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Otherin 1991 he founded his own I.T consulting firm with a little over a hundred thousand dollars he'll go on to sell in the year 2000 for 20 million today is the managing part of the dry investment funds of getting the hedge funds inspired by his meds or Warren Buffett
OtherMr McBride is also a published author this book The Downtown Ambassador talks about his influence in his investing style and it's both a fantastic information we'll be rattling away a few copies of that to make sure you stick around for that
Otherplease just take a second double check we might dismuted and linked through the camera on you can do that as well
Otherum thank you again for taking the time out of your day to speak to us towards all yours it's great doing well so would you like to do this as a pure q a or would you prefer me to make some introductory remarks and then we open up
Questionerintroductory remarks and then we open up to questions what do you prefer whatever you prefer if you have anything to me
Otherokay I'll just speak briefly and then we can pretty much talk about whatever you have on your mind and we can talk about what I discussed or we can go anywhere so that's good it's been 35 years since I left Clemson it's hard to believe it's been that long feels like yesterday and I was just talking to Chris it sounds like some of the buildings aren't there anymore but I think most of them are and I had a wonderful time at Clemson I had just come to the country as a foreign student and I had three wonderful years at Clemson my degree is in Computer Engineering and I actually took quite a view as many as much as I could I maximized the courses I could take the accounting Finance econ business courses I could take so I spent a lot of time in
QuestionerI could take so I spent a lot of time in Serene Hall and that was also wonderful and my journey from Clemson to becoming a value investor and a fund manager kinda value investor and a fund manager kind of took some left and right terms by the time I got there and one of the things that was kind of a seminal time for me was I heard about Warren Buffett and Charlie Munger for the first time about eight years after I left Clemson so it was in 94 and that was actually a seminal moment for me when I heard about them and I started to read about them and I was really intrigued in terms of their approach to investing and such and I didn't have any degrees in finance or anything but had a decent grasp of accounting and such from some of the classes in Clemson and so on and I was really interested in Buffett's approach to investing and here's the pros are very different from what was done by most of the mutual
Questionerwhat was done by most of the mutual funds and so on so I started to apply his approach to investing in 94 at that time I had just sold a small portion of my business for the first time I had some money I had about a million dollars in my bank for the first time and I started to invest that money and this was in 94.95 and I think by 99 or 2000 that million over 10 million investing had gone really well also the markets were actually in had given me some very strong Tailwinds as well and then a bunch of friends asked me to manage money for them that led to the creation of for bright funds which has now been running for about 21 years and the last year 2020. so 1994 and 1995 were years of maximized learning for me because I was just trying to pick up everything about Buffett and Munger and Berkshire Hathaway and so on so I felt like I was
QuestionerHathaway and so on so I felt like I was drinking from a fire hydrant at that time and last year was the second biggest year of learning for me maybe because sitting at home contemplating my navel with nothing else to do maybe that's why and so it was most people would like to forget about 2020 I think for my vantage point 2020 led to some wonderful insights and I'm going to make the journey from here on that much more interesting couple of things that I ran into in 2020 is one is there's a good friend of mine called Nick sleep some of you might have heard of him if you haven't heard of him what I would recommend is that you go to God Google and enter next sleep partnership letters and they're floating around on the web and there's about 13 years of letters he ran a very successful hedge fund and we shut it down in 2014. and now he's just a Gentleman of Leisure
Questionerand now he's just a Gentleman of Leisure uh doing quite well but there are some tremendous insights in those letters and those insights were so strong that they caused me to make significant changes to the way I invest and the other thing that happened also last year is I read a wonderful book and I can't recommend this book enough it's called 100 to 1 in the stock market and it's written by a guy named Thomas Phelps and this book actually came out in 1972 so it's about 48 years old but it's really Timeless and Thomas Phelps is a very gifted writer and I did a really good job in terms of explaining a bunch of nuances so one of the things that Nick sleep talked about was that he said look Walmart went public in 1970. and from 1970 till now which is more than 50 years the Walton family has held the stock they haven't sold they've just held the
