HardcoreValue

I’ve had this article written for about a week but didn’t publish it because I am far from certain on legalese of the warrants prospectus. I have written my best understanding of it and could be wrong. I would love to hear other investors’ opinions on the warrant adjustments. The reason I am publishing this article now is I just read Francis Chou’s 2012 letter which specifically discusses ‘the secret’. By the way, there are a number of other companies with TARP warrants, I also hold some Bank of America warrants, I just chose AIG for this post.  By Hardcore Value From the Chou 2012 Annual Report  “Bank TARP warrants are complex, with terms and conditions that are unique to each bank. Thus we encourage you to research them for yourself and draw your own conclusions. The legalese is quite intimidating but there is some help on the way. Some banks have started to pay dividends that exceed a set price, and we are starting to see how anti-dilution clauses that were added to protect TARP warrant holders apply with regard to: a) the adjustment of the strike price. b) the adjustment to the number of shares you can purchase for each warrant you hold.” By now, most investors are familiar
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Just a quick note on why I am convinced Apple Inc. (NASDAQ:AAPL) will need to create more iPhone options. Apple Inc. (NASDAQ:AAPL) still dominates the cell phone market but competitors have caught up and the iPhone is no longer a massively differentiated phone. Nearly everybody has one which reduces its wow factor. Apple Inc. (NASDAQ:AAPL) has a long standing policy of offering just one screen size for customers on their new product line. This one size fits all approach reminds me a lot of the famous Henry Ford Motor Company (NYSE:F) line “Any customer can have a car painted any color that he wants so long as it is black.” Take a look on the street now a days, how many black Ford’s do you see going by? Manufacturers can only make these callous statements when they dominate a market much like Ford Motor Company (NYSE:F) did with their model T. This leaves tremendous room for competitors to fill the needs that the dominant company is ignoring. Some people want a bigger screen much like some people want a red car. Any company in a competitive industry that leaves customers with extremely limited options will likely see their market share suffer. By Hardcore Value 'Get
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Hewlett-Packard Company (NYSE:HPQ) just yesterday announced their new tablet won’t be running Windows, unsurprisingly they went with Android. This isn’t a game changer for Microsoft Corporation (NASDAQ:MSFT) but is just one more example of competition chipping away at was once one of the widest moats in the corporate world.   PC makers used to be captive to Microsoft Corporation (NASDAQ:MSFT). In the 90s and 2000s, nearly early every computer application was designed for Windows so when deciding what operating system to install, PC manufacturers had only one choice. This gave Microsoft near unlimited pricing power. This wasn’t terrible for the PC makers as the cost could simply be passed on to consumers, so everybody was relatively happy. Then the mobile smartphone and tablet revolution happened and unsuprisngly the incumbent was very slow to adapt (read: The Innovator’s Dilemma). Just this week Bill Gates went on record admitting Microsoft Corporation (NASDAQ:MSFT) dropped the ball with mobile. “We didn’t miss cellphones, but the way that we went about it didn’t allow us to get the leadership. It’s clearly a mistake.” Google Inc (NASDAQ:GOOG) correctly bet that the future was mobile and their open source (free) software would garner sufficient developer support. Now Microsoft is trying to catch up
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I sold the last of my Apple shares last year at a decent profit, but looking back I attribute that to just plain luck. Here is my original investment thesis from February 2012. “With Apple, its tech and tech changes rapidly. Although I feel confident that Apple will be making more in 2013 it gets increasingly foggy thereafter… At 12x times earnings you are not paying for incredible earnings growth. I view Apple as a call option where you won’t impair the majority of your capital due to earnings over the next 2-3 years (in my opinion) and if things work out well you benefit in tremendous upside. ” That sounds reasonable and is pretty much the case for the bulls today. However, here’s my problem with it:“you won’t impair the majority of your capital due to earnings over the next 2-3 years” Excuse me?? How could just 2-3 years of earnings allow me not to impair the majority of my capital?Apple Inc. (NASDAQ:AAPL) had made $28 per share in 2011. Even if earnings grew at 33% for 3 years it would still only bring in income of $152.63 (37.24+49.52+65.87). Even adding back $75 of repatriated cash at the time (not today to avoid double counting) we still
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By Hardcore Value I just finished reading Moonwalking with Einstein by Josh Foer. I found out about the book after reading Saj Karsan’s review. Its a good book, I’d recommend it. My biggest complaint was it really digs into the history and science of memory. I get that Foer is  helping you understand how the brain works but I didn’t want to read a research report, I just wanted to improve my memory. I really think think Foer could have shaved off 75 pages and focused a lot more on the actual techniques. Does it work? Yes, absolutely. I just finished the book yesterday but I’ve already memorized all of the Canadian Prime Ministers and all the US presidents in order. It took about 20 minutes. It’s only been a day but I still remember them clearly and I feel pretty confident that I’ll remember them in a week and most likely much longer. I’ll update the post as time passes. That being said, you have to want to remember something and be willing to put in the effort, it’s not like you become rainman over night. Even the author admits he still takes notes when conducting interviews and why bother to memorize phone
