Parsad

I should *hope* that someone doing this as a job rather than a hobby can spend more time on the research than I can. Yes, that helps and is an advantage! Granted, I work pretty much 25-30 hours a week for Quantum as well to help pay the bills, so I probably don't have that much more time than most...it's just that I usually read till 1-2am and then back at it again at 6-7am...every day, of every week, in every year...even in the washroom! ;D Probably too much information. Cheers!

Any study of Graham would conclude that he would not be buying a stocks at the moment -- the margin of safety is just not big enough. Schloss "liked to buy stocks below book value" -- do you know how low the market would have to go in order for quality companies to be trading below book value. The margin of safety currently offered by Mr. Maket is not near enough for Schloss either. We own three stocks under book. In fact, our largest holding is a small-cap company that is relatively well-known, yet not a single person on this board, or its predecessor, has ever talked about it from my recollection. It trades at about 8.5 times earnings and less than 0.85 of book...and book is undervalued! Cash flows are consistent, little debt and it's been around a long time. Yet not a single person has ever talked about this company. Schloss would be buying stocks today...but that's because he would be doing more legwork and research than everyone on here. Cheers!

Hi Rick, Not to scare you off the investment, but I would be careful. Again many assumptions being made here and I am going to stop posting about APP I was merely surprised at the relatively unsophisticated level of rebuttals that really have nothing to do with past performance or the issues at hand. I would strongly disagree with you here. I think it's probably more of function of opportunity cost. What benefit is there in responding to a post where they may not have interest in the stock. This board on a percentage basis, probably has better ideas than any other value investing board out there I know of. I would say we probably have a better batting average than even the Value Investor's Club. Tariq, I went and took a look at this after watching the posts and I have all the same issues as you. - They will be in default of their covenants by September 30th. - They have only about $22M available under their revolving line of credit and they blew through $29M in the 2nd Q. - They've yet to file their 2nd Q 10-Q, and they've struggled numerous times in the past three years to get their reporting right. - Deloitte's resigned, while AAP rehired the same auditors they fired a year and a half ago. - The related party transactions are a bit of "oh-oh" notation in the financials...especially having his father in it. - Burkle's investment is miniscule when compared to his total assets under management. A few months ago, D3 walked away from 33% ownership of Mexican Restaurants (CASA) and took a huge loss on their investment. It too was a small portion of their total assets under management, and they are also known for being somewhat active with some of their positions. BOA & Lion Capital are in the driver's seat. They may let these guys default, forcing them into Chapter 11, and then restructure the whole thing with them getting the controlling equity stake...most likely scenario here. Charney's 53% stake would probably be reduced to something like 5% of the new recapitalized company, so that would at least keep him working, while shareholders would have to fight to retain any portion of the company. Now getting back to the point I made in an earlier post regarding the reason for Deloitte's resignation. You can have a minor disagreement about how to treat something on the accounting statement, and that would force the auditor to resign if the company does not agree with the auditor's assessment. But according to the MD&A in the 1st Q 10-Q and today's press release, there seems to be several issues with the controls implemented by AAP. These include the treatment of inventory costing, deferred tax assets and leasehold improvements. What else this entails, I'm not sure. But their previous accounting firm, the one they just rehired after Deloitte's resignation, also stated that the company had various internal control issues. So we still have no idea the depth of the problem, except that they've been subpoenaed and the company keeps saying that they think their unaudited financial reports are accurate! Yeah, ok! ;D If you are investing in this company, it's a speculative bet, since you don't know if the numbers are legitimate. You could end up being ok and make a killing, or you could get wiped out...I don't know. But I'm in the business of not losing capital, so it's not something I would buy. Best of luck. Cheers!

Ironically, one guy who did it completely right is John Linnartz and the guys from Farnam Street with OI Corp. John sold 51% of Mustang Capital to Western Sizzlin, and at the time he was accumulating a large position in OICO. Today the company is humming along with good management, John and Farnam's proxy acting as Co-Chairmen, and they've got a good team of executives running the company as well as on the board of directors. No bad blood, no notorious reputation...just did it right and for the good of his partners and OICO's shareholders. Cheers!

