Parsad

First, it would seem that Overstock's relationship with the fulfillment suppliers is absolutely key. Why do they stay loyal to Overstock? It seems as if it would be very easy to bolt to, say, Amazon and sell on its outlet site. The fact that they don't could be critical. I estimate that Overstock charges its suppliers 20-25% commissions. Amazon claims to charge only 12-15% for most merchandise categories. To Overstock's credit, that mark-up is akin to holding pricing power. Any insights into why this might exist? The product mix is different. Thus the 20-25% estimate you get is actually not correct. On the same merchandise, their commissions are similiar to Amazon's. You also have to factor in Overstock's customer service, and there may be undisclosed back-end deals with suppliers for loyalty, etc. This would be a very good question to ask on the Overstock webcasts. Second, are there dynamics unique to the surplus/overstock business that would prevent suppliers from selling through Amazon, Buy.com, etc.? At the very least, would they not want to hedge bets by selling on multiple sites? I confess I know very little about those industry dynamics. While Amazon provides a larger audience to market to, because there is so much product competition on there, suppliers may feel compelled to dispose of inventory through a smaller player where there is less similiar merchandise. Overstock's actual mark-ups are on par or less than their competitors, thus they run through inventory cycles a hell of a lot faster than their competitors. On affiliate merchandise, inventory turnover runs close to 40 times a year! That's insane! Amazon cannot touch that. I believe Amazon's turnover on affiliate merchandise is somewhere in the high 20's. Finally (and related to the second question), if Amazon really decided to chase down Overstock, why couldn't it just offer the same merchandise selection, promote it more heavily, and price it to match or barely beat Overstock? There seems to be an element of the sleeping giant at play here. If Overstock's growing success wakens Amazon, can the giant dig into its $26B chest of cash and obliterate Overstock at will? Overstock is undercutting Amazon, especially if you include the loyalty programs to repeat customers. Amazon cannot obliterate Overstock, without hurting it's own profitability. Think Sam's Club to Costco. Walmart could not kill Costco with their Sam's Club, because Costco's operations were just more efficient. Overstock will make more money on less revenue than Amazon did, as they are just run much leaner and have higher inventory turnover. Another example would be McLane's...running on such thin margins with high turnover. Amazon's best strategy is to just buy Overstock if they ever threaten the moat - just like Walmart should have done with Costco! Cheers!

ValueCarl, are you monetizing any part of your LVLT holdings right now? Had a pretty good run of late, and I know you bought quite a bit as the price fell in the last year or so. Hope you monetized a little! Cheers!

For those Canadian investors and shoppers interested, here is the initial list of Zellers stores being converted to Targets. Looking forward to it! Cheers! http://www.theglobeandmail.com/globe-investor/target-names-its-first-105-canadian-outlets/article2035807/

I've followed Liquidation World for nearly as long as I've followed Fairfax. Owned it briefly in 2002-2003 when I thought they may get their act together. Nope! This bungled mess of mis-management has finally been put out of its misery by Big Lots at 6 cents a share. Cheers and good riddance! http://www.theglobeandmail.com/globe-investor/big-lots-snaps-up-liquidation-world/article2036075/

Hi Folks, I talked to Fairfax and the best thing to do is call their switchboard number (416)367-4941 and ask for investor relations. They will do what they can as they have a limited supply of books. Cheers!

I just changed the first part of the title, so it's a little clearer. I think this is a good idea, as alot of Berkshire shareholders took pride in their ownership when Berkshire used to have their charitable donation program. Knowing how Fairfax and it's subsidiaries contribute, or even direct contributions to the community by it's employees, would just instill more pride and loyalty into the shareholder base. The booths this year, in particular Toronto's Hospital for Sick Kids, was a great idea. Cheers!

Microsoft got the idea of smart phone pretty early - in the nineties. They didn't perfect the user interface. They did the tablet in the late nineties/early 2000s which also failed. They were ahead of their time for these. You are correct. They also created a product called the WebTV a long time ago. I had one and it worked quite well actually, but way ahead of its time. Today, everything is going the way of WebTV. Perhaps, innovate was not the correct word. More like, they gave up too soon and let competitors latch onto good ideas while making them better. That woman was such a troll. Let me ask you... does Apple bundle a browser into every iPhone, or are you meant to download and install one separately? Seriously, that's what the whole damn thing was all about. Incredible. Yup! It was big then, but would be deemed ridiculous today. If you lobby enough, some politician will pick up the torch. The public always loves a villain. Look at Google today...everyone uses their "Don't be evil" philosophy against them. Soon enough, Apple will be the one everyone hates. Has anyone seen Southpark's spoof on Steve Jobs and the IPad recently? Cheers!