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Urbana continues to have its discount to its reported net asset value expand. It’s up to a massive 50%! Why the discount? A dual class share structure, a conflict of interest with management, related party transactions and a less than wonderful track record (although much of that is due to the nature of the sector they were invested in, stock exchanges) What could Urbana Corporation (TSE:URB.A)  do to permanently reduce the discount to NAV? Take a lesson from Warren Buffett and set a permanent buyback. In September 2011, Buffett announced a buyback that will continue ‘indefinitely’. When Berkshire shares fall below 110% of book value the company will buyback an unlimited number of shares. There are caveats such as not reducing Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)’s cash below $20b and it being dependent on the attractiveness of other investments but for all intents and purposes it is an extremely serious indication to the market that management thinks the stock is cheap and will take strong actions to reduce the discount to its intrinsic value. Since the announcement Berkshire has very rarely traded below the buyback level. Now let me say Urbana Corporation (TSE:URB.A) has made very serious buybacks in the past. Currently the company has 70m shares outstanding,
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I’ve really been getting into the mental models Charlie Munger has talked about so much. After you learn a new model, it stays deep in your head and can be applied to many situations in the future. While others look at a problem or a question in isolation, those with mental models can apply a number of different tools to the situation, offering superior insight. A great book I read recently was The Innovator’s Dilemma by Clayton Christensen. It’s extremely interesting because it says a business can do everything right by traditional standards like listening to your customers needs and improving your product quality but for those same reasons, see the destruction of your business. The book was a favouite of Steve Jobs who famously said: “It is not the customer’s job to know what they want.” It bridges together why so many great companies seem to simply die off. In a personal example, social media sites have great network effects and are in a great position to continue to be the market leader. However, lets look at the past 15 years of the leading social media sites, it shows a huge amount of change. ICQ>MSN>MYSPACE>FACEBOOK A key point described by Christensen is that there
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Recently, Globeinvestor (Canada’s leading business publisher) converted to a paywall which got a lot of people angry but with declining print circulation numbers, it was only a matter of time. Paywalls have some elements of a prisoner’s dilema. The best outcome for the industry would be for all providers to institute paywalls on consumers. However, the newspaper that remains only ad supported obtains higher traffic, increasing their profits at the expense of the industry. There are a number of assumptions, the failings of which provides a clue for how to deal with the problem. For example, it assumes a universal product. Many newspapers articles are simply press releases or reuters syndications which are widely available. Consumers are more likely to pay for content that has superior analysis or unique content. This unique content also explains why small town newspapers have had a slower decline than large city markets. As Warren Buffett mentioned on CNBC last month: “The bigger the community, the harder it is to have a community feeling.” For more on the mental models Charlie Munger speaks so highly of, check out the 
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“Like most trends, at the beginning it’s driven by fundamentals, at some point speculation takes over. What the wise man does in the beginning, the fool does in the end.” - Warren Buffet, 2006 Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) annual meeting  If there was ever a poster that conveys the insanity of Toronto’s condo market this is it. Condo sales are beginning to collapse in Toronto, yet a steady supply of new condos are being added to the inventory. The greater the over supply of condos, the crazier the promotions are to sell them. With that, the marketing geniuses have come up with this poster for the Palm Condo’s in Toronto. (I actually want to frame this poster.) The best part? “The two best investments are real estate and gold. Get both with the purchase of a suite at the Palm.”  Sounds too good to be true, eh? - By the way this isn’t a fake ad, I called and confirmed this promotion with the company. By: Hardcorevalue 'Get ValueWalk's Daily Edition By Email and Never Miss Our Top Stories'
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By hardcorevalue For years Microsoft Corporation (NASDAQ:MSFT) tried to avoid the low margin segment of PCs; hardware. However, a changing industry landscape has caused a shift for Microsoft as discussed yesterday in Steve Ballmer’s shareholder letter. “This is a significant shift, both in what we do and how we see ourselves — as a devices and services company.” “Further, as we develop and update our consumer services, we’ll do so in ways that take full advantage of hardware advances, that complement one another and that unify all the devices people use daily.” This is addressing the Microsoft Corporation (NASDAQ:MSFT) Surface tablet which upset traditional PC manufacturers who now have to compete directly with Microsoft. However, 4 years ago I remember reading a Microsoft Corporation (NASDAQ:MSFT) 2008 material risk disclosure that foreshadowed the change from just software to both hardware and software (the Apple model). This risk has been included in every annual report since then: An important element of our business model has been to create platform-based ecosystems on which many participants can build diverse solutions. A competing vertically-integrated model, in which a single firm controls both the software and hardware elements of a product, has been successful with certain consumer products such as personal computers,
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By Hardcore Value Listed below is OECD comparative price level estimates from August 2012. They are defined as the ratios of purchasing power parity for private final consumption expenditure to exchange rates. They provide measures of differences in price levels between countries. Theoretically, If the ratio is above 100 than the currency is overvalued relative to the US dollar and below 100 the currency is undervalued. (Although structural economic reasons can lead to permanent differences eg. minimum wages, geographic size etc.) Of course, PPP is hardly a reliable indicator for short term currency movements but it conceptually makes sense and I’ve yet to see a better long term tool. Note the many Eurozone countries with vastly different price levels (just one of the Euro’s problems). Also, the Swiss franc appears to be benefitting from a flood of investors leaving the Eurozone. Finally, commodity countries like Australia and Canada appear overvalued relative to the US dollar. That’s good news for Canadian investors like myself who are unhedged in US dollar investments. 'Get ValueWalk's Daily Edition By Email and Never Miss Our Top Stories'
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