Bruce Barkowitz interview - notes


Tuesday, February 28, 2012 by

CSIMA Conference : Value Investing Conference at Columbia (Feb 2012) : Notes 3 of 5

Rare interview with Bruce Barkowitz of Fairholme Funds
  • Bruce Berkowitz 
    • Top lessons for life
      1. Cash is king. You have to have it. Best way to hedge.
      2. There is no free lunch. If it is free, its not a lunch.
      3. You can't change people (others).
      4. You will only see reality (of people) under extreme stress. That is when facades melt.
      5. Volatility is not risk
      6. Always assume bad luck
      7. You should need only few variable to win, at the most 3 or 4. Otherwise, your odds weaken.
      8. If you need maths above 6th grade, you are in trouble.
    • Checklist
      1. Can you kill it? (Meaning is there a very big upside on the stock?)
      2. Is there an adult supervision at the company? (Meaning - Board of director and/or Chairman is experience, competent and capable of reigning in a distracted CEO.
      3. Is the company essential?
      4. Do the company depend on strangers (read bankers?)
      5. Can the company die?
      6. Is the company picking pennies in front a steam roller?
      7. How is the company balance sheet - Assets, current assets, change in current assets
      8. Management - Past, present. Does the management walk the talk?
    • Classic model in picking misunderstood stocks
      • Is the problem fixable?, when a company's stock is massively sold on a specific business problem
      • Is there a market aversion to a certain industry, sector?
      • Company belonging to the industry where the market (investors) has burnt massively.
    • Misunderstood companies
      • CIT, AIG, MBIA are misunderstood.
      • Holding companies : 
        • SHLD - Sear Holdings
        • BRK - Berkshire
        • LUK - Leucadia National
    • Financials
      • Financials fit with the mental models. Current environment is similar to 80s and 90s.
      • You just have to survive now, to be a big winner later.
      • You have to realize that contracts have average life. They expire. Really good times lead to bad time and vice-versa.
    • SHLD
      • It's misunderstood.
      • You have to understand the history of malls yo understand and appreciate the history of K-marts. If you do, you will look at real estate of SHLD very differently.
      • Note - I think Bruce is referring to the idea that malls will be willing to make the concessions in order to keep SHLD stores open

Agenda : Distressed Investing
Panel : Dan Loeb (Third Point Capital),  Bruce Barkowitz (Fairholme Funds), Daniel Krueger (Owl Creek)

Note - My big thank you to Columbia Business School. The comments made by speaker are off the record. I tremendously benefited from this event. This event is very unique in terms of the highest quality of speakers that it attracts while charging a negligible fee to the attendees. This conference is perhaps one of the best learning forum for students interested in value investing. The purpose of this post is to share the knowledge and increase the awareness about this great annual event organized by CISMA (Columbia Investment Student Management Association). I hope this post will encourage more and more students and practitioners to benefit from this great annual conference. The accuracy and accurate attribution to the speaker is not a guarantee.

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