Other[Music][Music][Music]good morning everyone my name is mithungood morning everyone my name is mithungood morning everyone my name is mithun i will be doing the introductions fori will be doing the introductions fori will be doing the introductions for today it's my pleasure to introduce ourtoday it's my pleasure to introduce ourtoday it's my pleasure to introduce our speaker mr monish babrai he's the ownerspeaker mr monish babrai he's the ownerspeaker mr monish babrai he's the owner and managing partnerand managing partnerand managing partner of the pubrae investment funds the fundsof the pubrae investment funds the fundsof the pubrae investment funds the funds manages more than 400 million dollars inmanages more than 400 million dollars inmanages more than 400 million dollars in assets and uses a value focused approachassets and uses a value focused approachassets and uses a value focused approach to their investments the fund isto their investments the fund isto their investments the fund is globally renownedglobally renownedglobally renowned not just for their performance tracknot just for their performance tracknot just for their performance track recordrecordrecord but also for their fee structure becausebut also for their fee structure becausebut also for their fee structure because it's one of the few funds globally whichit's one of the few funds globally whichit's one of the few funds globally which does not charge a management fee anddoes not charge a management fee anddoes not charge a management fee and only charges a performance fee anonly charges a performance fee anonly charges a performance fee an approach that has been inspired by theapproach that has been inspired by theapproach that has been inspired by the warren buffett partnerships which ran inwarren buffett partnerships which ran inwarren buffett partnerships which ran in the 1950s and 60s mr babra is also anthe 1950s and 60s mr babra is also anthe 1950s and 60s mr babra is also an author and his book the dundo investorauthor and his book the dundo investorauthor and his book the dundo investor is a fantastic read for aspiringis a fantastic read for aspiringis a fantastic read for aspiring entrepreneurs amongst us he has moreentrepreneurs amongst us he has moreentrepreneurs amongst us he has more recently been featured in the bookrecently been featured in the bookrecently been featured in the book richer wiser happier by celebrated and
William Greenricher wiser happier by celebrated and renowned financial journalist william green we are very happy to have mr pabrai with us the floor is all yours mr
Questionerpublic thank you so much thank you you know i am a huge fan of singapore and of course you know i've been a student of liquor you for a long time and the amazing miracle that he created in singapore so it's uh it's and you know i i know that nus is up there so very few times who i get to speak to such an august audience so it's a pleasure and an honor to be with all of you it's an interesting format that i was given to follow so i'll uh i'll try to follow the prescribed format where we'll go through about 40 minutes of a monologue where i go through maybe one or more investments and you know what what was the journey and trajectories and all that like so what i thought might be useful for all of you
Questionerthought might be useful for all of you is to it will kind of go into you know is to it will kind of go into you know is to it will kind of go into you know how do you how do you how do you expand or think about your circular expand or think about your circular expand or think about your circular competence and how that can affect and competence and how that can affect and competence and how that can affect and over time over time over time improve you as an investor improve you as an investor improve you as an investor
Questionerso i've got four different so i've got four different so i've got four different investments that investments that investments that i want to talk about i am not very i want to talk about i am not very i want to talk about i am not very optimistic that in 40 minutes we'll get optimistic that in 40 minutes we'll get optimistic that in 40 minutes we'll get through all four so we'll see how far we through all four so we'll see how far we through all four so we'll see how far we can get down the list but i know that we can get down the list but i know that we can get down the list but i know that we will get 40 minutes before we hit the will get 40 minutes before we hit the will get 40 minutes before we hit the four so i won't be having you know empty four so i won't be having you know empty four so i won't be having you know empty time so i kind of planned for a little time so i kind of planned for a little time so i kind of planned for a little bit more than bit more than bit more than i needed so going back going back all i needed so going back going back all i needed so going back going back all the way to maybe around 34 years ago the way to maybe around 34 years ago the way to maybe around 34 years ago 33 34 years ago i had just started my 33 34 years ago i had just started my 33 34 years ago i had just started my first business i.t services company i first business i.t services company i first business i.t services company i had just gotten one of my first clients had just gotten one of my first clients had just gotten one of my first clients i used to live in chicago the client was i used to live in chicago the client was i used to live in chicago the client was in wisconsin it was called ji case which in wisconsin it was called ji case which in wisconsin it was called ji case which is a manufacturer of farm and is a manufacturer of farm and is a manufacturer of farm and construction equipment they are now part
Questionerconstruction equipment they are now part of cnh which is based in europe but the of cnh which is based in europe but the of cnh which is based in europe but the ji case was a company based in racine ji case was a company based in racine ji case was a company based in racine wisconsin wisconsin wisconsin you know i had you know i had you know i had i had gotten a fairly large contract for i had gotten a fairly large contract for i had gotten a fairly large contract for them for a variety of i.t services the them for a variety of i.t services the them for a variety of i.t services the company had had been doing very poorly company had had been doing very poorly company had had been doing very poorly for a while they had been losing money for a while they had been losing money for a while they had been losing money for a while so for a while so for a while so they were very tight-fisted in all the they were very tight-fisted in all the they were very tight-fisted in all the you know the amounts they were willing you know the amounts they were willing you know the amounts they were willing to pay and the negotiations and all to pay and the negotiations and all to pay and the negotiations and all because they were just kind of because they were just kind of because they were just kind of scrambling on their end but there was scrambling on their end but there was scrambling on their end but there was one part of the company which was their one part of the company which was their one part of the company which was their finance arm finance arm finance arm where whenever i did work with that where whenever i did work with that where whenever i did work with that group they never tried to negotiate with group they never tried to negotiate with group they never tried to negotiate with me and they me and they me and they always seemed to have a lot of cash and always seemed to have a lot of cash and always seemed to have a lot of cash and it was like almost like i was dealing it was like almost like i was dealing it was like almost like i was dealing with a different company even though it with a different company even though it with a different company even though it was a subsidiary so i i asked the cio i was a subsidiary so i i asked the cio i was a subsidiary so i i asked the cio i said well you know james why why are said well you know james why why are said well you know james why why are these uh this all the rest of your guys
Questionerthese uh this all the rest of your guys beat me up on price and everything else but these guys they don't he says oh they have a lot of money and the rest of us don't but they have a lot of money so it prompted me to look into why is it that the finance arm of case was doing so well when the equipment arm was doing so poorly and what i discovered is that captive finance companies like if you have ford motor company and there's ford credit or toyota and toyota credit and that sort of thing where they are you know kind of financing their own vehicles etc those businesses are extremely good businesses and normally lending is not such a good business in fact i've had a lot of permanent wiped outs and losses in the investing in leveraged financial institutions and actually i don't invest in them anymore because i think i'm very bad at them but
Questionerbecause i think i'm very bad at them but captive finance arms are very differentcaptive finance arms are very differentcaptive finance arms are very different and the reason they're different is soand the reason they're different is soand the reason they're different is so if you think about you know like theif you think about you know like theif you think about you know like the certified pre-owned lexus for examplecertified pre-owned lexus for examplecertified pre-owned lexus for example right you know you go to a lexus dealerright you know you go to a lexus dealerright you know you go to a lexus dealer and you know they've got the lexus carsand you know they've got the lexus carsand you know they've got the lexus cars but they also have the certifiedbut they also have the certifiedbut they also have the certified pre-owned so certified pre-owned is onlypre-owned so certified pre-owned is onlypre-owned so certified pre-owned is only possible with lexus you can't have itpossible with lexus you can't have itpossible with lexus you can't have it with anyone else because they can givewith anyone else because they can givewith anyone else because they can give you a lexus warranty they can tell youyou a lexus warranty they can tell youyou a lexus warranty they can tell you we've done all the you know checks andwe've done all the you know checks andwe've done all the you know checks and inspectionsinspectionsinspections and and it gives a halo the brand haloand and it gives a halo the brand haloand and it gives a halo the brand halo so it itso it itso it it it has similar halo to buying a new carit has similar halo to buying a new carit has similar halo to buying a new car right in the sense that they're givingright in the sense that they're givingright in the sense that they're giving youyouyou a lot of assurance that you're getting aa lot of assurance that you're getting aa lot of assurance that you're getting a great car so when lexus finances one ofgreat car so when lexus finances one ofgreat car so when lexus finances one of their carstheir carstheir cars and let's say it's a three year or fiveand let's say it's a three year or fiveand let's say it's a three year or five year or seven year finance dealyear or seven year finance dealyear or seven year finance deal and let's say the borrower defaults youand let's say the borrower defaults youand let's say the borrower defaults you know doesn't make his payments etc they
