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Doris Buffett, the Sunshine Lady

I caught Doris Buffett, sister of you-know-who, on C-SPAN's "Q & A" program Sunday night. Brian Lamb conducts these interviews, and they're consistently among the best found anywhere. (In a world of self-absorbed cable TV talkers, Lamb and Charlie Rose on PBS are to be treasured, IMHO.)

Doris Buffett talked about her involvement with The Sunshine Lady Foundation, a private, family foundation incorporated in 1996. She's 80 years old, a mother and grandmother, and gosh, what a sensible, down to earth lady. When the interview started I didn't know if I'd watch the whole thing because I didn't know anything about her and her foundation. But it was a treat, and I bet Ms. Buffett is a treat much cherished by her family and friends.

You can watch the interview or get a transcript here.

During "Q & A," Lamb doesn't just ask about what the person does now. That is to say, he talked a good deal about the Sunshine Foundation -- most of the interview, of course. But you also gain insight into the person's motivations, what makes them tick, their background, where they've lived and so on.

Thankfully, Lamb brought up Warren Buffett, but in no way was the interview about Doris being Warren's sister.

On the other hand, Lamb brought out from Doris the immense love that she and her siblings had (and have) for their late father, Howard Buffett. I've read Warren Buffett speak of the devotion he's had for his father, and the quality of man he was in shaping his children's character. Brian Lamb asking Doris Buffett about her father was a nice touch to a delightful interview.

Greenburg: AIG "in Crisis"

I'm not an AIG shareholder. But I can't help but wonder how many AIG shareholders wish Hank Greenberg hadn't lost control of the company in 2005.

And I'm wondering if we'll see Greenberg attempt to take control again. He owns 9.8% of the stock. If he gets some of the top shareholders to back him, he's in a good position to make a run.

Greenberg called earlier today for the annual meeting to be postponed, and appeared on CNBC this evening. He wants the annual meeting delayed so the shareholders can take time "to consider" the impact of AIG's lousy past two quarters. Maybe he wants the time to line up his chips and make the run during a re-scheduled AGM.

In that case, the shareholders need to ask themselves how much (if any) of AIG's troubles were baked in pre-2005. Or if, as Greenberg-loyalists will doubtlessly stress, the troubles are the result of terrible management post-Hank.

One thing looks certain. With Hank Greenberg owning nearly 10% of the company -- and with a company as big as AIG, that's A LOT of money -- we know his interests are aligned with shareholders.

How Much Worse Will the Global Slump Get?

I caught Larry Kudlow's CNBC show Friday evening, which included Gary Shilling on the show's roundtable. Shilling said we'll NOT see a pick up in the second half of this year and sounded like there's more bad stuff to come.

Some on the panel laughed off Shilling. But my recollection is he appeared on Kudlow's show forecasting the housing slump before most anyone else. And the perma-bulls snickered at him then, too.

Well, Shilling got the last laugh on that. And, besides, he's a man of substance and worthy of listening to. I'm not sure he calls himself a value investor, but he strikes me as someone trying to take the facts and see the world as it is -- instead of confusing optimism with being a virtue.

Referring to the troubles AIG reported at the end of last week, Shilling said AIG management probably doesn't even know how much toxic financial waste (my term) is on their balance sheet. THAT sentiment will sound familiar to anyone reading this blog regularly because I related the same belief from Francis Chou's latest letter to shareholders.

I don't know if Gary Shilling reads or even agrees entirely with Ambrose Evans-Pritchard. But Evans-Pritchard's column in the Daily Telegraph certainly rhymes to my ears with some of what Shilling's been saying:

The avalanche of bankruptcies has begun. Six US companies of substance have defaulted on bonds over the past fortnight, against 17 for the whole of last year.

As a "non-believer" in the instant rebound story, I am not easily shocked by gloomy reports. But the latest note by Standard & Poor's - The Bust After The Boom - gave me a fright.

I don't know how much worse things will get. Or even if they'll get worse at all. That's not my game. I just try to buy stocks that will endure economic slumps until times get good again.

In the meantime, I read, read, and read some more.

The Great Donlan

Thomas G. Donlan of Barron's is THE BEST editorial writer around, for my money. (And since I'm a paying subscriber to Barron's Online, it really is for my money.)

I probably like Donlan because his views strike a chord with my own libertarian streak. Some may think he's a right wing conservative, though those folks probably didn't read his editorial sympathetic to possibly impeaching the current US President over government wire tapping.