Ballmer may be a monkey man, but to say that he needs to be fired because the stock price is low is ludicrous. Is that really what Einhorn said? Now, if he's arguing that Ballmer has driven out forward thinking people like Ray Ozzie, okay, that may be fair (but not necessarily accurate) criticism. But to fire him solely to create a catalyst? I think it's a little of both. A similiar argument could be made against other CEO's...for example Jeff Amelt at GE. Both have grown their respective businesses, but in certain areas that business was floundering and slow to adapt. I think in Microsoft's case, they were so busy protecting the moat, that they missed some of the innovation that was going on around them. They were so late when it came to search, mobile and cloud. I think they've recognized that in the last couple of years, and have been working on the innovation side again. But this industry moves very quickly...not like missing out on Gatorade or Frito-Lay in Coca-cola's case. Cheers!

Instead of buying Skype, Microsoft could have bought Fairfax for $8.5B! ;D - Prem and Hamblin-Watsa could have allocated the capital - You have a great leader ready to step in for Ballmer - And all that free-cash going into insurance and investments While Prem won't sell, how many other companies would be better off just going to Fairfax, offer to buy them, and let them step in. Wouldn't that make sense for so many companies far bigger than Fairfax? The problem is that most people just don't want to admit that someone else could do a hell of a better job. Just food for thought. Cheers!

To not give full credit to Ballmer for earnings growth implies that any monkey can run this company. Which further confirms what a great investment MSFT is. You might be correct on both counts! ;D Cheers!

What is the alternative to Ballmer? I don't think there is an alternative. I'd be happiest if Bill Gates came back, but that isn't going to happen. You also can't replace Ballmer with some VP at Microsoft, as they just won't carry as much weight...literally! ;D There really is no obvious replacement for Ballmer. Cheers!

Not sure I agree, nor disagree with Einhorn on this. I think the company needs to do more, but not sure firing Ballmer is the answer. Cheers! http://blogs.barrons.com/techtraderdaily/2011/05/25/microsoft-fire-ballmer-says-einhorn/?mod=yahoobarrons

On a similar subject, about a year or so ago there were a lot of negative remarks made about a certain Mr. B and his business ethics, or lack thereof. Coincidently this site went down for a day or so at the same time. I also acquired a very bad virus that I am 99.9% sure came from this site at that exact same time as the site was experiencing difficulties. Now to be clear, I don't blame anyone here for that, but I have often wondered if the reason why the site crashed was ever determined? I mean, it didn't just crash for no reason and the timing was rather coincidental. The exact reason is not known. All that is known is that the site's database was hacked and a virus file was added. I subsequently had to delete the database and restore a back-up version. Cheers!

Hi Liberty, About a year ago, we switched to unlimited bandwidth and data, and since then the performance has been pretty good. A few months ago, I had my site host move the website onto their grid system, which made it even faster. You get the occasional slow loading day or period...usually it's your own internet service provider causing the slowdown. If they are doing work on their network, it can slow down access to certain pages. Once in a while, the website host also does network upgrades, etc on their system, so you could see slow-loading pages when they are doing that. Finally, it could also be related to your anti-virus software, in particular if you are running a firewall, or high-level monitoring or scanning of sites. Sometimes, updates to that software can also cause slowdowns. The best way to check is to turn off your firewall or anti-virus software for a few minutes, and see how the pages load when the software is not working. Cheers!

It's nuts here right now! People are honking horns, celebrating...reminds me alot of the Olympics. Awesome game! Glad my boys won. Sorry for the class guys in San Jose like Thornton and Marleau. Thornton played with a separated shoulder today. Now we wait for Boston or Tampa! I don't think either one can beat us over seven games. Cheers!

