Current Holdings

[JBird]

BRK-- 76%

LUKOY-- 13%

Cash-- 11%

[wachtwoord]

MSFT	19.34
CSCO	 9.81
INTC	 8.38
BBY 	 6.63
ARO	 6.36
DELL	 6.09
EXC	 6.00
JNJ	 5.56
NVS	 4.71
WU	 4.03
SD	 3.97
NOV	 3.68
CHL	 3.66
AZN 	 3.37
NOK	 3.24
BBRY	 3.00
BAMM	 2.16

 

I'm currently contemplating letting go of BBY and am looking into ENB and CHRW.

[LC]

Nate, I've been meaning to ask you this for a while now: why do you choose to invest with a net-net basket approach a la Graham? I am sure you know Warren and Charlie's take on the question. I am curious what the reasoning is behind your choice of investing philosophy.

 

Louis

[ericd1]

50% BRK.  Stock and calls

20% BAC.  Stock, warrants, calls

15% AIG.  Warrants

5%  Other (too many ideas)

10% Cash

 

 

 

 

[oddballstocks]

Nate, I've been meaning to ask you this for a while now: why do you choose to invest with a net-net basket approach a la Graham? I am sure you know Warren and Charlie's take on the question. I am curious what the reasoning is behind your choice of investing philosophy.

 

Louis

 

Louis, good question.  I know myself, and I know I'm not Buffett or Munger, I have no hope of having investing returns like they did when they were small.  Buffett is truly a genius, I look at him like a star athlete.  He has a natural talent that I don't have, and no matter how hard I practice or try I will never perform at the superstar level.

 

On the other hand Graham laid out a great investing philosophy that can be implemented by anyone.  I will never become a billionaire, but I believe over the long term performance will be acceptable, and more importantly risk will be under control.  The greatest example is Walter Schloss, he continued to apply Graham's practices decade after decade.  He did 15% over the LONG term.  I think that's a reasonable goal, if I were to hit 15% over the long term I'd be very satisfied.

 

Realize my goals are different as well.  I'm investing my own money.  I can understand how someone managing OPM might want to shoot for incredible returns in an effort to attract investors and earn more money for themselves through fees.

 

I think a lot of people look at Graham's style of investing as too pedestrian, it's simple and boring.  Most in finance are smart, very smart, and doing something simple and boring isn't exciting, in some cases people view it as "below them."  It's much more exciting to dig into the nitty gritty of companies, talk to managements, model out the future rather than buying junky little companies below book value or below NCAV and holding.

 

Someone else asked how I can keep track of my portfolio, it's simple, it doesn't require much time at all.  Most companies I own don't report anything except maybe an annual report and possibly an interim report.  For example, Carlo Gavazzi reports in June and November.  It takes me about 30m to read each report, so 1 hr a year to keep up with that position.  Many of my tiny US companies send an annual report once a year that I can read in 15m or less.

 

The beauty of investing in boring, sleepy companies is that I am now worried that I don't hear any information for a year.  In almost all cases almost nothing has changed, the companies continue to execute as they have for generations.  Sometimes I'll get a random letter in the mail from a company announcing an acquisition or a record quarter, but mostly it's quiet.

 

If I were invested in a number of names with high newsflow I'm not sure how I'd keep up with them.  Right now I don't need any filter on my information, if I'm sent something by a holding it's important, so I just read it.

 

Hope this helps!  As seen from most portfolios posted investing in sleepy, boring, junky companies isn't for everyone.

 

One last thought, as to Buffett's thoughts on this, there was a video posted on neatvalue.com (looks like the site is dead now) where someone asked how Buffett would invest if he managed less than $10m.  He said he'd do the low book value stocks and below working capital stocks, like what he did with the Korean net-nets.  Then he quickly went on to say that he can't do that because he's much more successful.  I don't have anywhere near $10m, so there's no need to invest as if I manage billions. 

[beerbaron]

ALS.TO

BRK.B

SBSI

BK

MRVL

FFH

RCH.TO

 

Cash= 27%

[Uccmal]

Oddball, An interesting approach.  I believe Walter Schloss' returns were above 20% before partnership fees.  That is, If Walter had been investing only for himself he would have made about 20%.  Either way it creams the markets. 