Questionerthey haven't sold they've just held the stockstockstock but there have been nobut there have been nobut there have been no Public Market investorsPublic Market investorsPublic Market investors that have held the Walmart stockthat have held the Walmart stockthat have held the Walmart stock for this 50-year periodfor this 50-year periodfor this 50-year period or even a 40-year periodor even a 40-year periodor even a 40-year period or even a 30-year period maybe even notor even a 30-year period maybe even notor even a 30-year period maybe even not even 20 years you might be able to findeven 20 years you might be able to findeven 20 years you might be able to find some 20-year holderssome 20-year holderssome 20-year holders and so what Nick sleep asked is that ifand so what Nick sleep asked is that ifand so what Nick sleep asked is that if you owned Walmart stock in 1970 or 1980you owned Walmart stock in 1970 or 1980you owned Walmart stock in 1970 or 1980 what exactly was the facts that causedwhat exactly was the facts that causedwhat exactly was the facts that caused you to sell ityou to sell ityou to sell it and it's an important question to try toand it's an important question to try toand it's an important question to try to answeransweranswer and the flip side of that same questionand the flip side of that same questionand the flip side of that same question is that if you owned a Kmart stock maybeis that if you owned a Kmart stock maybeis that if you owned a Kmart stock maybe 20 or 30 years ago20 or 30 years ago20 or 30 years ago what caused you to keep it so Kmartwhat caused you to keep it so Kmartwhat caused you to keep it so Kmart on a number of metrics was a very cheapon a number of metrics was a very cheapon a number of metrics was a very cheap stockstockstock but it was a business in Declinebut it was a business in Declinebut it was a business in Decline and Walmart on a number of metrics wasand Walmart on a number of metrics wasand Walmart on a number of metrics was an expensive stockan expensive stockan expensive stock but it was a business that was growingbut it was a business that was growingbut it was a business that was growing and going from strength to strength so Iand going from strength to strength so Iand going from strength to strength so I used to always invest until fear withused to always invest until fear withused to always invest until fear with the idea of buying things well below
Warrenthe idea of buying things well below what they were worth and then selling them when they got to full price or maybe a little bit of a full price so buy a dollar bill for 40 cents or 50 cents or 30 cents and then as it approached a dollar get rid of it and find another 40 Cent or Fifty Cent dollar and that that's worked quite well I think it probably funds every dollar we started with turned into about 14 in the last 21 years and that's after fees and expenses but it's a inefficient kind of treadmill way to go through life what is vastly better is if you can identify great businesses which have great economic characteristics and very long runways ahead and hold those businesses for a long time without being particularly concerned that they may be somewhat overvalued if it's a really good business it will probably get optically overvalued
Questionerprobably get optically overvalued periodically maybe for a long time and you know Nick sleep in his one of his recent emails to me said to me he said that monish the best investors weren't investors at all they were entrepreneurs who never sold and so the idea is that we should think of ourselves as if we were the founders or the family that owns or runs the business and have the same mindset as them and as long as the business is improving as long as the mode is widening as long as things are getting better we shouldn't be focused on valuations and such of course if things get egregious if you're a family who owns GameStop right now you should have sold a while ago but beyond that I think that so that's a pretty significant mindset shift for me but I think it makes life easier I think the returns are better the taxes go way down
Otherdown so I've gradually started making this shift in my portfolio so with that you can open up to your questions they can relate to what I talked about or uh anything you have in your mind you can discuss anything you'd like to discuss and I hope you appreciate that I painted my office Orange and I wore my orange Merino shirt because it's the best color on Earth so thank you
Questionerso you touched on it before it gains out briefly when you make of the short series that are going on right now on the market with retail Industries do you think this will come to a horrible end for them or do you think that this is almost a new way to do well and that they will have more to role in our markets for years to stop
Otherokay I got some of it so you're were you asking about GameStop right
QuestionerI'm asking about GameStop and just short tweets that are going on
Questionershort tweets that are going on specifically in general of the market right now what do you make of that and do you think that this is I mean I think the thing is that auction driven markets have a basic characteristic that they either overshoot or undershoot on the actual value of the underlying business so let me give you an example so let's say I own an apartment building a block from the Clemson campus I rented out to students and if I go to a realtor and say hey what's my building realtor might say oh your building's worth a half million dollars and if I go to the realtor the next day and say hey what's my building worth she'll say listen dummy it's still half a million okay and then if I keep going every day to the realtor I'm gonna get pretty similar answer and of course he or she is going to get frustrated with my persistent questioning and then maybe
