CONTROLLED GREED.com tag:typepad.com,2003:weblog-144065 2008-09-05T19:37:07-04:00 This site is devoted to investing in undervalued stocks. The focus is global and typical investments can include net working capital discounts (also known as "net nets"), book value discounts, low P/E ratios, special situations and fallen angels. The name refers to one of Warren Buffett's qualities for investment success: "You must be animated by controlled greed and fascinated by the investment process." TypePad Five for the Weekend #5 tag:typepad.com,2003:post-55203560 2008-09-05T19:37:07-04:00 2008-09-05T19:37:07-04:00 With both major parties in the US holding their conventions over the past two weeks, they've consumed most news coverage during that time. And with the presidential election 60 days or so way, the news coverage should amplify and even... CONTROLLED GREED.com With both major parties in the US holding their conventions over the past two weeks, they've consumed most news coverage during that time. And with the presidential election 60 days or so way, the news coverage should amplify and even become frenzied as the mad dash to November gets underway.Of course, there's always the chance some unexpected event takes the American election off the front pages -- but baring that, political junkies will be in heaven for several weeks to come. Whether you're one of those or not, you might wish to take a break from politics and read these between now and Monday.
I mentioned Munich Re favorably in Gannon On Investing's Blogger Roundtable as a stock I didn't own (and don't) but liked and found attractive. This Bloomberg story speculates Munich Re and Swiss Re may be able to raise rates and profit next year, thanks to hurricane activity in the Gulf of Mexico and Caribbean. The story focuses on Munich Re and Swiss Re because they're the largest reinsurance outfits. Fairfax Financial (FFH/NYSE) and Tokio Marine Holdings (TKOMY/OTC) are in my portfolio and have reinsurance operations, so I'll keep an eye out to see if any of this activity impacts them favorably or negatively.
I don't follow Mario Gabelli closely -- you can't follow everyone, you know -- other than reading his comments in the Barron's Roundtables. But I read this Bloomberg report on Gabelli saying investors are correct to be worried about earnings next year. I note he's starting a hedge fund devoted to "green" technologies, which is great because its private money. The talk about government using taxpayer money to "invest" in alternative energy is ripe for abuse, waste, and political patronage, and ultimately won't solve anything. Remember, if wind or solar needs to be subsidized by taxpayers in order to exist, then by definition they won't be part of the solution long term. Yet if more and more funds like Gabelli's start -- and profit their investors -- that's a great sign.
Speaking of Gabelli, I recall that sometime back he started a sharia-compliant fund. The Economist runs this piece on the matter of Islamic finance. The amount of Islamic assets under management stands at around $700 billion, according to the article, so it's a big deal -- and likely to get bigger as oil-rich Middle Eastern nations rake in the bucks. Interesting article on an interesting subject.
I have never owned Dell stock, but have sort of followed the company since Mason Hawkins and Staley Cates made it a "double" position in their flagship Longleaf Partners Fund (and are reportedly the second-largest holder, topped only by Michael Dell himself). I've also recently seen that Dell has become a major holding in Peter Cundill's flagship fund in Canada. Maybe we're seeing a trend in Dell becoming a "value" play. Or will it prove to be a value trap? I don't know (which is nothing unusual). Breakingviews runs a piece on Dell's troubles.
This Africa Confidential feature story on elections in Angola contains this nugget: "The World Bank predicts that the economy, which has doubled in size
every three years since 2002, according to the Finance Ministry, will
grow by 20% this year, slowing to 11% in 2009 as oil production peaks
at 2 million barrels per day." Most African nations aren't enjoying GDP growth that high, but it has been 5% to 7% for much of sub-Saharan Africa recently. Which is why I continue believing this is a story worth following -- and perhaps even investing in.
Have a great weekend folks. Mark Mobius Eyes Thailand tag:typepad.com,2003:post-55153374 2008-09-04T18:20:51-04:00 2008-09-05T19:42:51-04:00 Well, I always thought Templeton's Mark Mobius looked like the King of Siam character in the movie, "Anna and the King." So maybe it's fitting to see this Bloomberg report on Mobius eying stock opportunities in Thailand. Why? Because of... CONTROLLED GREED.com Well, I always thought Templeton's Mark Mobius looked like the King of Siam character in the movie, "Anna and the King." So maybe it's fitting to see this Bloomberg report on Mobius eying stock opportunities in Thailand. Why? Because of anti-government protests prompting a state of emergency that could cause stock prices to plunge even further."Now is a good time to be looking at Thailand,'' where
shares have slumped 24 percent this year, said Mobius, who
oversees about $40 billion in emerging markets equities. "If
they move down by 20 percent, it would be very attractive.''He says he's sitting tight with the Thai stocks he currently owns -- including two of the country's biggest banks.Mobius' Templeton Emerging Markets Fund is down 26% this year, in line with the MSCI Emerging Markets index. The boom and bust aspect of emerging market investing certainly produces some wild rides over time.Another section of the linked article catching my attention:The fund is adding to its holdings in Turkey and South Africa
because of "better valuations'' and as growth continues at a "good pace,'' Mobius said. "We're finding so many companies now with price-earnings
ratios of single digit, and some companies are also paying good
dividends,'' Mobius said. "We're finding lots of
opportunities.''Energy followed by banking are the leading industries for
Templeton's investments, said Mobius, who favors companies that
produce commodities needed in China. Among metals, he recommends
palladium, given that the price gap between palladium and
platinum is "too high.'' Lynn Goes Looking for Bubbles tag:typepad.com,2003:post-55095404 2008-09-03T17:54:35-04:00 2008-09-03T17:54:35-04:00 Matthew Lynn has a good piece running on Bloomberg today -- where he speculates on five areas in which we could see the next investment bubbles.This section stands out to me:First, the place: Old Europe. Forget about the BRICs. The... CONTROLLED GREED.com Matthew Lynn has a good piece running on Bloomberg today -- where he speculates on five areas in which we could see the next investment bubbles.This section stands out to me:First, the place: Old Europe. Forget about the BRICs. The
next decade will belong to the FIGs -- France, Italy and Germany.
