Liberty

I thought this anecdote from the book about IEX was pretty funny. They called their exchange Investors Exchange. They shortened it to IEX because when they registered the website, they realized there was a problem.. See for yourself: www.investorsexchange.com ;D

I've looked at it briefly and it was interesting. Seemed like a solid conglomerate with good capital allocation operating in decent niches, but I haven't yet dug deep enough to really have a solid opinion.

I'm enjoying it too so far. Now looking back on the media coverage of it, it's pretty obvious that none of the media people had actually an advance copy to read, they just had an intern do a quick search through the book for certain keywords and asked questions based on the paragraph surrounding whatever that was. Well, they probably always do that...

The election in Quebec yesterday could be a good thing for Altius and its partners in the mid to long term since it probably means a better investment climate for miners and putting back the 'Plan Nord' on tracks without extra uncertainty on higher taxes and royalties and such.

;D

Setting up the factory during growth phase certainly must be capital intensive, but once the robots are all in place, it probably goes down a fair bit. Same with the battery gigafactory. It took less time for Tesla to go from zero cars and no factory to where it is now than it takes most big automakers to redesign just one of their models, and they mostly just iterate on existing tech, so there's not the added difficulty of building from the ground up with a new powertrain technology and a skeptical public... so it's not like they're moving slow if you keep them in context of their industry. Musk has said in interview that the hard part with growing so fast is that not all partners in their supply chain were taking them that seriously not so long ago, so they haven't all invested what they need to keep up with them. And if you are missing just one of the thousands of parts you need, you can't ship the cars... In any case, the number to watch is total number of cars shipped, not just in the US now that they are more international. Saying that Tesla is stagnating at this point is just disinformation. There are very long waiting lists in the US.

Tesla is currently supply constrained. They're selling all the cars that they're making as production ramps up quickly. If growth is flattening in the US, it's only because they've started shipping some cars to Europe (and Asia is coming soon IRC).

lu_hawk, have you ever looked into the model used by Malone at TCI? You could have looked at the business at almost any time in its multi-decade history and said: "wow, they have no earnings, they're spending all their money on interest payments and M&A, they're under-investing in CAPEX compared to their competitors... why are they worth anything?" And interest rates were multiples of what they are now for most of TCI's run too... You can wait for VRX to have a 15-year track record and to stop growing to be really sure they're good, but you pay a high price for that kind of certainty. On the other hand, it's absolutely fine to just chuck it into the 'too hard' pile if you can't get comfortable with it. That's where most businesses should go anyway... But IMO it is possible to get confident today by looking at the model, at management, at the track record so far, and at the assets. The company is guiding 8.25-8.75 adj. cash EPS in 2014, and that's without new acquisitions or extra cost cutting (and they usually underpromise and overdeliver). So that's about a 14x forward multiple for a very shareholder-friendly company growing very quickly. I don't know what will happen in the next year, but I'd be very surprised if in 5 or 10 years the company wasn't worth significantly more than it is now. But it does require a different mental model to think about than, say, a slow-growing non-acquirer selling below book value like AIG (not dissing it, I own more AIG than VRX). But hey, I could be wrong. I have been wrong many times in the past, so always take what I say with a grain of salt ;)

It depends on the product, and many branded products are branded generics. You might be able to slightly reformulate or improve a skin cream or contact lens and get a new patent on it, extending the protection. We're not talking about blockbuster drugs that are responsible for billions in revenue per drug and that have massive R&D costs if you want to improve them; that attracts the mother of all competition from generics for sure. You can look at their disclosure on patent cliffs and read management transcripts to get a better idea of their product positioning. If you want simple to understand, this is certainly not the company for you. Like Malone, they focus first on value creation, and if that means some leverage and complexity, that's what they do (though they don't go as far as Malone -- no tracking stocks, spinoffs, and weird derivatives yet :) ). Certainly not for everyone. But unless you don't believe the acquisition integration costs are one-time (and you can look at how past acquisitions were integrated), it's pretty easy to look at both their organic growth numbers and their adjusted cash without those integration costs to get a good idea of what they could earn within about a year if they stopped acquiring. That's real money that could be used to pay the debt, dividends, buybacks, etc. It's just that they seem to believe that that money is better used for more M&A because they think their model creates value, and I happen to agree with them, along with Sequoia and ValueAct. Now maybe they would always need a certain amount of "maintenance" bolt-on acquisitions to get new products in the pipeline and replace declining ones that can't easily be revived, but as long as the money spent there yields better returns than what it would cost in R&D to do the same, it's a good deal. The share count hasn't been growing much compare to the cash coming in, btw, and I think it actually went down in 2012 compared to 2011 (from memory) and been relatively stable for the past few years.

Not sure if this is what you mean, but there's some info here: http://glennchan.wordpress.com/2013/04/26/tracking-john-malone-part-1/ http://glennchan.wordpress.com/2013/04/26/tracking-john-malone-part-2/ http://glennchan.wordpress.com/2013/04/28/tracking-john-malone-part-3-liberty-media-lmca/ http://glennchan.wordpress.com/2014/03/15/libertymalone-update/

I think it's just the general market. I'm seeing tons of things that are down 3-6% today.

