Tag Archives: Buffett

Investment Presentation (JACK) and Readings

Don’t Confuse Growth With Sustainable Competitive Advantage

“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.”

–Warren Buffett, Fortune magazine, 11/22/99


Watch Ryan Fusaro, Value Investing Challenge winner present his top idea: Jack In the Box

Ryan Fusaro, winner of the Value Investing Challenge, shared his analysis of Jack in the Box and how the company’s refranchising efforts will unlock enormous value at the 8th Annual New York Value Investing Congress. Click here to watch a video of his presentation! http://bit.ly/PoQQLy

Long Jack in the Box (JACK)

Fusaro won and pitched Jack in the Box (JACK) in his talk entitled ‘Thinking Outside the Box.” He started with some history that JACK has refranchised from 25% in 2005 to 75% today.

– Incomplete financial reporting
– Potential margin improvement
– Great brands
– Cost structure hasn’t caught up with franchise model

He touched on how JACK owns Jack in the Box but also owns Qdoba, which has typically been too small to really matter but is now worth $580m by itself and value could be unlocked with a spin-off. Think McDonald’s (MCD) when it spun-off Chipotle (CMG). JACK also owns the real estate.

Fusaro says there’s a growth business embedded in a value business and also touched on unlocking real estate value.

Read more: http://www.marketfolly.com/2012/10/ryan-fusaros-presentation-on-jack-in.html#ixzz2AQm8GdUq

Presentation:Fusaro-VIC-Presentation_Jack in the Box_JACK

Let me know if you think the above was worthy of a prize?

Free-Market Money?


Dinner with Pabrai? Who will beat my bid?

Mohnish Pabrai is auctioning off two items: lunch with himself (plus a stock tip) and a life-size bronze bust of Charlie Munger. The proceeds of both will go to the Dakshana Foundation, which he established to help academically promising poor kids in India:


Do you have trading greatness? http://www.marketpsych.com/tradingedge.php

Your personality: http://www.marketpsych.com/personality_test.php

Youth has gone Austrian: http://mises.org/daily/6147/The-Future-of-the-Austrian-School



Have a good weekend.



Valuation: Valuing Growth and the Petersburg Paradox

Growth and value investing are joined at the hip. –Warren Buffett

The one and absolute truth I have learned about investing–and it is the only one–is that long-range success comes not from any simple rule or rules that can be followed by everyone but only from the most rigorous pursuit of disciplines designed to neutralize the emotional pressures that inevitably descent from time to time upon anyone who is responsible for investing other people’s money.

Those disciplines must be self-evolved because we all have different strengths and weaknesses. the things they have in common are (1) defining precisely what we are trying to do; (2) clearly understanding the reasons for the strategy; (3) recognizing in advance what problems will sooner or later accompany the strategy–for there will always be such problems’ and (4) developing the strength to “stay the course” given during troubled times. Successful investing requires constant inquisitiveness about the new and everlasting, open-minded re-examination of the old. The latter process is more difficult than the former. Not many of us are willing and able to accept the tough disciplines that are involved and not many achieve long-term investment success.  –Robert R. Barker, an investor who compounded capital at about a 25% annual rate during the 1950s and 1960s. (1979 Speech)

A Journey to Learn Valuation

I will first focus on how to value growth stocks. There is no promise that we will discover an answer, but we will study the investing greats and their original comments to find our way. Many “great” or famous investors have floundered on the shoals of growth investing. Like Bill Miller: http://executivesuite.blogs.nytimes.com/2008/09/08/bill-millers-really-bad-bet/. 

Humbly, we begin by studying the problem of using high and PERPETUAL growth rates when valuing a business.  When g is = to r, the result is an absurdity.

 The Dividend Discount Model


D1 (Estimate of next year’s dividend) = Current annual dividend * (1 + g)
r (Required Rate of Return for the Stock) = Real Risk Free Rate + (Market Return – Real Risk Free Rate) * Beta of Stock
Real Risk Free Rate = 52-Week T-Bill Yield**
Market Return = Estimate for the stock market’s return in the next year
g (Dividend Growth Rate) = Estimate for the stock’s dividend growth rate (you may calculate g by using the growth of the dividend in the past)

** 52-Week T-Bill Yield – You can find the yield by going to the U.S. Treasury Direct website, selecting the most recent year under auction date > 52-week bills > PDF of the latest auction results.

