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May 9 14

Buffett vs. Icahn on Coca Cola? Slam dunk for Icahn.

by Cove Street Capital

by Jeff Bronchick and Ben Claremon

We have been thinking about this issue for a few weeks, tempering our urge to dash out some heated thoughts of the moment. We have gotten over it.

Ignoring for a moment the details of Coca Cola’s magnificent excessiveness in its executive compensation plan, the issue here is Buffett’s decision-as Coke’s largest shareholder and long-term confidante of the management team-to express his viewpoint that the pay package is indeed excessive by abstaining from a shareholder vote on the pay package instead of voting against it.

Using a different strategy, Mr. Icahn took it upon himself to draft a Dear Warren editorial in the Wall Street Journal suggesting that Buffett’s behavior highlights exactly what is wrong with US corporate governance. Specifically, very few people are willing to actually address the issues regarding pay for performance and the ongoing transfer of outrageous sums to executives—at the expense of shareholders—due to fear of “rocking the boat.” Buffett responded that maybe Carl is used to dealing with a slightly different type of management team and Board, rather than the hoi polloi that flies around on Berkshire’s Net Jets and hobnobs with Warren. read more…

May 9 14

A Word From Our Trader

by Cove Street Capital

by Matt Weber |  Director of Trading + Operations

There is more to life than increasing its speed.

-Mahatma Gandhi

Even though we are “investors,” we are very aware of the High Frequency Trading (HFT) issues that emerge on our playing field. While the portfolio management team at CSC might profess not to care about a penny here and a penny there when they are looking for 50% and 100% moves over time (and that IS the correct big picture), it’s my job to pick up the pennies for our clients, or at least defend our wallets from the unrelenting pressure of HFT.

Having been a student of market structure ever since the creation of many market venues, algorithms, dark pools, and HFT, I believe that the majority of HFT is benign with regard to our day to day trading and in many cases the liquidity provided can be beneficial to our clients. There are predatory HFT firms and strategies that exist, but it is important to remember that “financial predators” have existed since investors met under a tree at Wall and Broad. So it’s not just the Lehman and Goldman block trading desks looking to scalp our clients, it is a new breed. read more…

Apr 21 14

Why We Continue to Think the ISS Approach Toward Corporate Governance and Executive Pay is Moronic

by Cove Street Capital



The opinions expressed herein are those of Cove Street Capital and are subject to change without notice. Past performance is not a guarantee or indicator of future results. Consider the investment objectives, risks, and expenses before investing. You should not consider the information in this blog a recommendation to buy or sell any particular security and this should not be considered as investment advice of any kind. You should not assume that any of the securities discussed in this report are or will be profitable, or that recommendations we make in the future will be profitable or equal the performance of the securities listed in this report. Recommendations made for the past year are available upon request. These securities may not be in an account’s portfolio by the time this report has been received, or may have been repurchased for an account’s portfolio. These securities do not represent an entire account’s portfolio and may represent only a small percentage of the account’s portfolio. Partners, employees or their family members may have a position in securities mentioned herein. CSC was established in 2011 and is registered under the Investment Advisors Act of 1940. Additional information about CSC can be found in our Form ADV Part 2a.

Mar 20 14

CSC Strategy Letter | Number 16 | What Would You Do if You Were Prem Watsa?

by Cove Street Capital

CLICK HERE to download Cove Street Capital’s March 2014 Strategy Letter, Number 16, “What Would You Do if You Were Prem Watsa?”

Jan 24 14


by Cove Street Capital

Here are some thoughts that didn’t make it into our January Strategy Letter but that I wanted to clean off the plate for the New Year:

  • Becoming a celebrity investor as a result of being a serial presenter on the investment conference trail is clearly a cool thing for the investor. Whether the clients benefit commensurately from that point onward is an entirely different question.  Sub-text: there is no correlation between the length of a power-point presentation and the likelihood of investment success.
  • Buy the drug war, sell the flamboyant billionaire. Betting on Mexico has been a better investment than wagering on Brazil over the past five years. You would never know it by the financial press.
  • Bitcoin and public entities associated with Elon Musk read more…
Jan 15 14

CSC Strategy Letter | Number 15 | The Fear Pendulum: From End of the World to Market Melt-Up?

by Cove Street Capital

CLICK HERE to download Cove Street Capital’s January 2014 Strategy Letter, Number 15, “The Fear Pendulum: From End of the World to Market Melt-Up?”

Dec 16 13

The Soft Stuff

by Cove Street Capital

Every December, the Cove Street Capital team spends both time and money on behalf of a charity. This year we spent an afternoon at the Alexandria House, a transitional residence providing safe and supportive housing for women and children in the process of moving from an emergency shelter to permanent housing. We helped them prepare for an onslaught of 1,000 kids coming for Mrs. Claus and her gifts and were awed by the staff and its founding director, Judy Vaughan.

There are immense and truly difficult problems that perpetuate a vicious cycle for the many people who are less fortunate. These are day-to-day issues, far from celebrity pleas and fancy dinners. You should give large and give often:

“Be the change you wish to see in the world.”  Mahatma Gandhi

Oct 31 13

CSC Strategy Letter | Number 14 | Steve Jobs Didn’t Give a *!@% About the Debt Ceiling

by Cove Street Capital

CLICK HERE to download Cove Street Capital’s October 2013 Strategy Letter, Number 14, “Steve Jobs Didn’t Give a *!@% About the Debt Ceiling”

Aug 19 13

CSC Strategy Letter | Number 13 |Who Are You Going to Believe—These Non-GAAP Numbers or Your Lying Eyes?

by Cove Street Capital

CLICK HERE to download Cove Street Capital’s August 2013 Strategy Letter, Number 13, “Who Are You Going to Believe—These Non-GAAP Numbers or Your Lying Eyes?”

Jul 2 13

Holiday Reading – Dundee Annual Report

by Cove Street Capital

I am not sure I am 100% in alignment with “Gold is the Answer” but this ramble is worth reading on a number of fronts from a guy who has put up a terrific record and doesn’t get a lot of play south of the border.


CLICK HERE to download.