Wednesday, June 28, 2017

Mohnish Pabrai's Recommended Reading List

Investor Mohnish Pabrai recently recommended a few books at his talk at Google which we just highlighted.

Mohnish Pabrai's Recommended Reading List

  Am I Being Too Subtle? by Sam Zell.  Pabrai said it was great and personally preferred to listen to the audiobook.

  Damn Right: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger by Janet Lowe. The other biography on Charlie Munger that Pabrai said included interesting tidbits not seen before.

  The Beak of the Finch: A Story of Evolution in Our Time by Jonathan Weiner.  Mohnish said he was fascinated by it.  "Unrelated to investing but a great read."

And in the past, Pabrai has also frequently recommended books such as:

  Poor Charlie's Almanack by Charlie Munger.  The classic text that any follower of his should read.

  The Essays of Warren Buffett by Warren Buffett.  Another classic.

And while he didn't recommend his own book, it's worth noting Pabrai has authored The Dhando Investor: The Low-Risk Value Method to High Returns.

For more book recommendations from top investors check out the right sidebar of Market Folly as we've posted many lists.

Mohnish Pabrai's Talk at Google on Entrenched Biases

Fund manager Mohnish Pabrai recently gave a talk at Google on how intensive stock research can be injurious to financial health. 

The video's description is "how the plethora of deeply entrenched biases and flawed evolutionary brain wiring makes us prone to make plenty of mistakes when picking stocks.  Specifically, the more time we spend analyzing a given business, the more likely we are to like it and invest in it. 

But if we don't spend time studying a business, how are we expected to understand its prospects and likely future?  This strong commitment bias is an important reason why most investment managers have trouble beating the index. 

Mohnish will lay out the origins of this bias problem and a few hacks to get around it."

Embedded below is the video of Mohnish Pabrai's latest talk at Google:

For more from this investor, we've posted Pabrai's talk on value investing as well.

For other investor talks at Google, we've posted many of those presentations and you can scroll through that link.

What We're Reading ~ 6/28/17

Taking the pulse of Disney's behemoth ESPN [Sports Business Daily]

The end of car ownership [WSJ]

Pitch on Bank of the Ozarks [Barrons]

Five ways a company can keep its competitive edge [Fortune]

Morningstar's updated top 10 holdings of ultimate stock pickers [Morningstar]

Half of Americans are spending their entire paycheck (or more) [CNN Money]

'How many jobs will be killed by A.I.?' is the wrong question [LinkedIn]

Inside the secret world of the shipping industry [Longreads]

Compound interest applied to learning [Kottke]

How to predict if a borrower will pay you back [NYMag]

Charlie Munger on The Psychology of Human Misjudgement

Investor Charlie Munger is well known for delivering his talk on The Psychology of Human Misjudgement at Harvard in 1995. 

A company called Tiny has created an animated and abridged version of the speech that hits the highlights and puts a visual twist on the talk.  So if you missed his talk or are looking for a quick refresh, this is a great synopsis. 

Embedded below is the video of Charlie Munger on the Psychology of Human Misjudgement:

For more on this investor, check out Charlie Munger's recommended reading list.

Tuesday, June 27, 2017

Steadfast Capital Boosts Trivago Position

Robert Pitts Jr.'s hedge fund firm Steadfast Capital has filed a 13G with the SEC regarding shares of Trivago (TRVG).  Per the filing, Steadfast now owns 5.4% of the company with over 1.60 million shares.

This is an increase of over 1.05 million shares since the end of the first quarter when they owned 550,074 shares.  The filing was made due to activity on June 14th.

We've previously highlighted how Foxhaven Asset Management has also built a Trivago stake

Per Google Finance, Trivago "operates an online hotel search platform. The platform allows users to search for, compare and book hotels. It gathers information from various third parties' platforms and provides information about the hotel, pictures, ratings, reviews and filters, such as price, location and extra options. The Company offers access to approximately 1.3 million hotels in over 190 countries via more than 50 localized websites and applications in various languages. The Company also offers marketing tools and services to hotels and hotel chains, as well as to online travel agencies and advertisers, among others. Its principal executive offices are located in Germany."

Paulson & Co Increases Valeant Pharmaceuticals Stake

John Paulson's hedge fund firm Paulson & Co has filed a 13D with the SEC regarding shares of Valeant Pharmaceuticals (VRX).  Per the filing, Paulson now owns 6.3% of VRX with over 21.81 million shares.

This marks an increase of 2.42 million shares since the end of the first quarter when they owned 19.38 million VRX shares. 

Per the 13D filing, Paulson & Co bought 2.71 million shares at a weighted average price of $13.7080 on May 11th.  They then sold 137,000 shares on June 8th at $13.2914.

