Other[Music][Music][Music][Music] good evening everyone we delighted to welcome you to CFA UK's eminent speaker series and I'm delighted to have with me monish Po monish as many of you know is a director and founder and managing partner of poai investment funds monish is also involved very heavily with the Dua Foundation which does a lot of great charitable work particularly when it comes to the field of medical sciences and monish made a transition from being a technologist or a technology focused investment professional onto investing and he follows into on the V on the path rather of Ben Graham Warren Buffett and also a mentor of some sort in terms of Charlie Monga so with that monish we're delighted to welcome you but those that don't know as my name is BR mad here and I'm delighted to be joined by my colleague Oliver as well we're both the
Questionercolleague Oliver as well we're both the co-chairs of CFA UK's value investment special investing group for those that aren't yet members or haven't yet renewed the dues for CFA UK they're still time to sign up so please do sign up as well with that Ollie why don't to hand it over to you thanks
Othercheck it's working um so mon thank you so much for joining us it's very generous of you to come and U also your generosity and sharing your ideas on your um on investing and and life on your um your books articles and interviews um so I'm sure many here will be familiar with your backstory but uh for those less familiar or as a reminder um I was going to ask you to walk us through your early years and and in particular I I was interested in whether having a magician for a grandfather and a entrepreneur for a father who started many businesses brought you to where you
Questionermany businesses brought you to where you find yourself today
Otheryeah well it's wonderful to be here thank you for having me I'm glad we could uh kind of make it work I had a short trip to to London and it was nice that we could make this happen in many ways I think I I feel like I kind of won the ovarian Lottery you know I had wonderful parents I would say almost like a dream grandfather so my grandfather he he passed away when I was about 12 years old and he was actually world famous magician probably top four or five in the world and he actually learned initially learned his trade here in London and British magician named oven Clark and he was always right till the end trying to continuously improve as a magician and continuously trying to get better and all of that but as a grandfather you know in the Summers we used to visit him he'd take Summers off
Otherused to visit him he'd take Summers offused to visit him he'd take Summers off and we'd go to his my mom's childand we'd go to his my mom's childand we'd go to his my mom's child childhood home in foothills of thechildhood home in foothills of thechildhood home in foothills of the Himalayas very nice summers in thatHimalayas very nice summers in thatHimalayas very nice summers in that place and he would start the day withplace and he would start the day withplace and he would start the day with doing magic tricks for us and he wasdoing magic tricks for us and he wasdoing magic tricks for us and he was very good at close-up magic so there arevery good at close-up magic so there arevery good at close-up magic so there are magicians who you know specializ hemagicians who you know specializ hemagicians who you know specializ he could actually do many different thingscould actually do many different thingscould actually do many different things but he was really good at close-up sobut he was really good at close-up sobut he was really good at close-up so you know really close it's moreyou know really close it's moreyou know really close it's more difficult and we would get up in thedifficult and we would get up in thedifficult and we would get up in the morning and have all these differentmorning and have all these differentmorning and have all these different tricks and things he'd do and and thentricks and things he'd do and and thentricks and things he'd do and and then he'd want us to have dessert firsthe'd want us to have dessert firsthe'd want us to have dessert first you know so then it would immediately goyou know so then it would immediately goyou know so then it would immediately go from Magic to it go to some place whichfrom Magic to it go to some place whichfrom Magic to it go to some place which had great desserts and of course hehad great desserts and of course hehad great desserts and of course he ignored my grandmother and my mother andignored my grandmother and my mother andignored my grandmother and my mother and all of that and so it was like his Focusall of that and so it was like his Focusall of that and so it was like his Focus was to make sure that the all thewas to make sure that the all thewas to make sure that the all the grandkids had the time of their lives sograndkids had the time of their lives sograndkids had the time of their lives so it was really amazing Summers with him
Otherit was really amazing Summers with him my father was an a quintessential entrepreneur so he must have started grown and bankrupted at least a dozen companies in a dozen different Industries and the common theme was that he was really good at identifying offering gaps in the market so he was really good at looking at kind of what was going on and saying oh if there was a product or service like this it could do well and it never really stopped him in terms of whether he had competence in that particular area so he was he was really good at quite amazing actually at figuring out things in a variety of different Industries one of the ventures that he had started with actually was paid for our college education in the US before it went bankrupt so it was really good was he started a gold jewelry Factory in Dubai and he had gone
Otherand he had gone bankrupt and that bankruptcy in 77 was pretty intense for him and he had switched for the first time in several decades to a job he he' taken a job in Dubai some semblance of stability and he was on a flight going from Mumbai to Dubai and there was this guy in the gold business who was sitting next to him toour flight and by the end of the flight they decided to become partners and they were going to create a new Venture and it was again classically my dad uh was just just talked to him about his business and it turned out that the UAE had no duties or tariffs on raw gold coming in but they had a 2% Duty on finished gold coming in in jewelry form but the 2% was the on the entire value of the jewelry so if you just looked at the labor content the duty was much higher because most of the content was gold labor was a small portion and so
Questionergold labor was a small portion and so the guy who was a jeweler was telling my dad that you know there is no jewelry manufacturing that exists in Dubai or in the UAE but if someone were to set up you know move the gold Smiths from India even though the cost would be higher there was an Arbitrage because you would there was a big spread between your elevated costs and what would be the cost of finished gold coming in and that you know that's what my father's all about is the the arbitral spread and and he said okay this guy knows the jewelry business I understand spreads and we can do this and the fact that he had no capital and you know those are always those are always Minor Details for my dad and it worked I mean basically and he was really smart so I think I think within you know the guy who was his partner was like a third generation 70 80 years in the jewelry
Questionergeneration 70 80 years in the jewelry business and kind of grew up with it and business and kind of grew up with it and business and kind of grew up with it and so he had a lot of knowledge my dad in about 10 months was equal to him in knowledge you know it was he he knew just as much about the businesses as him and he was actually better than him because he had done a lot of things in manufacturing so he was actually able to bring in a bunch of kind of processes and things which were better than what this guy could do so that business actually took off because there was a spread and then what happened is which happened with many of his businesses is that other people figured out that there's a spread and then the second competitor and the third competitor and then a lot of competitors and that spread just vanished basically and and it became really hard and so then that business in the event in the end basically there was no it became a me
Otherbasically there was no it became a me too proposition but by that time we had I had my brother and had completed about 2/3 we were 2/3 of our way through our degree when he went bankrupt and then my one of my uncles helped us with helping us finish college and such so but anyway that business which was basically happening from the time I was like about 14 or 15 onwards he used to take me on sales calls with him when I was about 16 I really don't know why he did that because I was a kind of squinny underweight kid not any Charisma for sales or anything and it would be kind of strange you know you're going of walk into he'd be cold calling these Jewelers and uh you know you're walking in with a teenager and he really didn't care about all that but to me it taught me a lot because I just saw how he'd walk into store where he doesn't know
