What percentage of your portfolio is in Fairfax Financial?

[coc]

Sorry, it seems Sanjeev and I responded at similar times and made many similar points. The only area we seem to disagree on is that small investors should focus on small areas. My only point here is that, while that absolutely may be a fruitful area to look, it is certainly not a prerequisite for excellent performance. Buffett and many others have proven (in my eyes) that larger companies ($500M+) provide hordes of opportunities to patient and shrewd investors.

[Parsad]

Hi Coc,

 

I don't disagree.  My point, which is similar to what Rick was trying to say, is that generally with small sums of money, you have a greater probability of better long-term results by investing in small, less-followed companies.  The operative word being "less-followed", not "small". 

 

It's just that the majority of stocks with little analyst coverage are small stocks.  As well, if you can combine that with a large enough position where you may be able to influence management to enact shareholder-friendly initiatives, the results can be substantial.

 

But to do well, you do not have to do that.  There are plenty of unliked, disparaged, large companies, that from time to time will be very attractively priced.  The opportunities just won't be quite as plentiful.  Cheers!

[rick_v]

Parsad with all due respect, I don't need you to "save me some pain" as its quite clear I manage way more AUM than you and I have been in the game longer as well.

 

What you are misconstruing is an attempt to refocus young investor's minds in seeking alpha (which means out performance btw) as opposed to buying and holding the cult stocks which goes against the very principles of value investing.

 

Further, your effort to try and rationalize everyones performance into one type of scenario proves that you have yet to fully grasp the power of value investing, and experience the results first hand by riding such plays, I don't think anything that I have said on this board would allow you or anyone to think that I am some gung ho investor throwing 100% of my capital in any one play.

 

I manage a family fund which exceeds $100M in permanent capital, comprised mostly of my family's net worth. I have built this fund over two decades from single millions by focusing on out of favor companies trading at a deep discount to intrinsic value. In addition my family and I are always on the search for young and gifted managers to deploy our capital with. We have capital with Greenlight, Third Point, and other gifted managers.  Something I thought I could find here. I am originally from Hong Kong.

 

Finally, I wasn't trying to convince anyone of anything, I merely said how disappointing it would be if the young or professional investors on this board were constructing their portfolios with FFH and BRK forming the majority as that is 100% not the way to generate alpha (again for those who are not familiar alpha = out-performance)

 

With regards to spotting small cap value plays, they exist and each and every year I find at least a handful. That doesn't mean my entire portfolio is running at 100-200% per year, naturally there are capital allocation decisions and in my case I only contribute a small amount of our portfolio to such plays. But on average, they generate significant returns and in my earlier days I did bet larger on each individual play because I had to.

 

Here are some Examples:

 

DTG 2008-2010

JMBA 2008-2010

XJT 2009-2010

VG 2009-2010

TA  2008-2010

 

There are many, many more and we have made millions of dollars on these plays. Before this period there were even greater opportunities.

 

Frankly, this part of my portfolio didn't even get hurt that bad in the "great crash" the part that got hurt were the larger capitalization companies.

 

I guess this also has to do with what type of an individual you are as well. If you are a leader you naturally gravitate towards generating your own investment ideas. Otherwise you just follow others... Buffet, Prem and all your other idols are all leaders.

 

I think this is somewhat of a wake up call to some of you. Its reminiscent of the Li Lu lecture at Columbia when he couldn't believe the students had all this data and knowledge but couldn't damn put it all together.

 

If you are truly seeking to master the concept of value investing and have a permanent base of capital, you should be generating your own ideas.

 

Good Luck to All!

 

After seeing Coc's second post I have decided to no longer post on this board. Coc I am 100% certain you are an academic.

 

Best!

 

[zippy1]

 

I manage a family fund which exceeds $100M in permanent capital, comprised mostly of my family's net worth. I have built this fund over two decades from single millions by focusing on out of favor companies trading at a deep discount to intrinsic value.

 

If one started with 1 million and compounded to 100M in 20 years, that is 26% CAGR per year.

If one started with 3 millions and compunded to 100 M in 20 years, that is 19% CAGR per year.