The filing also notes that on June 14th, John Paulson was appointed to the board of directors.

Per Google Finance, Valeant Pharmaceuticals is "a pharmaceutical and medical device company. The Company is engaged in developing and marketing a range of branded, generic and branded generic pharmaceuticals, over-the-counter (OTC) products, and medical devices (contact lenses, intraocular lenses, ophthalmic surgical equipment, and aesthetics devices). It operates through two segments: Developed markets and Emerging markets. In the Developed Markets segment, it focuses on the areas of dermatology, neurology, gastrointestinal disorders, and eye health therapeutic classes. In the Emerging Markets segment, it focuses on primarily on branded generics, OTC products and medical devices. Its pharmaceutical products include Xifaxan, Solodyn and Glumetza. Its OTC products include PreserVision, Biotrue and Boston. Its other generic products include Latanoprost and Metronidazole. Its ophthalmic surgical products include intraocular lenses, such as Akreos, enVista, Crystalens and Trulign."

Third Point Takes $3.5 Billion Nestle Stake: Letter

Dan Loeb's hedge fund firm Third Point has released a letter that reveals they've taken a $3.5 billion stake (including options) in Nestle in their hedge funds as well as a special purpose vehicle they raised for the opportunity.

They see four areas for improvement:

1) Improving productivity: adopt a formal margin target

2) Capital return: adopt a leverage target and buyback stock

3) Re-shape the portfolio: perhaps sell some businesses

4) Monetize their L'Oreal stake

Third Point feels that Nestle can hit earnings per share 50% higher than today.

Embedded below is Third Point's letter on Nestle:

You can download a .pdf copy here.

We've also posted other recent portfolio activity from Third Point here and you can also read Third Point's Q1 letter.

Berkshire Hathaway Invests in Home Capital Group and Store Capital

News has recently come out that Warren Buffett's Berkshire Hathaway has made two recent investments:

Berkshire Hathaway Invests in Home Capital Group (HCG)

First, Berkshire will indirectly purchased C$400 million of Home Capital shares via a private placement (40 million shares at around C$10 per share).  Additionally, Berkshire will give the company a C$2 billion line of credit.

Of the investment, Buffett said, "Home Capital's strong assets, its ability to originate and underwrite well-performing mortgages, and its leading position in a growing market sector make this a very attractive investment."

Berkshire will own just over a 38% equity stake in the company.  The company had been undergoing a strategic review as it sought ways to raise capital.

Home Capital had been a popular short among investors betting that Canada could see fallout from a subprime housing crisis of its own.  Buffett has clearly zagged the other direction with this bet.

After falling 45% over the past six months, HCG shares are now up 82% over the past few weeks.

For more on Berkshire Hathaway, we highlighted an interview with Warren Buffett last month.

Per Google Finance, Home Capital is "Canada-based holding company that operates through its subsidiary, Home Trust Company (Home Trust), which offers deposits, residential and non-residential commercial mortgage lending and consumer lending. It offers deposits through brokers and financial planners, and through its direct-to-consumer deposit brand, Oaken Financial. Home Trust, through its subsidiary, Home Bank, offers mortgage, deposit and personal banking products. Its mortgage lending includes Traditional Single-family and ACE Plus Lending; insured residential lending; residential commercial lending, and non-residential commercial lending. Its consumer lending includes credit card and line of credit lending, and other consumer retail lending. In addition it manages a treasury portfolio to support liquidity requirements and invest excess capital. Its operations also include Payment Services Interactive Gateway Inc., the Company's subsidiary involved in payment processing."

Berkshire Invests in Store Capital (STOR)

Secondly, Warren Buffett's firm has also made a bet on another industry that's seen some struggles: physical retail.  While it's not an actual retailer, it still has exposure to the industry as it's a REIT focused on single tenant commercial operational real estate. 

Berkshire has invested $377 million in Store Capital (STOR) according to the company, which turns out to be around a 9.8% stake.  The private placement issued 18.6 million shares at $20.25 per share.

Per Google Finance, Store Retail is "an internally managed net-lease real estate investment trust. The Company is engaged in the acquisition, investment and management of single tenant operational real estate (STORE) properties. As of December 31, 2016, the Company owned a portfolio that consisted of investments in 1,660 property locations operated by 360 customers across 48 states. Its customers operate across a range of industries within the service, retail and manufacturing sectors of the United States economy, with restaurants, early childhood education centers, movie theaters, health clubs and furniture stores. The Company's portfolio includes investments in approximately 1,330 property locations operated by over 300 customers across approximately 50 states. The Company provides real estate financing solutions principally to businesses that own STORE properties and operate within the broad-based service, retail and industrial sectors of the United States economy."

For more from Warren Buffett, we've highlighted other Berkshire Hathaway portfolio activity here.