Thursday, March 26, 2015

March Compilation of Value Links From Around the Web

Here is my compilation of the most interesting topics from around the web.

Feel free to reach out with questions or comments,



Warren Buffett:

Berkshire’s portfolio changes in Q4: Dataroma

Buffett delegating more to his deputies: Salt Lake Tribune

Buffett tells deputies to supervise newest Berkshire businesses: Bloomberg

Buffett’s German to do list: Handelsblatt

The fun has just started in auto sales Buffett says: Bloomberg

Buffett’s son is not heir apparent: CNBC

2014 Berkshire Annual report links:

2014 Berkshire Hathaway Annual Report: Berkshire

Article Buffett mentions on Jim Ling: D Magazine

Grading Buffett after 50 years: Fortune

Buffett on CNBC: Value Investing World

Berkshire’s acquisition of Kraft:

3G to acquire Kraft: Bloomberg

How Kraft Rolled out the welcome mat: WSJ

Kraft and 3G: WSJ

“Will own Kraft forever” says Buffett: CNBC

3G buying to keep: CNBC

Kraft Heinz structure: CNBC

The Kraft negotiations: CNBC


How to develop your best investment ideas with Josh Brooks of Granite House Capital: Youtube

Wilbur Ross on the housing market and oil prices: Bloomberg

Highlights from Seth Klarman’s 2014 letter: Bloomberg

More highlights: Valuewalk

Baupost sifted through energy companies: Bloomberg

Mohnish Pabrai at TiE SoCal: Youtube

Mohnish Pabrai and Guy Spier Google Talk: Youtube

Tribute to Donald Keough who lead Coke through the New Coke debacle: New York Times

Tribute to Irving Kahn who lived until 109 and worked under Ben Graham: Bloomberg

Friday, February 20, 2015

Invitation: YellowBRKers Meet and Greet at the Berkshire Annual Meeting

Dear readers,

You are invited to an event I host every year during the Berkshire Hathaway Annual Meeting weekend.

YellowBRKers 2015 details:

The 2015 event will be held at the same time and location as in prior years.

Friday May 1st from 4PM to 7PM

DoubleTree by Hilton Omaha Downtown
1616 Dodge Street
Omaha, NE 68102

For more details and registration:

I look forward to seeing you there!


Tuesday, February 17, 2015

February Compilation of Value Links From Around the Web

Here is my compilation of the most interesting topics from around the web.

Feel free to reach out with questions or comments,



Wilbur Ross “Why I’m ready to invest more in Europe.” CNBC

Wilbur Ross on Oil: CNBC

Five Good Questions with Mohnish Pabrai and Guy Spier: Part1, Part2

Demographics of India are Promising For the Future – Mohnish Pabrai: Bloomberg India and Part 2

Mohnish Pabrai's December 2014 talk to Sanjay Bakshi's MDI class: Value Investing World

Bill Gates’s Big Bet on Reducing Poverty: Bloomberg

Bill and Melinda Gates Foundation Annual Letter: Gates Notes

Bill and Melinda Gates discuss their foundation's work to improve global healthcare and combat poverty: Charlie Rose

Greenlight Capital’s Q4 letter: Marketfolly

Longleaf Partners Q4 Letter: Longleaf

Bruce Berkowitz on Sears: Valuewalk

Bank of America B warrants (hint – I own BAC/WS/A in my portfolio. Not the B warrants): Beyond Proxy

Klarman: What I’ve learned from Warren Buffett: CNBC

Atul Gawande: The Building Industry’s Strategy for Getting Things Right in Complexity: Farnam Street

Bill Gates at Davos 2015 – Sustainable Development A Vision for the Future: Value Investing World

Highlights of Warren Buffett Interview on Fox Business: David Kass

GMO 4th Quarter letter: GMO

Inside Google’s Secret Lab: Graham and Doddsville

Wednesday, December 31, 2014

Weekly Compilation of Value Links - December 31st

Here is my weekly compilation of the most interesting topics from around the web.

