Liberty

http://brooklyninvestor.blogspot.ca/2015/03/zero-based-budgeting-book.html

More or less about the book: http://brooklyninvestor.blogspot.ca/2015/03/zero-based-budgeting-book.html

Thanks for posting.

If you want to know what's wrong with the Isaacson bio, listen to this: https://overcast.fm/podcasts/episode/9510458169793

If you want to know what's wrong with the Isaacson bio, listen to this: https://overcast.fm/podcasts/episode/9510458169793 Also, looks like Apple's recent solar deal was a better investment than it first seemed: http://fortune.com/2015/03/27/apple-solar-california/

When you have lots of money, the IT people will convince you it's required ;)

Tim Cook is awesome. http://www.theguardian.com/technology/2015/mar/26/tim-cook-apple-donate-800m-fortune-charity Also, http://fortune.com/2015/03/27/tim-cook-apple-fortune-adam-lashinsky-journalism/

Could be. Some sites launch with a bunch of content that was produced pre-launch to avoid that empty look when people first see it.

Wouldn't that be a way to game GAAP earnings, something that Valeant obvious doesn't care too much about, since until recently they didn't have much to show on that front? And wouldn't this be transparent when looking at the cashflows? I'd love to see any evidence of this from the shorts. If it was true, I'm pretty sure that Allergan or Hempton would've uncovered it, but what I've seen from them was pretty weak. Not to mention that I don't think Bill Ackman, Jeff Ubben, and Sequoia would fall for these types of accounting tricks.

They usually improve the margins of what they buy, though I don't know if they'll be able to bring this one all the way up to their average (seems like a tall order).

In the mail today. Really looking forward to it.

It would indeed be simpler, but this would be one heck of a big vehicle. The way they're going now, soon they'll have a Malone-like constellation of entities. If you want it all, you can always just buy a basket, or pick those that have a profile that you prefer. Not a bad deal.

I don't know the answer to that one. I'm sure we'll find out more over time. I doubt they just threw away their playbook. There are probably some factors that mitigate this. I'm not sure I understand what you mean. The restructuring costs are one-time, in that they are one-time per deal. When you do new deals, you get new costs. And where you decide to cut depends; if you have 2 things and only need 1, you keep the best one, so sometimes that might mean cutting on the VRX side. From memory, Bausch basically had no growth, or very little, when Valeant bought them. Despite the inventory issues, I don't think this can be said of Salix (revenues are up almost 5x in the past decade), so I think it's probably fair to expect them to be worth a higher price.

That's a good question. It was addressed to my satisfaction a few times, including in Ackman's presentation when they first did the Allergan bid. The pharma industry is a trillion dollar industry just in the public markets, and many more trillions in private hands. They are looking for things globally. There are also asset sales by big public companies. I think the runway is pretty long. But I don't think they're on a treadmill either. If they can't do a big merger of equals, oh well. It would probably create a lot of value, but it's not the only lever they can pull. Shorts were saying the wheels would fall off when the lapped the B&L transaction, but the reverse happened. They don't need to do transactions to "cover up" something... There are tons of assets the size of B&L out there, and these will move the needle for a long time. The way they integrate things at the local level, in a very decentralized way, means that they can handle many more bolt-ons than very centralized companies that do everything via the bottleneck of the head office. A bunch of billion-dollar bolt-ons add up very quickly... Maybe at certain times the best way to allocate capital will be to pay down debt, or buy back shares, or increase R&D or the salesforce. I think they've shown to be opportunistic and able to find good value out there. In fact, it could be argued that one big mispricing right now is debt, and they've taken advantage of that by exchanging cheap debt for quality assets that they can make more profitable (lean operations + low tax rate) and keep growing in the future. That seems like a good trade. Maybe someday debt won't be mispriced and they'll have to make different tradeoffs to create value (maybe then they'll try to become investment grade), but that's the whole job of a capital allocator.

One more thing to add: If anyone re-reads this threads, you'll see that there were plenty of critical people. It's just that most of what they said didn't turn out to be right and they stopped commenting. It's not been a love fest from the start for sure, and I'm certainly always open to negative theses. But so far, we've been told the organic growth would tank, it's gone up. That restructuring charges were not one-time, but when they stopped acquiring during the Allergan saga, restructuring dropped down and adjusted earnings and GAAP converged in the direction of GAAP. We've been told they couldn't get the promised synergies, but they exceeded them. There wasn't enough disclosure on their products, they now provide more than most pharmas. We've been told they'll never be able to buy a big public company, but they just did. We've been told the debt was too high, yet in less than a year they delevered significantly (they were at 3.5x at the end of 2014, they're no doubt lower now, though they're about to go up again because of Salix, but it's not as bad as it seems because Salix earnings are temporarily depressed while the inventory is reduced). Cash conversion is strong, margins are high, new products are doing well (Jublia going like gangbusters, as is CeraVe), ValueAct and Ackman are adding and Sequoia is holding, etc. Even Hempton has been silent for a while. So if this thread seems positive, maybe it's because the company is doing well and it becomes harder to find negative things to say...

http://brooklyninvestor.blogspot.ca/2015/03/kraft-heinz.html

Sadly, Munger didn't give enough detail to be able to judge if he knows what he's talking about, so you're just guessing too, but if you can explain to me how Valeant is like ITT or Pearson worse than ITT's CEO at the time, I'd love to hear it, or anything else you have to say. But if you just want to imply negative things but not provide any substance, there's not much more I can say.

