Tom Russo: Global Value Equity Investing [Slides]

Tom Russo’s slides on Global Value Equity Investing – Richard Ivey School of Business

Tom Russo: Musings on "Global Value" Equity Investing

• Value Investing – 50 Cent Dollar Bills
  • Stanford Business and Law School, 1982
• “Capacity to Reinvest”
  • 2008 market collapse
• “Capacity to Suffer”
  • Berkshire Hathaway
  • Nestle – 35 year “planning horizon”
  • Pernod Ricard – credit default swap mayhem
  • SABMiller emerging market beer specialist
• Invest for the long term
  • White space
  • Position capital globally
  • Currency gains
  • Circle of competence
  • Tax efficiency
  • Virtues of low expectations!
  • Concentrate – few great ideas
  • Market volatility is long-term investor friend

"Capacity to Suffer"

• BERKSHIREHATHAWAY INC.
• GEICO
• Equity index put options
• Extraordinarily cautious short-term deposits, fiscal year, 2007

"Capacity to Reinvest"

• BERKSHIREHATHAWAY INC.
  • MidAmerican Energy Holdings Company
  • Burlington Northern Santa Fe Corporation
  • The Lubrizol Corporation
  • Bank of America Corporation
  • Berkshire Hathaway Subsidiary - e. g., Iscar Metalworking Companies

Nestle "Capacity to Suffer"

• Russian Ruble crisis (1998)
• Nespresso
• China and India
• Alcon (1970’s through 2010)
• Novartis payment/DiGiorno acquisition (2010)
• 2011 Chinese acquisitions in confectionary (Hsu Fu Chi International) and beverage (Yinlu.)

Pernod Ricard "Capacity to Suffer"

• China (early 2000’s)
• Addressable market -- over 500 million cases local spirits
• Absolut (2009) – global leader & premium vodka
• India (2012)
• Addressable market -- over 100 million cases of India made Scotch Whiskey currently consumed
• Leading premium priced local Scotch Whiskey brand
• Patrick Ricard – “Making Mistakes Today…”

SABMiller "Capacity to Suffer"

• China
• 50% interest in Snow, China’s leading brewer
• Sub-Saharan Africa
• Addressable market – 400 million barrels beer consumption
• “Double the price, halve the price, go farming”
• Indian Market
• Addressable market – current consumption 1 liter per capita
• Recently completed Foster’s acquisition
• Strategic partnership with Efes to coordinate Russian operations and expand together in Turkey, Efes’ home market

Market Volatility is a Friend of the Long-term "Global Value" Investor

1. Permits more effective reinvestment.
2. Offers merger and acquisition opportunity.
3. Enhances return from share repurchase.

See full slides below.