Tuesday, 28 April 2015

Buffett Octopus is Berkshire

Berkshire Hathaway is like a eight legged octopus with its main businesses separated into two portfolios; 1. Operating businesses and 2. Investments. Each of the portfolio carries different businesses feeding into Berkshire HQ where Warren's appetite for cash allows him to satisfy his capital allocation strategy.

video



The eight legs of Berkshire if I had it to sum would be:
  1. Insurance (Geico inter alia)
  2. Media (Washington Post inter alia)
  3. Manufacturing (
  4. Utility (Mid America Energy inter alia) 
  5. Transportation (BNSF Railway)
  6. Home Services
  7. Finance and Investment
  8. Franchise Operations
  9. Real Estate ( Warren's extra teeth or leg up)
All these businesses form the foundation of Berkshire's cash generating machine and each employee is like a suction cup gathering cash for Berkshire HQ the supreme conglomerate.

This business model has made many copycats, but nobody does it quite like Warren Buffett. He has made Berkshire Hathaway a mega octopus sucking up cash anywhere it exist while staying within his circle of competence. 

Focus InSight: The key strategy in a great business is finding businesses with cash run off for capital allocation in other generating units.

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FII

Thursday, 23 April 2015

Top Five Traits of a Good Investment Manager

In considering the deployment of capital and to satisfy the highest return on capital a good investment manager must be employed to carry the duties of guarding the capital being directed under his command.

Warren Buffett's first rule of thumb is;

  1. "don't lose money' and rule two says 
  2. "remember rule one"
Of course me being a shameless copycat investor would tell you that the top five traits of a good investment manager must be to; 
  1. Protect capital from permanent loss as the steward
  2. Increase shareholder value over the holding period, whatever the term
  3. Acquire asset class with sustainable competitive advantage
  4. Compound return on asset with every capital deployment opportunity, and finally
  5. Search for the diamonds in the rough and shoot the slow moving elephant businesses
Video link: Elephant kill

This is a simple checklist of traits to look for in a good investment manager, you can be as good yourself with the right discipline and investment attitude. 

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FII




Saturday, 18 April 2015

The Wealth Attitude Project

Today is the birth of the Wealth Attitude Project. There will be one event in the island of Jamaica at a date to be announced. We will share the Buffettism of investing and many more value investing ideas.

The Wealth Attitude Project will be launched next Friday, 24th April 2015 at 10:00 am in Kingston, Jamaica.

This event will hosted by Focus Investment Advisors and its affiliates.

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FII

Thursday, 16 April 2015

The Real Investing Formula

I have come to discover that the real investing formula is not some long elaborate square root base of some letters combined for a PhD in mathematics, but it is a rather simple set of basic principles.

Certainly not PhD maths for investing formula = (x+a)^n = _(k=0)^n〖(n¦k) x^k a^(n-k)

The real investing formula lies in;
  1. Recognizing the value of an investment opportunity and paying less than it's worth for it
  2. Applying basic maths i.e addition, subtraction, division and multiplication 
  3. Being patient for that investment opportunity to show up at the right price
  4. Safe guarding against permanent loss of capital (margin of safety) +Seth Klarman
  5. Understanding what you are investing in
  6. Keeping the investment approach real simple
  7. Accepting that you will make mistakes.
Seth Klarman on Margin of Safety
  1. Focus InSight: Keep it simple

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FII

Friday, 10 April 2015

The Bear Market Investor

A few weeks ago I posted a blog on the bearish investor and the essence of that blog was basically to give you an idea of how an investor should approach the investment landscape when the market for investment becomes bearish.

See video on the lessons of the bear:  The Grizzly.

There is an investment opportunity in all investment markets, but you almost must have an activist investor's eyes for the entire market place of investment with special interest in that section of the market that you understand well enough within your circle of competence.

The range of your investment skills should be malleable to adapt as you deploy capital. Dr. Henry Singleton did a fantastic job with the capital resource of Teledyne as its CEO. William Thorndike made out a case for Dr. Singleton's approach in his book "The Outsider".

One of the key disciplines of a bear market investor is remoteness or isolation from the follies of the investment market. This practice of isolation is similar to that of Warren Buffett from Berkshire Hathaway he being located out in Omaha, Nebraska and Wall Street, New York.

A bear is a big animal and only by packing on the pounds in the time of great time of harvest can build his strength and wait for the lean seasons. Bears are loners and they don't mind being away from the crowd hence the hibernation over the seasons.

 In a bear market the instinct of the bear market investors must be triggered by what comes to them, salmon, grass and any other thing that the season brings.

The sage is another key component resource for weight gain of the bear, which is like capital for a bear market investor.

Focus InSight: Learn the ways of the bear and take sage and isolate yourself from the market influence and await the investment opportunity that will come your way with patience exercised.

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FII

Friday, 3 April 2015

Top Five skills of an Activist Investor

Activist investors are like dragonflies, predatory in nature and with eyes for investment opportunities not readily seen by others. Like dragonflies, activist investors have a wide compounded visual of the investment landscape and will generally spot a value creation opportunity before most other investors.

Here are the top five traits of an activist investor. The activist investor:


  • Must be equipped with a strong cash/dry powder base to facilitate any capital structure to pursue an investment opportunity (cash to the activist investor is like water to the dragonfly, neither can survive without the existence of cash and water)
  • Must have the ability to hover over any industry with the flexibility to move quickly in any direction within that industry whenever the investment opportunity presents itself
  • Must be decisive when executing its capital deployment to optimize the return on capital allocated
  • Must understand the cycle of capital flow and position themselves in the cash flow traffic of the investment landscape and lastly,
  • Must be aggressive in establishing the value creation message and at the same time be a friendly face to the investment landscape without being a grave dancer. 

Focus InSight: If you want to be an activist investor, copy the ways of the dragonfly and be wise.


William "Bill" Ackman is the consummate activist investor. See link.

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FII