[Packer16]

You are correct the 2 folks who followed the more diversified approach (Schloss & Tweedy Brown) outperformed the market on average 13% (before fees) and about 9% (after fees).

 

Packer

[oddballstocks]

You are correct the 2 folks who followed the more diversified approach (Schloss & Tweedy Brown) outperformed the market on average 13% (before fees) and about 9% (after fees).

 

Packer

 

There's a section on Tweedy in The Money Masters that states that for a while in the 1960s and 1970s Tweedy only purchased net-nets at 2/3 of NCAV and sold at 1x NCAV.  They purchased anything and everything that met their criteria and their returns were great.  The problem was they eventually outgrew this strategy and adapted as they took on more money.

 

I would be happy with Schloss/Tweedy type returns.

[Gopinath]

Biglari Holdings Inc - 15%

Leucadia National Corp - 9%

DIRECTV - 8%

Bank of America Corp - 7%

SandRidge Energy Inc. - 7%

Fiat S.p.A. (ADR) - 6%

Chesapeake Energy Corp - 6%

VistaPrint Limited - 6%

J.C. Penney Company - 3.5%

FirstService Corp - 3.5%

EXCO Resources Inc - 3%

Chanticleer Holdings Inc - 3%

Misc(statistical bargains) - 12%

Cash - 11%

 

The cash will likely be consumed in few weeks as I am working on an idea may result in 5 - 10 bagger in few years.

[giofranchi]

The cash will likely be consumed in few weeks as I am working on an idea may result in 5 - 10 bagger in few years.

 

I really hope you will share that idea with the board!! ;)

 

giofranchi

[bennycx]

 

The cash will likely be consumed in few weeks as I am working on an idea may result in 5 - 10 bagger in few years.

 

One of the biggest problems I have is confirmation bias, as in working on an idea to confirm that I want to buy it and not to find out more about the company. To try and prevent that, whenever I have an interesting idea I would try to force myself to think that it is only an interesting idea and to think of all the potential negatives about the idea. Previously I always have the thought at the back of my head that this stock is going to be a 10 bagger etc etc, and because of that I missed out on all the potential downfalls believing that the upside more than compensates it ...

[Kraven]

You are correct the 2 folks who followed the more diversified approach (Schloss & Tweedy Brown) outperformed the market on average 13% (before fees) and about 9% (after fees).

 

Packer

 

There's a section on Tweedy in The Money Masters that states that for a while in the 1960s and 1970s Tweedy only purchased net-nets at 2/3 of NCAV and sold at 1x NCAV.  They purchased anything and everything that met their criteria and their returns were great.  The problem was they eventually outgrew this strategy and adapted as they took on more money.

 

I would be happy with Schloss/Tweedy type returns.

 

Me too!  That is one of my favorite all time pieces.  They would buy anything that met their criteria on a purely quantitative basis.  They would buy in any size.  They would have holdings that were $50 or $100.  I think they had about 1000+ positions at the time and were doing about 15% a year at the time.  Of course AUM grew and as you said they had to adapt which led to them becoming run of the mill value investors buying the same stocks as everyone else.

 

The interesting thing to me is that many people will talk about being contrarian and attempting to succeed unconventially, but very few recognize that investing in a Schloss/"old" Tweedy Browne manner is about as unconventianal as you can get.  It is equated with buying from a screen when it is very far from that.

 

As I have said before, I have dozens of positions and most are fairly small.  Definitely small by the standards of the board.  I follow a Schloss approach, but in terms of portfolio construction it's probably more like old Tweedy Browne than anything. 

[Vish_ram]

Oddballstocks

 

Where do you get details on OTC stocks? I took KOGL  KOPP GLASS INC at random, I couldn't find any info on bloomberg, OTCmarkets.com, SEC or yahoo. Even their website http://www.koppglass.com/ has no info.

 

what site do you use for filtering such stocks?