If one started with 5 millions and compunded to 100 M in 20 years, that is 16% CAGR per year.

If one started with 1 single  million  and compunded at 50% CAGR, it is 3.3billion now.

[coc]

Parsad with all due respect, I don't need you to "save me some pain" as its quite clear I manage way more AUM than you and I have been in the game longer as well.

 

What you are misconstruing is an attempt to refocus young investor's minds in seeking alpha (which means out performance btw) as opposed to buying and holding the cult stocks which goes against the very principles of value investing.

 

Further, your effort to try and rationalize everyones performance into one type of scenario proves that you have yet to fully grasp the power of value investing, and experience the results first hand by riding such plays, I don't think anything that I have said on this board would allow you or anyone to think that I am some gung ho investor throwing 100% of my capital in any one play.

 

I manage a family fund which exceeds $100M in permanent capital, comprised mostly of my family's net worth. I have built this fund over two decades from single millions by focusing on out of favor companies trading at a deep discount to intrinsic value. In addition my family and I are always on the search for young and gifted managers to deploy our capital with. We have capital with Greenlight, Third Point, and other gifted managers.  Something I thought I could find here. I am originally from Hong Kong.

 

Finally, I wasn't trying to convince anyone of anything, I merely said how disappointing it would be if the young or professional investors on this board were constructing their portfolios with FFH and BRK forming the majority as that is 100% not the way to generate alpha (again for those who are not familiar alpha = out-performance)

 

With regards to spotting small cap value plays, they exist and each and every year I find at least a handful. That doesn't mean my entire portfolio is running at 100-200% per year, naturally there are capital allocation decisions and in my case I only contribute a small amount of our portfolio to such plays. But on average, they generate significant returns and in my earlier days I did bet larger on each individual play because I had to.

 

Here are some Examples:

 

DTG 2008-2010

JMBA 2008-2010

XJT 2009-2010

VG 2009-2010

TA  2008-2010

 

There are many, many more and we have made millions of dollars on these plays. Before this period there were even greater opportunities.

 

Frankly, this part of my portfolio didn't even get hurt that bad in the "great crash" the part that got hurt were the larger capitalization companies.

 

I guess this also has to do with what type of an individual you are as well. If you are a leader you naturally gravitate towards generating your own investment ideas. Otherwise you just follow others... Buffet, Prem and all your other idols are all leaders.

 

I think this is somewhat of a wake up call to some of you. Its reminiscent of the Li Lu lecture at Columbia when he couldn't believe the students had all this data and knowledge but couldn't damn put it all together.

 

If you are truly seeking to master the concept of value investing and have a permanent base of capital, you should be generating your own ideas.

 

Good Luck to All!

 

After seeing Coc's second post I have decided to no longer post on this board. Coc I am 100% certain you are an academic.

 

Best!

 

 

I don't know what to tell you rick_v. I'm sorry you've made that decision. I'd appreciate you not saying things like "I am 100% certain you are an academic" when you are 100% wrong.  

 

At the end of the day, here was your point:

 

"Seeking out value in your own plays, specifically plays under $250M is the way to go. As you manage more capital you can look at under $1b companies as well. But to truly generate significant alpha you are gonna have to go there. And when I say significant alpha I am not even talking about 20-30% per year, I am talking about finding the 10 baggers, the 5 baggers, the 20 baggers. The ones that can be found with a lot of work, permanent capital, and patience."

 

I made a lot of arguments to the contrary, but you ignored all of them in favor of re-affirming your prior belief. Only micro-cap value can generate your "truly significant alpha."

 

The sad part is that I agree with you about generating ones own ideas (and you'll notice I never said anything to the contrary), but you're too high on your horse to read my posts and respond to them.

 

[Uccmal]

Thanks coc/Sanj for your voices of sanity. 

 

Never mind defining Alpha?  Can you define Buffoon?

 

Ego always blows apart at some time.  Does thinking about ideas all day, and talking with people, and reading science and business, and psychology qualify as working 16 hours per day?

