Jurgis

Hate to throw a tangent out there, but what is (was) the deal with this card exactly? It runs through the AMEX network but seems otherwise owned/managed/underwritten by FIA/BofA...how do the economics of that card look to AMEX v. a typical AMEX card? Does anybody know? From what I've heard in the past, the cobranded cards have crappier economics for Amex than pure Amex cards. OTOH, the benefits are also provided by BofA (I think), so some of the costs are not Amex's. In short, there has been a claim that pure Amex cards have higher margins/benefits for Amex compared to non-Amex managed cobranded cards.

What rishig said. Sorry, I won't join the "for fun" part. I see how this question might be fun in terms of finding net-net'ers on this board. I am not one though. Take care and have fun. :)

Anecdotally: The only Amex card I have is Fidelity Amex that gives 2% cash back on everything. If (when) they replace that with non-Amex card, I might get no-annual-fee Amex (Blue or similar), but I won't use it much if at all. I'll mostly use whatever card gives 2% cash on everything (right now I think Citi is the only other option, Cap One has 1.5% on everything). Like TwoCitiesCapital says, upper tier high-annual-fee Amex cards might be attractive to some people, but it's not clear how many Costco cardholders will get Amex card and will use it.

I'm going to shout @oddballstocks for this one!!! ;D Seriously: why would you consider P/B the only "value orientation" measure? Only Graham net-net investors can call themselves value investors? My lowest P/B is 1.X in BRK. Edit: I realized that's not true. I have couple small micro/nano-cap-oddballstock'sy positions that likely have lower P/B than BRK. Edit2: To show how much I track P/B, it took me over hour to realize that I also have BAC that is < 1 P/B. So I guess I could be in this contest after all. ;) And then I remembered that have a number of "really cheap" E&Ps that trade way below book. Great value oriented companies. So sad that they are close to BK. ;) My highest is close to infinity with some Malone stocks. I probably should buy some MCO just to annoy P/B vigilantes. ;D

Nitpick correction: Rupert is a Chairman, but not CEO. Richemont had two co-CEOs, one of whom just retired ( https://www.richemont.com/press-centre/company-announcements.html?view=article&id=460 ). It does seem that Rupert is heavily involved in the company and possibly strategically leading it similar to Malone and Diller who are not CEOs either. :)

Jurgis, what your saying is so wrong I don't know where to begin. There is risk and unknowns for all of us. We have to act with very incomplete information. As a result we can say much of what happens is luck. Suppose you get AA in texas holdem. You go in knowing your 80% fav against any hand preflop. Going in is the right thing to do and no matter what happens in the hand. Nobody says oh man I should've known better that my AA would get sucked out. Same as investing. My hero Walter Schloss typically had a hundred cigar butts in his portfolio. I am sure every year one or two goes bankrupt. Does he go I had a good 15% year but damn it I make a mistake with so and so bankrupt company. I am going to change my strategy? His success as well as his flops are the result of his strategy, if it works to get 15% he should keep it up! Now someone like Pabrai, he fundmentally takes too many risks trying to hit them out of the ball park. If he is wise I would think he would tone it down a bit and be less risky. If so, then there you have it! Someone can learn to invest with more MOS. It's a simple thing MOS is an actionable goal. There are couple issues with what you are saying: 1. I still believe that reducing everything to MOS is not helpful. It seems you are saying that buying overpriced stock is bad because of MOS, buying possibly fraudulent stock is bad because of MOS, buying commodity business is bad because of MOS. Sure, you can do it, but these are three different things that you should analyze and deal with separately instead of just pushing them all into a single MOS pile. 2. Investing is not poker. Sure, once again you are right that investors can try to figure out probabilities. But like I said in point 1, reducing everything to MOS only hinders your calculation of probabilities. You are much better of looking at company and saying "well, this has X% chance to be a fraud" than saying "well, this has Y% chance to have MOS". In fact, if you only look at business numbers and run some kind of formula to calculate MOS, then you're more likely to miss the other parts like fraud, cyclicality, commoditization, business changes, etc. So once again, in general I agree that investors should consider MOS, but I disagree at piling every single mistake into "there was no MOS" pile. And instead of addressing concrete issues like fraud/commodities/etc. just saying "MOS is an actionable goal". Anyway, I think part of the issue with this discussion is that it's too abstract. We might agree on concrete situations (e.g. ZINC or VRX or whatever), but we likely look at these things differently on the abstract level. Good luck.

