What are you buying today?

[LC]

Referring to IRM? I think so because the other companies I mentioned are well covered here.

 

Long term you are right - but I think this business and its customers are stickier than imagined. Record keeping for banks, lawyers, doctors, real estate, insurance....all the old professions... it's important and usually it's easier to keep paying the storage bill vs. finding alternatives.

 

Some of the ancillary uses of their space (fine art storage) are interesting - and it shows me management is not sitting around doing totally nothing.

 

They are leveraging existing customers and migrating them to digital recording and storage. There's only going to be more and more data. And a lot of these customers have been customers for years or decades. It's easier to keep paying IRM a modest fee (even as the client transitions from paper to digital) vs. an unproven incumbent. I mean, let's say Google or Amazon comes in and sells their datacenter space as a competitor. A couple of things IMHO would discourage this scenario: (1) it's simply not a sexy business, investors may see it as a sign of weakness that Google can't find any opportunities other than competing with hard drive space; (2) these tech companies are innovative but that is exactly the opposite of what a client wants. They want to make sure their records aren't the next ones to be hacked; (3) the tech co's are a bit opaque how they leverage customer data. amazon competing with 3rd party sellers, google leveraging cookie data - again, these clients do not want their data anonymized and analyzed for Bezos's or Zuck's benefit ; (4) history matters here - google may give a great deal now, but what happens in 5 years when they need to continue to show high % revenue growth and the client's annual fees are in goog's crosshair? do you pay the fee or switch to another provider? if you switch, now you have to manage millions of records being transferred, deleted, make sure nothing is corrupted, etc. etc.

 

So ultimately as to the moat - it's a business that is large enough where scale plays a role but small and boring enough to discourage large competitors. I think the overall dynamics of the business are neutral or trending down (data is ultimately cheaper than paper), but I think it's a bit like cigarettes in that it won't ever go away.

 

So I could be totally wrong, I think in the IRM thread I've said as much. I try not to reinvest too much here (but it looks so damn cheap - maybe I'm a sucker), but every quarter it sticks around, my cost goes down. It's a heads I win, tails I don't lose too much - at least IMHO.

[Castanza]

Referring to IRM? I think so because the other companies I mentioned are well covered here.

 

Long term you are right - but I think this business and its customers are stickier than imagined. Record keeping for banks, lawyers, doctors, real estate, insurance....all the old professions... it's important and usually it's easier to keep paying the storage bill vs. finding alternatives.

 

Some of the ancillary uses of their space (fine art storage) are interesting - and it shows me management is not sitting around doing totally nothing.

 

They are leveraging existing customers and migrating them to digital recording and storage. There's only going to be more and more data. And a lot of these customers have been customers for years or decades. It's easier to keep paying IRM a modest fee (even as the client transitions from paper to digital) vs. an unproven incumbent. I mean, let's say Google or Amazon comes in and sells their datacenter space as a competitor. A couple of things IMHO would discourage this scenario: (1) it's simply not a sexy business, investors may see it as a sign of weakness that Google can't find any opportunities other than competing with hard drive space; (2) these tech companies are innovative but that is exactly the opposite of what a client wants. They want to make sure their records aren't the next ones to be hacked; (3) the tech co's are a bit opaque how they leverage customer data. amazon competing with 3rd party sellers, google leveraging cookie data - again, these clients do not want their data anonymized and analyzed for Bezos's or Zuck's benefit ; (4) history matters here - google may give a great deal now, but what happens in 5 years when they need to continue to show high % revenue growth and the client's annual fees are in goog's crosshair? do you pay the fee or switch to another provider? if you switch, now you have to manage millions of records being transferred, deleted, make sure nothing is corrupted, etc. etc.

 

So ultimately as to the moat - it's a business that is large enough where scale plays a role but small and boring enough to discourage large competitors. I think the overall dynamics of the business are neutral or trending down (data is ultimately cheaper than paper), but I think it's a bit like cigarettes in that it won't ever go away.

 

So I could be totally wrong, I think in the IRM thread I've said as much. I try not to reinvest too much here (but it looks so damn cheap - maybe I'm a sucker), but every quarter it sticks around, my cost goes down. It's a heads I win, tails I don't lose too much - at least IMHO.

 

Thanks for sharing your thoughts.

[LC]

Yes and just for sizing purposes - it is currently a 7% position - started around 5%, went up to 10% as I bought more, now down to 7% due to market price declines and me allocating a greater % of funds elsewhere.

 

If the price were to run up (or the rest of the portfolio were to drop dramatically in relation) I would certainly trim a fair bit to offset my cost basis, also I think I need to keep it at-or-under a 7.5% position due to the uncertainty around the core business.

[lnofeisone]

Added to WFC, CLMT, started PGRE

[james22]

A little BRK.

[kab60]

Motorpoint PLC

[Mephistopheles]

WFC $25 strike leaps Jan 2022 at $5.15

[clutch]

couldn't resist BPY.UN...

[arcube]

WFC $25 strike leaps 2022 at $5.15

 

Are these Jan 21, 2022 expiry?

[Mephistopheles]

WFC $25 strike leaps 2022 at $5.15

 

Are these Jan 21, 2022 expiry?

