giofranchi

I think I have understood your point well... And, if you wish to know, the buildup of capital was due for $269.0 million to Investment Gains and for $194.3 million to Operating Businesses. Yet, both results were achieved thanks to Mr. Biglari’s “business acumen”: the reason Investment Gains were obtained thanks to his business acumen is obvious enough; and the reason also Operating Businesses gains were obtained thanks to his business acumen is that, when he took control of SNS, his operating business was just a “money losing restaurant chain”. I still think the first 7 lines of his 2013AL are clear enough. ;) Gio

Well, I guess you are right. And I have no problem in revaluing an investment of mine… if and when the facts change. Unfortunately, that “perhaps dramatically fall in profitability” Mr. Odey expects is not justified by any of the facts I am aware about. After more or less 25 years of great profitability, Mr. Brindle all of a sudden becomes just average… Of course, it is possible that the future parts ways with the past, even dramatically, but in the absence of clear and well founded reasons for it to do so, we should act as if past and future do rhyme. Gio

Sincerely, I don’t understand… Mr. Odey might be one of the most sophisticated investors in London… but I don’t understand anyway… Yes, I am clearly a bit dumb! ::) Why do people continue to value LRE on a BV basis? When it is selling for just 10 times ttm earnings? And when those earnings are all fcf? And when LRE enjoys a wonderful tax regime? Even if it doesn’t grow anymore (and I think it is an extremely pessimistic point of view… I would never bet against someone like Mr. Brindle!), at these prices you get an owners earning yield of 10%. Why go short something that earns double digits, when you can find true overvaluation everywhere else in this market? ??? Gio

Well, of course this I cannot say… But, as I have expressed in the past, good businessmen / investors somehow put themselves in good businesses / industries… Also, I clearly was not talking about BH stock market returns. The fact it underperformed some of its peers on a 5 years horizon doesn’t tell me much: I would be very surprised if on a 10 years horizon (meaning 5 years from now) those companies are still ahead of BH, and on a 15 years horizon I am almost positive they all will lag far behind BH. Gio

What is your target portfolio %, gio? When I first came across this thread, I felt like this definitely fits your taste. :D I would gladly put 7% - 8% of my firm’s portfolio in ALS at these prices. Hoping to get a chance in the future of averaging down. If I could take advantage of lower share prices, I would invest up to 15% of my firm’s portfolio. The same is true for BH. Look, as you have said, they both fit my taste very well: I like franchise businesses, I like royalty businesses, and I like shrewd businessmen / investors. In BH I have a franchise business led by a shrewd businessman / investor; in ALS I have a royalty business led by a shrewd businessman / investor. When the odds are in your favor, bet big… do I remember well? ;) Gio

I don’t think this is truly relevant. When I speak of “business acumen”, I mean both on the operations and in finance / investing. They both are important and complement themselves in the process of building wealth. I myself, just like Mr. Biglari, though on a much smaller scale, focus everyday both on improving the quality of operations and on effective capital allocation decisions. When Mr. Biglari bought SNS for a pittance, it certainly wasn’t the cash machine it is today. In fact, as he pointed out in line number 1 of the 2013AL, it was a “money losing restaurant chain”. What truly matters is the cost he paid to take control over SNS operations, and his ability to turn that business from an unprofitable one into a cash cow. Anyone can have his/her opinions on Mr. Biglari’s character features and ethics, but no serious entrepreneur should underestimate or fail to recognize the business achievements he has accomplished from late 2008 until today. :) Gio

I agree 100%. Though, it would be interesting to know Mr. Odey’s true reasons! Gio

I invite anyone who is skeptical about Mr. Biglari’s business acumen to think hard about what he writes in the first 7 lines of the 2013AL: Imo, it is nothing short of amazing! :) Gio

If and when Sanjeev gets one company of his to be traded publicly on a stock exchange, I want to be among his very first investors!! :) Gio

Wonderful! It will be great to meet you there! :) Cheers, Gio

Well, of course, this is not good news… Did Mr. Odey explain the reasons he is short LRE? Without knowing his rationale, it is very difficult to judge how relevant this is to the LRE thesis discussed on this thread… Maybe, twacowfca already knew about this and could shed some light on Mr. Odey’s reasons. Anyway, thank you for pointing this out! :) Gio

--Marc Bloch, “The Historian’s Craft” Business facts are nothing but a part of those historical facts and, therefore, they also are essentially psychological facts. If you read that classical essay by Mr. Bloch, you come to realize how right Mr. Keynes was, and why, when he said: This being said, I agree with you that prudence is always warranted and very welcomed! ;) Gio

Thank you, original mungerville! Given the fact you live in Canada, will you attend the FFH's annual dinner next april? It would be great fun to meet you in person! :) Cheers, Gio