Questionerknow doesn't make his payments etc they can repossess the car and when the car comes back to them they are in a very privileged position versus a typical lender so if i'm just like you know citibank or chase or someone who made a loan and the borrower defaults and the asset comes back to me i have so many different assets i am dealing with that i don't have a particular expertise or competence in a lexus you know lexus bmw mercedes they all look the same to citibank there's no difference for them right so when when these cars come back to citibank for example and they're going to default et cetera citibank will just you know send it to auction or whatever and try to get rid of it quickly and try to salvage and get as much money out of it so that they minimize their losses or come out ahead or whatever but in the case of lexus or whatever but in the case of lexus it's a little bit different so when they
Questionerit's a little bit different so when they repossess the car they have the option of refurbishing it making it part of lexus pre-owned bringing it back into their dealer channels for sale and getting a good price for it so their ability to work with that asset is very different than the ability of a city or someone and when you go to like equipment finance like you know the tractors and all of that now those are business tools right the critical business equipment you need for your business so first of all default rate should be lower because you know you will let the house go you're going to let many things go before you're going to let the tractor go because that's you know if they repossess the tractor you're in trouble so first of all default rates are low but secondly if they if there is a default and comes back to them they again have the same
Todd Combsback to them they again have the same abilities like lexus they can refurbish and they can sell it through the dealer network etc and so i found that what i learned from that experience when i was running my it company is a wow these captive finance companies are really interesting you know just something i kept in my head and you know in the financial crisis when all the auto companies were facing severe issues and they went bankrupt gm and chrysler went bankrupt four did not go bankrupt and the reason ford did not go bankrupt is because of ford credit so ford credit was so strong that it carried the company even when the rest of it was just as bad as gm and gm had taken their gmac and they had gone into mortgage lending and number other things which hit them really hard so they actually you know kind of left the reservation and went off the reservation basically
Ted Weschlerand went off the reservation basically and they paid the price so the captive finance arm of lexus should not be financing bmws you know you want to keep it to lexus because that's where it has real power and competitive branding so this this experience i had was in the early 90s just observing this right in 2012 which is you know maybe something like 30 years or yeah almost 30 years after i made that made that investment i made an investment in fiat chrysler in the fund so that when i when i had learned about all about this captive finance i was a you know running an i.t company wasn't running a fund or anything but when i made the investment in fiat chrysler one of the things i looked for was their captive finance because i knew that that piece is really good and it did not exist so they had been so decimated the capital had been so decimated they had
Questionercapital had been so decimated they had sold everything off including their capital financial of course a number of things that change in that business where it became a lot better business after the financial crisis because they redid their union contracts their cost structures went down so detroit actually went from being one of the worst places on the planet to build a car in up to 2007 to one of the best places on the planet to build a car in 2009 and beyond it actually became very competitive my interest in investing in fiat chrysler was because i think the world still thought of auto companies as terrible you know high capex unionized subject to consumer taste is everything you can think of that's terrible in making an investment and what they didn't realize is when these companies went through bankruptcy they got cleansed so a lot of their
Questionergot cleansed so a lot of their retirement liabilities went away the pension liabilities went away they went and redid their union contracts and a number of other things came in their way and the valuation was really off like the market cap of here at chrysler was five billion dollars and their annual revenue is 130 billion dollars so it was trading at about four percent of revenues and so if if they could write the ship and make even modest profits i felt that they could make five six seven billion in a single year so basically it'd be less than a p or one against future earnings and the other thing that was interesting to me was that which is the main reason i made the investment was that sergio marchionne was the chairman of here i was a ceo here at chrysler and i'd done a lot of work looking into sergio and used as a off the charts
Questionersergio and used as a off the charts exceptional leader so anyway we made theexceptional leader so anyway we made theexceptional leader so anyway we made the investmentinvestmentinvestment and from 2012 to 2022 it's a 10x andand from 2012 to 2022 it's a 10x andand from 2012 to 2022 it's a 10x and unfortunately i didn't capture the wholeunfortunately i didn't capture the wholeunfortunately i didn't capture the whole 10x because in the middle sergio died10x because in the middle sergio died10x because in the middle sergio died which was a big shocker but we made itwhich was a big shocker but we made itwhich was a big shocker but we made it we made several times the money we'vewe made several times the money we'vewe made several times the money we've made like four five times our money andmade like four five times our money andmade like four five times our money and such but the thing is that in thesuch but the thing is that in thesuch but the thing is that in the process of owning fiat chryslerprocess of owning fiat chryslerprocess of owning fiat chrysler i got to know john elcan who was ai got to know john elcan who was ai got to know john elcan who was a chairman and he's part of the ignellichairman and he's part of the ignellichairman and he's part of the ignelli family in italy which controls fiatfamily in italy which controls fiatfamily in italy which controls fiat chryslerchryslerchrysler and i had many conversations with johnand i had many conversations with johnand i had many conversations with john and i said that you know theand i said that you know theand i said that you know the finance arm which doesn't exist becausefinance arm which doesn't exist becausefinance arm which doesn't exist because they had a dealer santander bank who wasthey had a dealer santander bank who wasthey had a dealer santander bank who was doing all the financing for them i saiddoing all the financing for them i saiddoing all the financing for them i said i said the finance arm is the one of thei said the finance arm is the one of thei said the finance arm is the one of the most important things to put in place somost important things to put in place somost important things to put in place so i said why aren't you guys puttingi said why aren't you guys puttingi said why aren't you guys putting resources behind itresources behind itresources behind it why aren't you guys you know i think the
Questionerwhy aren't you guys you know i think the answer he gave was that we just don't have the financial strength and what i also observed is while he was saying we didn't have the financial strength they were pushing out very large dividends and and that made no sense to me so i felt like almost like the fiat chrysler owners they had been through so much trauma before that they wanted to you know pull chips off the table whereas i felt that if that if that cash had gone into the finance arm and i tried to explain to john that look these captive finance arms are really really exceptional businesses and you know santander bank you know they they finance everything they don't have the same variable as you guys would have they never went down that path so i wonder whether either they didn't understand it or there was something else that i didn't understand but our
Questionerelse that i didn't understand but our investment still worked but i think it would have been worked even better so this is an example of how something happens in life you know you cannot convert connect the dots you know looking forward but you can connect them looking back and then later something comes up which is you know way in the future 30 years in the future and the dots connect and you can you can do something about it so that's uh that's something i just wanted to share that i i learned about captive finance arms and that's a data point i always have so like recently i was looking at john deere and i went straight to looking at their capital finance and of course you see in john deere equipment you see a lot of cyclicality you see ups and downs and all that but we look at john deere finance it's just a straight line up
