giofranchi

Very interesting! :) Thank you, Sanjeev, for letting us know. And, please, keep us informed on future developments. Cheers, Gio

+1 ;) Gio

While I obviously would prefer an 11.11% yield to an 8.9% yield, I am still happy to get the second one, and have a management of shrewd businessmen to invest that cash on my behalf. It’s a steady and safe stream of cash that is important in business. If you enjoy that, everything else will follow. Of course, I agree: the juicer that stream of cash, the better! ;) But please consider: BRK has operating businesses that in 2012 earned 16.3% on net tangible assets worth $22.6 billion, and Mr. Buffett has paid a total amount of $48.6 billion to get control of those businesses. This gives him a yield of: (16.3 / 48.6) x 22.6 = 7.58%. Those investments create value, don’t they? What I mean is that the “quantity” of the yield is important, but also “quality” matters. Its safety, for instance, is very important. You want to have a machine that puts cash into your hands, when everybody else is scrambling for it, when times are tough. In business you must take decisions every day, and to take them with the peace of mind a safe stream of cash provides is very important. People constantly underestimate the difference it really makes to enjoy the clearness of thought a safe stream of cash provides. This is the true value added by the PMRL purchase. :) Gio

Well, I don’t understand… I have invested in ALS because it has transitioned and become a royalty business, and I like royalty businesses… If the purchase of the royalties doesn’t add value, what the hell am I doing here?! ??? Except that, of course, it does add value! ;) Gio

Hoisington Quarterly Review and Outlook - Q4 2013 Gio hoisington-investment-managment-quarterly-review-and-outlook-4q-2013.pdf

ap1234, you know I am a conservative and prudent guy, and I like to keep my eyes open to what is happening around me. I am the one who started the Macro “Musings” thread! ;D ;D And I like to keep lots of cash at hand. But I would never let macro ideas or facts prevent me from buying a great business at a great price, if I get that chance. And it is exactly what ALS has done purchasing the PMRL Royalties. If you look at the presentation, you see that the average price paid for other royalty transactions has been 23x on average, with a maximum of 37x. ALS has paid only 9x!! That’s what I call a great price! Furthermore, it not like commodities are in a bull market right now. Please, take a look at the picture in attachment from the latest paper by Mr. Albert Edwards: commodities are far below their 2007 peak and not far away from their 2008 bottom… Equities… well, that’s a completely different story! ;) Gio Stocks_vs._Commodities.bmp

Reading your posts, I am getting more and more convinced about one simple truth: to stay with Mr. Watsa, anyone must share at least some of Mr. Watsa’s temperament. And when do you really show your temperament? Well, when things are not going well, of course! In the Altius thread FFHWatcher yesterday wrote: I disagreed with him on that thread, for the simple reason I think Dazel is one of the very few posters on the board, who truly thinks like the Prems and the Warrens of the world! But, if you instead apply FFHWatcher's sentence to this thread, it would be right on spot! And what characterizes Mr. Watsa’s temperament most of all is an iron will. I am not saying you won't make money. Because all of you most probably will. I have always said the board is full of great investors. And I think it is true! So go on! Make a lot of money! I would just suggest that you leave FFH alone… don’t ever bet against its long-term prospects… don’t ever bet against an iron will… because that’s a bet you will lose. Gio

I admit I have not read all 182 pages of posts… ;) But, among Dazel’s posts, that I have read, I have found no evident flaw of logic, nor confused reasoning. When I read an investment thesis, it is some flaws of logic and some confused reasoning that I am on the lookout for: if you cannot write down your thesis on an investment clearly enough, then something must be wrong or missing. Imo, Dazel’s ideas and points of view are sound, complete, well-articulated, and very clear. :) Gio

Kennedy Wilson is among the very best in real estate. :) Gio

I have no investment in Jardine Strategic right now, but I do think it is a good choice. :) Bidvest too, but you better ask Ross! ;) Gio

Ah! Ok! I hadn’t read all those previous posts… But, of course, Packer already knew all this! ;) Gio

