No. of Recommendations: 17
having read many of your insightful posts, am curious how you weight trust other than retrospective [?]year return?
Reading the statements, basically.
Every 15 minutes you'll run into something that makes your brow furrow.
Not dishonest or illegal or immoral, but... What's that old song? Things that make you go "hmmmm".
Half the time it's simply things being incomprehensible when they didn't have to be.
You'll probably wonder at different things than I do, but you'll probably have a similar experience.
Nothing is bad, really. But there's always another one, and another.
As a random example, in almost the first post on this board, Manlobbi noted astutely
"But very briefly, the total economic value (intrinsic value) of the old BAM is exactly the same as the sum of the two new firms - the new BN (replacing the old BAM) plus the new BAM (the spinoff)."
I breezed past that, assuming it to be true. Certainly makes sense.
But the new manager company, current BAM ticker, is its own company now, with its own incentive schemes.
So there is another layer of dilution for the very-well-paid executives.
The shares outstanding are 392.5 million, but then you have to add another 8.6 million for dilution effects, and another 13.3 million in a footnote-like paragraph that are accounted for a different way and not included in the "per diluted share" numbers.
Total appears to be a bump of 3.4% in the share count beyond what's outstanding.
So, it appears to me that the value of BN plus the value of the [new] BAM is somewhat less than the value of the old BAM.
At a guess, management took the opportunity to reward themselves yet again.
As with many such things, it would take a LOT of digging to figure out whether and to what extent this is definitively the case, but it seems so.
This is certainly not a reason not to invest.
But when you find 5 or 10 or 20 such small things, you start to have doubts.
Many have commented on the regular corporate restructurings and spinoffs that, yes, sometimes makes some sense, but also making a long run tally of value trajectory near impossible.
And if you do piece it together, there is the issue that every couple of years there is a new metric introduced and discontinuation of figures you needed for your last value calculation method.
Put it this way:
I think I could say without fear of contradiction that there is a lot more corporate complexity and more inter-division transactions/agreements than is strictly warranted by the straightforward goal of maximizing value for shareholders with prudence and (sure) tax efficiency.
If the complexity doesn't arise from that goal, why is it there?
Management frequently seems disappointed, almost aggrieved, that valuation multiples aren't higher.
But they seem to do everything they can to make the structure and fees impossible to understand, assuring low valuations.
Ever heard of Partners Value Split Corp or Partners Value Investments Inc?
Ever found a list of the managers who benefit from the incentive pool?
None of these things is a big issue for me, actually.
The collection as a whole is the issue. Trust is an ineffable thing, and I stopped sleeping well with any meaningful position.
If it isn't to be a meaningful position, then it's not really worth the bother, in particular the considerable time it takes to keep up.
The notion of having a position is always a risk/reward issue. There's a price for everything.
I'm looking again now because it looks like it might be compelling on the reward side again.
But do I or don't I trust them?
Probably best for me to read another stack of their statements and see how my tummy reacts.
Jim