Otherwalk into store where he doesn't know anyone doesn't they don't know him andanyone doesn't they don't know him andanyone doesn't they don't know him and uh he'd close deals you know and jewelryuh he'd close deals you know and jewelryuh he'd close deals you know and jewelry is a big trust business you know peopleis a big trust business you know peopleis a big trust business you know people have to really trust you and he was ablehave to really trust you and he was ablehave to really trust you and he was able to build that pretty quickly so anyway Ito build that pretty quickly so anyway Ito build that pretty quickly so anyway I felt like by the time I was 18 becausefelt like by the time I was 18 becausefelt like by the time I was 18 because you know so many of these businessesyou know so many of these businessesyou know so many of these businesses have been bankrupt and I think when myhave been bankrupt and I think when myhave been bankrupt and I think when my brother and I were 12 orbrother and I were 12 orbrother and I were 12 or 13 we used to sit down with him we were13 we used to sit down with him we were13 we used to sit down with him we were like his bard directors at night and welike his bard directors at night and welike his bard directors at night and we had to figure out how to make thehad to figure out how to make thehad to figure out how to make the business last for one more day you knowbusiness last for one more day you knowbusiness last for one more day you know everything all the walls were caving ineverything all the walls were caving ineverything all the walls were caving in and the business was dying and we'reand the business was dying and we'reand the business was dying and we're just trying to make it last for one morejust trying to make it last for one morejust trying to make it last for one more day and then we'd make it last for oneday and then we'd make it last for oneday and then we'd make it last for one more day and then we'd next night saymore day and then we'd next night saymore day and then we'd next night say sit down and how do we make it last forsit down and how do we make it last forsit down and how do we make it last for one more day and so I finished severalone more day and so I finished severalone more day and so I finished several mbas by the time I was 18 and in lookingmbas by the time I was 18 and in lookingmbas by the time I was 18 and in looking back you know there was no kind of plan
Questionerback you know there was no kind of planback you know there was no kind of plan for any of this but looking backfor any of this but looking back it was without thatit was without thatit was without that experience I wouldn't have been able toexperience I wouldn't have been able toexperience I wouldn't have been able to be an investor it helped me I think whatbe an investor it helped me I think whatbe an investor it helped me I think what happened is and I I didn't even know Ihappened is and I I didn't even know Ihappened is and I I didn't even know I had this skill but I can crack businesshad this skill but I can crack businesshad this skill but I can crack business models really fast in a lot ofmodels really fast in a lot ofmodels really fast in a lot of industries that I may not have seenindustries that I may not have seenindustries that I may not have seen before and and such because I got sobefore and and such because I got sobefore and and such because I got so much exposure in those years so I'm verymuch exposure in those years so I'm verymuch exposure in those years so I'm very grateful that it went that way that'sgrateful that it went that way that'sgrateful that it went that way that's fascinating thanks um so uh F forward afascinating thanks um so uh F forward afascinating thanks um so uh F forward a bit I you became an employee at at tabsbit I you became an employee at at tabsbit I you became an employee at at tabs and then moved into uh Internationaland then moved into uh Internationaland then moved into uh International sales and marketing and eventually umsales and marketing and eventually umsales and marketing and eventually um founded your own business um do you wantfounded your own business um do you wantfounded your own business um do you want to talk about a bit of that Journey umto talk about a bit of that Journey umto talk about a bit of that Journey um maybe maybe to the point where you uhmaybe maybe to the point where you uhmaybe maybe to the point where you uh you sold a minority state to all theyou sold a minority state to all theyou sold a minority state to all the turmoil I had seen well when I was inturmoil I had seen well when I was inturmoil I had seen well when I was in childhood because my parents were reallychildhood because my parents were reallychildhood because my parents were really bad financial planners you know so
Otherbad financial planners you know so basically when the business went bankrupt there was no money for rent or grow groceries or anything so you know they're trying to borrow from family and friends and it was pretty traumatic and so my take was that once I got my degree engineering and such I knew that I would have good job prospects a good career decent income you know put away 15% in a retirement plan and let it compound and so on so I really had no interest in ever being an entrepreneur I just didn't like all the huge gations that I had seen so that's what had resigned myself to that's what I was doing and my dad was visiting me I think I was 24 and he told me one day that it's time to quit and start your own thing and I said you know don't you remember my childhood you know it's not a not the path I want to go down he said all I
Questionerpath I want to go down he said all I remember was a lot of excitement you know and he said to me he said look you know there are only two kinds of people who matter in a company large business he says the people who create have got some kind of role in the creation of the product or service and the people who sell so he said a business is the people who create the people who sell and then a lot of fill-in the blanks in the middle okay so he said number one you never want to be in the middle okay so he said you either want to be on the creative side or you want to be on the selling side if you're going to work for someone and then he said I was at that time on the selling side so he said look and before that I was on the creative side and the R&D side so when I was in R&D he actually told me look you could drop dead tomorrow and they wouldn't even know
Othertomorrow and they wouldn't even know that that's happened they would't eventhat that's happened they would't eventhat that's happened they would't even miss you so even whatever you bring tomiss you so even whatever you bring tomiss you so even whatever you bring to the party on the creative side isthe party on the creative side isthe party on the creative side is basically me too and he helped me movebasically me too and he helped me movebasically me too and he helped me move to the other side because he said evento the other side because he said evento the other side because he said even if you're a mediocre sales guy doingif you're a mediocre sales guy doingif you're a mediocre sales guy doing something you have value to the businesssomething you have value to the businesssomething you have value to the business so I actually move moved toso I actually move moved toso I actually move moved to International marketing and sales andInternational marketing and sales andInternational marketing and sales and then he told me look it's good that youthen he told me look it's good that youthen he told me look it's good that you made the move from creative to sellingmade the move from creative to sellingmade the move from creative to selling but all the spoils go to someone elsebut all the spoils go to someone elsebut all the spoils go to someone else you know you don't really see much ofyou know you don't really see much ofyou know you don't really see much of the spoils and really you need tothe spoils and really you need tothe spoils and really you need to capture more of the spoils for yourselfcapture more of the spoils for yourselfcapture more of the spoils for yourself and I was getting bored with theand I was getting bored with theand I was getting bored with the bureaucracy it was getting bigger and sobureaucracy it was getting bigger and sobureaucracy it was getting bigger and so on and so I decided yeah maybe he'son and so I decided yeah maybe he'son and so I decided yeah maybe he's right I'll take the plunge I try to makeright I'll take the plunge I try to makeright I'll take the plunge I try to make it as low risk as possible and then Iit as low risk as possible and then Iit as low risk as possible and then I found an offering G appap because I knewfound an offering G appap because I knewfound an offering G appap because I knew how to find offering gaps I can find
Otherhow to find offering gaps I can find offering gaps really easily and even P funds was an offering Gap so basically went down the path and then basically accidentally heard about Warren Buffett and Charlie Bunger in exactly about 30 years ago and that was a big eye opener for me because I said wow this is really cool because you're basically using the same brain cells to do investment research as you would to figure out strategy in a business that you're running I thought it'd be more interesting and more leverage to apply those brain GRE cells in investing because you wouldn't have to do any execution so I always enjoyed the strategy part of the business is much more than the execution part the execution is a lot of heavy lifting it's fun the first few times but it's better to be on the I always liked it when I was trying to figure the business out
Questionerwas trying to figure the business out and so the big aha moment for me with Warren Buffett was that all he does is figure businesses out he doesn't really run them and so that's how I made I I tried to see if I could make that transition and I did it being an investor for myself I sold a small portion of the company I had a million dollars for the first time I had cash in the bank and about 5 years later the million was about 13 million and so the public investing went way better than I thought kind of 94 to 2000 and then I that led to the formation of PAB funds and I kind of went from there so that's an interesting one by just very quickly you mentioned about that low risk and that offer and GAP piece and you talked about the mentees ship that you had say from Charlie Monga and Warren Buffett how do you sort of look at that offer
Questionerhow do you sort of look at that offer Gap as well as say those lowrisk scenarios in sectors that might not necessarily be ones that you would have traditionally focused in what would be your suggestions to say someone that's maybe young and starting out in the industry for the first time or maybe even to experienc investors well I mean
WarrenI think our job is to look for anomalies and job as investors is to look for things that make no sense it's when things make no sense that that's when there's some opportunity so on a steady state basis I think that markets are mostly efficient you know if you have a business like Coca-Cola and you know they they sell syrup to bottlers and they've got a dominant brand all over the world it's unlikely that a business like that would trade for one times earnings most of the time and it's unlikely it would even trade for 10 times earnings and you know