The Petersburg Complex

This paper by David Durand is a famous article that Ben Graham refers often to in his writings. Growth Stocks and the Petersburg Paradox  If you read only one article from this post, read that. To emphasize the importance of the above article, here is where others have analyzed the article St Petersburg Paradox and Tech Stocks 2000 and St Petersburg Paradox.

Then articles discussing how investors fool themselves: The_Importance_of_Expectations_–_August_2012 and Bubbles and Growth

Growth what is it good for and ROIC

The Dangers of Applying Discounted Cash Flow Models


Dangers of DCF_Mortier and CommonErrors

………….NEXT I will post Graham’s discussion on valuing growth stocks.


Just Show ME the Money

For those readers who lack the patience to study theory and who say, http://youtu.be/mBS0OWGUidc?t=37s There are other blogs for you to read: http://www.oldschoolvalue.com/blog/

52 Techniques for Accounting Fraud _ Jae Jun

One of my favorite blogs: www.greenbackd.com


Buffett Tutorial on Accounting and Valuation: See’s Candies Case Study

I have always maintained that excepting fools, men did not differ much in intellect, only in zeal and hard work.  –Charles Darwin

Value investing works, because it does NOT work ALL the time. –Joel Greenblatt

Today’s post focuses on accounting (GAAP) and valuation through the words of Warren Buffett. The case study on See’s Candies and the other readings will help improve your skills. The burden is on you to understand and apply the lessons. If you do not understand FIFO or deferred taxes, then look up those terms in a basic accounting book, then do problem sets to grasp the concepts. Don’t take Buffett’s words on faith; try to apply the concepts of economic Goodwill to a commodity based company like, for example, US Steel (X) versus a franchise company like Coca-Cola (KO). Do you agree with Buffett’s analysis?

Prof. Joel Greenblatt’s book, The Little Book that Beats the Market, is (simply) an application of Buffett’s thoughts on economic Goodwill.

Helpful hint: Take a subject like share repurchases or divdend policy and try to find many different sources on the subject. Learn the subject to death. Master how, when or if a company should act in returning capital to shareholders.

See’s Candies Case Study:Sees Candies 2012


A Parable on Valuation: The Old Man and the Tree or a Parable of Valuation

Inflation:Inflation Swindles the Equity Investor and Buffett inflation file

EBITDA: Placing EBITDA into Perspective and TEV to EBITDA Research

Joel Greenblatt: Little Book That Still Beats the Market, The – Joel Greenblatt

Secrets of (view): http://youtu.be/3PShSES5nBc   25 minutes

Corporate Finance

Share Repurchases: Corporate Structure and Stock Repurchases and Assessing Buybacks from all Angles_Mauboussin

Dividends: Dividend Policy, Strategy and Analysis

You will beat Wall Street easily if you apply the above lessons. The hard work is in mastering the material.   Stay the course.

The Power of Habit and Investing

I am was a serious chocaholic. After robbing a candy store, I tried to gobble down the evidence as the cops closed in. How was I ever going to stop my fixation on dark, rich, creamy chocolate and replace my bad habits with healthier ones?

“Chains of habit are too light to be felt until they are too heavy to be broken.” –Warren Buffett

To learn more about habits:http://charlesduhigg.com/

An excellent 3.5 minute video on the power of habits: http://www.youtube.com/watch?v=a6p3lG9EDXw&feature=related

The author’s words: What sparked your interest in habits? I first became interested in the science of habits eight years ago, as a newspaper reporter in Baghdad, when I heard about an army major conducting an experiment in a small town named Kufa.

The major had analyzed videotapes of riots and had found that violence was often preceded by a crowd of Iraqis gathering in a plaza and, over the course of hours, growing in size. Food vendors would show up, as well as spectators. Then, someone would throw a rock or a bottle.

When the major met with Kufa’s mayor, he made an odd request: Could they keep food vendors out of the plazas? Sure, the mayor said. A few weeks later, a small crowd gathered near the Great Mosque of Kufa. It grew in size. Some people started chanting angry slogans. At dusk, the crowd started getting restless and hungry. People looked for the kebab sellers normally filling the plaza, but there were none to be found. The spectators left. The chanters became dispirited. By 8 p.m., everyone was gone.

I asked the major how he had figured out that removing food vendors would change peoples’ behavior.

The U.S. military, he told me, is one of the biggest habit-formation experiments in history. “Understanding habits is the most important thing I’ve learned in the army,” he said. By the time I got back to the U.S., I was hooked on the topic.

