ZINC - Horsehead Holding Corp

[merkhet]

I think the going to the beach attitude was also pushed by Buffett in the 1990 chairman's letter: 

 

" Lethargy bordering on sloth remains the cornerstone of our investment style"

 

I think the context of Buffett's comment was more to say that you find a really good business and sit on your ass.  Not sure you can buy ZINC, GM, FCAU, CHK, PKX and sit on your ass.  It also doesn't imply that you can sit on your ass and find a good business.  It takes a lot of work to find what makes a business great and understand why you're getting it at a good price.

 

You buy stuff like ZINC or GM and you constantly have to sleep with one eye open.  Not that it's necessarily bad but it's not something you step away and ignore the stock quote for weeks at a time.  I mean FCAU has had lots of good news and the stock keeps going down.  Isn't that helpful as an investor to know that good news is hurting your stock, perhaps means your thesis is priced in?  I recall Pabrai saying that FCAU would be worth 3x where it is today after the RACE spin but here we are and it hasn't happened; it's actually dropped a lot. What's the market telling Pabrai?  Is he just going to ignore that because short term prices don't matter?

 

Which brings me to the other Pabrai philosophy of not looking at market prices all the time.  What's wrong with looking at market prices all the time?  You shouldn't let it affect your judgement but it's probably in your interest to know where things you would like to buy or sell are trading.  Obviously every second of the day is useless, but I think these guys pull the Buffett commentary to a weird extreme.  I bet you Buffett knows where IBM trades throughout the day while not being completely glued to the screen.

 

Could be wrong though, haven't read that 1990 letter in a while.  But there's this whole "do as Buffett does but not as he says" and some of the things Pabrai tries to emulate are probably not the things you want to take too seriously.

 

Isn't the whole point of value investing that sometimes what the market "tells" you is "sentiment" and not "intrinsic value"?

[Picasso]

Assuming we're dealing with a good business where intrinsic value doesn't change by very much then yeah sure you can say "short term" movement is sentiment.  That's not usually the case with businesses with rapidly changing intrinsic values.  The stock can remain cheap relative to a declining intrinsic value; it stays cheap all the way to massive losses.  You have to know that if GM puts out good number after good number and the stock goes down, whatever it is you're hoping for is 90% priced in.  You have a shot at something else driving returns but you're now dealing with low probability outcomes on uncertain intrinsic values. 

 

I think that's also true for a good business though, to a certain extent.  Intrinsic value is something we sort of make up that isn't set in stone.  Consistent negative price reaction to positive news is usually a really good sign that your thesis is wrong or played out.  It's not something I ever ignore even if some just consider it sentiment.  There are obviously exceptions where you decide you want to pray that you're within that small probability where the market is just plain wrong. 

 

Put another way: it's a lot different for a stock to go down for no reason at all than to go down when it's supposed to go up.

[cayale]

I think the going to the beach attitude was also pushed by Buffett in the 1990 chairman's letter: 

 

" Lethargy bordering on sloth remains the cornerstone of our investment style"

 

I think the context of Buffett's comment was more to say that you find a really good business and sit on your ass.  Not sure you can buy ZINC, GM, FCAU, CHK, PKX and sit on your ass.  It also doesn't imply that you can sit on your ass and find a good business.  It takes a lot of work to find what makes a business great and understand why you're getting it at a good price.

 

You buy stuff like ZINC or GM and you constantly have to sleep with one eye open.  Not that it's necessarily bad but it's not something you step away and ignore the stock quote for weeks at a time.  I mean FCAU has had lots of good news and the stock keeps going down.  Isn't that helpful as an investor to know that good news is hurting your stock, perhaps means your thesis is priced in?  I recall Pabrai saying that FCAU would be worth 3x where it is today after the RACE spin but here we are and it hasn't happened; it's actually dropped a lot.  What's the market telling Pabrai?  Is he just going to ignore that because short term prices don't matter?