Questionertrade for 10 times earnings and you know sometimes things get euphoric and it may trade for 40 50 times earnings like it did in like 99 2000 and sometimes thing gets kind of pessimistic like I think in the early ' 7s and until the early 80s where it's trading at seven times earnings or such so it vacillates and so when a business like that gets to the low-end extreme of being very undervalued then that's interesting and because there are 50,000 stocks you know I don't like to quote Jim Kramer too much but you know he says there's always a bull market somewhere and you know I mean I think he's right in the way in a way that there's always it's not possible that in a global market of 50,000 or so trade and equities that everything is perfectly priced you it's a nature of markets that they're going to undershoot and overshoot and in fact
Questionerto undershoot and overshoot and in fact if you just you know throw darts on all the businesses and the London Stock Exchange or the New York Stock Exchange any random company that you the dot hits you look at the 52 we range on that stock it's going to be like 60 to 100 or like 75 to 125 or 75 to 150 and it's not possible for most businesses that there's that much value change happening in a single year you know the coke business doesn't change that much in a year but the stock price because it's auction driven markets the nature of auction driven markets is that the way the mechanism by which prices get set can have a deviation from underlying fundamentals and so that's what allows us to actually make a living that's what we do so there's always things that are going on in markets and and I've always felt that you know whatever criteria you set if you said that I only want to buy
Questionerset if you said that I only want to buy things that are at a trailing PE of one things that are at a trailing PE of one things that are at a trailing PE of one you would find those if you said that I you would find those if you said that I you would find those if you said that I only want to buy things at a trailing P only want to buy things at a trailing P only want to buy things at a trailing P of 0.1 you would find those two and if of 0.1 you would find those two and if of 0.1 you would find those two and if you said I only want to buy things at you said I only want to buy things at you said I only want to buy things at one third of Book value you would find one third of Book value you would find one third of Book value you would find those as well so you can set any those as well so you can set any those as well so you can set any criteria you want and Mr Market will criteria you want and Mr Market will criteria you want and Mr Market will give you companies that fit that give you companies that fit that give you companies that fit that criteria and then you can drill down and criteria and then you can drill down and criteria and then you can drill down and see whether that kind of works for you see whether that kind of works for you see whether that kind of works for you or doesn't work for you take it from or doesn't work for you take it from or doesn't work for you take it from there would you be able to describe a there would you be able to describe a there would you be able to describe a bit the uh when you generated the the bit the uh when you generated the the bit the uh when you generated the the growth from 1 to 13 million and um and growth from 1 to 13 million and um and growth from 1 to 13 million and um and maybe in your first few years running maybe in your first few years running maybe in your first few years running the P was it would you say it's more the P was it would you say it's more the P was it would you say it's more deep value or if I don't want to label deep value or if I don't want to label deep value or if I don't want to label it if you don't label it but deep value it if you don't label it but deep value it if you don't label it but deep value special situations or or were there special situations or or were there special situations or or were there Quality Companies as well in that MI Quality Companies as well in that MI Quality Companies as well in that MI yeah so when I first started out as an
Questioneryeah so when I first started out as an investor I spent a lot of time reading up on Warren Buffett at Jolly Munger and the Burkshire annual reports and all of that and because I was running uh this it business I was my circle of competence was very heavily technology and Technology basically has the Nuance of having high Returns on equity for the most part and it's a good place to be so as long as you're not paying too much you know it's always great to be in businesses that have growth and that have high Returns on equity and so from like 94 to about 99 or 2000 I was very much a growth investor because uh I understood kind of that's what kind of was front and center what my so almost the entire portfolio was Tech at that time probably 80 8 90% was stack but I got concerned I had privately started a and it failed and that was painful I mean I lost about 3
Questionerthat was painful I mean I lost about 3 million I had some outside investors that lost about 2 million but what that gave me was it gave me about a three month look ahead versus what the market could see so I could see that we were in a very big bubble in early 2000 late 99 and I didn't know know when it would blow and how it would blow but I was pretty sure at some point this party would come to come to an end so what I did is pund started in in July 99 and I made a complete switch at that point so I went from you know these great businesses in Tech and so on because theyve become just so froy to deep value and in fact the day the NASDAQ peaked I think March 9th 2000 was the day Burkshire hit a multi-year low so people were literally selling books sh Dubai pets.com and chex.com and whatever else was happening then and so very simple stable businesses in the markets
Ted Weschlersimple stable businesses in the markets became hated and unloved and they became really cheap and so I was buying funeral homes and you know companies having oil tankers and that sort of thing and we did really well I mean I think the NASDAQ crashed and burned and P funds I think for from 99 to like 2007 we did before fees we did 37% a year no down years for about 8 years and it was done with a bunch of very basic non-growth type businesses and of course what I what I needed to do which I I got so comfortable with the Deep value and all of that is I probably by around 200 11 or 12 I should have switched back because by that time all the fro and stuff had gone away but i' had become so comfortable in this so I I was about 6 years late in actually realizing I need to kind of go back to the better businesses and so on uh but you know
Questionerbusinesses and so on uh but you know it's a forgiving business so life isit's a forgiving business so life isit's a forgiving business so life is okay just on that theme that youokay just on that theme that youokay just on that theme that you mentioned about say U looking at Deepmentioned about say U looking at Deepmentioned about say U looking at Deep value versus growth do you find anyvalue versus growth do you find anyvalue versus growth do you find any resonances right now but say the AI teeresonances right now but say the AI teeresonances right now but say the AI tee or deep growth and how does one if youor deep growth and how does one if youor deep growth and how does one if you do how does one cut away the noisedo how does one cut away the noisedo how does one cut away the noise from looking with say versus looking atfrom looking with say versus looking atfrom looking with say versus looking at True Value oriented sectors or companiesTrue Value oriented sectors or companiesTrue Value oriented sectors or companies
Otheryeah so actually value and growth areyeah so actually value and growth areyeah so actually value and growth are joined at the hip it's like a coin withjoined at the hip it's like a coin withjoined at the hip it's like a coin with two sides really cannot think of themtwo sides really cannot think of themtwo sides really cannot think of them differently so alldifferently so alldifferently so all businesses are worth the sum of futurebusinesses are worth the sum of futurebusinesses are worth the sum of future cash they produce discounted to presentcash they produce discounted to presentcash they produce discounted to present value at some reasonable interest ratevalue at some reasonable interest ratevalue at some reasonable interest rate and so it doesn't matter whether you'reand so it doesn't matter whether you'reand so it doesn't matter whether you're looking at Nvidia or some funeral homelooking at Nvidia or some funeral homelooking at Nvidia or some funeral home or you know any business any businessor you know any business any businessor you know any business any business has a very clear-cut single definitionhas a very clear-cut single definitionhas a very clear-cut single definition of what it's worth the controversiesof what it's worth the controversiesof what it's worth the controversies come in on what are those cash flows andcome in on what are those cash flows and
Questionercome in on what are those cash flows and uh how certain are you and I thinkuh how certain are you and I thinkuh how certain are you and I think that's where the difficulties come inthat's where the difficulties come inthat's where the difficulties come in
Questionerbecause businesses by their very naturebecause businesses by their very naturebecause businesses by their very nature are very unpredictable I mean there's aare very unpredictable I mean there's aare very unpredictable I mean there's a wide range of things that can happen towide range of things that can happen towide range of things that can happen to a business over time and especially thea business over time and especially thea business over time and especially the further out you go in the years I meanfurther out you go in the years I meanfurther out you go in the years I mean the Insiders of Nvidia couldn't tell usthe Insiders of Nvidia couldn't tell usthe Insiders of Nvidia couldn't tell us what it looks like 5 or 10 years fromwhat it looks like 5 or 10 years fromwhat it looks like 5 or 10 years from now in terms of Revenue cash flows theynow in terms of Revenue cash flows theynow in terms of Revenue cash flows they might have some difficulties with thatmight have some difficulties with thatmight have some difficulties with that so people on the outside looking inso people on the outside looking inso people on the outside looking in would have even greater difficulties butwould have even greater difficulties butwould have even greater difficulties but basically I I I don'tbasically I I I don'tbasically I I I don't particularly you know go one way orparticularly you know go one way orparticularly you know go one way or another I'm open I'm open to it's alwaysanother I'm open I'm open to it's alwaysanother I'm open I'm open to it's always better to be invested in a businessbetter to be invested in a businessbetter to be invested in a business which has growthwhich has growthwhich has growth prospects and has high Returns on Equityprospects and has high Returns on Equityprospects and has high Returns on Equity it it could be better to do that andit it could be better to do that andit it could be better to do that and even pay a higher multiple than a veryeven pay a higher multiple than a veryeven pay a higher multiple than a very low PE on something that's flat orlow PE on something that's flat orlow PE on something that's flat or declining so the bias should always be
