Weekly Thoughts, October Edition

1. Starboard recently replaced the entire 12 Directors of the Board at Darden Restaurants, which owns Olive Garden (and previously, Red Lobster). Unless you are starting a new religious organization, I have to ask why you need 12 people on your Board.  Institutional imperative at its finest. (Interestingly enough, Starboard brought back one of the displaced Directors, so now they have 13…complete head-scratcher).

2. Taylor Swift recently scored a #1 hit with her newest single, which consisted of 9 seconds of white noise.  That’s the power of a brand.  In contrast, U2 recently gave away their music for free and people were asking Apple for a way to give it back.  Contrarian trade is: Short Taylor, Long U2….

3. History repeats itself or at least it rhymes.  Someone famous said this.  Many examples out there, but here is one.  Payday lenders had their standards tightened a few years back and now some states are loosening them.

4. A few weeks ago, I wrote about Conn’s.  This Washington Post article is a great in-depth story about Rental America.  The company profiled is Buddy’s Home Furnishing, but the concept is not that different.

4. Just a great video of a Buffet lecture.  Couldn’t think of a better way to spend an hour.  For any non-investors, the first 5 minutes of the lecture offer a great life lesson, applicable to anyone.

5. Great article on Peter Lewis, who built Progressive Insurance into what it is today.  The article is from 1995 and written by Carol Loomis, author of Snowball.  Thanks to Jon Shayne for pointing it out to me.

6. How to Create Jobs, 101.  Angie’s List

Start with 97 Layoffs, see article.

Two months later (I am not making that up, check the dates on the articles), announce expansion plans with $25m in state and city incentives.

Here’s the money quote from the article that sums it up nicely: “In 19 years, the company has never turned an annual profit. Last month, it laid off 97 members of its sales force. Angie’s List has alternated between hiring sprees and rounds of layoffs for several years.”

See here, for my previous thoughts on Angie’s List.  Not much has changed, except a 40% decline in the company’s value.

7. Newspaper Reading: I typically read the newspapers in reverse order on the weekends.  This past week, I came across the following headlines, Markets Tumble and Market Soar in succession.  I guess nothing happened.

8. Speaking of market turbulence, I was waiting for my trademark to be approved before releasing it, but I thought I would share my soon-to-be trademarked, Reverse Headline Market Indicator (I am open to name suggestions).  The strategy involves the CNN website.  If CNN’s leading headline is anything connected with the market, do the exact opposite.  Last week, the leading headline was Ebola (with a sub-headline about the markets tumbling).







More to Explore

Returns for Great vs. Bad Businesses

Munger and The Cattle Rancher

Munger’s ability to find great businesses is directly related to his ability to consistently discard bad businesses. He is excellent at inverting, and discarding the bad businesses as quickly as possible.

The Abominable No-Man and Bad Management

Some investors think a business is good, but know that management is bad.  These investors justify the investment based on the idea that the great price of the business is worth the bad management. This is akin to marrying a supermodel who is going to yell at you all day.  Whatever pleasure your eyes may derive from the marriage, your ears will endure a greater amount of pain in the long run. The pocketbooks of those partnering with bad management are likely to see a similar 50%+ decline in their net worth.

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