Latticework Investor

May 11, 2009

I have started a new blog Latticework Investor.

From now on any new blog posts will be found there.


Pershing Square Letter to Investors

November 18, 2008

Scribd has a copy of Bill Ackerman’s letter to investors. It is a good read with details about specific investments, their attitude to investing and how they operate their fund.

Here are a few excerpts:

Current market

We are currently witnessing the greatest deleveraging event in history.

These actions have led to forced and indiscriminate selling in security markets around the world, which in turn has caused other investors to panic or simply to sell, to get out of the way of other forced sellers.

As such, it may be reasonable to conclude that the forced liquidation that is now taking place may not be a prolonged process.

Strategy

Our strategy is to seek to identify businesses and occasionally collections of assets which trade in the public markets for which we can predict with a high degree of confidence their future cash flows – not precisely, but within a reasonable band of outcomes. We seek to identify companies which offer a high degree of predictability in their businesses and are relatively immune to extrinsic factors like fluctuations in commodity prices, interest rates, and the economic cycle. Often, we are not capable of predicting a business’ earnings power over an extended period of time. These investments typically end up in the “Don’t Know” pile.

Risk management

Our simple approach to investing also allows us to avoid complicated approaches to risk management. Our investment strategy does not require us to open offices all over the globe. As such, we don’t need traders working around the clock. We can go to sleep at night and sleep. Our weekends are largely our own (Ok. I admit it. I am writing this letter in the office on Sunday.) Our risk management approach is to: (1) put our eggs in a few very sturdy baskets, (2) store those baskets in very safe places where they cannot be taken away from us and sold at precisely the wrong time due to margin calls, and (3) to know and track those baskets and their contents very carefully. We call this approach the sleep-at-night approach to risk management. If I can’t, we won’t.


Greenlight Capital’s Letter To Investors

October 7, 2008

Dealbreaker has posted four investor letters from prominent hedge funds, the letter from Greenlight Capital (pdf) grabbed my attention.

It contains lots of great investment ideas, following this post I will share what I think are the two best ideas mentioned.


Portfolio

October 5, 2008

My forth investment is:

  • A full position (10% of my portfolio) in Winn Dixe at a share price of US$13.52.

Portfolio

September 17, 2008

My third investment is:

  • A full position (10% of my portfolio) in Echostar at a share price of US$28.77.

Portfolio

September 4, 2008

As I have mentioned previously, I am going to use this blog to track investments that I make.

The first two investments I made on Tuesday are:

  • A full position (10% of my portfolio) in Sears at a share price of US$92.34.
  • A full position in American Express at US$40.63 a share.

I plan to post my investment thesis, along with what I believe each company’s intrinsic value is in the next week or so.


Seth Klarman at Columbia Business School

June 16, 2008

Highlights of Seth Klarman’s speech at the Columbia Business School courtesy of Alex Bossert’s Thoughts on Value Investing.

Rule #1: Don’t lose money. Rule #2: Never forgot Rule #1.

Baupost always looks for catalysts in its investments. If you find a stock trading for 50% of what you think it’s worth you want there to be something that will trigger it to reach fair value.

Baupost will always sell an investment as soon as it near their estimate of fair value.

Baupost has analysts focused around the type of opportunity; spinoff analyst, index fund deletion analyst, post bankruptcy analyst, distressed debt analyst and an analyst looking at companies that are depressed because of a bad earnings announcement.

Baupost invests in: Both public and private distressed debt, Real estate (Baupost has done over 200 real estate deals including biding on RTC auctions), U.S. and foreign equities, LBO’s and Derivatives.

Baupost looks at every merger, rights offering, privatization of government business, spin off, major share repurchase, dutch auction tender, thrift conversions or anything else that could cause mispricings.

Baupost does best when there is high uncertainty and little information.

Sometimes the market doesn’t assess risk correctly by relying on volatility (beta).

Baupost’s three investment principles:

1. Focus on risk before return.

2. Focus on absolute returns.

3. Only focuses on bottom up investing.

On a side note I have posted a few other times about Seth Klarman and these posts are among the most popular by number of pages views.