Very good blog response! I think it was very balanced. I think they paid fair value for Skype, but I like the acquisition. The thing that changed my mind altogether on buying MSFT was the deal with Nokia. I think that is big! It will strengthen the moat by allowing Windows Mobile to become more prevalent. It was what justified my belief in the company being around for another 10 years. With so much free cash flow, a rock-solid balance sheet, and the probability that I will recover all of my capital at a minimum in 10 years, I thought it was a worthy play using LEAPS. If it goes significantly cheaper, then we will move in and buy equity. Regardless, it is probably the largest LEAP position we've ever taken! Cheers!

Didn't Bigs and Linnartz get into a shouting match over the Denny's activist deal? Or am I remembering incorrectly? I also remember Linnartz giving a less than stellar interview about why you should vote for their side on the Denny's proxy.. I think it was Dennys, but I'm having a hard time remembering the details. I think you are confusing a number of things. - One, it was Jonathan Dash who was seeking a seat on the board of Denny's...the other investors were Oak Street Capital, who have successfully implemented change at Red Robin, after they lost the activist battle at Denny's. - Two, I don't believe Sardar, nor Western or Steak'n Shake, had a stake in Denny's. - Three, I've never heard of any shouting match between Sardar, Linnartz or Dash. Cheers!

Why does this have to keep happening to us? At this pace there just may be 20 yr olds in the coming years ahead who will be able to say the market was higher back when they were born. I think a number of things are causing this: - Technology is playing a huge role. The speed with information goes from one person to another...one investor to another...unprecedented. - Huge pools of both investor and speculative capital, including dark pools of capital...includes P/E, hedge funds, HFT, offshore accounts, pension plans, massive endowments, etc. - Expansive global entrepreneurship...perhaps a new era of sorts that could last a generation...BRICS, other Asian & South American countries, Eastern Europe, etc. These factors, and I'm sure a number of others, are compressing timeframes. When was the last time a company like Microsoft was displaced in less than a decade by a company like Google...then Google displaced by Apple...and Apple could soon be displaced by Facebook! This compression leads to volatility that may actually benefit the value investor...so it's not all bad! ;D Cheers!

Am I correct to assume all this? Would you agree that BRK is at least as much undervalued today as it was at 50-55K in 2000? Yes, except that Buffett is 10 years older...thus we are ten years closer to it being run without him. With Microsoft, the transition has already happened, and things for the most part are running fine. Cheers!

Sanjeev, do you happen to have your interview with John Linnartz archived somewhere? I stumbled upon the original thread, but the link doesn't seem functional anymore. Here is the interview. Cheers!

Doesn't look like Sardar is getting any better at keeping quality people around him. According to the 10-Q filing today, BH has sold Mustang Capital subsequent to the 2nd quarter. I found John Linnartz to also be a very straight-shooter. He went into that relationship to protect his family's long-term interest in Mustang Capital, and because he had faith in Sardar's leadership and ethics...not unlike myself! It's a shame when power and money get in the way of doing what's right. Cheers!

Forward PEs of less than 9 for MSFT and less than 7 for DELL and HPQ: isn't that absurd already? At what point do you consider them that severly undervalued? They are very undervalued already...more so in MSFT's case. Not quite Berkshire at 40K in February of 2000, but closer to Berkshire at $50-55K in 2000. You remember the rapid correction in Berkshire's price through November of that year! Like I said, if it goes down further, back up the truck. MSFT should be in the $35-45 range. Cheers!

I like these guys alot. Patrick is a straight-shooter too, and he like all of us, were on the wrong end of the Biglari ethics meter. Keep an eye on him. He's one of the good guys! Cheers!

If I may ask, how many positions do you typically hold? Usually 6-12, depending on what's available. The fewer positions we have, the more certainty there is in the ideas. Cheers!

How much of your overall portfolio would you feel comfortable allocating to a single sector like tech? Other than options, we don't buy any position that is less than 4-5% minimum. If it is a solid idea, then we can go all the way up to 25% in one idea, but that is very rare. In MSFT's case, our position is through in the money call options...nominal value is 3%, and notional value would be 20%...so we are pretty long! If the price gets hammered, then we will step in and buy equity. The reason being is that discounted prices can last years, but heavily discounted or absurd prices, usually don't last that long and the long-term survival of the business becomes less important. Markets will correct a significantly undervalued opportunity rather quickly, whereas moderately undervalued businesses can remain that way for years. This occurs because the severly undervalued opportunity tends to get recognized much faster by the investing community. Cheers!