BREAKING

We interrupt this regularly scheduled letter for a brief and likely useless take on “the virus”.

The first issue is that when a market is on its tippy-toes on a stool reaching for a lightbulb, there is a material probability of a fall, one is just not sure exactly what is the precipitating event. This is one of those events that are not on the spreadsheet. Issue two is our sense that this is what defines a “transitory” experience, which does not mean it will not be painful for an uncertain duration. It means that for much of what we own, this is a “mark to market” exercise rather than a permanent impairment of capital. Thirdly, we have leaned into a few new ideas: Six Flags (Ticker: SIX) and Cinemark (Ticker: CNK) are examples of being horribly early, that represent this viewpoint. And now back to the program.


MARCH 2020 — We spend a lot of time in these pages endeavoring to wax poetically about the world at large and our investment place within it, even though that is not really what we do for a living. We get it. Some people just want to know our thoughts about the investment world…and yes, we do have opinions on that subject. But we are just not sure that ours are any more relevant than others—however well said—and industry compliance is always more annoying when we address specific ideas. We also suspect that investment success is distinctly uncorrelated in the short-run with an increasingly public stance and the amount of ink and PowerPoint which one devotes to it. In other words, if you can be embarrassed by unforeseen events in the stock market, you probably will be.

The reality is that we mostly do a lot of reading and talking about businesses and the people who operate them on behalf of shareholders, and try to limit our activity in the marginally dumb things available to us on a daily basis in the search for: The Really Good One. Paraphrasing the words of someone a lot older than us, a lot wealthier than us, and who has spent much more time in Omaha than us: “the reality is that good investing is work, work, work, and then be ready from time to time when a great opportunity appears, and then step up to the plate with all you prudently have.” (Oh, and be right.)

And now we get to the specific subject at hand. Here we are with ViaSat (Ticker: VSAT) stuffed in every allowable portfolio corner we can muster, including the personal account of your writer. Another takeaway from the aforementioned investor: take your position first, and then—from the enlightened height of your own self-interest— LET OTHERS KNOW. This is particularly relevant since a key weakness and annoyance at ViaSat is that they do not have a single PR bone in their collective body. This doesn’t have to be a corporate problem, but from time to time it is. The reader is now forewarned.

So what is a Really Good One? It tends to be a pretty decent business, with a pretty decent balance sheet, led by pretty decent people whose stock is being badly punished in the short-run by a “low probability / high severity” narrative with intellectual backing that can be crushed through some reasonable “System Two” cognitive processes and the passage of time. That process is usually the outcome of some unusually differentiated set of experiences and/or its own passage of time at the trough which enables one to take advantage of the “System One” thinking on display at the equity market voting booth. (We sent many of you the Kahneman book as a Holiday Gift several years ago—don’t tell us you just ate the chocolate and are not following this train of thought!)

Back to ViaSat. Let’s start at the beginning and state that our firm and its predecessor have followed the company since 2001. The writer was one of the largest shareholders at the time with a single digit entry cost per share. Partner Eugene Robin and, oddly enough, his father are former employees. We think we have a pretty good network in the satellite communications world—which is complicated, opaque, and far away from New York. And Wuhan. So we may well turn out to be very wrong, but it will be a well-thought out and off-Wall-Streetderived wrong. And while in real life, results—not process—win, good process tends to create longterm success and we are sticking with it.