Feedback: Pre-Dinner Happy Hour 2016

[NormR]

Thanks go to Sanjeev and Fairfax for arranging for the room and drinks.  I think the space worked well.

 

Again a big thanks for Francis Chou for getting  Charles T. Akre to speak to us about investing in long-term compounders.  He gamely took questions for over an hour and provided more than a little insight into an investment process that has provided ~17% annual returns (after fees) to investors for over 20 years.

 

I thought it was a great event and would only ask for "more please". 

 

But let me know if you've any thoughts/feedback.   

[Jurgis]

Was great. :)

[buffettsbeast]

It was great! My deepest thanks to everyone that made it possible!

 

Towards the end, they both brought up a question to asks ourselves that had something to do with a company growing its economics at 25% and trading at 20x earnings but I missed the question. Does anyone remember what they were suggesting we grasp or what the question was?

 

Thanks!

 

 

[Jurgis]

It was great! My deepest thanks to everyone that made it possible!

 

Towards the end, they both brought up a question to asks ourselves that had something to do with a company growing its economics at 25% and trading at 20x earnings but I missed the question. Does anyone remember what they were suggesting we grasp or what the question was?

 

Thanks!

 

The short gist is that if you're sure that a company will grow earnings 20% for a long time, it doesn't matter if you buy it at 20PE or 25PE or 30PE. You still gonna get around 20% return long term.

 

 

 

My comment on this: yeah, sure. Good luck being confident that a company will grow earnings 20% for a long time. Mostly does not happen. Even with great companies.

 

Hope this helps. ;)

[augustabound]

Any pics to post? I really want to know how close Jurgis looks to his profile pic.

[Jurgis]

Any pics to post? I really want to know how close Jurgis looks to his profile pic.

 

I look more like Picasso's profile pic.  8)  ;)  :P

[buffettsbeast]

The short gist is that if you're sure that a company will grow earnings 20% for a long time, it doesn't matter if you buy it at 20PE or 25PE or 30PE. You still gonna get around 20% return long term.

 

 

 

My comment on this: yeah, sure. Good luck being confident that a company will grow earnings 20% for a long time. Mostly does not happen. Even with great companies.

 

Hope this helps. ;)

 

Thanks for the clarification.

 

I think the point was more about the concept that your expected return will track the growth in the economic value of the business over the long-term more than the earnings yield. The 20% figure was just arbitrary but yes, it sure would be nice! :D 

[Jurgis]

The short gist is that if you're sure that a company will grow earnings 20% for a long time, it doesn't matter if you buy it at 20PE or 25PE or 30PE. You still gonna get around 20% return long term.

 

 

 

My comment on this: yeah, sure. Good luck being confident that a company will grow earnings 20% for a long time. Mostly does not happen. Even with great companies.

 

Hope this helps. ;)

 

Thanks for the clarification.

 

I think the point was more about the concept that your expected return will track the growth in the economic value of the business over the long-term more than the earnings yield. The 20% figure was just arbitrary but yes, it sure would be nice! :D

 

Yes, right.

 

But  there are subtleties.

 

It assumes you hold the stock long term and related to that the more you overpay, the longer you have to hold for return to be close to "growth in the economic value of the business". If you buy a 10% ROE/growth business for 10x book, even 20 years of holding may not give you 10% annualized return.

 

That's where the percentages and prices in the examples still matter. You cannot use this argument to get good results by overpaying any amount. Also if the economic growth slows down, the return will drop similarly.

 

BTW, you are pretty precise in your formulation. There are additional caveats for less precise people. You can't really use PE and ROE in same sentence and all that.

[roundball100]

[...]  But let me know if you've any thoughts/feedback. 

 

Norm - thanks for hosting this part of the event.  It was, as usual, both entertaining and educational.

[buffettsbeast]

The short gist is that if you're sure that a company will grow earnings 20% for a long time, it doesn't matter if you buy it at 20PE or 25PE or 30PE. You still gonna get around 20% return long term.

 

 

 

My comment on this: yeah, sure. Good luck being confident that a company will grow earnings 20% for a long time. Mostly does not happen. Even with great companies.

 

Hope this helps. ;)

 

Thanks for the clarification.

 

I think the point was more about the concept that your expected return will track the growth in the economic value of the business over the long-term more than the earnings yield. The 20% figure was just arbitrary but yes, it sure would be nice! :D

 

Yes, right.

 

But  there are subtleties.

 

It assumes you hold the stock long term and related to that the more you overpay, the longer you have to hold for return to be close to "growth in the economic value of the business". If you buy a 10% ROE/growth business for 10x book, even 20 years of holding may not give you 10% annualized return.

 

That's where the percentages and prices in the examples still matter. You cannot use this argument to get good results by overpaying any amount. Also if the economic growth slows down, the return will drop similarly.

 

BTW, you are pretty precise in your formulation. There are additional caveats for less precise people. You can't really use PE and ROE in same sentence and all that.

 

That's great, thanks for the clarification!

[Jurgis]

One minor comment to organizers: water. I asked hotel staff for couple pitchers of water and they seemed highly in demand. :) Might be something to keep in mind for next year. Don't need bottled water if it costs, just pitchers are fine.  :)

 

Thanks

[Packer16]

Thanks Norm for setting this up and Francis for always finding an interesting guest.

 

Packer