giofranchi

Interesting article from Barron's in attachment. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes Fermenting_change_at_Danone.pdf

Sirius XM: What's The Value Of The Largest Radio Giant On Earth. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes sirius-xm-what-s-the-value-of-the-largest-radio-giant-on-earth.pdf

February 2013 performance. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes 2013-2-February-Monthly-Report-TPOI.pdf

$7.83 for BV x share, $13.86 for share price today: 13.86 / 7.83 = 1.77, actually higher than 1.6… No, sorry but never heard of the word ‘bromance’… is ti really that bad?!?! ;D ;D giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

Richard Brindle explains why dull is good. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes annual-report-2012-inteview-with-richard-brindle.pdf

New Gary Shilling Insight. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes insight-0313b.pdf

Evergreen on Gold. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes NA+EVA+3.1.2013.pdf

Charles Gave on the recent Italian election. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes Charles_Gave_on_the_election_in_Italy.pdf

WEB giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

I don’t know: just purchased it, after reading Buffett’s letter. I have read “Trust: Do Business with People You Can Trust” by Mrs. Rittenhouse and I liked it a lot. :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

All the silver in the world giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

Broyhill Asset Management Investment Outlook Feb 2013 giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes Investment_Outlook_Portfolio_Strategy_Feb_13.pdf

twacowfca, I might have been a little too emphatic using words like “deep knowledge” or “intimately understand”… Anyway, just by reading all your posts about LRE, it is clear to me that you know a great deal!! ;D ;D giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes Yes. Profound wisdom is knowing that which is important. That is very different than knowing everything that is possible. :) twacowfca, Mr. Graham ventured the motto “Margin of Safety”. Instead, I would venture the motto “Circle of Competence”. I think that understanding what you really know, and accepting what you don’t understand, comes first. How would you calculate a margin of safety, if your knowledge of the asset you are trying to value is flawed or incomplete? “Garbage in, garbage out”, right? My idea is simply that too much quantitative analysis can create a sort of false feeling that a business is actually inside your circle of competence, just because you have crunched so many numbers on it, that, oh well, you surely must understand what’s going on! You surely must know what that business is worth! But that is simply not true! And might be dangerously misleading! Any business owner understands this: paraphrasing Mr. Ergen, it is the “signing of the checks” that gives you the right perspective on how a business really operates. And, if you are not in the position to sign the checks, I’d rather rely on the 4 “qualitative” reasons you have just reminded us, that make LRE such a great business. And, though it might be tough to incorporate “qualitative” reasons in the valuation process, it is also required. Otherwise, you will never get a meaningful idea of your margin of safety. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

Of course, and I don’t argue with that. The fact is returns are related to quality, but they are not related to quality ONLY. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

Well, of course I agree! If you have read any post of mine, you understand why nobody agrees more than me! What I meant, though, is a bit different. Let’s put it this way: would you judge the whole American economy “safer” than any single business? I guess so: as safe as a single business might be, there is always a slight probability that something completely unexpected goes terribly wrong… But what about the whole American economy? It will never go bust! So, does it follow that an investment in the whole American economy is always “safer” than an investment in any single business? No. Why? Because the safety of an investment is always a risk/reward affair. And the balance between risk and reward is what matters. The whole American economy might be less risky, but it will grow 2% to 3% for the next decade. If your reward hurdle is 10% annualized, an investment in the whole American economy is the “riskiest” thing you could do, because the probability to never achieve your hurdle is almost 100%. I do not agree that 1 dollar of FFH BV is worth less than 1 dollar of BRK BV. If I assign the same probability to the fact that FFH increases BV at a 15% annual compound rate over the long term, as to the fact that BRK increases BV at a 10% annual compound rate over the long term, which is the case, 1 dollar of FFH BV is worth more, not less, than 1 dollar of BRK BV. The reason why I assign the same probability to the fact FFH will be able to compound BV per share at 15% over the long term, and to the fact BRK will be able to compound BV per share at 10% over the long term. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

