giofranchi

http://www.bloomberg.com/news/2014-09-10/inversion-pioneer-ubben-delivers-17-as-quiet-activist.html Well, exactly! ;) Gio

Thank you! Very interesting. :) Gio

Then we should welcome such poor and misleading information! ;) Gio

Lol!! ;D ;D ;D Gio

Sure! No doubt about that! But what attracted me to the ALS business model in the first place is the following: A fast growing portfolio of royalties in some diversified necessities of life Three are the important things here: 1) fast 2) royalties 3) diversified necessities of life What I was asking hohi, and I ask you too, I ask Dazel, I ask SD, I ask zachmansell, and any other knowledgeable investors in ALS, is the following: I have no doubt about 2) and 3), my doubt instead is: shouldn't a project generator side of the business, that is successful in finding at least some profitable mines, be necessary, if we are also to enjoy 1)? Imo this is very important for the long-term, because, as I have said, a successful project generator is what truly sets ALS apart from any other investor in 2) + 3), that’s to say any other company which tries to manage a portfolio of royalties in the resources market. This is still not very clear to me, and I would appreciate any insight of yours. Gio

Well, I don’t know much about LINTA… But since I have first invested in Liberty Media, I have seen Malone taking many value enhancing initiatives, from which I have handsomely profited, and I hope I will see many more before he finally retires. For me it is that simple, and I don’t like too “esoteric” or elaborate reasonings when it comes to do business… I am sure that, when Malone finally retires, I will be able to find another good business, led by a good entrepreneur, and offered to me at a good price… I will most surely sell Liberty Media and buy that other business. Btw, why do I always say “good entrepreneur” instead of “good manager”? Because I know a lot of entrepreneurs and a lot of managers: looking at their different behaviors is almost like looking at the difference between lions in a zoo and lions in the wilderness. Imo when it comes to our financial success, we’d better keep company with “wild beasts”! ;) The difference I see between Malone and Maffei is the difference I see between a great entrepreneur and a great manager. Gio

So I was re-reading Buffett's 1991 Notre Dame speech and thought this part was interesting for this discussion: Yes! Interesting indeed! :) Thank you, Gio

I would also mention [amazonsearch]Building a small business that Warren Buffett would love[/amazonsearch] I think it is well written and easy to understand. Gio

Yes! Of course it does! :) Thank you, Gio

--Warren E. Buffett Like people on this board already know, I am not looking for a) a good business, or b) a good entrepreneur, or c) a good price… I am looking for a) and b) and c). I demand those three requisites together, otherwise I look somewhere else. In other words, I don’t like to run risks when the free cash of my firm is at stake! ;) What is then the only risk I run? Well, obviously the so-called “concentration risk”. The number of companies, that at any given time satisfy both a) and b) and c), might be very small indeed. If I am wrong about any single investment of mine, some pain will surely be felt… Needless to say, I prefer to run this “concentration risk” than to accept the risks of a competitive threat, of a mediocre manager, or of holding a business at too high a price. Gio

hohi, it is me who really appreciate what you have to say! And your insights about ALS are among the most useful to me! :) This is why I would like to know your opinion about one doubt of mine. Among all the things ItsAValueTrap has said, the following has grabbed my attention the most: ALS has never discovered a profitable mine. Never? In 18 years? Now, you know very well how intelligent I reckon the ALS business to be: a project generator + a manager of royalties can, at least in theory, do wonders. It is the combination of the two that imo sets ALS apart from any other investor in the resource space. After all, when royalties are for sale, anyone can buy them, right? But who can also enjoy the work of a proven project generator? Whose goal is to develop new royalties at very low costs? Only a handful of companies! Royalties are a very good business, but very good businesses are not always available at fair prices… Sometimes they might be, like the game changing acquisition ALS has recently closed, but most of the times the price they are selling for might be way too high… And then there is nothing else to do but wait… Not at ALS, though! Because, if ALS doesn’t find bargains to scoop up, it can go on creating them! Huge advantage, isn’t it? And one that could speed up the process of value creation very much! So you see how much relevance I attach to the project generator side of ALS business. And therefore my question: how do you reconcile a proven project generator, the word “proven”, with the fact they have not discovered a profitable mine yet? It is very fine when the idea behind a business is a truly intelligent one… But also execution matters! A lot! I know royalties are a percentage of sales, not a percentage of earnings… And that is great, and it is one of the reasons why royalties are such a good business. But, is it sustainable to keep generating royalties from mines that are not profitable? Will people go on paying royalties to us, if we don’t discover and give them mines that ultimately could be run at a profit? Besides my short term trading strategy, this is a doubt I have about ALS in the long run. Gio

Maybe… I think about it this way: I have investment 1 (ALS) and investment 2 (LMCA), both with the potential to unlock much value in the medium and long term. Investment 2, though, imo has greater potential to unlock value in the short term (due both to the spin-off event and the slump in the price of iron-ore). Instead of putting 50 in investment 1 and 50 in investment 2, at least for a few months I have decided to put 20 in investment 1 and 80 in investment 2. Then, either if I were right or wrong about investment 2 short term potential to unlock value, I will reestablish the proper balance between those two in my portfolio. You might call it trading… Others might simply refer to what I am doing as “position sizing”… By the way, let me ask you: do you have 25 in ALS.TO, 25 in ARG.TO, 25 in DMM.TO, and 25 in LON:STI? If it were so, I would be really surprised! If not, how do you choose the percentage of those investments of yours? Always thinking about the long term picture only? Short term “opportunism” never plays a role in it? Gio