Questionerit's just a straight line up there is no noise there is no noise there is no noise there is no hiccups because you know there is no hiccups because you know there is no hiccups because you know you're financing for five or seven years you're financing for five or seven years you're financing for five or seven years you really don't have high defaults it's you really don't have high defaults it's you really don't have high defaults it's just a very smooth just a very smooth just a very smooth beautiful line and it's a great business beautiful line and it's a great business beautiful line and it's a great business and i think they understand how how good and i think they understand how how good and i think they understand how how good that business is so you know i think that business is so you know i think that business is so you know i think that's an example but another time you that's an example but another time you that's an example but another time you know i i think this was in 2002 know i i think this was in 2002 know i i think this was in 2002 or 2003 i had read somewhere a long time or 2003 i had read somewhere a long time or 2003 i had read somewhere a long time ago probably in the 90s that the failure ago probably in the 90s that the failure ago probably in the 90s that the failure rate rate rate there was an article about the failure there was an article about the failure there was an article about the failure rate of different businesses rate of different businesses rate of different businesses in different sic codes you know as i say in different sic codes you know as i say in different sic codes you know as i say code what we use in the us for different code what we use in the us for different code what we use in the us for different industry classifications so there was industry classifications so there was industry classifications so there was this article about failure rate of this article about failure rate of this article about failure rate of businesses by sic code businesses by sic code businesses by sic code and i noticed in that article that the and i noticed in that article that the and i noticed in that article that the lowest rate of failure of any lowest rate of failure of any lowest rate of failure of any type of business was funeral homes type of business was funeral homes type of business was funeral homes so funeral homes basically pretty much
Warrenso funeral homes basically pretty much never went out of business and i found it really interesting and i thought about it for a while i think the reason funeral homes don't go out of business is multiple reasons number one when all of you graduate not one of you is going to say i want to be the king of funeral services or i want to join a funeral services operation it's a morbid industry young people aren't looking to go down that path so first of all they're not a lot of entrants looking whereas you know if if you look at something like bitcoin everyone and their brother wants to create something a clone of bitcoin right and be the first guy and have a bunch of them at one cent or whatever but no one does that in funeral services so so you don't have a lot of intense pressure for people wanting to go into that business which is not the same with airlines right everyone wants
Questionersame with airlines right everyone wants to start airlines because they think it's it's fun and flashy the second is that when we're looking for a place to do the last rights of our beloved uncle or or aunt or father or mother or whatever we're not going to take the low bit so we're not going to call six places and compare prices okay we're gonna probably look at a place that has the family has worked with in the past where there may be some history and then go down that path and we're not really going to be focused on price and such because so it's a morbid time etc and so it's not a business that faces intense pricing pressure you know they they can price however they want they can even you know overprice it if you will and you may not even understand whether you were you were ripped off or not because you don't have a benchmark you know what
Questionerdon't have a benchmark you know what should a funeral cost how do i know you
Othershould a funeral cost how do i know you
Othershould a funeral cost how do i know you know i deal with one every single 40
Otherknow i deal with one every single 40
Otherknow i deal with one every single 40 years or something so basically it
Otheryears or something so basically it
Otheryears or something so basically it doesn't face those type of pressures and
Otherdoesn't face those type of pressures and
Otherdoesn't face those type of pressures and the other is that the brand and the
Otherthe other is that the brand and the
Otherthe other is that the brand and the traditions of places that have been
Othertraditions of places that have been
Othertraditions of places that have been there for a while they tend to have a
Otherthere for a while they tend to have a
Otherthere for a while they tend to have a following inside so they were i just
Otherfollowing inside so they were i just
Otherfollowing inside so they were i just noted that it's interesting that you
Othernoted that it's interesting that you
Othernoted that it's interesting that you know funeral
Otherknow funeral
Otherknow funeral homes have a very low failure rate then
Otherhomes have a very low failure rate then
Otherhomes have a very low failure rate then i think in 2002 when i was running my
Otheri think in 2002 when i was running my
Otheri think in 2002 when i was running my fund one of the things i do is i i have
Otherfund one of the things i do is i i have
Otherfund one of the things i do is i i have a subscription to value line i look at
Othera subscription to value line i look at
Othera subscription to value line i look at value line every week and one of the
Othervalue line every week and one of the
Othervalue line every week and one of the things
Otherthings
Otherthings you know in their summary document they
Otheryou know in their summary document they
Otheryou know in their summary document they have one of their lists is out of the
Otherhave one of their lists is out of the
Otherhave one of their lists is out of the 1700 companies that they follow that
Other1700 companies that they follow that
Other1700 companies that they follow that maybe the 50 companies with the lowest
Othermaybe the 50 companies with the lowest
Othermaybe the 50 companies with the lowest pe
Otherpe
Otherpe then they have another 50 companies with
Otherthen they have another 50 companies with
Otherthen they have another 50 companies with the highest pe so they just give you a
Otherthe highest pe so they just give you a
Otherthe highest pe so they just give you a list
Otherlist
Otherlist and and i always look at the low pe list
Questionerand and i always look at the low pe listand and i always look at the low pe list and usually you'll find some companies pand usually you'll find some companies pand usually you'll find some companies p of 2 p of 3of 2 p of 3of 2 p of 3 and those are like real dogsand those are like real dogsand those are like real dogs you know likeyou know likeyou know like you should just avoid them like theyou should just avoid them like theyou should just avoid them like the plague usually what that means is ifplague usually what that means is ifplague usually what that means is if something's trading for two timessomething's trading for two timessomething's trading for two times earnings is basically that's in the pastearnings is basically that's in the pastearnings is basically that's in the past there's no more earnings leftthere's no more earnings leftthere's no more earnings left that engine has run out of juice okaythat engine has run out of juice okaythat engine has run out of juice okay but i noticed in 2002 that there werebut i noticed in 2002 that there werebut i noticed in 2002 that there were two funeral services companiestwo funeral services companiestwo funeral services companies sittingsittingsitting amongst the lowest fees they wereamongst the lowest fees they wereamongst the lowest fees they were sitting at asitting at asitting at a both of them one was sitting at a pe ofboth of them one was sitting at a pe ofboth of them one was sitting at a pe of twotwotwo and the other was sitting at a p of 2.3and the other was sitting at a p of 2.3and the other was sitting at a p of 2.3 so i said it cannot beso i said it cannot beso i said it cannot be that these companies can't make moneythat these companies can't make moneythat these companies can't make money if anyone can make money they can makeif anyone can make money they can makeif anyone can make money they can make money i mean i don't knowmoney i mean i don't knowmoney i mean i don't know who all are going to die in singapore inwho all are going to die in singapore inwho all are going to die in singapore in 2022 but i can tell you how many are2022 but i can tell you how many are2022 but i can tell you how many are gonna diegonna diegonna die okay so that's that you can come come upokay so that's that you can come come upokay so that's that you can come come up with that number with a lot of precisionwith that number with a lot of precision
Questionerwith that number with a lot of precision and so there is a recurrence in the sense that humans are gonna die and certain percentage of population will die and the revenue is going to show up and all of that so i said this is really strange why would a funeral services company trade at two times earnings right i mean they should be at 20 30 times earnings because they're just so stable even if they have no growth they're so stable in a low interest environment it should be at least 10 times earnings right at that time interest rates weren't so low so i decided to dig in right so one of the things i just want to tell you is that reason i'm giving you this data is to just say what is the trigger there needs to be a trigger to dive in right so there's 50 000 stocks the data set is too large we can't look at all 50 000 stocks so we have to have a way of shortlisting