Feel free to reach out with questions or comments,



Guy Spier on Investing and Life: Marketfolly

Five questions for Pabrai and Spier: Fivegoodquestions

2014 Pabrai Funds Notes: Bitsbusiness

Mohnish Pabrai talk at Boston College: Youtube

Mohnish Pabrai Barrons interview on Bank of America, Citi, Google and Hyundai: Barrons

Mohnish Pabrai at the Economic News of India: Economic Times

Q&A with Warren Buffett at the Forbes 400 Philanthropy Summit: Youtube

Berkshire Hathaway acquires Charter Brokerage: Yahoo Finance

Susan Decker on what its like to be on Berkshire’s board: Bizjournals

What Tom Murphy taught Warren Buffett: Quartz

Charlie Munger 2008 Caltech lecture: Youtube

Howard Marks on Investing in Russia: Bloomberg

Howard Marks memo : The Lessons of Oil: OakTree

NYSSA interviews William Thorndike of The Outsiders: Youtube

Larry Cunningham: Berkshire and Buffett Today: Culture, Control, and the Duracell Deal: Beyondproxy

Value Investor Insight interview with Keith Trauner and Larry Pitkowski: Value Investor Insight

“Dream, People, Culture”: Carlos Brito, CEO of Anheuser-Busch InBev: Value Investing World

Discussion of Henry Singelton’s business success: Seeking Alpha

Leon Cooperman presenting on the strategies of Henry Singelton: NYSSA

Henry Singleton in Forbes magazine 1979: Forbes

Joel Greenblatt on Wealthtrack: Youtube

Graham-Newman Letters to partners 1946-1958: RBCPA

Warren Buffett’s 2014 letter to Berkshire’s top managers: WSJ

Monday, November 17, 2014

Weekly Compilation of Value Links - November 17th

Here is my weekly compilation of the most interesting topics from around the web.

Feel free to reach out with questions or comments,



Google Talks featuring Larry Cunningham author of: Berkshire Beyond Buffett”: Youtube

Notes from the Capitalize For Kids Sohn Canada 2014 featuring Ainslie, Adrangi, Gottfried, Akre etc: Marketfolly

Atul Gawande on his book: “Being Mortal: Medicine and What Matters in the End”: Charlie Rose and at the Aspen Institute

Tracy Britt Cool in Fortune Magazine: Fortune

Advice from Tracy Britt Cool: CNBC

Sandy Gottesman talking about long time friend Warren Buffett: Bloomberg

David Enhorn on CNBC talking about opportunities he is finding: CNBC, His short thesis on AthenaHealth (CNBC), Apple is firing on all cylinders (CNBC), People are misunderstanding SunEdison (CNBC)

Kyle Bass on his investment in General Motors: CNBC

Berkshire Hathaway’s wind investments: WSJ

Interview of Lee Carroll, CEO of Berkshire Hathaway Specialty Insurance: Business Insider

Michael Lewsi on the 25th anniversary of Liar’s poker: Charlie Rose

Elon musk speaks about Tesla and SpaceX at Vanity Fair’s New Establishment Summit: Youtube

Warren Buffett’s 6 best investments of all time: Fortune

Notes from Sohn Conference San Francisco: Marketfolly

Interview of Google co-founder and CEO Larry Page: Financial Times

How Berkshire’s Brooks Running Shoes plans to become a billion dollar brand: Fortune
Julian Robertson on the three most important things in investing: Marketfolly, thoughts on the bond bubble (Bloomberg), Asia is a golden place for hedge funds (Bloomberg) and Japan’s economy needs more juice (Bloomberg)

Bruce Berkowitz on managing risk and reward: Youtube

Donald Graham speaks about Warren Buffett and Berkshire Hathaway: David Kass

Profile of Larry Cunningham’s “Berkshire Beyond Buffett”: WSJ

Warren Buffett’s recent acquisitions of capital intensive companies: WSJ

Old files from Walter Schloss surface: Valuewalk

Buffett’s BNSF bet is paying off: Bloomberg

John Malone and his use of tax breaks: Bloomberg

Will Thorndike on when share buybacks are a good idea: Harvard Business Review

Berkshire to acquire Duracell : David Kass blog

What was bought and sold in Berkshire’s portfolio in the 3rd quarter: David Kass Blog

What successful fund managers were buying in selling in the third quarter: Dataroma

Tuesday, October 28, 2014

Weekly Compilation of Value Links - Oct 28th

Here is my weekly compilation of the most interesting topics from around the web.

