I’ve been receiving a considerable amount of interest in the Tarpon Folio since my interview last week about Neutral Tandem on the Seeking Alpha site. The stock has performed quite well since the interview went out, which is great, but – and this really should go without saying – my interview had nothing to do with that rise in share price. Nonetheless, it seemed to increase the interest level in Tarpon among a new group of folks – in particular, traders and short-term players. And, well, that last bit kind of gives me the willies.
Here, on the other hand, was a set of questions I received this week from a long-term investor who saw that interview and had been looking for a portfolio manager that shared a philosophy with Warren Buffett. Great questions, and exactly the kind of investor who is a good fit for Tarpon. Here’s the back and forth we had:
Q. Do you have any track record returns on your fund other than the one mentioned on your site?
A. The website contains all the public track record info about the Tarpon Folio. You can see a month by month breakdown of returns in my letters to investors, listed in the News & Articles section.
Q. Who do you consult with regarding your picks (who is your Charlie Munger?)
A. I have yet to find my Charlie Munger. (They all seem to want to be Buffett, too.) I read voraciously, though, and will talk to the analysts of the various research reports I subscribe to as needed. I am careful to stay within my circle of competence and try hard to buy things that don’t need a second opinion.
Q. If you publish all your holdings regularly, what is to stop someone from simply replicating the fund?
A. The short answer is that nothing is to stop anyone from owning the same securities I do, but the kind of people who would replicate my fund aren’t the investors I’m looking for, anyways. My investors can see what we own anytime day or night, but they want me to handle everything, full stop. Prospects and potential replicators (too sci-fi?) may see a list of holdings one-time, but they won’t know the portfolio weightings and won’t know of any full sales or new positions until my next letter to investors.
Q. Really enjoyed the SeekingAlpha article on Tandem, and have liked a lot about your fund set up and investing approach. Seems like you have really bent over backwards to let people know you are trying to do it right. Read some of the articles you wrote cited on the website, and liked them.
A. Thank you for noticing. I try to be as transparent as possible, and believe that helps explain our success the first year.
Q. I read your bio and website, but could you give me some more info on what got you into value investing?
A. I don’t think I really “got into value investing” in the literal sense as much as I found something that was a great fit, and that happened to be value investing. My grandfather worked on the Street, and we’d chart the Dow together on that graph paper with the little green squares, but investing still didn’t really take with me until many years later. In the interim, I became a world class cheapskate, grew skeptical of most institutions, and I suppose I grew a naturally analytical noggin. A dozen years ago I read an article about Warren Buffett one night after slogging thru the efficient market theory at business school, and that was the original spark. Knew what he was doing not only made the most intuitive sense to me, but that I would really enjoy working hard at it to get better. So, I did.
Q. How do you go about assessing management? Do you actually visit many companies, or mainly just go by the numbers?
A. Never got much out of talking to management. I think it can compromise your judgment as an investor…particularly if you don’t recognize the soft sell and/or view it as a shortcut to doing the work. So, I mainly go by the numbers, but that does include reviewing management’s salary and stake. Bios are mostly meaningless, and talking to management usually ranks far below listening to what they tell others. Sometimes company or store visits can be useful in better understanding the business, but in general, I don’t want to invest in too many businesses with a wide gap between what the numbers say and what management does in any case.
Q. Why do you think you’ll be better than so many other value investors out there?
A. There are at least four reasons I like my horse in this race. The first is that I include certain technologies and telecom in my circle of competence, while most value investors do not. Over the next three decades, I believe those skills will on balance be more valuable for my investors than if I possessed similar expertise in, say, banks, healthcare and insurance companies. Tech will simply grow faster as a percentage of GDP, and there are hardly any value guys chasing the best opportunities in what will be the fastest-growing sector. Neutral Tandem is a recent example.
The second is that I am literally alone on an island, which is how I believe value investing should be done. I am a better investor living here in the Keys than I would be anywhere else.
The third is that I’ve successfully managed and run businesses before. I believe former operators and small businessmen tend to make the best investors.
And the fourth is that, well, I think I can outwork almost every other investor out there. Will leave it at that for now, but could go on all night…
So, if you’re interested in Tarpon, and you think about picking a fund manager the same way as the gentleman above, please contact me anytime.
Look away, short-timers!
This is one of my favorite Saturday mornings of the year. Not just because there’s a full moon party at Morada Bay tonight. Warren Buffett’s latest letter to shareholders was released today. It’s a great intro to the business of Berkshire Hathaway, and I’d encourage Tarpon Folio investors to read it. After all, it’s your business, too. I highlighted some of the best quotes below.
On successful investing:
We’ve put a lot of money to work during the chaos of the last two years. It’s been an ideal period for investors: A climate of fear is their best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. In the end, what counts in investing is what you pay for a business – through the purchase of a small piece of it in the stock market – and what that business earns in the succeeding decade or two.
On the bailouts of last year:
In my view a board of directors of a huge financial institution is derelict if it does not insist that its CEO bear full responsibility for risk control. If he’s incapable of handling that job, he should look for other employment. And if he fails at it – with the government thereupon required to step in with funds or guarantees – the financial consequences for him and his board should be severe.
It has not been shareholders who have botched the operations of some of our country’s largest financial institutions. Yet they have borne the burden, with 90% or more of the value of their holdings wiped out in most cases of failure. Collectively, they have lost more than $500 billion in just the four largest financial fiascos of the last two years. To say these owners have been “bailed-out” is to make a mockery of the term.
The CEOs and directors of the failed companies, however, have largely gone unscathed. Their fortunes may have been diminished by the disasters they oversaw, but they still live in grand style. It is the behavior of these CEOs and directors that needs to be changed: If their institutions and the country are harmed by their recklessness, they should pay a heavy price – one not reimbursable by the companies they’ve damaged nor by insurance. CEOs and, in many cases, directors have long benefitted from oversized financial carrots; some meaningful sticks now need to be part of their employment picture as well.
And, in case you’re wondering – yes, although it looks a bit odd, apparently it is acceptable to spell “benefitted” in the above with two t’s. But I had to Google that to be sure.
Uh, did I mention I get a bit obsessed with these letters?
Anyway, the best quote attributed to Charlie Munger:
Are we supposed to applaud because the dog that fouls our lawn is a Chihuahua rather than a Saint Bernard?
And the closing thought:
At 86 and 79, Charlie and I remain lucky beyond our dreams. We were born in America; had terrific parents who saw that we got good educations; have enjoyed wonderful families and great health; and came equipped with a “business” gene that allows us to prosper in a manner hugely disproportionate to that experienced by many people who contribute as much or more to our society’s well-being. Moreover, we have long had jobs that we love, in which we are helped in countless ways by talented and cheerful associates. Indeed, over the years, our work has become ever more fascinating; no wonder we tap-dance to work. If pushed, we would gladly pay substantial sums to have our jobs (but don’t tell the Comp Committee).
Here’s the letter in its entirety.
And if you’re thinking about going to Omaha for the annual meeting on May 1st, please let me know!
Today Seeking Alpha published a 2,500 word interview with me about my highest conviction pick in the Tarpon Folio lately. No-brainer: Neutral Tandem (TNDM).
Click here to read the entire article over on the Seeking Alpha site. And here’s a recent slideshow from the company as well.
View of Statue of Liberty from the NYC harbor today. http://yfrog.com/5c3q5j 1 day ago