Questionerso we have to have a way of shortlisting so we have to have a way of shortlisting right so one of the things i'm looking right so one of the things i'm looking right so one of the things i'm looking for shortlisting is i'm looking for for shortlisting is i'm looking for for shortlisting is i'm looking for anomalies anomalies anomalies something weird that makes no sense something weird that makes no sense something weird that makes no sense this was something weird that made no this was something weird that made no this was something weird that made no sense right so i said let's dig in and sense right so i said let's dig in and sense right so i said let's dig in and find out what's going on find out what's going on find out what's going on and when i dug in what i found with and when i dug in what i found with and when i dug in what i found with these two companies stuart enterprises these two companies stuart enterprises these two companies stuart enterprises and service corp and service corp and service corp is they were very large publicly traded is they were very large publicly traded is they were very large publicly traded funeral services operators and they had funeral services operators and they had funeral services operators and they had been doing a roll-up been doing a roll-up been doing a roll-up for more than 10 or 15 years where they for more than 10 or 15 years where they for more than 10 or 15 years where they had been buying mom and pop funeral had been buying mom and pop funeral had been buying mom and pop funeral services paying you know 10 8 10 12 services paying you know 10 8 10 12 services paying you know 10 8 10 12 times earnings and then their own stocks times earnings and then their own stocks times earnings and then their own stocks were you know worth a lot more and they were you know worth a lot more and they were you know worth a lot more and they just kept doing that and they had bought just kept doing that and they had bought just kept doing that and they had bought like thousands of funeral homes and then like thousands of funeral homes and then like thousands of funeral homes and then what happened is they got too levered what happened is they got too levered what happened is they got too levered like in the case of stuart enterprises like in the case of stuart enterprises like in the case of stuart enterprises they had bought they had bought they had bought a large number of funeral homes in
Questionera large number of funeral homes in europe but they were having trouble managing them and so none of those funeral homes were producing any cash flow so they had paid all this money out but they were not making any money and so they were kind of upside down where the debt service was difficult and i said you know this sounds like a great business with a bad balance sheet right i mean basically the the business is fine it's the balance sheet that's stupid and so i said can they get out of it what what what would happen here i looked at the situation and they were they were trading at two times earnings okay so i said look all these people they bought these funeral homes from okay and and what student enterprises have done is let's say they bought john hardy funeral services for example in kansas city for example they made no changes to the
Questionerexample they made no changes to the business it was still called john hardy because it had brand recognition and the people who were the clients never realized the business had been sold they still had the john hardy family running it and they tried to keep everything the same right because the value was in the longevity of that brand and that so this was not one business like mcdonald's with 1000 locations it was each individual place running with its own brand because if you kill that brand you would really uh take away value uh and such so i said look they bought john hardy for maybe 10 or 15 times earnings okay if they go back to john hardy and say listen would you like the business back for five times earnings and john hardy would say yes because they know how good a business is so they would say these dumb asses paid me three
Otherwould say these dumb asses paid me three millionmillionmillion and i can buy it back for a millionand i can buy it back for a millionand i can buy it back for a million here's your million goodbye right so ihere's your million goodbye right so ihere's your million goodbye right so i felt like if they had to you know kindfelt like if they had to you know kindfelt like if they had to you know kind of raise cashof raise cashof raise cash to take care of theirto take care of theirto take care of their bank debt etcbank debt etcbank debt etc because there were so many of thesebecause there were so many of thesebecause there were so many of these funeral homes they could easily sell afuneral homes they could easily sell afuneral homes they could easily sell a few hundredfew hundredfew hundred relatively quicklyrelatively quicklyrelatively quickly and they would raise more enough cash toand they would raise more enough cash toand they would raise more enough cash to get their situation so i said i don'tget their situation so i said i don'tget their situation so i said i don't thinkthinkthink i don't think this can go bankrupt ii don't think this can go bankrupt ii don't think this can go bankrupt i think they've got many different leversthink they've got many different leversthink they've got many different levers and they had some cash and they hadand they had some cash and they hadand they had some cash and they had about 18 months of breathing room andabout 18 months of breathing room andabout 18 months of breathing room and the markets don't like uncertainty sothe markets don't like uncertainty sothe markets don't like uncertainty so they had punished a stock because ofthey had punished a stock because ofthey had punished a stock because of thisthisthis and then what happened in a few monthsand then what happened in a few monthsand then what happened in a few months is they actually did something betteris they actually did something betteris they actually did something better than i thought they made a deal to sellthan i thought they made a deal to sellthan i thought they made a deal to sell all the european funeral homes so theall the european funeral homes so theall the european funeral homes so the total cash flow those european funeraltotal cash flow those european funeraltotal cash flow those european funeral homes were generating was a big fat zerohomes were generating was a big fat zero
Ted Weschlerhomes were generating was a big fat zero actually was negative they were losing money and they made about four or five hundred million when they made that deal so when they sold it off an asset which was stranded suddenly gave them a bunch of cash and the stock started moving it doubled then it doubled again eventually we moved on but it was a very nice home run for us and again there it was just you know something i had read a long time ago which i understood about funeral homes and then you have this other understanding which is good business bad balance sheet can you can you work with that and then you know kind of confluence of factors coming in and that works out another example it was a canadian tubular steel producer so they made these you know pipes and such that go into pipelines and waterways and that sort of thing so ipsco ipsco made these steel
Questionerthing so ipsco ipsco made these steel pipespipespipes like you know if you're laying pipelinelike you know if you're laying pipelinelike you know if you're laying pipeline from canada to the gulf coast you wouldfrom canada to the gulf coast you wouldfrom canada to the gulf coast you would contract with someone like this ipsco tocontract with someone like this ipsco tocontract with someone like this ipsco to create all thecreate all thecreate all the all the piping and you give them like aall the piping and you give them like aall the piping and you give them like a two or three year contract to do thattwo or three year contract to do thattwo or three year contract to do that and so on the nature of their businessand so on the nature of their businessand so on the nature of their business was that they hadwas that they hadwas that they had a lot of visibilitya lot of visibilitya lot of visibility into future earnings and cash flowinto future earnings and cash flowinto future earnings and cash flow because these were contracts you knowbecause these were contracts you knowbecause these were contracts you know the people building the pipelines wantedthe people building the pipelines wantedthe people building the pipelines wanted surety or deliverysurety or deliverysurety or delivery surety of price and so they signed thesesurety of price and so they signed thesesurety of price and so they signed these guaranteed contracts with companies likeguaranteed contracts with companies likeguaranteed contracts with companies like gibsongibsongibson so if school was a company that wasso if school was a company that wasso if school was a company that was trading at about i think 40 odd dollarstrading at about i think 40 odd dollarstrading at about i think 40 odd dollars a sharea sharea share maybe 42 43 a sharemaybe 42 43 a sharemaybe 42 43 a share they had no debtthey had no debtthey had no debt they had about 14they had about 14they had about 14 in cash per share on their balance sheetin cash per share on their balance sheetin cash per share on their balance sheet and they had publicly stated that theand they had publicly stated that theand they had publicly stated that the next two yearsnext two yearsnext two years of earnings were 14 each in each of theof earnings were 14 each in each of theof earnings were 14 each in each of the next two years
Questionernext two years and the stock was at like 42 or 43. so i said okay they are saying the future earnings because they have those contracts locked in and so if you just take the current cash plus the next two years cash coming in it's equal to the stock price and they've got all these plants and equipment and inventory and everything else brand and everything else all that is available for zero so i said now markets don't like uncertainty right so after two years there was absolutely no visibility of what earnings would be it could go to one dollar it might even go negative we have no idea right and so because of that uncertainty the markets were not willing to give this a 10 multiple or something because they felt this was like peak earnings for example right my take was that hey why don't i just you know buy the stock and watch this movie for two years you