Questionermy persistent questioning and then maybe in six months or a year they might say in six months or a year they might say in six months or a year they might say oh there's gonna change it's the calms have changed a little bit it's five hundred and five thousand have changed a little bit it's five hundred and five thousand have changed a little bit it's five hundred and five thousand or 510 000 something like that right so or 510 000 something like that right so or 510 000 something like that right so when you have an intelligent buyer and an intelligent seller when you have an intelligent buyer and an intelligent seller when you have an intelligent buyer and an intelligent seller buying or selling an asset buying or selling an asset buying or selling an asset usually those prices tend to be quite usually those prices tend to be quite usually those prices tend to be quite rational rational rational and they tend to be very close now if I and they tend to be very close now if I and they tend to be very close now if I take take take just imagine that we're we have a just imagine that we're we have a just imagine that we're we have a newspaper which is publishing just stock newspaper which is publishing just stock newspaper which is publishing just stock quotes for all the stocks in New York quotes for all the stocks in New York quotes for all the stocks in New York Stock Exchange for example and they have Stock Exchange for example and they have Stock Exchange for example and they have the name of the company and they have the name of the company and they have the name of the company and they have the high and low price for the year and the high and low price for the year and the high and low price for the year and the current price okay and I throw a the current price okay and I throw a the current price okay and I throw a dart at that stock quotes page dart at that stock quotes page dart at that stock quotes page any random company that it hits any random company that it hits any random company that it hits what it'll show is that the minimum what it'll show is that the minimum what it'll show is that the minimum price for the year was thirty dollars price for the year was thirty dollars price for the year was thirty dollars the maximum was seventy dollars and the the maximum was seventy dollars and the
Warrenthe maximum was seventy dollars and the current price is like 55. for example current price is like 55. for example current price is like 55. for example okay the min max range okay the min max range okay the min max range would be at least a two to one would be at least a two to one would be at least a two to one difference 30 to 70 50 to 110 that sort difference 30 to 70 50 to 110 that sort difference 30 to 70 50 to 110 that sort of thing you'd see a pretty wide range of thing you'd see a pretty wide range of thing you'd see a pretty wide range and the business value has not changed and the business value has not changed and the business value has not changed by that amount by that amount by that amount it is the nature of the way the prices it is the nature of the way the prices it is the nature of the way the prices get set in auction driven markets that get set in auction driven markets that get set in auction driven markets that causes them to have much wider causes them to have much wider causes them to have much wider fluctuations than what I would see if I fluctuations than what I would see if I fluctuations than what I would see if I were trying to sell a home a block from were trying to sell a home a block from were trying to sell a home a block from Glam so if I sold the whole January or Glam so if I sold the whole January or Glam so if I sold the whole January or October or March it wouldn't make much October or March it wouldn't make much October or March it wouldn't make much difference it'd all be almost the same difference it'd all be almost the same difference it'd all be almost the same price and because of this nature of price and because of this nature of price and because of this nature of auction-driven markets where it's Ben auction-driven markets where it's Ben auction-driven markets where it's Ben Graham said the markets at a voting Graham said the markets at a voting Graham said the markets at a voting machine in the short term and a weighing machine in the short term and a weighing machine in the short term and a weighing machine in the long term we're going to machine in the long term we're going to machine in the long term we're going to get distortions in fact the it is get distortions in fact the it is get distortions in fact the it is because markets are auction driven because markets are auction driven because markets are auction driven that I can make a living doing what I'm
Questionerthat I can make a living doing what I'm doing if they did not have this characteristic where prices deviated from intrinsic value in some pretty significant ways then I couldn't make a limit it just would work so what we are seeing right now the GameStop phenomena is actually unprecedented we haven't actually seen that in the history of markets in the sense that usually what would happen is that when in the past there is some stock that has shorted a lot GameStop is a company that has a very large short position and the short position could be justified because this is a business that has been in secular decline for a very long time so video games used to be very non online you would you'd go to the GameStop store you'd swap different games you'd get the console and everything was around a physical store and now most of those games those are
Questionerand now most of those games those are downloads you pay play remotely you play it on your phone so it has disrupted their core business model quite heavily and they may have a very difficult time in the future making their business profitable or make it work because uh the Paradigm has shifted so clearly the people who shorted so just taking a step back it is a very dumb activity to short stocks when you short a stock your maximum upside is a double so some stock is worth a hundred dollars and I think it's worth zero for example so I could borrow the shares from my broker from somebody else and I owe them one share of hundred dollars back now that share eventually goes to one dollar so I sell it I borrow the shares I sell it then later when it's down at one dollar I buy it back and I return the share and I pocket the 99 difference okay so that's typically how short