Dine Out's info is primarily in Chanticleer's 10-Q's and 10-K. It's just the holding company for Shaw Ppty's and Chanticleer's interest in the South African Hooter's restaurants, but trades on the Frankfurt exchange. You can go to Yahoo.com's finance site and get a quote on it. Like I said, I have no idea who would buy Dine Out's shares at current prices, but there are people out there buying, and it would give Chanticleer's interest alone a paper valuation of over $5M. Cheers!

Don't know. I think HOA has more than enough cash flow to pay back the $5M, but they may want to extend it out again. We'll have to wait and see. Cheers!

Yup, looks like the Hooters Inc deal is dead. No news anywhere on what is happening with HOA. There were media articles discussing that HOA would have to be sold or seek an equity partner, but nothing yet. Chanticleer still has the right of first refusal in any HOA deal. Also, the SA restaurants are held within the Dine Out company trading on the Frankfurt exchange. The value of the shares owned by Chanticleer would worth somewhere around $4M. Don't know who is paying those prices for those shares, but they are getting it, as it looks like they are selling small portions...in total 6% sold according to the latest 10-Q. Cheers!

I like that one! I think that's a keeper. Cheers!

You would be taking a significant risk investing in American Apparel. The investments success would be predicated on a few crucial outcomes: 1) The financials aren't worse than just a restatement...no material deficiencies, fraud, etc. 2) Somebody is going to step in and inject capital 3) That the brand would retain its cache with consumers as the recovery progresses - I suspect #2 will happen, but there is no guarantee. - #3 is a finicky aspect of fashion. Brands come and go, and maybe AA has will soon wear out its desireability. - #1 is a serious concern if Deloittes completely bailed. Cheers!

I have another quote that will become famous one day: "When your next door neighbour becomes your stock market analyst or your economist, then you probably should move." - Sanjeev Parsad, 2010 Cheers! ;D

I'm guessing most of you still haven't seen the Schloss presentation. ;D Cheers!

Walter Schloss, one of the greatest investors in history, spoke at the Richard Ivey School of Business. I would recommend that investors and investment managers alike read his comments. There seems to be a very large contingency of investors focusing on macroeconomic issues on the board these days, and I thought this would be a terrific refresher on the core points of Ben Graham's theories of intelligent investing. There is also the full audio of the presentation available at the Ben Graham Resource Center. Cheers! http://www.schloss-value-investing.com/2010/07/walter-schloss-presentation-at-the-benjamin-graham-center-for-value-investing/#more-70

I wouldn't be so certain. The investment approach sounds like one based on the assumption that a greater fool will always be willing and able to buy, which is fine until the music stops. Problem is that no one knows when the music stops and those left without a seat get destroyed. Nothing to do with greater fool theory, but it does have to do with fools following herd mentality. Further, remember that when Buffett was delivering outsized returns early in his career, he was buying boatloads of companies at 3-7x earnings (with the earnings growing) -- the broader public had truly given up on the stock market. We are nowhere this type of environment, although I suspect we'll see something similar in the future. Buffett has paid significantly larger P/E's for various businesses over the years, including when he ran the Buffett Partnership. Think See's Candies, the rest of GEICO, Coca-Cola, Dairy Queen, etc. I'm not saying to overpay for assets, but that investors should buy the best investment relative to its risk profile...sometimes that is stocks, sometimes bonds, and sometimes that means remaining in cash. At present, my point is that large-cap, high-quality stocks offer relatively better value than fixed income instruments. Now, let's make something clear...that doesn't mean every large-cap stock is cheap or a great deal, but if you compare quality large-cap stocks to various subsections of the investment market, they are relatively cheap. Cheers!

I believe Dash lost primarily due to his previous relationship with Steak'n Shake, which was used to dissuade shareholder opinion by the existing board. Thus, doing Biglari-style takeovers may not be as desireable as we may perceive. Cheers!

Carl, That is not Charlie Munger, I assure you. Cheers!