We have written them off for so long that we're in danger of
forgetting that all three have been among the richest societies
in the world for more than 1,000 years.As the Chinese and Indian middle classes expand, they will
spend money on the kind of upmarket, design-led, history-rich
products the FIGs are so good at making. After the credit crunch,
their mix of stable, export-led, self-financing growth will look
more attractive than the debt-fueled U.K. and U.S. models. I'm not predicting Continental Europe will out perform the US -- or anywhere else for that matter. Too top-down for me. But I like Lynn's notion of looking to Europe as opposed to China and India. I LIKE having exposure to those markets (see my two previous posts on 3i Group), it's just that the contrarian in me likes the indirect route.And I think stodgy old "Old Europe" could turn out quite well for investors looking back five or so years from now. 3i Group to Close 2 to 3 Deals in China This Year tag:typepad.com,2003:post-55086580 2008-09-03T14:44:30-04:00 2008-09-03T14:44:30-04:00 Coming on the heels of my post last week on 3i Group (III/LN) putting money to work in India, comes this Reuters report from Shanghai. The company will close two or three deals on the Chinese mainland in 2008, with... CONTROLLED GREED.com Coming on the heels of my post last week on 3i Group (III/LN) putting money to work in India, comes this Reuters report from Shanghai. The company will close two or three deals on the Chinese mainland in 2008, with an investment focus on consumer and retail areas.One bit:3i typically holds investments in China for three to five years,
with the average deal worth $50 million to $100 million, although it
would be willing to make much bigger deals in the future if it can the
find right opportunities, said Cheung."You'll find some people invest in companies six months before IPO
at a discount but that's not the deal we do," she said, adding that 3i
currently has 10 dealmakers for the China market.
I may be wrong, yet I continue believing 3i to be a very low risk investment. It sells for less than book and has top-notch management. And it strikes me as a great way to play Mainland China and India (though understand it's not a pure play -- the firm invests mostly outside those areas).If you reside outside the UK -- and most of my readers are in America, followed by Canada -- you need to buy the stock in London. There are probably not enough shares floating around over-the-counter in the US to buy a decent sized position. But check with your broker.Another option is to check out Capital Southwest (CSWC/NASDAQ). No, it doesn't invest in China or India, but it gives you exposure to business development opportunities largely unavailable to retail investors, and also has excellent management. It's up since I bought it (!) but still going for less than book.I believe either 3i Group or Capital Southwest (or in my case, both) are better ways to go than something like Blackstone. But I'm talking my book here, right? As I always stress, do your own due diligence. Bullish on the Russian Bear -- and One Stock in Particular tag:typepad.com,2003:post-55054000 2008-09-03T01:45:59-04:00 2008-09-04T18:02:40-04:00 Barron's Online runs an interview with Julian Mayo, co-manager of the US Global Investors Eastern European Fund, which focuses primarily on Russia. The fund is down more than 20% so far this year, after averaging gains of 40% per year... CONTROLLED GREED.com Barron's Online runs an interview with Julian Mayo, co-manager of the US Global Investors Eastern European Fund, which focuses primarily on Russia. The fund is down more than 20% so far this year, after averaging gains of 40% per year the previous seven.I don't know anything about Mayo or the fund. But these are sometimes interesting. And, heck, there was a time (many years ago) when I hadn't heard of, say, Marty Whitman or Peter Cundill or the guys at Tweedy, Browne or...well, you get the idea.Now I'm not saying this fund manager will one day rank among those gentlemen. In fact, the odds are against it, as they are with all of us in all likelihood. But one thing did stand out -- Mayo having 12% of his fund in one stock: Gazprom. It is the largest natural gas producer in the world. Asked why so much of his fund is put into this company, Mayo says:Well, I think again it is partly a question of
visibility of earnings. The long- term story for Gazprom is the
deregulation of the industry, because the company has essentially been
providing subsidized gas to consumers. Traditionally, Russian gas was
priced artificially low, but the Russian government is liberalizing gas
prices which is an ongoing commitment, and that's working its way
through so that natural-gas prices are rising significantly higher than
inflation every year. And that's, obviously, having an impact on
Gazprom's bottom line.We are expecting earnings growth around 10% or
thereabouts for this year and actually an accelerated growth number
over the next year, maybe another 15%. The stock trades at around 10
times this year's earnings and about 8.5 to nine times next year's
earnings. So again it is a very attractive value proposition as we see
it. Buffett The Vulture (or More Proof That Cash is King) tag:typepad.com,2003:post-55033620 2008-09-02T15:50:07-04:00 2008-09-02T15:51:19-04:00 Bloomberg reports on Ron Peltier, who runs HomeServices of America, which has a parent company called Berkshire Hathaway. HomeServices is the second-largest real estate brokerage in the US, according to the linked article.Interesting bit:"Cash is king,'' Peltier said in an... CONTROLLED GREED.com Bloomberg reports on Ron Peltier, who runs HomeServices of America, which has a parent company called Berkshire Hathaway. HomeServices is the second-largest real estate brokerage in the US, according to the linked article.Interesting bit:"Cash is king,'' Peltier said in an interview. "If you've
got cash available, you have the opportunity to take advantage of
some great buying opportunities.''Followed by this a bit further down:Peltier said he expects to spend $200 million in the next two
years paying 20 cents to 25 cents on the dollar for distressed
brokerages to get HomeServices into new markets. The HomeServices
chief executive officer said he couldn't give details on pending
