Liberty

The focus on debt was probably pushed by some of the big shareholders. I think the message was probably something like: Now's not the time to optimize per-share returns by a few percents by shrinking share outstanding, now is the time to regain confidence by showing that the model works and the balance sheet is solid. Buying back debt on the secondary market at 80 cents on the dollar might not be the highest potential return, but it is a very certain return, which has benefits when there's a lot of uncertainty.

Keep in mind the track record of analysts who try to read the supply chain tea leaves. The company has much better visibility, and has a good track record with their guidance. Chances are, they will land somewhere close to the top end of their guidance, which would be pretty great considering the tough comp and FX headwinds. Per share results will be further improved by the reduce share count since last year.

http://www.cnbc.com/2015/11/10/citron-researchs-left-mallinckrodt-not-a-pharmaceutical-company.html Andrew Left (Citron) on CNBC, mentions Valeant a few times.. Even says half-positive things about them and says his short position is "significantly, significantly reduced".

Down almost 10%.

60 Minutes on Hamilton the play, and Lin-Manuel Miranda: http://www.cbsnews.com/news/hamilton-broadway-musical-60-minutes-charlie-rose/

Some info on UMG here, via Bluegrass Capital on Twitter: http://www.musicbusinessworldwide.com/files/2015/03/Vivendi_White_Paper.pdf Slide 26. UMG Also broken out here (p.21, 24): http://www.vivendi.com/wp-content/uploads/2015/02/20150227_Financial_Report_and_Audited_Consolidated_Financial_Statements_FY_2014.pdf

Good post, Jay21. Your point about streaming/satellite being a delivery technology rather than a product is what too many people miss, IMO. Have you looked into the economics of owning a music label? I haven't, and I'm curious to know if it has the characteristics that would attract Malone and Maffei.

Via George Pearkes, Pearson's alumni profile at Dukes and his charitable gift: http://dukengineer.pratt.duke.edu/node/268 https://today.duke.edu/2014/06/pearsongift

Looks like they brought down their borrowing cost significantly. Fully-swapped borrowing cost for LILA is now down 230 bps to 6.4%. Sounds almost too good to be true. It's not really my area, so I'm not 100% clear on how this works, but it appears that the decreased rate comes with an increased nominal exposure.

Q3 is out: http://www.libertyglobal.com/pdf/press-release/LG-Earnings-Release-Q3-15-FINAL.pdf

New acquisiton: http://www.csisoftware.com/2015/11/constellation-softwares-jonas-division-completes-acquisition-of-par-springer-miller-systems/

Salix had depressed revenues because of a channel stuffing scandal (which allowed VRX to buy them at a reduced price). Inventories should be back to normal around Q4-early 2016. In 2014 they mostly drew down existing inventories.. Management has guided to 600m of Salix revenues for Q4, which should be a more business-as-usual run-rate. From the Q2 call:

That's a harder question to answer than it seems. I think the most interesting angle is that Apple uses a lot of custom stuff while the rest of the industry uses a lot of commodity parts. That wouldn't be a successful strategy for Apple if it was a tiny niche player, but it has the scale (especially as a share of total profits) to make it work, and so it can use custom hardware to help differentiate its products while a lot of competitors are all using the same stuff. And because they aren't making much money, they have less to spend... It's a bit like when desktop PCs were all similar beige boxes using similar components and running the same software; who cares if you get a HP or a Compaq or a Dell? And these companies end up competing on specs and price because they are not differentiated otherwise, eating their margins away... But the Mac business has been doing quite well for over 15 years, keeping its high margins and outgrowing the industry. If you like what the Mac offers, you can't get it anywhere else. Also, a lot of Apple's recent innovations are integrating hardware-software and sometimes services pretty tightly. 3D Touch works as well as it does because of that (they spent 5 years on it, apparently). But when developers are targetting a super fragmented base (everybody on different hardware, on different versions of the OS, some don't even support the feature, etc), it's a lot harder to get that integration right and provide a good user experience. Same with Apple Pay (hardware+software+service), same with the rest of the ecosystem integration (easier to make it a good user experience when you control all the hardware and software across devices). So they can keep copying stuff, but catching up might be hard to do with a moving target. Maybe in a few years the other SoCs match the A9 for single-threaded speed and power-efficiency and so on, but by then Apple will be on something else that they're spending billions of dollars developing in secret right now. And all those components only matter if the end product is actually something that people think is the best and worth paying up for. If someone else came up with a breakthrough SoC that was ahead of Apple but the rest of the user experience wasn't that great or was almost the same as on a cheaper alternative (ie. running exact same OS and apps, just a bit faster or with more battery time), it wouldn't be the end of the world for Apple.

Rishi, I think that's very easy in hindsight. Less obvious at the time. I do know at least two other investors who sold in the 230-250 range because of valuation concerns, so it certainly isn't unheard of. But if I put myself back in the mindset at that time, the factors were: EBITDA was going up quite fast, with conservative guidance (which they usually beat) of 7.5bn for 2016 with no additional M&A. Even at the peak of 120bn EV (and it didn't spend that long there), that's a bit more reasonable. Also, with a decently high stock price, it was expected that they would probably do a big merger of equals at some point, and that could have changed everything (especially if a big part was done with equity). They were also growing quite fast, delevering just by virtue of normalizing salix inventories and had many new succesful products, restructuring charges were falling away, etc. At the time the stock didn't seem too expensive when considering all the opportunities that laid just ahead on the road, and it didn't seem that speculative considering their succesful track record. Growth is another part of value, after all, and they seemed to have a very good recipe for profitable growth. Of course in hindsight, we know what happened to the stock... Now the question is, what actually happened at the company? And what is the value of all this?