Warrenokay so that's typically how short selling works when it works the problem is when it goes the other way so if I borrow the share that a hundred dollars and it ends up being priced at 500 for example so I would when I'm trying to close out by short position I'd have to buy the shares back at 500 and then return them and I'd have a 400 loss so in Short Selling there's an asymmetry where your maximum loss possibility is infinite and the maximum gain possibility is a double just from those metrics alone one should never short why would you want to go bankrupt if you're wrong and just make a double if you're right but nobody listens to me and definitely the people with the big hedge funds don't listen to me so I have never shorted a stock in my life I will go to my grave without ever having shorted a stock it's not because I don't consider many
Warrenit's not because I don't consider many things overvalued I do find many things overvalued in the market but I have no ability to predict when or how those over evaluations would adjust if something is overvalued there is nothing that prevents it from getting even more overvalued so I haven't been watching the game stock price as we've been speaking where is the stock at right now can someone tell me where games talks at yes as of This Moment's at 303 of 104 over there yeah so in the online chatter I was reading last night there were a bunch of gung-ho guys talking about taking it to a thousand today that was their objective let's take it to a thousand and they are hell-bent on wiping out one or more hedge funds and if the hedge funds actually have a short position not a put option but a short position and they haven't already covered and there was a significant short
Questionerand there was a significant short position I think they are in very serious trouble so when I look at the market today we have this weird thing going on with a few heavily shorted stocks that are rising because so this has not happened before in the past what has happened is there has been collusion so collusion is actually illegal so if I were to form a group with a bunch of people and say we're gonna just keep buying these shares and make the short sellers swear it out make the shares go up really high and then when it gets to some ridiculous number then we'll you know sell our shares and whatever in the meantime the short seller has gone bankrupt there are laws against that but what is happening on Reddit and what is happening on Wall Street bets is protected I think protected by free speech and it's not a group that is colluding because they don't
Otherthat is colluding because they don't know each other they're not really particularly trying to but it's a virtual group it is an effective group I'm curious how the SEC deals with this because now they've discovered something which actually breaks down Market mechanisms Market back to them stop working in these types of situations it is in general even if you short stocks in general it is very stupid to be shorting stocks that are heavily shortened so that's like playing with fire so if you want to go short you could short an index that's safer or a basket of stocks but or stocks that don't have large short interest but I think stocks like GameStop blackberry and a few others who are going crazy it's not good so when I look at the markets okay so one part of the market is these very small number of heavily shorted stocks within the
Questionerheavily shorted stocks within the Distortion and if I were you we can get our popcorn and watch from the sidelines and entertain ourselves that's fine when we get past these stocks into some of the Robin Hood names or the Teslas of the world and so on we do have Bubble s characteristics there I think the Game Stops have gone beyond bubbles it is just these are Mega bubbles Tesla clearly in bubble territory according to me so there's about I would say maybe 10 or 15 names of businesses that have gone crazy on valuations driven by the Robin Hood phenomena and such but when we get past all that once we get the past the 10 15 names beyond that then it's not clear to me that markets are overvalued they do seem to be richly valued but if interest rates stay really low for a long time you could justify those valuations so it's an interesting Market because you
Questionerit's an interesting Market because you have I think there's clearly a bubble in spacks there's a bubble in these heavily shorted stocks there's a bubble in the Robin Hood names and but beyond all of that I think I'm not sure there are bubbles everywhere so do you think that if the SEC means that this kind of online phenomena is is legal that I'm sorry that hedge funds will kind of not really feel like this with their time short and just kind of abandon it all together do you think that this will kill shorting as a mechanism yeah I think the the I'm pretty sure GameStop has the attention of the people at the SEC of course they've we've just had an election the Commissioners just changed so there's a new guard that's feeling its way through the system if you will they haven't been there for very very long and they are probably at