 

To get 16% returns as per Zippy's calculations takes some skill but is not that difficult.  It falls into the realm of price is what you pay, and value is what you get.  If you get FFH at a discount where it has been trading for over a year (until this summer) then you get FFH's returns plus the return to value component which takes you way above their returns. 

 

Repeat above with other companies and protect your ass.

 

A.

[Guest dealraker]

In order to be good stewards of this board--- do we have to believe the returns claimed by some of the posters? 

[premfan]

Omg there is no right or wrong way to do anything.  It comes down to personal choice/time/effort.  I absolutely agree with all of rick's points though.  Its defining what your expections are . Once you have a expection use any framework + keep improving your process to get the desired result. Rick is throwing his own personal expection about finding multi baggers on people that dont want to  give the effort to find them. The limiting belief is that  i cant get outsized gains because i'm not smarter than prem, buffet or etc. Put the work in and keep improving your process and get there. Or copy prem/buffet/ or etc's holdings and go play golf. No worries its a personal choice.

[doc75]

Rick_V, if you're still reading:  I'd like to echo Coc's comments and say I'm sad to see you've made the decision to stop posting.  As a novice, I found your ideas to be very interesting and informative, particularly since they are different than many other posters'.  I sometimes agree and sometimes disagree, but frankly that's like saying Paris Hilton agrees/disagrees with Stephen Hawking on the nature of black holes.  I've looked into each company you mentioned simply to practice my analytical skills.  Same goes for Harry Long and a number of other posters on here.

 

I find this board to be amazingly informative and at the same time perplexing.  For the life of me I can't understand how or why such intelligent and rational people could be so insulted (and be so insulting!) over someone disagreeing with their opinions.  It's strange that people who are so talented at stripping emotion out of their investment decisions could be unable to strip emotion out of their *discussion* of investment decisions... particularly when the discussion arises on an anonymous electronic forum!

 

THat's not a judgement, just an observation.

 

Rick_V,  Harry Long and Munger (to name three)  have all recently shared insight based on their own rich analysis.  Some of their posts have led to passionate debates that have brought up some very good points of finance and some pretty ugly bits of human nature.  It seems the general source of friction is a simple conflict of egos:  "preachy" posts on both sides of the argument.  Being a novice, I find the extreme self-confidence more amusing than annoying, and I learn a lot from the debates.  But it's pretty sad if it ends with people no longer posting.  I'm being selfish here: I learn a lot from you folks!

 

In any case, thanks to everyone for sharing their ideas!  I hope it continues!

[Parsad]

Parsad with all due respect, I don't need you to "save me some pain" as its quite clear I manage way more AUM than you and I have been in the game longer as well.

 

Yes, that is why you private messaged me a while ago to ask me how much money other posters on the board manage when you disagreed with them.  At the time, I told you that some people manage lots of money and some manage smaller sums.  That you would not know if someone held one share of Fairfax or thousands.  

 

Frankly, I couldn't give a rat's ass how much money you manage.  There are alot of assholes who manage alot of money and do a shitty job.

 

What you are misconstruing is an attempt to refocus young investor's minds in seeking alpha (which means out performance btw) as opposed to buying and holding the cult stocks which goes against the very principles of value investing.

 

Like I really didn't know what "alpha" meant.  It's probably the most overused, overhyped word in the financial industry lexicon these days.  Usually used by guys who don't know what they are doing.

 

I manage a family fund which exceeds $100M in permanent capital, comprised mostly of my family's net worth. I have built this fund over two decades from single millions by focusing on out of favor companies trading at a deep discount to intrinsic value.

 

Usually means inherited wealth.  As someone posted, over twenty years your compound return is far less than what you were suggesting.

 

I guess this also has to do with what type of an individual you are as well. If you are a leader you naturally gravitate towards generating your own investment ideas. Otherwise you just follow others... Buffet, Prem and all your other idols are all leaders.

 

I think this is somewhat of a wake up call to some of you. Its reminiscent of the Li Lu lecture at Columbia when he couldn't believe the students had all this data and knowledge but couldn't damn put it all together.

