Liberty

For residential rooftop For Concentrated Solar Thermal The difference is that over time natural gas can do anything, while solar is on a pretty clear trajectory: https://en.wikipedia.org/wiki/Price_per_watt#/media/File:Price_history_of_silicon_PV_cells_since_1977.svg

Can you share your thesis on this one? Thanks.

Officially a medical leave: http://www.nytimes.com/2015/12/29/business/valeant-pearson-chief-executive-medical-leave.html?smid=tw-dealbook&smtyp=cur

Mike Pearson hospitalized with "severe pneumonia": http://www.cnbc.com/2015/12/25/the-associated-press-valeant-ceo-hospitalized-with-severe-pneumonia.html Not a merry xmas.. :( Guess this is what happens when a guy who works all the time starts working even more for a few months...

Happy holidays to all. Have fun, relax, try to enjoy your family and friends. Cheers!

That is the burden that early adopters face. By the time most regular people join a trend, all these problems have been ironed out. For example, most people who own an iPhone have never experience any of the earlier models (certainly not before the 4, probably not before the 5).

CVS has tried to disable Apple Pay in the past and I'd not be surprised if they were not fully on board yet. I don't think this is Apple's fault, but over time, holdbacks should be fewer and fewer. The large purchase thing is probably a rule from the card issuer, not necessarily something Apple controls, but I suspect that the process will be streamlined over time. Maybe they can issue a special token from the software so that you can reply to the phone questions without the physical card (would be more secure anyway).

Good to know, thanks!

Can you point me to the right place to look for this feature? The excerpt that Bluegrass posted was no different from other trackers I believe. I think I was told there was another conversion feature that I missed. Page 55-56 has the one I'm talking about. Mentions annex C, which isn't published yet.

S-4 for the trackers is out. Interesting new optional conversion option that doesn't seem entirely explained yet (annex not yet out..?): http://ir.libertymedia.com/secfiling.cfm?filingID=1047469-15-9375&CIK=1560385

You are absolutely right about customer service. IMO this goes with the stores, where they also do classes for people who might otherwise be scared of technology, where you can try the products, and they do a lot of basic repairs in the back. The good service plus knowing that there's actually a place you trust where you can go gives a lot of people a lot of peace of mind that they don't get by going to Best Buy or the Verizon store or whatever. Amazon is another company that has built a lot of trust over time through customer service, and as long as you can maintain that trust, it'll give you a competitive advantage over others who don't have it (in fact, a lot of people trust Amazon so much that they buy without comparing prices elsewhere -- something that I've done often).

You don't think it's too early to judge either way? We don't even have sales numbers, much less margins, it's a version 1.0, and it has been out for only 2 full quarters...

Some here might enjoy this long-form podcast discussion with the former heads of Safari and iOS at Apple, talking about their experirence at the company. I haven't listened to this one yet, but the other episodes in the series were good. Don Melton swears every other word, so this might not be safe to play out loud in some settings.. Debug: 76: Melton & Ganatra episode IV: Management https://overcast.fm/+I_JFBNKk

Expectations are a strange thing. Rumors and analyst reports say that something is expected, and then it doesn't happen, and Apple is somehow "late" despite never having announced a product... It's kind of the opposite of Google, which constantly releases info about "upcoming" stuff that never comes or is clearly vaporware, but they get the PR boost for it. And then everything is kind of expected to be the next iPhone (despite the fact that it's clear that nothing will ever be, though the iPhone should remain the iPhone, which is good enough), so every time Apple releases something promising as a V1.0 and builds a new multi-billion business out of thin air, it's disappointing to the market... Oh well, taking advantage of a variant perception is what investing is about. Time will tell who is right and who is wrong.

Correct. And while the iPhone is the most obvious example due to the fairly high rate of refresh, this subscription model actually applies to all the hardware where performance increases over time (Mac, iPad, TV, Watch, albeit all at much lower renewal rate, translating into a lower monthly "subscription" equivalency). Each of which adds up to the total as long as customers keep renewing and adding more products/services over time. This works as long as Apple can maintain customer fidelity/stickiness compared to the competition. Phones are so inexpensive vs the value that they provide, they are much more personal and emotional devices than computers, and they are carried everywhere, making them wear out much faster than a computer that stays relatively static and protected. There are also many more opportunities for all kinds of new sensors and features that aren't available to PCs. The replacement cycle won't be like PCs for a while, we're not even 10 years into the modern smartphone era, things are still changing very fast.

I don't mind the lower multiple as long as the cashflows and ROICs are closer to those of a software company with very high renewals than those of a commodity hardware maker. It's not like they have other uses for most of that cash, so I'd rather see buybacks at 7x FCF ex-cash than at 15-20x... But Apple sentiment goes in cycles, and we'll see higher multiples again at some point. Maybe when China starts booming again, or if the tax code ever gets reformed and they can bring back all the cash, etc... iPhone 7 should also get people more excited since an external refresh always makes a bigger impact, even if the S years are just as solid functionality-wise.