Feel free to reach out with questions or comments,


Buffett’s 1966 investment in Walt Disney: Base Hit Investing

Buffett’s 1983 acquisition of Nebraska Furniture Mart: Value Investing World

Graham and Doddsville Newsletter Fall Edition: Columbia

Tracy Britt named CEO of the Pampered Chef: Bloomberg

John Malone interview compilation: Youtube

Buffet’s stock pickers Todd Combs and Ted Weschler: Fortune

Capital In The 21st Century: The Gates Notes

Buffett cuts Tesco stake: Bloomberg and WSJ

Larry Van Tuyl on the sale of his business to Buffett: Automotive News

Great Investors Best Ideas Dallas 2014 Notes from Perry, Einhorn, Ackman etc: Market Folly

Monday, October 13, 2014

Weekly Compilation of Value Links - Oct 13th

Here is my weekly compilation of the most interesting topics from around the web.

Feel free to reach out with questions or comments,



Joel Greenblatt interview on CNBC – September 23rd: CNBC

Warren Buffett transcript discussing the Van Tuyl Group on CNBC Oct 5th: CNBC

Warren Buffett interview with Carol Loomis at the Fortune Most Powerful Women’s Conference: Link and a video of him signing to 400 women: Link

Buffett rolls out the Berkshire Hathaway Brand: CNBC

Buffett says getting a mortgage is a ‘No-brainer’: Bloomberg

Walter Schloss interview in OID from March 1989 with a letter from Warren Buffett: Link

Guy Spier discussing his new book The Education of a Value Investor: ValueConferences

Peter Buffett in the Washington Post October 10th: Washington Post

Notes of Charlie Munger’s Daily Journal Meeting from Phil Demuth of Forbes: Part 1, Part 2, Part 3, Part 4.

Interview with Prem Watsa with Chennai: Part 1, Part 2

Tuesday, September 23, 2014

The Best From The Web: Weekly Value Links

Notes from Charlie Mungers Daily Journal Annual Meeting held September 10th 2014 from Marketfolly, Valuewalk, Forbes and Motleyfool

Seth Klarman’s recent letter to investors: Valuewalk

Andy Kilpatrick released an expanded edition of his book Of Permanent Value: Amazon

Warren Buffet places his first sports bet in Las Vegas: CNBC, The Post Game

Global valuation figures by country: Star Capital

Coverage of the turmoil at Benjamin Moore: Fortune

Whitney Tilson’s thoughts on Berkshire Hathaway’s valuation: Tilson Funds

Mohnish Pabrai’s talk at Pan IIT Canada: Youtube

Authors@ Google talk by Guy Spier: Youtube

Wells Fargo CEO John Stumpf spoke at the NPC Press Club on banking, the economy and his relationship with Warren Buffett: National Press Club, Bloomberg

Buffett, Blankfein and Bloomberg on small business: Bloomberg

Friday, September 12, 2014

The Best From The Web: Weekly Value Links - Sept 12th

Interview with Joel Greenblatt in Barrons: (Link)

Interview with Wilbur Ross in Outlook Business: (Link

Howard Marks Memo to Oaktree Clients: (Link

Charlie Munger’s Letters to shareholders of Blue Chips Stamps 1978-1982. Compiled by Max Olson:

Blue Chip Stamps financials: (Link)  and letters: (Link

Jason Zweig interviewed Charlie Munger after the Daily Journal annual meeting on September 10th: (Link) and the second article (Link2)

More coverage of the Daily Journal meeting from Noah Buhayar at Bloomberg: (Link)

Notes from the Value Investing Congress in NYC: (Link) and (Link)

“How Guy Spier Evolved Into a Great Investor” on Bloomberg Radio: (Link)

Third Avenue Funds 3Q 2014 Shareholder Letter: (Link)

Salman Khan – The Learning Myth: Why I’ll Never Tell My Son He’s Smart: (Link)

So Bill gates Has This Idea for a History Class (New York Times): (Link)

Excerpts from Baupost’s Q2 Letter to Investors: (Link

Thursday, May 8, 2014

Notes from the 2014 Berkshire Hathaway Annual Meeting

Here is a link to a transcript of the comments made by Warren Buffett and Charlie Munger at the 2014 Berkshire Hathaway Annual meeting:

Tuesday, March 4, 2014

Yellow BRKers Meet and Greet at the 2014 Berkshire Hathaway Annual Meeting

You are invited to the Yellow BRKers Meet and Greet on Friday May 2nd, 2014 at the DoubleTree Hotel in Omaha to meet and have fun, starting at 4:00 pm and you can linger until 7:00 pm (or longer). There will be a short program at approximately 5:30.

