giofranchi

I have come to think I want to invest both in companies with long runways, which can go on growing for a very long time and therefore don’t distribute dividends, and in companies which are more mature and therefore distribute generous dividends. The balance between these two types of investment depends on the general environment: under certain conditions I am going to hold more of the first kind of companies (basically when general valuations are reasonable or the market is oversold), under other conditions I am going to hold more of the second kind. Cheers, Gio

I am reading [amazonsearch]A Curious Mind[/amazonsearch] by Brian Grazer. It is very interesting so far, and I would recommend it. Find in attachment what Mr. Grazer has to say about "curiosity meetings". Cheers, Gio

+1! +1! Cheers, Gio

+1 Cheers, Gio

This is what I mean: When you control all the earnings of an industry, competitors struggle to catch up with you. You have the means to continuously improve your product, while no one else can because they lack those means (earnings). Therefore, the gap between you and your competitors tends to become wider and wider. That is, of course, unless the whole industry is shrinking (which, as I have said, I don't think is the case with smartphones), or you start making foolish mistakes… In other words, your fate is in your own hands. If you don’t pay too much for a business whose fate is in its own hands, and if that business is run by a smart management, usually it is a good thing to own. Cheers, Gio

Apple controls 92% of the smartphone industry earnings. To me it looks like a near monopoly. Usually, if you don’t pay too much for a monopoly, it is a very good thing to own. I agree growth won’t be as fast as it has been in the past (how could it be?). But I think you don’t need much growth to achieve reasonably good results, if you buy a monopoly at a 10% FCF yield. And I don’t see the smartphone industry starting to shrink anytime soon. There is no substitute for the smartphone in sight yet, and smartphones can still get much more powerful and useful than they are today. Therefore, I basically agree with Viking: a 10% compounded return from here is plausible. Cheers, Gio

+1! ;) Also design, no? Imo AAPL is software + hardware + services (customer service included) + fashion. They have to keep designing great looking products, no? Of course, the fact they control practically all the earnings of the smartphone industry helps. Cheers, Gio

Thank you very much for sharing your thoughts! :) Basically, I reckon AAPL a sort of monopoly (they control 92% of earnings, right?) in a still growing market. And usually, if well managed like AAPL seems to be, that is a very good thing to own. Cheers, Gio

http://www.fairfax.ca/news/press-releases/press-release-details/2015/Fairfax-to-Acquire-80-Interest-in-Eurolife/default.aspx Life insurance? ??? Cheers, Gio

I agree. Great accomplishment. And let’s hope this will turn out to be an important step towards their final goal that will benefit all humanity. Cheers, Gio

Thank you! ;) Cheers, Gio

Either you don’t do what is risky, or you must have the strength to be candid about it with your shareholders and the public. “I want to give minority shareholders all the information I would want if our positions were reversed”… Well, exactly! Cheers, Gio

Then you should also agree that a manager who doesn’t mislead his/her shareholders is important. Cheers, Gio

Yes, I did. The parts of a 10k that I think should be read at least. But I never think I know a business very well, simply because I have read its 10k. There is so much more about a business that outside shareholders don’t really get the chance to know. That is surely the case with my own businesses (which are small). And I don’t see how it could not be even more so for a huge, very acquisitive public company. Trust in management is a fundamental part of investing as a minority shareholder. And I think we should keep learning which manager truly deserves our trust, and which one instead does not. Is the VRX experience useful in this regard? I think it is. Cheers, Gio

Not now, of course! But I have read all the conference call transcripts of the last 4 years… And I have never found any comment about the sustainability of price increases, nor how it would affect organic growth. Let alone warnings about Philidor and its dubious practices… Is it too much to ask for a CEO who at least dwells on possible risks “before” they have become real threats? Cheers, Gio

Picasso, do you think Pearson knew price increases were not really sustainable? And did he know Philidor could have raised problematic questions to answer? If so, is it too much to ask for a CEO who not only says “hey, look how fast we are growing and how good results are!”, but also “to be completely fair to our shareholders a large part of organic growth until now has been achieved through price hikes, and I don’t think that’s sustainable going forward”? Or do you think he wasn’t aware of these issues? If he wasn’t, how could a minority shareholder ever be aware of issues even the CEO ignores? Cheers, Gio

