2011 Markel Breakfast Notes

Dear Readers,

I hope everyone has enjoyed the notes from the Berkshire Meeting and from the Value Investing Congress. I have heard from a lot of people and so far the consensus has been that the notes were pretty comprehensive. I feel very fortunate to have readers all around the world who I can communicate with and get to know. This has been a very busy time of year for me and I wanted to make sure I took the time to thank everyone for following my blog and my career. I am still looking for the right full-time opportunity for after graduation so feel free to email me if you know of any equity value funds who are looking for a research analyst.

Before I move on I wanted to apologize again. For about a 6 hour period on Sunday night the version of the Value Investing Congress notes available through Scribd was not a complete version. Accordingly, if you downloaded a version that is missing stock charts for each of the companies, please feel free to email me and I will send you the polished version.

I know that you all have a lot to read right now but I wanted to post my notes from the 2011 Markel Breakfast while the comments and content were still very relevant and timely. For those of you who have not been to Omaha during the Berkshire weekend, the Markel Breakfast is held the Sunday after the Berkshire meeting and is a standing room only event. I was lucky enough to get a seat right in front and had the opportunity to hear CIO Tom Gayner and Vice Chairman of the Board Steve Markel discuss a number of topics, including:

• The state of the municipal bond market
• The state of the property and casualty insurance market
• Markel's approach to buying whole companies
• Inflation, hedging and currency risk
• The David Sokol affair

As usual, I have embedded a Scribd document of my notes in this post. While they are only a little over 8 pages, they are a bit too long to read on a regular blog post. If you have any trouble with Scribd, click this link to access a Google Docs copy (with no sign-in required). If neither of those options works, feel free to email me at inoculatedinvestor@gmail.com and I will gladly send you a PDF copy of the notes.

Finally, I wanted to let you know that there is still one more set of notes yet to be released. I attended the Creighton Value Investing Panel in Omaha and got to hear investors such as Vitaliy Katsenelson and Whitney Tilson answer questions from two moderators. It was an interesting event and I encourage you to stay tuned for the notes.

Thanks again for all of your support and I hope you enjoy the Markel notes.

Sincerely,

Ben Claremon

UCLA Anderson 2011

The Inoculated Investor

Markel Breakfast 2011 Notes

Detailed Notes from the 2011 Value Investing Congress

Dear Readers,

It has been a very busy 10 days and I am not even done editing all of my notes yet. However, after 24 pages of Berkshire annual meeting notes, I am now posting over 70 pages of notes from this past week's Value Investing Congress in Pasadena. Unlike the BRK meeting notes, these are in bullet point form because there are far too many data points and the speakers often move too fast for me to type the notes in paragraph form. These were taken in real time and I apologize for any errors or omissions. In any case, I think they provide a very comprehensive summary of what was discussed at the event.

For those of you who do not have the time to go through all of the notes, I have highlighted the companies that were pitched and discussed. I also included tickers and stock charts for most of the companies that were extensively analyzed. I think there were a number of compelling ideas pitched and I will briefly highlight a few that stood out in my mind as deserving some more research:

• Guy Gottfried of Rational Investment Group pitched Morguard Corp (TSE: MRC), a Toronto-listed real estate company that is run by a great investor and whose stock looks to be trading a fraction of the value of its real estate properties. Not to take anything away from the other great speakers, but I think Guy made the best presentation.
• Ori Eyal of Emerging Value Capital Management discussed a share arbitrage opportunity with PRISA (NYSE: PRIS) A and B shares. His compelling analysis made it seem unlikely that an investor could lose money and very likely that there would be significant upside in the next 6 months.

Aside from those two, there were also a number of interesting international and domestic stocks and other securities discussed. Some of you may notice that a few of the speakers have started their funds very recently and do not have long track records. As such, some people I spoke to voiced their concerns that it is hard to know if these guys are truly great investors. However, I have noticed that the young guys who run their own funds perform some of the most comprehensive and thoughtful research of any investors I know. As such, I highly recommend reading through the notes to see if anything piques your interest.

Also, if you like what you see in the notes, I suggest signing up to attend the next Value Investing Congress. The event will be held in New York on October 17th and 18th and the organizers are offering a very attractive early bird special for those who can commit to attending early. Please visit http://www.valueinvestingcongress.com/register/ if you would like to take part. I cannot promise that I will be there so there may not be much in terms of notes published in the blogosphere.

