giofranchi

Hi muscleman, I partially, but not fully, agree with you. Mr. E. H. Harriman was used to say: So, after appreciating from $10.45 (my purchase price) to $14.80 in 8 months, and in the meantime also distributing a 5% special dividend at year end 2012, for a total return of little less than 50%, TPOU is now trading at a 9% discount to NAV ($16.31, see file in attachment). It is obvious that, if you are interested in a “quick and easy” 10%, EXO.MI at a wider discount to NAV might be a better choice than TPOU. Vice versa, if you are interested in something that will grow, I still prefer TPOU. I simply think “the opportunistic son of a bi…” business model of Mr. Loeb is far superior to the EXOR’s more static business model. After closing the gap to NAV, sincerely I don’t see how EXOR could grow as fast as Third Point. And Third Point will grow: 1) After increasing NAV per share 22.5% last year, it has already increased NAV per share 18.4% in 2013, both far above its long term track record, despite the $13 billion under management. 2) Mr. Loeb focuses on “special situations” of any kind: in stocks, in bonds, in real estate, in currencies, etc. The markets he operates in are huge! And compared to them $13 billion are just a flimsy sum of money. 3) When AUM will actually start to become too large (many years from now) and therefore to impair results, Mr. Loeb will give money back to shareholders through special dividends. For those who reinvest the dividends, TPOU might still continue to be a compounding machine. So, I prefer EXOR right now as a trading opportunity, while I still prefer TPOU as a long-term investment. giofranchi 2013-05-15-Estimated_NAV_Announcement.pdf

twacowfca, based on the file in attachment, I cannot easily understand Mr. Brindle’s interest in Lancashire… I was wondering if you could clarify that to the members of the board who follow Lancashire. Thank you very much! :) giofranchi Director-PDMR_Shareholding.pdf

biaggio, I forgot to thank you for the paladin idea! :) I started looking into it and I noticed that John Goodman is on medical leave: do you have any more detailed news to share with us on his actual health conditions? Cheers! giofranchi

Thank you Kraven! I will surely purchase it and enjoy its reading! :) Best regards, Gio

Comstock Partners, Inc. - Why We Remain Bearish giofranchi Why_We_Remain_Bearish.pdf

Thank you wellmont, biaggio, muscleman, and others. First of all, let’s be clear: I am still studying VRX, and I am still reading all their conference call transcripts. I think conference call transcripts are very useful, because to read them is basically to listen to people who know the business very well, and therefore can explain it to you easily. Usually, I have found that, as I go on reading conference call transcripts, the whole picture gets clearer and clearer, until you get conviction, or else you quit and put it in the “too hard pile”. That being said, muscleman, let’s take a look at the numbers: in 2012 their Revenues were $3.55 billion, then they reported $0.93 billion in Amortization of intangible assets, $0.34 billion in Restructuring, integration and other costs, and $0.078 billion in Acquisition-related costs. A total of $0.93 + $0.34 + $0.078 = $1.348 billion in acquisition related costs, or 38% of Revenues. But: acquisition related costs are not costs, they are investments! What’s the point of declaring Amortization costs on assets they bought precisely because they think those assets are worth more, and not less, the price they paid them for? They are activist investors: they purchase assets and then they hasten to make them better, implementing change, and increasing their profitability. So, I expect also their value to increase over time, not decrease. Restructuring and integration costs are the capital, the labor, and the resources they use to make those purchased assets better and more valuable. So, I repeat, they are not costs, they are investments. In pharma I rarely look at the Net Income, I prefer much more the trend in Revenues and FCF. My current view on long-term debt: I have already expressed it in a previous post. Basically, I think a heavier debt load might be justified and sustained during their high growth years. When growth will inevitably taper down, then I would like to see a rapid decrease in debt too. biaggio, what about their products? Well, let me ask you a question: can you formulate a more predictable and therefore dependable need and/or desire in us humans than to be beautiful? Any business that helps us feeling more beautiful is a business I want to own. Hey! Do you know that even a genius of John Maynard Keynes’s caliber had an extremely hard time throughout his life accepting his “ugly appearance”? He said he “didn’t feel entitled to be touched by another person”, because of his ugliness… Even one of the brightest mind of the last century craved for the beauty he didn’t possess! Well, VRX is just big, and getting bigger, in dermatology, oral health (that glamorous Tom Cruise smile, right?), and aesthetics! What’s not to be liked about it? As long as the “serial acquirer” status is concerned, let me ask you another question: if you include the stock market, aren’t BRK, MKL, FFH, OAK, LMCA, LUK, etc. just that? Serial acquirers? They all are in the business of buying $1 assets for 50 cents… and that is a wonderful business! Of course they are serial acquirers! And when they cannot be, they lament the fact, like Mr. Buffett who sadly admitted he could find no elephant to shoot in 2012. The best definition of VRX I can come up with follows: an activist investor on a value basis in beauty related products searched for in inefficient markets. Why inefficient markets? Because their strategy purposely focuses on markets that are overlooked by other large pharma companies, and therefore are intrinsically more inefficient. And I like that definition very much! :) Finally, I agree with wellmont: future results will almost entirely depend on the quality of the decision making process by Mr. Pearson and his team: if I am wrong about their skillfulness, VRX will prove to be a disappointing investment. Disclosure: my firm has a relatively small position in VRX right now (3.5%). It will change together with my judgment on the quality of management. giofranchi