 

I think the members on this board have generated more original ideas than any other board I've visited in the last decade.  The funny thing is, many of the managers you invest in, and the people you say are leaders, read this board!  So I'm guessing we do have something pertinent to say once in a while and the boardmembers here have something to contribute.

 

After seeing Coc's second post I have decided to no longer post on this board. Coc I am 100% certain you are an academic.

 

No worries...your membership has been cancelled and somehow the other boardmembers will survive.  I do not have the time or patience to sit here and massage egos.  And frankly if Coc, or anyone else for that matter, is or isn't an academic, I don't care...I hope to just try and learn something from him and everyone else on here.  You would have done yourself a favor by engaging him, rather than insulting him.   Cheers!

[Uccmal]

Hi doc75,  I appreciate your sentiments re:  member's egos etc.  But, in two messages Rick_v managed to trash a mode of investing that had been successful for me over and over.  He did the same with systems others use.  His results apparently are no better than those of anyone else on the board with similar levels of experience.  We can sort of do without that behaviour.  The moment someone says that something in investing is "black and white" is the moment I lose all respect for them. 

[doc75]

Hi doc75,  I appreciate your sentiments re:  member's egos etc.  But, in two messages Rick_v managed to trash a mode of investing that had been successful for me over and over.  He did the same with systems others use.  His results apparently are no better than those of anyone else on the board with similar levels of experience.  We can sort of do without that behaviour.  The moment someone says that something in investing is "black and white" is the moment I lose all respect for them. 

 

I re-read my message and maybe it appears I was taking a "side", so to speak. My comment about "ugly bits" of human nature was a general observation, not finger pointing at anyone in particular... though in retrospect I suppose the "ugly bits" could have referred to the d*ck measuring contests that inevitably results when egos clash.

 

Anyway, I think most would agree the board is at its best when there's debate without trash talk or pomposity.  I mostly wanted to point out the disparity between dispassionate investing and dispassionate posting.  I just ignore posts with a really pompous or condescending tone.  But maybe my lack of financial ideas makes it difficult for me to know what it feels like for someone to insult them!

 

And I still think it's best if people like rick_v, who clearly has interesting things to say, continue to post.

 

ps:  I agree about the black-and-white.  A disagreement quickly gets ugly when one side refuses to concede anything to the other, even if that concession is simply "I see your point, but I disagree.".  Some people see their path as absolute truth.  I have a friend who's a financial idiot but believes he is a guru on the subject  of women.  He knows what's best for everybody, with certainty. 100%. Don't argue.  It's bloody annoying at times, but once you get used to it, it provides fantastic entertainment. :)

 

 

[doc75]

Hi doc75,  I appreciate your sentiments re:  member's egos etc.  But, in two messages Rick_v managed to trash a mode of investing that had been successful for me over and over.  He did the same with systems others use.  His results apparently are no better than those of anyone else on the board with similar levels of experience.  We can sort of do without that behaviour.  The moment someone says that something in investing is "black and white" is the moment I lose all respect for them. 

 

And Al... Of all posters on here, I've learned possibly the most from you and Ericopoly! 

[Partner24]

I've red the further posts since the last time I've writen something.

 

As I've already said, as this board grow, it might be harder and harder to keep it's long term culture intact (respectful, pragmatic, long term oriented, less Wall Street oriented, etc.).

 

It's just my two cents, but we must remain vigilant, because if we don't, it's culture will get really diluted and we'll lose our footprint in the World Wide Web.

 

Cheers!

 

 

 

[rranjan]

I read this thread from start to end after refinishing my floors( btw, It came out very nice or may be after hard work results feel way better). Not for anyone specific but I think we all should tone down a bit if other person has different view point. Simply agree to disagree. I do think some of the Ricks's points were simply not backed by any fact. On top of that , the tone for making any point doesn't need to be harsh at all.

 

Having said that, I think counter reaction can be also expressed differently even if some one crossed the line. Give the benefit of doubt 1-2 times. Some time people go overboard while trying to make their point and cross the limit. Easiest option is to refute it with verifiable fact. Rick claimed that even 30% per year return is not good but even his own stated, not verified, record with permanent base of capital does not support his claim. I was going to point that out then I saw some one already did it.

