by Jeff Bronchick | Chief Investment Officer
Fender tried to go public in 2012. It failed and here is why.
In how the world should work, the prevailing private equity investors bit the bullet and raised new capital at levels well below what was being offered to the public. “New” CEO Larry Thomas retired. Private equity buyer TPG Growth is the new sheriff in town. “New” models are being introduced and most interestingly, Fender is tentatively experimenting with the Direct-to-Consumer scene. Oh, and Board meetings have suddenly gotten a lot more interesting with the addition of two U2 band members.
I don’t think a single thing has changed since my initial piece…but there is a price for what will inevitably be another chance to take our money.
The opinions expressed herein are those of Cove Street Capital, LLC 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. The information in this presentation should not be considered as a recommendation to buy or sell any particular security and should not be considered as investment advice of any kind. You should not assume that the security discussed in this report is or will be profitable, or that recommendations we make in the future will be profitable or equal the performance of the security discussed in this presentation. The report is based on data obtained from sources believed to be reliable but is not guaranteed as being accurate and does not purport to be a complete summary of the available data. Recommendations for the past twelve months are available upon request. In addition to clients, partners and employees or their family members may have a position in security mentioned herein. Cove Street Capital, LLC is a registered investment advisor. More information about us is located in our ADV Part 2, which is available upon request.
by Jeffrey Bronchick | Chief Investment Officer
Read this article from the New York Times and replace many of the nouns with “investor,” “stock,” and “investment industry.”
Long before social media, Wall Street and its predecessors had a wildly viral network of passing rumors around that may or may not have any basis in reality. Historical readings back a few hundred years show that little progress has been made to date.
“The analyst said…”
“I read somewhere in the Wall Street Journal…”
“Do you see that x smart guy bought y security?”
“I went to an idea dinner and they were really pushing xyz.”
“Did you see Barron’s this weekend?”
While it is possible to find real information to rely on, I never cease to be amazed when I push a little through the veneer and see how little work was done by the current announcer of said idea.
Reading primary material is slow and painstaking, and obviously that is why few actually do it. Legal and SEC mandates that have created 600-page 10k’s have not made our lives any easier. Internet access has made some things easier but it also raises idle chatter to a deafening level. And then there are those kittens.
Conservative Investors Sleep Well – Philip A. Fisher
Good Strategy Bad Strategy: The Difference and Why It Matters – Richard Rumelt
Organizational Intelligence: Knowledge and Policy in Government and Industry – Harold L. Wilensky
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…
by Matt Weber | Director of Trading + Operations
There is more to life than increasing its speed.
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…
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.
CLICK HERE to download Cove Street Capital’s March 2014 Strategy Letter, Number 16, “What Would You Do if You Were Prem Watsa?”
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…
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?”
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: http://www.alexandriahouse.org/.
“Be the change you wish to see in the world.” Mahatma Gandhi