How have your own habits changed as a result of writing this book? Since starting work on this book, I’ve lost about 30 pounds, I run every other morning (I’m training for the NY Marathon later this year), and I’m much more productive. And the reason why is because I’ve learned to diagnose my habits, and how to change them.

Take, for instance, a bad habit I had of eating a cookie every afternoon. By learning how to analyze my habit, I figured out that the reason I walked to the cafeteria each day wasn’t because I was craving a chocolate chip cookie. It was because I was craving socialization, the company of talking to my colleagues while munching. That was the habit’s real reward. And the cue for my behavior – the trigger that caused me to automatically stand up and wander to the cafeteria, was a certain time of day.

So, I reconstructed the habit: now, at about 3:30 each day, I absentmindedly stand up from my desk, look around for someone to talk with, and then gossip for about 10 minutes. I don’t even think about it at this point. It’s automatic. It’s a habit. I haven’t had a cookie in six months.

What was the most surprising use of habits that you uncovered? The most surprising thing I’ve learned is how companies use the science of habit formation to study – and influence – what we buy.

Take, for example, Target, the giant retailer. Target collects all kinds of data on every shopper it can, including whether you’re married and have kids, which part of town you live in, how much money you earn, if you’ve moved recently, the websites you visit. And with that information, it tries to diagnose each consumer’s unique, individual habits.

Why? Because Target knows that there are these certain moments when our habits become flexible. When we buy a new house, for instance, or get married or have a baby, our shopping habits are in flux. A well-timed coupon or advertisement can convince us to buy in a whole new way. But figuring out when someone is buying a house or getting married or having a baby is tough. And if you send the advertisement after the wedding or the baby arrives, it’s usually too late.

So Target studies our habits to see if they can predict major life events. And the company is very, very successful. Oftentimes, they know what is going on in someone’s life better than that person’s parents.


I recommend reading The Power of Habit : Why We Do What We Do in Life and Business by Charles Duhigg: http://www.amazon.com/The-Power-Habit-What-Business/dp/1400069289/ref=sr_1_1?ie=UTF8&qid=1340109798&sr=8-1&keywords=the+power+of+habit

The Mental Habits for Investing

Obviously we seek to learn from other great investors, but how to incorporate their habits as part of our own?

The power of mental habits for investing: http://marktier.com/Excerpts/chap01-01.php

Turning $100 to $15,000 + over 25 years

Yesterday http://wp.me/p1PgpH-MW

I asked what we could do with $100 if held for 25 years. The best performing stock since 1987 is Fastenal (FAST), a nuts and bolts distributor. The high and low for FAST after its IPO in 1987 was 38 to 20 cents. FAST traded at 20 cents after the 1987 crash but let’s say we take a rough mid-point of 30 cents per share. NOT INCLUDING DIVIDENDS, you would have compounded your funds at a 22.2% rate or turned your $100 into $15,000 so far.

Look at the beautiful financials on the above compounding machine: FAST_VL and FAST_MORN. Read the President’s Letters to Shareholders: President’s Letters: http://investor.fastenal.com/letters.cfm. Read the past four letters in sequence 2008 – 2011. Are you clear about what the company does, its goals, strategies and how its management allocates capital?

What’s the point except for hindsight bias and to make us jealous. I was aware of Fastenal during the 2009 crisis but had always dismissed investing in Fastenal due to its “high” P/E multiple. Yet, during 2009, the company kept investing in its operations while the price dropped to 13xs to 14xs normalized non-growth cash flow per share. What would stop the company from growing or taking continuing market share due to its competitive advantages of scale, low-cost, and reach?  I missed this opportunity in 2009.  Investing is simple, but not easy.

Don’t YOU make the same error. Study great companies so you have an awareness of what greatness is and be ready when opportunity knocks on your door.


But what can you use now to help you find such companies? Buffett once said that compounding was the eighth wonder of the world.   http://www.buffettsecrets.com/compound-interest.htm

Companies that can earn high returns on capital while also redeploying capital back into their businesses while continuing to earn high rates are indeed special. Buffett said he understood the chewing gum market (Wrigley) or the soda market (Coke) better than Microsoft (MSFT).  Look for businesses doing extraordinary thing in prosaic industries where the need and demand won’t change much while the company can strengthen its competitive advantages through scale and customer captivity.