I have sold out of BH some months ago. Cheers, Gio

Ok, thank you! Although this sounds much easier to do when you are lucky / savvy enough to buy at an already very depressed price. Some people on this board have done so: some have decided to hold on their shares, others have decided to sell. I guess it is much more difficult to do, when you have suffered all through a very steep decline in share price… Cheers, Gio

With fraud I mean most of all a management that lets shareholders believe A when instead there is B going on behind the scenes… We were told organic growth was achieved 50% trough volume and 50% through price. And Philidor was never mentioned to shareholders. That’s why I started the poll when VRX stock price was still trading well above $200. Cheers, Gio

How do you suggest to deal with an accusation of fraud then? We never really know with great depth the management of a public company, right? And that’s one of the differences between owning a private business and owning a fraction of a public company. Am I wrong? Therefore, I have come to two possible solutions: a) Invest only in those companies which have a very low probability of being accused of fraud, b) If an accusation of fraud should be brought up anyway, I’ll cut my losses short. Do you have any other idea? Thank you, Gio

I do not think this should be exaggerated! It is the first time it has happened. I agree. Except there is a huge difference from Watsa’s reputation 10-15 years ago and his reputation today. The same is true for Malone at TCI and today. The same I hope will be true for Pearson a few years from now. I guess it is a matter of track record: if a manager has already proven he/she can withstand accusations and has already proven those accusations wrong in the past, it is much easier to have confidence in what he is doing and saying. Tell me: do you really see Malone getting accused of fraud... now? Do you see Watsa getting accused of fraud... now? Do you see MKL getting accused of fraud? Do you see GOOG getting accused of fraud? Do you see ABT getting accused of fraud? Etc. I don't. Or at least thanks to their strong reputation the probability of such accusation is much lower. But we can never be sure, right? That’s why I think 1) and 2) will be useful to cut my losses short next time! Cheers, Gio

Hi John, I am no longer a shareholder of VRX. I have sold around $105 for a 50% loss on an investment that was 15% of my firm’s portfolio. In the past I had doubled my money in VRX, therefore my experience with VRX is not so punishing as it looks like at first glance… still, to tell you the truth, it hurts a lot!! I hope, though, that I have learnt some good lessons: 1) VRX has been the very first company I have owned that ended up being accused of fraud, and I really didn’t know how to react promptly. Now I know: no matter how much I like a company, if it gets accused of fraud, I will sell and wait to see what happens from the sidelines; 2) A bit more diversification helps: not much… from 5-10 companies to 10-15 companies; 3) Most of all REPUTATION: in the public markets I have finally come to realize that reputation is paramount! And from now on I’ll limit my investment universe to those companies led by managers who have been successful in building an almost unassailable reputation for themselves. Because probably they won't be accused of fraud, and should they get under attack for some other reasons, I must have the conviction to keep trusting what they do and say. What I think I still don’t understand is why people seemed almost to rejoice about the fact VRX got into trouble… I will be extremely happy if Pearson proves to be honest and successful as he seemed to be just a few months ago, even if I am no longer a shareholder of VRX! I am happy when I find a great company, and disappointed when a company that looked great runs into trouble. I can only guess the opposite is true for short sellers! Cheers, Gio

This is exactly what I meant with “fraud” from the beginning: those who liked VRX liked its business model and the CEO who was implementing that business model. Pearson told his shareholders that he was buying durable assets at a good price, and that he was then cutting unnecessary costs to the bone. To keep doing so, in an industry which already enjoys very high margins, requires focus and discipline. And he was showing his shareholders very good business results (a very strong organic growth included). Of course, if and when results reported by management are put in doubt, I am lost: I have my own businesses to run each day, and I don’t have the time to do all the work necessary to disprove an accusation of fraud. The lesson I think is to invest only with those owner/managers whose reputation is so much respected that it most probably won’t be attacked: Buffett, Malone, Watsa, and a few others. This being said, I’ll continue to follow VRX closely: I am very curious to know what will happen in the next few years. I would be delighted if I see it will be successful and Pearson will be proven a truly reliable manager after all. He will then surely deserve a place among those managers whose reputation will never be attacked again, and I will then be very glad to invest with him again, albeit at a much higher price and when VRX will be a much larger company. Cheers, Gio

Eric Topol's Top 10 Tech Advances of 2015 http://www.medscape.com/viewarticle/855826 Cheers, Gio

Apple Pay, Chip Credit Cards Help Redefine Payments http://news.investors.com/technology/121515-785312-mobile-payments-rise-credit-cards-more-secure.htm?p=full Cheers, Gio