Top 10 Companies by Share Buyback Yield

Source : http://www.factset.com/websitefiles/PDFs/buyback/buyback_3.12/

Portfolio update March 2012

Ticker	Two Years	One Year	Six Months	Year To Date	Since Inception
My Portfolio	18.25%	20.55%	31.06%	21.42%	18.24%
S&P 500	11.25%	7.34%	22.68%	11.66%	1.29%

Portfolio update Feb 2012

Ticker	% Portfolio
Combined	100.00%
Cash	15.55%
BK	13.73%
BAC	12.20%
WFC	10.41%
BRK-B	10.26%
IACIX	7.82%
JEF	7.03%
TAVIX	5.60%
BP	4.59%
HLDCY	4.28%
MSFT	4.12%
PTP	3.18%
bacA (custom)	1.21%

Total Returns:

Ticker	Two Years	One Year	Six Months	Year To Date	Since Inception
My Portfolio	16.35%	14.85%	21.13%	14.10%	17.05%
S&P 500	13.76%	6.39%	17.01%	8.73%	0.72%

Inflation or Deflation ?

Steven Romick of FPA Crescent fund discusses his thinking on inflation or deflation and how he is positioning the portfolio to handle either.

http://www.fpafunds.com/downloads/crescent/FPA_Crescent_Qtrly_Commentary_1211.pdf

Pabrai on philanthropy

http://www.forbes.com/sites/mohnishpabrai/2012/02/01/i-stole-this-idea-get-untouchables-into-indias-m-i-t/

Chris Davis comments on BNY Mellon

One of the largest detractors from last year’s results was our holding in Bank of New York Mellon, which we count as a mistake because we have meaningfully lowered our appraisal of the company’s fair value. However, unlike some of the examples mentioned above, we have no doubt about the bank’s durability or the fact that it will remain profitable. After all, this 233-year-old institution has endured despite panics, depressions, civil war, world wars, and more. More important, we believe that the stock price has declined more than the business value and thus we expect to earn back some of this loss in the years ahead.
The immediate cause of the stock’s decline was earnings’ shortfalls, which in turn were caused by a combination of factors. Some of the factors are likely to be permanent. For example, for many years the company made a considerable profit executing foreign exchange trades on behalf of custody clients in a manner that does not appear to have been clearly disclosed to clients. In addition to harming the bank’s reputation, this practice is now the subject of significant litigation led by several state attorneys general. Beyond the cost of litigation and settlements, it is likely that the foreign exchange profit pool has been significantly and permanently reduced. Other factors, such as today’s record low interest rates and clients’ preference for bonds over stocks, should eventually reverse and add to profits. But some, such as a competitive pricing environment in which steep discounting is the norm, may or may not reverse. This last factor is unexpected as the industry is an oligopoly with the top three institutions accounting for about 50% of a very slow growing market, which typically makes discounting unnecessary. Profits lost by price cuts are unlikely to be regained even by meaningful changes in market share.
In our estimation, this combination of short-term and long-term factors has reduced earnings by some 20%–25%. Because we expect at least a portion of these factors to eventually reverse, we have reduced our estimate of Bank of New York Mellon’s value somewhat less. Bank of New York Mellon’s stock price, however, fell more than 30% indicating a widespread belief that all of these factors represent permanent changes. While we think this pessimism is understandable given the bank’s poor record of execution in recent years, considerable evidence also indicates that the bank’s core businesses remain quite strong. For example, in 2011 the bank increased its assets under custody by 3%, its assets under management 8%, its deposits 37%, its loans 18%, and its capital by 10%.
At today’s price, the company’s shares are valued at less than 10 times depressed profits that incorporate all the negative factors described above. We find this a particularly low valuation given that the company’s business model entails relatively little credit risk, obsolescence risk or balance sheet risk and that it can grow with relatively little incremental capital required. If some of the negative factors such as current interest rate spreads or today’s competitive environment improve, the stock could benefit not just from growing profitability but also from an upward revision of the company’s multiple to better reflect the durability and profitability of the underlying business. Although we recognize our mistake and have lowered our assessment of fair value, the fact that the shares now trade at a low multiple on depressed earnings leaves us optimistic that Bank of New York Mellon will add to our future returns and that we will earn back some of this loss in the years ahead.