Questionerand watch this movie for two years you know get some popcorn you know turn on a big screen tv and just watch the movie for two years see how it unfolds and so i did that i put about 10 of the funds assets i think was in 2004 or something into ebsco about like six seven months later they announced that we have one more year of visibility of earnings and we're again going to make another 14 dollars i said hallelujah god loves me so the stock is now at 60 and change because you know markets can now see that okay 42 is too low because they're gonna mix it with 60 or 65 by then okay and then markets got a little bit more bullish about them and the stock was trading at about 85 or 90 a share and they had not made any more announcement we just had the sixty dollars guaranteed and i was thinking you know should i take my tips off the table i don't know what happens after
Questionertable i don't know what happens after three years just like anyone else and who knows what the situation looks like and while i'm running through all these kind of mind games in my head the stock suddenly goes to 148. like i wake up one morning and i see if school is at 1 48 and just a straight vertical line up so i said whoa what's going on and it turned out that some swedish company offered to buy them for like 155 so i said god truly loves me because i was happy to you know take my chips off the table at 90 and move on i did not wait for that deal to close i didn't even wait for it score to respond to that offer or any of those things i just immediately placed buy or sell orders and we were done with ebsco and i think eventually that deal closed for 160 or 165 or something and it became a private company under the swedish company
Questionerswedish company
Questionerswedish company sososo there again i think the the thing is
Questionerthere again i think the the thing is that sometimes
Questionerthat sometimes that sometimes wall street gets confused between risk
Questionerwall street gets confused between risk and uncertainty this is an example of
Questionerand uncertainty this is an example of getting confused between risk and
Questionergetting confused between risk and uncertainty if school was a business
Questioneruncertainty if school was a business with very high uncertainty but the risk
Questionerwith very high uncertainty but the risk was very low so when you
Questionerwas very low so when you generally run into a combination
Questionergenerally run into a combination of very high uncertainty very low risk
Questionerof very high uncertainty very low risk the end result is usually going to be
Questionerthe end result is usually going to be very high returns so that's a that's a
Questionervery high returns so that's a that's a good formula to keep in mind
Questionergood formula to keep in mind amazingly we have gotten through three
Questioneramazingly we have gotten through three examples and i haven't run out of time
Questionerexamples and i haven't run out of time yet which is great we might even make it
Questioneryet which is great we might even make it through most of the fourth example
Questionerthrough most of the fourth example fingers crossed so the first example is
Questionerfingers crossed so the first example is actually the very first investment i
Questioneractually the very first investment i made on july 1st 99 when my fund started
Questionermade on july 1st 99 when my fund started and it was a company called silicon
Questionerand it was a company called silicon valley bank
Questionervalley bank and silicon valley bank at this point
Questionerand silicon valley bank at this point might have a branch in singapore i'm not
Questionermight have a branch in singapore i'm not sure they've expanded a lot so at that time in july 99 one of my concerns was that valuations were getting pretty crazy i mean we were about i didn't know it at the time but we were about eight or nine months away from a massive implosion in the nasdaq the collapse of that dot-com bubble but i knew that we were in a bubble i had myself had a private.com and so i was i was able to see things which had already blown up and so i could see things about maybe four or five months ahead of other what others could see so i i knew that i mean i recognized that i was a tech guy that the internet was transformation but i also recognized that the valuations that we had in a bunch of these pets.com and whatever else was ridiculous but i was i was trying to find a way to play that arena where i have upside without
Questionerarena where i have upside without downside and i found that i found a way to play and i found that i found a way to play that with silicon valley bank so silicon valley bank is a actually what what i would have done really well on is that if i just held it from then till now i actually held it for just about a year i more than doubled or tripled my money and i moved on but it's compounded at like 20 a year for like 20 years so far it's done really well it's a very unusual bank it's headquartered in silicon valley and their clients are mainly venture-backed tech companies their main clients actually are the top flight venture capitalists so if you're sequoia or anderson horowitz or greylock whoever when you fund a a a company and you're the first venture capital going in you're probably going to tell the company to open an account at silicon valley bank the reason you're going to
Questionervalley bank the reason you're going to tell them to open a silicon valley bank tell them to open a silicon valley bank tell them to open a silicon valley bank because silicon valley bank is very because silicon valley bank is very because silicon valley bank is very has got a lot of expertise has got a lot of expertise has got a lot of expertise in dealing with tech companies in dealing with tech companies in dealing with tech companies so so so the vcs know that they can get reporting the vcs know that they can get reporting the vcs know that they can get reporting from them which is better than they can from them which is better than they can from them which is better than they can get from other places because they get from other places because they get from other places because they understand what the venture capitalists understand what the venture capitalists understand what the venture capitalists are looking for the vcs in their terms are looking for the vcs in their terms are looking for the vcs in their terms would say you need to send us these would say you need to send us these would say you need to send us these reports show us the balances whatever reports show us the balances whatever reports show us the balances whatever else so they they've got great reporting else so they they've got great reporting else so they they've got great reporting for them the other thing they've got is for them the other thing they've got is for them the other thing they've got is that that that because it's almost like the captive because it's almost like the captive because it's almost like the captive lenders so lenders so lenders so when a company gets venture capital when a company gets venture capital when a company gets venture capital they don't want to spend that money they don't want to spend that money they don't want to spend that money buying servers and furniture and so on buying servers and furniture and so on buying servers and furniture and so on those things they would rather finance those things they would rather finance those things they would rather finance right so that their the money the raise right so that their the money the raise right so that their the money the raise goes further goes further goes further and silicon valley bank is really good and silicon valley bank is really good and silicon valley bank is really good at financing those things so if if a
Questionerat financing those things so if if a company is looking to buy a quartercompany is looking to buy a quartercompany is looking to buy a quarter million worth of servers for examplemillion worth of servers for examplemillion worth of servers for example computer equipmentcomputer equipmentcomputer equipment they'll make that loan and again forthey'll make that loan and again forthey'll make that loan and again for them it looks like a captive because ifthem it looks like a captive because ifthem it looks like a captive because if the company goes underthe company goes underthe company goes under and they get you know they get title toand they get you know they get title toand they get you know they get title to those servers they'rethose servers they'rethose servers they're they're financing those every three daysthey're financing those every three daysthey're financing those every three days with some other so they could go to somewith some other so they could go to somewith some other so they could go to some new startup and say listen i can givenew startup and say listen i can givenew startup and say listen i can give you all the servers at half offyou all the servers at half offyou all the servers at half off you know 70 off and they're brand newyou know 70 off and they're brand newyou know 70 off and they're brand new come and take a look at them you know acome and take a look at them you know acome and take a look at them you know a lot of people will take them up on thatlot of people will take them up on thatlot of people will take them up on that so so they have a way to recycle thatso so they have a way to recycle thatso so they have a way to recycle that assetassetasset in a way that most of the lenders wouldin a way that most of the lenders wouldin a way that most of the lenders would not have because they are so homogeneousnot have because they are so homogeneousnot have because they are so homogeneous in or some company that goes under justin or some company that goes under justin or some company that goes under just bought a software license and thatbought a software license and thatbought a software license and that license is valuable and they can againlicense is valuable and they can againlicense is valuable and they can again recycle that license and so on so theirrecycle that license and so on so theirrecycle that license and so on so their business is really good but the other
