Liberty

I think the thing that a lot of Apple-watchers misunderstand is that commoditization doesn't work the same way for consumer products as for enterprise products. In the enterprise, products are judged by how they can do the job that eventually leads to the company making money, they are measured against a very clear yardstick. If you need to host the company's website and can do it more profitably and without losing necessary functionality on a cheap server rather than an expensive one, that's what you should do (when it doesn't happen, it's usually because of vendor lock-in). Will the more expensive one be better designed and nicer? Probably, but the IT bean counter probably won't ever see the servers that he's buying anyway, so that's no even a consideration, and if he does work on what he buys, he probably can't justify the extra cost to the boss who's looking at the bottom line. For consumer stuff, the equation is different. You don't have that profitability benchmark to judge things against. The person buying is the same person who will use the thing. Other factors play a much bigger role and products are judged in relation to each other, not in relation to an invariable external benchmark like making a profit. Spending a few bucks more on something that you'll use for hours each day for a couple years might feel totally worth it even if "you could do all the same tasks on a cheaper product". That's why despite the fact that a modern Honda Accord is probably more luxurious, fast, safe, and reliable than a Mercedes from a couple decades ago, there's still a luxury car market. The low-end didn't become 'good enough' and people stopped buying higher-end cars. As long as the high end stays relatively better than the low-end, it'll have a market with people who want something better (not everybody does, or can afford it, but that's part of the differentiation). That's why expensive running shoes still exist (Nike, etc) despite the fact that cheap ones are now much better than the cheap ones from years ago. There's no 'good enough' line over which improvements don't matter in consumer stuff. Better always matters, and I don't see a company in the world that is operating on the level that Apple is in its categories (I mean on the product level -- people will always find individual areas where Apple is slightly behind, but to make a good product, you need the whole package). And it's a self-reinforcing cycle, with Apple attracting many of the best designers and engineers because they want to work on the best (it's like joining the marines), and because they're so profitable, they have a lot more money to spend on cool R&D and very expensive manufacturing processes rather than count pennies and use cheap plastic molds and such (who else is making hundreds of millions of products with CNC aluminum milling? and soon sapphire glass? custom SOCs that nobody else can get rather than mostly off-the-shelf chips?).

The real question is, how does a company that spends what Allergan spends on R&D have fewer product launches in its late stage pipeline and lower organic growth than Valeant? If you do your DD on Valeant and learn how they operate, the answer is quite obvious: They focus their R&D only on what is economic and has been shown to work historically, they keep fixed costs lows, they don't spend on marketing that has bad ROI (advertising targeting the customer, selling to physicians in segments where you can't say anything else than what is on the label, etc) but they spend a ton on their salesforce where it makes a difference and focus on assets where relationships with doctors matter (ie. there are relatively few dermatologists recommending a zillion sales, so they target that bottleneck). They don't sell all products everywhere but focus each products on specific markets where the growth potential is best, regulation most favorable, and competition lowest, etc. Basically, they're very rational about how they deploy their resources and their first test is always financial. Other companies aren't like that, so it's no surprise that they get very different results.

http://www.sec.gov/Archives/edgar/data/1091667/000109166714000090/exhibit992publicpresenta.htm Charter and Comcast's presentation on the deal.

http://www.sec.gov/Archives/edgar/data/1091667/000109166714000090/exhibit992publicpresenta.htm Charter and Comcast's presentation on the deal.

Latest presentation updated today: http://altiusminerals.com/uploads/Investor-Presentation-(April-28,-2014).pdf

Ok, which one of you started buying again today? Raise your hand. :)

I don't think anyone has claimed that VRX was getting 20% IRRs on their acquisitions from the prices they pay alone (they're not a stock-picker, so to speak, finding 50-cent dollars everywhere). They rarely seem to massively underpay, actually. Most deals seem pretty fairly priced based on multiples (though they never overpay, have proven to walk away from deals when prices go up, and for most of their acquisitions, they were the only bidders). It's their different operational model and overall strategy that brings the ROIs up. Look at Ackman's slide #97 to see how much of a difference the lower SGA, R&D and taxes make on the bottom line (and that's without the revenu synergies from their huge salesforce in fast-growing markets). Someone else buying the same businesses but operating them with the business-as-usual model wouldn't get that performance.

Thanks for the suggestion. Another that is on my list is The Frackers by Gregory Zuckerman.

