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Seth Klarman – Top 10 Holdings Q22019

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Value Investor Insight: Alexander Roepers Interview

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  • While he spends considerable time and effort on “constructive activism” with his portfolio companies, Alexander Roepers is quick to highlight the basic impetus for all of his investment ideas.
  • Describe where you will and won’t look for ideas.
  • We avoid high tech due to the risks of technological obsolescence.

The Secret To An Outstanding Growth Strategy Is To Prune Those Growth Ideas That Are Not Working Out

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  • Daniel Grioli: So if you think about fishing, if you know what you want to catch, you know what sort of fish you have some idea of its habits, you know what its habitat is, you know the time of day when it’s active and the title conditions when it’s more likely to be searching for food and things like that.
  • Daniel Grioli: So you go out fishing and you’re not necessarily … you can’t guarantee that you’ll catch a fish, but you’re trying to look for a certain set of conditions.

Kinder Surprise – KML taken out by PPL

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  • With regards to the preferred shares, I will point out that PPL has two preferred share series with minimum rate resets: PPL.PR.K (575bps, resets at +500bps with a 575bps mininmum rate) and PPL.PR.M (575bps, resets at +496bps with a 575bps minimum rate).
  • Both trade above par value and both reset in the middle of 2021.
  • Holders of KML preferred shares can keep clipping their coupons and have a little more confidence that the size of PPL will back it up.

Avenue Therapeutics: Two-Step Merger with Cipla, CVR

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  • Tramadol is currently only approved in oral/pill form in the U.S., Avenue (via their controlling shareholder Fortress Biotech - FBIO) owns the exclusive license to develop and commercialize an intravenous ("IV") version of Tramadol, IV Tramadol is widely approved and used (~10% of IV painkiller market share in Europe) internationally but hasn't been approved for use in the United States.
  • Currently the company is putting together their new drug application ("NDA") to submit to the FDA for approval.

Industrial Services of America: Tiny Liquidation, Assets Sold to Nucor Sub

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  • On August 19, the company announced the sale of substantially all of their assets to River Metals Recycling, a subsidiary of the large steel producer Nucor Corporation (NUE), for $23.3MM and following the sale, the dissolution of the company with proceeds being distributed to shareholders.
  • IDSA's balance sheet is a bit of a mess and the company was facing de-listing, but following the liquidation, IDSA expects to distribute $1.15-$1.35 per share, with the stock trading at ~$1.10 that's an attractive 13.5% spread to the mid-point.

My 10 Cents on the WeWork IPO – The “AWS of Commercial Real Estate” or a “Double Hype” ?

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  • WeWork’s actual product: Open Plan offices (for start-ups and wannabes)
  • Moving from a single office (with open doors) environment into an open plan office still is an interesting experience.
  • Summary: A hype company with a hype product and not the AWS of Real Estate

How to Invest a Lump Sum of Money

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  • Before you even get the money in your hand, you should consider what you want this money to do for you.
  • The DCA is a seductive strategy when you fear JNJ shares will drop by 20% a few weeks after buying a lump sum of $12,000 in a single transaction.
  • Don’t wait for the next market crash.

Concentrated Investing – The Successful One Stock Portfolio

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  • During his recent interview with Tobias, Daniel Grioli, the Managing Partner at Guisgard Capital , demonstrates how very concentrated portfolios can be successful, using a real-life example.
  • Tobias Carlisle: He takes $1 billion in, invested in a single stock at a time and sits on the boards?
  • Daniel Grioli: And it was interesting hearing him speak at the Columbia conference because one of the things that came out of that was that in the 15 or 20 years that he’s been investing, he’s only invested in about five or 10 companies.

Why Value Investing Works – In A Single Chart

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  • Kirrage illustrates why value investing has worked in the past and will continue to work in the future, saying:
  • That is an important lesson but one that so many people manage to look past – possibly because the more problematic aspect of the chart is that, while it makes it very clear where you ought to invest, that is far, far easier said than done.

Stanley Druckenmiller: Never, Ever Invest In The Present

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  • I started there when I was 23 years old.
  • After about a year and a half -I was a banking and a chemical analyst -this guy calls me into his office and announces he’s going to make me the director of research, and these other eight guys and my 52-year-old boss are going to report to me.
  • And too many people tend to look at the present, oh this is a great company, they’ve done this or this central bank is doing all the right things.

Investor, Pay Attention

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  • Before you read on, jot down either Company A or Company B.
  • Consider my experience with the stock of Hotel Leela.
  • Now, my idea is not to lead you to conclude that you need to gather a world of information on a business while doing its analysis (in fact, the first 20% information will tell you 80% about the business), but it’s important to pay attention and include the most important information while doing your analysis.

Learning from other Industries

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  • Video

New 13F Summary Newsletter Just Released: Top Hedge Fund Portfolios

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  • The brand new Q2 2019 issue of our quarterly newsletter is now available.
  • It reveals the latest portfolios of top hedge funds and summarizes their new 13F filings.
  • Quarterly Subscription: Normal Price $89.99 Discount Price $59.99 per quarter

Charlie Munger: Great Investors Remain Rational, Objective, and Dispassionate

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  • Munger is highlighting the importance of investors remaining rational, objective, and dispassionate:
  • The idea of being objective and dispassionate will never he obsolete.
  • —CHARLIE MUNGER, BERKSHIRE ANNUAL MEETING, 2003

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