Questionervery very long and they are probably at this point trying to figure outthis point trying to figure outthis point trying to figure out what exactly is the right course ofwhat exactly is the right course ofwhat exactly is the right course of action over here there are a number ofaction over here there are a number ofaction over here there are a number of things that are going on here which arethings that are going on here which arethings that are going on here which are unprecedented it is not obvious thatunprecedented it is not obvious thatunprecedented it is not obvious that there's anything going on that in termsthere's anything going on that in termsthere's anything going on that in terms of current laws is illegal and the SECof current laws is illegal and the SECof current laws is illegal and the SEC could take actions which could theycould take actions which could theycould take actions which could they could do a longer term halt on tradingcould do a longer term halt on tradingcould do a longer term halt on trading but those sorts of things have verybut those sorts of things have verybut those sorts of things have very negative impacts on Market participantsnegative impacts on Market participantsnegative impacts on Market participants so I think I think the SEC is probablyso I think I think the SEC is probablyso I think I think the SEC is probably torn in terms of exactly what actiontorn in terms of exactly what actiontorn in terms of exactly what action would be the correct one sowould be the correct one sowould be the correct one so to some extentto some extentto some extent there could be an argument made that youthere could be an argument made that youthere could be an argument made that you let the market work this out becauselet the market work this out becauselet the market work this out because there were dumb people in hedge fundsthere were dumb people in hedge fundsthere were dumb people in hedge funds who did these dumb things and theywho did these dumb things and theywho did these dumb things and they should face the music that comes fromshould face the music that comes fromshould face the music that comes from their actionstheir actionstheir actions and and so I'm not exactly sure whereand and so I'm not exactly sure whereand and so I'm not exactly sure where this will go but I'm pretty sure thethis will go but I'm pretty sure thethis will go but I'm pretty sure the Regulators are very carefully looking at
QuestionerRegulators are very carefully looking at what's going on. I wanted to ask quickly I've been hearing a lot about impact investing ESG investing I was wondering if that factors into your thought process at all with valuations and seeing different metrics that aren't typically included come into how you looking companies you are asking about impact investing correct
Warrenyes I'm of the frame of mind that it's better to separate capitalism from doing good in the world sometimes you can do both but it's difficult to serve two two masters so I I feel that when one is investing one should focus on delivering returns and making good Investments and and those should be the primary focus now the thing is that I won't invest in some things for example I don't think I would invest in a tobacco company but I have invested in the past in a liquor company for example and I've
Warrenin a liquor company for example and I've definitely invested in the past indefinitely invested in the past indefinitely invested in the past in companies thatcompanies thatcompanies that pump a lot of carbon into the atmospherepump a lot of carbon into the atmospherepump a lot of carbon into the atmosphere for example most car companies do thatfor example most car companies do thatfor example most car companies do that so I think it becomes a slippery slopeso I think it becomes a slippery slopeso I think it becomes a slippery slope when you're trying to look at you cannotwhen you're trying to look at you cannotwhen you're trying to look at you cannot optimize two variables you can reallyoptimize two variables you can reallyoptimize two variables you can really optimize one variable and I think as aoptimize one variable and I think as aoptimize one variable and I think as a investor what you ought to do is focusinvestor what you ought to do is focusinvestor what you ought to do is focus on the Investments and the returns youon the Investments and the returns youon the Investments and the returns you could draw some kind of limits like I'mcould draw some kind of limits like I'mcould draw some kind of limits like I'm not overly eager to invest in casinos ornot overly eager to invest in casinos ornot overly eager to invest in casinos or sports betting and that sort of thing orsports betting and that sort of thing orsports betting and that sort of thing or state lotteries and such but othersstate lotteries and such but othersstate lotteries and such but others could say that's fine and I reallycould say that's fine and I reallycould say that's fine and I really wouldn't have a big argument against itwouldn't have a big argument against itwouldn't have a big argument against it the same with tobacco others could saythe same with tobacco others could saythe same with tobacco others could say it's fine and I wouldn't have a bigit's fine and I wouldn't have a bigit's fine and I wouldn't have a big argument against that but I think aargument against that but I think aargument against that but I think a better model is to just uh separate thebetter model is to just uh separate thebetter model is to just uh separate the two is focus on investing by itself andtwo is focus on investing by itself andtwo is focus on investing by itself and the impact you want to create you can do
Otherthe impact you want to create you can do that on the philanthropic side thank you
Questionersomeone else have any other questions both online or in person
Questioneryeah I actually have a quick question for you what are you expecting like the Outlook of the market in the next year I know I've kind of been feeling like there's going to be a dip but that's also been kind of what everyone's been feeling for the past year do you think the market kind of stays on its trajectory that it's on or what are you kind of anticipating
Otheryeah that's a good question Nicholas uh I've actually never really paid attention to what might happen in markets in and one year is a very short time or even over multi-year periods so I run a very concentrated portfolio I don't have any short positions by the time you get to my sixth or seventh position we are talking about 80 or more of the portfolio so
