Graham And Doddsville

I recently came across three articles that I think are must reads.

Marty Whitman, legendary manager of Third Avenue Funds, has over 50 years of experience under his belt.  Most value investors know that he describes his value philosophy as investing in businesses that are ‘safe and cheap’.   In a recent  Financial Post article, Ian Lapey, designated successor to Whitman on the Third Avenue Value Fund, describes how Third Avenue defines cheap by tweaking Ben Graham’s famous net-net formula.  Read the article here.

As a student at Columbia Business School, I helped to launch the student run newsletter Graham and Doddsville. My successors did an outstanding job interviewing Bruce Berkowitz for the most recent issue.  It is interesting to contrast Third Avenue’s focus on asset value with Berkowitz’s focus on cash flows.  Jean-Marie Eveillard says that value investing is a ‘wide tent’.  While different investors arrive at intrinsic value using different methods, they are all searching for the same thing:  businesses selling well below their estimate of intrinsic value. You can read the Graham and Doddsville interview here.

For more on Bruce Berkowitz, see his interview in the recent issue of Outstanding Investor Digest here.

Bruce Berkowitz of the Fairholme Fund held a conference call on March 30 which focused on their investment in Pfizer.   A replay of the call can be found here:

Pfizer CEO Jeffrey Kindler will join Bruce Berkowitz, Fairholme Capital Management’s Chief Investment Officer, for a Conversation with Bruce on Monday, March 30th, at 3:00 PM Eastern Time. We’ll also have Charles Fernandez, President of Fairholme Capital Management and an authority on corporate restructurings and the healthcare industry, bring his unique viewpoint to the discussion.

Bruce and Charlie will discuss the Fund’s leap into cash-rich companies in industries that are generally regarded as recession-resistant, like healthcare, defense and infrastructure. We’ll review some fundamentals and learn why they believe these new holdings can deliver the returns that Fairholme investors expect – even when pitted against a severe deflationary environment.

Pfizer, the world’s largest research-based pharmaceutical company, has recently taken on the mantle of Fairholme’s anchor holding, representing nearly 19% of our portfolio’s assets. Our panel will present Fairholme’s compelling investment case for Pfizer, including findings related to its stock valuation, healthcare demographics and regulatory issues.

Pfizer’s Jeff Kindler will take questions and discuss the unfolding merger with Wyeth, which will create one of the most diversified companies in the global healthcare industry.

If you have questions about Pfizer, or any other position in The Fund’s portfolio, submit them to agustin@fairholme.net well in advance of the call, and Bruce, Charlie or Jeff will try to answer you on air. Or call in during the conference for your chance to join the conversation.

You have two ways to participate – by internet or phone. Go to www.fairholmefunds.com at the appointed time to hear the live audio stream.

 

Bruce Berkowitz, founder of the Fairholme Fund, is one of my favorite investors.  I heard him speak several times as a student at Columbia.  Berkowitz has recently been making rounds in the media.  Berkowitz and his team arrive at intrinsic value by “counting the cash.”  He does this by adjusting financial statements to come up with an estimate of owner earnings.  I am working on a post about owner earnings, which should be posted shortly.  Once Berkowitz determines a company’s owner earnings yield, he then tries to “kill” the business.  Killing the business means trying to imagine every worse case scenario, and testing how that scenario will affect the company.  He looks to buy companies with a double digit owner earnings yield and solid management, that he can’t kill.

To learn from SuperInvestor Bruce Berkowitz, see below:

Interview on Bloomberg TV (12/9/2008)

“A Bargain Hunter Stands Tall” (Kiplinger.com)

An older Interview with Investment News from December 2007.

Bruce Berkowitz, manager of The Fairholme Fund, recently held a great, candid call with shareholders.  It is a must-listen here.