I would say I have no hero… All I care about are rational things, instead of irrational things… All I look for are great results, instead of poor results… Whoever acts rationally and gets great results… Well, he/she is my "hero"… Until he/she starts acting irrationally and getting poor results! ;) Period. Cheers, Gio That's how I define a hero; not someone who can't do wrong, but someone who does do a lot right. So I admire people like Albert Einstein and Richard Feynman and Benjamin Franklin and Buffett, etc, but that doesn't mean I automatically agree with everything that they do/did or say/said. I think you know that's what I meant when I said "hero" (and then basically contradicted Munger in that same post, so we're not talking blind worship).

For those who were asking about the Jobs biographies and the shortcomings of the Isaacson one: http://daringfireball.net/2015/03/the_h_word http://daringfireball.net/2012/02/walter_isaacson_steve_jobs

As much as Munger is a hero of mine, I think he's wrong here (it's not like anyone is always correct). I suspect he's followed Valeant from afar in the media, and since most of the media coverage has been quite negative in the past year (the Allergan line repeated everywhere), it did sound to him like a story he's heard before. I wish his comment had been more detailed so we could know for sure if this is just a superficial opinion on things, a throwaway line during a meeting where he spoke for a long time, or if he actually knows enough about the situation to be informed and still came to that conclusion. From Wikipedia: ITT was buying a ton of random stuff at a time when conglomerates were popular. Food makers, car rental, defense contractors, TV stuff, cosmetics, books, whatever. Throw it all into the pot. Valeant is very different. You have a guy who spent his entire career studying pharma, who's very carefully selecting certain pharma assets that have desirable characteristics and buying companies that fit into that strategy and that have real synergies with the existing operation. In the past year he's proven that the restructuring charges do disappear if acquisitions stop. And he's been doing it at a time when his approach was very unpopular, with almost everybody being a skeptic and his stock being undervalued for many years. Not exactly the conglomerate indiscriminate buying boom bis. When Valeant starts buying auto part makers, movie studios and shrimp farms with stock, then we'll know something has gone wrong. In the meantime, Valeant is a lot more like a mix of P&G and 3G than it is like ITT. I'm pretty sure Munger likes both 3G and P&G... Not to mention that the ITT guy was apparently involved in coups in Brazil and Chile. And Pearson is supposedly worse? Did he eat a puppy at the annual meeting and nobody told me? Basically, Munger is wrong. Having a contrary opinion to one of my heroes feels weird, but I'm sure Munger would prefer independent thinking even if it disagrees with him than a deferral to authority.

Thanks Sanjeev and Aurelius!

I think you might be right. I think higher retained earnings because of a lower dividend payout does make a difference compared to the historically higher dividend payout, but not buybacks. My original post on this was about reinvestment in the business, and then this shifted to buybacks and I lost the thread. My bad. True, but not really relevant today in practice. Maybe if no secondary market existed, people would insist on a higher payout.

Here's how I understand it: If you're looking at it from the point of view of the investor, then yes. The value will be roughly the same (adjust for taxes and such) whether you get dividends or buybacks or a mix of both. If you're looking at it from the point of view of the business/index, then there's a difference; dividends leave the system, capex and buybacks stay in it.

http://scottgrannis.blogspot.ca/2015/03/the-reluctant-recovery-continues.html Another perspective that might interest some of the macro tourists.

Are buybacks so different from capex when it comes to measuring the growth of the SP500 or another index, though? Say the index is 500 businesses, a composite of their share prices. If buybacks help increase earnings per share, and stock prices go up, all else being equal, the index goes up too, right? If that money had been paid out in dividends, maybe some of it would have been reinvested in stocks from the index, affecting the supply-demand balance, but not all of it for sure. So buybacks, like capex investments in more capacity or productivity, should make the index go up more on average than if they hadn't taken place. If buybacks are made at bad times, like at market peaks, the effect might be a lot weaker, but is it weaker than if the money had just left the system via dividends? In other words, the buybacks might have been a bad deal for shareholders, creating only, say, 70 cents of value with a dollar, but that value still accrues to the stock (fewer shares to divide the earnings by) rather than leaving the system via dividends. Is that so different from mediocre capex that creates only 70 cents of value per dollar invested (it's not like that doesn't happen all the time)? Again, it's not something we want. But if we compare it to dividends, I think we can see how it would have a different effect on the index price over time. Could it be that people and businesses are deleveraging but governments are leveraging up? It would be interesting to see the breakdown of that new debt. It could certainly have a deflationary impact on the economy overall since government going in debt because of, say, lower tax intake, isn't something that will stimulate the economy the same way that spending on more stuff would. As I said, I'm not making predictions, except maybe in the Buffett way of believing that over the long-term, things should get better and good companies should keep creating value. My main point was that it's not as easy to predict as some people who look at a few convincing charts or ratios seem to believe.