Coming soon: Europe's biggest economy will be U.K. giofranchi Coming_soon_Europe-s_biggest_economy_will_be_UK.pdf

Hi David! I don’t follow BRK’s investments so closely (I completely “delegate to the point of abdication” to the Warren-Todd-&-Ted trio ;D ;D ;D), and I must admit I wasn’t aware LMCA already was among them… I just posted the piece of news I received by Seeking Alpha. Thank you for the clarification! :) Gio

On last November 25, 2012, rjstc wrote me the following message: Barely 6 months later, Mr. Loeb is trying to take precisely that course of action with the letter in attachment: very nice call, Ron!! ;) giofranchi Dan-Loeb-Third-Point-Letter-to-Sony1.pdf

Parsad, on November 26, 2012, I started the “Liberty Media” thread under the section “General Discussion”. Then, on March 14, 2013, ItsAValueTrap started the “LMCA – Liberty Media” thread under the section “Investment Ideas”, which is where it actually belongs. I was wondering: is there a way to put the two threads together? And to create just one thread “LMCA – Liberty Media” under the section “Investment Ideas”? Thank you very much! :) giofranchi

giofranchi

Thank you very much! :) giofranchi

Please, find them in attachment. giofranchi Hussman_WineCountryConference_130405.pdf Mauldin_Unsustainability_WCC.pdf Martenson_Shifting_Baselines_WCC.pdf Chanos_CHINA_PRES_for_Wine_Country_Conference_April2013.pdf Mish_Wine_Country_Conference_2013.pdf

muscleman wrote me a message, asking what I know about the pharma industry. My answer follows: Hi muscleman! To tell the truth, I am a big fan of… great businesses!! :) I don’t think I have any particular insights into the pharma industry, other than I have followed for some years companies like JNJ, NVS, ABT, and TEVA. But, let’s be clear: I don’t think you must have great insights into the pharma industry, to understand that pharma companies might be great businesses! First of all, we will always need drugs, unfortunately they will never go "out of fashion" or become useless… Second, the prospects for future developments are bright: it was Mr. Feynman, one of the greatest minds of the twentieth century, who proclaimed himself to be a great fan of biology. I think he said something like this: Third, I like “knowledge” businesses: they are scalable, and a business, which enjoys scalability, tends to be a cash flow machine. Third, they are not capital intensive: not only they generate a lot of cash, they also generate a lot of FREE cash. I know of no better environment for an outstanding capital allocator to leverage his/her skills. On the other hand, the drawbacks with pharma are very well known: first, huge investments in R&D are needed, and second, the uncertainties of the returns on those investments are many and hard to fathom. That’s why I agree with Mr. Buffett's point of view: a basket approach with pharma is the way to go. And the basket I chose for my firm was made of 4 companies (JNJ, NVS, ABT, TEVA), which were themselves very diversified companies, and which had an outstanding track record as capital allocators. The same, imo, is true for VRX, with the added benefit of a still much smaller size, and therefore still much more room for growth. Mr. Pearson, of course, is clearly very shrewd, deeply motivated, and truly committed to deliver outstanding results for his shareholders. So, imo, he is among the very best people with whom I would like to partner. I don’t really have much more to add about my knowledge of the pharma industry… with the exception, perhaps, that I am reading [amazonsearch]Shaping The Industrial Century: The Remarkable Story Of The Modern Chemical And Pharmaceutical Industries[/amazonsearch], and I find it a fascinating read! Highly recommended. Best regards, giofranchi