Questionerdeclining so the bias should always be towards a great growing business but one should one should uh kind of be agnostic you should just look at the landscape and kind of see what's going on and so to your philosophy it sounds like it's um sort of well Whitney Tilson calls himself a make money investor rather than value or growth but um and uh over the years with PB funds have you have you found certain sectors that you've done better in or or worse in or or is it really been St agnostic sector agnostic just look for opportunities
Otherit's a really opportunistic business so one of the things Charlie would repeatedly tell me I think people asked Warren and Charlie this question that you know if you guys were starting today you know how would you do and his answer was we would do terribly you know because he said that you know in the'
Questionerbecause he said that you know in the' 60s or'60s or'60s or' 7s they were shooting fish in a barrel7s they were shooting fish in a barrel7s they were shooting fish in a barrel after letting the water out you know andafter letting the water out you know andafter letting the water out you know and so they had so many opportunities I meanso they had so many opportunities I meanso they had so many opportunities I mean us markets you knowus markets you knowus markets you know 7475 that was an orgasmic period to be a7475 that was an orgasmic period to be a7475 that was an orgasmic period to be a value investor you know it was just avalue investor you know it was just avalue investor you know it was just a ter unbelievable you could have prettyter unbelievable you could have prettyter unbelievable you could have pretty much bought anything and you would havemuch bought anything and you would havemuch bought anything and you would have done well and equities were you knowdone well and equities were you knowdone well and equities were you know just primed to do well for next couplejust primed to do well for next couplejust primed to do well for next couple of decades so today I think Charlie andof decades so today I think Charlie andof decades so today I think Charlie and Warren always complain that the brainWarren always complain that the brainWarren always complain that the brain power that is focused on you know publicpower that is focused on you know publicpower that is focused on you know public equities and all of that is veryequities and all of that is veryequities and all of that is very significant I mean you know we have moresignificant I mean you know we have moresignificant I mean you know we have more mutual funds than stocks in the USmutual funds than stocks in the USmutual funds than stocks in the US probably similar in the UK and we haveprobably similar in the UK and we haveprobably similar in the UK and we have more hedge funds than stocks and uh somore hedge funds than stocks and uh somore hedge funds than stocks and uh so the thing is that and we have morethe thing is that and we have morethe thing is that and we have more analysts than Stocks by some Factor youanalysts than Stocks by some Factor youanalysts than Stocks by some Factor you know maybe 3 to one or 4 to1 orknow maybe 3 to one or 4 to1 orknow maybe 3 to one or 4 to1 or something so a lot of stuff is picked
Othersomething so a lot of stuff is picked over I found last few years years it's quite difficult to find stuff and you know when I look at my portfolio currently it's the most weird portfolio you can think of you know I manage about a billion dollars about 600 million in Turkey in three names another 300 million in coal in three or four names and a few other things which don't matter that much you know and I would have never guessed that be kind of you know that way but but to tell you just to tell you how weird and opportunistic this business is I had at 13 months ago 13 months back my investments in Coal was Zero I had no investments in the coal business just around 13 months ago maybe yeah just about 13 months ago March May 18th or so I saw a tweet on Twitter where someone had put my handle on the tweet and said David einhorn's position in Console Energy
Questionereinhorn's position in Console Energy looks a lot like mish's ipco bet ipsco looks a lot like mish's ipco bet ipsco looks a lot like mish's ipco bet ipsco is a business that I have very fond memories of so when I saw that tweet I I actually in my mind I thought that even though God loves me he doesn't love me so much to give me a second ipco so much to give me a second ipco so much to give me a second ipco it's like one and done and that that what had happened in 2003 and 2004 was what had happened in 2003 and 2004 was what had happened in 2003 and 2004 was never going to happen in my lifetime never going to happen in my lifetime never going to happen in my lifetime again and so ipco was a tubulous steel again and so ipco was a tubulous steel again and so ipco was a tubulous steel manufacturer in the US and Canada they manufacturer in the US and Canada they manufacturer in the US and Canada they made steel for pipelines and oil fields made steel for pipelines and oil fields made steel for pipelines and oil fields and so on and it was a company with no and so on and it was a company with no and so on and it was a company with no debt they had $15 a share in cash and debt they had $15 a share in cash and debt they had $15 a share in cash and they they had given guidance that for they they had given guidance that for they they had given guidance that for the next two years our net income and the next two years our net income and the next two years our net income and free cash flows are going to be $15 a free cash flows are going to be $15 a free cash flows are going to be $15 a year for each year for the next two year for each year for the next two year for each year for the next two years and the stock was at $40 so if you years and the stock was at $40 so if you years and the stock was at $40 so if you just look to the cash on the balance just look to the cash on the balance just look to the cash on the balance sheet and the next two years of cash sheet and the next two years of cash sheet and the next two years of cash coming in you would be at
Todd Combscoming in you would be at $45 and plant and equipment and $45 and plant and equipment and $45 and plant and equipment and inventory would all be free there was no inventory would all be free there was no inventory would all be free there was no debt and and they were giving this this debt and and they were giving this this debt and and they were giving this this was not really guidance because when was not really guidance because when was not really guidance because when these people built pipelines they gave these people built pipelines they gave these people built pipelines they gave purchase orders to ipsco because they purchase orders to ipsco because they purchase orders to ipsco because they wanted a guarantee that those that steel wanted a guarantee that those that steel wanted a guarantee that those that steel would be delivered certain time certain would be delivered certain time certain would be delivered certain time certain place absolutely so basically these were place absolutely so basically these were place absolutely so basically these were firm purchase orders and so the company firm purchase orders and so the company firm purchase orders and so the company had extreme Clarity on exactly what they had extreme Clarity on exactly what they had extreme Clarity on exactly what they would produce and what the cash flows would produce and what the cash flows would produce and what the cash flows would be and all of that so it wasn't would be and all of that so it wasn't would be and all of that so it wasn't like you know Apple giving guidance or like you know Apple giving guidance or like you know Apple giving guidance or Microsoft G guidance something this was Microsoft G guidance something this was Microsoft G guidance something this was like contractually set very cyclical like contractually set very cyclical like contractually set very cyclical business it was possible that after 2 business it was possible that after 2 business it was possible that after 2 years cash flows could be zero could be years cash flows could be zero could be years cash flows could be zero could be negative but I said you know why focus negative but I said you know why focus negative but I said you know why focus on the negative you know let's keep them on the negative you know let's keep them on the negative you know let's keep them like my dad let's always think the glass like my dad let's always think the glass