By the way, I don’t follow much his other companies, but as far as Liberty Media is concerned, it is selling around NAV… Therefore, it doesn’t really seem to be much “Malone premium” in the share price today. Probably, it is because people think they are late to the Malone party by now… My hope is they are wrong: are 15 years too many? Perhaps… But also 10 years in his company might do great things for your financial well being, and 10 years from now he will be Buffett’s age. Buffett is still pretty at the top of his game, isn’t he? ;) Gio

Common sense by Seth Klarman http://www.viewfromtheblueridge.com/2014/09/12/common-sense/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+viewfromtheblueridge%2FJkgK+%28The+View+from+the+Blue+Ridge%29 Gio

Malone is 10 years younger than Buffett. Many think Buffett can be at the helm of Berkshire for at least 5 more years… Therefore I hope to keep company with Malone for another 15 years… If Malone is gone, so I am too… No matter what happens to the stock price then. Gio

SD, 3 things: 1) I sold ALS before the earnings release; 2) I am not “selling X to buy Y, to later sell Y & buy X”… Actually, I am only “selling X to buy Y”… Why? Because you should not forget that my firm’s 5-6 months worth of fcf is not negligible… And I will use that cash to buy back ALS… If the price stays this low, I will start at the end of this month to buy back ALS… though it will take me at least 6 months of fcf to get back near the amount of my investment in ALS a few days ago; 3) Do I plan to sell Liberty Media and Liberty Broadband in the future? Only if my thesis works out as I expect. Simply because, if it does, by then Liberty Media and Liberty Broadband would have grown to a disproportionate percentage of my firm’s portfolio. I see this as yet another luxury that owning some operating businesses might give you! ;) Gio

September 2014 Commentary Gio Sep2014Commentary_FINAL.pdf

I agree. My idea though is to run that risk at least for a few months. What do I have to lose? Let’s examine the worst case scenario I can foresee: a) Kami and/or JL get approved in the meantime; b) ALS trades at another price level. But: c) Though certainly not the gains I would have enjoyed with ASL, hopefully I have made some money with the Liberty Broadband spin-off; d) Even if ALS doubles, it would still have much room for growth; e) There will always be some uncertainty in the commodity business, and therefore some volatility too; f) With volatility I expect a new reasonable entry price will be available sooner or later; g) ALS then will only be a better and more proven royalty company. I can live with such a worst case scenario… what do you think? Gio

I think about ALS as a very long term investment candidate for my firm. And I have yet to find a public company, that I would like to hold for 2 or 3 decades, which doesn’t give chances to get back on board over and over again (albeit at different price levels, of course!). None that I know of. Zero. And I don’t see why ALS should prove to be the exception. I also look at Valeant as a sort of event driven investment right now. But I have also commented on the reason I still feel more comfortable with Liberty Media. Besides, the Liberty Media timeline is much clearer than Valeant’s (who knows when the acquisition of Allergan might actually come to pass?) Gio

With ALS 4 to 6 months are a long time… meaning that anything can still happen… I admit though that the first day of "my new strategy" has turned out to be very lucky indeed! ;D Gio

Yes, that’s my idea too… the problem I have with this kind of “trading strategies”, instead of simply buying and keeping a business I understand and like, is they almost never work out like I had thought!! ;) Gio

That’s exactly the risk I am accepting to run for at least some months… Gio

Two reasons: 1) Rights offering 2) I don't see why Liberty Broadband should drop: I would be very hard pressed to say which one will hold better assets, whether Liberty Media or Liberty Broadband... Gio

I have changed my mind… Not about the quality of ALS, of course… but about how I want to play the situation… Before the end of the year Liberty Media is going to spin-off Liberty Broadband, rights will be offered to purchase more shares of Liberty Broadband at a discount, probably with the right to oversubscribe. Just as I have participated to the fullest extent possible in the BH rights offering, the same I want to do with Liberty Media. Therefore, I have sold some ALS and bought more Liberty Media. My hope, of course, is Alderon doesn’t get financed before the end of the year, the price of iron-ore remains under pressure, and therefore the market volatility in ALS stock continues. Then, after the Liberty Broadband spin-off is over, and I have exercised all rights of mine plus oversubscription, hoping the market receives the spin-off well and reevaluates Liberty Broadband accordingly, I will start purchasing ALS again. Luckily at a bargain price still. Risks of this strategy: 1) Alderon gets financed in the next 3 months 2) ALS gets acquired, 3) No oversubscription right will be accorded to Liberty Broadband shareholders 4) Liberty Broadband won’t be reevaluated by the market I see the Liberty Broadband spin-off as an event driven investment, while I look at ALS as a business I want to hold for the very long term: I am putting aside for a short period of time a very long term investment for an event driven one. How does it sound? Very foolish? ??? Gio

Sorry! I hadn't checked, but David already started a thread about this book... ;) Gio