deals, though he expects at least one to close by the end of the
year. HomeServices spent about $10 million buying companies in the
past year, Peltier said.Good lengthy article, which Bloomberg has increasingly been making available on its website, as Maoxian has noted on his blog. So much for the web demanding shorter pieces. Or, perhaps the web in general demands shorter pieces but financial coverage in particular is an exception.Anyway, as with the savings & loan crisis in the early 1990s, the current housing slump and credit crunch will surely offer up tremendous bargains. I don't know who will benefit, or if I will benefit, but I know one thing: cash is and will always be king. Another Value Investor Explains His Approach tag:typepad.com,2003:post-55000218 2008-09-02T01:35:48-04:00 2008-09-02T01:36:51-04:00 In Warren Buffett's "Superinvestors of Graham and Doddsville," he describes the various approaches Walter Schloss, Bill Ruane and others apply to value investing. The differences, however slight, can be seemingly endless.James Bartholomew (who I don't know) describes his approach in... CONTROLLED GREED.com In Warren Buffett's "Superinvestors of Graham and Doddsville," he describes the various approaches Walter Schloss, Bill Ruane and others apply to value investing. The differences, however slight, can be seemingly endless.James Bartholomew (who I don't know) describes his approach in The Daily Telegraph:Then there are those ??? mostly professionals ??? who
closely analyse profits of companies to decide what is their real
profitability. They consider, quite rightly, that the declared profits
of companies are not calculated according to rules that accurately
reveal what an investor needs to know. Others
invest according to charts of share prices. And there have been many
other approaches. I am fundamentally a value investor with a bit of
everything else thrown in. I do look at the
charts in a rather simple sort of way. I try to invest in businesses
which have some kind of advantage over others. Above all, I try to look
at the numbers (which many investors don???t bother with) while always
recognising the psychology of the situation ??? both for the company and
for investors.He goes on to discuss one of his holdings:When I first bought a large stake in Healthcare Locums
last year, the market was still pretty sceptical. The company had been
through many changes in a short time. I was lucky
to have met the managing director, Kate Bleasdale, when she worked for
another company and I was confident she knew what she was doing. But
the market took its time to recognise this was a good business that
could keep increasing profits even through a recession. The
credibility of the profit forecasts gradually improved and, in
response, the shares have done very well. While the overall market has
fallen about 15pc, Healthcare Locums has risen 29pc this year and has
more than doubled from the price at which I first bought it. Five for the Weekend #4 (Labor Day Weekend Edition) tag:typepad.com,2003:post-54895284 2008-08-29T18:02:40-04:00 2008-09-02T22:11:27-04:00 You might have noticed I haven't been posting as much as I have in the past. Sometimes when that happens it is because non-blogging duties consume my time, even when I find things I'd like to post about. Lately has... CONTROLLED GREED.com You might have noticed I haven't been posting as much as I have in the past. Sometimes when that happens it is because non-blogging duties consume my time, even when I find things I'd like to post about. Lately has been a bit different. Non-blogging tasks have consumed my time, but there also hasn't been much that I wish I could post about if I had the time.Perhaps that's because nothing is going on (from the bottom-up prospective of a value investor) with the Labor Day holiday coming up. Or because everything got swallowed up by the Democratic Party convention in Denver. Either way, it just feels like we're muddling through and tolerating many stocks being underwater until investors at large see their value. And, with that, I offer up five items to read over the course of the three day weekend.
Francis Chou has released his semi-annual report for 2008. His flagship Chou Associates Fund holds a fair amount of newspaper-related stocks, which he says he bought too early. I'm a fellow traveler in one -- Media General (MEG/NYSE) -- though he got in at a much lower price than me. Meryl Witmer's firm dumped their stake, but I'm holding because Media General is way too cheap here. I am confident of unloading it at a higher price, though I'm doubtful of this turning out to be a winner for the portfolio. On other matters Chou reports finding bargains in retail, media, cable and telecommunications and pharmaceuticals. He is staying away from financials.
Chou's bullishness on newspapers is countered somewhat by this from Lauren Silva of Breakingviews. Much of her thoughts concern The McClatchy Company, a holding of Chou Associates Fund. Newspapers are either selling at the point of maximum pessimism (see John Templeton), or they're going the way of buggy whips. We're in the fog of war regarding that, meaning we'll be able to look back with 20/20 hindsight and clearly see the bargains of a lifetime or a black hole.
Speaking of Francis Chou and Breakingviews, here's a negative consideration of Sears Holdings and Eddie Lampert. Sears remains a holding in Chou's flagship fund, and I note it is still worth more than his cost.
Regulars here know I'm also a huge admirer of Mason Hawkins and Staley Cates of Southeastern Asset Management, home to the Longleaf family of funds. This New York Times piece on Longleaf investing in Sun Microsystems is worth a look. I don't own Sun or Dell, which the article mentions (Southeastern owns 7% of Dell, second only to Michael Dell himself).
Eliot Wilson writes in The Spectator that the credit crunch has impacted Kazakhstan and its 15 million citizens: The economy is slowing ??? from over 9 per cent growth in 2006 to an
expected 4 or 5 per cent this year. Leading Almaty-based lenders ???
notably BTA and London-listed Kazkommertsbank ??? are in all sorts of
difficulties. Only the super-conservative Halyk Bank, also
London-listed, has avoided the meltdown. Many bank staff haven???t been
paid for months.