 

[Packer16]

Oddballsotck & Kraven,

 

Just curious if you have been able to obtain the returns Schloss and TB have gotten.  Both of their performance records are old (circa 1984).  TIA

 

Packer

[oddballstocks]

Oddballsotck & Kraven,

 

Just curious if you have been able to obtain the returns Schloss and TB have gotten.  Both of their performance records are old (circa 1984).  TIA

 

Packer

 

I have Schloss to his OID interview in 1989.  The relevant Tweedy record is the one to the mid 1980s, after that is what they have on their website after they switched strategies.

 

The return mentioned in Money Masters was that Tweedy had a 20 year record of doing 15% annually with a portfolio that consisted of 1/3 net-nets, 1/3 inactive (unlisted stocks), 1/3 companies they ended up controlling because they continued to buy as they were cheap.

 

The book mentions that the returns are good, but not excellent, 15% a year net of expenses is good enough for me.

 

It says they had over 1,000 holdings during this time, with position sizes ranging from $50 to $400k, and a few in the millions.  They managed $50m at the time with this strategy.  The average holding period was three years, on average 5% of the portfolio was merged or acquired a year.

 

Also of note it says that around 1980 Tweedy acquired Asset Investors Fund, a CEF which only invested in net-nets.  I wonder if anyone could get the track record of that fund off a Bloomberg or something.

 

Here are Tweedy's results from 1975-1996.  As of the early 1980s they were still doing the net-net/unlisted stuff.  I'm not sure when they drifted away, but they absolutely killed the index up until 1987.

[Packer16]

Thanks for the response.  One theory I wanted to test was Grantham's contention that a cheap BV approach was driven primarily by out performance between 1973 and 1984 and since then the cheap BV approach appears to have stopped out performance.  In addition, I wanted to see from your current experience if outperformance by the amounts Schloss and TB did historically are still possible.  Thx.

 

Packer 

[plato1976]

15% during what kind of years ?

1980 - 2000 ?

 

Oddballsotck & Kraven,

 

Just curious if you have been able to obtain the returns Schloss and TB have gotten.  Both of their performance records are old (circa 1984).  TIA

 

Packer

 

I have Schloss to his OID interview in 1989.  The relevant Tweedy record is the one to the mid 1980s, after that is what they have on their website after they switched strategies.

 

The return mentioned in Money Masters was that Tweedy had a 20 year record of doing 15% annually with a portfolio that consisted of 1/3 net-nets, 1/3 inactive (unlisted stocks), 1/3 companies they ended up controlling because they continued to buy as they were cheap.

 

The book mentions that the returns are good, but not excellent, 15% a year net of expenses is good enough for me.

 

It says they had over 1,000 holdings during this time, with position sizes ranging from $50 to $400k, and a few in the millions.  They managed $50m at the time with this strategy.  The average holding period was three years, on average 5% of the portfolio was merged or acquired a year.

 

Also of note it says that around 1980 Tweedy acquired Asset Investors Fund, a CEF which only invested in net-nets.  I wonder if anyone could get the track record of that fund off a Bloomberg or something.

 

Here are Tweedy's results from 1975-1996.  As of the early 1980s they were still doing the net-net/unlisted stuff.  I'm not sure when they drifted away, but they absolutely killed the index up until 1987.

[oddballstocks]

Money Masters was written in 1980, so 1959-1979 presumably, maybe 1960-1980.

 

15% during what kind of years ?

1980 - 2000 ?

 

Oddballsotck & Kraven,

 

Just curious if you have been able to obtain the returns Schloss and TB have gotten.  Both of their performance records are old (circa 1984).  TIA

 

Packer

 

I have Schloss to his OID interview in 1989.  The relevant Tweedy record is the one to the mid 1980s, after that is what they have on their website after they switched strategies.

 

The return mentioned in Money Masters was that Tweedy had a 20 year record of doing 15% annually with a portfolio that consisted of 1/3 net-nets, 1/3 inactive (unlisted stocks), 1/3 companies they ended up controlling because they continued to buy as they were cheap.

 

The book mentions that the returns are good, but not excellent, 15% a year net of expenses is good enough for me.

 

It says they had over 1,000 holdings during this time, with position sizes ranging from $50 to $400k, and a few in the millions.  They managed $50m at the time with this strategy.  The average holding period was three years, on average 5% of the portfolio was merged or acquired a year.