As always, I am unable to attach a PDF of the notes to this posting. However, I have created a Google Doc that anyone who clicks this link can access. Also, I have embedded the Scribd copy of the notes below. If neither of those works for you, feel free to send me an email at inoculatedinvestor@gmail.com and I will send you a PDF copy.

I hope you enjoy the notes. I appreciate all of the emails and offers to help me in my job search that I have received. I am looking forward to hearing more from all of you in the future.

Sincerely,

Ben Claremon

UCLA Anderson 2011

The Inoculated Investor

*****Update: The Scribd document attached is the correct one. My apologies, for a little while last night (between 2am and 8am LA time) a not-complete version was available on Scribd. I am sorry if anyone downloaded a non-polished copy and would be happy to send you an updated PDF version if you email me.
2011 Value Investing Congress Notes

Comprehensive 2011 Berkshire Meeting Notes

Dear Readers,

After 6 hours of continuous typing and close to 15 hours of editing, my notes from this year's Berkshire Hathaway annual meeting are complete. At the end of it all, the total tally is over 18,000 words and over 24 pages of wisdom from Buffett and Munger. As always, these notes were taken by hand, without the use of a recorder. For those of you who were not able to make it to the meeting this year, I hope the notes serve as an adequate substitute. For those of you who were in attendance, I hope the notes provide a comprehensive review of what was said.

Unfortunately, Blogger does not allow me to attach PDFs to posts. But, to make it easier on everyone I have created two ways for you to view the notes. First, you can click this link and access the notes through Google Docs. You don't even need an account with Google. Also, I have embedded a Scribd document to this post for those of you who like Scribd. However, as always, I am happy to email out PDF versions upon request. Just shoot me an email at inoculatedinvestor@gmail.com if you want a PDF copy.

Lastly, I am asking the value investing community for some assistance. I will be graduating from the Anderson School of Business at UCLA in June. Accordingly, I have been selectively looking for the right full-time position. Ideally, I would like to work as an equity research analyst for a value-focused buy-side firm. If you know of anyone who is looking for a diligent analyst with a passion for stocks, I would really appreciate it if you would think of me. You can view examples of my research on this site under the "Equity Research" link on the right side of the page. I am also happy to provide a copy of my resume upon request. Thanks so much for any help you can provide.

Enjoy the notes and please stay tuned for notes from other Omaha events and the upcoming Value Investing Congress.

Sincerely,

Ben Claremon

The Inoculated Investor

2011 Berkshire Annual Meeting Notes

Book Review: The Most Important Thing by Howard Marks

I was very fortunate to receive an advance copy of Howard Marks's new book, The Most Important Thing, directly from Howard himself. I then asked Howard if he would mind if I reviewed the book for my blog. Knowing how popular the memos he writes on behalf of Oaktree Capital Management are with members of the value investing community, I thought my readers would really enjoy learning more about his investment philosophy. Howard agreed to let me review the book on one condition: that I do so objectively and without hesitating from articulating any criticisms I had. The ultimate product is the following analysis of The Most Important Thing, in Scribd format because it is a little too long for a blog post. If you have any troubles with Scribd or would like a PDF copy, just email me at inoculatedinvestor@gmail.com and I will happily send it to you.

According to the link to the book on Amazon.com, it will be available on May 1st and can be pre-ordered now. I won't take any time here (read the review!) to explain why, but I highly recommend that readers with an interest in investing consider purchasing the book in order to further your own knowledge and gain a new appreciation for both Howard's writing and approach to investing.

Book Review- The Most Important Thing by Howard Marks

Stay Tuned for the Best Posts of the Year

Dear Readers,

I certainly have a busy few weeks coming up. No, I am not talking about the last 6 weeks of school work that are required for me to actually graduate in June. I am talking about the equivalent of Super Bowl week for value investors. Specifically, over the next 3 weeks, I will be attending the following events:

1. April 30th: Berkshire Hathaway Annual Meeting in Omaha

2. May 1st: Markel Breakfast in Omaha

3. May 3rd and 4th: Value Investing Congress in Pasadena

4. May 12th: 2011 South Central Scholars Value Investing Idea Dinner in LA- I am co-hosting this event with Alex Rubalcava and we are donating all of the excess proceeds to South Central Scholars, a nonprofit that helps kids from South Central LA realize their dreams of attending college and grad school. If you would like to learn more or make a donation, please visit the organization's website at: http://www.southcentralscholars.org/

As in previous years, I plan to blog about all of these events and hope that I will be able to produce my usually comprehensive notes for the Berkshire meeting and the Value Investing Congress. If you are planning to be at any of these events and want to meet up, feel free to email me. I would love to meet more of you in person. However, if you are not able attend, I hope my notes will serve as a good substitute. So, stay tuned for a series of posts that should be the best ones of the year.