The entire letter is posted here
http://davisfunds.com/document/read/DNYPMComm1Q12/

Portfolio Update Dec 2011

Current Holdings

Ticker	Portfolio %
Bank of America Warrants (Exp 2019)	0.77%
WFC	10.69%
TAVIX	5.56%
PTP	3.37%
MSFT	3.96%
JEF	7.33%
IACIX	8.34%
HLDCY	3.82%
Cash	14.87%
BRK-B	11.54%
BP	4.70%
BK	14.18%
BAC	9.30%
ALR	1.56%

Returns

Ticker	Two Years	One Year	Six Months	Year To Date	Since Inception
My Portfolio	13.15%	2.05%	-1.48%	1.67%	13.60%
S&P 500	7.71%	1.06%	-3.00%	0.78%	-1.43%

Charlie Rose interviews Ray Dalio CEO of Bridgewater Associates

http://www.charlierose.com/view/interview/11957

Excerpts from Phil Fisher`s book

The book "Common Stocks and Uncommon Profits" was published in 1958. The following excerpt describes how the monetary system has been intentionally biased in US towards devaluing the currency after 1932.

Fisher

Revisiting buying PUT options on TLT

Over a year ago I thought about buying PUT options on TLT expiring on Jan 20,2012 for 2.6$/share.Basically this investment would have had a huge payout if we had a runaway inflation and interest rates went up significantly on government bonds.

http://stalking-value-stocks.blogspot.com/2010/08/thinking-about-buying-put-options-on.html

Looking back that investment would be worth 0.13$/share....a loss of 95%.

But I think betting against treasury bond yields is still a good idea. In my perfect world I would buy a TLT PUT expiring in 2022 but nobody is willing to sell that long dated PUT option.

So here is an investment which makes all the sense in the world ....but you just need someone willing to take on the opposite side of the bet.

CBO Budget and Economic Forecast

Charts from CBO's Budget and Economic Outlook: An Update

View more presentations from Congressional Budget Office

Michael Lewis on Daily Show

http://www.thedailyshow.com/watch/tue-october-4-2011/exclusive---michael-lewis-extended-interview-pt--1

http://www.thedailyshow.com/watch/tue-october-4-2011/exclusive---michael-lewis-extended-interview-pt--2

Bought Henderson Land(HLDCY) at US $4.38/share

About Henderson Land
Henderson Land(ticker HLDCY) owns a significant amount of land in Hong Kong (21 million square feet)and China (150 million square feet, primarily in secondary cities). In Hong Kong the government owns most of the land and sells it to the land management companies like Henderson in the auction market. The auction process can end up being a costly way to acquire the land. Instead of bidding on auctions Henderson Land acquires land by buying up old decaying buildings and tears them down to make skyscrapers. Hence the cost of land is the cheapest among their competitors.They have also acquired huge amounts of agriculture land over the past two decades at low costs and is working with the government to convert it into residential lots.I personally saw their AIA financial center building in the heart of downtown Kowloon during my visit to Hong Kong this summer.

Unlike US, as per HK accounting, land and property needs to be restated annually based on present market values on companies balance sheet. Hence the book value of the company accurately represents the present value of assets.

Valuation

BHKD = Billion Hong Kong Dollars

The latest stated book value of Henderson Land stock is about 190 BHKD. At my purchase price the company is selling for 80 BHKD. Henderson owns 40% stake in Hong Kong and China Gas which is also listed in stock market and is worth 54 BHKD. Hence at current price I bought Henderson`s real estate in Hong Kong and China with current market value of 190-54 = 136 BHKD for 80-54 = 26 BHKD. I know that Hong Kong real estate is currently a bubble and the governments is taking significant steps to reduce the property price appreciation but, at 80% discount to book value I feel I have a significant margin of safety for any losses. Even if Hong Kong real estate prices fall by 50%......the company will still be worth 122 BHKD vs my purchase price of 80 BHKD.

Insider Ownership

Companies having high insider ownership is a huge plus for shareholders since you can trust that they will take capital allocation decisions in best interest of the shareholders. Lee Shau-kee family(Chairman of Henderson Land), who already owns 56% of the companies stock, boosted their stake in April by investing 10 BHKD in Henderson stock and raising their ownership to 59%. I view this as a vote of confidence in the companies future as well as proof of its undervaluation. While Lee Shau-kee purchased the shares at $58 HKD/share my purchase was made at $31 HKD/share......a 47% discount to his purchase price.