Article discusses Berkshire, Soros', Paulsen's and Ackman's holdings at quarter end. Cheers! http://online.wsj.com/article/SB10001424052748704868604575433871575927394.html?mod=WSJ_hpp_LEFTWhatsNewsCollection

You might get a "trade" if capital move from treasuries to large cap stocks (but who can predict with any certainty). It's a certainty. Institutions will have to move into these assets because their yields will diminish over the next year or two. How is a property casualty company or life insurer going to be profitable in such a low-yield environment? Underwriting? You can have a few companies with better standards surviving on their underwriting culture, but the broad industry does not behave that way. They will have to take more risk and seek higher income investments. What about endowment funds and their constituent expenses? Hedge funds with their operating expenses? Baby boomers entering retirement? All of these institutions and investors will have to move their cash hoard into higher yielding investments. Taking the perspective of Buffet and assuming I buy IBM (or a basket of large caps) with the intention of holding forever, the current economic return wouldn't be much better than 7% -- that's fine for Berkshire Hathaway but I'd rather sit on my cash and wait for a much better risk/return and ideally come across a lollapalooza, in the words of Charlie Munger. 7% would be a hell of a lot better than 10-year treasuries yielding 2.8% or 30-year treasuries yielding 3.8%. 7% would allow any insurer to be completely profitable. under this scenario, the earnings don't materialize as currently anticipated and stocks in fact are not cheap on any basis and decline Corporations in general are operating at terrific levels of efficiency. Even if we run into another period of decreased consumption like we saw in late 2008 and early 2009, corporations don't have the same level of overhead. You may see a slowdown, but businesses are adapting better, and they have much better balance sheets. Unemployment went from 5% to 10% between 2006 and 2009, and business is slower today than two-three years ago, yet corporations are generating profits nearly on par or better than 2006 and 2007. Cheers!

Prem fixed his salary at $600K per year many years ago, not unlike Buffett's fixed salary. Several years ago, Prem decided to institute a small dividend, so that both he and the many executives at Fairfax, could receive an annual salary based on the economic growth of the business without having to ever sell their shares. The compensation structure would also be equitable for every shareholder as well. It's not the most tax-efficient structure, but it is equitable and will increase their income by modest amounts over time. While Prem lives a frugal life and has the resources outside of Fairfax to meet all his living needs, some of the executives were probably not quite in the same position. This was his way of making sure they retained their shares instead of selling any of them. Cheers!

Most likely. Cheers!

I think if the purchase was under $400M, then it was probably Lou Simpson, as GEICO has far less capital. Fiserv purchase was most likely a Simpson purchase. Cheers!

I'm guessing Berkshire's stake in JNJ is probably significantly larger than the 13F is showing. We were buying alot more towards the middle of July when the bottom fell out over a few days, and I would think they must have added at least some more shares during the same time if they were buying at higher prices back in June. Cheers!

Hi Bronco, Yes, all three are great businesses. For us, it's always about what is the alternative and the opportunity costs involved. Do we buy low-yielding fixed income instruments, keep zero-yield cash, or buy quality businesses with dividends greater than the best yields of high quality corporate bonds? In this case, the choice was somewhat obvious. It doesn't mean the price won't fluctuate and it doesn't mean we'll hold these stocks for a long period of time. We will hold them until other investments offer a higher potential return relative to their inherent risk profile or investors bid them back up closer to fair value. That's it. Whether Prem or Warren buys, or the world is falling apart won't matter. We have to go by what we see and have available to us, and where there is a mispricing of risk. Cheers!

While I agree with you for the most part, I am getting skeptical of these stocks. They keep salivating about them on CNBC. Many many hedge funds have loaded up into these stocks as part of their "de-risking". And are they that far from fair value? Southeastern has a very good chart in their last quarterly letter of the spreads between Dow stock yields at market lows and high quality corporate bond yields. The spread has widened considerably and probably alot further than listed in the chart, as corporate yields continue to shrink. While this may continue for some time, the gap is very large. I have to disagree with the comment about CNBC...I don't think that may people are actually talking about this, since CNBC and everyone else keeps talking about Japan and deflation. I've only read a handful of people who agree with the disparity in large-cap quality...Hawkins, Grantham, Miller and a couple of others. Some people are starting to catch on, but the general market is still sitting on treasuries. Cheers!

Well, I'm glad to see Buffett added a shitload of Johnson & Johnson...so did we! Cheers!

This guy is the golden child. Everything is pointing to him running the operations side and he's got the ability and demeanor to do it. Cheers!