 

Which brings me to the other Pabrai philosophy of not looking at market prices all the time.  What's wrong with looking at market prices all the time?  You shouldn't let it affect your judgement but it's probably in your interest to know where things you would like to buy or sell are trading.  Obviously every second of the day is useless, but I think these guys pull the Buffett commentary to a weird extreme.  I bet you Buffett knows where IBM trades throughout the day while not being completely glued to the screen.

 

Could be wrong though, haven't read that 1990 letter in a while.  But there's this whole "do as Buffett does but not as he says" and some of the things Pabrai tries to emulate are probably not the things you want to take too seriously.

 

Well said!

[Vish_ram]

 

 

I am being nit picky, but investors aren't paying him 25% profit over 6% hurdle rate *unless* the fund is over the high water mark - which itself compounds from prior year's water mark at 6% rate. He has yet to catch up to the high water from a few years ago. So, investors aren't paying anything since 2009 or 2010. One may say that's fair given his performance. From an ethical point, I admire how his compensation structure has been set up.

 

I am being nit picky on your nit picky, but doesn't every dollar deposited with Pabrai's fund have its own high water mark? I mean someone could come in at the bottom in 2009 and double or triple whatever his money from that point to now. He will have to pay Pabrai fees no? This isn't a lot as I suppose very few invested with Pabrai after the crash, but I guestimate it is on the order of single digit millions.

 

 

BTW, I admit I totally missed the high water mark until you brought it up, thanks.

 

 

1) Having this fee structure benefits Pabrai immensely.  Assume that he had 2 & 20. With 2% down every year, his under-performance to S&P will be greatly magnified. Many of his LP's would have already bailed out. Now without 2%, they will linger for lot longer, giving him the benefit of time. 2% also puts more pressure on him not to lose capital.

 

2) PIF's have very high turnover, maybe 10 times that of S&P (I'm basing it on 13F's). The tax adjusted returns will be lower compared to just buy and hold in S&P or QQQ ETF's.

 

3) The 25% above 6% makes sense for a person like Buffett. What if I collect LP's money, invest all in S&P. In long run, S&P returns including dividends reinvested are more than 6%. I'll continue to collect some fees and sleep with both eyes closed. This I call, Heads I win, Tails I don't lose much.

[AzCactus]

Actually here are Buffett's holdings in 1990:

 

                                                                12/31/90

  Shares    Company                                  Cost        Market

  ------    -------                              ----------    ----------

                                                      (000s omitted)

3,000,000  Capital Cities/ABC, Inc. ............ $  517,500    $1,377,375

46,700,000  The Coca-Cola Co. ...................  1,023,920    2,171,550

2,400,000  Federal Home Loan Mortgage Corp. ....    71,729      117,000

6,850,000  GEICO Corp. .........................    45,713    1,110,556

1,727,765  The Washington Post Company .........      9,731      342,097

5,000,000  Wells Fargo & Company ...............    289,431      289,375

      Lethargy bordering on sloth remains the cornerstone of our investment style: This year we neither bought nor sold a share of five of our six major holdings.

 

I'd say that portfolio is night and day with the portfolio Pabrai has while he takes naps on the beach.

 

Completely agree.  If we look at these holdings most of them at least have much more staying power than those Pabrai currently owns. 

[ERICOPOLY]

Once you've been doing it for a long time (16+ years Pabrai has been at it), you should be able to look back at the stocks you've bought in the past and confirm how closely their business performance corroborates your initial assessment of their intrinsic value. 

 

Then adjust your approach based on reality teaching you a lesson as to whether you need a new approach or not.

 

Let's say the study confirms that you are truly buying things at 50% of intrinsic value -- well then, you don't need to adjust anything at all.  And if it delivers some bad news, then you have more to adjust in your methodology than just positions sizing.  It can lead to a real "aha" moment.

 

[rishig]

 

 

I am being nit picky, but investors aren't paying him 25% profit over 6% hurdle rate *unless* the fund is over the high water mark - which itself compounds from prior year's water mark at 6% rate. He has yet to catch up to the high water from a few years ago. So, investors aren't paying anything since 2009 or 2010. One may say that's fair given his performance. From an ethical point, I admire how his compensation structure has been set up.

