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It’s 13-F season, and you’re not going to find many like Guy Spier’s Aquamarine Capital in the first quarter —- zero buys, zero sells. “Pathetic, isn’t it,” quips Spier in an interview.
Spier says he feels less pressure to trade for trading sake after he stopped charging management fees. He also cites the possibly apocryphal study showing that the best investors are actually dead, or alive but inactive. (A spokeswoman for Fidelity Investments, which is widely credited with the research, says the firm is unaware of the study.) And the bigger issue is that he just doesn’t want to sell. “I can always sell Berkshire Hathaway to raise some cash for another investment, but that investment might have a far higher risk profile, and also have significant declines, the way so many friends of mine have [who are] invested in tech.”
Spier’s investments in Berkshire Hathaway (BRK.A)(BRK.B) account for about a third of his roughly $350 million portfolio, and another major holding is the Daily Journal (DJCO), whose portfolio is run by Charlie Munger, Warren Buffett’s sidekick.
Spier and fellow investor Mohnish Pabrai once spent $650,000 on a charity lunch with Buffett, which he chronicled in the book, “The Education of a Value Investor.” One potential client told Spier he doesn’t need to pay him to buy Berkshire Hathaway, a criticism Spier accepts. “In my case, the portfolio is everything, to the downside and the upside,” he says. “You take care of the downside through companies like Berkshire, and you try to achieve some upside through other things that could or could not work out.”
He is fully on board with Berkshire Hathaway’s recent push into the oil industry with Occidental Petroleum (OXY) and Chevron (CVX), though he doesn’t directly own any oil company. “The war with Russia has made it utterly clear that we’re not going to get rid of our oil dependence in the next decade or two. And because the industry has been under invested massively, there’s going to be extraordinary returns to people
invested,” says Spier.
In what turned out to be a more morbid discussion than planned, Spier says for the last 10 years he has valued Berkshire Hathaway for what it would be if Buffett died or was otherwise incapacitated. He is willing to take the lumps — he estimates a 20% to 30% decline over three to six months after Buffett went away — because of his belief that Berkshire Hathaway would bounce back.
What makes Berkshire Hathaway unique is that its capital from insurance is invested in equities. “And I don’t know of any other insurance company that’s managed to convince the regulators to do that,” says Spier. “It was a 20-year or 30-year project for Warren to show the regulators why this was a better way to be. So I’m not assuming that there’s any extraordinary investment talent after Warren goes away.” Down the road, however, Berkshire Hathaway might lose its special culture without Buffett at the helm. “There is a very special and unique culture there. And that is part of what enables him to generate the returns.”
Some breaking news is that Spier actually has made a transaction this year — he sold Twitter (TWTR), a company that along with Google parent Alphabet (GOOG) he bought during the pandemic, for more than $50 per share. After Elon Musk launched his takeover offer, “I spent about five milliseconds thinking if he were to allow me to come into the private deal, would I do it.” But what was troubling was how quickly the board
accepted Musk’s offer, showing there was no alternative bidder in sight. Spier speculates that Musk may be able to negotiate a buyout price in the mid-$30s for Twitter.
Spier has also invested in Alibaba (BABA) — a big holding for Munger, who gets his Chinese insights from Li Lu, the value fund manager and founder of Himalaya Capital Management. “That doesn’t make it right, but it raises the probability that the conclusions are right,” says Spier. “Like General Motors, what is good for Alibaba is good for China, and what is good for the planet is good for Alibaba,” he says.
“I have this conflict because I don’t like investing in locations which have abuses of human rights, and China has certainly abused human rights, but on the other side they have lifted so many people out of poverty,” he says. If China makes rational decisions, he says, “they will respect the variable interest entities, they will respect providers of capital from other countries.” All that said, the Zurich-based investor says his stake in Alibaba is probably not big enough to have a significant influence on his portfolio, and he isn’t interested in buying more. “There are businesses in the United States that I would invest in before I added to Alibaba, because I just love the United States. It is just the most amazing destination for capital.”
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