Partner24, I had missed your comment till now… sorry! While I understand your point, I cannot completely agree with it. Let me explain: the safeness of an investment is not the safeness of the business you invested in. It is quite different. I think we all agree on that. As I see things, FFH at BV is a safer investment from a risk/reward perspective than BRK at 1.3 x BV: 1) A lower multiple: not the most important thing, probably the least important thing, but I like it anyhow. 2) FFH is much smaller than BRK, and Mr. Watsa could be at the helm for the next 20 years, while Mr. Buffett surely will not. Less capital to invest, more room to grow. The longer the founder stays at the helm compounding capital, the better I like it. I am not saying BRK won’t find the right solution. I am just saying that, as far as a good business is concerned, I HATE CHANGE. We are talking about risk, right? 3) In a down market no one will shine like FFH, either in the short and in the long term. In a up market (and no market stays exuberant forever…) I believe FFH will lag behind BRK in the short term, while still being profitable, but it will do at least as good as BRK in the long term, probably even better! Of course, you might disagree with me, but those are the reasons why I said FFH is the strongest ark I know of. giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

twacowfca, I might have been a little too emphatic using words like “deep knowledge” or “intimately understand”… Anyway, just by reading all your posts about LRE, it is clear to me that you know a great deal!! ;D ;D giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

I second that. I've been waiting a couple of years for the shares to get down to 1.2x book. I just can't pull the trigger at 1.5x. Well, you might surely be right! I have already said before why I think in this environment LRE might still be a bargain at 1.6 x BV, and I think it is pointless to repeat it again. Instead, what I would like to point out is the fact that 1.6 x BV is just a number… too little, really, to recognize a true bargain. Think of the deep knowledge twacowfca possesses about LRE… and, as far as I know, he hasn’t sold a single share to date! Share price might certainly decrease. Any price can go down. But to recognize a true bargain you should “intimately” understand how a business creates wealth over time, and therefore have the conviction, “the rarest of business commodities”, that the price you pay is much less than the value you get. Sometimes, behind a number, let’s say 1.6 x BV, great bargains lay hiding! ;) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

Great! I hadn't thought of that: my “sum of the parts” analysis was flawed, but conservative… a lucky outcome!! ;D giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

Please, take a look at page 5 of the Presentation in attachment: if you buy into Liberty Media right now, you get a portfolio of companies valued at $11,202 million marked to market, as of December 31, 2012. Then you also have $1,420 million in cash. The $540 million of debt you see on the balance sheet in fact remained with Starz in the January 2013 separation. So, Liberty Media right now is debt free. Actually, as can be read on page 1 of the Press Release in attachment, Liberty Media had $1.8 billion in cash and no debt at the time of the spin-off. This leaves us with a portfolio worth $11.2 billion + $1.8 billion of cash = $13 billion of “liquidation” value. And market capitalization today is $12.93 billion. It means LMCA is trading for less than NAV, and you are getting Mr. Malone paramount skill for creating value completely for free. Imo, a good bargain! LMCA management seems to agree with me: from January 11, 2013 through January 31, 2013, barely 20 days, they repurchased $52.1 million worth of stocks at an average cost per share of $110.19. :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes LMCA_News_2013_2_27_General_Releases.pdf Q4-12-Conf-Call-Slides-LMC-final.pdf

Fourth Quarter and Year End 2012 Earnings Call giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes Q4-12-Conf-Call-Slides-LMC-final.pdf

The worst is over giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes IceCap_Asset_Management_Limited_Global_Markets_February2013.pdf

Biglari Holdings Investors Now Getting Core Steak'N Shake Business For Just $125 Million giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes biglari-holdings-investors-now-getting-core-steak-n-shake-business-for-just-125-million.pdf

Thing goin' on that you don't know http://www.cravensbrothers.com/archives/1459 giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

I don't know if these writings by David Merkel have already been posted... giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes Insurance_Investing_Part1.pdf Insurance_Investing_Part2.pdf Insurance_Investing_Part3.pdf Insurance_Investing_Part4.pdf