Otherbusiness is really good but the other thing that what they were doing is in silicon valley you know when you go to a restaurant you know like ill for neo whatever and the waiter serves you even the whaler gets stock options you know the masseuses at google got stock options so everyone gets stock options and so what silicon valley bank did is whenever they made loans to these companies they collected warrants from them on the side so they made the loan and said you also have to give us warrants and so they would they would collect these warrants and they had hundreds and hundreds of these companies which were their clients and they had a huge amount of warrants but there was no disclosure on how many warrants pitch companies whatever but i knew that they were sitting on this huge stockpile of warrants and these companies were going
Questionerwarrants and these companies were going publicpublicpublic you know at that time the borroweryou know at that time the borroweryou know at that time the borrower probably hadn't burst soprobably hadn't burst soprobably hadn't burst so i was only paying 10 times earnings fori was only paying 10 times earnings fori was only paying 10 times earnings for the business because no one wasthe business because no one wasthe business because no one was interested in these regular companiesinterested in these regular companiesinterested in these regular companies everyone wanted like you knoweveryone wanted like you knoweveryone wanted like you know sexy businesses and all that in a fewsexy businesses and all that in a fewsexy businesses and all that in a few months after i investedmonths after i investedmonths after i invested they started announcing thatthey started announcing thatthey started announcing that we monetized eight of these and we madewe monetized eight of these and we madewe monetized eight of these and we made so much money and there was dwarfingso much money and there was dwarfingso much money and there was dwarfing their earnings so the amount they weretheir earnings so the amount they weretheir earnings so the amount they were making on those when so they startedmaking on those when so they startedmaking on those when so they started gradually as these coming start goinggradually as these coming start goinggradually as these coming start going public they started going into theirpublic they started going into theirpublic they started going into their looking through that treasury and sayinglooking through that treasury and sayinglooking through that treasury and saying okay what do we have and they startedokay what do we have and they startedokay what do we have and they started unloading those and then the stockunloading those and then the stockunloading those and then the stock started reacting to that you knowstarted reacting to that you knowstarted reacting to that you know because because they had this huge thingbecause because they had this huge thingbecause because they had this huge thing and eventually we we tripled our moneyand eventually we we tripled our moneyand eventually we we tripled our money and it was like the bubble burst and butand it was like the bubble burst and butand it was like the bubble burst and but i think byi think byi think by june or july of july august of 20
Questionerjune or july of july august of 20june or july of july august of 20 2000 which was just very little over a2000 which was just very little over a2000 which was just very little over a year or 14 monthsyear or 14 monthsyear or 14 months after i made the investment we were outafter i made the investment we were outafter i made the investment we were out and we i think we made a 3x on it soand we i think we made a 3x on it soand we i think we made a 3x on it so that that worked out pretty goodthat that worked out pretty goodthat that worked out pretty good and so that was a case where you knowand so that was a case where you knowand so that was a case where you know you had thisyou had thisyou had this unknown basket but i'm not payingunknown basket but i'm not payingunknown basket but i'm not paying anything for it right i didn't know whatanything for it right i didn't know whatanything for it right i didn't know what was in the basket but i was again it waswas in the basket but i was again it waswas in the basket but i was again it was low risk high uncertainty right welow risk high uncertainty right welow risk high uncertainty right we weren't paying for itweren't paying for itweren't paying for it and so the basket was utterly useless iand so the basket was utterly useless iand so the basket was utterly useless i still have a well-run bank and nowstill have a well-run bank and nowstill have a well-run bank and now they've expanded all over the place andthey've expanded all over the place andthey've expanded all over the place and what they've kept to their theirwhat they've kept to their theirwhat they've kept to their their knitting they only deal with ventureknitting they only deal with ventureknitting they only deal with venture back companiesback companiesback companies and i think they have a very great nicheand i think they have a very great nicheand i think they have a very great niche in banking and that's why they've donein banking and that's why they've donein banking and that's why they've done so wellso wellso well over all these yearsover all these yearsover all these years so that gives you some sense ofso that gives you some sense ofso that gives you some sense of kind of four different investments whichkind of four different investments whichkind of four different investments which are somewhat different from each otherare somewhat different from each other
Todd Combsare somewhat different from each other in different times and what i'm looking for is i have no interest in some business that's trading at 10 and it's worth 13 or 15 or 17. that's not of interest what i'm looking for is a wide list pricing we don't necessarily need an information edge we usually don't have an information edge but we can have easily have an analytics edge so in these situations i had no information edge on silicon valley bank i don't know what's in that basket but i can analyze it from a high level and say i can't lose i i know that it's uncertain but i can't lose so it's okay i can go in there take it from there so with that i think we'll uh turn it back to mithun and take it from there and let me turn the volume up here we'll try to go back and forth with the volume thank you vincent thank you so much
Otherwe enjoyed this session over to hashem
Otherwe enjoyed this session over to hashem
Otherfor the q a moderation thank you so much
Otherthank you
Questionerfor the inside full session one of the interesting questions that i saw in the registration form was that if somebody who has just entered the fund management industry and wants to open their own fund at a young age without any track record on big institutional firms how can they do it if you if you don't have a track record i i think that that's almost somewhat dishonest if you will so i would really encourage you to have something before you take other people's money but if you're hell-bent on doing it then uh focus on friends family and fools hopefully the fools don't lose money but go to your go to your mom go to your brother go to your sister and take it from there but i also feel that if you have got the chops to invest well and you are young
Questionerand you are young even with a very modest amount of money it is going to grow i mean this is the power of compounding you know if you you're doing mid-20s a year you're going to double every three years and 30 years you're going to have a thousand times what you started with so you don't need large sums and in 10 or 15 years you can have a decent amount of money and a track record and then actually have a legitimate reason to get others to give you money
Questionerabsolutely agree with you the people tend to underestimate the power of compounding nowadays the next question is what do you think about people who think that value investing is dead in the modern era all intelligent investing is value investing so people have this misnomer that there's growth investing and value investing in their two separate things it's two sides of the same coin
Questionerit's two sides of the same coin
Questionerso what we're trying to do with investing is we're trying to put out a dollar today with the hope that we get more than a dollar in the future back and the how long it takes to get two dollars back or three dollars back and and and such will determine our rate of return and definitely you're going to do in general better if you invest in businesses which have strong growth prospects as long as you're not paying too much for that growth so it took me a long time to to get there but you know if you buy a dollar bill for 25 cents and it's not going to change much in value and you're correct about that it's worth a dollar you'll make four times your money and depending on how long it takes to make four times your money is whatever your analyzer return is but if you are able to invest in a starbucks
Questionerinvest in a starbucks relatively early they could have anrelatively early they could have anrelatively early they could have an infinite almost an infinite number ofinfinite almost an infinite number ofinfinite almost an infinite number of stores globally and the unit economicsstores globally and the unit economicsstores globally and the unit economics are so good in the in the us when theyare so good in the in the us when theyare so good in the in the us when they open our starbucksopen our starbucksopen our starbucks in 18 to 24 months they get all theirin 18 to 24 months they get all theirin 18 to 24 months they get all their money back that they put into a storemoney back that they put into a storemoney back that they put into a store and internationally they get it in 12 toand internationally they get it in 12 toand internationally they get it in 12 to 15 months it's an incredible business i15 months it's an incredible business i15 months it's an incredible business i mean your roes are off the chart this ismean your roes are off the chart this ismean your roes are off the chart this is unlevered returns of like 60unlevered returns of like 60unlevered returns of like 60 60 70 unlevered and with an ability to60 70 unlevered and with an ability to60 70 unlevered and with an ability to create infinite number of coffee shops icreate infinite number of coffee shops icreate infinite number of coffee shops i mean manhattan they would put fourmean manhattan they would put fourmean manhattan they would put four coffee shops and four corners and nonecoffee shops and four corners and nonecoffee shops and four corners and none of the businessesof the businessesof the businesses went down they all did well so the holywent down they all did well so the holywent down they all did well so the holy grailgrailgrail is to find the great compoundersis to find the great compoundersis to find the great compounders where the dollar becomes much morewhere the dollar becomes much morewhere the dollar becomes much more valuablevaluablevaluable you don't necessarily need to even payyou don't necessarily need to even payyou don't necessarily need to even pay much less than a dollar as long asmuch less than a dollar as long asmuch less than a dollar as long as you're you're right on the growthyou're you're right on the growthyou're you're right on the growth prospects and you can run that that can
