Message to Parsad

[Guest Bronco]

Parsad,

 

I am sure all the users on this board thank you for the board and the specialized discussion.  Was hopeful you could answer some questions, but understand if you can't.

 

1) Of the three - SNS, BRK, FFH - which one do you see as the best value today?

 

2) Of the three stocks mentioned above, which do you view as the best investment for the next 30 years?

 

3) What is the best investment you have made over the past 2 - 3 years?

 

4) Same as #3, except worst investment.

 

5) What is your favorite investment idea that you own (directly or indirectly) for the next 3 - 5 years?

 

If people find this interesting and make some comments, I will throw in my 2 cents to the above questions.

 

-Bronco

[Parsad]

Hi Bronco:

 

1) BRK is a very mature company, Fairfax is mid-stage and Steak'n Shake is still a baby.  Based on size, the prospects for Steak'n Shake are best.  Based on valuation, all three are relatively close to fair value based on the risk of the businesses they run...BRK and FFH's business is the most volatile, based on the risks they assume.  Steak'n Shake's burger business, if well managed, is a cash-cow with less volatility, but Biglari could easily add more risk by entering the insurance business.  All three have terrific balance sheets, ethical management and good potential, none are dirt cheap.  I'm not adding to any at the moment.

 

2)  Who knows.  I think Fairfax and Steak'n Shake will continue to do very well.  Berkshire's size is really a problem now.  Buffett's age and who is going to replace him is another issue on the investment side.  They may be as good as Buffett, but they have to be as ethical and honest.  The collection of businesses there are the best we'll ever see.  What we won't see is a CEO who can command the respect of the managers like he does.   

 

3)  Oh, we've had a bunch...Fairfax, Overstock (both debt & equity), Steak'n Shake, Wells Fargo, Odyssey Re, Clear Channel (debt), Boston Pizza Income Trust, Keg Income Trust.  The best based on what we paid relative to book and the eventual return...that would be Fairfax and Steak'n Shake...both up over 300% from the lows we bought at.  Actual investment based on the dollars invested, be it options or equity...Steak'n Shake options (up over 1200%) and Overstock options (they were up over 800% one year).

 

4)  That's easy.  We bought options of RDN, PMI and MTG in the U.S. fund, and equity of all three in the Canadian fund in 2008.  We thought they would lose 50% of their equity, but didn't expect 70-80%.  It didn't hurt the U.S. fund much, but it did impact the Canadian fund early on.  We learned our lesson well on that one!

 

5)  Can't talk about that.

 

Cheers!

[Guest Bronco]

Parsad,

 

Great feedback - appreciate it.  Understand you need to walk a fine line on some topics.

 

Was hoping this would start a good dialogue - get other peeple's input as to these questions.

 

 

[SmallCap]

Parsad,

 

I wouldn't feel too bad about RDN, MTG and PMI, I also invested in RDN equity in 2008 (it appeared to be the strongest capitalized in the industry), it sure seemed at the time like it was way undervalued. miraculously (more due to luck then skill) I made it out of RDN with a decent return. but I still consider RDN to be in my big mistake column. The biggest mistake I ever made was at the same time I invested in RDN I invested in a REIT CYRV using some of the same assumptions I had for RDN and that one really hurt my returns.

 

Both of those investments I made so many mistakes in my evaluation processes and I violated some of my rules and they came back to bit me.

 

So I know it doesn't make it any better but just know that you were not alone in your optimistic evaluation of RDN and company.

 

SmallCap