2023 Annual Letter

Some Thoughts on Banks: And a look at First Republic

2022 Annual Letter: Dear Investors, The stock market was down 19% this year. High inflation caused the central bank to raise interest rates to attempt to bring it in check, and those higher interest rates rippled through the economy and asset prices.Thanks for reading Concentrated Compounding! Subscribe for free to receive new posts and support my work.

2022 H1 Letter: To My Clients, Through the first half of 2022, our stock portfolios are down roughly 20-22%, while the stock market is down 20%.Thanks for reading Concentrated Compounding! Subscribe for free to receive new posts and support my work. I don’t usually write quarterly letters, but as the market is down significantly so far this year, I thought I would share a few thoughts on the economy, the outlook for the businesses we own, and a large mistake I made last year.

2021 Annual Letter: To My Investors, The stock market had another strong year in 2021, gaining 30%. Our stock returns were around 23%, with most of your portfolios up about 18% after taking cash balances into account. This is the second straight year of underperformance, bringing the total two-year returns on our equity portfolios to +41% compared to +51% for the stock market. I’m going to examine that underperformance in this letter in the context of our strategy and long-term goals of earning

Altice: My Last Levered Value Investment, I Swear

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2020 Annual Letter: To My Investors, In the investment markets, 2020 was a truly dramatic year. At the height of the fear over the coronavirus pandemic, US stocks were down 30%, and from there they staged a rally and finished the year up 18.4%. Our stock returns were around __%, with most of your portfolios up __% after taking cash balances into account.

2019 Annual Report: To My Investors, We had a good year in 2019. Most of you had gains in your equity portfolios of around ___%, which was ___ of the 31.5% gain for the stock market. Our portfolio businesses had a good year, in aggregate, but our stocks outperformed those business results significantly.

Wells Fargo: Poorly Managed, Still Too Cheap: Wells Fargo, long one of the most respected banks in the US, has had a rough past few years. The bank illegally opened unwanted accounts for clients in late 2016, and since then it has been repeatedly in the news for more mistakes and customer abuses

Kochland: Overview The modern Koch Industries began when Charles Koch became CEO of his father’s businesses after his passing. Koch Industries started with a few separate energy-related assets; Charles used this base to acquire additional businesses that were largely tangential to what Koch Industries already owned. An emphasis was placed on buying and owning cash generative assets, financing them conservatively, and running them in a largely decentralized manner, all with an eye on generating h

Magellan Midstream: This Compounder Is On Sale: After my last article on midstream oil and gas companies, many of you reached out to me about what I actually own in the space. I have owned Magellan Midstream Partners (MMP) for the last couple of years, and due to some recent underperformance, I have been a significant buyer in the past month.

The Case for Berkshire: My last post on Berkshire was a bottom-up, technical valuation that found that the current market price, which stands right around $200, is likely to produce returns in the range of about 10% annualized. In this piece, I want to take a hard look at all the risks that investors face when they invest in a company and how those risks present themselves in relation to Berkshire. We will see that the company is so diversified, run so rationally, and financed so conservatively

Midstream Energy: Scary Looking Backwards, Too Cheap Looking Forwards: Disclosure: my clients and I are long Kinder Morgan (KMI) and Magellan Midstream Partners (MMP). Midstream energy has gotten a bit of press recently, perhaps because the sector has had a nice bounce this year after a long bout of underperformance. I have had a large position in midstream energy names for the last year or two. I believe that these are good businesses that are trading way, way too cheap. Most investors balk whe

Some Initial Thoughts on Brookfield's Oaktree Purchase: Disclosure: my clients and I are long Brookfield Asset Management (BAM) I’m no expert by any means on Oaktree, but I wanted to go through a few thoughts I had on the deal from the perspective of a BAM shareholder. I’m going to take a look at what I think average earnings power might be, how I would expect those earnings to grow, some thoughts on valuation, and how the deal fits into BAM’s broader portfolio.

Berkshire Hathaway 2018 Valuation: My clients and I have been owners of Berkshire Hathaway for a few years. Berkshire is a solid, relatively unlevered, well-managed, diversified, and highly tax-efficient investment. These factors make me comfortable owning a chunk of it even though the future returns are unlikely to be much more than 10% annualized.

Liberty LILAK: Recovering Nicely After Hurricanes: I have owned Liberty LILAK for a little while. Those that follow it know that it hasn’t exactly done well over the past couple of years. There has been trouble at one of its big segments and a couple of hurricanes that severely impacted earnings power starting in late 2017. At this point, it seems that perhaps we have turned a corner - hurricane effects have lessened and subscriber losses in its troubled segment seem to have bottomed.

Markel: A Follow Up on Ventures and Intrinsic Value Growth: After my last post on Markel (disclosure: long a tiny bit) I wanted to go back and look at two things. First, how has the company done with its ventures segment? Second, how has intrinsic value compounded over the past few years. Ventures I had mentioned that I was a bit worried about capital allocation at Markel because there had been some write downs in the ventures and other units (ventures holds privately owned non asset management

Some Thoughts on Markel After a Tough Year: Disclosure: I own a tiny bit of Markel (literally 1 share) for a client. More broadly, I generally like the company and wanted to go over some of its strengths and weaknesses and a rough estimate of its valuation. Markel has been one of the better managed insurance companies over the past couple of decades. Its playbook has been something like Berkshire Hathaway’s - consistent underwriting gains, a fairly low-risk fixed income portfolio, a large equity

2018 Annual Letter: We had a good year in 2018. Most of you had returns of __%, which was ___ of the 4.5% loss for the stock market. As you are all aware, I judge performance by how our businesses perform over the long-term, and 2018 was, on aggregate, a very strong year in that regard. I believe those strong business results will fuel the strong long-term returns that we are all looking for.

2017 Annual Letter: Most of you had returns of __% in 2017, compared to a 21.7% gain for the stock market. This poor result was due to two reasons – holding large cash balances and, with the stocks that I did pick, generally underperforming the market. We had a few investment wins, but those wins were outweighed by a continued lag in our energy investments compared to a very strong stock market.