And what do you propose they should do? If they don't make concentrated bets, they pretty much have no chance of outperforming SP500. (Well, maybe Klarman outperforms without concentrated bets, but he's likely an exception). It might be easier for smaller investors. They might be able to outperform while still maintaining MOS. I think that's what Oddball suggests with his "niche egregiously undervalued investing". I'm still not sure that works for a lot of people. Not that concentrated bets on large caps work for a lot of people either. Calling common theme to mistakes "excessive risk-taking" might be correct, but I am not sure if it's helpful. Yes, MOS, right. "It was excessive risk taking, there was no MOS". Sure I can say this about every situation that went wrong, but is that really helpful? Isn't this like trying to fit a hammer to every screw, nail, joint and rope there is?

oddball: yeah, what you are saying makes sense to me. :) Couple comments: - Re "dud companies" - yeah, some "dud companies" are easy to avoid for me too and I wonder why others get into these traps. But then I buy something that's a dud and probably someone else says "oh, that was obvious dud, why would anyone buy it". :) - Holding too long. Yeah, that's one of the issues why "niche egregiously undervalued investing" does not work for me. With so-so mediocre companies, I have no good feeling when to hold, when to fold, etc. Somehow this seems easier with "great" companies, though perhaps I'm just deluding myself. ;) Another example of mistake of omission from some time ago. Bought UVIC - pretty OK shareholder-friendly microcap. Got Baker Street hedge fund manager on board. They hit a rough patch after I bought. Cut divvie. They had patent royalty agreement with B&L that was expiring in couple years with possible loss of a bunch of free money. I held couple years. They renegotiated the agreement, started investing into new product lines, but numbers were not budging up. Baker Street got out through a "sweetheart" deal - company bought their shares. I looked at the numbers, decided to sell too. A year or so after I sold, price went up 3x-4x and it was finally sold to Valeant (B&L really, but Valeant owned B&L by that time). It's easy to say that this was not a mistake that the process was right, but OTOH I still wonder if it really was. And this was a large position for me comparatively speaking. Also not-that-mediocre company, so I can't write this down completely to "niche egregiously undervalued investing" not working for me.

Good post oddball. I guess the only place where I disagree with you is that you make it sound easy to do the niche egregiously undervalued investing. I've tried this and it did not work for me. So I just buy BRK. Furthermore, even when I look at some people who are supposed to be good at niche egregiously undervalued investing, I don't see them being very successful either ( not implying you here - I don't know your returns ;) ). Still a good post and it might work for you and some other people. ;)

Swapped back from DISCK to DISCA, spread down to 1%. Swapped DISCA to DISCK, 4.8% spread.

The fact that people spend hundreds of hours evaluating financial statements of various companies (and even worse on macro or TA) and still don't outperform just blows me away. Perhaps they should just buy BRK. :P ::)

Are you guaranteeing a return over 8-9% with your picks? Edit: this discussion should be moved to BRK section though.

I called Fairfax and they told me that I just need to bring photo ID. No proxies, etc. I might also bring a print out of my brokerage statement or proxyvote vote confirmation. But they said that's not needed.