Well kirkomi, But that’s exactly why I have said that you might learn more from failure than from success! My idea is simply that, if you critically study success, and if at the same time you also critically study failure, you might draw some useful lessons that help you take better business decisions. “Critically” means that you must be able to understand by yourself that “prayers won’t save you from shipwreck”. ;) Our experiences are necessarily limited, because our time is limited, we cannot know everything and cannot be sure to be always right. Yet, I don’t think there is either complete cluelessness or full control. You might start completely ignorant, but you might also get better and better each day that passes, even if you never reach full control. Believe me, I know and understand very well what you have written. I have read it myself many times! Over and over again. And I have always found it to be scientifically / logically very sound… but unfortunately not very useful! Gio

Well WhoIsWarren, after your review, it certainly is not on top of my reading list… ;) Gio

Kept on reading and kept on buying: my investment in ALS is another 50% larger today. :) Gio

Al, don’t you think that business, like any human endeavor, might be taught, learnt, and improved upon? Don’t you think there are patterns that, if properly studied and followed, might at least help and lead to business success? Do you really think everything in business is just random? If you find common features among companies that in the past went from 1 to 100, why not to look for those same features in the companies you investigate and want to buy? This being said, I think we learn as much from failure than we do from success. But the point here is my belief that we can learn and get better! I have the book, but have not read it yet… I cannot judge its quality or usefulness. I cannot say if it is a good learning tool, or otherwise… But the tone of your post seems to suggest: A waste of time! No one recognizes a good business from a bad one! Don’t even try! You will never know! This I think is misleading. And what I try to do every day is to get better and better at business. Gio

Very good! Thank you very much! :) Gio

Thank you, twacowfca! Always insightful! :) What about the great freeze that has engulfed North America? What do you think is LRE exposure to the damages caused by such an extreme and rare event? Gio

Gio

Well, I think the quotes that make this thread say enough about Mr. Rockefeller’s methods and character traits. I would add two things though: 1) It is important to recognize, if ever there was a right man in the right place, it was Mr. Rockefeller: the oil industry simply became the biggest thing on earth during his lifetime… Therefore, imo a very substantial component of luck cannot be ruled out… 2) The importance of “cooperation” or, in the absence of cooperation, the importance of “consolidation” in an industry without great barriers to entry. I remember that also Mr. Buffett said something similar regarding insurance: actually, he spoke about “regulation”, which in the end is nothing but a sort of “forced cooperation”. ;) Gio

No, I bought ENDP at $37 and never added more shares… Actually, I sold some. Of course, I am waiting for a correction, hoping there will be one in the near future… Well, just the day before yesterday ENDP was up 6% in a single day… doesn’t really look like the market has understood the story behind the company very well, does it?! --The Rolling Stones Just like in music, in business too what really matters are the people. Henry Ford said: “As soon as I saw Mr. Rockefeller’s face, I knew what had made the Standard Oil Company”. Exactly. Don’t get me wrong: I know very well what Mr. Buffett says about the quality of a business and about the quality of management… But I am not talking about the quality of management, I am talking about the quality of owners… Those are two completely different things. My idea is simply that great business owners put themselves in the right businesses too. Precisely the same way Mr. Jagger chooses / writes the right song! :) The problem with compounders is not that the market has not understood “their stories”. The problem is the market simply has not the patience nor the discipline to stay with them. And it will never have! It is only in a 10 – 15 years timeframe that they are almost sure of outperforming, but the market looks out only to the next year, or to the next two years at the maximum! That’s why compounders, I mean companies that will be able to grow their net worth at high rates for many years into the future, probably will always be the most fertile soil for irrational pricing and valuation mistakes. And I think those with the patience and the discipline to stick with them will in time reap great rewards. --The Rolling Stones Gio

Here is what I think is the simple truth: without equity hedges, we wouldn’t even be here talking about BBRY. It is as simple as that: no one here can stomach those damned equity hedges! But that’s the way they operate… And that’s the reason why it is so difficult to follow them. Gio

I think Mr. Pearson and Mr. De Silva are doing in the pharma industry what Mr. Dalton is doing in the mining industry: they have identified capital allocation flaws in their respective businesses and have come up with some kind of solution. Mr. Pearson and Mr. De Silva tried to solve the problem of too much capital wasted in unproductive R&D, while Mr. Dalton tried to solve the problem of too much capital wasted in exploration and in building a mine. They might not be geniuses, but they don't have to be... because are very good and reliable capital allocators. And, if I am to invest in a business, the very first requirement I want to see satisfied is that it be led by very good and reliable capital allocators. I want to keep company with them, and with them only. Gio

Well, on a PPP basis the CHF is among the most expensive currencies in the world… what bothers other paper currencies, doesn’t seem to affect the CHF in the least! ;) Gio