giofranchi

Let me ask a question: will you add to your short position even if FB's growth remains strong? Do you think it is so much overvalued? Cheers, Gio

Morningstar puts FV at $127. Which are the “out of reality” assumptions you think they are making? Of course if your judgment about Zuckerberg is so negative, valuation does not matter much. Cheers, Gio

How many users do you think FB will have when it reaches peak earnings? How many years from now? How large a market will VR be? Which new technologies will Zuckerberg invest in with $23 billion of cash and counting? How much will those new technologies grow? I clearly agree that no company grows faster than the market forever. But FB is a very young company, just like Zuckerberg is a very young founder/CEO. I don’t see the risk of FB becoming too bureaucratic and slow, nor the risk that Zuckerberg might grow complacent any time soon. And certainly he won’t retire for the foreseeable future. The only thing that might dampen FB’s growth is its sheer size. But size is always relative, and FB’s market is potentially huge. I know all this is still just qualitative and I am sorry I cannot come up with a number to be compared with your estimated peak EPS. Cheers, Gio

Of course FB valuation makes sense only if it keeps growing. Because of the huge network effects it enjoys (the larger the number of users, the more new users will be drawn in), I think its users might still grow quickly for some time. And what about all those other technologies Zuckerberg has bought? How much will they grow? And those $23 billion in cash? How successfully will Zuckerberg use them? Answer: I really don’t know. But I believe Zuckerberg has by now proven to be among the most prescient technology and business leaders in the world and will probably go on making smart moves for a very long time. This being said, the position I have opened is small, and here is what I intend to do: a) FB’s growth remains strong and its stock price keeps rising: I’ll keep buying small amounts when I have some cash. b) FB’s growth slows down materially: I’ll admit I was wrong, and sell out at a loss (which will be very small). c) FB’s growth remains strong and its stock price falls in a general market decline: I’ll add aggressively. Cheers, Gio

I have opened a very small position in FB. I still see lots of growth ahead: imo FB users will continue to grow and advertisers will keep growing even faster, also FB will probably start monetizing Messenger, WhatsApp, and Oculus Rift soon. It is a wonderful company run by Zuckerberg who has by now proven himself as an outstanding technology visionary and a great capital allocator too. Just like IBB, NKE, and SBUX, FB is another investment I’ll gladly make larger during any pullback. PS Andrew Left seems to be shorting the stock: http://seekingalpha.com/article/3994102-notable-analyst-right-short-facebook Last time I was long a stock Left was shorting it ended very badly… We’ll see! Cheers, Gio

I have sold some NKE and SBUX to open a new position in IBB. It has fallen more than 30% from its 52 Week High and it has tested more than once a level that is 10% below the current price. Furthermore, some large cap biotech cos offer good value at these prices. The sector as a whole I think will keep growing handsomely for the foreseeable future. NKE and SBUX were already relatively small positions (I like both cos, but I think there is a meaningful multiple contraction risk). Now of course NKE, SBUX, and IBB are even smaller. But I would gladly buy much more of the three should prices come down. Cheers, Gio

SBUX surely is selling for a high multiple. But that is different from being expensive. SBUX is expensive only if its growth decelerates meaningfully from what it has been during the last 5 years. Morningstar for instance believes SBUX is selling below IV... Evidently they think opportunities for growth in the next 5 years are still very compelling. I agree with what you say about averaging down, and in fact the position I have opened would let me buy twice the number of shares I own today without making SBUX too large an investment in my portfolio. Cheers, Gio

Tracking positions maybe? I do that sometimes just to be sure that I revisit and possibly buy a lot when I see the stock down 50% or some number. Although price alerts may work as well... Not only. If SBUX keeps growing for the next five years almost as fast as it has grown during the last five years (and I think that might very well be the case), five years from now it will probably sell for the same multiple it is selling for now. Of course in the meantime a correction in price might come and a better buying opportunity might materialize. But no one can be sure about that, right? Besides, if a correction truly happens, I have ample room to buy more. Cheers, Gio

Is there a thread about Starbucks? I couldn't find one. I have just opened a relatively small position in SBUX for almost the same reasons I have recently opened positions in NKE and DIS: I like management very much, I like the business very much... I don't like its price very much. Just like NKE and DIS I think SBUX has great opportunities for growth during the next 5-10 years (especially in emerging markets, but not only): its multiple is higher than both NKE's and DIS's, but it has grown faster recently and imo could go on doing so for a long time. Cheers, Gio

I like DIS for almost the same reasons I like NKE, and I have opened a relatively small position. DIS today is cheaper than NKE, with a forward P/E of 16. And during the last 10 years it has increased earnings at an even faster CAGR than NKE: 15%. Just like NKE, DIS is very little indebted. What's not to like? Cheers, Gio