Articles on Fastenal


To Win Big, It Helps to Be a Little “Nuts”

Wednesday April 18, 2012 |

Here’s a simple question for all you students of business success and stock-market returns: What has been the best-performing stock in the United States since the “Black Monday” crash of 1987? If you said Apple or Microsoft or Walmart or Berkshire Hathaway, you’d get credit for a reasonable answer. But you’d be wrong. The best-performing stock in the United States over the last 25 years is a company that most of you, I’d be willing to guess, have never heard of — a company called Fastenal, based in the quiet town of Winona, Minnesota (population: 28,000), located on the banks of the Mississippi River 30 miles northwest of La Crosse, Wisconsin.

In what glamorous, high-margin, cutting-edge business has Fastenal made its mark? Not software, healthcare, or aerospace. Fastenal is the country’s dominant distributor of nuts and bolts. That’s right…If you’ve got the proverbial screw loose, if you’re a major construction company or a small contractor or individual homeowner desperate for an exotic nut or bolt to complete a job, Fastenal is where you turn.

According to a recent article in Bloomberg BusinessWeek, the company has more than 11,000 sales people in 2,600 stores along with an online catalogue that extends for 10,700 pages. It also has more than 5,500 “fully customized and automated Fastenal stores” on job sites and at customer locations — essentially, vending machines for nuts and bolts. The result of this overwhelming reach is truly overwhelming business performance. According to BusinessWeek, the company’s share price is up 38,565 percent since October 1987. Microsoft, by contrast, is up less than 10,000 percent over that same period (still not bad!), and Apple is up by 5,500 percent.

What’s the lesson to draw from Fastenal’s growth and prosperity? I suppose you could wax rhapsodic about the virtues of low-tech components in a high-tech age, and remind yourself that not every growth company is based in Silicon Valley or some other Internet hotspot. But the real lesson is more universal than that. The Fastenal story reminds all of us of the power of making big bets and staking out an “extreme” position in the market — in this case, offering a wider variety of products through more channels at a greater number of physical and virtual locations than anyone else in the business.

Fastenal has thrived because it has carved out a truly one-of-a-kind presence in its field. As its founder, Bob Kierlin, told BusinessWeek, “It was the craziest thing to ask people to invest in a company selling nuts and bolts” — especially one that aspired to sell anything to anyone virtually anywhere. But as it turns out, if you want to win big, it helps to be a little, ahem, nuts.

That’s a lesson I’ve learned over and over as I’ve studied hugely successful companies in brutally tough industries. It’s just not good anymore to be “pretty good” at everything. The most successful companies figure out how to become the most of something in their field — the most elegant, the most simple, the most exclusive, the most affordable, the most seamless global, the most intensely local. For decades, so many organizations and their leaders got comfortable with strategies and practices that kept them in the “middle of the road” — that’s, in theory, where the customers were, that’s what felt safe and secure. But today, with so much change, so much pressure, so many new ways to do just about everything, the middle of the road has become the road to nowhere.

Just to be clear, being the “most of something” doesn’t have to mean being the biggest or most dominant player in your field. It means being the most deeply committed to a one-of-a-kind strategy and a distinctive presence in a world in which most companies and their leaders are content with doing business more or less like everyone else. As Jim Hightower, the colorful Texas populist, is fond of saying, “There’s nothing in the middle of the road but yellow stripes and dead armadillos.” To which we might add companies and their leaders struggling to stand out from the crowd, even as they play by the same old rules in a crowded marketplace.

One of my favorite bankers in the world, Vernon Hill, who created the one-of-a-kind Commerce Back several decades ago (which he sold to Canada’s TD Bank for a cool $8.5 billion), and is now creating the truly unique Metro Bank in London (the first new bank launched in London in 138 years), has a simple reason for why he strives to become the most of something among banks — in his case, not the biggest, but the most colorful, the most entertaining, the most intensely focused on service and convenience. “Every great company,” he likes to say, “has redefined the business that it’s in. Even though I was trained as a banker, I don’t think like a banker. I do things that conventional bankers think are nutty.”

What goes for nutty bankers goes for retailers selling nuts and bolts. If you want to win big, you have to stand for something special — whether that’s the widest selection and most comprehensive reach, or the most focused offerings and most memorable service. There are countless ways to design the kind of unique profile and strategic presence that Fastenal has in its business and Vernon Hill has in his business. All it requires is a commitment to originality, a willingness to challenge convention and break from standard operating procedure, that remains all-too-rare in business today, precisely because it can look a little “nutty” to the powers-that-be.

