Numi, why did you quit PE? Isn’t PE suppose to be a prime destination a lot of ppl wnat ot get to? the guys I spoke to in PE are pulling in enough cash to get a date with Kim K.
You never know, maybe numi already had dates with Kim K…
palantir, i was reading the MSFT annuals again…after gaining some understanding of GOOG, i’m beginning to see why MSFT is very good indeed…i like goog more due to growth prospects but msft is downright cheap and high quality earnings…
what I don’t get is, why is the market not showing more love to them? they got a decent dividend too…net of cash they’re trading close to 10X FCF…and these are pretty steady flows too…
the most logical thing to do here is to write off their online search biz (which they did) and ignore the XBOX thing …after doing that, you got two very strong revenue/earnings stream with windows/business…
I’m rambling but i’m inclined to take another position in a tech stock (i don’t even consider them tech in the sense they will lose their position overnight, try working in finance without excel)…
In my view, strong management team involves smart people who are unusually committed to the company. Prime example is Steve Jobs and other talented founders who are driven by far more than financial incentives. In rare cases, their egos can get in the way (i.e. Yahoo’s Jerry Yang), but these guys put every waking hour and every ounce of their talent into their company. They won’t sell out for short term gain and competitors cannot poach them.
Strong management is definitely not about years of experience, whether its in the company, the industry, or just plain old. Good operations people are necessarily to fill the gaps, but they’re replaceable.
I think I can only believe in “no evidence of crappy mgmt team”. To find the crappy mgmt team one can do a big checklist with all that Corp Gov stuff that is summarized at CFA L3 and/or your books of preference - we basically want people who don’t look like crooks, don’t have big egos and aren’t lazy asses. I’m using crooks here in the widest possible way - any guy who has motivations that differ too much from long term shareholder value may be bad news (this will actually include variations on big egos and lazy asses)
It’s really hard to judge a possible strong mgmt team. Even if the analyst is really really strong on all business little blocks (strategy, marketing, talent management, etc) it’s still hard to be able to judge if what the top dogs of the industry are doing is right or wrong - not to mention traits like character. Even assuming a CEO is experienced, honest and hard-working, he probably knows way more about their business than we do - and on top of that we have very limited access to information.
I can’t even have a strong opinion on how good Steve Jobs was/was going to be after 2010. Did he left a strong culture to keep Apple at the top without him? If alive, would he keep winning? Could his ego become a downfall? A few decades ago Lee Iacocca was viewed as the utmost genious until things got rough; so was Alan Greenspan.
I feel that management data is way more useful when you want to short a company than to go long on it.
If I were to model it, I would probably do a big checklist and then give very little positive weight for the “I don’t think they’ll screw me over” effect, if present.
How about trying to find “strong management” for Sovereign debt? That’s a load of fun!
Can I ask what do you see in MSFT after reading G’s report?
The way I see it is:
Windows: Mega cash cow, business will decline according to conventional wisdom, but even if it does, MSFT can still milk it. (However it may not decline…tomorrow is a mystery)
Server and Tools business: Strong business with growing revenues and margins.
Biz division: Enterprise software + Office, growing presensce in enterprise, revenues and margins are rising.
Entertainment division: Xbox has started doing really well last few years, and I expect Windows Phone is going to do well too. It seems to be a good product. This used to be unprofitable, but now margins have been rising last 3 years. It may well end up owning gaming business…esp the way Sony is flailing about. Furthermore, there have been a lot of changes happening within microsoft, especially in their consumer products. Just look at their design initiatives! I couldn’t see Metro happening under BillG.
Why it is undervalued:
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People just look at MSFT and say: “MSFT will decline because of cloud computing”…I’m skeptical of that view. There is much more to MSFT than Windows desktops.
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People also have little faith in Steve Ballmer. (eg David Einhorn), whom I think is mistaken. They tend to view BillG as a God, but fail to recognize that many of MS’s missteps and failures were because of BillG’s views and under his leadership. It’s a mistake to blame everything on SteveB.
MSFT has also rapidly been buying back shares, and increasing dividend.
The search business is losing about 2-3 B a year, which is not really that much. Even if that whole thing was canceled, only a small amount of value would be created IMO. What exactly are you looking to ignore in Xbox?
I’m starting to warm to Goog, their search business has a moat. What I’m afraid is what if it does a MSFT and stays flat for 10 yrs…but I need to smoke on this a little bit more. Somewhat skeptical of these random other things Goog makes. Self driving cars? wtf o well.