That's it for now. Here's wishing everyone in the US and Canada the best over the Labor Day weekend. And for readers everywhere, the hunt for value continues into September and beyond. 3i Group Eyes Buyouts in India tag:typepad.com,2003:post-54859186 2008-08-29T00:15:46-04:00 2008-08-29T00:17:05-04:00 It's been a while since I've posted about 3i Group PLC (III/LN) -- the publicly traded (in London) private equity firm run by Phil Yea. When I bought 3i stock in 2005 the firm was doing deals in the UK... CONTROLLED GREED.com It's been a while since I've posted about 3i Group PLC (III/LN) -- the publicly traded (in London) private equity firm run by Phil Yea. When I bought 3i stock in 2005 the firm was doing deals in the UK and on the European Continent.The company still does that -- but more and more of its deals and investments are in Asia these days. Including Mainland China and India. So in addition to being a play giving the portfolio exposure to Greater Europe, 3i gives us a smart (and I hope smarter) way to play Mainland China and India.I've come across this report of 3i "eying" buyouts in India. Saurabh Shah, heading up the firm's efforts in India, gives three reasons why buyouts will pickup there:One, large conglomerates may look at spinning out businesses that
are not on top of their priority list. ???If a conglomerate wants to keep
its best business, it may decide to hive off its No. 9 or No. 10
business,??? says Shah.Two, where succession planning becomes
difficult, the company may be better served by selling out to investors
who can bring in the right mix of professional management to achieve
the company???s longer term objectives. And three, in a
service sector-dominated economy such as India, it will be the
professional managers that a financial investor (read private equity)
brings in, that will lead to greater wealth creation.Good article. Check it out in its entirety when the opportunity arises. Where to From Here? A (Very Humble) Consideration tag:typepad.com,2003:post-54606302 2008-08-25T06:00:00-04:00 2008-08-26T22:59:21-04:00 Seems like we're just stumbling along in this down year (so far) for most stock market investors. That could change at any moment -- but let's assume for now things won't change much today at least.Where will things go from... CONTROLLED GREED.com Seems like we're just stumbling along in this down year (so far) for most stock market investors. That could change at any moment -- but let's assume for now things won't change much today at least.Where will things go from here in the markets? Four scenarios pop into my head:SCENARIO #1 -- We Muddle Along. This is where the Bear market continues well into 2009 and even into 2010. We see the usual Bear rallies and sell-offs, and we can even get lucky with a stock holding here or there popping in price via takeover or something else. But basically we just endure the next couple of years (give or take a few months), then we start a new Bull phase.SCENARIO #2 -- We Muddle Along...and Along...and Along. This is where the Bear market goes on much longer than anyone anticipates. Just grinding on and on, well beyond 2010. The Bear keeps going and investors, even many considering themselves "long term" investors lose patience and throw in the towel on holding equities, which helps fuel the Bear even more. The general media runs stories on the death of stock investing, with profiles of families facing ruin because their stocks and stock funds have been down seemingly forever. The heads of the New York Stock Exchange and NASDAQ are hauled in for Congressional hearings, with members of the Senate and House demanding to know what they will do to correct the great wrong being done to the American people. "Big Markets" replace "Big Oil" as the villains politicians cite in seeking votes.SCENARIO #3 -- Surprise on the Upside. This is the best of the scenarios -- the new Bull phase takes place much sooner than anyone anticipates. It could be sometime this fall or early next year or, heck, tomorrow for that matter. I doubt this happens, but the more you hear people taking for granted that the market is and will be down for awhile, the more we could see "conventional wisdom" get stood on its head. Not for the first time in history.SCENARIO #4 -- Surprise on the Downside. This is the most scary. This is where we're all complacent muddling along in what we think is Scenario #1. But out of nowhere we suffer a market crash, or perhaps an extended and very brutal market sell-off of massive proportions. It could be sparked by some geopolitical event, or series of events. Or it could be the housing slump turns out much worse than we've seen, followed by rot in other areas ranging from auto loans and credit cards to who knows what. Or something totally unforeseen.Personally, I believe the first scenario is most likely. But just because the odds are in something's favor doesn't mean it happens. I remember the New York Jets beating my beloved Baltimore Colts in Super Bowl III, after all. The third scenario would be great, because I like seeing my portfolio increase in value (well, duh!) and the sooner the better.The other two scenarios? Well, I don't do the top-down stuff. But the really bad Bear markets in our history took place when most American households didn't invest in the markets. Now people have been conditioned to buy through the ups and downs, and I do that myself. Yet what if we saw a very long trashing of the markets -- more than just a couple of years? Would the broader public panic? I don't think so, but I don't really know. No one does.For now, the muddling continues. Five for the Weekend #3 tag:typepad.com,2003:post-54573798 2008-08-22T18:51:36-04:00 2008-08-22T18:51:37-04:00 With the weekend upon us, here are five items you might wish to check out before Monday brings yet another workweek. King Pharmaceuticals (KG/NYSE) has the distinction of actually being in the black since being added to the portfolio. And... CONTROLLED GREED.com With the weekend upon us, here are five items you might wish to check out before Monday brings yet another workweek.
King Pharmaceuticals (KG/NYSE) has the distinction of actually being in the black since being added to the portfolio. And this performance has been achieved with the company keeping a low profile -- until now. King made an unsolicited $1.38 billion bid for Alpharma Inc., which the Alpharma board rejected as too low. King's CEO says his company is committed to getting a deal done with Alpharma. Both companies' shares rose on the news (though that could mean something or nothing over the longer term).
Foot Locker (FL/NYSE) should join King as a profitable investment at some point, though it took no time at all to achieve double-digit loss status right after I bought it last year. The results of one quarter, or even several, mean next to nothing over the long term. But Foot Locker's better-than-expected results suggest the company's fortunes may be improving. This position is still underwater, but with the stock trading a tad above book value, half of annual sales, and yielding 4%, continued patience seems prudent IMHO.
