9th annual Spring value investing congress

April 3, 2014 Las Vegas, NV Global Value Equity Investing

Tom Russo, Gardner Russo & Gardner

www.ValueInvestingCongress.com

Thomas A. Russo
Value Investing Congress April 3-4, 2014

 Fifty-Cent Dollar Bills Capacity to Reinvest

Goodwill is the Gift That Keeps on Giving International, The Most Promising Venue

Capacity to Suffer
Management Matters Family-Controlled Companies

Semper Vic Partners, L.P. Major Global Value Equity Holdings March 31, 2014
Company Berkshire Hathaway Inc. Cl A Nestle SA-Spons ADR Philip Morris International Inc. Mastercard Inc Cl A Wells Fargo Compagnie Financiere Richemont Heineken Holding NV SABMiller PLC Pernod Ricard Anheuser-Busch InBev ADR Unilever NV ADR British American Tobacco PLC Brown-Forman Corp Cl A Altria Group Inc. Diageo PLC Martin Marietta Materials Comcast Corp Special Cl A Scripps Networks Interactive Cl A Graham Holdings Co. Berner Gruppen NHST Media Group Total Equity Cash and equivalents Total Portfolio % of Assets 11.1 10.7 8.5 7.2 7.2 6.7 6.5 6.3 5.9 5.2 4.9 3.2 3.2 3.1 2.7 2.4 2.2 1.1 0.8 0.3 0.1 99.3 0.7 100.0 3

Capacity to Suffer Table of Annual Historic Total Returns Semper Vic Partners, L.P.
Year 2014 (thru 2/28) 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 Compound Annual Return Semper Vic Partners -0.8% 21.9% 24.2% 6.7% 21.5% 25.8% -31.5% 7.7% 20.8% 3.2% 11.9% 33.5% -1.0% 0.1% 15.6% -2.1% 23.8% 24.7% 19.0% 23.6% 12.4% 22.1% 13.4% 27.4% 5.3% 24.6% 19.8% 37.1% 24.8% 43.9% 13.6% 15.4% Dow Jones Industrials -1.1% 29.7% 10.2% 8.4% 14.0% 22.7% -31.9% 8.9% 19.1% 1.7% 5.3% 28.3% -15.1% -5.4% -4.7% 27.2% 18.1% 24.9% 28.8% 36.9% 5.0% 16.7% 7.4% 24.5% -0.7% 31.8% 16.2% 5.5% 27.2% 33.6% 1.0% 11.9% S&P 500 1.0% 32.4% 16.0% 2.1% 15.1% 26.5% -37.0% 5.5% 15.8% 4.9% 10.9% 28.7% -22.1% -11.9% -9.1% 21.0% 28.6% 33.4% 23.0% 37.5% 1.3% 10.1% 7.6% 30.5% -3.1% 31.7% 16.5% 5.2% 18.8% 31.7% 6.2% 11.1%

Musings on Perils of Wall Street

Not everything that counts can be counted, and not everything that can be counted counts.
Albert Einstein

People who like this sort of thing will find this the sort of thing they like.
Abraham Lincoln

Bad ideas on Wall Street typically are not bad ideas at the start, but rather good ideas taken to extreme.
Warren Buffett, Annual Meeting observation

Musings on Perils of Wall Street (cont.)

Wall Streets Mistaken Emphasis: Percentages of Nothing
Research and Development as a Percent of Sales Working Capital as a Percent of Sales Cash Flow Conversion Ratio Percent of Business from New Products (within 3 years) Percent of Business from Developing and Emerging Markets Avoid Family-Controlled Companies

In a cruel twist of irony, the pursuit of profit something that Wall Street pushes so hardis what leaves companies open to being displaced.
Clayton Christensen, Reuters August 2011

Musings on Perils of Wall Street (cont.)

Invest as though you are a pilot.
Professor Jack McDonald, Stanford Business School 1982

Antidote to Wall Street family-controlled companies

with the capacity to suffer reported profits burdens while pursuing measures for the long-term intended to maximize shareholder value.

Not everything that counts can be counted, and not everything that can be counted counts.

People who like this sort of thing will find this the sort of thing they like.

Bad ideas on Wall Street typically are not bad ideas at the start, but rather good ideas taken to extreme.

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Wall Streets Mistaken Emphasis

Research and Development as a Percent of Sales
Heinz International R&D expenditures versus royalty payments Early participation with manufacturing

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Wall Streets Mistaken Emphasis

Working Capital as a Percent of Sales

vs.

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Wall Streets Mistaken Emphasis

Cash Flow Conversion Ratio

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Wall Streets Mistaken Emphasis

Percent of Business from New Products (within 3 years)

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Wall Streets Mistaken Emphasis

Percent of Business from Developing and Emerging Markets

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Wall Streets Mistaken Emphasis

Avoid Family-Controlled Companies

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In a cruel twist of irony, the pursuit of profit something that Wall Street pushes so hardis what leaves companies open to being displaced.
Clayton Christensen, Harvard Business School

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Invest as though you are a pilot.

Jeppesen Aviation Chart

Eye towards all instruments

Altimeter Compass Fuel Gauge Gyroscope Pilot Vision Speedometer

Do not discard Jeppesen aviation charts Avoid simple, one variable solution James Clark co-founder Netscape
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Closing Observation Its entirely personalits business.

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