Charlton Heston & Warren Buffett’s 8.7% Stake In Axtalta

Charlton Heston & Warren Buffett’s 8.7% Stake In Axtalta
By Mark Hirschey (Work of Mark Hirschey) [CC BY-SA 2.0], via Wikimedia Commons

Charlton Heston & Warren Buffett’s 8.7% Stake In Axtalta  by Matt Brice, The SOVA Group

This past weekend I was reminded of the time I pulled a quick one on my parents.  The movie, The Ten Commandments, was on television and I knew my parents would let me stay up way past my bedtime to watch the educational and religious film.  It worked perfectly, but I certainly had no interest in a Charlton Heston movie.

Fast forward a bunch of years, and I believe one scene has come back as a great teaching lesson.

Warren Buffett has become a religion, and his words are taken as the Ten Commandments brought down by Moses (or Heston) from on high.  They are not to be violated or ignored. BUT–Buffett is the biggest violator.

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Take yesterday’s announcement that he was buying an 8.7% stake in Axtalta Coating Systems.  Axtalta was a recent IPO in November of 2014 at $19.50, yet Buffett paid around $28 per share.  I know I have read that Buffett doesn’t do IPOs.  Yet, this purchase was not only at a higher price, but the stake he bought was directly from Carlyle, a private equity company.  You read that right, Buffett bought a secondary offering from a private equity group at a premium to an IPO price.  The horror….

Cue the scene where Heston smashes the tablets to the ground after he comes down from Mt Sinai.

I could fill a book with examples of Buffett saying one thing and doing another.  Does this make him a hypocrite?  I don’t think so, but I am a delusional fanboy….

What it means is that exceptions are going to happen.  And in the investment world, sometimes the best opportunities are found in the exceptions.  But you can only know if they are good investments if you understand the principles underlying those rules first.  Warren Buffett knows those, and that’s what he preaches, but he is more than willing to smash the tablets when a great opportunity comes along.

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The Sova Group is a private investment fund managed by Matt Brice. As principal of The Sova Group, Matt Brice has been managing investments since 2009. Prior to founding The Sova Group, from 2007 until 2009 he worked as an associate attorney in the Mergers and Acquisitions group of Debevoise & Plimpton LLP, an international law firm based in New York City. Mr. Brice holds a B.A. in Philosophy from Brigham Young University and received his law degree from Columbia Law School.
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  1. Benjamin Graham – also known as The Dean of Wall Street and The Father of Value Investing – was a scholar and financial analyst who mentored legendary investors such as Warren Buffett, William J. Ruane, Irving Kahn and Walter J. Schloss.

    Buffett describes Graham’s book – The Intelligent Investor – as “by far the best book about investing ever written” (in its preface).

    Graham’s first recommended strategy – for casual investors – was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks – Defensive, Enterprising and NCAV – and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various “special situations”.

    The first requires almost no analysis, and is easily accomplished today with a good S&P500 Index fund.
    The last requires more than the average level of ability and experience. Such stocks are also not amenable to impartial algorithmic analysis, and require a case-specific approach.

    But Defensive, Enterprising and NCAV stocks can be reliably detected by today’s data-mining software, and offer a great avenue for accurate automated analysis and profitable investment.

    Most of Buffett’s deals like the one described here are “special situations”.

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