If you do business the same way everyone else in your field does business, why would you expect to do any better? So ask yourself: What are you the most of in your business — and how do you become even more of that?


According to a recent article in Bloomberg BusinessWeek:

There’s no shame in not knowing the top-performing stock since the crash of ’87. It’s neither Apple (AAPL) nor Microsoft (MSFT), and deprived of the obvious candidates, most people draw a blank. That includes Bob Kierlin. When told that the answer is actually Kierlin’s own company, Winona (Minn.)-based hardware supplier Fastenal (FAST), the 72-year-old founder responds with typical Midwestern understatement: “Oh, wow. Gee. Well, thanks. That’s great news.”

Kierlin, 72, surely knows how well his stock has done: He owns 13.6 million shares, now worth almost $700 million. In the past quarter-century, Fastenal is the biggest gainer among about 400 stocks in the Russell 1000 index that have been trading for at least 25 years, surging 38,565 percent, not including dividends, according to data compiled by Bloomberg. Adjusting for splits, the stock has gone from 13¢ on Oct. 19, 1987, to $50.85. It gained 60 percent over the past year.

Fastenal edged out UnitedHealth Group (UNH), whose stock gained 37,178 percent and far outstripped Microsoft’s 9,906 percent, Apple’s 5,542 percent, and the Standard & Poor’s 500-stock index’s 506 percent. Not bad for a company that literally sells nuts and bolts. “I can understand the disbelief,” says Jonathan Chou, a vice president at mutual fund company T. Rowe Price Group (TROW), which started buying Fastenal stock many years ago and now owns a 12 percent stake in the company.

Chou attributes Fastenal’s success to its stranglehold on the fastener-supply business: There is simply no other distributor that offers so many products in so many locations. The company has 2,600 stores that serve retail and wholesale customers, while its biggest rival, W.W. Grainger (GWW), has 450. Fastenal’s 11,000-plus sales force is technically sophisticated and responsive to customers, Chou says. The company also boasts the kind of scale that allows it to buy hundreds of thousands of items at low-cost from suppliers around the globe.

Fastenal’s website lists 17 categories of fasteners spanning 10,701 pages. Click on bolts, and you’ll see 18 subcategories across 2,471 pages. The breadth of offerings is an almost insurmountable barrier to competitors. “It would be very difficult to replicate this type of product assortment,” says Chou. “The economic moat in this business grows as Fastenal grows.”

While Fastenal’s products may be mundane, companies can’t live without them. “What Fastenal stocks and sells is essential,” says Morningstar (MORN) analyst Basili Alukos. “If you don’t have enough or the right kind, your plant will shut down. Factories are willing to pay a huge convenience premium to a single distributor that can make sure their supply is safe.”

Kierlin says that the idea for a store that offered a vast variety of nuts and bolts—threaded fasteners, as they’re known in the trade—came from his childhood. His father’s auto parts shop was across the street from Winona’s main hardware store. Customers, Kierlin says, kept bouncing between the stores to order hex-cap screws, axle nuts, and cotter pins. In 1967, one year after he returned from a stint with the Peace Corps in Venezuela, that memory inspired him. “Here I’m thinking,” he recalls, “why can’t you have a store that sells everything?”

Originally he thought to sell the fasteners in cigarette pack-size boxes from vending machines placed around town. When he found that no machine could hold enough boxes, Kierlin resolved to raise money to start a conventional store. “It was the craziest thing to ask people to invest in a company selling nuts and bolts,” he says. Even so, Kierlin persuaded four high school friends to chip in a total of $30,000 to found Fastenal. “We didn’t have a lawyer,” he says. “We tried to do it on the cheap.” One of his pals vetoed Kierlin’s preferred name—Lightning Bolts.

Fastenal’s first delivery vehicle was a banged-up Cadillac Coupe de Ville that always veered to the right. The company’s first office desk was a wooden rolltop Kierlin bought for $25 from a laundry that had gone out of business. The original shop had 1,000 square feet on one floor, plus a similarly sized basement (rent was $50 a month) and was lined with kegs that each held 5,000 nuts or screws. When that store filled up, Kierlin rented seven residential garages around Winona and bought 30,000 surplus cardboard toothpaste cartons to hold hardware. “Had you visited our stores in that era,” says Kierlin, “you would have thought we were selling toothpaste rather than fasteners.”