Questionerof the portfolio so what matters is what happens to those businesses so the micro Will trump the macro I don't ever look at macro circumstances who's the president which fam which party controls Congress I think those are irrelevant data points so my point of view what I focus on is number one of the businesses that I'm interested in do I understand those businesses well what are the future prospects of those businesses and how do I think those businesses will perform long term so I'll give you a I'll give you an example in 2019 middle of 2019 I was in Istanbul in Turkey and I had made a few trips to Turkey in the last few years and met with several dozen publicly traded Turkish companies and um towards the end of my trip I met with one particular company and I was really Blown Away with the numbers and the quality of the people and all of that it
Otherquality of the people and all of that it was quite interesting now at that time in July 2019 the general macro scene in Turkey was that the currency was highly unstable it was likely to go through significant evaluation the leadership in the country left a lot to be desired and foreign investors were exiting and mass they were just bailing out the business I was looking at so there are many businesses but I'll just put it simply to you so this is a company that is the largest operator of warehouses in Turkey they have 12 million square feet of warehouses about two and a half million of it is refrigerated their clients are like Amazon Alibaba car for Ikea they've got like a blue chip client base 99 of their warehouses are leased on long-term leases they usually sign tenure leases and if the warehouse is rented to a multinational
Othermultinational usually the lease is in euros and they've got two three percent annual escalators if it's rented to a Turkish company they usually have inflation indexed rents increasing every year based on inflation so the you could buy the entire company at that time in July for about 40 million dollars and so if you take the 12 million square feet and divide it by the 40 million you are paying less than three and a half dollars a foot for prime long-term leased warehouses to class A tenants and so you were paying let's say and actually if you bought the holding company it was less than three dollars but let's say we were buying this at three dollars a foot there was debt on these properties which was about 17 a foot so you had about 17 a foot of debt you have three dollars of basically embedded Equity value the liquidation value of the
Questionerthe liquidation value of the assets was at least around sixty dollars a square foot fifty sixty dollars a square foot on a bad day you could sell it for fifty dollars a square foot so you could liquidate this whole company and basically you'd pay off the debt and for every three dollars you put in you would get about 33 dollars or 11 times your money but that wasn't even the most interesting part of this for me the father-son team that ran this business were exceptionally gifted capital allocators and they had done a number of things I'd see in the past where they were very smart about how they were allocated Capital so I could see that if I was paying 40 million dollars for this company and it was worth maybe four or five hundred million dollars that if I look far enough in the future maybe five or ten years from now it would be worth a lot more than the
Warrenit would be worth a lot more than the four or five hundred million because they would be doing things that would add value Beyond the liquidation value of the business we after we had kicked the tires and done the work to assure ourselves that this wasn't any fraudulent anything we're looking at I spent an afternoon visiting all the warehouses and so on we started buying the stock and at that time I told you that people were in Mass leaving turkey we ended up getting enough stock where now we own one-third of the company it's the largest position we own in terms of percentage ownership of a company and since we invested the Turkish lira collapsed by 40 percent so it went down just like people said it would go down it went down quite a bit to me it did not matter if the currency used in Turkey was seashells or dollars or Turkish lira it didn't matter what
Otheror Turkish lira it didn't matter what the currency was it didn't matter how the currency was it didn't matter how much it devalued at the end of the day those warehouses had a global value they were Prime properties in a prime metropolitan area and so on so even though we suffered a 40 devaluation in dollar terms between then and now we are up about six or seven times what we paid and we have not sold we have no plans to sell I told you about this change in mindset about thinking as an owner your father-son team have done a number of things in the last year and a half which have actually increased the value of the business things that I didn't even have on my radar soon my radar so in making that investment it never crossed my mind what is happening with GameStop or what is happening with Tesla or what is happening with the fed or who's going to be the next president or what is going
Warrenbe the next president or what is going to happen to markets in the next 12 months none of that is relevant what is relevant is how well does the management team in this company run this business that is all that matters here and that's I think how one ought to look at a business so if you were going to buy a McDonald's in Clemson and someone wanted to sell it what you'd be focused on is how is that McDonald's performed in the last few years what kind of cash flows it's produced what are the demographics of Clemson looking like for the next few years and not much else beyond that would matter and it would be the price is reasonable you could make a go at it if it's unreasonable you would take a pass so that's how I look at the investment I have no idea what markets will do in the next 12 months and I really don't care
