Trigram

@Woirble @NguyenMari49148 @DReds928 So it is cancelled for today? And envion group will file another motion for another date?

@NguyenMari49148 @DReds928 $SOC As of 6 minutes ago, no order from the court on Pacer with respect to the ex parte motion and the Santa Barbara webpage for 25-cv-0224 continues to show the hearing, which was scheduled to begin in an hour, as vacated. Grok says impossible for hearing to happen today.

$SOC is this close to take off. Good luck to all Sable Offshore Bulls!

In Investing, it takes a lot of activities and certain kind of temperament to do nothing. Doing nothing is the necessary but insufficient condition for outperforming.

@BRK_Student Thanks for the clarification!

@TrigramPartners In that chart everything is sized to multiple of invested capital not earnings. I should have labeled it better.

@BRK_Student Adam - in your ValueX presentation, the purchase multiple on See’s seems off. It was about 12-14 times aftertax earnings that Mr Buffett paid ($25M purchase price, and it was earning about $2m a year after tax, based 1983 annual report) - did I miss anything? Thx!

@capitalemployed Amazing timing- right before Berkshire revealed its position in $DAL :)

Interview #131 just published. For this edition we welcome Wengang Ji from Trigram Partners @TrigramPartners Wengang discusses his background, launching Trigam Partners, his approach to investing, and shares two stock ideas. capitalemployed.com/p/2-stock-pitc…

@capitalemployed published an interview of Trigram on Thursday, which, by the way, did a fantastic job running an investment newsletter. Two stock pitches in this letter were included. $DAL is one of them. And funny enough, it is also in Berkshire’s 13F published on Friday.

The Seawall Holds: Federal Judge Tosses Activist Lawsuit Against California Offshore Production $SOC A federal judge just delivered a long-overdue reality check to the professional obstruction industry strangling California’s energy production. U.S. District Judge Michelle Williams Court, a Biden appointee, dismissed the Center for Biological Diversity and Wishtoyo Foundation’s lawsuit challenging BOEM’s approval of Sable Offshore’s Santa Ynez Unit restart. The plaintiffs didn’t lose on the merits. The court ruled, on its own initiative, that they lacked standing to even bring the case. These groups built a business model around tying up American energy projects in federal court, funded by foundation grants and recoverable attorneys’ fees, with costs externalized onto every California driver and taxpayer. Meanwhile, since Santa Ynez shut down in 2015, California has: • Become the most expensive gasoline market in the lower 48 • Lost Phillips 66 LA and Valero Benicia to closure • Deepened reliance on foreign crude from regimes hostile to U.S. interests Sable’s platforms can produce 50,000+ BOE/day from existing infrastructure on existing leases. The only thing standing between Californians and that supply has been litigation designed to delay until projects die. The playbook: File suit. Drag it out. Drive up costs. Collect fees. Repeat. Thursday, a federal judge said no, on the threshold question of whether these groups belong in court at all. A win for Sable. A win for every Californian tired of subsidizing a permanent litigation industry. More of this, please. — CA4ES courthousenews.com/nonprofits-hit…

Thanks for having me. Excellent newsletter.

@brettgardner_10 On the first hour of bidding.

@TrigramPartners That's about my limit too, haha. Think we are falling a bit short.

Anyone who wins and invites me will receive a FREE signed copy of Buffett's Early Investments (amzn.to/48YoKlz).

@SowingAlphaSeed No - this is only half the story. What happened was Dempster Mill was liquidated promptly for way more than what he marked them at prior year, which makes this accusation go away.

@MikeFritzell Or minority shareholder vote, they intend to ram through the transaction using their 70% share with a ridiculous low share exchange ratio to rob shares the minority group. Such behavior is not only un-Berkshire like, it is board-line illegal. My fund will fight them to the end.

@MikeFritzell Well after hesitating, I need to push back on Hikari Tsushin - historical return on equity has been mediocre to say the least. Also, their way of “stealing” from minority shareholders of a company they own 70%, is extremely outrageous. No independent appraisal

Pitches for: - Hikari Tsushin: “probably has the best capital allocation record in Japan at scale by far” - Binjiang Service Group: “grew revenue 22% and 15% in the two most recent years… 8-9% dividend yield”

@villa19199 @MikeFritzell 1502 don’t come close to the level of 3316 IMHO. Very very different for various reasons (poor ROE, poor ROA, poor ownership structure, SOE presence, commercial vs residential etc.) don’t think these two are comparable.

