Value Investor Conference London

April 2014

“The Security I Like Best”: Warren Buffett’s article on GEICO from 1951
In December 1951, Warren Buffett wrote this article for The Commercial and Financial Chronicle titled “The Security I like Best”;  that security was GEICO. In this article, Buffett set out the virtues of GEICO and his view that at 8 times 1950 earnings “no price is being paid for the tremendous growth potential of the company”. GEICO had already grown significantly from 2,514 to 143,944 policyholders in the decade prior to 1950. Berkshire Hathaway initially bought 30% of GEICO in the 1970s and the rest in 1996. It now has 12 million policyholders and is still growing rapidly.

Excerpt from Seth Klarman’s recent letter to Baupost investors
In the opening line of this excerpt, Klarman refers to the market heading in to 2014 as “resembling a Rorschach test. What investors see in the inkblots says considerably more about them than it does about the market.” Through his analogy of a “Truman Show” market, Klarman states that “a policy of near-zero short-term interest rates continues to distort reality with unknown but worrisome long-term consequences.”

Just the Facts
This article written in the FT by Terry Smith uses Microsoft as an example to describe how when making investments we should just stick to the facts. He writes that much of the research and commentary surrounding Microsoft is based upon “the biases of the commentators, who often seem to feel that because Microsoft is not hip or fashionable, and doesn’t have the design sense of Apple, it doesn’t deserve to succeed.” Microsoft has been a large holding in the Metropolis Valuefund since 2011.

Factor in the changing investment cycles
David Stevenson, writing in FT Money, provides an overview of the different investment styles.  He discusses the recent relative under-performance of value investing but confirms his conviction that it still works in the longer term for investors who can afford to be patient.

Howard Marks – Dare to be Different II
This memo revisits some of the ideas raised in the first version of his Dare to be Different memo from 2006. He identifies some of the unconventional behaviour required by investors if they are to achieve superior investment performance. As Marks puts it: “Passive Investors, benchmark huggers and herd followers have a high probability of achieving average performance and little risk of falling far short. But in exchange for safety from being much below average, they surrender their chance of being much above average. All investors have to decide whether that’s okay. And, if not, what they’ll do about it.”

Activist Insight
The Activist Investing Annual Review 2014 looks at the most influential activist investors in the industry for 2014. Included in second place is ValueAct Capital, whose President Mason Morfit will be speaking at the upcoming London Value Investor Conference on 22nd May.

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  • “It's very much the Rolls-Royce of the investor conference market” Paul Scott, Stockopedia
  • “Very good event with excellent quality of speakers. Well done!” Andrew Hardy, Momentum GIM
  • “Please make this an annual event, thought it was brilliant, learnt lots and the topics were well diversified. Very interesting day. Thank you” Mary Allen, Rothschild
  • “Very well organised and it was a treat for investors like us to hear some great speakers” Roli Saxena, Drona Capital
  • “A fantastic conference with lots of superb speakers and interesting discussions- well done!” Paul McNulty, Setanta Asset Management
  • “Great conference overall. Hard to complain – good job” Travis Moss, JP Morgan

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