Otherlike my dad let's always think the glass is overflowing you know and so I said is overflowing you know and so I said is overflowing you know and so I said the extent of the analysis I did was I the extent of the analysis I did was I the extent of the analysis I did was I just want to own this for 2 years and I just want to own this for 2 years and I just want to own this for 2 years and I just want to see what Mr market prices just want to see what Mr market prices just want to see what Mr market prices this at 2 years from now when there's 45 this at 2 years from now when there's 45 this at 2 years from now when there's 45 on the balance sheet I I really want to on the balance sheet I I really want to on the balance sheet I I really want to see if this price is at 40 you know see if this price is at 40 you know see if this price is at 40 you know that'd be kind of fun to see that was that'd be kind of fun to see that was that'd be kind of fun to see that was the extent of the analysis I had no the extent of the analysis I had no the extent of the analysis I had no insight into what happens in year three insight into what happens in year three insight into what happens in year three or year four or anything so one year or year four or anything so one year or year four or anything so one year goes by and the company announces that goes by and the company announces that goes by and the company announces that we're going to have one more year of $15 we're going to have one more year of $15 we're going to have one more year of $15 a share and so now we are at 60 well a share and so now we are at 60 well a share and so now we are at 60 well done monish we're in the black and the done monish we're in the black and the done monish we're in the black and the stock is now at 90 it's been moving up stock is now at 90 it's been moving up stock is now at 90 it's been moving up inching up and it's doubled basically inching up and it's doubled basically inching up and it's doubled basically more than doubled and we still have this more than doubled and we still have this more than doubled and we still have this issue where it's a very cyclical issue where it's a very cyclical issue where it's a very cyclical business and who knows what happens and business and who knows what happens and business and who knows what happens and I was thinking you know we should we've I was thinking you know we should we've I was thinking you know we should we've got long-term gains we can unload and
Questionergot long-term gains we can unload and move on and while I was kind of running this thing through my head one day I wake up and the Stock's at 155 some Swedish company offered to buy it for $160 a share and I don't know why the sweds didn't come a year earlier and buy it for $60 a share but you know things don't make sense on this planet you know like Mark Twain says you know fiction makes sense but reality never makes sense so one fto second after reading that I unloaded the shares and so when I'm reading this Tweet someone says ipsco is back and you know that's a wonderful life so I said let's look into Console Energy which I've never heard heard of in my life and I looked into it and I realized that there were there were some differences but there was a big positive in console which was not there in ipco console was furiously buying back shares if ipsco
Questionerfuriously buying back shares if ipsco was doing buy bags it would have been on steroids you know I mean that would have been something that would been a sight to behold uh but you know they were very few management teams are enlightened enough to do BuyBacks it just doesn't fit for most management you know uh like CEO was one time telling me I buy my stock the cash leaves and nothing happens to the stock price it just goes into The Ether you know so management teams have a very hard time with BuyBacks and so basically it turned out that console also has contracts a year in advance so like for example most of the next 12 months months of their sales they already know kind of in a band what they're going to collect and they also know a bit about two years and 3 years not 100% but they know more and they're using a lot of the cash for BuyBacks and
Otherusing a lot of the cash for BuyBacks and so on so many ways it's uh not as tight as ipsco but in some ways it's better there's kind of it it's not identical but quite similar and so I said okay you know this is wonderful it's back ipsco is back life is good and so so I spent a lot of time last year with coal miners and in the coal mines that also was an orgasmic experience uh it was really good actually I think I think coal miners are some of the best people on the planet they just wonderful people Northern Appalachia and Central Appalachia and Southern Appalachia and they were so wonderful I think 2 weeks in the mines the terminals and all of that actually spent about 8 months trying to get my arms around coal and I still have a lot more to learn we have some more trips coming up later in the summer and looking forward to those and so here we are with you know 30% in
Questionerand so here we are with you know 30% in coal and life is good it's a very interesting point that you bring on monish it really shows the behavioral biases and like you say in terms of the need to try and understand the Investments that you making it based on your time spend with the Cal miners um are there any similar unloved sect s that you spot about or sectors which are overhyped due to either cyclical Trends or maybe long-term trajectories and how does one go about even approaching that because clearly Cole wasn't the sector you were looking at but you did the Deep dive and understood that so how would say someone that starts looking at a sector has got no idea about it how should they approach those scenarios
Questioneryeah I mean I think a good way to look at it is try to focus on what is hated and unloved you know hated and unloved is a
Questionerunloved you know hated and unloved is a good way to start I made a trip to Istanbul my first trip to Istanbul in 2018 I was just in Istanbul before coming to London you know I made that trip just because I was just looking at numbers and turkey was just you know screening super cheap and of course it had a lot of issues it had you know runaway inflation still does Runway inflation crazy monetary policies you know currency getting decimated all recipes for great disasters but I said you know the blue fish and the boss first is very good and uh so why don't we make a trip to Turkey and just see what's happening and I had a friend Die Hard Ben Graham disciple nice guy and I said hey you know if I came to Istanbul could we visit the businesses in your portfolio he said oh it' be so much fun and I said so I said look here's the rules number one don't
Questionerlook here's the rules number one don't take take me to any company that youtake take me to any company that youtake take me to any company that you don't have an investment in and numberdon't have an investment in and numberdon't have an investment in and number two let's start with the one that's yourtwo let's start with the one that's yourtwo let's start with the one that's your idea number one and then idea number twoidea number one and then idea number twoidea number one and then idea number two and we just go down the list and he saidand we just go down the list and he saidand we just go down the list and he said yeah sure so I started to look intoyeah sure so I started to look intoyeah sure so I started to look into turkey and I found that a lot of it wasturkey and I found that a lot of it wasturkey and I found that a lot of it was correctly beaten down because itcorrectly beaten down because itcorrectly beaten down because it deserved to be beaten down but theredeserved to be beaten down but theredeserved to be beaten down but there were some babies thrown out of the bathwere some babies thrown out of the bathwere some babies thrown out of the bath water we just need a couple of babies wewater we just need a couple of babies wewater we just need a couple of babies we don't need too much you know one or twodon't need too much you know one or twodon't need too much you know one or two and that's all we're looking for we'reand that's all we're looking for we'reand that's all we're looking for we're looking for just some anomalies you knowlooking for just some anomalies you knowlooking for just some anomalies you know and turkey had a few had a few thatand turkey had a few had a few thatand turkey had a few had a few that because no one was interested no onebecause no one was interested no onebecause no one was interested no one wanted to be there you had some reallywanted to be there you had some reallywanted to be there you had some really really high quality businesses like Cokereally high quality businesses like Cokereally high quality businesses like Coke bottlers and dominant beer brands andbottlers and dominant beer brands andbottlers and dominant beer brands and things like that and a lot of thethings like that and a lot of thethings like that and a lot of the footprint of these companies that werefootprint of these companies that werefootprint of these companies that were listed in Istanbul the revenues were
Otherlisted in Istanbul the revenues were coming outside of turkey so they were being punished just because they were listed there and so we said okay we can we can do that so basically I think I think there's there is no strategic plan that one can come up with I think one needs to kind of read newspapers and you know keep your eyes and ears open look at Value line or whatever is the equivalent in the UK and look at what's things are kind of in an area where not too many people are paying attention or people hate it and that sort of thing and that's generally going to be areas where there could be possibilities of something and we don't need a whole lot you know if you can find one of those in a year we're doing well great and before we open the room two questions I know there's one final question that we got from a member who couldn't make it um
Questionerfrom a member who couldn't make it um from a member who couldn't make it um how much attention should a bottomup how much attention should a bottomup how much attention should a bottomup value investor pay to macro Trends I value investor pay to macro Trends I value investor pay to macro Trends I know the CPI numbers came out today some know the CPI numbers came out today some know the CPI numbers came out today some would suggest lower than what was would suggest lower than what was would suggest lower than what was expected so some of the equity indices expected so some of the equity indices expected so some of the equity indices have certainly rallied but is that have certainly rallied but is that have certainly rallied but is that necessarily a concern it's in the noise necessarily a concern it's in the noise necessarily a concern it's in the noise level so I think it's the less clutter level so I think it's the less clutter level so I think it's the less clutter in your minds I think the better it is in your minds I think the better it is in your minds I think the better it is so it's hard enough to just figure out so it's hard enough to just figure out so it's hard enough to just figure out what one simple business is going to do what one simple business is going to do what one simple business is going to do long term we don't need to complicate long term we don't need to complicate long term we don't need to complicate the situation I think our energies need the situation I think our energies need the situation I think our energies need to be focused on the micro on the to be focused on the micro on the to be focused on the micro on the individual business the individual individual business the individual individual business the individual managers what are the likely range of managers what are the likely range of managers what are the likely range of outcomes of that business and I think outcomes of that business and I think outcomes of that business and I think when you start overlaying you know macro when you start overlaying you know macro when you start overlaying you know macro and CPI and and CPI and and CPI and interest rates and all that it's just interest rates and all that it's just interest rates and all that it's just going to for the most part Lead You going to for the most part Lead You going to for the most part Lead You astray so keep it simple focus on the