Some of my favorite editorials concern a federal government energy policy (the best policy is no policy) and the nomination of Janice Rogers Brown to the Court of Appeals for the District of Columbia (she was right in saying the New Deal was an advancement of socialism).

This week's issue of Barron's contains another winning editorial (scroll down):

In 20th-century America, gold was the first good money to go. First, it was driven out of circulation by a flood of paper; then the government confiscated much of the gold its citizens were hoarding.

Silver dollars were the next driven out, and silver quarters and silver dimes weren't far behind. In 1965, it cost more than 10 cents worth of silver to make a dime. First, the government made it illegal to melt down coins, then it took the silver out.

Pennies were next. Until 1982, there was enough copper in a penny to pose a temptation to melters and hoarders.

The pennies made after 1982, though intrinsically almost worthless at the time, now contain more than a pennyworth of zinc and copper. And there's more than five cents worth of copper and nickel in a nickel coin.

Since 2006, it has been illegal to melt down pennies and nickels for their metal; now there are active proposals to substitute baser metals for zinc, copper and nickel.

There is a better alternative: Create good money, and maintain its value.

See what I mean?

Many wonder (and worry) about Rupert Murdoch's plans for Dow Jones. I certainly hope those plans include keeping Thomas Donlan at Barron's.

Trash Talking in The Globe and Mail

Rob Carrick of The Globe and Mail has a good piece about value investors sorting through the trash of Bay Street (Canada's Wall Street). Here's a bit:

Torstar seems to be richly deserving of its consensus “underperform” rating and, in fact, investors who heeded this warning in recent days might have been spared the stock's most recent plunge. Still, Torstar has some influential fans. Noted value investors like Francis Chou, Prem Watsa and the Cundill division of Mackenzie Financial have made the stock a significant portfolio holding, and The Successful Investor newsletter rated it a “buy” in its May edition.

My Torstar exposure is limited to my Fairfax Financial position (which, as I remind you from time to time, has become a free ride for me).

Maybe I'll buy it sometime, but right now there are other stocks tempting me more. And maybe my experience with Media General has me leery of newspaper-related stocks.

One of those is enough. At least for now.

Five for Friday

To help get you off to a good start on your weekend reading, here are five links you might check out:

• Templeton's Mark Mobius says South Korean stocks are cheaper than other emerging market equities, and the currency is undervalued as well. Bloomberg reports the Templeton Emerging Markets Fund (I think they're referring to the closed-end fund on the NYSE) is up 23% over the past 12 months.

• Cundill's David Tiley talks to the Financial Times about attractive value opportunities in Italy. Many Italian companies are controlled by families and/or cross-share holding structures (sounds familiar to anyone investing in Japan), yet he says they often pay good dividends. "We are being paid [to wait for change]," he says.

• Bloomberg's Katherine Burton discusses hedge fund managers running 'concentrated" portfolios -- describing Jon Wood's 40-position portfolio as an example. I've seen concentrated --  or "focused" -- portfolios defined as few as 10 and as many as 50 holdings. I believe 20-25 positions is well diversified, but what do I know? Walter Schloss used to hold 100 names, and the guys at Tweedy Browne do, too. You'll find information on Eddie Lampert and Whitney Tilson in the linked article.

• Regular readers know I've been keeping an eye on Lonrho PLC, the pan-African conglomerate trading on the London Stock Exchange. It's not a big company and its hard to find any in-depth analysis of it. But the African sub-continent GDP has been growing at approximately 7% and could be -- note could be -- a great way to play emerging market growth. Especially with everyone and their brother keen on Mainland China and India. Yet as the post-election crisis in Zimbabwe shows (not to mention the earlier political turmoil in Kenya), investors face significant risks and corruption. Undaunted, Lonrho Chairman David Lenigas explains why he wants his company back in the former Rhodesia.

• Among this blog's most-read non-stock-picking posts dealt with building a men's wardrobe. Here's a 2003 article in the same vein by Jeffrey Tucker of the Mises Institute. I especially agree with his point that (assuming you don't have a limitless budget) you should pay up for suits, sport coats and shoes. You can then get plenty of shirts, ties, pants and socks from less expensive sources.

Enjoy and have a great weekend.

Soros the Investor, the Philosopher

Like many people my age, the first I learned of George Soros was reading one of John Train's "Money Masters" books some years ago. My recollection is that Train's profile of Soros was favorable, as it should have been since Soros has always been a successful investor. He is something of a master in matters of global finance, by any objective measure IMHO.

I also saw Soros profiled on the old "Adam Smith" show on PBS, probably back in the early 1990s. Again favorable.