I think after reading/thinking about google I got a sense of the space overall…the pieces just sort of fell in place in terms of understanding what each company do and their position…after finding out how google was able to own the search/internet navigation space i saw how msft owns the operating software space and its “moat” per se…really simple stuff…
I’m not completely clear on “cloud computing” and who win will but MSFT will have their hand in there due to their enterprise relationships…
MSFT revenues/profits for windows/business is strong on its own but I think the search/phones/games segments can be ignored (i assign zero value to it)…
Thing I like so much about google is their “big thinking” as exemplified by the self driving cars (imagine when cars in the future drive itself through the use of google maps of some sort)…i mean, they have big ideas (really big) and when i started to think of what they’re looking to do 10 years out, i see amazing possibilities…lots of their stuff will fail misserably (not even sure G+1 will even work or their attempt at social networking (wouldn’t be surprise to see them buy out FB one day))…
I’m glad google exists as it does. I don’t care if it is super profitable. But the stuff they come up with makes my life so much better. Without the stuff google does the iphone is about as half as useful.
i love how google is positioning itself for aapl’s eventual irrelevance…one of the subtle (or maybe obvious) things I am noticing…
Hmmm…what growth are you projecting for Google? I think that if Google is going to continue this growth its undervalued but if it’s slowing down to less than 10% growth a year…perhaps not. Don’t you feel that their core market is saturated as is? I don’t forsee Google making inroads into China…ever.
I assume china is out of the picture …
in terms of growth, i’m thinking long term (5+ years)…is it north of 10%+, absolutely…i don’t expect them to do much in terms of earnings in the near term, but i’m focused on the impact they will have on the world in the long term which translates into huge dollars…
imagine if you owned google and how much you can pull from it? aapl is a $600B dollar company today as a benchmark…
Numi is swinging a bigger dick than I am.
Nice, just bought this book.
I like that book. Very useful stuff in it, the time management stuff too.
Haha, you guys are too kind. Yeah, I spent a couple years in private equity / leveraged buyouts before ultimately realizing that I enjoyed public markets investing more than doing deals. I just felt a lot more in touch with everyday happenings in the world and also appreciated the dynamism and psychological elements of the public markets, and it was this combination of factors that sent me back to the drawing board to figure out what I really wanted to do. In private equity, you work with a lot of intelligent people with good business acumen, not only with respect to doing deals but also with regard to growing companies after you’ve bought them. However, there is also a rather lengthy and challenging process of getting a deal done, and some people seemed to enjoy this process more than I did - I was really more interested in focusing on investment for investment’s sake.
So, in 2010, I decided to go to business school. I know a lot of people in finance that don’t have their MBA’s, but I had been thinking about business school as early as 2006 and it was an important life goal for me and I found the education and experiences to be tremendously valuable. In 2011, I did my internship at a multi-strategy hedge fund last summer. This helped me realize that I want to continue working in investment management / hedge funds. I got my MBA several weeks ago, and now I’m back in New York interviewing with various buy-side firms in hopes of finding the right opportunity and culture fit. (I’m open to potential introductions!)
That’s pretty much what I’ve been up to since I went on hiatus from this forum almost a year ago. Also, regarding your point about people in private equity reeling in some good coin, I can say it’s a good job to have but most people aren’t actually “killing it” until you make principal at most buyout shops, with the exception of the mega-shops such as TPG, Blackstone, KKR, and the like, where you’re easily getting high-six figures all-in as a vice president out of business school. Unfortunately, as a pre-MBA private equity associate, that also meant I wasn’t able to score a date with Kim Kardashian, but I did see her walking around during a time-out at a Mavericks game once, and she is really hot.
please elaborate a bit more on the Kim K viewing…how did the crowd react? did you feel nervous? envious? was she still with that guy she broke up with?
She was with Miles Austin that night so I presume they were still dating. I think the crowd around me was pretty starstruck as they were sort of muttering things about her, and nobody wanted to be overt, but I overheard them and that’s how I noticed. As for my own reaction, I guess you could say I was “delighted.”
Numi, you always struck me as more of a public markets guy, though at the time you went for PE, you said you were more interested in “transactions oriented work” and putting deals together. I never quite got it, since it didn’t seem to fit with the rest of your personality, and figured that the allure of PE paychecks was driving that (not a criticism, just an observation).
Your public equities persona seems much more consistent with the way your mind works. The transaction is much simpler in the public equities world, and that leaves more time for thinking about the business and the investment thesis, which always struck me as your forte.
i’m doing some research on Austin and Kim right now…will let you know if i get any insights…
bchadwick, thanks for your thoughts. I was wondering what you thought specfically made me have more of a “public markets mentality”? I have some ideas and certainly the three years I’d spent in equity research influenced the way I thought about investing at least in part, but when I left research I did feel pretty burnt out and wanted to try something new. In particular, private equity satisfied my curiousity to both work on the buy side and also see the trnasactional side of things. However, it wasn’t until I had been in PE for a couple of years that I realized it wasn’t for me (when argably, maybe I could have known sooner). In an effort to better understand my own strengths and weaknesses, I’d appreciate hearing your candid feedback, not to mention that people frequently ask me why I left PE during interviews.
What’s been new with you these days? Any exciting developments for you over the last year? Have you come across any good books or websites that you’ve recently found to be influential in the way you think about investing?