Biggest past mistake: not buying-and-holding BRK 20 years ago and playing golf since then instead of sitting on investment boards. 8) Biggest current mistake: not switching to index and playing golf... To be determined though. ;) Random list from memory: - Oil & gas recently. Still to be determined, but likely to be a mistake. One of the reasons: great returns on oil & gas when I bought 2008-2009. So assuming that 2014-2015 will be like 2008-2009 was "fighting the last war" mistake. - Chinese reverse mergers. I think I got out at a wash mostly but I had some big losses - and some big gains - which is one of the reasons for big losses. - I mostly did not "blindly follow super investors into various situations". Most of the recent "follow super investors " ideas on CoBF made no sense to me, so I did not buy. However, instead I bought a bunch of overvalued super investor companies: PSH, FRMO. Might still work out, but looks pretty bad so far. - General issue with a lot of my investments: not enough DD and not enough second level insight. (See comment about switching to index). Part of the excuse for these: yeah, things were way easier in 1990's/2000's. Or at least it seemed that way. ;) - BTW, mistakes of omission always seem to be great companies that I bought and sold way too early. But I guess that's also a bias of selective memory: you don't remember much so-so companies where you sold and missed maybe 20-30% of gain - even though if you miss these couple times a year, your return is 20-30% lower. But you always remember that you bought GOOG, AAPL in 200Y and missed on the X-bagger. Even though both might be equally bad to your long term returns. - To emphasize the above: unless you are very concentrated and/or hold-forever, your returns may die not from big mistakes (i.e. you expect company to do well and it BKs), but from paper cuts where you miss the 20-30% extra in so so positions. This is especially the case for Graham/net-net investors - possibly not many people on this board, but I see it elsewhere where people still do shorter term mediocre company investing. - It's tough to remember those so-so company shorter-term investment 20-30% mistakes... Even looking at past trades it's tough to evaluate if you really missed those extra returns or if you sold at the right price/moment... - OK, apart from GOOG, AAPL, BRK, the big mistake of both omission and commission: bought GILD, then GILD acquired HepC startup for X billion - I decided that this was a waste of shareholders' money and promptly sold GILD. Result: missing that 4x-5x bagger.

Great talk. Great guy. Now I am a bit in a bind though. I like the CEO. I don't like the business. :) The future for superluxury is possibly not that great. And I'd rather invest in Apple that caters to somewhat-snobs than Richemont that caters to super-snobs. And even though Johann believes that super-snobs are backward-looking in buying hand-made unique (numbered) watches and jewelry, I am not so sure. At some point they may go with smartwatch even if it's not unique and hand crafted just because it offers more functionality than hand-made super luxury watches. And the argument that superluxury item should be "forever" and not thrown away in two years... yeah, I get it... and yet, I still think it's a flawed argument. Perhaps because I don't value nostalgia. Smart jewelry is not on horizon yet, so Cartier can hold on for much longer. Still the reliance on taste conservativism of new snob elite is possibly not good. Johann probably is aware of this though. But then I've never been a superluxury admirer. I'm a geek and I value functionality rather than the brand/rarity/uniqueness/artistry. I can appreciate high art, but that's a bit different. Anyway, thanks for posting. If I decide to put money in superluxury, Johann Rupert would be my choice for CEO. ;)

The article is a summary of his talk here (which I highly recommend): Not a bad talk, but you may have posted a link to the wrong talk. The talk is from 2010 and I don't think it's related to 2015 Bloomberg article. :)

That's a fair observation. However, it seems that if you want to outperform indexes, it's very hard to do so with diversified portfolios with 3% positions. There are other arguments for concentrated portfolios too including the famous "why would you buy your 25th best idea instead of the best idea". If I look to invest for outperformance, I'm mostly looking at managers who hold concentrated portfolios and not someone who's top positions are 2-4%. But, yes, they probably should have rebalanced and sold some when VRX ran up. Sequoia especially should have lowered their VRX position perhaps to 10% or so and not >20% that it was at the top. OTOH, VRX was the one position giving them outperformance (and I was criticized when I pointed that out in the past), so that probably clouded their judgment with expectations of continued outperformance. ValueAct did the best by selling some last year. Ackman might still be criticized most since he probably had highest cost of VRX among the bulls.

Yes, agreed, that's what I liked about Ackman's positions. I can call them a bit overpriced but mostly they are quality businesses. (In as sense it's like muscleman asking about Mecham - yeah, some of his buys are not cheap, but they look like growth/quality businesses). Yes, agreed with that too. Although others perhaps did not react by moving to options - so in a way Ackman's reaction might be worse than others'. But if I invested money with others who bought VRX, I'd be questioning myself about them too.