Soros, of course, has received some unfavorable coverage the past few years. Almost entirely because he's stepped into the political arena via his comments and donations. Most, if not all, of the criticism he's received is because his politics are left of center, and he's been a vocal opponent of the Iraq war. Those facts along with the fact he's filthy rich makes him a target.

Some of the criticism may be valid. But some has been embarrassingly stupid. I heard one talking head, who should know better, say some years ago that Soros and Warren Buffett were trying to bring down the US Dollar.

And he uttered this nonsense as though they had the power to do so.

I think another cable talking head has used the word "evil" to describe Soros. Whether this person really believes that or not I don't know. Personality-driven news and made-up threats are good for ratings, because the dumbed-down, reality-show, MTV kind of programming works for 24-hour news channels. And casting Soros as a villain -- wealthy and with an accent right out of a 007 thriller -- makes for a narrative that sells in some circles.

I'm no expert on Soros. I get the impression he's more of an enthusiast for the Welfare State than me, but perhaps I'm wrong. I will say, though, that his efforts to persuade public policy in the direction of ending the insane War on Drugs should be applauded. And, in my view, worthy of the Presidential Medal of Freedom.

I got to thinking about George Soros today when reading Matthew Lynn's spot-on Spectator piece on the man:

‘I have been fortunate in making a lot of money and spending it well,’ Soros writes. ‘But I have always wanted to be a philosopher, and finally I may have become one.’ In a sense that’s true. Just not a very good one. And, as Soros himself appears to sense, if it weren’t for the money, no one would be very interested in the philosophy.

Like I said, spot on.

Templeton Fund Managers Profiled

Sonita Horvitch has been profiling mutual fund managers for the Financial Post in Canada for some years. This column has her interviewing two managers for Templeton that I'm not familiar with (not that that means anything much).

But Templeton is a venerable value firm with a global approach (and admittedly a huge amount of assets to put to work), and I've alway enjoyed Horvitch's reporting. Or at least since I found her on the Internet in the late 1990s.

The linked column reveals some of the managers' stock picks -- telecoms and insurance firms among them.

75th Anniversary Edition of Graham and Dodd's Security Analysis to be Published

McGraw-Hill will publish Security Analysis: The 6th Edition this coming October. Several value investors are joining forces to update and refresh the 1940 version of the book, considered by Warren Buffett and many others to be the definitive version.

According to the press release issued today, Buffett has written a new foreword for the special edition, saying: "I studied from Security Analysis while I was at Columbia in 1950-1951, when I had the extraordinary good luck to have Ben Graham and Dave Dodd as teachers. Together, the book and the men changed my life."

Among the value investors helping edit the upcoming edition is Seth Klarman, who says:

"This is a fabulous new edition of Security Analysis. We have retained the integrity of the original text but added new overviews, as well as commentary on each section. Experienced value investors and novices alike will have much to gain from this revised classic. While the world has changed in more ways than they could have imagined, so much of what Graham and Dodd taught is completely relevant today. Their insights still illuminate the way for modern day value investors. It is an honor and real privilege to collaborate on this edition of Security Analysis."

Another is Jim Grant:

"Ben Graham could write, and he could invest. He could write about investing. He produced an investing book, Security Analysis that promises to endure for as long as there are stocks and bonds. And he wrote that book while suffering the torments of the 1929-32 bear market. He is my hero."

Sounds like something worth checking out this fall, that's for sure.

Just Because You Love A Product Doesn't Mean You Buy The Stock

People used to misquote Peter Lynch, the legendary former-manager of Fidelity's Magellan Fund. He said (I'm paraphrasing) that you and I as ordinary individuals can have excellent insights into companies -- through our knowledge of which products we buy and use regularly.

Some took that to mean that if you love Product A, you should buy Product A's stock.

But Lynch only meant that our knowledge of good products -- that we buy Product A but not Product B -- was a starting point from which we do further due diligence.

Ideally, we'll find that Product A's stock is undervalued. And could enjoy the company's products and ultimately see its stock benefit our brokerage statements.

But that's often not the case -- especially with some hot names.

One of those names over the years has been Starbucks. And I reflected on Starbucks and Peter Lynch when reading Michael Sesit's new Bloomberg column mentioning the company (scroll down to the bottom).

I drink Starbucks coffee regularly. I rarely stop by their stores, much less hang out in them. But I buy this Starbucks blend in my local grocery store every week.

