giofranchi

"The Inevitable - Understanding the 12 Technological Forces that Will Shape Our Future" by Kevin Kelly: I am not yet half through it, but this book is already one of the most interesting and useful I have read recently. Here you find some excerpts so far: Cheers, Gio

Here you can find what I think are the most interesting excerpts: Cheers, Gio

I am reading "Blockchain Revolution" by Don Tapscott, and I find it to be quite fascinating so far. Here you can find the most interesting excerpts: Cheers, Gio

As I have said, the healthcare sector as a whole benefits from powerful tailwinds that will be in place for the foreseeable future (an aging population that will keep spending more and more on healthcare products and services, with the average lifespan that will keep increasing). Also technology will play an ever increasing role in healthcare with interesting, though unpredictable, outcomes. Of course, I can't say who will win and who will lose... and that's why I find an exposure to the overall sector a fine way to benefit from those trends. Cheers, Gio

I have opened a position in VHT. It has outperformed the S&P500 both in the last 10, 5, and 3 years, by a meaningful margin. Of course, I cannot say if its outperformance will last, but the healthcare sector benefits from some powerful and long term tailwinds. And the costs of this ETF are very low. Cheers, Gio

Another threat to PCLN’s business model might be posed by the Blockchain technology. The excerpt in attachment is from “Blockchain Revolution” by Don Tapscott, which I am reading. Overall I see two secular trends as powerful tailwinds for PCLN: 1) The travel industry will continue to grow meaningfully for the foreseeable future, 2) The industry will continue to shift towards online and mobile transactions. PCLN is the n.1 company globally and therefore it is the business that will benefit most from those trends. I also see two possible threats: 1) AMZN, FB, GOOGL (and maybe Airbnb), 2) the Blockchain technology. Cheers, Gio

No doubt, Liberty! Anyway even 10 years of very high margins in a business world that changes faster and faster are difficult to explain without some kind of durable competitive advantage. It is pretty brutal out there! Cheers, Gio

BTW, PCLN has been doing business for 20 years next month. And it still generates fcf which is 33% of revenue. How could you enjoy such high margins for such a long time without some kind of moat? I don't know. Cheers, Gio

You might be right, clutch! Usually I try not to judge the future prospects of a business based on my personal preferences. What you say sounds reasonable and probably that's what I do too. But then again our preferences cannot explain why 147 million rooms were booked using PCLN's sites during Q1 2017. Apps should also be considered: I don't use them to book rooms, but evidently many people do. And PCLN's apps are by far the most widely used. Thank you for all your inputs! Cheers, Gio

Do you believe that PCLN's network of 584.000 traditional hotel properties is a relatively easy thing to replicate? Expedia which is its largest competitor has a network of 385.000 hotels. Much smaller. On the demand side this translated into 174 million rooms booked in Q1 2017 for PCLN vs. 64 million for Expedia, a huge difference! And that's why I asked about truly large players (AMZN and FB), because they surely have the resources to build networks as strong as PCLN's. Smaller players (Airbnb included) might try but with much greater difficulties. What am I missing here? Cheers, Gio

I have opened a position in PCLN. The travel booking market is very large at $1.4 trillion and only 40% of it is online. This makes me believe a lot of growth might still be in store for the next 5-10 years. And PCLN surely is the market leader. What do people here think about the threat of larger players like AMZN and FB entering the travel booking market and driving margins down? Cheers, Gio

+1 Once agian high general market valuations and political/macro uncertainties are not allowed to get in Berkshire's way when a smart buy becomes available. Cheers, Gio

Yes, I guess that might be approximately correct. Right now I prefer to hold a diversified portfolio of stocks and etfs. But for many years I was much more concentrated, basically because at times FFH was 30%-35% of my portfolio. And that’s why when FFH traded close to 1.4xBVPS I probably sold more than 20%-30% of my position. Sometimes FFH has gone from 35% of my portfolio to 15%, which means I have sold more than 50% of my position. On the other hand, at a minimum of 15% FFH has always remained a meaningful position in my portfolio during the last 5-7 years. Of course, results have not been spectacular, but I would say they have been satisfactory enough. Right now my position in FFH is much smaller than 15%: as I have said, it is not because I think their business prospects have deteriorated, but because I don’t want to let any position of mine influence the overall results of my portfolio too much. Cheers, Gio