I wrote a few thoughts on Apple in my investment journal. It's kind of stream of consciousness, so it might not all make sense or address everything. Apologies in advance: --- Random thoughts on AAPL: Software is a great business if you can get your customers to pay for it. Fairly easy in the enterprise, very hard for consumers. The typical approach with consumer software is to give it away and charge third parties for access to the attention (advertising), wringing small amounts from each person but building scale to compensate (Google, Facebook, Twitter). Even Microsoft on the consumer side sells most of its Windows licenses embedded in the price of new computers (most people have no idea how much they actually paid for Windows). Despite what most people think, Apple is primarily a consumer software company. Thought-experiment: An iPhone and a Mac running Android and Windows. What would the selling price be like? What would the margins be like? This makes it clear that most of what people pay for is the software differentiation. Nice hardware can command a small premium, but not much if most of the actual user experience is the same as on much cheaper hardware. You can see that in how premium Android handset makers have little pricing power. If you’re making a commodity, the primary way to make money is to be the low-cost producer (Samsung). So Apple sells software, but it monetizes it through hardware, which is something that people are willing to pay for (cognitive bias favoring physical things?). If Apple didn’t make hardware and sold its OSes directly to consumers, to be installed on other manufacturers’ hardware, they could be successful, but I doubt that the average selling price would be nearly as high as the delta between an iPhone + iOS and an iPhone with Android. In other words, paying for software through hardware feels like a better deal to most people than paying for just software, even if they are actually paying more in the first case. The differentiation provided by the software is key. Add to that a brand that was built over time (one of those intangibles that Dorsey talks about, very hard to value, but can still make a big difference) and the hardware+software+services integration that comes from one company building the whole stack, and you get a better, more differentiated user experience than what a company selling just OSes could ever make. Apple has a flywheel working for it, and would-be competitors in the premium segment of the market have barriers to entry. If you are not differentiated, it’s very hard to be premium. If you spend a lot of time, care, and effort building a premium product from high-quality materials. Spend a lot on R&D to have cutting edge features that requires lots of expensive customer parts, you hire the best designers and engineers, etc. You still won’t be able to sell your product for much more than the rest of the Android competition because the user experience, which is mostly in software, won’t be that different. You can never price much higher than the material costs because why would someone pay $500 for your thing when they can get mostly the same thing for $300? If you are differentiated, people who want your thing either come to you, or they don't get it. If someone substitutes your Samsung for a Motorola, it’ll be different, but not a huge deal. If someone swaps your iPhone for a Samsung, it’s a whole different thing that you have to learn that works differently (don't underestimate muscle memory for things that people use all day), has different aesthetics, a different feel, integration into a different ecosystem, etc. Apple doesn’t have to appeal to everyone, as long as it appeals to enough people at the higher-end of the market. Some seem to think that Apple has to win people all over again all the time, but the facts are otherwise. People in the Apple ecosystem tend to stay in the Apple ecosystem. Not only do they tend to buy Apple devices again when they upgrade existing devices, but they also tend to buy more devices from Apple over time. A lot of people who just wanted an iPod or an iPhone probably ended up with Macs and iPads over time… The market for mobile devices is unique in size and opportunity. Almost nothing that I can think of is the same when it comes to universality and to the value that it brings to people. The difference between a regular car and a premium car versus the value provided is a very hard thing to make work for most people. Absolute numbers matter. Paying tens of thousands of dollars more for a better experience and a product that makes you feel better to own and use is a lot to ask. But paying a few hundreds of dollars more for a device that arguably brings most people more value than a car is a no brainer to many. A car that is 30% more expensive than average can still be less affordable than a smartphone that is 100% more expensive than average. Apple is almost uniquely positioned to get ambitious new products off the ground. It has built goodwill over the years, and millions of people trust the brand enough to try what they have to offer and be early adopters. A lot of it is getting passed the chicken & egg problem and getting to critical mass. Let's say Motorola releases a smartphone that is very differentiated, with unique features. How many developers are going to write apps that take advantage of the unique characteristics? Very few, right? Because they are worried there won’t be enough (paying) users to make it worth their effort. And if very few developers are willing to take advantage of a phone’s unique features, how unique will the user experience be really? Does it mean that Motorola can’t make anything other than what its in-house software engineers can code for on top of Android? Yikes. Google certainly won’t spend time on that, they are worried about the lowest common denominator and fragmentation. And if you do make something unique that requires hardware+software integration, you’re stuck maintaining a fork of the main Android tree and as soon as you stop, you’re likely to break things for users. In Apple’s case, as soon as there’s new hardware or software features, a large number of people buy the new hardware and almost everybody upgrades to the new software rapidly. This is a massive target for developers, having users who are a