Wow!! To hear Mr. Tepper's case for markets really makes me feel like I am being cautious and conservative at the worst time possible… basically, it makes me feel like a fool! :( giofranchi Mr. Tepper's chart. giofranchi tepperchart.pdf

Wow!! To hear Mr. Tepper's case for markets really makes me feel like I am being cautious and conservative at the worst time possible… basically, it makes me feel like a fool! :( giofranchi

Find in attachment the HDGE ETF Market Commentary for May 2013. giofranchi HDGE_PMCommentary_052013.pdf

Société Générale on US Energy Independence. giofranchi Econote17_US_energy_EN.pdf

Q1 2013 Conference Call giofranchi valeant-pharmaceuticals-Q1-2013-conference-call.pdf

Enjoy! :) giofranchi Image Credit & Copyright: Isaac Gutiérrez Pascual (Spain)

Kraven, my point of view is different: I am always invested in productive businesses, I just try to “adjust” my defensiveness / aggressiveness according to the “climate” or the “pendulum”, paraphrasing Mr. Marks. The operating activities of the businesses my firm controls keep generating some cash: do I put it to work immediately, or do I wait for better opportunities? It depends basically on two things: 1) Do I see great bargains today? 2) How is the “climate” or the “pendulum”? I just try to answer those two questions and act accordingly. That doesn’t mean I am out of business… as long as I can prevent it, I will never be out of business! ;D Furthermore, I don’t understand why a lot of people think FFH stock price will decline with the market, if a correction comes… It is true that FFH stock price fell from January to March 2009, yet it is also true that FFH stock price appreciated +36% in 2008, while the market tanked –37%… So, who really knows? What I know for sure, instead, is that FFH shareholders will benefit from a market correction like the shareholders of no other company. :) giofranchi

Hi bmichaud, in your historical analysis you just forgot to mention that going from 1937 to 1949 we had to endure one of the bloodiest war in human history… Will we behave in a wiser manner this time? I really hope this time is different! Let’s pray it is so. giofranchi

Thank you very much! ;) giofranchi

The problem with that kind of thinking is simply that, if it were true, we would have finally find a way to earn a higher return on our capital. On average, though, the return on capital is a sort of “social contract”. A too high return on capital for too long a time will not be easily accepted today, as it has never been accepted throughout history. What is for sure is that, as long as the consumer saves only 1%-2% of income, and as long as the government runs large deficits, the “new era” of permanently higher returns on capital cannot be proven: If we don’t save, like we used to do, and the government spends, like never before, profit margins MUST be higher! And the fact this spending binge has been going on for almost 30 years doesn’t mean it is sustainable forever, certainly not if, to sustain it so far, we have progressively run into heavier and heavier debt! giofranchi

Yes! Of course, you are right! My point is simply that also the micro is traded in the market (unless you own a private business). And market behavior as a whole will somehow affect also our micro picks. Therefore, when I think that in the future the probability of averaging down in my investments will be high, I tend to build up cash and I reluctantly put it to work. That’s all. Imo, this is much more important, because my circle of competence is currently limited to just a few dozen companies, and I don’t see extreme bargains among them. Your circle of competence, instead, might be made up of hundreds or even thousands of companies, and the probabilities of still finding great bargains among them might be very good indeed. So, I guess, it depends a lot on the situation: you could afford to completely disregard the averages, while at the same time it would be imprudent for someone like me to do so. giofranchi