 

Yes, I'll edit

[arcube]

WFC $25 strike leaps 2022 at $5.15

 

Are these Jan 21, 2022 expiry?

 

Yes, I'll edit

 

Thank you.

[arcube]

WFC $25 strike leaps 2022 at $5.15

 

Are these Jan 21, 2022 expiry?

 

Yes, I'll edit

 

Mephistopheles  - Do you mind sharing your thoughts on the size of this position and how you allocate?

[KJP]

Comcast

General Dynamics

Alexander's

[Spekulatius]

Comcast

General Dynamics

Alexander's

 

I also added GD  and TRV and restarted CMCSA and ORI.

 

Strange disconnect in the Market, some stocks go to the moon, others into the doghouse.

[HalfMeasure]

Comcast

General Dynamics

Alexander's

 

I also added GD  and TRV and restarted CMCSA and ORI.

 

Strange disconnect in the Market, some stocks go to the moon, others into the doghouse.

 

It seems there is no tolerance for owning things that "aren't working" (e.g. anything going down is broken), and no tolerance for not owning things that "are working" (e.g. FOMO). Everything feels very momentum driven, whether business/fundamental momentum (businesses doing well must certainly keep doing well) or merely price/sentiment momentum (stocks going up must certainly continue to go up).

[Mephistopheles]

WFC $25 strike leaps 2022 at $5.15

 

Are these Jan 21, 2022 expiry?

 

Yes, I'll edit

 

Mephistopheles  - Do you mind sharing your thoughts on the size of this position and how you allocate?

 

Sure. I have a mix of common and options. Bulk of it is common with some options at strikes 25, 27.5, 30. Options like <1% of portfolio. I bought today because WFC is near the lows from March, and cost of leverage was only about 10% + dividends. Meanwhile the stock is at like 75% of TBV. Depends on how this crisis plays out, I thing the banks are very well capitalized. Govt will never let them fail.  Zero or negative rates for long would hurt. Everyone says we will have same rates or lower for long. People act like we will never see high rates again but I don't think we can ever be so sure.

[arcube]

WFC $25 strike leaps 2022 at $5.15

 

Are these Jan 21, 2022 expiry?

 

Yes, I'll edit

 

Mephistopheles  - Do you mind sharing your thoughts on the size of this position and how you allocate?

 

Sure. I have a mix of common and options. Bulk of it is common with some options at strikes 25, 27.5, 30. Options like <1% of portfolio. I bought today because WFC is near the lows from March, and cost of leverage was only about 10% + dividends. Meanwhile the stock is at like 75% of TBV. Depends on how this crisis plays out, I thing the banks are very well capitalized. Govt will never let them fail.  Zero or negative rates for long would hurt. Everyone says we will have same rates or lower for long. People act like we will never see high rates again but I don't think we can ever be so sure.

 

Thank you.

[kab60]

More BRK

[Ballinvarosig Investors]

I have been buying Markel. Never thought I would be given a chance to get it at a cheap price again, but here we are. Looks like it's slightly better value than Berkshire to me as well.

[Broeb22]

I have been buying Markel. Never thought I would be given a chance to get it at a cheap price again, but here we are. Looks like it's slightly better value than Berkshire to me as well.

 

Some on this board hate FRFHF/FFH, but what are your thoughts on MKL relative to FFH? Do you just like the S&P500 plus portfolio returns Markel delivers better than the deep value dumpster-diving Prem prefers? FFH seems pretty cheap right now too, and I've considered adding to my baby position.

 

There is a whole lot more pessimism built into FFH right now because people don't believe the investment results will be good going forward. From 60% of book, they don't have to be great to get a decent return in the equity. But I think investing is hard, and Prem is fundamentally a good investor who made a couple large bad bets (particularly deflation hedge which might have become pretty valuable around now) which really dented performance. If you back out the losses from that large bet, results are only mediocre since 2010.

[clutch]

There is a whole lot more pessimism built into FFH right now because people don't believe the investment results will be good going forward. From 60% of book, they don't have to be great to get a decent return in the equity. But I think investing is hard, and Prem is fundamentally a good investor who made a couple large bad bets (particularly deflation hedge which might have become pretty valuable around now) which really dented performance. If you back out the losses from that large bet, results are only mediocre since 2010.

 

A couple? NO.

[Castanza]

MSGS, BRK

[TwoCitiesCapital]

WFC $25 strike leaps 2022 at $5.15

 

Are these Jan 21, 2022 expiry?

 

Yes, I'll edit

 

Mephistopheles  - Do you mind sharing your thoughts on the size of this position and how you allocate?

 

Sure. I have a mix of common and options. Bulk of it is common with some options at strikes 25, 27.5, 30. Options like <1% of portfolio. I bought today because WFC is near the lows from March, and cost of leverage was only about 10% + dividends. Meanwhile the stock is at like 75% of TBV. Depends on how this crisis plays out, I thing the banks are very well capitalized. Govt will never let them fail.  Zero or negative rates for long would hurt. Everyone says we will have same rates or lower for long. People act like we will never see high rates again but I don't think we can ever be so sure.