 

In some other thread, there was suggestion to limit the number of people to keep the discussion civil but as long as Parsad doesn't mind extra work involved with having extra members, I think it's a bad idea. No need to make it a closed group other wise no new member, who might add great value to discussion, will be able to join us.

 

As Partner24 pointed out -  If we remain vigilant as a group, 90% job is done. For the rest, Parsad can use his judgement to moderate, private message or outright cancel the membership. But remaining vigilant also include not going over board with counter argument even if counter argument is very sound.  Same point can be made in better way.

 

I am not preaching by long shot because collective wisdom of this board will most likely reach to right conclusion most of the time but some time heated counter argument, even if right, goes too far.

[Guest Bronco]

Rick v - it is a shame you had to take your ball and go him. I think disagreements are constructive and good...can also be fun.  No need to get personal though.

[oec2000]

FFH price 1990: $11.

FFH price 2010: $400.

Guess what? Someone who had invested "single millions" in FFH 20 years ago would, with dividends reinvested, today have >$100m - just being a couch potato.

 

coc, thanks for calling a spade a spade. You should post more!

 

 

[vinod1]

COC,

 

What an outstanding first post! I have a word document of comments on this board that I want to re-read and your first post went right into it. I hope to have the pleasure of reading more of your comments. Thank you!

 

Vinod

[cwericb]

I just got caught up on this board a few minutes ago and would like to add my two cents worth.

 

There is a fine line between discussion and argument. If we were all in agreement with everything said on this board and we simply patted each other on the back, the board would be a waste of time.

 

A good example of the value of this board is the FBK thread. Usually SD takes an optimistic view of the company, while Cardboard leans more towards the pessimistic side. Just when I get a little over enthusiastic about the company’s future, Cardboard brings me back to reality. They are respectful of one another, but often see things differently leaving the reader to use his own judgement as to how to view each posters views and make a more informed decision about investing in the company. That is the true value of this unique board. It is an exchange of ideas and thoughts -positive and negative. Let’s have lots of disagreement, but let’s try and keep the egos and rhetoric down to the point where no one gets insulted.

 

I think that it might have been a knee jerk reaction on rick_v’s part to depart the board and he probably would have reconsidered after he cooled off and realized that even he is not 100% right 100% of the time. But it was also perhaps a little harsh of ‘The Boss’ to kick him out. But that is his prerogative. Without Sanjeev this very unique board wouldn’t exist and someone has to keep the kooks out - and I am not referring to rick_v by that remark. But when a decision is taken to bar an active member from the board maybe we should take a poll? Comments?

[Sea Island]

Rick resigned before being asked to leave

[twacowfca]

My personal pref would have been to encourage him to stay despite the supercilious attitude because he had some good ideas, but Sanj was privy to even more of that attitude through emails.  You have my full support, Sanj.

[Guest longinvestor]

I just got caught up on this board a few minutes ago and would like to add my two cents worth.

 

There is a fine line between discussion and argument. If we were all in agreement with everything said on this board and we simply patted each other on the back, the board would be a waste of time.

 

A good example of the value of this board is the FBK thread. Usually SD takes an optimistic view of the company, while Cardboard leans more towards the pessimistic side. Just when I get a little over enthusiastic about the company’s future, Cardboard brings me back to reality. They are respectful of one another, but often see things differently leaving the reader to use his own judgement as to how to view each posters views and make a more informed decision about investing in the company. That is the true value of this unique board. It is an exchange of ideas and thoughts -positive and negative. Let’s have lots of disagreement, but let’s try and keep the egos and rhetoric down to the point where no one gets insulted.

..... Without Sanjeev this very unique board wouldn’t exist and someone has to keep the kooks out - and I am not referring to rick_v by that remark. But when a decision is taken to bar an active member from the board maybe we should take a poll? Comments?

I am backing Sanjeev on this. Read the part about rick_v private messaging Sanjeev asking about how much money folks on this board manage. That is over the top. The message and the messenger are both screwed up!