@MikeFritzell Binjiang margins compressed from 23.2% to 14.9% from 2021-2025. It's difficult to have much visibility into where it bottoms out. I used to own some $1502 but had similar challenges understanding what was driving the results. Very tricky to know how clients make their decisions.

@villa19199 @MikeFritzell Hi - I am the guy pitched 3316 during the MOI ideas breakfast. Their 14.9% net margin is decent and I think it should stabilize around that. As long as their return on equity remains strong, I don’t mind their net margin to further compress as long as they continue taking shares

@iCyclone I would rather these traits being tested by nature (if unavoidable) than by another group of human beings. But I am being wishful this morning.

I remain in awe of #Ukraine' toughness, resilience, adaptability, and skill in defending themselves. I so admire them. May we all show such traits.

All Americans should have access to affordable, reliable energy to lower their costs and increase their job opportunities.

@WSJ The premium is absolutely ridiculous comparing to care received. So healthy people will drop out of the system gradually.

The decline in January payments has been driven by a loss of federal Affordable Care Act subsidies. on.wsj.com/48HNEph

@brettgardner_10 Understanding the business model(so that you feel comfortable to handicap its earning in next 10-20 years, not just what it does today) and the management team (must be honest capable and incentivized) are of ultimate importance. Rest are optional.

This raises the question of what sort of due diligence is actually necessary for a given investment (which, importantly, is also contingent on where you are at as an analyst / investor). Does visiting a factory give you additional information? I'd argue it depends on the investment. But I don't think most analysts can actually analyze a warehouse effectively. Sure, if you go to a food product company and rats are everywhere, you are probably in a bit of trouble. But not so sure on a general industrial company. I've been to some factories of superb businesses where I was surprised at the set up--but once I thought about it, the structure made sense for that business. @GZuckerman wrote about Munger buying the coal investments (wsj.com/finance/invest…). Apparently, someone mentioned the stocks to him at dinner, he then read the annual reports, and bought them. No calls with management, scuttlebutt--just reading. But Buffett was able to buy ISCAR and Munger was able to buy the coal stocks based on what seemed like little work because of decades of knowledge accumulation, allowing them to sniff out attractive opportunities and apply common sense to financial statements. This is why they have been able to avoid fraud and bullshit. Stories of how little work these great investors do to make investments misses the point that they are able to do little work on those individual investments because they've done so much work in the past.

@aakashgupta What’s government preferred’s liquidation preference? That answers all the questions.

The math on Fannie and Freddie is so dislocated it looks like a pricing error. Fannie printed $14.4 billion in net income last year. Freddie printed $10.7 billion. Combined market cap on the pink sheets right now: ~$12 billion. The market is pricing $25 billion in annual earnings at a 0.48x multiple. Find me another 0.48x earnings multiple anywhere in American finance. It doesn't exist. The dilution fear is the reason the stock is cheap and the reason the stock is wrong. Treasury put in $187 billion. The GSEs have swept back over $300 billion since 2012. That's an 11.6% IRR. If Treasury exercises its 79.9% warrants at today's price, the government's stake is worth ~$9.6 billion. If it exercises post-relist at 10x earnings, that stake is worth $200 billion. The difference is $190 billion. Washington doesn't leave $190 billion on the table to spite penny stock holders. Capital requirements look scary until you do the arithmetic. The ERCF says $334 billion. They have $179 billion. The FHFA can lower Tier 1 to 2.5% without Congress. New target: ~$190 billion. Gap: $11 billion. One IPO closes it. One year of retained earnings closes it twice. G-fees are already at 65 bps. Pre-crisis they were 20. The GSEs have been charging privatized pricing inside a conservatorship for 14 years. Credit losses outside of 2008 average under 5 bps. The margin is so fat that mortgage rates don't move at all on release. So what are you actually buying at $5? A royalty on the American mortgage system. 65 bps on $7.5 trillion in outstanding MBS. $48 billion in gross annual revenue. Under 5 bps in historical losses. The most predictable spread in finance, backstopped by a guarantee both parties have publicly committed to preserving. JPMorgan trades at 13x and takes real credit risk. Utilities trade at 15x with half the visibility. These two trade at 0.48x collecting tolls on other people's risk. The second those warrants convert and the NYSE listing goes live, every index fund and pension fund with a financial sector mandate has to buy. Two of the ten most profitable companies in America, sitting on the pink sheets, waiting for one signature.