Questionerprospects and you can run that that can work out quite well so value investing is not dead because investing is not dead and anything that is not intelligent in terms of investing is not value investing that all falls into the category of speculation right thank you this is the last question from the form and i think everybody wants to know the answer of this so in your opinion what do you think is the most important asset class or investment in the for the current period short term long term and medium term which will provide the highest returns
Questionerwell i mean i think i think the thing is i i said that you know we look for anomalies and generally speaking they they always show up in in different ways so i think it's the wrong way to approach it so i don't think you should approach investing top down i have never approached a top down i
Todd Combsi have never approached a top down i haven't said i need to invest in tech and now let me go find the best tech play or i need to invest in blockchain and let me go find the west blockchain a bet and so on i think it's for me it's a lot more opportunistic where you're reading a value line and you suddenly see some funeral services at two times and you had no plans until then to ever invest in funeral services ever in your life and there you go on a journey that you never thought you'd be on and like i mean i talked about talked about this a few times in the past but in 2018 i was visiting turkey visiting a bunch of companies i have a good friend there who's kind of like a bengal type investor and so i just told him listen i'm coming to turkey can you just go meet all the businesses in your portfolio he said oh that'd be so much fun manish let's go do it and
Ted Weschlerfun manish let's go do it and he took me to this one company where they were the largest warehouse operator in turkey the liquidation value of their warehouses which was really easy to calculate they're about 12 million square feet it was close to a billion dollars and they had about 200 million dollars of debt on it so you know 800 million you know book value if you will or or market value and the stock was at 20 million and they had a bunch of other assets besides them so i just asked my friend you know are these guys frauds you know like are they crooks what's going on here and he said i've never heard anything which is untoward about them so i said what's going on here he says well they just never really explained their business they don't really have an ir department 20 million dollars most fund managers don't even take a look at them you know
Todd Combsdon't even take a look at them you know and so it's just flying under the radar and so i i kicked the tires quite a bit i went and visited the warehouses and you know their clients were like amazon and car 4 and ikea and then 99 these 10-year leases inflation index really prime properties i couldn't find anything wrong with it and then i met the father and son i find them to be tremendous capital allocators i found them to be exceptional and then i thought you know how much stock can i get here it was like so thinly traded whatever we ended up because turkey is such a hyper traded market we end up owning one third of the business i bought one third of that business for seven million dollars and then it went up like six seven times in value in the next couple of years still undervalued you know still big gap from 800 million but we're not in any hurry so what i'm
Ted Weschlerwe're not in any hurry so what i'm saying is that it's bottoms up i didn't go into turkey even thinking i'm going to make an investment in turkey i just said let's go check out you know the the tea is great the coffee is great the baklava is great and on the side we'll see if we have some good meetings as well so i was always focused in the meetings to get some good tea ask them their baklava and then whatever else happens in the meeting it's all okay you know and then the food was great you know dining on the bluefish on the bosphorus is just great so there was nothing to complain about and then also made some money on the side so it was all fine but yeah so i think that i think the short medium long term all that doesn't mean much to me to me it is all about a treasure hunt this is a treasure hunt and we don't know where the treasures
Warrenand we don't know where the treasures come from i have no idea where the next investment i make will come from we want to read a lot we want to have a lot of inputs coming in so serendipity has a way to happen and then sometimes we make bets and they don't work and that's fine too because templeton said that if you're wrong even 30 40 percent of the time you're still okay it can tolerate a high error rate that's how i would suggest you approach it thank you
Othernow we'll take questions from the floor martin can you unmute yourself and go ahead yes thank you well hello to everyone it's a pleasure and monique thank you so much for the opportunities and privilege also thank you to the mba's finance club for for doing this event so here are my questions i i would like to know how do you differentiate your investment approach related to for example
Questionerapproach related to for example water and bucket water and bucket both of you are intelligent investors but but but which are the differences that still which are the differences that still which are the differences that still allows and allows you and him to achieve allows and allows you and him to achieve allows and allows you and him to achieve high returns high returns high returns if also i would like to know if you have if also i would like to know if you have if also i would like to know if you have any any insights that you can give as any any insights that you can give as any any insights that you can give as relative to alibaba and relative to alibaba and relative to alibaba and the chinese market the chinese market the chinese market and third if if we're possible to reach and third if if we're possible to reach and third if if we're possible to reach out to you if sometimes we have some out to you if sometimes we have some out to you if sometimes we have some business opportunity that might be of business opportunity that might be of business opportunity that might be of your interest
Otherwell martin thanks for those questions you can reach me at mp those questions you can reach me at mp those questions you can reach me at mp bryfunds.com i need ideas bryfunds.com i need ideas bryfunds.com i need ideas so when you find things that are so when you find things that are so when you find things that are widely mispriced widely mispriced widely mispriced please call me collect please call me collect please call me collect and please send me an email that'll be and please send me an email that'll be and please send me an email that'll be very appreciated
Otherwell you know warren well you know warren well you know warren buffett is buffett is buffett is is god is god is god you know he's at a way at a level of you know he's at a way at a level of you know he's at a way at a level of performance and you know practicing the performance and you know practicing the performance and you know practicing the art in a manner that none of us will get art in a manner that none of us will get art in a manner that none of us will get to in our lifetime in many ways he's to in our lifetime in many ways he's to in our lifetime in many ways he's like a swiss army knife
Questionerlike a swiss army knife so he can invest in you know 20 different ways 20 in you know 20 different ways 20 in you know 20 different ways 20 different formats in in a variety of different formats in in a variety of different formats in in a variety of businesses and industries sometimes it's compounders sometimes their liquidation compounders sometimes their liquidation compounders sometimes their liquidation plays plays plays different ways so i think profit is different ways so i think profit is different ways so i think profit is exceptional exceptional exceptional on a number of fronts the good news with on a number of fronts the good news with on a number of fronts the good news with him is that he's an open book he's a him is that he's an open book he's a him is that he's an open book he's a teacher teacher teacher he wants to teach and he's an he wants to teach and he's an he wants to teach and he's an exceptional job teaching he's been very exceptional job teaching he's been very exceptional job teaching he's been very generous with his teaching generous with his teaching generous with his teaching and so and so and so his his lessons are available his his lessons are available his his lessons are available to all of us it's open book to all of us it's open book to all of us it's open book in fact all the berkshire annual in fact all the berkshire annual in fact all the berkshire annual meetings are on cnbc's website meetings are on cnbc's website meetings are on cnbc's website for 20 plus years those are great those for 20 plus years those are great those for 20 plus years those are great those are a great resource the annual reports are a great resource the annual reports are a great resource the annual reports are a great resource so i think that are a great resource so i think that are a great resource so i think that even if even if even if we figure out three percent of what we figure out three percent of what we figure out three percent of what buffett has figured out buffett has figured out buffett has figured out and even if we operate in a very narrow and even if we operate in a very narrow and even if we operate in a very narrow circle of competence circle of competence circle of competence versus his much broader circle of versus his much broader circle of versus his much broader circle of competence we can still do really well