My exposure to Barry Diller's IAC/InterActiveCorp is through John Malone's Liberty Media (which has three tracking stocks that I hold and count as a single position). Malone was pretty unhappy with Diller's plans to split IAC into five companies, which took effect this week. Tim Mullaney of Bloomberg files this story on the prospects of the five newly-traded stocks.
I'm all for alternative energy -- wind, solar, you name it -- as long as it pays for itself. If it needs taxpayers to foot the bill then it can never be part of the solution. That's one reason why Tom Donlan of Barron's is such a refreshing voice. He's pointed out in the past that the best energy policy is no energy policy. But I'm afraid this is an issue ripe for charlatans to make big bucks at taxpayer expense. Investigative reporter Tim Carney details Boone Pickens' veiled corporate welfare in two columns in the Washington Examiner, which you can access here.
I've just about finished Too Close to the Sun: The Audacious Life and Times of Denys Finch Hatton by Sara Wheeler. This is the guy Robert Redford played in the movie Out of Africa (which was based on the famous memoir by Karen Blixen). Redford's character was an American in the movie but in real life Finch Hatton was from Britain. I recommend the book if this sort of thing sparks your interest. Most of the important stuff takes place in British East Africa, known today as Kenya. It's as much about a time and place and long-gone era as it is about a man's life. For those interested in Kenya in the here-and-now, read this from Africa Confidential on how politicians, administrators and churchmen fostered post-election slaughter of more than 1,000 and displacement of another 350,000.
That's all for now. Thanks for reading and we'll see you next week if not sooner. Charlie Rose GM Fest with Rick Wagoner and Bob Lutz tag:typepad.com,2003:post-54490226 2008-08-20T23:16:15-04:00 2008-09-04T17:15:07-04:00 Charlie Rose is one of the best interviewers on TV in the US. The other is Brian Lamb of C-SPAN. Both ask questions designed to not only get information but encourage conversations. They aren't part of the self-indulgent "it's all... CONTROLLED GREED.com Charlie Rose is one of the best interviewers on TV in the US. The other is Brian Lamb of C-SPAN. Both ask questions designed to not only get information but encourage conversations. They aren't part of the self-indulgent "it's all about me" cable TV crowd.That was most evident on Charlie Rose's PBS show Monday and Tuesday nights this week. He devoted both shows to General Motors (GM/NYSE). It was great stuff -- and I'd have enjoyed both immensely even if I wasn't a (currently underwater) GM shareholder. The first night Rose devoted the entire hour to sitting down with Chairman and CEO Rick Wagoner. From the point of view of GM stockholders, this may have been the most important of the two shows. And that's because this is where the discussion involved cash, cash burn and bankruptcy.But the highlight was definitely the second night -- which featured Bob Lutz.Much of this hour was about the Chevy Volt (which figured prominently the first night as well). Rose conducted these interviews in Michigan and you can tell he's excited about the Volt for environmental reasons, and because it's GM's chance to "leapfrog" and be a "game-changer." All well and good. And, if the Chevy Volt is a big hit in 2010, Lutz will go down in American business history -- and maybe even American history, period. If that proves to be the case, I hope observers remember to credit Rick Wagoner for hiring him (one of the smartest moves anyone in authority can make is to hire people smarter than they are).But I enjoyed the Lutz interviews for more than just the Chevy Volt. For one thing, the man is 76 years old and looks 50, if not younger. He's sharp, funny, and you can tell he's a leader. Listening to him talk, you get the feeling that those working under him respect him totally and would leap over tall buildings to please him. Not because he rules them with whip but because he inspires them. How many supervisors can do that? Not many (and it may take leaping over tall buildings to bring the Volt off successfully).When I bought GM stock in 2005, I knew of Lutz very generally -- that he was a "car guy" come out of retirement in a place (Detroit) run by financial types for far too long. I had never seen him interviewed at length. And maybe that's a good thing, at least at the time.I like to buy companies with good management, but I try to resist the temptation of falling in love with any one executive. ESPN personalities often poke fun at each other over having a "man crush" on certain athletes. And right now, my knees are getting weak for a certain grey-haired stud in Motor City.Would I buy GM stock if I didn't own it already based solely on these Charlie Rose programs? No, anyone still needs to do their due diligence. But I would be rooting for Lutz -- and Wagoner -- even if I didn't own the stock. And I hope Lutz one day writes a book. Georgia on My Mind and Flights of Fantasy tag:typepad.com,2003:post-54298086 2008-08-18T06:00:00-04:00 2008-08-18T21:22:14-04:00 The whole Russia-Georgia thing got my buy-when-there's-blood-in-the-streets tendencies rocking and rolling last week. My first impulse was to see if there were any semi-market crashes in Russia or -- even better -- Georgia. And see if any companies there became... CONTROLLED GREED.com The whole Russia-Georgia thing got my buy-when-there's-blood-in-the-streets tendencies rocking and rolling last week. My first impulse was to see if there were any semi-market crashes in Russia or -- even better -- Georgia. And see if any companies