Technicals

Question 1

Tell me about something in the news that youre following

Answer 1

Several interesting themes

1. corporate debt levels
2. trade/nafat
3. inflation in canada
4. corporate reporting to 6 months

Question 2

how do you manage risk

Answer 2

individual level, security selection is the best way. put all your eggs and watch the basket.

avoid value traps: companies that generate significant cashflow, doesn’t matter if multiples contract

Question 3

What drives book value multiples

Answer 3

PE * ROE

Question 4

1. when might you see a high EV/EBITDA but low pe?

Answer 4

a. Lots of net debt, high ev

Question 5

How do you think about risk

Answer 5

a. importance, buffet: rule #1 don’t lose money, gains are hard to get back
b. define risk
i. traditional finance = vol
ii. investors should think about material detereitnion of the underlying economics of the business
c. indivudal level
i. need to understand the business
ii. need high quality businesses, run by an effective management team that has a meaningful stake in the business, good capital allocators
iii. capital structure, how is the business financed
d. portfolio level
i. spend more time at the indivudal level, given my levels of capital, currently own ~11 companies
ii. ideally around 25, eliminate idiosyncratic risk,
iii. Marginal benfit of diversification really decreases after this level

Question 6

benefits of running a concentrated portfolio

Answer 6

Best ideas (dilution risk)
transaction costs reduced