Otherastray so keep it simple focus on the business make sure you understand thebusiness make sure you understand thebusiness make sure you understand the business if you understand the businessbusiness if you understand the businessbusiness if you understand the business then you understand what it's worth thenthen you understand what it's worth thenthen you understand what it's worth then you can you know divide it by two oryou can you know divide it by two oryou can you know divide it by two or three to see if you can get it at youthree to see if you can get it at youthree to see if you can get it at you know 1/3 1/2 or some number lower thanknow 1/3 1/2 or some number lower thanknow 1/3 1/2 or some number lower than that and then we go from there soundsthat and then we go from there soundsthat and then we go from there sounds good
Questionerwell monish thank you so much forgood well monish thank you so much forgood well monish thank you so much for answering the stage segment with thatanswering the stage segment with thatanswering the stage segment with that why don't we open the floor up towhy don't we open the floor up towhy don't we open the floor up to questions thank youquestions thank youquestions thank you um the last speaker of CFA Society wasum the last speaker of CFA Society wasum the last speaker of CFA Society was all about macro actually Russell NAIAall about macro actually Russell NAIAall about macro actually Russell NAIA and uh we talked about financialand uh we talked about financialand uh we talked about financial repression and we won't talk about thatrepression and we won't talk about thatrepression and we won't talk about that but one thing the reason I brought himbut one thing the reason I brought himbut one thing the reason I brought him up was he started the library ofup was he started the library ofup was he started the library of mistakes and they were going to open upmistakes and they were going to open upmistakes and they were going to open up a branch of the library mistakes ina branch of the library mistakes ina branch of the library mistakes in London I remember you talking a coupleLondon I remember you talking a coupleLondon I remember you talking a couple of years ago I think it was at latisof years ago I think it was at latisof years ago I think it was at latis work and you said that you were studyingwork and you said that you were studying
Questionerwork and you said that you were studying your own mistakes very diligently and going to produce you know taxonomy as it were some learnings on that could you perhap share that with us you know
WarrenCharlie Charlie used to say to me that you want to learn from your mistakes but you don't want to learn too much investing is a business where if you have a 50% error rate 40% error rate that's bar for the course so it is a business where there's going to be a large error rate because we're trying to project into the future anytime you're trying to project into the future it's a fraught with uncertainties so you're going to have a lot of errors and I think it's a useful exercise to look at the things that have not worked and why have they not worked and it's also much richer data set if you can look at the investment mistakes of the greats because your own mistakes
Questionerthe greats because your own mistakes will take a long time to to build a record but if you were to look at Berkshire pathway or other investors you admire we've got several decades of history and so that can accelerate the learning right and so Warren and Charlie have been very transparent about many mistakes they've made you know Dexter shoes and for a long time Net Jets were the problem they had problems with jry and so you can you can look at the businesses and the question to ask is what was very obvious at the time the investment was made by this great mind that was visible and should have been a show stoer but the great mind missed it and then that what I did is I converted that into a checklist question and so basically it was looking at that's exactly how checklists were designed in aviation and that's why flying is so safe is uh
Otherand that's why flying is so safe is uh the FAA in the USthe FAA in the USthe FAA in the US has ahas ahas a definition of what a human life isdefinition of what a human life isdefinition of what a human life is worth and I'm sorry to report to youworth and I'm sorry to report to youworth and I'm sorry to report to you that they have a very finite number thatthat they have a very finite number thatthat they have a very finite number that they assigned to a human life and Ithey assigned to a human life and Ithey assigned to a human life and I haven't looked at it recently but Ihaven't looked at it recently but Ihaven't looked at it recently but I think maybe 10 years ago when I lookedthink maybe 10 years ago when I lookedthink maybe 10 years ago when I looked at it it was like 1.8 million orat it it was like 1.8 million orat it it was like 1.8 million or something Us mightbe 2 and a half or 3something Us mightbe 2 and a half or 3something Us mightbe 2 and a half or 3 million now and so what what they wouldmillion now and so what what they wouldmillion now and so what what they would do is that when a plane crasheddo is that when a plane crasheddo is that when a plane crashed they would look at what happened howthey would look at what happened howthey would look at what happened how many people died and if nothing was donemany people died and if nothing was donemany people died and if nothing was done how many people were likely to die inhow many people were likely to die inhow many people were likely to die in the next 10 or 20the next 10 or 20the next 10 or 20 years and then they would multiply thatyears and then they would multiply thatyears and then they would multiply that number by the 1.8number by the 1.8number by the 1.8 million and they would only ask themillion and they would only ask themillion and they would only ask the industry to make changes if the cost ofindustry to make changes if the cost ofindustry to make changes if the cost of those changes was below that number sothose changes was below that number sothose changes was below that number so it was very pragmatic in the sense thatit was very pragmatic in the sense thatit was very pragmatic in the sense that if there's a particular you know issueif there's a particular you know issueif there's a particular you know issue with aircraft engine or something thatwith aircraft engine or something that
Otherwith aircraft engine or something that they want to change and this not fixing this issue would lead to 100 people dying a year the budget is 180 million per year so you would have like a billion dollars or $2 billion or something that you could ascribe and tell the industry to fix it now the approach the nuclear industry took in the US was that a human life was worth infinity and their perspective was that we cannot lose a single life right and that's the death of the nuclear industry and a very clean solution for energy and it never got a fair shake so I much prefer the faa's approach but going back to the checklist you know they came up with these checklist for Pilots for takeoffs and landings and all these things based on you know making sure that they did all the things they were supposed to do and so the investing checklist was just Ones based on errors so if we saw
Questionerjust Ones based on errors so if we saw that the Dexter shoes investment didn't work at Burkshire we would ask the question that is this the a business that can be decimated by lower cost foreign manufacturers for example right and so that would become a conversion of the Dex shoes example into or for example the US Air investment that bua made you know is the business unionized and can unions do the business in and is it a lowcost operator so USA was a high cost operator and it had unions and it had Southwest basically come in into his backyard and you know give them a lot of problems so that's how I went about building the checklist it was faster to use other people's mistakes I also use my own mistakes and that's been actually quite useful thank you Mish for coming you've been a great great influence on my life you don't know this but I'm telling you the first
Questionerknow this but I'm telling you the first lesson I learned from you was not about investing but about taking a nap which I read an interview of yours probably in 2002 2003 and since then I've been taking a nap so thank you very much I I took a nap just before this so I'm ready to rock and roll so I'm not going to insult your time by asking what is the difference between value and grow investing and nonsensical questions like that uh what I want to ask you about is uh after working for 17 years for other people I started my own comp and I have an investment management business and what I and you have said in the past I don't remember which interview but you said that it's very easy for uh entrepreneurs to become investors but not investors to become entrepreneurs or something around that so anyway long story short the question is that you know how have you kind of
Questioneris that you know how have you kind of thought about um you know building uh in in a way you have actually funds as a business but more kind of spreading out and really building an asset management business some tips and tricks would be greatly received thank you