This is a casual atmosphere. It's a "happy hour" type of gathering - not a formal dinner or anything of that sort.

The DoubleTree is located on 16th and Dodge. There may be some street parking, otherwise, one can use the parking garage with an entrance from the South at 16th & Dodge street, just east of the First National Bank.

Be sure to register if you are attending by clicking on the 'register' tab:

I hope to see you there!

Saturday, February 22, 2014

My Latest Investment Idea: Horsehead Holdings

Long time readers of this site will recognize Horsehead Holdings from a report I wrote back in March of 2009 when Horsehead was at $4 per share. The idea has worked out very well. I recently wrote a report on the company for a second time when the stock was at $14 back in December.  Although the stock has run up since then, I still think the idea is very compelling. 


Horsehead Holdings (ZINC) is at an inflection point as they shift production to new zinc recycling facility that will lower their cash breakeven price of producing zinc, making them one of the world's lowest cost producers. Horsehead's use of recycled electric arc furnace (EAF) dust feedstock sourced from the steel industry gives them an enduring and sustainable competitive advantage. Once the new facility is complete, Horsehead's cash breakeven cost of producing zinc will be below the lowest price zinc has traded for in the past 10 years and the second lowest cost of production of any zinc producer in the world. Unlike their competitors, the cost advantage will grow over time because as the price of zinc rises, their cost of goods sold remains stable whereas their competitors generally have costs that are linked to revenue. Horsehead currently trades at FY '15 FCF yield of 14%. Horsehead is worth at least $22 valuing them at FCF yield of 10% and potentially much more if zinc prices increase, which I view as very likely. In addition, the replacement value of their assets has been estimated at over $1.5 billion or twice today's market cap. Furthermore, the recycling fees Horsehead charges create a base of stable recurring cash flow of over $85 million per year regardless of the level of zinc prices. The market appears to be valuing this company as a traditional metals/ mining firm when this is not going to be the case once the new facility opens. Commodity companies can have massive moats if they have a sustainable low cost advantage, which Horsehead will have. Furthermore, Horsehead has long term contracts with steel mini mills to recycle about 70% of the dust produced in North America that date back to the 1980's, when the industry began. These contracts and long standing relationships as well as geographic advantages stemming from placing their plants in close proximity to their customers is the reason that competitors have not moved into North American market and aren't likely to in the future. Investing at today's price is also a free option on future increases in the price of zinc. Although this is not an element of my valuation, I believe due to market factors, increases in zinc prices going forward are likely and this creates massive upside to earnings. If zinc prices reach $1.30/ pound, Horsehead would be worth $35/ share valuing the company at 10x FCF. Further upside comes from a likely increase in steel industry utilization which would increase the amount of dust sent to Horsehead. Finally, super investor Mohnish Pabrai has been buying a significant amount of stock in recent months near the current price.

Monday, May 20, 2013

Meet One Of The Youngest And Brightest Hedge Fund Analysts That Isn't On Wall Street

Today I was profiled in Forbes. Thanks to Chrystan Paul for writing a great article: 

"22-year-old Alex Bosset is not your typical college student. A finance major at the University of Minnesota, he was recently ranked among the top 14 buyside analysts in a list compiled by SumZero, a social network for professional investors (co-founded by Divya Narendra and funded by the Winklevoss twins)."

Read the rest of the article here:

Friday, March 22, 2013

2012 SumZero Buyside Analyst Awards

"The Wall Street Journal today presented SumZero’s 2012 Buyside Awards list, a list comprised of 14 of the best-performing members of SumZero between June 2011 and December 2012. Winners were determined based on average and median idea performance, average community rating, and other quantitative factors indicative of a consistent ability to pick winners and convince the community of the research quality. All winners authorized their presence on the list."

Click Here the Read the WSJ Article: SumZero 2012 Buyside Awards 

Monday, March 11, 2013

Yellow BRKers Meet and Greet at the 2013 Berkshire Hathaway Annual Meeting

Are you coming to the Berkshire Hathaway Annual Meeting?

