Charlie Munger has been Chairman of The Daily Journal (DJCO) since 1977 and his legal firm controls 41% of the company. It is thinly traded but is one of the few profitable news organizations. This article in TheStreet.com gives a quick overview of DJCO's success.
The Daily Journal has avoided the problems afflicting other news organizations by targeting niches, such as lawyers and readers in small communities in California. This tactic has lead to a profitable mix that capitalizes on the weak coverage of local news on the Web. The company also provides specialized information and software to courts.
The company's operating results have been phenomenal. Its return on equity of 28% and net margin of 22% leave the New York Times and Washington Post in the dust. - TheStreet.com
Daily Journal Prints Cash: Under the Radar
So the business is doing well. At least it is in the context of that industry's troubles. What I find even more interesting is that at the start of this year the company had around $ 22 million of cash and equivalents (mostly in US Treasuries). In fact, for most of the past decade the company had remained cautiously positioned with investments. Around March, approximately $ 20 million of those investments in US Treasuries were converted to common stocks. Those equity investments are now worth $ 54 million with another $ 8 million of cash on the balance sheet...and still no debt (~$ 6 million of the $ 8 million of cash currently on the balance sheet as of 9/30/09 is from FCF generated this year). So as of 9/30/09 approximately $ 62 million of the company's $ 80 million market value is represented by cash and stocks.
One could easily argue that of the great investors who've been around a while Charlie and the DJCO team have had the best year.
Also, if you think DJCO has a decent future right now...that $ 5 million+ in FCF DJCO is generating can be bought for around $ 18 million ($ 80 million market value minus $ 62 million in cash and stocks).
Slightly more than 3.5 Price/FCF. I'm guessing that the portfolio is a pretty sound one considering who is in charge. Whether the business has good future prospects is not as clear but the margin of safety appears to be there.
Adam
No position in DJCO
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Applying Newton's Fourth Law
Origin of Newton's 4th Law?
"Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: He lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases." - Warren Buffett
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Find good businesses; buy at nice discounts to value; stay within limits & stick to what's understandable (necessarily unique for each investor); minimize trading, frictional costs, & errors of all kinds.
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This site's emphasis? Put simply, it's on finding and buying -- with the long-term in mind -- good businesses at a plain discount to conservatively estimated value; it's on selling shares of those well-bought high quality business reluctantly. The view here is that selling makes sense only when core economics become permanently impaired, prospects have been misjudged, market price not just somewhat but, instead, meaningfully exceed per share intrinsic value, or opportunity costs are high. Buy/sell decisions aren't just an opportunity to increase returns; they're also an opportunity to make mistakes. It's easy to overemphasize the former and forget the latter. The focus here is on minimizing trading, frictional costs, and errors of all kinds; it's on staying comfortably within realistically assessed limits. First and foremost is the view that an investor should never make a specific investment based upon what someone else thinks. In other words, what makes sense to own is necessarily unique for each investor and it'd be unwise to not act accordingly. So, more generally, this site simply attempts to better understand some useful principles and ideas in context of investment. It's about, in a practical sense, what tends to work over the long haul as well as what, at times, gets the investor into trouble. It's not about grand theories in finance and economics. These too often distract from what matters or, worse yet, lead to costly misjudgments. As a result, they are mostly viewed with a healthy dose of skepticism here. Otherwise, the best thinking across disciplines should be learned well then put to good use in a way that's uniquely suitable.
About
Notable Quote
"Warren and I have not made our way in life by making successful macroeconomic predictions and betting on our conclusions.
Our system is to swim as competently as we can and sometimes the tide will be with us and sometimes it will be against us. But by and large we don't much bother with trying to predict the tides because we plan to play the game for a long time.
I recommend to all of you exactly the same attitude.
It's kind of a snare and a delusion to outguess macroeconomic cycles... ...very few people do it successfully and some of them do it by accident. When the game is that tough, why not adopt the other system of swimming as competently as you can and figuring that over a long life you'll have your share of good tides and bad tides?" - Charlie Munger
Our system is to swim as competently as we can and sometimes the tide will be with us and sometimes it will be against us. But by and large we don't much bother with trying to predict the tides because we plan to play the game for a long time.
I recommend to all of you exactly the same attitude.
It's kind of a snare and a delusion to outguess macroeconomic cycles... ...very few people do it successfully and some of them do it by accident. When the game is that tough, why not adopt the other system of swimming as competently as you can and figuring that over a long life you'll have your share of good tides and bad tides?" - Charlie Munger