Thank you for following my blog and I look forward to sharing my content with you.

Sincerely,

Ben

Equity Research Piece: Sterling Construction Co. (STRL)

I came across Sterling Construction Co. (STRL) after running a screen on Capital IQ for companies with: low debt levels, market caps between $100M and $500M and trailing EV/EBITDA multiples below 7x. I happen to believe that there is a lot more inefficiency in the small cap space and thus I often dig in that arena. What I quickly saw was that companies reliant on government infrastructure spending were trading at very low EV/EBITDA multiples. In fact, during my research I also came across Orion Marine Group (ORN), a company that operates in similar markets to STRL. At first I was intrigued by the valuation of ORN, but after more digging, STRL became the more compelling research candidate.

Unfortunately, I discovered the company a few weeks too late. On March 14th, 2011, the stock closed at $12.48, a price that implied a trailing free cash flow yield over 18%. Since then the stock has jumped to a price above $16 and no longer offers a sufficient margin of safety for my taste. However, I do think the stock bears watching because of the uncertainty surrounding state infrastructure spending. It is possible that the pessimism regarding states' ability to fund capital expenditures will drive the stock price down to a level that more than compensates for the inherent risks. Plus, I believe that STRL is a takeout candidate because the larger players such as Fluor and KBR may only be able to achieve growth through acquisitions over the next few years.

I should mention that this is my own personal research and the analysis and opinions presented should not be attributed to West Coast Asset Management. I hope you enjoy the piece as a I think it is representative of the type of research I like to do. For those of you who do not have time time read all 12 pages, I have included an executive summary in the first two pages of the write up. Please feel free to make comments or suggestions. I am always looking for feedback on my research, both positive and constructive.

As usual, I have put the write up in Scribd format to preserve the formatting of the charts. However, if you have trouble downloading the piece, feel free to email me and I will happily send you a copy.

Sterling Construction Co. Write Up

Please Help Japan

Readers,

For anyone who has been following the events in Japan over the past week, it has been a very painful time. But, there are people there who are really suffering and need as much help as we can provide. I happen to be a member of the Japan America Business Association (JABA) at UCLA Anderson. As such, I know many students who are from Japan and are likely going to return there after graduation. Sadly, I find myself not knowing what to say to people or how to console them. How can you really convey how sorry you are after watching the images of the tsunami wiping out everything in its path? The before and after pictures of the Sendai area are breathtaking in their brutality. Personally, I feel helpless to extent that it causes a sort of paralysis. So, I have been trying to find a way to help that has the greatest potential impact. Therefore, I am hoping to use my position as a very minor celebrity in the value investing world to raise money for those affected and increase awareness of the ongoing situation in Japan.

So, this is what I am asking from you:

1. Please help the MBA programs at UCLA Anderson, Pepperdine, and USC support the disaster relief effort by making a donation at http://socalmbahelpjapan.wordpress.com/. All of the proceeds will be donated to the the US Red Cross. The acute crisis may be nearing an end (at least we all hope), but the devastation is ongoing and, as citizens of the world, we can't just forget about the people of Japan once the news cycle shifts to another topic.
2. Keep informed about what is going on in Japan. Read newspapers, watch the news, keep up with your favorite blogs, follow Twitter. Do something to prevent yourself from moving on with your life just because the disaster didn't happen in your backyard. Because, especially if you live in California, one day it might happen here. The point is that the people of Japan deserve our empathy and for us to realize that we have an obligation to understand their plight.
3. Finally, reach out to anyone you know who has roots in Japan. I am living vicariously through someone who is very close to me and is currently in Japan. I have to say it is so difficult that I can't imagine how hard it would be if my family, friends, and the place where I grew up were going through so much turmoil. Believe me, they need your support.

Let us all hope that the earthquake and volcanic activity subsides and that the situation with the nuclear facilities becomes more manageable soon. The Japanese people need some indication of hope so that they can move forward. In the meantime, please help any way you can.

Sincerely,

Ben C.

The Inoculated Investor