It certainly is never good when big problems surface at companies you own, especially when there could be fraud. It's possible that I have been fooled by management. It's not really a consolation, but if that is the case, at least I was in good company; someone who can fool Jeff Ubben and Mason Morfit for years while they are on the board can probably fool many people. I know it's now popular to say that the bears warned us, but what they actually said isn't quite what ended up happening, and I find the revelations about possible fraud at Philidor a lot more worrying than what had been raised before. This is a good case study in reverse halo effect. When things were going well, everything about the company was great (management, the structure, the assets). Now that things are going badly, everything about the company is terrible (management, the structure, the assets). I think when the dust settles, reality will probably be more nuanced, and even if things are bad enough that ValueAct and the board has to fire management and put others in place, I doubt there won't be value there. I'm in the camp that is waiting for more information. I think many people act like everything is known, but I think (to paraphrase Rumsfeld) that there are probably still many unknowns unknowns that will come out and that aren't even part of the speculation at this point, and when we have a more complete picture, we'll be able to judge things better. Most of what we have from management was a response to the original accusations of channel stuffing and fake sales. I want to hear what they have to say on this more recent stuff. I think it's a good sign that they put that ex-federal judge and deputy attorney general on the investigation committee. The guy seems to have a sterling reputation, I don't think he'd join a kangaroo court. Same for Morfit and Ingram.

Anandtech's reviews are always in-depth (particularly when they look at the SoC chips): http://www.anandtech.com/show/9686/the-apple-iphone-6s-and-iphone-6s-plus-review For those who want to jump straight to the conclusions of the multi-page review: http://www.anandtech.com/show/9686/the-apple-iphone-6s-and-iphone-6s-plus-review/15

Maybe, but keep in mind they've been using the same model successfully since 1993, so you could be waiting for a while...

Complexity certainly makes you more vulnerable to attacks. After all, 10 years ago Fairfax was accused of being the next Enron and a few decades prior Berkshire was investigated by the SEC because its cross-ownership structure (Bluechip stamps, etc) was so convoluted that it was hard to know what was going on. It's important to do the work to build confidence in an idea, but it's also impossible to be 100% certain of anything in investing. It's a probabilistic game. Fairfax wasn't the next Enron, but David Sokol had a great reputation and was probably Buffett's successor according to many people, until he wasn't... That said, I think CSU is less vulnerable than most. It's not easy to understand, but it's also not that easy to successfully attack, I think.

Hi Grey, If you think the aerospace cycle is going to get ugly, wouldn't OEMs be better targets than companies that rely on aftermarket sales that are more a function of large existing installed base and RPMs? TDG, to take one example, has had some real stress tests in the past decades; it grew through 9/11 and through 2009 (the only time RPMs went down since the early 1990s).

The same thing that makes the VMS businesses resilient in downturns is what makes it hard to grow very fast organically; when a large fraction of your revenues are recurring (maintenance contracts, and now increasingly some SaaS), with churn rates in the single-digit range, it means that customers tend to stick around for 15-25 years. This makes it hard to rapidly gain market share at the expense of a competitor, unless they really screw up. And the niches where they operate don't tend to be in fast-growing, glamorous corners of the economy. A lot of the organic growth actually comes from price increases. Over the past decade, I'd say they've been increasing prices about 5-6% a year on average.

It would grow significantly slower without M&A. Management doesn't believe in buybacks (doesn't see them as fair to shareholders), and the businesses are capital-light, so there would be fairly little reinvestment opportunities without M&A. They could probably increase organic growth somewhat by funding more of what they call 'initiatives', but they're already focusing a fair amount of organic growth, so I'm not sure how much more they could wring out. The cash would no doubt pile up and they'd probably end up with dividends or special-dividends to get rid of it. That said, I think the businesses are very sustainble without M&A. They just won't grow nearly as fast on their own as the combination of organic + M&A does. The CEO actually wrote about the value of organic growth and M&A in one of his recent letters. If you are interested in the topic, I recommend you try to find it. I'm fairly sure it was from 2-3 years ago, but I don't have them here to check at this time. One company in the space that does very well with organic growth is Tyler Technologies (TYL). Slightly different focus than CSU; I think it might be interesting if it wasn't so expensive, but I haven't yet studied it closely.

23.3 it is: http://www.nytimes.com/2015/11/03/business/dealbook/visa-to-buy-back-former-europe-unit-for-up-to-23-3-billion.html

http://www.wsj.com/articles/valeant-short-seller-dials-back-warning-of-bombshell-report-on-monday-1446417120

A week ago it seemed very likely that the original accusations, which were for channel stuffing and phantom pharmacies with fake sales, were wrong. And apparently they were. This is new stuff. All I'm saying is that there are multiple plausible scenarios. A bunch of people immediately jump on "management knew", and I'm saying that the exact same circumstances that we're seeing right now could have arisen without management knowing. Maybe. But I think there's a difference between doing something that is clearly fraud - changing doctors prescriptions, if the media reports are accurate - and what I've seen Valeant do so far.

OM, I don't see why it's hard to believe that the goings on at Philidor were known to the c-suite. It's obvious that the reason for Philidor was to be aggressive in filling prescriptions with Valeant drugs. Valeant paid 100 million for control of Philidor. That amount of money must get approval from the CEO. So it looks like the C-suite was aware. There's a difference between the C-suite being aware of the deal with Philidor and of Philidor's existence, and possibly of aggressive but legal practices, and being aware of anything illegal going on at Philidor. If you're Andrew Davenport and Valeant buys you out but then leaves you to operate mostly on your own, and you have 100m+ in additional earnouts coming if you can meet certain targets, if you're a crook, it's possible that you could devise a way to juice results to meet those targets in a way that PBMs and VRX don't find out (at least over the short exitence of Philidor.. it's not like this has been going on for years).