I would include also BH, ALS, LMCA, VRX, ENDP, TDG, GLRE, TPRE, and BAM. I know people disagree with me, but imo LRE fits the lot too. LRE is simply the most tax efficient special dividend paying company that I know of. It is amazing how much of the dividend received I get to reinvest! :) Gio

;D ;D Well, cannot really argue with that!! ;) Cheers, Gio

Here, Dazel, I must point at TransDigm's track-record: they are 20 years old and their compound rate is 33% over that time. :) Gio

If they do not think about the quality of the business, the quality of management, and the price they pay to purchase the business and to partner with its management, then what are the Prems and the Warrens of the world thinking about? Business is business for everyone. No matter what your name is, nor how much successful you have been in the past. Gio

Usually I look at the board as a “disproval” or “confirmation” tool: it is a community populated by the most savvy investors I know, therefore, if they agree or disagree with any investment thesis of mine, I take notice: and I usually heed the consensus on the board. But, as far as FFH is concerned, they are so much difficult to follow, that even the board becomes imo a “contrarian” tool: and I won’t heed the consensus on the board. The more investors are completely out of FFH, the happier I am to hold on to my shares. And I haven’t sold a single one. I intend to hold my shares, and possibly to increase my ownership of FFH, for the next 20 years. We will see. :) Cheers, Gio

I agree 100%! In fact, that's exactly the reason I decided to join the board in the first place! ;) Gio

Hey! FFHWatcher... I was only joking with that "quarterback" stuff, ok? ;) Cheers, Gio

And what about the dinner?! ;D ;D Will you be there next April? It would be a pleasure to meet you in person. ;) Cheers, Gio

ap1234, as usual your questions are very interesting and well thought out and expressed. Thank you! As always, I will let someone else (Dazel, of course) answer them!! ;D ;D Anyway, I would consider that we don’t need to compound at 29% to make ALS a worthwhile investment: because the price we are paying imo is very low. Think about all those projects that are on ALS’s balance sheet for almost nothing… and probably we are not paying much above true BV. Anything in between their historical compound rate and 15% is fine with me. To consider a compound rate of 15%, when historically they have achieved 29%, isn’t somehow like getting a 50% margin of safety? ;) Gio

FFHWatcher, Be sure I am not a cheerleader… I am a quarterback!! ;D ;D ;D Seriously, I like a royalty business, I like a shrewd and opportunistic businessman / investor at the helm of a royalty business, I like his track-record and I like the fact he is still very young. I like a share price that I think is very cheap. These are facts. I am not imagining anything… I have no dreaming visions of future greatness… If something has worked so well in the past, if I see no reason why that success should suddenly stop, and if I don’t have to pay much to jump on board, well then I definitely want to partner with smart people. Period. ;) Gio

I’ve just bought more: my investment in Altius today is another 35% bigger. :) Gio

I guess this could be explained with the commodity bubble that spiked around 2007-2008. I guess ALS is not the only company whose stock price got pumped up by the crazy love for commodities that swept the whole world in those years… Then it popped, like any bubble always does, and the stock price followed suit. Here, I think, Dazel is right again: today’s sentiment towards commodities is very far from that last speculative fever. If anything, the opposite is true: commodities nowadays are looked at with great suspicion (just look at the Canadian$ and the Australian$ in 2007 and today!). Gio

Well, but this is a positive! Not a negative in the least! It means the price is still low. A low price equals a small downside. Doesn’t it? Think of it this way: in 2008 it was in the $25-$30 range… Now, after 5 years of great value creation, it is around $14… In 2009 it went down to around $5… A compound rate of 29% annual, like Dazel says, means that in 5 years your value gets to be circa 3.5 times bigger… $5 x 3.5 = $17.5… I think Dazel is right: I don’t see much downside here, even if a serious market correction should come. :) Gio

Yes! And let me add one thing more: I would gladly welcome a substantial decline in its price. LRE is the best alternative to an wholly owned operating business, that can be found and bought on any stock exchange. At least, as far as I know. Those who think it is important and very useful to continuously replenish their cash reserve, but do not possess a thriving operating business, and don’t have the resources yet to buy one, should seriously welcome a substantial decline in its price. ;) (Ah! And, of course, then take advantage of it!! :) ) Gio