Value Invest London

May 2017

Welcome to the 30th edition of Value Investor Digest

The Berkshire Hathaway Annual Shareholders Meeting will take place today and so we have several articles to bring you related to that event, including a link to the live stream which can be accessed below. This edition also features a recent Yahoo interview with Buffett’s money managers Ted Wechsler and Todd Combs; plus an article written by Ted Seides who on why, as now seems certain, he has lost his 10 year $1m wager with Warren Buffett on the performance of a basket of hedge funds versus the S&P 500. In addition we feature a recent write-up titled Benefitting When Stocks Swoon which has details on an investment in Britvic, an article on whyRobots Suck at Value Investing and the latest memo from Howard Marks titled Lines in the Sand


Berkshire Hathaway Annual Shareholders Meeting – Live Stream
For the second year running the annual meeting will be streamed live on Yahoo Finance today from 10am ET (3pm BST). For anyone unable to travel to Omaha for the meeting this has been a welcome development – 40,000 shareholders are expected to attend the meeting with an additional 1 million viewers tuning in from around the world to listen to Buffett and Munger’s wit, wisdom and insights. They normally take questions from journalists, analysts and shareholders in the audience for around five hours. If you can’t watch live then you can also watch on demand at the same link for 30 days after the event.

Buffett’s Money Managers Speak
Todd Combs and Ted Wechsler now each run $10bn each for Berkshire Hathaway. In this 8 minute video interview and summary Buffett explains why he and Charlie selected the pair and we also hear from Todd and Ted themselves. When referring to the managers of Berkshire’s operating companies Charlie Munger has mentioned in the past that they take an approach which is “delegation just short of abdication.” Beyond a few simple rules for Todd and Ted to follow, it seems this approach is repeated with the two money managers as well – Buffett said in the interview: “They’ve each got $10bn, they could put it in one stock…they could put it in ten stocks or they could put it in a hundred stocks.”

Why I Lost My Bet With Warren Buffett – Ted Seides
Ted Seides bet Warren Buffett $1m in 2008 that “Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.” As it now looks almost certain that Buffett will win the bet Ted Seides has written up the six reasons why he thinks he lost. The $1m proceeds will go to Girls Incorporated of Omaha – see “the arena for accountable predictions” at for details of this and many other interesting bets.


Benefitting When Stocks Swoon
This article takes a look at the development of an investment in the WD40 company from 1995 to 2016 – the returns over the period are broken down in to EPS growth, dividend reinvestment and multiple re-rating in an interesting table on page three, which isolates the effect on returns of the multiple expansion which has taken place since 2013 – which some investors have suggested is one of the effects of stocks with certain characteristics being viewed as ‘bond proxies’. It is an interesting case study because, as identified in the article the current PE multiple is 32x and “If one assumes that the business operations over the next 21 years are much like the last (which we think is reasonable), then returns are going to be much lower without a further re-rating.” The article concludes by contrasting the potential returns from investing in Britvic.


Why Robots Suck at Value Investing
One of the findings of a recent study published by the CFA Institute called Facts About Formulaic Investing was that Graham & Dodd’s 1934 book Security Analysis cannot be mimicked by a simple algorithm. When referring to formulaic factor-based funds the author noted that “They all have the same problem. In recent years, there is no evidence of outperformance”. Referring to the study a CIO was quoted in the article as saying “This paper emphasises the importance of not just going with a quant screen or simple model…you need human insight”. For the other side of this argument click here to read another article written about the same study, titled “Alternative” Facts about Formulaic Value Investing


Howard Marks Latest Memo – Lines in the Sand
In this unusual memo Howard discusses the subscription lines of credit in the form of bank loans which are extended to LPs to enable them to use borrowed money, rather than LP capital to make early investments or pay fees and expenses. After a detailed description of what they are and how they are used Howard suggests that it’s possible that these lines might result in fewer but larger capital calls which, in a market meltdown or financial crisis, could increase the probability that banks will recall lines and decrease the probability that all LPs will meet the calls – some over-commited LP funds without diversified sources of credit could find themselves subject to “(a) suffer levered losses and (b) be forced to liquidate marketable securities in a crisis to satisfy capital calls in connection with their commitments to closed-end funds.”

Sign-up for Value Investor Digest

* These fields are required. We will not share your contact details with anyone.

  • “It’s very much the Rolls-Royce of the investor conference market”
    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
  • “It’s kind of like Glastonbury isn’t it, for the Value Investing community”
    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
  • “Definitely worth it and I know a number of people who have ‘ummed and arred’ about coming along and I’m sure that they will be regretting that they didn’t come today – and it’s only going to get better as far as I can see”
    Tim Green, Private Investor
  • “Having sat through the whole day as I wanted to come and hear all of the speakers – I’ve been really impressed by the quality”
    Anthony Bolton, Fidelity
  • “I’ve got a bunch of business cards to add to my collection and some folks I’ve been looking forward to meeting, plus some firms I didn’t even know existed but sound really interesting and I’m looking forward to building on that relationship base”
    Mason Morfit, ValueAct Capital
  • “You couldn’t find that anywhere else really, where you’re speaking to the principals who have been voted on to the Board [of Microsoft] to effect change”
    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”
    Don Yacktman, Yacktman Asset Management
  • “Very well organised and it was a treat for investors like us to hear some great speakers”
    Roli Saxena, Drona Capital
  • “I came last year and I liked it so much that I have been looking forward to today ever since”
    Dominique Levy, Sonian Capital
  • “We’e got a very sophisticated audience who are used to value investing – I think this is a good audience”
    David Samra, Artisan Partners
  • “The profile of the speakers is one of the main reasons that I came”
    Niels Borgen, Private Investor
  • “When you look at the ideas speakers have put forward in previous years and how they have performed over the last few years, they’ve done very well – if that performance continues it would be quite remarkable. It does show that you can pick up some good ideas at a conference of this sort”
    Jonathan Mills, Metropolis Capital
  • “I came last year as well and I thought that it was the most outstanding event that I have been to”
    Leon Boros, Equity Strategies