 

Like you say, many here like opposing viewpoints but not pompousness. There are plenty of msg boards out there, Yahoo for one for demented folks. No pollution needed here.

 

 

[coc]

Thanks oec and vinod...I hope to continue posting when I have something useful to say. I just find it incredibly hard to argue with someone who uses statements like "This is a black and white argument" or "There is no room for debate" or "It is simply a fact that..." or "I am 100% certain that..." I don't believe the world of business is that clear-cut.

 

The unfortunate part is that rick_v is clearly an intelligent person and him and I probably agree on a lot more things than we disagree on, but my efforts to provide another side to what is "common wisdom" in value investing circles was met with personal attacks and "my way or the highway" type arguments.

 

Just to make myself clear, because I feel mine and some other posters' arguments were twisted around in an effort to make things black and white, here's the core of our argument:

 

1. There are plentiful attractive investment ideas in larger companies. One does not need to restrict themselves to small companies to find highly successful investments. I tried to illustrate this point by going through some of Buffett's most successful investments, a number of which were in well-known, but at the time unloved, companies. This was in response to "Seeking out value in your own plays, specifically plays under $250M is the way to go. As you manage more capital you can look at under $1b companies as well. But to truly generate significant alpha you are gonna have to go there."

 

2. Investment return expectations can get unreasonably high. I presented the track records of the "greats" to illustrate how difficult it would be to earn 30-50% CAGR on any amount of capital. Unfortunately, this was met with a straw man that "8-9% annually simply won't make you rich." Again, I'm against expecting unheard-of returns, not saying you should accept paltry returns and take up golf. This was in response to "And when I say significant alpha I am not even talking about 20-30% per year." and "People like Prem or Buffet didn't get to where they are by being passive investors looking for 8-9% a year."

 

3. There is no shame in sticking with a few companies you know well. An incredible amount of wealth has built this way by "amateurs" and professionals alike. I used this point to illustrate that there are no "degree-of-difficulty" points in investing. There are so many paths to heaven here. Because this board is centered around Fairfax, I used that as a good illustration of this concept.

 

This was in response to "But if you are a young and passionate value investor or a fiduciary that has represented your skills to partners, it is completely pathetic to buy and hold BRK or FFH and think you are going to generate any alpha, or get RICH for that matter."

 

Well, fortunately for these pathetic people, a lot of "alpha" has been generated holding Fairfax and it's not a $200B company like BRK yet. And apparently Ruane, Cunniff is a pathetic firm for holding BRK from inception until present day. I think Buffett might disagree with that statement.

 

I did not say the following:

 

1. You should ape Buffett or Hamblin-Watsa's picks and go home.

2. It is "better" to invest in large companies than small ones.

3. There aren't a plethora of opportunities in unknown companies.

3. It's OK to be lazy and accept paltry returns if you're a professional.

 

At the end of the day, I believe open-mindedness is a big asset if you're an investor. This is not physics, there are few absolutes.

 

I also, probably shooting myself in the foot here, need to say that I'm automatically a little skeptical of someone talking about "out of this world alpha generation" and "value type plays." That just struck me as odd, but as I said above, rick_v has been a solid contributor to the board and he, like me, is not a caricature: he seems to have many great ideas and some ideas I totally disagree with.

 

[stahleyp]

i love this website, but this post is really quite unfortuate. we are all value investors. some are better investors than others. most, if not all, of you guys are better than me!

 

live and let live!

[Guest longinvestor]

"The most difficult thing to do for many investors is to sit in the middle of the room and not do anything at all" is a great line (WEB?) that comes to mind when someone suggests that the only way to find values is to keep fishing for 16-17 hours a day.

 

Now if working means reading voracaiously for many hours a day, that is great. We know that the superstars do that kind of reading which helps them filter out most ideas which are not true values. Nothing wrong with that kind of "staying busy". Suspect some on this board have zeroed in a few names, notably FFH and BRK after going this route despite Rick_v's  broad brush (mis)characterization. The historical context of these days is that there are/were a plethora of value plays out there including FFH and BRK themselves! Lifetime opportunities these. Value folks can ill afford to miss this opportunity.