 

Also of note it says that around 1980 Tweedy acquired Asset Investors Fund, a CEF which only invested in net-nets.  I wonder if anyone could get the track record of that fund off a Bloomberg or something.

 

Here are Tweedy's results from 1975-1996.  As of the early 1980s they were still doing the net-net/unlisted stuff.  I'm not sure when they drifted away, but they absolutely killed the index up until 1987.

[AchilliesValue]

Oddballsotck & Kraven,

 

Just curious if you have been able to obtain the returns Schloss and TB have gotten.  Both of their performance records are old (circa 1984).  TIA

 

Packer

 

I have a detailed Schloss record until '95 and when he retired in 2001 I have an article that says limited partners returns were 15.7% or 721.5x from 1955-2000.  He took 25% of profits w/ no hurdle so that implies a gross return of 20.9% vs 11.2% for the S&P.  From 1984-1995 he "only" returned 18.8% (gross) vs 15.3% for the Dow and limited partners actually under performed after fees.

 

Back on topic my current portfolio is

 

BOBS

CSTR

DRAD

MAG

SAND

SHLD

STTYD

TWMC

20% Cash

Buffett-Letters-on-Walter-Schloss.pdf

Going_out_on_Top_Walter_Schloss.pdf

[Kraven]

Thanks for the response.  One theory I wanted to test was Grantham's contention that a cheap BV approach was driven primarily by out performance between 1973 and 1984 and since then the cheap BV approach appears to have stopped out performance.  In addition, I wanted to see from your current experience if outperformance by the amounts Schloss and TB did historically are still possible.  Thx.

 

Packer

 

I think Oddball answered the same way I would have.  TB did very well until they had to adjust their strategy.  Whether that was solely as a result of AUM that was too high, I am not sure, but that was certainly at least a part of the decision process. 

 

I would disagree completely with Grantham's contention.  Outperformance buying these sorts of things is still very possible.  Based on my understanding of what most board members do (at least those who post most often), I would say that I probably follow the TB approach from a portfolio construction standpoint more than anyone.  I will buy at least a small position in anything and everything that meets my parameters (once in a while some things that don't, but I try not to stray).  It's a very satisfactory way to invest.

[Packer16]

The Money Masters has a nice write-up on these.  Interestingly enough at the time Sequoia held LIN TV and Tweedy Browne Gray Communications.  At the time, TB used a 10x EBITDA PMV metric about the same that TV stations are being taken-out today.

 

Packer

[Kraven]

I have a detailed Schloss record until '95 and when he retired in 2001 I have an article that says limited partners returns were 15.7% or 721.5x from 1955-2000.  He took 25% of profits w/ no hurdle so that implies a gross return of 20.9% vs 11.2% for the S&P.  From 1984-1995 he "only" returned 18.8% (gross) vs 15.3% for the Dow and limited partners actually under performed after fees.

 

I am not sure those years are truly representative of his fully body of work.  I would say a couple things about it.  One, Schloss was already getting up there in age at that point and Edwin was doing more and more of the investing.  On those lists of stocks Schloss owned people are always surprised at some of the names, like McDonald's, that he owned.  Anything that makes you go "hmmm" (a little Arsenio humor) is almost certainly an Edwin selection.  So the style had shifted a bit.  Second, the style had shifted already from a net net type strategy to a low p/b strategy and then to simply trying to get around 1x p/b as opportunities dried up (the frothy 80s market) and their AUM had grown fairly substantially over those years, relatively speaking.

[Kraven]

The Money Masters has a nice write-up on these.  Interestingly enough at the time Sequoia held LIN TV and Tweedy Browne Gray Communications.  At the time, TB used a 10x EBITDA PMV metric about the same that TV stations are being taken-out today.

 

Packer

 

Yeah, Money Masters is great.  I love the way it was written.  None of the fawning over "celebrity" business and investing types that exists today.  It's just very matter of fact.  The section on Buffett is good too.  Buffett before he was Buffett - not larger than life.  He was just a wealthy investor who seemed like a regular guy.  But for me, the Tweedy Browne subsection is the best part of that book.

[stahleyp]

Is the book you guys are referring to?

 

http://www.amazon.com/Money-Masters-Time-John-Train/dp/0887309704