Questionerokay thank you very much I appreciate it
Otheruh are there any other questions
Questioneruh are there any other questions
Otherokay uh I have one more for you so along the lines of currency we was talking
QuestionerBitcoin has been an incredible scene recently I was wondering what your opinions are on that and if you do that as a legitimate currency or just another Speculator
Otheryeah so the thing is that 99 of the stuff that goes on in this world I do not understand and that's perfectly fine because I only need to understand things that I actually invested if you were to ask me I only have two choices buy Bitcoin or sell Bitcoin I would not want to be holding Bitcoin I think that there are a number of speculative elements associated with it and there are people who believe in it big time but Bitcoin also has some very interesting nuances which I like I read some stories recently of some people who lost hundreds of millions of dollars worth of
Questionerhundreds of millions of dollars worth of bitcoin because they lost their password and they couldn't get 10 attempts and they made eight attempts and after the tenth attempts it would lock up permanently and in one case someone's hard disk which had all his Bitcoin accidentally ended up in a landfill in the UK I don't know if you guys heard that story and he had about 280 million of Bitcoin in that hard drive that is now in some landfill in the UK so he offered 70 million dollars to the landfill owners to give him a month to dig in that landfill Okay so you know it kind of it's going a little funny we've had the same thing with gold right you have a ship loaded with gold and it sinks and for all practical purposes that gold has lost forever until 200 years later someone finds it or whatever so even though they claim Bitcoin is safe and you know all this
QuestionerBitcoin is safe and you know all this stuff you have weird things like thatstuff you have weird things like thatstuff you have weird things like that going on where you can have to scratchgoing on where you can have to scratchgoing on where you can have to scratch your head but yeah I've looked at it ayour head but yeah I've looked at it ayour head but yeah I've looked at it a little bit there's nothing that I havelittle bit there's nothing that I havelittle bit there's nothing that I have found thatfound thatfound that excites me about putting my assets intoexcites me about putting my assets intoexcites me about putting my assets into Bitcoin so I would just say that we justBitcoin so I would just say that we justBitcoin so I would just say that we just talked about turkey we talked to thetalked about turkey we talked to thetalked about turkey we talked to the warehouses I talked about that thewarehouses I talked about that thewarehouses I talked about that the medium of Exchangemedium of Exchangemedium of Exchange could be seashells in turkey and thosecould be seashells in turkey and thosecould be seashells in turkey and those warehouses would still have value so thewarehouses would still have value so thewarehouses would still have value so the money is a is not a is a mechanism tomoney is a is not a is a mechanism tomoney is a is not a is a mechanism to create liquiditycreate liquiditycreate liquidity for all of us to have an easier timefor all of us to have an easier timefor all of us to have an easier time buying and selling goods and servicesbuying and selling goods and servicesbuying and selling goods and services it has value based on the relative valueit has value based on the relative valueit has value based on the relative value we ascribe to it in our transactions aswe ascribe to it in our transactions aswe ascribe to it in our transactions as we go about itwe go about itwe go about it and Bitcoin is no different so it couldand Bitcoin is no different so it couldand Bitcoin is no different so it could have some value as a medium of Exchangehave some value as a medium of Exchangehave some value as a medium of Exchange but to say that a Bitcoin is going to bebut to say that a Bitcoin is going to bebut to say that a Bitcoin is going to be worth five million dollars at some pointworth five million dollars at some pointworth five million dollars at some point I think defies logic so in my little
QuestionerI think defies logic so in my little brain I cannot figure it out and there are lots of things my little brain cannot figure out it's okay I don't need to go long or short there thank you
Questionerhi I have a quick question on something that you mentioned earlier you said at the year of 2020 was a great year of growth and learning for you what would you say were some of your biggest takeaways or lessons that you learned and how does that affect the way that you invest Now versus maybe in the past
Questioneryeah that's a great question so I mentioned my friend Nick sleep and in fact I'm just going to do a search to see if it his letters are there so I can tell you whether I'm but I I always worry whether they're taken down or not yeah so I think if you do a Google search just next sleep letters it'll bring up some links which will give you all his letters I think those are like
Questionerall his letters I think those are like the Dead Sea Scrolls they should be required reading so he ran a fund from 2001 to 2014. the entire thing is in a single PDF and what I would do is I would start with the oldest letters and then work my way forward and I think it would be a tremendous education to go through that so just to give you a little bit of the cliff notes version of the next leap letters is Nick understood this notion really well that when you find great businesses with great runways run by great managements that you take the mindset of an owner and not an investor so in 2013 when he was just before he shut down his funds he was running about three billion dollars in capital and 40 percent of the capital was invested in Amazon so about 1.2 billion was in Amazon stock and then Costco and Berkshire Hathaway made up almost the rest of the portfolio