there became incredibly undervalued.Then I read several geopolitical types say that if Russia is intent on "reclaiming" its former Soviet republics, it wouldn't stop at Georgia. Looking at the map and you see that Ukraine is the big prize there.Ukraine. My mind got to bubbling up memories of reading James Morton, Cundill's emerging markets guy, saying nice things about various Ukrainian firms he'd put money in. I think he even said some traded in London -- I haven't asked my broker about buying stocks in any former Soviet satellites but I know it's easy to buy stuff in London. And, if investors would be dumping stocks in Russia and Georgia, well they'd be doing the same with Ukrainian ones as well. If I could research and find the ones Cundill and the like held, they'd be great candidates to start off with.Then, assuming they were selling for a fraction of their true worth, I could buy one or two. And then, assuming things calmed down and the Russian Bear pulled out of Georgia and the bullets stopped flying and the bombs stopped dropping, the markets in that part of the world would recover. And I'd rake in some great profits in relatively short order.But that's a lot of assuming, folks.And as the week wore on, my juices stopped flowing as my adrenalin calmed down. Reading what Joe Rosenberg, Loew's Chief Investment Officer, said in Barron's reflects my thoughts on coming back down to earth. It's hard enough making money investing in countries with the rule of law, let alone Russia (and I'll add countries impacted by it), where the law is whatever Vladimir Putin decides it is.I've got enough on my plate. What with stocks like General Motors (GM/NYSE). And retail holdings American Eagle Outfitters (AEO/NYSE), Foot Locker (FL/NSYE) and Office Depot (ODP/NSYE) underwater with consumers struggling. And don't remind me of my Japanese consumer lenders.Okay, I'm back to being sane now. Five for the Weekend #2 tag:typepad.com,2003:post-54258890 2008-08-15T18:35:00-04:00 2008-08-17T22:01:07-04:00 Not a whole lot is going on in the markets, from my perspective. That of a stock picker, I should emphasize. There is, of course, plenty of stuff playing out in the credit markets, and on the battlefields of Georgia.... CONTROLLED GREED.com Not a whole lot is going on in the markets, from my perspective. That of a stock picker, I should emphasize. There is, of course, plenty of stuff playing out in the credit markets, and on the battlefields of Georgia. No one has a crystal ball, and the best way to navigate our way through the fog of events -- both seen and unseen -- is to read as much as we can and make the most intelligent decisions we can.Right now the smartest decision seems to be to sit tight -- as far as the portfolio goes.So, with that, here are five items you might wish to check out over the next couple of days.
Southeastern Asset Management released its semi-annual shareholders report for its Longleaf family of funds this week. I recommend you download and print it out. If you're a fellow traveler with me in General Motors (GM/NYSE), you'll want to read what Mason Hawkins and Staley Cates have to say in the letter for the flagship Longleaf Partners Fund. And for some interesting points on Japan and China, see the letter for the International fund. Then again, just read the whole report.
No shortage of news stories on Warren Buffet's latest moves regarding investments held through Berkshire Hathaway, such as this Bloomberg report. I continue believing that individual investors (I'm one) may better invest their time keeping up with the moves of some other professionals, like Mason Hawkins and Staley Cates (mentioned above). That's because Buffet can't buy many stocks others can, due to his asset-size. I will say one thing striking in recent Buffet stories over the years is how willing he is to invest in non-US companies. When I came across Buffet and Charlie Munger in the 1980s, they rarely ventured outside America (a holding in Guinness comes to mind).
How bad things are -- and will ultimately get -- with the big banks is unknowable. They may be screaming bargains but putting any money in them is a gamble, and not a very smart one at that. Then again, I'm a GM investor, right? Anyway, further worries for the banks are exemplified by this Bloomberg interview with Mohamed El-Erian of Pimco, who says it has become
harder for financial firms to raise capital because investors
such as sovereign wealth funds have gotten "smarter.'' Sobering stuff.
Speaking of sobering stuff, there's the matter of Russia and Georgia. Will this turn out to be a very small event in history, or the start of something big? Only time will tell. And a good way to pass the time is to read this analysis by George Friedman of Stratfor. I'm not overly-knowledgeable about Stratfor, yet everything I've ever read by them seems level-headed and even-handed. From the linked analysis: But the geopolitical foundations of the war have been building since
1992. Russia has been an empire for centuries. The last 15 years or so
were not the new reality, but simply an aberration that would be
rectified. And now it is being rectified.
And if you're keeping an eye on Russia's involvement in Georgia, it might be worth keeping up on the level of Russian government involvement with TNK-BP (the Russian joint-venture with BP, the British oil giant). Martin Vander Weyer writes in The Spectator: But what is outrageous is the way in which various arms of the Russian
state, including the visa authorities, have been deployed to make life
as uncomfortable as possible for BP???s expatriate managers, to the
extent that BP is now close to losing any effective control of its
massive investment.
