Value Invest London

March 2011

March 2011     Issue 2

Welcome to the second edition of the Value Investor Digest.  We are aiming to publish this every two months, however if we fail to find sufficient quality material, we will simply wait until we have.

The objective of the Value Investor Digest is to share interesting third party material.   We provide you a brief synopsis and a link to the original source. Please feel free to pass this onto friends or colleagues and let us know if you have any suggested material for future updates.

The Berkshire Shareholders Letter 2010
Many of you will have already read Warren Buffett’s annual review of his businesses and investments.

Commentary on Berkshire Shareholders Letter 1977
This was a short article written on 28 Feb 2011, the day after Buffett’s letter was published, which extracts some of the key investment advice which Buffett shared with his (fortunate) investors in 1977. It is remarkable how consistent he has been with his messages since that first letter 33 years ago. A link to the letter itself is also attached.

Vitaliy Katsenelson’s on “Sideways markets”
I met Vitaliy at a gathering of value investors in Zurich in January.  He has now authored two books on value investing with the second being a more digestible version of the first.  This article addresses part of the message of his two books making the point that just investing in great companies is not sufficient when markets can over a long period of time drift sideways and this is typically accompanied by PE compression.

Seth Klarman’s preface to the 6th edition of Security Analysis
Whilst not particularly current, Seth Klarman’s preface to the 6th edition of Security Analysis (published in 2009) is the best essay on value investing we have read.   Klarman also authored the now out of print “Margin of Safety”, copies of which sells on Amazon for $800-1500!

Interview with David Einhorn
There is a fascinating dispute playing out in the value investing world between two of the more high profile value investment managers in the US.  David Einhorn, at Greenlight Capital, is shorting Florida property company, The St Joe Company, whilst Bruce Berkowitz has a big long position in the stock.   Both have a tremendous track record since they started their funds in the late 90s.  In this interview (apologies for the rather long introduction), Einhorn is negative on quantitative easing, positive about gold, long on Pfizer and Apple and also discusses why he is shorting St Joe.

Profile of Bruce Berkowitz
On the other side of the St Joe Trade (see above), sits Bruce Berkowitz.  This article is a good profile of this very successful investor.

Compiled by Metropolis Capital

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    Paul Scott, Stockopedia
  • “The people in that room were a more powerful cadre of the powerhouse of investment than has been gathered for a very long time”
    Jonathan Ruffer, Ruffer LLP
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    Nick Train, Lindsell Train
  • “What I like about it is that it is a practitioners conference and it’s an opportunity to come and hear from your peers about the work that they are doing and how they see value investing”
    Hassan Elmasry, Independent Franchise Partners
  • “I think people really look forward to it and enjoy it. There’s a good bunch of people here who have travelled a reasonable way – the speaker after me was from Hong Kong and there’s a big Canadian crew and a big US crew – people come from around the world to see this”
    Nate Dalton, Affiliated Managers Group
  • “If somebody’s already been through that process of seeing what the conference is about and then is willing to pay their money for the effort of coming here, that’s a great filtering process.”
    Gary Channon, Phoenix Asset Management
  • “The conference has become a part of the furniture of the London scene. You can discover that is what lies inside you – that you are innately a value investor.”
    Richard Oldfield, Oldfield Partners
  • “I do speak at a fair number of conferences to investor bases, this one is really quite a good list – some very, very good investors present and some very interesting speakers”
    Jon Moulton, Better Capital
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    Anthony Bolton, Fidelity
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    Mason Morfit, ValueAct Capital
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    David Shapiro, Willis Towers Watson
  • “What I was impressed with is, because the subject is very similar, value investing, they found a variety of ways of attacking the same subject. I was also very impressed, having done this in another location, of seeing them stay on target time-wise so that it moves along at a great pace and I think the audience is greatly rewarded by that discipline”
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    Leon Boros, Equity Strategies