Othermade up almost the rest of the portfolio so 90 of the portfolio was Amazon Costco in Berkshire Hathaway okay that's how he was running his portfolio the UK regulators were giving him a lot of grief saying you cannot have all this risk in a portfolio with so much money in one position and that you need to diversify and it went against every bone in his body because he understood Amazon really well he did not want to change even 10 years from now his Amazon position because he understood that business was exceptional at that time in 2014 Amazon was 300 a share now it's 3300 or more than that so what he did in with his partner Zach is he wrote to his investors saying look I'm returning all your capital I'm shutting down my funds we've had a good run they compounded about 20 a year for 14 years and Nick and his partner I'm estimating God
QuestionerI'm estimating God maybe a somewhere between 100 and 200 million each from all the fees and gains and such that they had made and they kept their stake in these three companies so for example if Nick got 100 million half of it was in Amazon and maybe the rest over the Berkshire and Costco and he kept it that way and you can imagine what that did to his net worth it's worked out very well and he pretty much outperformed almost any manager that I know of and we're doing he's been driving these race cars on race tracks he's taking long bike rides he's going skiing he's not doing much work I would say in terms of actual work I don't know maybe 100 hours a year or something so the learning for him was that when you identify and find these exceptional great businesses which have very high returns of equity very long runways very great managers
Questionervery long runways very great managers very long runways very great managers very deep modes you go all in and very deep modes you go all in and very deep modes you go all in and ideally you try to find them small and ideally you try to find them small and ideally you try to find them small and then it's set it and forget it and it's then it's set it and forget it and it's then it's set it and forget it and it's similar to what this book in 1972 came similar to what this book in 1972 came similar to what this book in 1972 came out talks about the 101 in stock market out talks about the 101 in stock market out talks about the 101 in stock market returns returns returns I think even though the book is 48 years I think even though the book is 48 years I think even though the book is 48 years old I think it's Timeless so I think old I think it's Timeless so I think old I think it's Timeless so I think these were the big lessons for me which these were the big lessons for me which these were the big lessons for me which is I was always an investor who said is I was always an investor who said is I was always an investor who said okay okay okay find an undervalued asset and sell at a find an undervalued asset and sell at a find an undervalued asset and sell at a full price like for example when I full price like for example when I full price like for example when I bought our investment in Turkey I said bought our investment in Turkey I said bought our investment in Turkey I said okay this is very undervalued we'll have okay this is very undervalued we'll have okay this is very undervalued we'll have a good run at some point we'll move on I a good run at some point we'll move on I a good run at some point we'll move on I don't think about it that way anymore we don't think about it that way anymore we don't think about it that way anymore we own one-third of those of that business own one-third of those of that business own one-third of those of that business which means that out of the 12 million which means that out of the 12 million which means that out of the 12 million square feet 4 million square feet square feet 4 million square feet square feet 4 million square feet belongs to us my fund investors belongs to us my fund investors belongs to us my fund investors I like that business the managers are I like that business the managers are I like that business the managers are really good really good really good and we will keep that business for a
Todd Combsand we will keep that business for a long time and so that's a completely different mindset from what I had before what I was trying to do these precise calculations of intrinsic value and all of that we're not doing that so that's the big change are there any other questions out there
Questionerone issue with that with that change in your thinking what are you doing with all your time now that you're not having to uh do all the the analysis that you were doing
Todd Combsthere is always analysis because the portfolio is like an aircraft carrier it was positioned a certain way let's say in 2019 or middle of 2020 and it's I'm moving it into a different direction so the movement or a different direction which is where we eventually end up with a bunch of great Compounders that will take a few years so we've started to make some Investments but these are not overnight because we've
Questionerthese are not overnight because we've got we're in effect we're pregnant with a bunch of positions and we have to let those play out so I think in the next few years we'll probably get the aircraft carrier positioned correctly and then once we are there then yeah it should be just uh monitoring those businesses a little bit and then look at what's on the horizon in any way in any case I always think of myself as a general Leisure I mean my job is reading and thinking so that doesn't change it'll always be reading and thinking all right we're just about something about it's time so I think we're going to wrap this up thank you so much for all your insightful knowledge this is a great great presentation