Tom Russo’s slides on Global Value Equity Investing – Richard Ivey School of Business
[munger]
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
- Permits more effective reinvestment.
- Offers merger and acquisition opportunity.
- Enhances return from share repurchase.
See full slides below.
