need to know? Because when I invest, it is always for the very long run. I don’t know ASPS… but I am always very eager to learn! ;) Gio

I have just finished reading the book, and I must say it is very well written and very informative by any standard! Imo, an outstanding job! :) If I may provide a very small and not truly important criticism, in the chapter about “Jokey Stocks” I would have stressed more insistently on the importance of reading and studying the lives of great entrepreneurs and capital allocators… Mr. Mihaljevic rightly says there is no sure formula for identifying future business leaders… Yet, I believe that, anyone who takes the time and makes the effort of studying the lives of Mr. Buffett, Mr. Walton, Mr. Malone, Mr. Icahn, Mr. Singleton, Mr. Templeton and other great businessmen of the past, Mr. Baruch, Mr. Keynes, Mr. Rockefeller, Mr. Mellon, Mr. Baker, Mr. Sage, Mr. Vanderbilt, Mr. Franklin, etc., would enjoy at least a rough guide on what to look for. ;) Gio

Gio

Gio

Well, in business I think a “good culture” equates to “flexibility and adaptability”, exactly because, as Oddball says, “there are many seen and unseen factors that influence decisions.” Flexibility and adaptability mean: “tell me the rules of the game, and I will figure out ways to make money.” By definition this kind of “good culture” should work in any environment. :) Gio

--The New York Times, Monday, May 4, 1931 Gio

Ross, I am curious: does your professional background have something to do with metallurgy, or do you really develop such deep technical knowledge in any sector you invest? :o Gio

Well, I also agree that Eric is doing the right thing! Because I simply don’t understand how anyone could develop any kind of faith in such a gigantic organization run by bureaucrats. Its price is low? Very well then, buy it! But, if you also hedge your position, it makes a lot of sense to me! ;) On the contrary, I invest only in businesses run by entrepreneurs, and not the average entrepreneurs, but those who have been the most successful during the past two decades, are still relatively young, are still very much motivated, and still have a lot of skin in the game. And I want to stay invested with them for a very long time (for the next two decades, or even more if possible!). In the company of such men, with such a long term view, I don’t really feel the need to buy insurance. I want to keep ready cash at hand, when I think other investors are too euphoric and behaving recklessly, simply because, no matter what my investments will do in the long run, their stock price might fluctuate, even violently, in the short run… Let’s put it this way: I don’t buy insurance on my investments, because I think their correlation with the “ineptitude of others” in the long run approaches 0%; I keep ready cash at hand, because I think their correlation with the “ineptitude of others” in the short run is 80%? 90%? 100%? Whatever! I want to enjoy the safety such investments provide in the long run, and also to take advantage of their inevitable short run fluctuations! Gio

This also really doesn’t make much sense to me… The S&P500 has actually declined 50% two different times in 10 years… And 2011 in Europe has been almost worse than 2008… Simply put, if we keep inflating bubbles, they will keep blowing up… no matters what statistics seem to suggest! ;) Gio

Cardboard, as always I am very happy to make you laugh… ;) Anyway, a great buying opportunity imo is LRE that trades below 700 GBp. Do you think it is so impossible to happen? Or ALS that goes down 20% from here. Or FFH that trades around today’s BV… I could go on. If one of those opportunities comes, I want to be ready with a lot of liquidity. I almost don’t care about what the general market does, and surely I don’t care about BAC… If you had taken the time to understand how I invest my firm’s capital, you would certainly have not talked about BAC… not that it would have been time particularly well spent… but usually I laugh only when I think I know what I am talking about… (and don’t worry: in 2009 I scooped up plenty of bargains!) Gio

Gio

But you must have patience. In another thread I have written that Mr. Watsa has an iron will. And Dazel commented: an iron will comes from doing your homework… I would say instead: an iron will comes from doing your homework and having patience. While it could be easily enough understood how “doing your homework” is begotten and nourished, “having patience” is a bit more of a mystery… It seems to be very tough to teach patience to those characters who naturally lack it. Gio

Well, let me speak for the average investor who seeks above average returns… Because that’s exactly how I look at myself! ;) Some insurance, whether in the form of keeping a cash reserve or buying some puts, makes a lot of sense to us… because we are just average, not outstanding investors! Still, we are looking for above average returns… You might think that to be average and to look for above average returns is simply a foolish dream… But the way our investing world works, it might be not! There is at least one chance for us, average investors, to achieve above average returns: and that is to be ready and able to grab those few, rare, and great opportunities, that once in a while come along. And this is precisely why insurance matters to us: we don’t buy insurance against a market crash, or against an investment of ours that goes south… instead, we buy insurance against the fact we might miss the boat, when a rare and great opportunity finally presents itself. If we, average investors, are able to fully take advantage of 3 or 4 rare and great opportunities in a lifetime of investments, we might truly achieve above average returns after all. On the contrary, if we are not able to do so, we, average investors, will certainly end up with average returns. Gio

I agree. It is not about predicting market crashes… which I also think is foolish… Instead, it is about strategically and constantly adjusting powder still left dry. And I almost always leave some powder dry… Even at the bottom of a secular bear market… Because you simply don’t know and can never tell… Some great opportunities might always come along unexpected… And generally I don’t want to sell very good businesses with great future prospects, to be able to take advantage of those great opportunities… That’s why some dry powder might always be useful, and when you use it, next goal should be to rebuild your cash reserve anew… How much dry powder? Usually, I like to look closely at other investors, to understand how euphoric or depressed they are behaving, and manage my cash reserve accordingly. Gio

Gio

No problem! It is just that FFH’s assets are practically all denominated in USD, therefore I always think in USD, even when I refer to its share price! ;) Gio

What do you mean? Yesterday I added more FFH at $378... Gio

+1 Gio

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Ok, I know FFH will sink, when Q4 2013 are finally out… Then, I will buy even more… ;D ;D Gio

I have bought the 1994 edition… But have no idea what’s the difference between the 1994 edition and the 1981 edition… One thing I know: the 1994 edition costs little more than half the 1981 edition! ;) Gio

That’s why you want to partner with the best (or one among the best!) capital allocator in the field! If changes come, Mr. Randal will be among the very first to recognize them and stir the boat accordingly. Anyway, besides a sort of royalty business model, XON has very little in common with ALS… ALS imo is a balance sheet value play… XON cannot be justified by any value metrics… It simply is a company owned and operated by a very smart person, with the potential to be a 10x bagger (hey! Mr. Loeb spoke about $125 billion… which would translate into a 42x bagger!! ;D). But that’s all! The tastes of pure value guys clearly won’t be satisfied here! ;) Gio

Well, of course the purchase of this company cannot be justified by any P/E, P/S, or P/B multiple… Nonetheless, I think it still makes sense to invest small amounts of capital in enterprises with the potential for explosive growth… If it turns out right, you make 10 times your investment, if not, you lose it all… ;) Gio