Liberty

They sell below cost just like Amazon is a charity funded by shareholders, right? People have such a hard time understanding that some expenses (both capex and through the income statement) are maintenance and others are growth. I don't know if it's a good business and I'm not investing in it, but to think that a company that tripled revenue in the past 3 years, has invested billions in a massive battery factory, international expansion, global supercharger network, developing multiple models (S, X, 3, semi, probably a pickup and a smaller SUV based on the 3), is spending tons on self-driving software and hiring engineers quickly, etc, isn't spending a lot more on growth than what is required for maintenance isn't thinking things through. What if they had released Model S in 2012, then waiting until this year for Model X and only released Model 3 in 2022 (negating the need to build the Gigafactory so early)? What if they had been a lot slower with the Supercharger network, Autopilot, etc? You don't think their aggregate profitability would look a lot different? Of course, their growth would also look a lot different, and they'd be pushing the industry forward a lot more slowly... It's a tradeoff that might or might not pay off, but to just look at the aggregate numbers and think this is directly comparable to GM's very different growth/reinvestment profile is missing the point.

Here's the Reed Hastings letter to Tilson. Worth reading: https://seekingalpha.com/article/242653-netflix-ceo-reed-hastings-responds-to-whitney-tilson-cover-your-short-position-now

https://www.cnbc.com/2017/10/06/amazon-considering-selling-online-prescriptions-decision-coming-soon.html

All right, I've had enough. 100 pages in, I'm moving on to a different book. Too bad, it's an interesting topic, but I'm finding the book to have too many problems and to be generally weak. You get most of the goodies that Galloway has to say if you listen to one of his podcast appearances.

He's the worst. He's got the opportunity to ask the best investor of all time questions and all he can do is talk about himself, make bad dad jokes, or try to score political points. Buffett is incredibly patient and gracious with him. If I was Buffett, I'd long ago have asked to not have him be part of interviews as a condition for my being interviewed, not for me, but to avoid wasting the time of the millions of viewers.

Liberty Global Provides Update on the Impact of Hurricanes in the Caribbean http://www.businesswire.com/news/home/20171006005214/en/Liberty-Global-Update-Impact-Hurricanes-Caribbean

http://www.yetanothervalueblog.com/2017/10/cord-cutting-and-other-cable-risks-chtr.html

Farther in the Amazon chapter, and it gets both better and worse. Some of the good stuff might be a bid redundant if you've read Brad Stone's book, though, and less in-depth. Bad stuff is I've already found two things that I think might be factual errors: Makes me wonder about the fact-checking on other things that I'm less familiar with...

If what happened in the mid-2000s was a commodity bubble (combined with the generational dislocation of 2008-2009), then ALS played it well, but yeah, expecting a replay is just speculation, not investing.

very interesting exercise, and probably something that I suffer from too. Though I've not explicitly done the work, I've been mentally keeping track of things and it certainly feels like I keep losers too long and have sold winners too early in the past. I'm trying to do better on that front, but I think I should probably find a more systematic approach to dealing with the problem... Thanks for bringing it up. Cheers.

https://www.outlookbusiness.com/specials/masterspeak_2017/companies-that-maximise-per-share-value-even-if-they-dont-grow-will-be-great-bets-3783 H/T @June_street

In the mining world, the future's always rosy. I guess I've just too rarely seen mining projections materialize fully, and like Mark Twain's cat, I'm now worried even about cold stoves... This reminds me, I've kept printouts of the early Sandstorm Metals & Energy presentations. Good stuff.

Good to know that they've diversified even more. As I said, I haven't been paying as much attention in recent years since I don't invest in commodities anymore. One thing that I keep wondering about is, Did we enter a commodity depression/downturn a few years ago, or was the preceding period a bubble and we're now back to a more normalized level (that everybody feels is low because they anchored to the higher level), and now a real downturn would take us even lower than this level? Predicting this is way above my pay grade, but it would be another worry I'd have in this business. To think "we fell so much, can only go up" while we're actually plateauing at a more sustainable level and from here moves can be up or down, but not sustainably back to the anchor point. Oh well ¯\_(ツ)_/¯

Don't be sour. If I wasn't in favor of scrutiny, I wouldn't be sharing my skeptical take in this lovefest. And if I had been holding SHW during that 6-year period, I'd certainly be asking some of the same questions I'm asking now. Are they creating value? What's the IV and has it been growing? How is capital being deployed and what's the ROIC? Is this a good industry to be in and what are the long-term prospects? Are the value drivers knowable and predictable, or am I gambling? Etc.

Yeah, there's always more deals. There's hundreds of pages in this thread of people scrutinizing every little development, for all the good it did them so far. Reminds me a bit of SHLD (though less lately), when people where so certain that the value was right there and it was about to come out any day now. As I said, I hope it all starts working better and that shareholders get good CAGRs in the end. I was a shareholder for years, so I'm predisposed to like the company. I'm just skeptical it'll suddenly become easier than it was in the past (you have to look at base rates), or that even if it goes well, you can wake up any morning to a huge downturn in commodities and see royalties squeezed, possibly for years and years (bulls will say "but that's when they'll deploy capital", but I've been a bit underwhelmed by what they did in the last huge commodity downturn).