Questionercompetence we can still do really well so we don't need to be a swiss army life like buffett is if you only understood captive auto finance for example or captive finance and you only invested in that area you could still do very well just with that understanding so we don't need a lot of bells and whistles to do that regarding alibaba well i mean i think that i used to have a large position alibaba most of it we have switched over to process i thought that's a somewhat better bet which owns 10 cent i think both alibaba and tencent are amazing businesses there is a lot of uncertainty and even probably a lot of risk related to the ccp the chinese communist party if they decide they want to kabash these businesses they have the power to do that i don't think they'd want to do that but clearly china has gone down a path and in fact the whole world is
Questionerpath and in fact the whole world is going down a path where they're trying to define rules for the big tech companies the victor companies have run their affairs like the wild west so they are going to face more regulation and they are going to face more restrictions but the history of this arena is that in the u.s when the government went after businesses for antitrust like when they went out to microsoft or att or ibm or any of these companies if you invested right after those investigations were launched or announced you did really well as an investor and the reason is that when the government finally realizes that a business has an unfair competitive advantage it means that's a really really strong advantage and the second is that the company is usually able to run circles around the regulators in terms of how they leverage them i mean just look
Questionerhow they leverage them i mean just look at google at google at google in europe in europe in europe right i mean right i mean right i mean they have it out for google in europe they have it out for google in europe they have it out for google in europe they want to really slam google and they want to really slam google and they want to really slam google and apple and all these companies really apple and all these companies really apple and all these companies really hard and they've been trying to do it hard and they've been trying to do it hard and they've been trying to do it for so many years for so many years for so many years but even if google pays a 1 billion 2 but even if google pays a 1 billion 2 but even if google pays a 1 billion 2 billion 3 billion fine billion 3 billion fine billion 3 billion fine it is meaningless it is meaningless it is meaningless that engine is so strong and so powerful that engine is so strong and so powerful that engine is so strong and so powerful that what looks like a big victory to that what looks like a big victory to that what looks like a big victory to the regulator is just the regulator is just the regulator is just a pimple on a camel's part it's a pimple on a camel's part it's a pimple on a camel's part it's irrelevant to google so i think that in irrelevant to google so i think that in irrelevant to google so i think that in china it may be something similar where china it may be something similar where china it may be something similar where the regulations are coming in the regulations are coming in the regulations are coming in but what that demonstrates is the power but what that demonstrates is the power but what that demonstrates is the power of these models of these models of these models and and and these models may have some things these models may have some things these models may have some things some wings getting clipped but they may some wings getting clipped but they may some wings getting clipped but they may continue to do well in spite of that continue to do well in spite of that continue to do well in spite of that thank you thank you thank you thank you thank you thank you
Otheri think we'll have time for only one i think we'll have time for only one i think we'll have time for only one last short question because we've got last short question because we've got last short question because we've got some questions in the chat as well i've
Othersome questions in the chat as well i've mentioned uh monis's email address and the chat so if anybody needs to get their own questions answered so they can email them directly so
Questionerone last question can you please unload yourself and go ahead thank you so much monish you have always been a proponent of cloning like crazy so would you recommend any managers or professionals who we should sort of follow and clone like crazy thank you so much
Otheryeah i think i think one person i think that you should really study is chuck akery there's a google talk if you just you know go on youtube and just you know do google talks chuck akery it'll pull up he also did another interview with a podcast called invest like the best and i think you can pull up a bunch of other interviews about chakri and i think chakri is very interesting to study because he's the opposite of buffett in
Questionerbecause he's the opposite of buffett in terms of a swiss army knife he is a one trick pony but the one trick he has is so powerful he talks about this three luggage tool and the three-legged stool i'll just go over a little bit just to complete the point the three luggage tool is basically a stool that's used by farmers for milking a cow you know a little stool that they sit on before everything are automated to milk the car and he has a bunch of these three luggage tools in his office and he says when he invests in a business he's looking for the three legs of the stool the first leg he wants the business to be generating very high returns on equity and assets high rov businesses high businesses without much leverage that's the first leg the second leg is he's looking for great people he says great people who care about enriching outside shareholders who they
Todd Combsenriching outside shareholders who they don't even know and they're great managers high ethics and you know understand capital allocation so great business which is irv great people and the third part of the leg is the ability of the business to reinvest its earnings at similarly high rates and those are his three legs and if you find those three legs the third one is really hard to find so for example if you look at a business like mastercard which has very high returns on equity run by ajay banga great guy they have no ability to reinvest the money because the business needs no capital it's so efficient whereas a business like starbucks for example has all three links because they could eventually have an infinite number of stores and it tells you how dumb i am i've known this for a while i still don't own starbucks so stupid but the
Questionerdon't own starbucks so stupid but the thing is so all chuck akery has donething is so all chuck akery has donething is so all chuck akery has done is focus on these three luggage toolsis focus on these three luggage toolsis focus on these three luggage tools and sometimes he makes it makes anand sometimes he makes it makes anand sometimes he makes it makes an investmentinvestmentinvestment and it doesn't work out they end upand it doesn't work out they end upand it doesn't work out they end up compounding at seven percent orcompounding at seven percent orcompounding at seven percent or something and he eventually takes hissomething and he eventually takes hissomething and he eventually takes his chips off the table but he's had he'schips off the table but he's had he'schips off the table but he's had he's had 200 baggers in his portfoliohad 200 baggers in his portfoliohad 200 baggers in his portfolio several ten dollars he's beaten theseveral ten dollars he's beaten theseveral ten dollars he's beaten the market very soundly over many decadesmarket very soundly over many decadesmarket very soundly over many decades andandand that's i think a tremendous amount thankthat's i think a tremendous amount thankthat's i think a tremendous amount thank you so much i think there was a questionyou so much i think there was a questionyou so much i think there was a question about the last name of chuck it's acreeabout the last name of chuck it's acreeabout the last name of chuck it's acree a-k-r-ea-k-r-ea-k-r-e thank youthank youthank you
Otherso now i'll be handing it over to sharesso now i'll be handing it over to sharesso now i'll be handing it over to shares tototo end the session thank you yeah soend the session thank you yeah soend the session thank you yeah so so on behalf of nusmba finance club andso on behalf of nusmba finance club andso on behalf of nusmba finance club and usmba club ecosystem i would like tousmba club ecosystem i would like tousmba club ecosystem i would like to thank you mr monish for sharing yourthank you mr monish for sharing yourthank you mr monish for sharing your insights with usinsights with usinsights with us it was a privilege having you here weit was a privilege having you here weit was a privilege having you here we definitelydefinitelydefinitely have something to take back homehave something to take back homehave something to take back home although we are at home what was what
Questioneralthough we are at home what was what was most intriguing for me at least was how you picked on these anomalies and also the industries which were which are usually over something like a captain finance arm or funeral services it has also motivated me to look for these industries and hopefully make money out of it mr moniz i hope to see you in future events organized by nus and to all the participants thank you for joining in and showing in your enthusiasm have a fantastic week ahead everyone thank you
Otherit was a pleasure to be with all of you and yeah i would love to be back at nus it was a lot of fun i think all of you will do really well and glad to see corbett is in the waning ending phases hopefully and we can get back to our lives which will be great thank you thank you thank you