You are invited to join as fellow shareholders unofficially gather on Friday, May 3, 2013 at the DoubleTree Hotel in Omaha to meet and have fun, starting at 4:00 pm and you can linger until 7:00 pm (or longer). There will be a short program at approximately 5:30.

This is a casual atmosphere. It's a "happy hour" type of gathering - not a formal dinner or anything of that sort.

The DoubleTree is located on 16th and Dodge. There may be some street parking, otherwise, one can use the parking garage with an entrance from the South at 16th & Dodge street, just east of the First National Bank.

Please register here:

I hope to see you there!

Thursday, December 20, 2012

Bank Of America Report

Bank of America was on the brink of Bankruptcy just a few years ago. Under prior management, growth in assets was pursued at the expense of sounds business practices. This combined with years of poor underwriting and the disastrous loans that came with the acquisitions of Countrywide Financial and Merrill Lynch, caused huge damage to the franchise. To this day Bank of America remains one of the most shorted stocks on the NYSE.

However, the problems BAC has faced are temporary. Brian Moynihan became CEO in 2010 and has made it a priority create a “fortress” balance sheet and clean up their legacy issues. The underlying business is very high quality and is producing 13-15% ROTE. The high earnings power of the underlying business is being clouded by a very high expense rate, high litigation costs, mortgage put backs, high cost long term debt, etc. These issues are quickly being resolved. I expect by 2014-2015, Bank of America will be mostly finished taking care of the financial crisis related issues.

Bank of America is currently one of the best capitalized banks in the United States. Their capital levels are already in excess of the Basel 3 requirements that come into full effect in 2019. Basel 3 requires them to be at a tier one common equity ratio of 8.5% by 2019. At the end of the 3rd quarter they were already at 8.97%.

At today’s price ($10) Bank of America is selling at one of the widest discounts to its tangible book value ($13.50) in its history. By 2015, I expect BAC to be earning in excess of $30 billion/ year pre-tax and potentially well in excess of this. At this level of earnings, Bank of America is worth at least $25 per share. In addition, in 2013 alone Bank of America could return up to $18 billion to shareholders based on Brian Moynihan’s statement during the 3rd quarter conference call where he indicated that nearly all capital going forward will be returned to shareholders.

Wednesday, June 20, 2012

Goldman Sachs Investment Report


Goldman is trading for the cheapest price in its history as a public company. Goldman is a great business that dominates just about every business segment they are in. Goldman has been hit from every angle recently. Some of the challenging factors include subpar loan demand, low M&A, IPO and other investment banking business, regulatory threats, market deleveraging, lower company leverage, constant criticism etc. This has resulted in one of the world’s premier investment banks trading at less than 75% of tangible book. Goldman is worth over $200 per share and investors are ignoring many positive factors going forward. Over the course of Goldman’s history they have been very nimble in shifting assets to the highest ROI areas, assuming that ROE will be at these very depressed levels forever is not an accurate conclusion. Goldman is trading at a large discount to the liquidating value of its assets that are nearly all mark to market. Investors are ignoring the opportunities and tailwinds that exist. There is a huge potential to grow significantly overseas and competition has been reduced from the financial crisis. In addition, the reduction of the firm’s temporary liquidity will add a few billion to the bottom line. Increased leverage and a return to more risk taking will also boost results.  Large share buybacks at such an advantageous price will further enhance value. Goldman is a low downside bet that could be worth up to $270 in a few years or 3x the current price.

Click here for the full report:

Goldman Sachs Investment Report

Wednesday, March 28, 2012

Berkshire Hathaway Annual Meeting

Are you going to the Berkshire Hathaway Annual Meeting?

If so please email me and let me know and register for this event.

The Yellow BRK'ers Meet and Greet is a great event for a first timer and anyone else:

Berkshire Hathaway shareholders from all online communities are welcome to an unofficial gathering on Friday, May 4th, 2012.

You are invited to join as fellow shareholders unofficially gather on Friday, May 4th, 2012 at the DoubleTree Hotel in Omaha to meet and have fun, starting at 4:00 pm and you can linger until 7:00 pm (or longer). There will be a short program at approximately 5:00 or 5:30.

This is a casual atmosphere, with light snacks available. It's a "happy hour" type of gathering - not a formal dinner or anything of that sort.

The DoubleTree is located on 16th and Dodge. There may be some street parking, otherwise, one can use the parking garage with an entrance from the South at 16th & Dodge street, just east of the First National Bank.