 

I dunno - I think everyone is saying that rates will go lower because they've been tired of being wrong for the last 12-years.

 

It was just as recently as 2018 when no one wanted to own bonds and were sure that rates were headed higher. Basically, since 2008 people have been saying rates can't get any lower. And despite certain bounces off local-lows like the taper tantrum and post-Brexit moves, the general trend for the last 10-years has been lower with new lows in rates set every few years...because the economic environment demands lower rates.

 

I don't see that changing just because people are finally throwing in the towel after 12-years of being underweight duration and wrong. They're only beginning to see the light and that may change 6-months from now when people may, once again, be clamoring for higher rates saying the bottoms are in and there is no way rates can go lower.

 

Rates will fluctuate in the short-term, but my guess is the 10-year doesn't go anywhere near 2% for the next few years. As a point of reference, the recent high was ~3.25% in 2018 at the middle of the rate hiking cycle.

[Mephistopheles]

 

Sure. I have a mix of common and options. Bulk of it is common with some options at strikes 25, 27.5, 30. Options like <1% of portfolio. I bought today because WFC is near the lows from March, and cost of leverage was only about 10% + dividends. Meanwhile the stock is at like 75% of TBV. Depends on how this crisis plays out, I thing the banks are very well capitalized. Govt will never let them fail.  Zero or negative rates for long would hurt. Everyone says we will have same rates or lower for long. People act like we will never see high rates again but I don't think we can ever be so sure.

 

I dunno - I think everyone is saying that rates will go lower because they've been tired of being wrong for the last 12-years.

 

It was just as recently as 2018 when no one wanted to own bonds and were sure that rates were headed higher. Basically, since 2008 people have been saying rates can't get any lower. And despite certain bounces off local-lows like the taper tantrum and post-Brexit moves, the general trend for the last 10-years has been lower with new lows in rates set every few years...because the economic environment demands lower rates.

 

I don't see that changing just because people are finally throwing in the towel after 12-years of being underweight duration and wrong. They're only beginning to see the light and that may change 6-months from now when people may, once again, be clamoring for higher rates saying the bottoms are in and there is no way rates can go lower.

 

Rates will fluctuate in the short-term, but my guess is the 10-year doesn't go anywhere near 2% for the next few years. As a point of reference, the recent high was ~3.25% in 2018 at the middle of the rate hiking cycle.

 

Will we have zero interest rates in 10 years? Maybe. But what does that mean for income for banks and their valuation? NIM will suffer of course, but I suspect non-interest income will play more of a role in banking profits. Secondly even if interest income and net income suffers, valuations should hold up or expand right? At zero interest rates, normalized valuations could be 20+.

 

Willing to bet on WFC is at like 10x 2010 earnings.

[TwoCitiesCapital]

 

Sure. I have a mix of common and options. Bulk of it is common with some options at strikes 25, 27.5, 30. Options like <1% of portfolio. I bought today because WFC is near the lows from March, and cost of leverage was only about 10% + dividends. Meanwhile the stock is at like 75% of TBV. Depends on how this crisis plays out, I thing the banks are very well capitalized. Govt will never let them fail.  Zero or negative rates for long would hurt. Everyone says we will have same rates or lower for long. People act like we will never see high rates again but I don't think we can ever be so sure.

 

I dunno - I think everyone is saying that rates will go lower because they've been tired of being wrong for the last 12-years.

 

It was just as recently as 2018 when no one wanted to own bonds and were sure that rates were headed higher. Basically, since 2008 people have been saying rates can't get any lower. And despite certain bounces off local-lows like the taper tantrum and post-Brexit moves, the general trend for the last 10-years has been lower with new lows in rates set every few years...because the economic environment demands lower rates.

 

I don't see that changing just because people are finally throwing in the towel after 12-years of being underweight duration and wrong. They're only beginning to see the light and that may change 6-months from now when people may, once again, be clamoring for higher rates saying the bottoms are in and there is no way rates can go lower.

 

Rates will fluctuate in the short-term, but my guess is the 10-year doesn't go anywhere near 2% for the next few years. As a point of reference, the recent high was ~3.25% in 2018 at the middle of the rate hiking cycle.

 

Will we have zero interest rates in 10 years? Maybe. But what does that mean for income for banks and their valuation? NIM will suffer of course, but I suspect non-interest income will play more of a role in banking profits. Secondly even if interest income and net income suffers, valuations should hold up or expand right? At zero interest rates, normalized valuations could be 20+.

 

Willing to bet on WFC is at like 10x 2010 earnings.

 

I'm tired of addressing the low rates = high multiples argument so I won't really go into the details.

 

But if rates are at 0% because inflation/growth is 0, or negative, than no - you won't have 20x multiples on equities. Just like we didn't have 20x multiples on equities in the Great Depression when rates were near 0. Just like Europe hasn't had 20x multiples on its equity indices for the bulk of the recovery despite low/negative interest rates.

 

And to expect that on equity markets as a whole is one thing. To expect it on bank stocks whose primary form of revenue/income has been decimated and needs to be replaced with a fundamentally new business model seems foolish.