So I'm a loyal customer. Yet I've never been temped to own the stock. It's always been a growth story and I'm a value guy. Now that Starbucks is, from what I read, having less-than-superb results maybe it will eventually become a "value stock." Some say Wal-Mart has achieved (or sunk to) value status, though I've passed on it as well.

Anything is possible. In the meantime I'll continue enjoying the coffee.

My Fairfax Free Ride

One of my favorite developments in investing is seeing a stock double in price. This lets you sell enough to get your original capital back -- with the rest still being a full portfolio position.

The the stock becomes a free ride. It can keep going up. Or it can go down. Either way, you're OK.

Fairfax Financial Holdings (FFH/NYSE) is a case in point. I've reported on Controlled Greed previously that I've sold enough to get my original investment out of the company (I've owned it for years and recommended it on this blog in 2005).

Fairfax reported fine results Thursday. Then the stock sold off today.

I don't know what the future holds. That's true for everything, and I often feel like this site should be named "I Don't Know" instead of Controlled Greed.

I do know that some really smart folks have been recommending Fairfax lately. And buying it, too. And, it might turn out to be a great stock from here on out. I sure hope so, because it's still a full portfolio position for me. But Fairfax was a much better buy when it was trading for less than US$150 -- and there was even a short time when it was under US$100.

So I'm holding here.

I just wish every stock performed for me like Prem Watsa's. Thank heavens for him and Fairfax. It makes it much easier suffering from Media General, Mueller Water, USA Mobility and my Japanese consumer lenders.

Berkshire Hathaway Meeting This Weekend

With Berkshire Hathaway's annual meeting taking place this weekend, some random thoughts come to mind.

I've never attended one of these, but I'm sure they're a blast.

I wonder, though, if the truly long-time Berkshire shareholders feel sort of like the fans of a rock band who they used to see in small clubs and other venues. Then the band gets really, really big and seeing their favorite act means "sharing" the experience with massive crowds in huge arenas. Though I'm not denying Buffett's and Munger's investment wit and wisdom surely deserves as large an audience as possible.

I've read that this weekend's gathering is, at least in part, being carried live by CNBC and the Fox Business Network (I don't know about Bloomberg).

I remember when I first subscribed to Outstanding Investor Digest in 1991, it was one of the few, if not only, publication running lengthy transcripts of the Q&A session. I don't remember the financial media giving the Berkshire meeting much coverage, let alone the general press. OID's coverage of the meeting was really a competitive advantage for the publication, but I can't imagine it is any longer. (I stress that OID remains a great publication for value investors, but its publication schedule is lousy.)

In picking stocks, investors have hits and misses. Then they have those stocks they missed by not buying. That was certainly the case with Berkshire Hathaway at the height of the Internet bubble. Reading and seeing second- and third-rate investors putting down Buffett was clearly the bell ringing in hindsight. And it shouldn't have taken hindsight to see that.

I haven't looked at the company closely lately, but my impression is that Berkshire is more or less trading at roughly fair value. I've got a few names on my dance card I'm thinking about buying -- but Berkshire isn't among them. Maybe I'll look back and regret that, too.

Anyway, if any of you reading this are heading out or in transit to Omaha, have a safe journey there and back.

And a great time in between.

Joe over at The Stalwart is going, and I'll be sure to read his thoughts about the gathering. He has a consistently interesting take on various topics and, while I don't know if he's a value player or not, getting his perspective on the Berkshire Hathaway annual meeting sounds more than worthwhile.

GM Posts $3.3 Billion Loss

Yet I patiently remain a holder. I may be brave, crazy or stupid, but if I wasn't prepared to see results like those announced today I would have sold last fall. When it was apparent we were headed for a downturn, if not full blown recession.

General Motors (GM/NYSE) has a great non-US business. Clearly, more work -- read cuts -- needs to be done in North America.

In short, GM shares are trading for less than my personal cost in the low $30s (I first bought these shares in early 2005, before launching Controlled Greed). And they are also below the $26.75 price when I recommended them in April 2005.

But if I didn't own the stock, I'd buy it here, putting 4% to 5% of a portfolio in it.

Should you? Only you can decide that. Just do your own due diligence before jumping in.

Harbinger's "Midas of Misery"

By way of Sivaram's Can Turtles Fly? blog, I found this BusinessWeek feature on Philip Falcone, founder of Harbinger Capital Partners.

Those of us shareholders in Media General (MEG/NYSE) know the name because Harbinger owns more than 18% of the Class A shares. And also because last week Harbinger succeeded in electing its three nominees to Media General's Board of Directors.