Well, that's it for now. But before ending this post, let me link to another item of interest to any value investor. Fat Pitch Financials celebrated its 4th anniversary this week. So stop by George's blog if you haven't already to express your good wishes and congratulations.Have a great weekend. Coming Attraction: That Early 90s Show tag:typepad.com,2003:post-54114310 2008-08-13T08:00:00-04:00 2008-08-25T21:17:34-04:00 I don't know what will happen in the future. With markets or anything. And I believe the fact that I know I don't know is among my few strengths as an investor.But there are some things I'm fairly certain of.... CONTROLLED GREED.com I don't know what will happen in the future. With markets or anything. And I believe the fact that I know I don't know is among my few strengths as an investor.But there are some things I'm fairly certain of. One is that the current credit crisis will eventually offer up opportunities just like the savings and loan crisis of the early 1990s did. That time is not now. It may be six months from now or a year from now or even longer. Just not now -- that would be a huge risk, in my humble view.For me, the risk is missing out. I'm an individual investor doing my own research, which consists of reading as much as I can as often as I can. One of my shortcuts, if there is such a thing, is keeping an eye on what truly great investors are doing.One is Michael Price, who runs MFP Investors and is most known for running the Mutual Series group of funds. He left soon after selling the funds to Franklin Resources.Price isn't in the press much these days, probably one of the nice things about being out of the mutual fund business (though Mason Hawkins and Staley Cates manage to keep very low profiles). Yet he is the subject of this Bloomberg story. This part well down the report stands out to me:Price said he plans to buy stakes in smaller banks that are
replenishing their capital. He can't find many worth investing
in, he said. "In the next six months lots of banks are going to raise
capital and we're going to probably put money into 5 or 10 of
probably 50 or 100 we'll look at,'' Price said. "We're going to
be very selective.'' The words of a very smart and patient man, with the longterm record to prove it. Evans-Pritchard: Stage Two of Gold Bull Market "Just Beginning" tag:typepad.com,2003:post-54113650 2008-08-12T22:04:28-04:00 2008-08-12T22:07:26-04:00 Ambrose Evans-Pritchard notes that gold has been falling. And falling despite fighting between Russia and an ally of the US, Euro-zone inflation, the highest CPI in the UK since the Bank of England went independent, and rampant inflation sweeping the... CONTROLLED GREED.com Ambrose Evans-Pritchard notes that gold has been falling. And falling despite fighting between Russia and an ally of the US, Euro-zone inflation, the highest CPI in the UK since the Bank of England went independent, and rampant inflation sweeping the developing world.He gives four possible reasons for this. And goes on to say why he thinks the gold bull has a long way to go yet. He ends his piece with this:Gold bugs, you ain't seen nothing yet. Gold at $800 looks like a bargain in the new world currency disorder.I've noted here before -- confessed? -- that I sold my position in Central Fund of Canada too soon (it's a closed-end fund holding gold and silver bullion). And I am not in gold or gold mining stocks at all. Perhaps I should be tempted, but I like the idea of owning stocks in undervalued companies better.I wonder if I'll one day look back at $800 gold and regret not heeding the linked article. Time will tell. Franklin Templeton's Don Reed on John Templeton tag:typepad.com,2003:post-53973116 2008-08-11T06:21:00-04:00 2008-08-12T18:17:43-04:00 With John Templeton's recent passing, it's not surprising to see more and more articles about him or referencing him. I came across another one -- an interview with Don Reed, President and CEO of Franklin Templeton in Toronto:"The first time... CONTROLLED GREED.com With John Templeton's recent passing, it's not surprising to see more and more articles about him or referencing him. I came across another one -- an interview with Don Reed, President and CEO of Franklin Templeton in Toronto:"The first time that I ever attended a meeting where he spoke was in New York City. He was addressing a group of shareholders and he said: 'Ask me any question. It doesn't have to be on the investment area. It could be of any nature that you'd like.' I was blown away by the various questions that were asked at the time. One woman (said): 'Five years ago, when I attended this meeting, I asked you what I should do with my son, who was troubled at the time.' You said: "Your son should go out and take an MBA program and go into the business world.?
He has been very successful, and thank you for that.'There were a lot of those types of things - from every area that you can possibly imagine. One individual said: 'Sir John, why don't you have Quaker Oats in the portfolio.' He said: 'Every morning when I get up, I eat my Quaker Oats oatmeal, and it's good for me and it tastes good. " 'But everybody knows that's the case with that company, so everybody is paying prices that are too high - and that's why I don't own the stock.'The interview touches on Reed's life before Templeton recruited him in the late 1980s and what he finds attractive now. He reports being overweight telecom in his fund, with Asia accounting for most of the portfolio in terms of geography. Interesting that he says the credit crunch in the US started five years ago. Five for the Weekend tag:typepad.com,2003:post-53948760 2008-08-08T18:54:43-04:00 2008-08-08T18:54:43-04:00 The dog days of August are here in earnest. If you're in a heatwave, crank up the air conditioner and rummage through these stories if you need reading material between now and Monday. Berkshire Hathaway may find itself on my... CONTROLLED GREED.com The dog days of August are here in earnest. If you're in a heatwave, crank up the air conditioner and rummage through these stories if you need reading material between now and Monday.
Berkshire Hathaway may find itself on my buy list if investors start selling the stock. I've missed opportunities to buy Mr. Buffet's company in the past -- most notably at the height of the tech bubble -- and would love to correct that mistake, as I did with Capital Southwest (CSWC/NASDAQ). Josh P. Hamilton files this Bloomberg exclusive on Buffet and Berkshire. Despite falling earnings, the company is still raking in the dough and with asset prices declining, it's "Buffet Time" according to one investment player.
Harvard University's endowment fund has made a gain of 7% to 9% for the fiscal year ended June, boosted by investments in
commodities, US Treasuries and some strong hedge-fund performers, according to The Wall Street Journal (free Reuters coverage here). That's below the endowment's 15% average over the past decade, but with all that's going on in the credit markets the results have to be considered excellent. And this bit from the linked report is noteworthy to those of us value types: The paper said another Harvard investment that racked up even more
profits from the credit crisis was Seth Klarman's Baupost Group, a
Boston-based investment firm that rose more than 52 percent last year,
in part by buying credit-default swaps, or insurance protection, on
residential mortgage-backed securities and corporate bonds.
You probably heard the Dow Jones Newswires report quoting Wilbur Ross as saying the US economy won't recover until late 2009. Ross, like Gary Shilling, I don't follow as much as my favorite value managers, but I have immense respect for and pay attention to. As a General Motors (GM/NYSE) shareholder, I noticed this from the linked report: Meanwhile, Ross said he continues to focus on his International
Automotive Components business, which sells parts to auto makers. He
said recent steps from Ford Motor Co. (F), General Motors Corp. (GM)
and Chrysler LLC are encouraging, but vehicle purchases won't come back
until people feel good about their homes.
