In the 55th issue of Value Investor Digest we look forward to the Berkshire Hathaway Annual Shareholders meeting today with a placeholder for the event and also a link to the livestream. We also look ahead to the London Value Investor Conference on May 19th and provide links to other articles from Sir Chris Hohn, Value Investor Insight on Metropolis Capital, Dave Iben, a Ruffer Investment Review and we also provide a link to an obituary for Michael Price, who sadly died recently at age 70 – plus four other articles.
“The oil price spike, which may well be structural, has to lead to incentives for accelerated decarbonisation…I personally believe that we’ll have demand disruption as we had in the 70s, and that there’ll be a dramatic acceleration in decarbonisation. I actually view it as a positive thing.”
“The company builds and outfits very large scale projects primarily serving the pulp and paper and hydroelectric-power markets. In pulp and paper it’s one of only two players in the world – Finland’s Valmet is the other – that can build new plants that have price tags of $500 million or more. In power generation, Andritz has 20% of the market for new hydroelectric plants overall, and 40% of the market for pumped-storage hydro plants. These are plants that typically use variable, renewable energy sources in part to pump water uphill, which then keeps the plant going when the sun isn’t shining or the wind isn’t blowing – it’s essentially a huge water battery.”
We are grateful to Value Investor Insight for providing VID readers with access to this article. You can subscribe to the excellent Value Investor Insight here.
We were privileged to have Michael Price speak at the LVIC in 2013 (video link) and were saddened by his recent death aged 70. At the link below please scroll to the In Memoriam section for full comments from Hedda Nadler, who knew Michael for decades: “Michael was always loyal and caring about the people around him, including us. He was especially devoted to his mentor Max and had a big portrait of him hanging in his office. While a Fortune cover called him ‘the meanest SOB on Wall Street’, the Michael we knew was kind, generous, and a mensch. He was low key, a devoted family man, and very loyal. The world is a lesser place without Michael.”
“I taught my first investing class 70 years ago. Since then, I have enjoyed working almost every year with students of all ages, finally “retiring” from that pursuit in 2018. Along the way, my toughest audience was my grandson’s fifth-grade class. The 11-year-olds were squirming in their seats and giving me blank stares until I mentioned Coca-Cola and its famous secret formula. Instantly, every hand went up, and I learned that “secrets” are catnip to kids. Teaching, like writing, has helped me develop and clarify my own thoughts. Charlie calls this phenomenon the orangutan effect: If you sit down with an orangutan and carefully explain to it one of your cherished ideas, you may leave behind a puzzled primate, but will yourself exit thinking more clearly.”
“The economic implications of the war are significant in amplifying inflation in energy, agriculture, and other goods and services, and tempering the risk appetites of investors and corporations. The prospects of high inflation, deteriorating growth, and the potential for a U.S. and global recession have increased significantly.”
“‘Everybody likes the really good franchises that have oligopolies and sell things people need. You pay a fortune for that in the US, but if you’re willing to own companies in Korea and Brazil, and of course Russia, China, Japan, places like that, you can get these really good companies for bargains.’ While many investors are pressing companies to pull out of Russia on moral grounds, Iben was as impatient with that argument as he is with calls to shun fossil fuels to speed the energy transition. ‘Selling Gazprom would not hurt Russia in any way,’ he said. ‘We all want less pollution and we all want peace in the world. Selling stocks mindlessly down 90 per cent is not a way to achieve those goals.'”
“I remember being told in South Africa how dangerous it is to go swimming at the point where two oceans meet – things can look calm on the surface while, below the waves, powerful currents struggle to prevail, making for treacherous conditions. Forty years of a bull market, where for decades ‘buying the dip’ has been a sure-fire idea, is clashing against circumstances and events which may break this benign and predictable investment pattern. Investors who buy on the dip fancy themselves brave.”
“The thing that gave us the confidence to do this was that we were wrong for two years – understanding and learning from being wrong and learning from trying things gave us the confidence to pivot the model.”
“…this was one of the biggest earnings surprises and the biggest one-day sell-offs I have ever seen that involved a big company. And it was neither predictable nor overdone. The notion that it was obvious beforehand that Netflix’s valuation was crazy or that its business model was clearly in trouble — which we heard a lot of yesterday and will hear a lot of in days to come — is hindsight masquerading as foresight…Netflix’s management team said just three months ago that they would add 2.5 million subscribers in the first quarter. They missed that target, on an adjusted basis, by 2 million. Management did not set the target lightly. This is a team that has learned the hard way that overpromising is the best way to piss off Wall Street. They were blindsided by their own business. If I’m right about this, this is a moment for conservative portfolio allocations and avoiding high valuations. Don’t pay up for what you can’t reasonably forecast.”
“We need to do some kind of rethinking here…This disastrous war is an eye opener. The whole ESG community needs to think through how to handle state-owned companies in countries that violate human rights.”
“From a portfolio perspective, it is critical not to focus solely on an asset’s expected return but how it behaves relative to other positions in a portfolio. The value of something that can protect value or even make money when equities are losing heavily is not simply about lower drawdowns and volatility. It is about the ability to rebalance and reallocate from your defensive asset into much more attractively valued risky assets. The compound impact of this through time can be profound.”
“At first glance, these two items – Europe’s energy dependence and supply-chain disruption – may seem to have little in common other than the fact that they both involve international considerations. But I think juxtaposing them is informative…and worth of a memo”