The BusinessWeek article makes a good read. My advice is to print it out because it's fairly long. My printer spit out six pages and I have a hard time reading stuff that long on any computer screen.

Anyway, you'll find lots of interesting material in this profile. It touches on Media General but there's lots more worthy of your time.

Reviving Brooks Brothers

Anyone with any appreciation for traditional men's clothing wishes for Brooks Brothers to regain its past glory. The popularity of "dress casual" some years back, among other things, certainly took a toll on the company.

The Daily Telegraph reports on Claudio del Vecchio's efforts to restore the old-fashioned standards that made Brooks:

"We changed everything," says del Vecchio. "A lot of it we changed back to what it was before."

An interesting bit is that del Vecchio claims the late Gianni Agnelli -- jet-set fashion icon and Fiat chief -- wore Brooks Brothers shirts.

Oil Storage: World Point Terminals

I don't know anything about World Point Terminals -- but I'm a huge admirer of Peter Cundill. According to this from The Globe and Mail Cundill has served on the company's Board since 1998:

This little company, which seemingly trades by appointment and has a market capitalization of about $350-million, arrived on the Vox radar screen because it's had a healthy little run over past month, rising 40 per cent for no obvious reason. Mind you, it also fell by 70 per cent before it bounced back, again for no immediately apparent reason.

The stock is not covered by any analyst, which makes it hard to get a grasp on but also possibly interesting if you can figure it out. I submit that for these reasons and more, it's worth a careful look.

World Point Terminals trades in Canada. The linked story says Peter Cundill owns 10,000 shares.

More on Sequoia Reopening

Michael Santoli mentions the Sequoia Fund reopening in his Barron's column (scroll down). It's notable that the fund's redemptions stem from attrition in the fund's longstanding shareholder base. Remember that this fund was launched to accommodate investors when Buffett ended his partnership.

Santoli writes:

Sequoia's performance is ahead of its peers' and the S&P 500 over the past year. That's impressive for a value-oriented fund, especially one with 19% stashed in retailers, and speaks to the managers' avoidance of credit-sensitive names in the 25-stock portfolio.

Santoli points out that nearly half of Sequoia's net asset value consists of unrealized taxable gains. So anyone thinking of getting in may want to do so in a non-taxable account, if possible.

Two Views of St. Joe

St. Joe has long been a favorite of many value investors including Marty Whitman. The company owns 700,000 acres in the state of Florida -- with 310,000 acres within 10 miles of the Gulf Coast.

This week's Barron's has a bullish piece on St. Joe. The stock price has fallen in half since 2005. But Barron's suggests this is a good time to get in, believing Florida's real estate market to pick up in the next year or so.

Another positive view of St. Joe is found on Clyde Milton's Cheap Stocks blog. Clyde has owned the stock previously, but doesn't now. He says he'd like to see it fall a bit more before getting in.

I've never owned St. Joe, and don't know anything about it compared to Clyde. Yet one of the things I find interesting about his blog is his theme of finding undervalued real estate assets in value stocks. So if you're a value player and real estate plays appeal to you, keep an eye on Clyde's moves with St. Joe in particular and his blog in general.

Sequoia Fund Reopens

Longtime readers will recall my posting about the death of Bill Ruane in 2005. I wrote:

When Warren Buffett closed the Buffett Partnership in 1969, he gave the partners a choice of receiving shares of Berkshire Hathaway or cash. Those taking cash were encouraged by Buffett to put their money in the Sequoia Fund. Either choice turned out to mean profits of millions of dollars.

The Wall Street Journal reports the Sequoia Fund is reopening to new investors for the first time since 1982.

Harbinger's Nominees Voted on Board

In a most unsurprising development, Harbinger's three nominees for Media General's (MEG/NYSE) Board were elected today. I say unsurprising because you couldn't follow this story and not get the feeling as time went on -- from both Harbinger and Media General management -- that the slate was likely to make it.

The only question was the vote tally. The results are preliminary and will be finalized in the next several days.  But Harbinger says the preliminary tabulations show its candidates received between 57% and 68% of the votes cast.

If true, that sounds like a lot.

Media General's Class A stock is overwhelmingly held by institutions. There's very little float considering its a NYSE-listed company.

One thing about that is if the institutions are against you on something, they can wage and win a proxy battle. With Gabelli owning 22% and Harbinger owning another 18%, the three director nominees didn't need all that much more support.

Of course, you know what I'm going to type next, don't you?

Media General, like most other media outfits, has a dual-class structure keeping the founding family in charge. So this event may turn to be every bit as underwhelming as it was unsurprising.

We'll see.