Guest Introduction
Alex Morris - Founder of TSOH Investment Research
Author of "Buffett and Munger Unscripted: Three Decades of Investment and Business Insights from Berkshire Hathaway Annual Shareholder Meetings"
Background in wealth management before launching his own research service in 2021
Alex's Investment Journey
Discovered Buffett's shareholder letters in college
Drove from Gainesville, Florida to attend Berkshire's annual meeting as a college student
Started an entrepreneurial venture similar to StubHub for student tickets
Worked at RIAs (Registered Investment Advisors) for about 10 years while writing on the side
Launched TSOH Investment Research in 2021
Core Investment Philosophy
On Value Investing:
"Warren says, 'Charlie and I think there is no other kind of investment than a value investment. In other words, we don't know how anybody would invest in a non-value investment... Value is getting a lot for the expectable future cash flows in terms of what you're laying out today.'"
On Business Ownership Mindset:
"The minute you shift from just this ticker and the price and daily volatility to actual ownership, something changes."
On Understanding Value vs. Price:
"We understand the two concepts [value and price] everywhere, except when we try to invest... Then we go to the stock market and all our natural reflexes that we've developed are gone."
Time Horizons, Risk, and Volatility
Buffett and Munger distinguish between volatility (price fluctuations) and risk (permanent loss of capital)
Long-term thinking creates advantage in a market focused on short-term results
Position sizing reflects conviction and risk assessment
Alex's approach: "I'm a value buyer and a growth holder"
"I want to get a deal when I buy. But I'm willing to stay when the business recovers and shows continued growth."
Management Quality and Capital Allocation
Trustworthy management with aligned incentives is critical
GEICO example: After acquisition, Berkshire changed incentives to focus on long-term growth
"Once they bought the company [they could] tweak the incentives in a way to no longer worry about something that, while optically bad for the business, was objectively the right decision in the fullness of time."
On business leadership qualities:
"I look at someone like Satya Nadella at Microsoft... I have a sense for who he is. I'm very comfortable that... he has a broader vision and interest in the business."
Interest Rates and Investment Value
Buffett's View:
"Interest rates basically are to the value of assets what gravity is to matter."
Interest rates form the basis for opportunity costs and valuation
Buffett maintains a minimum hurdle rate (around 10%) regardless of prevailing rates
Focus on opportunity costs rather than precise cost of capital calculations
Inflation's Impact on Businesses
Businesses with pricing power can weather inflation better
Cash-intensive businesses suffer more during inflationary periods
Reference to Buffett's 1977 article on inflation as "the investor's enemy"
Business models matter tremendously during inflationary periods
Mr. Market Psychology
The stock market offers regular opportunities to buy businesses at discounted prices
Daily price movements reflect emotions, not necessarily business value
"This liquidity, this constant price discovery should be a significant opportunity for the long-term owner because you choose when or when not to engage with Mr. Market."
The danger comes when investors look to the market for validation after making investment decisions
The National Indemnity Case Study
Berkshire insurance subsidiary experienced dramatic business volume changes over decades:
1980: ~$100M in premiums
1986: ~$360M (6x increase)
1999: ~$50M (85% contraction)
2004: ~$600M (10x increase)
Emphasized quality underwriting over volume
"They explicitly told the employees that nobody would ever be let go at National Indemnity as a result of a lack of volume. Their concern was not the amount of business written, it was the quality of the business that was written."
Most public companies couldn't withstand the volume contraction due to market pressures
On Business Change and Evolution
Change is constant in markets and businesses
"When we look at the largest companies today, and the largest companies 10 or 20 or 50 years ago, they've changed much more than we're willing to admit and accept."
Example of GE's fall from prominence
Success requires continual adaptation and learning
Finding Meaning in Investing
Alex sees success balancing both personal and professional dimensions
Discusses the paradox of investing: those who stay for reasons beyond money often find both fulfillment and returns
"If you come here just for the money, you might not stick around long enough to see the results of what this pursuit can do for you, both intellectually and the people you get to meet and things you can learn."
The intellectual fascination of investing can be as rewarding as the financial returns
Key Takeaways
Investing is ownership of income-producing businesses
Quality of management and proper incentives are critical success factors
Market volatility creates opportunity for patient, disciplined investors
Time horizon advantage comes from understanding business value beyond price movements
Success in investing requires both intellectual curiosity and emotional discipline
Podcast Program – Disclosure Statement
Blue Infinitas Capital, LLC is a registered investment adviser and the opinions expressed by the Firm’s employees and podcast guests on this show are their own and do not reflect the opinions of Blue Infinitas Capital, LLC. All statements and opinions expressed are based upon information considered reliable although it should not be relied upon as such. Any statements or opinions are subject to change without notice.
Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed.
Information expressed does not take into account your specific situation or objectives, and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal, or investment adviser to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.