By 1987, Fastenal had 45 stores, mostly in small and midsize towns, and the owners decided to take it public. The stock started trading in August 1987, two months before the market crashed. While the company’s shares fell about 20 percent in the rout, it made up most of that loss by the end of the year. Fastenal had 250 employees at its initial public offering and allocated 100,000 of the offering’s 1 million shares to its employees. Kierlin and his partners also earmarked proceeds to set up an educational foundation for their alma mater, Cotter High School. The company estimates that it provides about $100 million a year to Winona (population 28,000) in employee compensation and dividends paid to local shareholders.

Today, Fastenal has a market value of $15 billion. Net income grew to $358 million in 2011 from $6.4 million in 1990; revenue climbed to $2.77 billion from $52 million. It has stores in all 50 states and has also moved into Mexico, Canada, Central America, Asia, and Europe, often by setting up facilities near U.S. customers that are expanding in those markets. And it finally rolled out a version of that vending machine Kierlin dreamed up 45 years ago, pitching it as a “fully customized and automated Fastenal store within the customer’s location.” Fastenal installed nearly 5,505 of them last year.

None of this means that Fastenal’s stock will keep scorching the market. Charles Carnevale, chief investment officer of EDMP, a money manager in Lutz, Fla., calculates that Fastenal’s shares now trade at 42 times the previous 12 months’ earnings, more than double the company’s expected earnings growth of 19 percent. He also thinks Fastenal’s dividend yield of 1.3 percent is too low. “Fundamentals,” he says, “don’t compensate for the risk.”

That doesn’t bother Kierlin. He says that for all of its success, Fastenal has less than 3 percent of a $150 billion U.S. market, giving it plenty of room to boost sales. And he’s excited that demand for its vending machines is torrid. Fastenal is growing even faster overseas than it is domestically, he adds, so “the best years are still ahead.”

The bottom line: Launched with $30,000, Fastenal has grown into an industry giant with 2,600 stores and a $15 billion market value–over a 5,000 to 1 return so far.


Pat Dorsey and Buffett on Moat Investing; Great Blogs


Moats: http://www.youtube.com/watch?v=ptIGzhgIE3o

  1. Customer switching costs: A customer would have to take a lot of time or money to switch like Microsoft’s Office Software.
  2. Network effect: credit cards which benefit by increasing units. Ebay.
  3. Cost advantages: A low cost producer. Process based cost advantages like Dell’s build to order are not as durable. Scale based cost advantage like UBS with a dense network of vans and shipping points.
  4. Intangible assets-brands, regulatory approvals, patents-that provide pricing power.

How management affects moats: http://www.youtube.com/watch?v=bQkcT0hSzY0&feature=relmfu

It is better to invest in a great business. Common attributes of management teams that have built or destroyed competitive advantages.  A view of businesses along the commoditization spectrum–Oil service businesses to Disney.  Management has more influence on a commoditized business. Ask whether management understands what drives the moat.

Wal-Mart’s laser-focus on low price.

Strayer Education—has a focus on educational quality. Focus on key metrics of the business.

Always widen the moat. Don’t deworsify. ADP’s bad acquisitions.

Value or Value Trap: http://www.youtube.com/watch?v=kTw7by4Z8As&feature=related

Annual report forensics: http://www.youtube.com/watch?v=_hg1MEltp58&feature=relmfu

Buffett’s Criteria for Investments

How Buffett identifies a good investment: http://www.youtube.com/watch?v=14SK4CX_KYY

Buffett says, “Throw at my head”: http://www.youtube.com/watch?v=2a9Lx9J8uSs&feature=related  What Buffett looks for in an investment–the chewing gum market. I want to know about what the economics of the business will look like in ten years.

Great Blogs

http://brooklyninvestor.blogspot.com/2011/09/directory-of-posts-on-ideas.html  A value investor who seeks the nooks and crannies of the market. Some excellent articles found here.


And Where are We Now? The Market as a Discounting Mechanism

“Be fearful when others are greedy. Be greedy when others are fearful.”

“People are habitually guided by the rearview mirror and, for the most part, by the vistas immediately behind them.” – Warren Buffett

Legg Mason’s Letter on Current Equity Premiums and Investor’s Views on future Growth Investors current May 2012 expectations for stocks

The Market as a discounting Mechanism

In September 2011, I posted on the bad news cascading in the housing market: http://wp.me/p1PgpH-2g and I posted the link below to show the charts of various home builders’ stocks.