+1 Cheers, Gio

I have not the time to study and evaluate complicated (but potentially very lucrative) investment ideas (I am not a full time money manager). Therefore, my process is straightforward: I invest on a constant basis (each month, a sort of dollar cost averaging process) in cos which have outperformed during the last 5 and 10 years (are probably doing something right), and which I believe could go on performing very well during the next 5 years. And my approach to diversification is the following: the more cos I find that qualify, the better. Cheers, Gio

True. On the other hand, during the last 5 years I have made good money in FFH, increasing my position while it was trading near 1.1xBVPS and lightening my position up while it was trading near 1.4xBVPS. If something similar happens in the future, buying at current levels might turn out to be quite profitable. Cheers, Gio

+1 Cheers, Gio

If you believe FFH could increase equity from now on like MKL might do, or that FFH could increase both BVPS and dividends like TRV might do, FFH is clearly undervalued today. On the other hand, if you believe FFH will go on performing like a mediocre insurance company, FFH might still be overvalued. I am not adding more shares right now: it is not a judgement about their future prospects, but it is simply because I like a diversified portfolio and don't want to let any position become too large. Cheers, Gio

Thank you, David, for sharing! Very interesting. Cheers, Gio

and A move to more of these "paid to wait" type deals is very welcome cheers nwoodman Good find! Thank you for sharing. Cheers, Gio

Thank you very much for all the different perspectives, When they were poor underwriters nobody thought they would improve someday and become profitable. Now they look like poor investment managers, and of course nobody seems to believe their investment results might improve in the future. Personally, I think it is easier to give them credit now on the investment side then it was to give them credit back then on the operating side. Because they have already proven they can choose investments wisely in the past. Though I wouldn’t talk about 15% annualized anymore, nor I have any idea which kind of return should we expect from now on, I believe if they manage putting together both good underwriting and good investments, the business model is quite sound and satisfactory results will follow. We will see. Cheers, Gio

The simple fact is that they have $86B in cash and $105B in retained earnings. 82% of every dollar they have ever earned is sitting in a "bank account". Idle. Only 18% of earnings were reinvested in the business or used to acquire other businesses*. How much better off would Apple shareholders be if Steve Jobs had listened when Buffett told him to buyback shares (when Apple was $30 per share split adjusted)? -- * In fact, things are worse than they seem. Instead of paying their employees with this excess cash, they pay them with undervalued stock. On the other hand, it seems to me that the founders have done a pretty good job at keeping the price of GOOG's shares near FV, if not slightly undervalued, most of the times. It seems that hoarding cash has at least this simple advantage: it gives the market a reason not to push a stock into bubble territory! Cheers, Gio

It's very possible in such situations to run the company for the founders and not the other shareholders, since their interests can be different. They're multi-billionaires and more dividends or buybacks or more focus on ROIC won't materially change their lives, but it could make a difference to other shareholders. Not saying they are or aren't, just pointing out that this can be the dynamic with large controlling shareholders. Ok, I get that. I just don't get the reason why large and rich shareholders should choose a lower ROIC instead of a higher ROIC all else being equal... why should they choose to never pay dividends nor buy back shares and to just hoard cash, if they think they will never use all that cash? Cheers, Gio

I've heard this many times before, but I am not sure I understand: 1) The founders are the largest shareholders: how could you run the company for the founders and not for shareholders? 2) As long as you have ideas to grow, to run a company for its employees might not be so bad after all: great employees lead to great ideas which in turn lead to great new products. New products that might earn lots of money for shareholders. 3) To pay a dividend and to buy back shares is not complicated stuff: if the founders thought it could be the best thing to do, they would be probably be paying dividends and buying back shares. Evidently, they think it is not yet that way. Just like Buffett doesn't pay dividends nor buys back shares. Cheers, Gio

+1 Cheers, Gio