 

I am being nit picky on your nit picky, but doesn't every dollar deposited with Pabrai's fund have its own high water mark? I mean someone could come in at the bottom in 2009 and double or triple whatever his money from that point to now. He will have to pay Pabrai fees no? This isn't a lot as I suppose very few invested with Pabrai after the crash, but I guestimate it is on the order of single digit millions.

 

 

BTW, I admit I totally missed the high water mark until you brought it up, thanks.

 

 

1) Having this fee structure benefits Pabrai immensely.  Assume that he had 2 & 20. With 2% down every year, his under-performance to S&P will be greatly magnified. Many of his LP's would have already bailed out. Now without 2%, they will linger for lot longer, giving him the benefit of time. 2% also puts more pressure on him not to lose capital.

 

I don't understand this point. I was at the annual meeting this year, and I clearly remember the amount of fees collected since 2007 being a zero. Pabrai has no ax to grind, he is the largest investor in the fund, and has collected no (management or performance) fees in 8 years. Yes, absolutely none. Let's focus on the investing aspect rather than come up with reasons on how he is milking his investors - because he absolutely isn't. The comment he made is he is fine with collecting no fees, because they don't deserve to until the fund clears the high water mark (which has been compounding at 6%) and they run a very low cost operation.

[Steven B]

Assuming we're dealing with a good business where intrinsic value doesn't change by very much then yeah sure you can say "short term" movement is sentiment.  That's not usually the case with businesses with rapidly changing intrinsic values.  The stock can remain cheap relative to a declining intrinsic value; it stays cheap all the way to massive losses.  You have to know that if GM puts out good number after good number and the stock goes down, whatever it is you're hoping for is 90% priced in.  You have a shot at something else driving returns but you're now dealing with low probability outcomes on uncertain intrinsic values. 

 

I think that's also true for a good business though, to a certain extent.  Intrinsic value is something we sort of make up that isn't set in stone.  Consistent negative price reaction to positive news is usually a really good sign that your thesis is wrong or played out.  It's not something I ever ignore even if some just consider it sentiment.  There are obviously exceptions where you decide you want to pray that you're within that small probability where the market is just plain wrong. 

 

Put another way: it's a lot different for a stock to go down for no reason at all than to go down when it's supposed to go up.

 

Good points Picasso, thanks. I would just add that it isn't black and white; just because a position goes against you when good news hits might indicate the market knows something you don't. It could also indicate a million different other things. I agree that if you view your position as a trade (relative valuations, etc.) then maybe you should think about getting out. But if your confident in your work and the position is truly an investment than it should make no difference.

 

In the case of GM there is still recall stank among other things that is shaping short term sentiment.

 

 

[str8shot]

Assuming we're dealing with a good business where intrinsic value doesn't change by very much then yeah sure you can say "short term" movement is sentiment.  That's not usually the case with businesses with rapidly changing intrinsic values.  The stock can remain cheap relative to a declining intrinsic value; it stays cheap all the way to massive losses.  You have to know that if GM puts out good number after good number and the stock goes down, whatever it is you're hoping for is 90% priced in.  You have a shot at something else driving returns but you're now dealing with low probability outcomes on uncertain intrinsic values. 

 

I think that's also true for a good business though, to a certain extent.  Intrinsic value is something we sort of make up that isn't set in stone.  Consistent negative price reaction to positive news is usually a really good sign that your thesis is wrong or played out.  It's not something I ever ignore even if some just consider it sentiment.  There are obviously exceptions where you decide you want to pray that you're within that small probability where the market is just plain wrong. 

 

Put another way: it's a lot different for a stock to go down for no reason at all than to go down when it's supposed to go up.

 

Good points Picasso, thanks. I would just add that it isn't black and white; just because a position goes against you when good news hits might indicate the market knows something you don't. It could also indicate a million different other things. I agree that if you view your position as a trade (relative valuations, etc.) then maybe you should think about getting out. But if your confident in your work and the position is truly an investment than it should make no difference.

 

In the case of GM there is still recall stank among other things that is shaping short term sentiment.