Behold, the stocks are up about 50% to 100% now that the news is becoming positive. Note the Presentation from Doug Kass:Kass-ValueInvestingCongress-5712 –go to the last three pages to view the need for housing stock.

Home Sales Improving


Economic Blogs

Excellent post on our current economic conditions here: http://scottgrannis.blogspot.com/ and http://mjperry.blogspot.com/

George Carlin on America; Buffett Notes; Aristotle on Ethics; Valuation and more

George Carlin, the Truth Teller

George Carlin: You have no Rights:http://www.youtube.com/watch?v=hWiBt-pqp0E&feature=related

George Carlin on Choice in America: http://www.youtube.com/watch?v=mKQs-jDI7j8&feature=related. Fascism won’t come to America in brown shirts and black boots but in yellow shirts with smiley faces on them.

Aristotle on Ethics

Judge men by their actions (one minute video):  http://www.youtube.com/watch?v=5quLP3rHxwQ&feature=related

Buffett Notes on 2012 Berkshire Shareholder Meeting

Notes on Recent Berkshire Hathaway Meeting (30 pages): http://covestreetcapital.com/Blog/wp-content/uploads/2012/05/Notes-from-the-2012-Berkshire-Hathaway-Annual-Meeting.pdf

Herding Lizards on Wall Street:

The implication is that “Markets are irrational because of quirks in human nature,” Burnham explains in his 2005 book Mean Markets and Lizard Brains.

In this very interesting book Burnham explains that our lizard brains are pattern seeking and backward looking, which again was handy when we lived in caves, but not so great for managing our 401ks.

The fact is, without the constant inflation of fiat money, people would (or have to) spend very little time thinking about their money or savings. Squirreling a little money out of every paycheck would suffice for retirement preparation.

But the modern world of central-bank hyperplanning, hyperbailing, and hyperprinting makes that impossible.


Wall Street Traps for the Unwary: http://www.thereformedbroker.com/

Due Process Abandoned

The Obama administration now claims the authority to kill American citizens without a trial, without notice, and without any chance for targets to legally object. The “targeted killing” program of George W. Bush’s administration has been radically expanded to include Americans far from any war zone.


More on Buffett and his plans for forced redistribution: http://www.jamesaltucher.com/


Jae Jun has borrowed some of my notes on Greenwald in his posts which I encourage anyone to do. His blog is an example of someone who is seriously committed to self-learning and teaching/sharing what he discovers. Bravo!  That said, no one is a guru so check  his posts with your own common sense and independent thinking. For example, replacement value is extremely difficult to do accurately.



Much more



Back with Buffett Case Studies: Dempster Mills and Sanborn Map

“We are what we repeatedly do. Excellence then, is not an act, but a habit.”–Aristotle

My Black Ops Ninja team was able to crack Buffett’s safe in Omaha and bring back these case studies for your enlightenment and study. Mr. Buffett was found passed out on his desk from a Cherry Coke drinking binge.  This video was running on his TV: http://www.youtube.com/watch?v=-0PrTkE5jG4&feature=related  Mr. Buffett is preparing for this weekend’s Buffett Lovefest.

Buffett’s Case Studies:

Dempster Mills

& Sanborn Map

Dempster_Mills_Manufacturing_Case_Study_BPLs What lessons are there here for us to build upon?

Notes on Buffett’s Meeting with Ivey MBA Students on March 30, 2012

Notes on Buffett Lecture to Ivey School Students: Ivey School_2012_Buffett_Notes

Mr. Buffett will often repeat the same concepts and stories to the students. But let’s read what he has to say about certain subjects.

On Valuation: When valuing a business we should think of it as “deferring consumption and laying money out now to get more money back at a later date”–i.e., the two birds in the bush. There are two major questions to be answered: 1. How much money will investors get back? and 2. When will they get it back?

What I seek is certainty about the pay-off, make sure there are two in the bush. The way I deal with certainty is to find companies that have historically great returns and earnings, leveraging on a competitive advantage.

Passion: My passion was valuation

Information: People have better information now, but they still react irrationally.


  • Buy equities strategically and opportunistically.

  • But ultimately, the key to success is emotional stability.

  • Someone with intellectual curiosity can learn the profession.