Is there a thread about Nike? I couldn't find one. After an almost 20% decline, I have decided to open a relatively small position. Leaving room to average down if I am early. A 30% ROE is great, NKE has increased EPS at a CAGR of 13% during the last 10 years, and the stock return has been a very impressive 19% annual. Furthermore imo it has still much room to grow globally. Though I don't like its forward P/E of 22 very much, I also think it doesn't expose me to the risk of a steep multiple contraction. Therefore, I expect the return of an investment in NKE today to be not far from its growth in intrinsic value. Cheers, Gio

A decline of -9% last year (almost all due to the VRX position) is certainly weighing on my investment results during the last 5 years… On the contrary my results as an entrepreneur have been better than I had thought. The end result is I have compounded the equity of my company at slightly more than 15% annual during the last 5 years, which is my goal and essentially what I am interested in. Of course you might say this board is investment oriented and, as some have already “kindly” pointed out, my results as an entrepreneur shouldn’t even be mentioned… Maybe that reasoning is sound, but I on the contrary don’t think those two aspects of my professional career are so completely independent from one another. If I thought so, I would be probably investing in a S&P500 ETF and never devote any time following specific businesses. Cheers, Gio

But I really never intended to. I have only tried to say what I was doing and why. I use both Twitter and this board as means through which I can share ideas with people I would never have met otherwise. I manage my own businesses and my own money. I have no hidden goals. You might be right. But as I have said I don’t really care. Instead, what I care about is being involved in some businesses, thinking about their dynamics, and learning what works and what doesn’t. Being constantly aware of how things are evolving in the business world. Besides, I also think that Fairfax and the Malone family of businesses might differentiate somewhat my portfolio from the S&P500 (for better or for worse I cannot say… we’ll see). Cheers, Gio

Guys, I had lost this discussion until now. There is no doubt I have been very wrong with VRX (it was a large position), I have been wrong with AGN (it was a small position), while I had no particular view about Theranos except the article I had read and posted… Though I surely have learnt some lessons, basically I keep looking for great managers at the helm of great businesses that could be bought at fair enough prices. Over the long term I think this strategy could yield stock market returns that are in the range of 7%-9% annual, while my own businesses could on average generate 5%-6% of additional free cash. That is still my goal, but I am very aware of the fact I might never achieve it. Why do I choose to invest in specific businesses instead of simply investing in the S&P500? Because I enjoy the process of following real businesses and I believe that to understand their dynamics helps me very much in managing my own companies. At least, this has been my experience until now. Cheers, Gio

It is curious, I think, that Morningstar rates AGN as both a "Wide Moat" and a "Low Uncertainty" stock. Qualitatively putting AGN in the same league with let's say JNJ and PFE. But they also say AGN is cheaper than PFE and much cheaper than JNJ... I have no position and won't open one. Cheers, Gio

I have read what I could find about the St. Jude Medical deal and my first impression has been confirmed: St. Jude Medical is a wide moat business that I like, what I don’t like is the debt load ABT has accepted in order to acquire the company. It still makes me nervous. Therefore, I have decided to sell ABT, and to watch how the integration of St. Jude Medical goes from the sidelines. Meanwhile I have redeployed the proceeds in MKL. Cheers, Gio

Their insurance operations kept performing satisfactorily. Therefore, I wouldn't consider selling. Though I won't add either, unless the stock goes south in the next days/weeks. Cheers, Gio

A quarter in which both returns from equities and from equity hedges have been negative... Gains from their bonds portfolio couldn't offset those poor results. Cheers, Gio 2016-Q1-Press-Release-final.pdf

Ahah!! But don't worry! The "Gio effect" works in reverse for small positions: they will continue skyrocketing! ;) Cheers, Gio

At least ABT has a long track record of doing M&A successfully... Though I cannot say if this large acquisition has some merits or otherwise will cost shareholders money. Cheers, Gio

If what you say is right, I have very wrong ideas about Apple's products (I instead believe they are cheap if compared to the value delivered), and therefore I don't deserve to make any money with this investment of mine. We will see. Cheers, Gio

Abbott to Acquire St. Jude Medical http://www.prnewswire.com/news-releases/abbott-to-acquire-st-jude-medical-300259246.html Cheers, Gio

With neither a meaningful contraction nor expansion in the multiple it is selling for, I would expect an 8%-10% return annual. It is basically what I look for from my stock market investments in general. To get to my goal of 15% annual the remaining 5%-7% must be free cash my own businesses generate. At least in theory that's my "business plan". Cheers, Gio

Do you think the "China problem" is structural? If so, why? Thank you, Gio

Logan, Tim Cook has commented on the upgrade rate saying that for the iPhone 6s it has been slightly faster than for the iPhone 5s two years ago, although slower than it had been for the iPhone 6. Anyway, I would be very happy with modest growth in sales and earnings + a dividend that keeps increasing 10% each year + some buybacks. Cheers, Gio