 

Buffett has said in the short term the market is a voting machine and in the long term it's a weighing machine. Anyone who has observed markets closely has seen that they are not efficient. They are strongly driven by fear/euphoria and the least sophisticated investors continually sell shares at the lower points and buy at the higher points, doing just the opposite of what they should do. As Buffett said - buy when others are fearful and sell when others are greedy. But this takes conviction and discipline. And of course you need to know what the hell you are doing. Buffett also said if you can't stomach a 40% decline in your investment, investing in stocks is not for you.

 

You look at GM - selling at 5x earnings, increasing its buyback to $9B total, investing in Lyft and the driverless trend, focusing on profitable sales not just sales growth, and continuing to put its recall issues behind it. Barra seems to be doing a credible job transforming the company. Major investors include Buffett, Einhorn, Tepper, and Cooperman, most of whom added to their positions in 2015.

 

So why is the stock stuck in the mud? Auto stocks as a whole are stuck in the mud. Predominant fears include that industry sales have peaked, US consumer spending may fall, China demand is uncertain, and the commodities crash may help trigger a recession. Maybe GM is a dog and has peaked. Maybe it will be be worth 30% more in a year. Longs will either look like idiots or smart guys. We'll see.

   

[Ham Hockers]

May as well just keep quoting myself

 

for f***'s sake people, have some respect for market prices.

[Picasso]

I'm not really endorsing a long or short on GM, just saying you should watch market reactions to what you think should be perceived as a positive/negative for your key holdings.  When you get conflicting reactions you need to take a closer look at your thesis which obviously a lot of the GM shareholders are doing right now.  Mr. Market is often wrong but he's also often right and you need to respect what he's trying to tell you. 

 

Obviously it depends heavily on the kinds of stocks you buy.  I ignore a lot of the noise on a good business but something like GM you should really try to kill the thesis when it moves against you on positive news.  I have a couple holdings like that right now and it obviously sucks because it's easier to blame a silly Mr. Market.

 

Here's a good example too:  Let's say the Fed unleashes QE after QE and stocks refuse to go up.  Would you just sit there and say "eh, stocks look cheap compared to bonds let's just ride this out."  No you should probably get the hell out and have a damn good reason to still stay long.

[walt373]

Finding current intrinsic value isn't the end-all of the investment process. What would you estimate the intrinsic value of ZINC was 1 year ago, given what we know today? Certainly not $0. The stock price was $15 and bonds were over 100. They still had options. A lot happened since then to destroy all that value. Much of it was unforeseeable to most investors. So arguably, ZINC was "undervalued" at the time but still made for a terrible investment. What we are really concerned about is future intrinsic value, not intrinsic value in the present. Because what good is being able to accurately estimate intrinsic value if it can change that much in a short period of time? Yeah you can play the odds, but then in that case, you cannot make it a concentrated position. Buffett makes it a point to pick companies for which he is able to estimate intrinsic value far into the future, and avoid situations where he cannot.

[randomep]

Once you've been doing it for a long time (16+ years Pabrai has been at it), you should be able to look back at the stocks you've bought in the past and confirm how closely their business performance corroborates your initial assessment of their intrinsic value. 

 

Then adjust your approach based on reality teaching you a lesson as to whether you need a new approach or not.

 

Let's say the study confirms that you are truly buying things at 50% of intrinsic value -- well then, you don't need to adjust anything at all.  And if it delivers some bad news, then you have more to adjust in your methodology than just positions sizing.  It can lead to a real "aha" moment.

 

+1

 

This is what I think when it comes to my own investments. There are two basic outcomes for an investment:

 

1. I made a good bet with the information given and things didn't line up and I got unlucky

  1.b. same as above but I exacerbated the loss by sizing wrong

2. I calculated the odds wrong (for example by being too optimistic or not factoring in unknowns)

 

I added 1b. because of Pabrai's letter regarding ZINC. 1b and 2 are things you can improve on, and 1, well that's just the name of the game.  It's like going all in with AA preflop and getting sucked out.

 

Personally I think the problem with his ZINC investment is 2. But he doesn't think so. If I am right, then PIF is in for a lot of pain in the coming years.