group of self-selected people who are ready to spend more on things they want. So it’s not a surprise that pretty much all developers write for the Apple platform first and sometimes only, and the quality of apps tends to be higher (I remember comparing the iPad Bloomberg app vs the Android tablet app — yuck). Competing in the smartphone space is easy, but competing with Apple is surprisingly hard. Anyone can make a smartphone these days, just ask some Chinese supplier and they’ll make one for you. But competing with Apple means getting someone who would buy an iPhone or a Mac to buy something else, it means fighting for those juicy profits at the top end of the market. To even play, the table stakes are high. One of them is having an app store that contains everything anyone could want. The only other company that has that apart from Apple is Google. But to compete in the high-end, you need to be differentiated. If you’re running Android, you aren’t — most of the user experience will be the same as on every other commodity Android handset out there. Catch 22. Even if you can be differentiated, that’s not enough. You also have to be good. Amazon tried a unique approach with its Fire Phone and its fork of Android, but very few companies out there are product-focused the way Apple is, integrating hardware+software+services into a package that works as a whole in a way that someone who paid hundreds of dollars for it won’t feel bad. People aren’t buying spec lists or individual features, they are buying a whole products and all the tradeoffs that were made for it. If some Windows Phone out there comes out with a camera that is much better than the iPhone’s, it won't matter terribly because the rest of the package is still a Windows Phone that nobody wants. Back to Apple’s flywheel: If you have fat margins, you can reinvest more than others. The mistake that I think many make here is that they look at R&D across the industry for things that are available to anyone. If there’s a new, better Snapdragon SOC that everyone uses, it’s not differentiating. If Google improves Android, all Android phones get it. It’s like Buffett’s story about textile machinery that gets more efficient, but all your competitors buy it, so you end up like people standing on tip-toes are a parade. Nobody is really better off than before. But if you can reinvest in things that are unique to you, you are widening the moat. If you can buy thousands and thousands of CNC machines to mill solid blocks of alimunium and you’re the only one who can do that at scale, or if you build the best chip-design group in the industry and have them make faster, more power-efficient, more featured chips that only you can use, or if you can reinvest in a network of large, beautiful stores in prime locations, the first and best implementation of a fingerprint scanner, a pressure-sensitive screen with haptic feedback, etc. This even includes more esoteric and long-term things like releasing a new programming language (Swift) that you know a whole generation of coders will eventually learn because your platform is the most lucrative, further tying them to your ecosystem and distancing you further from what developers have to deal with elsewhere (Java on Android, ew) while offering them a more modern, more powerful language that will eventually make their lives easier. The company’s culture and long-term approach is also a competitive advantage in creating value. Patience is underrated in business. There’s this idea that Apple releases new products that are perfect and magical… But that’s totally not the case. They tend to release things that are good enough at the time, but based on a good idea, and then iterate until it truly is a great product for the masses. The original iPod impressed people, but it’s the later versions (Nano) that sold like cupcakes. The original iPhone blew people’s minds, but it’s the later versions that became truly ubiquitous (the original didn’t have video, GPS, 3G, cut & paste, an app store, etc). The first iMac with the computer behind the screen was a great idea, but it’s only several generations later that the original idea of a computer truly hidden behind a thin panel was realized. Same for the Macbook Air, which was originally very expensive, very slow, had weird ports, etc. Now there are countless laptops that descend directly from that original Air, and they are selling very well. I think it’s likely that a similar thing will happen with the Watch; a few versions from now it’ll be thinner, faster, have more battery life, more sensors. Developers will think up new apps and complications unique to it that make it more useful, more things in the physical world will interact with it (unlocking doors, vehicles, paying for things, security ID for computers, buildings, payments, etc). At some point it’ll be more of a mainstream thing (though if the estimates are true and they sell close to 14m of them this year, in just three quarters, with supply issues at the beginning, that’s one hell of a start for any new product priced at that level). Apple is sometimes called an integrated company, but that's a bit misleading. They are a hybrid. They are highly modular when it comes to commodity components, with hundreds of suppliers for things like flash memory and other parts, but they are highly integrated when it comes to the more differentiated parts of their products (f.ex. SoCs, software, industrial design, etc).

Amazing! This is going in the history books.

Because we're tribal and that affects cognition heavily: http://lesswrong.com/lw/gw/politics_is_the_mindkiller/

Write-up on Liberty Global by @jnvest: http://www.jnvestor.com/lbtya/

Quarter-billion acquisition for HEICO: http://www.prnewswire.com/news-releases/american-securities-announces-sale-of-robertson-fuel-systems-to-heico-for-255-million-300195732.html

Apple Pay coming to China with Unionpay partnership: http://www.apple.com/pr/library/2015/12/18Apple-China-UnionPay-to-Bring-Apple-Pay-to-China.html

I believe that's just for songs that they are streaming online, though, which is a small part of their business.

CVS on the VRX-Walreens deal: http://fortune.com/2015/12/16/cvs-valeant-walgreens/

Q3 letter: http://www.valuewalk.com/wp-content/uploads/2015/12/Pershing-Square-Holdings-Ltd.-Q3-Investor-Letter1.pdf