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Geoff Gannon March 31, 2018

NACCO (NC)

As I’m writing this: the stock is back down to $32.85 a share, which is basically what I bought my shares at back in October. So, I wanted to point that out to members who thought the stock was more expensive than when I looked at it and so not worth a look. You can, if you want, get shares at basically the price I got mine. The company’s first annual report as a stand alone business came out. And they also have transcripts of...

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Geoff Gannon March 30, 2018

ExxonMobil (XOM): A Blue-Chip Energy Company Likely to Provide Double-Digit Returns

Member write-up by Trey Henninger   Exxon Mobil (XOM) is one of the oil majors. Traditionally, being an oil major has meant being a fully vertically integrated company from oil exploration, drilling, refining, and chemical production. ExxonMobil continues to fulfill that role, but they are much more than an oil company today. Although they are typically billed as an oil AND gas company, they are much more.   Business Model Overview   ExxonMobil is a very complicated business with many different parts. The simple way...

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Geoff Gannon March 30, 2018

EM Systems: The Japanese Industry Leader in Pharmacy Software

Member write-up by Clayton Young.   Thinking Points EM Systems (TSE: 4820) is an industry leader in pharmacy software looking to leverage its strengths in closely related industries. The company’s biggest strength is its business model, which lowers industry standard system implementation costs and better aligns cost structure to its customers’ operating performance. Share price is a little elevated today at 1,398 yen per share (13.8 TTM EV/EBIT). Investors can reasonably expect an investment CAGR between negative 2.5% and 8.8% over the next three years....

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Geoff Gannon March 26, 2018

Why I’ve Passed on Keweenaw Land Association (so far)

Trey had a good question in response to my Keweenaw Land Association article: “Are you willing to share your reason for not investing at this time? My first pass analysis leads me to also not choose to invest at this time. For me, it’s a matter of opportunity cost. Simply beating the S&P500 is insufficient. Since the S&P500 is projected to return much lower than its historic rates of return, my current opportunity set is much better. That’s really always been my hesitation with owning...

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Geoff Gannon March 25, 2018

Choose to Choose

Wednesday, March 21st: Summerset by Andre Kostolany
Thursday, March 22nd: Fairfax Financial by Alex Middleton
Friday, March 23rd: Keweenaw Land Association by Geoff Gannon
To Focused Compounding members:
There are two kinds of stocks out there: stocks you find and stocks that find you.
If you were on Twitter, read newspapers, or visited Bloomberg or CNBC this week – Facebook was a stock that found you. If not for the fact you’re a Focused Compounding member, Keweenaw Land Association would not have been a stock that found you this week. You’d have to go out and find it.

We can look at this objectively or subjectively. If we look at it objectively – that is, we study the stock – then we’d classify Facebook as a widely-known stock and Keweenaw as a lesser-known stock. This is usually how we talk about the situation. We separate the mega caps from the micro caps. We separate the stocks with analyst coverage, liquidity, etc. from those without all that. But, there is another – much less comforting – way of looking at the difference between Facebook and Keweenaw. If we look at it subjectively – that is, we study the stock picker – then, we’d say you’ve ordered your own, personal informational environment in such a way that you constantly hear about Facebook and rarely hear about Keweenaw. You spend a lot of time reading facts and opinions about Facebook and frequently feeling the urge to judge Facebook as a business and as a stock. Meanwhile, you don’t spend a lot of time reading facts and opinions about Keweenaw nor do you frequently feel the urge to judge Keweenaw as a business and a stock. This probably sounds wrong to you. “I didn’t organize my life that way,” you say. I never decided to think about Facebook all the time and Keweenaw rarely if at all.

No. Society made that decision for you.
As a member of a wider stock picking society, you consume a lot of information passively. It is brought to you. In fact, many of the stock ideas we have are ideas that were brought to us. Because you’re a Focused Compounding member, even Keweenaw was brought to you. There is a difference between active research and passive research. It’s the difference between conception and concurrence. If you pick up the Keweenaw annual report – never having read my write-up on the company – you’d have to conceive of a way to value it. You’d have to frame the problem of understanding the business a certain way. And then you’d have to appraise the business for yourself. But, when an idea is brought to you – and especially when it is brought to you again and again throughout the day – there is no personal, solitary act of conception. There is only the social act of concurrence or dissent. You do not have to conceive of Facebook as a stock at all. You need only read whatever bull thesis is …

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Geoff Gannon March 23, 2018

Keweenaw Land Association (KEWL)

I’m creating this thread so there’s a place for members to discuss this stock and especially the April 12th board election. I wrote a full article about the stock here: https://focusedcompounding.com/keweenaw-land-association-buy-timberland-at-appraisal-value-get-a-proxy-battle-for-free/ The company sent out another letter today: https://keweenaw.com/wp-content/uploads/2018/03/KLAL-Letter-to-Shareholders-3-23-2018.pdf Check OTCMarket.com page for the ticker KEWL: https://www.otcmarkets.com/stock/KEWL/news And also the company’s own site (but, remember, the company won’t post anything from Cornwall there. OTCMarkets.com will): https://keweenaw.com/company-reports/ Those are the links you need for information. This is the place to discuss the stock. For those wanting...

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Geoff Gannon March 22, 2018

Keweenaw Land Association: Buy Timberland at Appraisal Value – Get a Proxy Battle for Free

Keweenaw Land Association (KEWL) is an illiquid, unlisted stock. It trades something like $15,000 to $20,000 worth of stock on an average day. The company does not file with the SEC. However, you can find plenty of information – including investor presentations, annual reports, quarterly reports, and other news – at the “company reports” section of Keweenaw’s website. You can also find news about the company – including press releases from a 26% shareholder who is trying to take control of the  board – at...

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Geoff Gannon March 22, 2018

Fairfax Financial Holdings: Large Upside Potential with Minimal Downside

Member write-up by: Alex Middleton   Introduction  In the past 10 years Fairfax Financial has achieved what can easily be considered sub part returns, however I believe that the company will outperform the S&P significantly in the next 10 years as a result of the improved rate of return on their investment portfolio and a multiple expansion on their stock.  One of the main reasons that their stock is undervalued today is because people are anticipating that Fairfax’s growth will underperform in the future as...

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Geoff Gannon March 21, 2018

Summerset (SUM): A New Zealand Retirement Village Developer with “Float”

Member write-up by: André Kostolany Investment Horizon: 5+ years Market Cap: 1,494MM NZD Type: Compounder Net Debt: 348 NZDMM Target Upside: 150% (ability to compound 20%+ p.a.) Price/Net Tangible Assets: 1.95x Country: New Zealand Price/Underlying TTM EPS: 18.0x Industry: Senior Living Price/IFRS TTM EPS: 6.8x   Summerset (SUM) is a retirement village developer and operator. It has created 20% CAGR in shareholder value since its IPO in 2011 and is just entering an accelerating growth period Summerset’s operating model is that it operates its retirement...

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Geoff Gannon March 16, 2018

Amadeus: An Aggregation Platform and IT Business That Will Grow Along with Airline Passenger Volumes

Member write-up by Philip Hutchinson   Amadeus is a large, Spanish-headquartered IT company serving customers in the travel industry, tied to the long-term growth of transactions in the global travel industry.   First, let’s talk a bit about what the company does. Although all of Amadeus’ activities relate to the travel industry, the company is in effect two completely separate businesses: the operation of a global distribution system (“GDS”) and the provision of software to companies in the travel industry – mainly airlines.   Amadeus...

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