Questioneryeah Buffett says you know I'm a better businessman because I'm an investor and I'm a better investor because I'm a businessman there's a lot of interplay between the two so if you've done one you've got some advantage in doing the other and yeah in general going from entrepreneur to investor is I think easier than going the way and especially if you've actually done a bunch of this in your teen years you know running lemonade stands at the age of 12 is very useful so I think the investment business there are some really simple things that I latched on to that Warren Buffett had talked about and you know he
QuestionerBuffett had talked about and you know he said that if you delivered above market returns they would swim to you in the middle of the Atlantic through shock and infested waters to invest with you even if you were a leper so you don't need any sales skills they would find you and the key is that you know above market returns after frictional costs and all of that is a rarity and so I think the important thing when you are running an investment management operation is the focus has to be on doing well and if you do well for your investors then without even that much nudging they are probably wanting to give you more money but what you can also do is you can nudge them and one of the things I found very peculiar about the investment business when I started was that because I was running these private Partnerships and hedge fund and so on the SEC in the US doesn't allow me
Warrenso on the SEC in the US doesn't allow meso on the SEC in the US doesn't allow me to speed dial you know a bunch ofto speed dial you know a bunch ofto speed dial you know a bunch of dentists in North Carolina you knowdentists in North Carolina you knowdentists in North Carolina you know pound them on the phone and say pleasepound them on the phone and say pleasepound them on the phone and say please invest with me that would be actually beinvest with me that would be actually beinvest with me that would be actually be illegal for someone like me to do thatillegal for someone like me to do thatillegal for someone like me to do that and that's how i' Built My businessesand that's how i' Built My businessesand that's how i' Built My businesses you know that's my father would go dooryou know that's my father would go dooryou know that's my father would go door too and all of that and you basicallytoo and all of that and you basicallytoo and all of that and you basically build a you know list of uh you knowbuild a you know list of uh you knowbuild a you know list of uh you know likely customers and such and you justlikely customers and such and you justlikely customers and such and you just go through the list right and when Igo through the list right and when Igo through the list right and when I heard the rules that okay you can onlyheard the rules that okay you can onlyheard the rules that okay you can only talk to people you know and you can'ttalk to people you know and you can'ttalk to people you know and you can't talk to people you don't know I said I'mtalk to people you don't know I said I'mtalk to people you don't know I said I'm going to run out of people I know ingoing to run out of people I know ingoing to run out of people I know in about 15 minutes you know and then whatabout 15 minutes you know and then whatabout 15 minutes you know and then what am I going to do after that you know soam I going to do after that you know soam I going to do after that you know so I really was in a quandry but then II really was in a quandry but then II really was in a quandry but then I said okay you know humans are lookingsaid okay you know humans are lookingsaid okay you know humans are looking for purpose in life so I first went tofor purpose in life so I first went tofor purpose in life so I first went to my investors and I said we we were luckymy investors and I said we we were lucky
Questionermy investors and I said we we were lucky first year we were up like 70% orfirst year we were up like 70% orfirst year we were up like 70% or something and I said you know thank yousomething and I said you know thank yousomething and I said you know thank you for your for your confidence and supportfor your for your confidence and supportfor your for your confidence and support and please give me more money to manageand please give me more money to manageand please give me more money to manage I remember there's a great quote BillI remember there's a great quote BillI remember there's a great quote Bill Gates and he says that even if you're aGates and he says that even if you're aGates and he says that even if you're a monopoly you have to ask for the ordermonopoly you have to ask for the ordermonopoly you have to ask for the order so basically I went to my investors andso basically I went to my investors andso basically I went to my investors and very directly asked for the order andvery directly asked for the order andvery directly asked for the order and then the second thing I told them isthen the second thing I told them isthen the second thing I told them is that your friends andthat your friends andthat your friends and family you can talk to them but the SECfamily you can talk to them but the SECfamily you can talk to them but the SEC won't let me talk to them until theywon't let me talk to them until theywon't let me talk to them until they call me so I need you to tell them thatcall me so I need you to tell them thatcall me so I need you to tell them that I'm the greatest things in slice breadI'm the greatest things in slice breadI'm the greatest things in slice bread and that they should call me and onceand that they should call me and onceand that they should call me and once they call me or email me I can poundthey call me or email me I can poundthey call me or email me I can pound them forever and nobody has any problemsthem forever and nobody has any problemsthem forever and nobody has any problems with that so please set it up so I canwith that so please set it up so I canwith that so please set it up so I can you know bother the people the closestyou know bother the people the closestyou know bother the people the closest to you and they were very willing to doto you and they were very willing to doto you and they were very willing to do that too because you know they want to
Questionerthat too because you know they want to be led to the promised land and I was telling them this is the path to the promised land the math is really simple in the sense that so let's say like I started with $1 million right and a year later I had like 2 and a.2 million it became 1.7 million from the growth and about you know 7 800,000 came in so if you were running an operation investing operation where you were your returns were let's say 15 or 20% and assets coming in were another 10 15% this would be you know 25 30 35% a year 35% a year would be assets doubling every 2 years and anything that's doubling every two years is going to grow pretty fast on a million doll2 million or $3 million base to bring in a million dollars or half a million dollars isn't that hard you know you've got like I had eight investors when I started a year later I had 17 investors
Questionerstarted a year later I had 17 investors and then two years later I had about 25 investors and I was spending a lot of time on those 25 and I was pushing them for them to open up their networks and for them to open up their checkbooks and we just kept going and thankfully what was helpful to me was the numbers were really good as we were growing and so it worked so also the other thing that I think is useful is to focus on the friends family and fools especially the fools and then it works well thanks Mish if if I was looking at your fund or someone else they might say those are pretty concentrated bets on turkey and coal and they might think that seems a bit hairy perhaps um and the de value style the issue might be that you never have to be wrong because if you're wrong in a big way with such concentrated vets um has a lot of downside what would you
Questionerum has a lot of downside what would you say to an investor who's concerned about that and then secondly if it goes well and the coal mines do well you have to find the next deep value opportunity it's less of a kind of a compounder um I suppose you have this question for investors how would you how would you answer that
Questioneryeah those are really good questions and I think the my my portfolio is so weird at this time and most of my net worth is in the funds so I have multiple incentives to uh you know not get it wrong so I spent a lot of time actually thinking about that and what I the conclusion I came to is that I really cannot think of turkey as a monolith so in the sense that we have three bets in Turkey two out of the three bets the vast majority of their income and assets are outside turkey They Se subsidiaries and all of that there's a lot of ring
Otherand all of that there's a lot of ring fencing around those other subsidiaries and so it's kind of difficult to come up with scenarios where there's a total implosion I I I really cannot think of scenarios where something like that can happen easily I mean I think that that' be very extreme outlier in effect basically what this becomes is it becomes around five bets and uh five bets is okay I mean I think that it's you know I think that uh very comfortable with these bets two of them don't work maybe even three of them don't work if the third one we don't have a complete Wipeout I think the end result will still be okay and as I sit here today I have difficulty figuring out or fig coming up without or fig coming up with scenarios where even one doesn't work so I think it's probabilistic I think it positive I mean I think what I'm saying the upside Wass a downside Etc so