This stock comprises 4% of my portfolio.

To read more
Lee Shau Kee Purchase
http://www.bloomberg.com/news/2011-04-13/lee-shau-kee-s-1-3-billion-investment-in-henderson-may-fund-home-projects.html

Page 11 and 12 of Third Avenue Shareholder Letter
http://www.thirdavenuefunds.com/ta/documents/reports/2Q2011ShareholderLetters.pdf

Mid Year Report
http://www.hld.com/en/pdf/investor/presentations/1011.pdf

Portfolio Update

Haven't updated my portfolio info on this blog in a while. During this volatile market I was able to acquire some stocks at very attractive prices.

Prem Watsa hedging for deflation

 

GuruFocus: Yeah, actually there's a question from our readers about the difference between the U.S. and Japan.


Watsa: Yes, there are many differences. But it's the psychological climate that is very interesting to me. I was there in 1988, ‘89 in Japan, and when we asked the Japanese business people, this thing can't last, the markets are so high, the land prices are so high, you know what they said? "We're not like the U.S. We believe in working together, we won't let stock prices come down because we have all our group members owning our stock, and we won't let land prices come down because we'll buy it if anyone wants to sell land." And when you heard that discussion many times, over a week or so, you might actually believe them. You might have thought yourself, my goodness, this can't happen, maybe these guys are different, maybe the market doesn't work here in Japan. And to think today, 10-year government rates have gone from 7-8% to 1%, short term rates to 0%, and the stock market down 75% from 40,000 in 1989 to less than 10,000 today, it's unbelievable to someone who was there in the ‘80s.

Another thing: In the late 1980s, Japanese women, housewives, were taking their grocery money and putting it into the stock market because markets were going up and everyone was excited. Stock prices came down, and for the last10-15 years, Japanese households are only making bank deposits or investing in Japanese Treasury bonds. So the psychology has changed dramatically. And the question is, is the culture different in America that their psychology won't change? That people will continue to spend? House prices are down 50%, stock prices are down, 401k's are down, will they still spend? And my worry is, the answer to that is no. They will start saving, there's already signs of that, and they will be careful about their spending, they will be careful about taking risk, and that is left to be seen. But that's my worry, that psychological change in the American consumer might be taking place right in front of us.

Read further here
http://www.gurufocus.com/news/146628/gurufocus-interview-with-fairfax-ceo-prem-watsa-ire-rimm-dell-brka-brkb

Insiders at BNY Mellon are buying

I am quite bullish on BNY Mellon stock (NYSE:BK) and the stock has fallen 33% since beginning of this year. Its always good to see when the insiders at a company put their own money to buy the stock....its another indication that the stock is a good value.

http://insiders.morningstar.com/trading/insider-activity.action?t=BK&region=USA&culture=en-us

Sequoia fund investor day transript 2011

Link

Financial Historian Niel Ferguson interview with Wealthtrack

Author of the book

Civilization: The West and the Rest

http://www.amazon.com/gp/product/1594203059/ref=as_li_tf_tl?ie=UTF8&tag=consuelomackw-20&link_code=as3&camp=211189&creative=373489&creativeASIN=1594203059

Video Link :Interview Video

My own rules of investing

1. Will the business be around in 10 years or so ? What are the odds that something unforeseen can occur which may change the landscape completely ? Am I smart enough to see events that can break this business in long term ?
2. Does the business have pricing power ? Can the business raise prices because of inflation or because it can ...and not loose customers ?
3. Does the business have MOAT i.e. a sustainable competitive advantage ? 
4. Is the management shareholder friendly ? Does it have the right incentives ?
5. Is it selling for a reasonable price taking into account the free cash flow it generates or will generate ? 
6. Is the business conservatively capitalized ? Is it highly leveraged ?
7. Does the management allocate capital prudently ....be it dividends,share buyback or smart acquisitions ?
8. If the business is cyclical I try to normalize the free cash flow it would generate over long term. 

Value Investing Congress 2011 Notes

http://www.scribd.com/doc/54958483/2011-Value-Investing-Congress-Notes