With news breaking that all-out war may break out between Russia and the former Soviet Republic of Georgia, this column by Bloomberg's Michael Sesit is especially timely. That Russia is something of a bully to its neighbors is well known, and shareholders need to be wary if putting money into any Russian companies (even if the management is okay, the government could always ruin you). Less well reported here in the US is how provocative the eastward expansion of NATO to Russia's borders is.
And finally, something fun to end on. John Foley of Breakingviews writes that in
honor of the 2008 Olympic Games in China, there are some "financial medals" the editors at Breakingviews
would like to see awarded. Check it out and have a chuckle.
With that, the weekend officially begins -- and I suspect it started for many of you several hours or more ago already, depending on workloads and timezones. So have a great one and we'll see you Monday. Good Guy, Bad Decision tag:typepad.com,2003:post-53914684 2008-08-08T00:37:52-04:00 2008-08-08T00:38:58-04:00 Gerald Ford's worst moment as President of the United States wasn't when he decided to pardon Richard Nixon. And it wasn't when his economic advisor Alan Greenspan (yes, that Alan Greenspan) talked him into wearing and passing out the ludicrous... CONTROLLED GREED.com Gerald Ford's worst moment as President of the United States wasn't when he decided to pardon Richard Nixon. And it wasn't when his economic advisor Alan Greenspan (yes, that Alan Greenspan) talked him into wearing and passing out the ludicrous "W.I.N." buttons -- which stood for "Whip Inflation Now."Ford's worst moment was when he declined letting Alexander Solzhenitsyn visit the White House.Supposedly, Ford and his advisers thought a visit would anger the Soviets and be provocative. I'm sure it would have angered them, but even then it was evident that Solzhenitsyn was a rare individual, and of great importance -- especially at that time in history. I wonder if Ford ever regretted his decision? I don't recall offhand and I don't mean to condemn Ford. He was making a tough call in real time (back when you never heard the term, "real time"), and making decisions on the spot that appear differently perhaps down the road is something we stock pickers can empathize with.But Ford's backbone in heroically using his veto pen -- he vetoed loads of bills in his time -- somehow went soft on what could have been one of the great Oval Office moments in Presidential history.I thought about President Ford choosing not to meet Solzhenitsyn when news of Solzhenitsyn's death broke the other day. I also recalled something else, which Charles Moore touches on in The Spectator this week:In 1983, the novelist arrived in London to be presented with the
Templeton Prize for Progress in Religion by Prince Philip at Buckingham
Palace. There was a bit of a row because Solzhenitsyn wanted to publish
his acceptance speech for samizdat circulation in the Soviet Union. The
royal bureaucracy, perhaps fearing Soviet ire, told him he could not.
My friend Malcolm Pearson, who had helped Solzhenitsyn in the past and
had palace connections, was called in to sort things out (publication
was permitted). Solzhenitsyn immediately endorsed his enormous
Templeton cheque to Malcolm and asked him to get it banked in
Switzerland, by which means it reached Soviet dissidents.Rest in peace, Mr. Solzhenitsyn. Mid-Week Random Notes tag:typepad.com,2003:post-53810100 2008-08-06T00:45:07-04:00 2008-08-08T00:01:18-04:00 Here are a few things catching my eye the middle of this week. The Wall Street Journal reports that Third Avenue Management is planning to raise money for a private equity fund investing in distressed companies. Marty Whitman has long... CONTROLLED GREED.com <div xmlns="http://www.w3.org/1999/xhtml"><p>Here are a few things catching my eye the middle of this week.</p><ul>
<li>The Wall Street Journal <a href=""http://online.wsj.com/article_print/SB121790042960712303.html">reports</a>" that Third Avenue Management is planning to raise money for a private equity fund investing in distressed companies. Marty Whitman has long been known as a "vulture investor" and maybe this means good times are not too many years in front of us. From the article: <em>"The last time Third Avenue started a private fund was in the early
1990s; it wound down in 2000 after its investments worked out and
reached favorable valuations."</em></li>
</ul>
<ul>
<li>Charlie Rose devoted his entire PBS show Monday night to <a href=""http://www.charlierose.com/shows/2008/8/4/1/a-conversation-with-peter-chernin">interviewing" Peter Chernin</a>, Chief Operating Officer of News Corp. I can't recall if it was David of the Finance Trends blog, or someone else, but whoever said it was correct -- Charlie Rose is the best at doing these in-depth conversations with business leaders and investors. I've seen him talk with smokestack industry guys, Silicon Valley types, foreign business people.? It's all good.</li>
</ul>
<ul>
<li>Mark Mobius <a href=""http://www.bloomberg.com/apps/news?pid=newsarchive&sid=anE2oR_5Ulyk">told</a>" Bloomberg that the Fed should cut its benchmark interest rate to 1% <em>"to boost the economy as
falling oil prices reduce the threat of inflation."</em> I wasn't able to catch Larry Kudlow's CNBC show Tuesday evening, but I wonder if that go any play there (since all matters regarding the Federal Reserve tend to get those panelists' juices flowing). Most interesting to me in the linked report is Mobius saying he's finding attractive valuations in Turkey and South Africa, and is bullish on banks in Brazil.</li>
</ul>
<ul>
<li>Lehman Brothers has chosen to <a href=""http://www.reuters.com/article/businessNews/idUST35048320080805?sp=true">drop" coverage of portfolio holding Aiful</a> (AIFLY/OTC), in response to Aiful's protesting a Lehman report in June. The report said the Japanese consumer lender was "arguably insolvent." Aiful has threatened legal action and Lehman has since issued an updated report, which included some significant revisions. From the linked Reuters story: <em>"Aiful, owned 41.2 percent by foreign investors, has seen its shares tumble 35 percent since Lehman's first report on June 23."</em></li>
</ul>
<p>Let's see what the rest of the week has in store for us.</p></div> |
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