It's a great read. However, I have conflicting reaction to Bruce's thoughts. He is definitely very smart and successful investor - I won't argue about it. And yet, the best ideas that he presents: Hertz, URI, Pfizer - is that really the best one can do while working 12 hour work days at Fairholme?
He repeatedly says that he tries to kill companies and then he chooses Hertz and URI which both have negative tangible assets putting them one foot in a grave. Sure, if neither of them BKs, he may win big, but is this really consistent of "not losing money" for your investors mantra? Are they safe in any meaning of the word? He argues that they are, based on deep calculations of free cash flow based on his own definition of FCF. I am sceptical.
Then we have Pfizer. First he argued that the company is great because it had a lot of cash and was not planning to make acquisitions. Now he supports the purchase of Wyeth. Furthermore, his thesis is that Pfizer will do great by just competing in generic area. I am not an expert in this, so maybe he is on to something, but I am also sceptical about it. His argument that "people spend less time choosing generic than the chocolate they buy" sounds very much like patent-protected pharma marketing FUD: buy our patented pill, the generic is garbage. It may work though if executed properly.
It is a time in the market when like he says "the index may almost work", i.e. you may have great results by just buying the index, since things have been beaten down so much. So obviously he and his fund can add only two things: safety and overperformance. It seems to me that he is chasing overperformance in lieu of safety. Time will show if he was right to do it.
Disclosure: I own WYE stock. |