 

If I am right, then Pabrai should go back and reread chapter 20 on MOS in the book "the intelligent investor" if he wants to truly be a value investor.

 

 

 

 

 

[arcube]

 

 

I am being nit picky, but investors aren't paying him 25% profit over 6% hurdle rate *unless* the fund is over the high water mark - which itself compounds from prior year's water mark at 6% rate. He has yet to catch up to the high water from a few years ago. So, investors aren't paying anything since 2009 or 2010. One may say that's fair given his performance. From an ethical point, I admire how his compensation structure has been set up.

 

I am being nit picky on your nit picky, but doesn't every dollar deposited with Pabrai's fund have its own high water mark? I mean someone could come in at the bottom in 2009 and double or triple whatever his money from that point to now. He will have to pay Pabrai fees no? This isn't a lot as I suppose very few invested with Pabrai after the crash, but I guestimate it is on the order of single digit millions.

 

 

BTW, I admit I totally missed the high water mark until you brought it up, thanks.

 

 

1) Having this fee structure benefits Pabrai immensely.  Assume that he had 2 & 20. With 2% down every year, his under-performance to S&P will be greatly magnified. Many of his LP's would have already bailed out. Now without 2%, they will linger for lot longer, giving him the benefit of time. 2% also puts more pressure on him not to lose capital.

 

I don't understand this point. I was at the annual meeting this year, and I clearly remember the amount of fees collected since 2007 being a zero. Pabrai has no ax to grind, he is the largest investor in the fund, and has collected no (management or performance) fees in 8 years. Yes, absolutely none. Let's focus on the investing aspect rather than come up with reasons on how he is milking his investors - because he absolutely isn't. The comment he made is he is fine with collecting no fees, because they don't deserve to until the fund clears the high water mark (which has been compounding at 6%) and they run a very low cost operation.

 

Rishi - Again well said.

 

I think he is the second largest and not the largest investor in the funds (overall), unless the largest one got some or all capital out of the fund recently. I am not sure about this but if I recall correctly, his structure is not 2/20 like Vish referred to.

 

I also agree with you that he is not milking anyone (even the annual meeting (two) expenses are not charged to fund/lp's.) and the discussion here should be related to analysis of investments.

[str8shot]

I'm not really endorsing a long or short on GM, just saying you should watch market reactions to what you think should be perceived as a positive/negative for your key holdings.  When you get conflicting reactions you need to take a closer look at your thesis which obviously a lot of the GM shareholders are doing right now.  Mr. Market is often wrong but he's also often right and you need to respect what he's trying to tell you. 

 

Obviously it depends heavily on the kinds of stocks you buy.  I ignore a lot of the noise on a good business but something like GM you should really try to kill the thesis when it moves against you on positive news.  I have a couple holdings like that right now and it obviously sucks because it's easier to blame a silly Mr. Market.

 

Here's a good example too:  Let's say the Fed unleashes QE after QE and stocks refuse to go up.  Would you just sit there and say "eh, stocks look cheap compared to bonds let's just ride this out."  No you should probably get the hell out and have a damn good reason to still stay long.

 

I agree it's good to be skeptical and try to kill the thesis as a way of protecting against loss of capital. As for macro environment events like the state of QE, I simply try to follow Buffett's advice and focus primarily on the business and its prospects.

 

As I reflect on investing decisions made over the years, most of the time when I have invested in off the radar "high upside" opportunities - GNW a few years back and most recently ZINC, they haven't worked out. I bought GNW around $14 and sold at $8 when it became clear management did NOT have a handle on the long term care business. That stock is now around $2.50. Some tout it as an attractive play now. ZINC had the potential (when Mooresboro was fully ramped up) to be among the lowest cost producers in an otherwise unattractive commodity space, and that was what got my attention, like many on this board. The problem was that it was like betting on the come rather than betting on something that was already implemented and running - meaning the plant. And what may have been a competent or well regarded management team in the years prior lost all credibility in the past two years.