I have just finished listening to the interview. I didn’t know Mr. Ubben, but his ideas make a lot of sense to me. Great entrepreneurial spirit! ;) Gio Gio, check out Mason Morfit, the guy who's on the VRX board and who helped created Pearson's incentives: Very impressive, as well as his partner.

Eventually, possibly if things go well, but I doubt management would want to sell for a while, it wouldn't maximize value for them if they think the business model can really keep scaling (insiders own a bit over 43% of the shares).

Thanks for pointing them out, I've started reading their public letters and they're interesting so far.

They've been pretty clear about that. One of their goals for the year is to reduce their leverage below 4x EBIDTA, and if they do a big merger of equals, it'll probably be done with stock to delever. But based on their track record, if they can't get more value over the long-term than they have to give, they won't do it, so I'm not too worried about them issuing stock.

Microsoft has been making good moves lately. Good start for the new CEO. If they get out of devices a bit more, they could be a good natural ally of Apple against Google; Apple's strength has never been services, so Microsoft should aim to fill that niche, which is only possible if they stop filtering all their decisions through: "will this help push windows?" Office for iPad a good start. They apparently already have 12 million downloads. They've lost the platform war in mobile, they should focus on building software on top of all the existing platforms rather than lock themselves out into just win mobile, which is just shooting themselves in the foot IMO.

http://i.imgur.com/dmev4A4.jpg If true that order info is sold before execution, that's pretty slimy.

Thanks, I snagged it!

True, but they're at 93 next year, so at that rate eventually probably means 2017...

He obviously meant that they feel that by paying with stock, they risk giving away more value than they are getting, thus diluting shareholders. If the stock was overvalued, it would be less valuable to them because they would be giving away less value by growing the number of shares. f.ex. If IV is 10 and share price is 5, it costs you a lot more value for a fixed nominal price paid in new shares than if the IV is 10 and the price is 20.

Thanks fareastwarriors. update: ±90% combined ratio? Seems quite aggressive... http://i.imgur.com/FZlrMc3.png

It's clear that if this is the only thing you know about management, it's a red flag. And I agree to some level, it's not my favorite thing that he's said. But what matters is meaning. I think that in this case, the words look worse than the meaning, because most people who would say this are empire builders, but he's clearly not like that. They put that on a slide of aspirational goals and everybody jumped on it. They had a similar aspirational goal a few years ago (which they reached profitably), but I don't think it made waves back then because nobody thought they could do it. If having these kinds of ballpark goals motivates him and his team without resulting in bad behavior, I'm all for it. But if I start seeing bad behavior, then I'll be out. The main difference between saying that and Buffett saying that he's always looking for big elephants is that he's quantified the size of what he's looking for a bit more, but as long as they both are disciplined about creating value, I don't think it's a problem. If you didn't know that Buffett had the right approach, saying that he is looking to do multi-billion-dollar acquisitions could be worrying too... VRX has been saying for a while that they're interested in doing a merger of equals (iirc, they almost did one but walked away), and that this deal would probably be mostly equity to delever. If they almost double in size just from that, it wouldn't take that much more growth and smaller acquisitions to reach that ±150b size. But if they don't reach it, I don't think management will care that much... And if that merger of equals provides anything near the benefits that they brought to previous deals (getting a good price, cost cutting, benefits from lower tax, their more efficient approach to products and R&D, etc), that could be a lot of value creation per share. Basically, VRX has a different model than most of the industry. If you believe that their model is superior at creating value and that the current management is good at executing it, then it follows that they should swallow other companies that are a good fit and integrate them into their model because these businesses are more valuable inside valeant than outside. But if that's incorrect, we should be seeing signs strain over time. I haven't seen them yet, but I'm certainly keeping my ear to the ground.

If that was the only thing he said, absolutely not. But if you listen to all that he's saying and not just one thing out of context, you'll see that he's absolutely not an empire builder. He repeatedly talks about how their first criteria for anything is financial, and if a deal doesn't hit their return targets (and they are conservative with those, giving no value to future products, extra synergies, etc), they won't do it even if it's strategic, otherwise attractive, or if everyone else is doing it. They said that they're agnostic about markets and products and don't feel they have to be in anything, and that they only do deals when they are the only ones at the table, they don't participate in auctions or bidding wars. Management is compensated on long-term per-share metrics and gets not benefit from growing unprofitably. Basically, growth for growth's sake is bad. But profitable growth is very good, so I'm glad that they have big ambitions while staying disciplined.

Galaxy s5 fingerprint sensor vs. iPhone 5s fingerprint sensor. Looking at these two phones side by side (not just the sensor) makes me feel good about Apple. Really looking forward to the iPhone 6.

Thanks for the link. I agree about Markel being very similar to Berkshire, but earlier in its development, which should be a good thing. The fact that their float has been cost-free on average for a long time and that they have tons of spare capacity to write premiums if the market goes hard is a big plus IMO. I'm excited about the potential for deploying the Alterra investments into more equities and (hopefully) better-performing bonds, and for Markel Ventures to keep growing. I like this quote by Gaynor from the last call: I own only two insurance companies, and they are AIG (warrants) and Markel. I wish I could also own Fairfax, but as much as I love their culture and track record and they are an inspiration in many ways, I don't feel comfortable enough with their recent strategy. Maybe someday I'll be able to add them as a long-term holding... I kind of own Berkshire; They are Markel's biggest equity holding, and I've bought some for my wife's account.