To register for the event:

Monday, September 12, 2011

Complete Pabrai Funds Annual Meeting Notes: September 10th 2011 in Chicago

Note: A recorder wasn't used and therefore the following is a summary of what he said rather than an exact transcript.

Prepared Comments:

$100,000 invested in June of 2000 would be $554,600 today. This is an annualized return of 17.3% since 2000 vs. 1.1% over the same period for the S&P 500.

Assets under management: $580 million

A few past ideas:

International Coal Group:

Purchased in February 2010 at $4.3

Sold April 2011 at $10.30

138% return in slightly over 1 year

Wilber Ross founded the company and sought to replicate his International Coal Group playbook. Mohnish discussed Wilbur Ross's history and why it made sense to figure out what he was doing now.

· Mohnish liked that the company was going into metallurgical coal

· Fairfax was buying

He found the investment from looking at Fairfax fillings

Reverse engineering other people’s ideas is a very powerful approach


Purchased in April 2009 at $12.21

Sold April 2011 at $37.3

206% return in 2 years

Mohnish became interested when the stock fell 90%

Thesis: 100+ NYC’s to be built over the next 100 years. Places such as China and India are expanding rapidly.

Healthy balance sheet to ride out the storm

2-3 years out sales and FCF are likely to grow significantly due to fast growth in the Asia markets

Downside protection: selling below replacement cost

Terex was a 2% basket bet

At a price of $16 Terex is interesting to look into again

London Mining:

Purchased at $1.26 in December 2008

Sold July 2011 at $6.3

360% return in two and a half years

Found this idea by looking at John Burbank’s portfolio. They owned over 13% of the company.

The company was trading for $146 million and had cash of $300 million

This idea plays into the 100 cities thesis

Low probability of loss of capital

Management was unknown

Took comfort in the fact that it was a net net and John Burbank’s ownership


Some large caps are quite cheap today

The fund has a large non US exposure. 55-60% of the portfolio has revenue/ assets outside the United States.

25% of the fund’s cash went into recent volatility. The fund was able to put meaningful capital to work. The fund still has plenty of dry powder.

10% of the portfolio has gone into Japan. This is the cheapest market in the world. Very cheap and consistently profitable. There is a wide discount to intrinsic value and Mohnish expects good returns.

Mohnish’s first ever stock tip:

Taisei Oncho (JASDAQ: 1904)

Founded in 1941

Design and manufacture AC/ plumbing equipment

$59 million market cap

Cash plus bonds minus unearned revenue minus debt is $114 million

Net Income $6.1 million

Pabrai Funds has been buying every share offered since December 2010

Pabrai Funds now owns 1.4% of Taisei at an average price of $4.28

Consistently profitable since 2006

Tangible book value of $16.78

This company is trading at ¼ of intrinsic value

30-40 similar companies in Japan

Question and Answer session:

1. Can you discuss you investments in Goldman and BYD?

He doesn’t discuss particular investments. But he did say that he got the ideas from Buffett.

2. Given Buffett’s investments in Bank Of America, what does he think of the company? Are the warrants more attractive than the common?

He will not comment if he is buying or not. But he cited a study written by a few professors that said if you buy what Buffett has bought at the end of the month that his holdings are announced. And purchased at that week’s high price, you would still do significantly better than the S&P. So Bank of America is probably a good place for investors to look.

3. Mohnish invested in Frontline in 2004. The shipping industry is very distressed right now. Is it worth looking into at this point?

Very large crude carriers (VLCC’s) have a lead time of 3-4 years between when they are ordered and when they are delivered. A large amount of orders were placed at the end of the boom. Because of the long lead times and unintelligent behavior by ship buyers (namely the Greek’s) this market is subject to huge boom and bust cycles. The smaller ships and dry bulk ships have less volatility.

Frontline had most of its ships on spot charters. Then rates collapsed. Across the industry the single hull ships were taken out of service and scrapped.

If Frontline liquidated its VLCC’s, the value of those ships only fell from $70 to $60 million. The stock priced the ships at $15 million.

He bought because the stock was really cheap but it’s a bad industry over time.

4. Why were the investments in 2008 so small?

Some were basket bets on commodities and those were 2% positions. Normal positions are 5%. 10% is the most he will put into a company. The Japan basket bet is currently 10% and could reach up to 20% of the portfolio.