Gio, I don't think either of us is worried about an Enron. More about a David Sokol (ie. very good manager who nonetheless had character flaws that made him do questionable things, and once he does that, how do you know where he'll stop? It's not like Sokol needed the money, but some people just can't help themselves...). I don't think it hurts to check... As they say: Trust, but verify :) https://en.wikipedia.org/wiki/Dutch_auction They used this when they repurchased shares in 2012. It's a good mechanism and I love big tenders for shares when they are undervalued. I just don't understand why management sold that many shares right after saying they thought they were very undervalued.

That's probably the best way to do it (hopefully the spin-off isn't too loaded with debt). They were willing to buy all of TWC in good part because Charter management and strategy/operations are superior. But if they're running the show from the start at the new spin-off, the possibility for synergy isn't there to justify a big takeover premium...

This reminds me of a recent Economist feature: "The slumps that shaped modern finance: Finance is not merely prone to crises, it is shaped by them. Five historical crises show how aspects of today’s financial system originated—and offer lessons for today’s regulators" http://www.economist.com/news/essays/21600451-finance-not-merely-prone-crises-it-shaped-them-five-historical-crises-show-how-aspects-today-s-fina

Got my copy of this one in the mail (1 cent used on Amazon!). This one should be fun. I'm mostly creating this thread just so I can quote this excerpt from the movie version (which I haven't seen yet, I'm waiting to have read the book, but I found that quote while researching it) :D The HBO movie is available for free on Youtube (thanks to Otsog for pointing that out): http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/barbarians-at-the-gate-(tv-movie)/

Good picks. Warburgs is on my list, as well as many other biographies by Chernow. I've added the Little book to my list. Seems interesting. I have Art of Profitability but haven't read it yet. Based on a recommendation from this board, of course! Thanks for sharing.

Makes a lot of sense, thanks!

Interesting. "Charter Chief Executive Tom Rutledge will be chairman of the new company." I wonder if they have ownership restrictions on the new company... If not, and if the assets are attractive, I don't see why CHTR wouldn't try to buy it all eventually. Also:

Can you elaborate on this. Why did they have so many impairments? Thanks for the feedback, I haven't had time to dig into this one much yet, been busy on a couple of other ideas lately :)

The difference that bother me are how management apparently sold shares right after they were saying on conference calls that the shares were undervalued. That's very strange behavior to me.

No worries, I know how that is :D If you don't mind sharing, what other books did you order? I'm always looking for ideas for the 'to read' list. Thanks.

http://basehitinvesting.com/great-investor-glenn-greenberg-discusses-his-investment-philosophy/ Article on Glenn Greenberg. I thought it was interesting that 30% of his portfolio is in Valeant. I wasn't familiar with him before reading this, but he apparently has a very good long-term track record (mid 20%s since the early 1980s).

That's a great typo!

I hope you enjoy it. Please share your thoughts here once you've read it, I'm curious to know what you think of it.

[amazonsearch]The Prize: The Epic Quest for Oil, Money, and Power[/amazonsearch] For those interested in the history of the oil industry (from the 1850s onward). I'm just a few hundred pages in, but so far it's excellent and I feel it deserves the Pulitzer that it received. Really interesting details about the early drillers, the first big gusher, how Standard Oil, Royal Dutch, Russian operations, the first pipelines and tankers, etc. What I find most fascinating is the various strategies and tactics used by the big players to get around one another and get an edge.

A big part of it is zero-based budgeting and focus on ROI and durable assets. Other pharmas have high R&D fixed costs that they carry, and this year's budget it based on last year's budget (with an increase thrown in, probably). They have X dollars and figure out how to spend them. VRX doesn't carry most of those fixed costs, it outsources when it needs to do R&D, and the budget for all R&D has to be justified from the ground up every time, so there's a lot less inertia in the system. Basically, a lot of pharmas are not very shareholder-friendly, so they don't mind spending shareholder money on things that have been shown not to have good ROIs because "that's what we do, that's what others do, that's how it's always been done" rather than "it makes financial sense". The incentives matter a lot too; as has been mentioned a few times, Allergan management is incentivized based on the absolute dollar amount spent on R&D (looking at inputs rather than outputs). No wonder productivity is low.

Suing the US Air Force 8) http://www.bloomberg.com/news/2014-04-26/musk-s-spacex-to-sue-u-s-air-force-over-launch-monopoly.html

I've just finished watching the video of the presentation for the second time. Those of you interested in the company who have just looked at the slides, I recommend that you also watch the video. There's more said than what is shown (not tons, but some interesting stuff).