 

So i take one overriding lesson from ZINC - stick with the "buy a good business at a fair price" theme rather than the reverse. i have rarely had a loser when i followed this approach, even though the upside potential has tended to be more limited.

 

To further the point, while they may calibrate as "overvalued" from a P/S, P/E, or DCF perspective depending on future growth assumptions, he who buys truly outstanding companies once they have clearly established a huge moat like Google, Amazon, Starbucks, and Facebook is positioned to kill it over the long term. They are no brainers. It was the same for Microsoft, Intel, Cisco, and Oracle back in the 90s. But there can be a hesitancy to buy them because these stocks typically look overvalued at any point in time, and eventually come back to earth when the growth rate slows. 

 

So I have had to ask myself why did I buy ZINC in late 2014/early 2015, looking to make a 2-3x, when I could have bought GOOG at 20x forward earnings. And I actually thought about buying GOOG when I instead bought ZINC. Pabrai did buy a position in GOOG around $520, and it's now $740. A 40% return within the past year and it was a no brainer. I know the answer to my question - I was looking to hit a home run with ZINC under the assumption their was little downside risk. Wrong assumption - it turned out it was a high risk, high potential reward play. And yes position sizing comes into play - i could have invested in both, taking a lesser position size in ZINC.

[kranthi_vic]

A major flaw in everyones thesis was that downside of Mooresboro plant was adequately protected by INMETCO & ZOCHEM.

They can sell these, was what we all thought! (How wrong we were .)

 

The opposite was true, because Mooresboro plant was dependent on  INMETCO & ZOCHEM for positive cashflows for paying debt & plant repairs. There was nothing else generating positive cashflows in this company.

 

The only way this idea would have worked was if there was a quick rampup, which we all knew was not comming with continuous plant issues.

(Someone even posted McNulty curves, and Mooreesboro was on series 4, it became quite evident.)

 

Hindsight is 20/20 but with a little financial insight we would have realized : With short term debt looming ; no ramp up; bad macro economic conditions & a dependence on INMETCO & ZOCHEM for cashflows, there is no magic wand for solvency.

 

 

I personally have learnt a lot about Risk from this investment.

- Financial Risk

- Execution Risk

- Position sizing Risk (The need to not get overly greedy & not lose objectivity)

- Commodities pricing Risk (Hence the need to hedge)

 

 

But in the end i failed Munger..he says learn from others mistakes.  I hope i learnt from my own mistake on this one.

 

 

 

[Parsad]

 

But in the end i failed Munger..he says learn from others mistakes.  I hope i learnt from my own mistake on this one.

 

Munger nearly lost everything in the 1973-74 correction...he was down some 70%+.  He learned from his own mistakes as well!

 

Berkshire was lucky things turned out like they did after the whole Solomon's debacle...otherwise Berkshire would not be here today.

 

Prem is lucky he is still standing after buying C&F and TIG and then being hit with 9/11 and Hurricane Hugo! 

 

We all make mistakes...don't be so hard on yourself.  Cheers!

[Liberty]

 

But in the end i failed Munger..he says learn from others mistakes.  I hope i learnt from my own mistake on this one.

 

Munger nearly lost everything in the 1973-74 correction...he was down some 70%+.  He learned from his own mistakes as well!

 

Berkshire was lucky things turned out like they did after the whole Solomon's debacle...otherwise Berkshire would not be here today.

 

Prem is lucky he is still standing after buying C&F and TIG and then being hit with 9/11 and Hurricane Hugo! 

 

We all make mistakes...don't be so hard on yourself.  Cheers!

 

Wise words. I've sure made many terrible mistakes, and I've tried to learn from them, but they still hurt, and I'm sure I'll make some more.

 

I think one of the necessary - but not sufficient - qualities to do all right in investing is the ability to keep going despite setbacks, because there are many. To paraphrase Munger, if this was easy, everybody would do it.

 

You also need to be disciplined and have the right mindset and strategy, etc... But if you have all that but can't get back up after you fall down, you still won't get anywhere.