Otherthe upside Wass a downside Etc sothe upside Wass a downside Etc so there's a lot of focus on downside and Ithere's a lot of focus on downside and Ithere's a lot of focus on downside and I think even on the cold side thesethink even on the cold side thesethink even on the cold side these business businesses have no debt whichbusiness businesses have no debt whichbusiness businesses have no debt which is very unusual for mining companies tois very unusual for mining companies tois very unusual for mining companies to not have debt and they have no debt theynot have debt and they have no debt theynot have debt and they have no debt they actually have netactually have netactually have net cash and they are very focused oncash and they are very focused oncash and they are very focused on returning the cash to shareholders soreturning the cash to shareholders soreturning the cash to shareholders so they are very relatively simplethey are very relatively simplethey are very relatively simple businesses in terms of how they'rebusinesses in terms of how they'rebusinesses in terms of how they're running and they have a lot ofrunning and they have a lot ofrunning and they have a lot of resilience if you have businesses withresilience if you have businesses withresilience if you have businesses with no debt they have a lot of antino debt they have a lot of antino debt they have a lot of anti fragility built in the other questionfragility built in the other questionfragility built in the other question about youabout youabout you know what happens in the futureknow what happens in the futureknow what happens in the future well this is all opportunistic there'swell this is all opportunistic there'swell this is all opportunistic there's no strategic plan here so we may findno strategic plan here so we may findno strategic plan here so we may find things in due course or we may not andthings in due course or we may not andthings in due course or we may not and uh time will tell so if we don't find ituh time will tell so if we don't find ituh time will tell so if we don't find it I hope I'm smart enough to either putI hope I'm smart enough to either putI hope I'm smart enough to either put the money in treasuries or somethingthe money in treasuries or somethingthe money in treasuries or something benign and be patient that's the Hope 4benign and be patient that's the Hope 4benign and be patient that's the Hope 4 and a half% 10e yields not bad hi
Questionerand a half% 10e yields not bad hi thank you so much for doing this it's been great um so my questions are around persistence you said you your in 2018 help you invest in turkey and understand the businesses there but then before the return to Orthodoxy what was happening there you know all the headlines around Turkey was sort of the economy they were negative how do you still have the persistence to you know keep holding those stocks and not see yeah that's a
Questionergreat question so when I went in in 2018 and 2019 and later I had no doubt that the Turkish lra would continue to get decimated and for example I think in 2018 when I visited it was three lra to the dollar 2019 it was 5 L to the dollar now it's approaching 33 L to the dollar in dollar terms we are heavily up on our investments and I included that probably out of maybe 200 listed Turkish
Ted Weschlerprobably out of maybe 200 listed Turkish companies maybe 180 or 19 190 or more were not investable because I think they would face headwinds with those sorts of inflation numbers and devaluation numbers but I also it was very clear that there was some businesses that were either going to be totally unaffected by it or were actually going to get Tailwinds out of it so this was like one of our investments we made in Turkey was a company called tab airports all the revenues of Tav inside turkey and outside turkey is denominated in Euros in Turkey a lot of their costs are denominated in L so the Turkish people suffer a lot so their wages do not go up at the rate of inflation so what has been happening with tab airports is that their costs in Euros when you convert the leader to Euros are declining in this headwind environment and their revenues are
Todd Combsenvironment and their revenues are unaffected because they're Euro based sounaffected because they're Euro based sounaffected because they're Euro based so that business has been I mean right whenthat business has been I mean right whenthat business has been I mean right when I looked at it I said that this businessI looked at it I said that this businessI looked at it I said that this business is not going to be affected plus a veryis not going to be affected plus a veryis not going to be affected plus a very large percent of their footprint islarge percent of their footprint islarge percent of their footprint is outside turkey so even if you ignore alloutside turkey so even if you ignore alloutside turkey so even if you ignore all the currency issues and all that and onthe currency issues and all that and onthe currency issues and all that and on top of that there was a a deal they hadtop of that there was a a deal they hadtop of that there was a a deal they had done in the middle of covid where theydone in the middle of covid where theydone in the middle of covid where they took over the almati airport intook over the almati airport intook over the almati airport in Kazakhstan and there are very fewKazakhstan and there are very fewKazakhstan and there are very few airports in the world first of all mostairports in the world first of all mostairports in the world first of all most airports are run by governments but aairports are run by governments but aairports are run by governments but a few are private but most of the privatefew are private but most of the privatefew are private but most of the private ones are under bot Arrangements buildones are under bot Arrangements buildones are under bot Arrangements build operate transfer where eventually theoperate transfer where eventually theoperate transfer where eventually the concession runs out and you transferconcession runs out and you transferconcession runs out and you transfer everything to the government heat throweverything to the government heat throweverything to the government heat throw is different from that and very fewis different from that and very fewis different from that and very few airports are like hro but the Almarairports are like hro but the Almarairports are like hro but the Almar airport was an outright purchase veryairport was an outright purchase veryairport was an outright purchase very rare unusual situation for an outright
Otherrare unusual situation for an outright purchase it was an outright purchase and it was a purchase happening when passenger traffic was zero so you can imagine a buyer what kind of price he would pay when the business is producing losses heavy loss with no end in sight a lot of uncertainty so they got a great deal on that on that purchase there's a Harvard Business School study there are actually two Harvard Business School cases you can buy them for like $7 or $8 a piece like the price is right and that that are on Tab airports one of them is about the deal with almati and and such so basically that transaction took place where they bought the that airport for 400 million they put in about 200 million of capex they just opened a new terminal so 600 million I think on a bad day today they could unload that for several billion dollars I think if they
Questionerseveral billion dollars I think if they if they offered it for sale there would if they offered it for sale there would if they offered it for sale there would be biders coming in at 3 4 5 six billion be biders coming in at 3 4 5 six billion be biders coming in at 3 4 5 six billion for that property and they would refuse for that property and they would refuse for that property and they would refuse to sell at those prices anyway so that to sell at those prices anyway so that to sell at those prices anyway so that was in the mix as well so when I looked was in the mix as well so when I looked was in the mix as well so when I looked at it I said yeah the babies's gotten at it I said yeah the babies's gotten at it I said yeah the babies's gotten thrown out of the bath water we got to thrown out of the bath water we got to thrown out of the bath water we got to kind of be very careful about this kind of be very careful about this kind of be very careful about this environment so we basically have a Coke environment so we basically have a Coke environment so we basically have a Coke bottler in Turkey but a l large portion bottler in Turkey but a l large portion bottler in Turkey but a l large portion of their footprint is outside turkey of their footprint is outside turkey of their footprint is outside turkey they are the number one they they have they are the number one they they have they are the number one they they have all the bottling rights in Pakistan uh all the bottling rights in Pakistan uh all the bottling rights in Pakistan uh they just got half of Bangladesh and they just got half of Bangladesh and they just got half of Bangladesh and they have about you know eight or nine they have about you know eight or nine they have about you know eight or nine other countries so most of the footprint other countries so most of the footprint other countries so most of the footprint is outside turkey and even within turkey is outside turkey and even within turkey is outside turkey and even within turkey you know if we had a global you know if we had a global you know if we had a global thermonuclear event and everything got thermonuclear event and everything got thermonuclear event and everything got wiped out and you know out of 7 or 8 wiped out and you know out of 7 or 8 wiped out and you know out of 7 or 8 billion humans if we had 50 million billion humans if we had 50 million
Warrenbillion humans if we had 50 million humans left let's say somebody would restart a Coke bottling plant and the Coca-Cola Company would still have the trademark and even if they had to pay for it in seashells the currency is not relevant people would be able willing to trade certain amount of their labor for a Coke especially after such a thermonuclear event they'll be ready for a beer or a Coke you know so I thought that that business has been around for like 140 years and I thought you know I don't think it's going anywhere for another 140 years so there was a lot of resilience when you have iconic assets like that at valuations that made no sense so that's why we went and did it and that's why you know to his question I feel that the the headline oh it's all turkey and 60% and all of that but when you kind of drill down into it we have 12 million
Questionerdrill down into it we have 12 million square ft of prime real estate in Warehouse houses in Turkey the Indian guy with a weird mustache owns one3 of it and the Indian guy with a weird mustache paid 8 million for the one3 which has got a liquidation value of approaching 2 billion now and we have about a third of that that footprint you know it's Amazon Ikea car 4 Toyota Mercedes these are the tenants you know long leases Etc inflation index leases so I couldn't find a way that it was going to go away suddenly
Othergreat on that note we're going to try and conclude the staged section of the event but would you stay for us a little bit longer I'm doing good man this is fun fantastic fantastic well with that thank you very much for everybody for participating we really appreciate it thank you for mon