Got Fairfax voting email from Fido today. Also Fairfax posted proxy circular at http://www.fairfax.ca/Investors/financial-reports-and-filings/financial-reports-and-filings/2015/default.aspx . However, neither of them mention anything about what I need to bring to attend the meeting. So gonna call Fairfax, probably Monday.

If you believe he has skill to long-term outperform, then the answer to the "when" question is pretty much anytime. Of course, it's kind of tautology, since by the very definition of long-term outperformance you'd outperform regardless of the time you started. You'd just outperform a bit more if you buy now after the huge underperformance. If you don't believe he has skill to long-term outperform, it's not worth buying at all, since with 1.5%/20% headwind, you'd never win. Well, you might if he short-term outperforms, but that's likely just a gamble. If you're not sure if he has skill to long-term outperform, well, that's a toughie. You could try to see how things work out for next X months or years. But how will you know if that's skill or luck? Overall, this is the tough decision for me regarding any investment manager. Most successful investment managers are great salesmen and they always have stories of why they will outperform. Looking at their track records is backward looking and does not guarantee future gains. Looking at their current positions means evaluating them based on your biases towards these positions. I still don't know if it's better when the investment manager holds positions I like (well if I like them, I could just buy them myself instead of paying the manager; also perhaps the manager has the same bad biases that I have) or when they hold positions I don't like (if I don't like them, why should I like the manager; otoh, if I don't like them, perhaps the manager has unique view that I don't)... Going back to Ackman and PSH. Here are the things about Ackman & PSH: 1. Valeant position. I don't like it less at $30 compared to the higher prices though. So neutral perhaps. 2. Switching to options to increase VRX position, switching to options in Mondelez to preserve position and get cash. IMO people don't outperform long term with option bets except perhaps where long term options are Black-Scholes mispriced. So negative. 3. HLF short. This seems to have become ideological and personal. I'd rather this wasn't a public stand and Ackman could get out of it without "losing face". Right now it's a crappy position which he probably won't exit. So negative. 4. Other positions. I own none of them personally apart from small position in Fannie/Freddie prefs. I have looked at most of what he owns, since he runs concentrated portfolio. I don't think his positions are very cheap and attractive, but I also don't think they are bad. Some of them may do well long term. Some of them might be even cheap - I might just be undervaluing them. So slightly positive (could be a big positive if you believe Ackman's selection here). So overall, I'd say I'm slightly to mid negative. I might dump my PSH position at a loss. I am still trying to decide if I like Ackman long term. I liked him and his positions more than Einhorn (GLRE) and Loeb (TPRE), which I dumped last year. It appears that my choice was wrong so far. Gotta think about it some more. BTW, I wouldn't look it the way you do "What uncertainties do we want to see removed". If you won't trust Ackman to handle current situation, why would you trust him after it passes (e.g. VRX "uncertainty" resolves)? He could get into similar "uncertainty" in the future again, no?

What do you guys think about CVC?

I looked up my past correspondence and it seems that in 2015 the proxy came around this time (March 16-18). So I guess I'll wait a bit longer to see if/when Fido sends it to me and then call Fairfax to ask if I need anything else. Edit: it's gonna be online proxy note anyway, but it might contain everything I need. I'll keep you guys posted. Let me know if you get some info too. ;)

What concerns me is the position conversions to options. IMHO, while the positions may or may not be attractive, with options he can continue to blow up just because of timing. In other words, I am not sure if he or much anyone else can show great results by doing options. (Sorry you option guys here ;) ).

Yeah, it's not super easy (anymore?) There was a number of spinoffs that cratered last year. I made money on some, sold some at a wash, most dropped more after I exited. It's still possibly a good place to look. Possibly even at the fallen angels, i.e. the ones that cratered. DNOW (oil/gas related though), HYH, HY (oh, actually it recovered and I guess it's no longer a spinoff at this point). OTOH, I am not an expert in this area, currently I mostly buy owner operators with good management (with some exceptions haha). Not that many spinoffs in that land apart from Malone constellation.

Two words: platform value That was very good! ROFLMAO.