[bskptkl]

Actually here are Buffett's holdings in 1990:

 

                                                                12/31/90

  Shares    Company                                  Cost        Market

  ------    -------                              ----------    ----------

                                                      (000s omitted)

3,000,000  Capital Cities/ABC, Inc. ............ $  517,500    $1,377,375

46,700,000  The Coca-Cola Co. ...................  1,023,920    2,171,550

2,400,000  Federal Home Loan Mortgage Corp. ....    71,729      117,000

6,850,000  GEICO Corp. .........................    45,713    1,110,556

1,727,765  The Washington Post Company .........      9,731      342,097

5,000,000  Wells Fargo & Company ...............    289,431      289,375

      Lethargy bordering on sloth remains the cornerstone of our investment style: This year we neither bought nor sold a share of five of our six major holdings.

 

I'd say that portfolio is night and day with the portfolio Pabrai has while he takes naps on the beach.

 

Just pointing out that the third largest holding there is a doughnut 25 years later, though of course Buffet changed his mind and sold it way earlier.

[ERICOPOLY]

Actually here are Buffett's holdings in 1990:

 

                                                                12/31/90

  Shares    Company                                  Cost        Market

  ------    -------                              ----------    ----------

                                                      (000s omitted)

3,000,000  Capital Cities/ABC, Inc. ............ $  517,500    $1,377,375

46,700,000  The Coca-Cola Co. ...................  1,023,920    2,171,550

2,400,000  Federal Home Loan Mortgage Corp. ....    71,729      117,000

6,850,000  GEICO Corp. .........................    45,713    1,110,556

1,727,765  The Washington Post Company .........      9,731      342,097

5,000,000  Wells Fargo & Company ...............    289,431      289,375

      Lethargy bordering on sloth remains the cornerstone of our investment style: This year we neither bought nor sold a share of five of our six major holdings.

 

I'd say that portfolio is night and day with the portfolio Pabrai has while he takes naps on the beach.

 

Just pointing out that the third largest holding there is a doughnut 25 years later, though of course Buffet changed his mind and sold it way earlier.

 

25 years of dividends from that doughnut.  Probably returned all the initial capital outlay.

 

[AzCactus]

Actually here are Buffett's holdings in 1990:

 

                                                                12/31/90

  Shares    Company                                  Cost        Market

  ------    -------                              ----------    ----------

                                                      (000s omitted)

3,000,000  Capital Cities/ABC, Inc. ............ $  517,500    $1,377,375

46,700,000  The Coca-Cola Co. ...................  1,023,920    2,171,550

2,400,000  Federal Home Loan Mortgage Corp. ....    71,729      117,000

6,850,000  GEICO Corp. .........................    45,713    1,110,556

1,727,765  The Washington Post Company .........      9,731      342,097

5,000,000  Wells Fargo & Company ...............    289,431      289,375

      Lethargy bordering on sloth remains the cornerstone of our investment style: This year we neither bought nor sold a share of five of our six major holdings.

 

I'd say that portfolio is night and day with the portfolio Pabrai has while he takes naps on the beach.

 

Just pointing out that the third largest holding there is a doughnut 25 years later, though of course Buffet changed his mind and sold it way earlier.

 

25 years of dividends from that doughnut.  Probably returned all the initial capital outlay.

 

The names are organized alphabetically .  So Fhlmc was the least valuable at the time of the letter and third least expensive.  Furthermore on a cost basis this position was less than 4% of capital if I did my math right. 

[bskptkl]

Actually here are Buffett's holdings in 1990:

 

                                                                12/31/90

  Shares    Company                                  Cost        Market

  ------    -------                              ----------    ----------

                                                      (000s omitted)

3,000,000  Capital Cities/ABC, Inc. ............ $  517,500    $1,377,375

46,700,000  The Coca-Cola Co. ...................  1,023,920    2,171,550

2,400,000  Federal Home Loan Mortgage Corp. ....    71,729      117,000

6,850,000  GEICO Corp. .........................    45,713    1,110,556

1,727,765  The Washington Post Company .........      9,731      342,097

5,000,000  Wells Fargo & Company ...............    289,431      289,375

      Lethargy bordering on sloth remains the cornerstone of our investment style: This year we neither bought nor sold a share of five of our six major holdings.