And here's the Andrew Left short report that made it tank in the past few days: http://www.citronresearch.com/citron-exposes-the-dark-side-of-shopify/

I'm talking about the deals that I paid attention to back when I was a shareholder, Kami/Julienne lake, which were supposed to be worth multiples of the market cap by now. I certainly hope it'll turn out how you expect it to.

Someone will have to sell it someday, and you can't be certain you won't have to sell. You can't even be certain management won't sell the business to someone else or get into trouble in the coming years/decades or get hostile bids at low prices. But all I meant is that it's nice to talk about the long-term, but once in a while you have to see if things are actually working. You can't always kick the can down the road and say "oh well, the past 10+ years haven't done so well, but I'm holding forever so it doesn't matter". Your return on invested capital and opportunity cost matters, unless you don't care about making money. Yeah, the 0.98% dividend should increase once the debt is paid down, a few years after they bought those declining assets. And then if they want to materially increase cashflows, they have to invest in new things, either with more debt or using cash from that current cashflow, or some of their options have to materialize after years of development and permits and capex, all depending on favorable commodity prices (which could kill any project if they swing the wrong way), dealing with outside mine developers who are mostly promoters that pay themselves millions and rarely get a project through the finish line.. Seems very uncertain and difficult. Or you could've bought SHW at 15 P/E a few years ago and watched it grow at 20-30% ROIC and 50%+ ROE. And if dividends is what you're after, look at this: To each their own, but to me ALS is in the too-hard pile. I'm not even saying it won't do well. I hope it will. I'm just saying it's a tougher business than what I thought it was when I first learned about the model.

I don't think that really matters. All that matters is the opportunity cost vs your next best opportunity. You could also hold SPY forever, or BRK or MKL, or whatever else you like. The question is, will ALS do better or worse than your other alternatives at creating value over that time? I don't think this is what matters. If the stock is flat because there's been little value creation, or because it was overvalued 10 years ago and now the valuation has compressed to a fairer level, or because the macro picture wasn't sustainable at the time, it could be more expensive than a stock that has tripled over the past 10 years but that has also more than tripled IV during that time. I really can't know how these deals will do, which is why I can't invest. I don't think management can even know, because it'll depend on many factors out of their control. People said the same things about the deals 6 years ago and they were very convincing at the time, you can go back and re-read the thread. Maybe they'll go well, maybe they won't. But the longer it takes for it to get going, the lower your IRR... ¯\_(ツ)_/¯

https://www.bloomberg.com/news/articles/2017-10-05/amazon-is-said-to-test-own-delivery-service-to-rival-fedex-ups Amazon Is Testing Its Own Delivery Service to Rival FedEx and UPS

How do you value it? What metrics do you use and what is your estimate of IV? What IRRs do you think they've been getting on their investments?

I don't have a blog. I'm well aware of all the value investor sayings about how stock price doesn't matter and all that matters is IV and hold forever and all that. But you still have to buy at some point and sell at some point, and once in a while you should check your theory against reality to make sure you aren't fooling yourself, so the stock price does matter. And the market isn't entirely inefficient for companies that are heavily discussed online and that are being invested in by Fairfax and such, so if after 10+ years the stock is flat, chances are that IV isn't compounding at 30%/year underneath the surface (and book value/share hasn't compounded, and while cashflows are up, they traded a big chunk of cash and equity for those declining assets that aren't exactly shooting the lights out so far). My comments were about all that management has been doing in the past 10 year (and the hundreds of pages of this thread about it), yet they have relatively little to show for it. They're still dependent on all kinds of things that are out of their control, like partner capex, commodity prices, regulators, macro-economic factors, etc. That's why I decided it wasn't a business for me. I prefer it when management has more control over its destiny. I mean, maybe the cycle will turn and projects will get developed and ALS will go crazy next year, I really wish that for shareholders. I just think the commodity world is a bit too roll-of-the-dice and that the actual cashflows of the business aren't that impressive, so too much of the value is assigned to non-cash-flowing assets that have a wide probability distribution of outcomes.

What's the "long run", though? Because some ALS investors from 10+ years ago are basically flat. And that's not mentioning those who bought on the refinery excitement and are still deep underwater. Meanwhile, many other good businesses have compounded well and doubled or tripled or more since. So to get a good relative performance going forward, ALS would need to start raking up some serious CAGR to even just catch up. Looking at my notes, I first bought ALS in April 2011, and I sold it all on sept 10, 2014. But it's worse than even that seems because I moved in and out a bit as I needed capital for other things or new developments made me move capital back in, so I did worse than if I had just held for the period (which wouldn't have been that great to begin with -- book value per share was actually higher in 2011, according to Morningstar, though I know that's not the best measure). If I had held since then, I'd be 6+ years in with little to show for it. I'm just an ex-shareholder who keeps an eye on it once in a while because, like everyone here, I was attracted by the smarts of the management and the royalty model. But at some point, I decided that the model wasn't nearly as good as I thought it was and got out. Time will tell if I made a mistake or not, but at some point, the long-term has happened, you can't just push it back further over the horizon forever.

Just for fun I looked at ALS stock price on January 8, 2011, when this thread was created 6.7 years ago. $13.84 Impressive how much has happened since then and yet...

https://www.amazon.com/Six-Billion-Shoppers-Companies-Commerce/dp/1250088674/ Another one that recently came out. Haven't started it yet, but will report my thoughts here when I've read it.