5. How do you value Potash?

He won’t discuss current holdings.

6. When making investments in commodity companies, how do you handicap for the risk of more supply entering the market and low barriers to entry?

It’s important to know where the company is on the cost curve. They want to own the lowest cost producer. When the price of the commodity goes down, the highest priced mines will close but the lowest cost producers will continue to be profitable.

7. If a 5% investment quadruples and goes to 20% of the fund, will you trim that position?

He’s never trimmed a position. The portfolio is less concentrated now, so this is less of an issue. He will only sell if it goes above intrinsic value or he finds a better investment. He usually sells at 90% of intrinsic value.

8. How do you analyze Japanese companies when information might be difficult to get or only in Japanese?

Financial statements are always in English and that’s the first step. It’s a basket bet so he spends less time researching each company than he would for a normal position. He didn’t hire a translator because that would take too long. Japan has a very trustworthy culture. He would never do the basket approach in China, India or most other places.

9. What are some investments that have lost money in the past?

The Pabrai Funds have made mistakes. The frequency of mistakes has gone down. One mistake was Sears. Many smart people were buying. Lampert is a smart guy. But he should have realized that it was a poor business. The business continues to deteriorate over time and the company has no moat. The funds lost 60% on their investment in Sears. He added an item to his checklist to prevent this mistake in the future.

10. Why did he sell Berkshire Hathaway?

Berkshire is doing well and is likely to do better than the index over time. But he can find cheaper things to invest in.

11. Are placeholders still part of the portfolio?

He no longer uses them because they didn’t work. One of his mistakes going into the financial crisis was being fully invested. The placeholders went down a lot which hurt the portfolio. It’s a much better idea to have a cash cushion because it tempers a decline and it provides dry gun powder when stocks get cheap.

12. Why is he invested in alternative energy?

He doesn’t want to discuss his ideas so he wouldn’t answer this question.

13. How do you structure the portfolio to withstand a crisis?

The portfolio has become more diversified and he also holds a larger cash cushion.

Charlie Munger says if you can’t handle a 50% drop in your portfolio then you shouldn’t be investing because that will eventually happen.

Berkshire Hathaway has gone down 50% a few times even though it’s a great business. In a stock market decline the fund will most likely go down.

However, investments such as the one in Japan will not be correlated to the rest of the portfolio.

14. How do you deal with currency in foreign investments?

He said he has no great insight into currency and he didn’t hedge the Yen. Since he started buying Japan, the index is down 15% and the Yen is up 8%. So far his basket is profitable. He ignores the effect of currency.

15. When investing in distressed businesses, how do you distinguish between a temporary verse long term problem?

He admitted making mistakes on this in the past. This is one of the most important factors and he spends a lot of time on this question. But it comes back to finding the intrinsic value and comparing that to the stock price. Investors need to determine if the distress is justified or not. For example, London Mining was worth much more in a private transaction than the price the Pabrai funds were buying at.

16. When you interview corporate management how do you evaluate their decision making process?

Most CEO’s are very poor capital allocators. A good way to judge management is to look at what tangible book value has done over time. He doesn’t interview management or even talk to them because he doesn’t want to be convinced by their sales skills. Management is always optimistic and this could cloud his decision making process. It’s better to evaluate management on your own and look at their past decisions.

17. For commodity based businesses you look at the cost curve to determine a good investment. What metric do you use for other industries?

In a commodity business he wants to own the lowest cost producer. It’s different for each industry. In retailing he looks at gross margins. This shows how well the company is run. In banking it’s the return on assets. It depends on the industry.

18. I didn’t quite catch the whole question but it had to do with his philosophy on following great investors?

This strategy doesn’t always work. But it’s a great search strategy. He’s found it to be very effective. Mohnish follows Klarman, Burbank, Watsa etc.

19. At what point does creating a basket distance you from understanding individual companies?

He’s borrowing the idea from Ben Graham. The situation in Japan is similar to what Graham was doing in the 1940’s and 1950’s in the US. This basket won’t dominate the portfolio, it’s a temporary thing.

20. How do you manage tough times?

People lose sight of basic reality. Most people freak out when their job is lost. It’s important to focus on what’s most important in life and what makes you happy. Keep a balance between work and those things.