 

I'd say that portfolio is night and day with the portfolio Pabrai has while he takes naps on the beach.

 

Just pointing out that the third largest holding there is a doughnut 25 years later, though of course Buffet changed his mind and sold it way earlier.

 

25 years of dividends from that doughnut.  Probably returned all the initial capital outlay.

 

The names are organized alphabetically .  So Fhlmc was the least valuable at the time of the letter and third least expensive.  Furthermore on a cost basis this position was less than 4% of capital if I did my math right.

Ya - missed that.

My main point - can't sleep on these forever. Buffet doesn't, notwithstanding lethargy/sloth comment.

[randomep]

 

But in the end i failed Munger..he says learn from others mistakes.  I hope i learnt from my own mistake on this one.

 

Munger nearly lost everything in the 1973-74 correction...he was down some 70%+.  He learned from his own mistakes as well!

 

Berkshire was lucky things turned out like they did after the whole Solomon's debacle...otherwise Berkshire would not be here today.

 

Prem is lucky he is still standing after buying C&F and TIG and then being hit with 9/11 and Hurricane Hugo! 

 

We all make mistakes...don't be so hard on yourself.  Cheers!

 

Wise words. I've sure made many terrible mistakes, and I've tried to learn from them, but they still hurt, and I'm sure I'll make some more.

 

I think one of the necessary - but not sufficient - qualities to do all right in investing is the ability to keep going despite setbacks, because there are many. To paraphrase Munger, if this was easy, everybody would do it.

 

You also need to be disciplined and have the right mindset and strategy, etc... But if you have all that but can't get back up after you fall down, you still won't get anywhere.

 

 

 

Munger did not make bad investment decisions. He knew the market was grossly underpricing his holdings. His fund was a success in the end simply by riding out 73-74. 

I like what Liberty said, investment is a lifelong process like the cliche saying: "the race is not to the fastest, but to those to keep on running".

 

Buffett was confident he'd be rich when he was 25, I am not sure any one of is that confident. But in the abscence of absolute certainty I feel you must have a contingency for failure.  Some who are in the 20's or early 30's may go for it all from the get-go; they can afford a huge percentage permanent loss of capital. But for older folks who have a bigger nest egg, -20% in a sideways market is a huge hit.  And I don't know what I would do if I lost 70% of my entire portfolio; maybe jump off a bridge.

 

So for me, the key is to not get knocked out of the investing game.

 

 

[deadspace]

Actually here are Buffett's holdings in 1990:

 

                                                                12/31/90

  Shares    Company                                  Cost        Market

  ------    -------                              ----------    ----------

                                                      (000s omitted)

3,000,000  Capital Cities/ABC, Inc. ............ $  517,500    $1,377,375

46,700,000  The Coca-Cola Co. ...................  1,023,920    2,171,550

2,400,000  Federal Home Loan Mortgage Corp. ....    71,729      117,000

6,850,000  GEICO Corp. .........................    45,713    1,110,556

1,727,765  The Washington Post Company .........      9,731      342,097

5,000,000  Wells Fargo & Company ...............    289,431      289,375

      Lethargy bordering on sloth remains the cornerstone of our investment style: This year we neither bought nor sold a share of five of our six major holdings.

 

I'd say that portfolio is night and day with the portfolio Pabrai has while he takes naps on the beach.

 

Just pointing out that the third largest holding there is a doughnut 25 years later, though of course Buffet changed his mind and sold it way earlier.

 

25 years of dividends from that doughnut.  Probably returned all the initial capital outlay.

 

FNMA is only a doughnut because of government manipulation

You can make anything bankrupt by forcing writedowns and then nationalizing the entity when those write downs need to be reversed because they don't represent reality

[RadMan24]

Nevermind, I'll find someone like you Horsehead

I'll wish nothing but the best for you too

Don't' forget me ahhh babe, I'll remember you, "We'll be operational one day"

Sometimes it's fun to invest but sometimes it hurts instead

 

-Anonymous