Book review: “Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future”

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I have to admit that before I read the book, I had a deep dislike for Elon Musk. I am not a big fan of egomaniac super star CEOs to put it mildly.

Over the years I followed Tesla but not in much detail, I always thought it is just a big hype. But recently I had the chance to catch a ride with a Model S and was very positively surprised. So as part of my vacation book package I downloaded the Elon Musk biography.

What did I learn from the book ?

1. Elon Musk was not the founder of Paypal. He was the founder of X.com which merged with Paypal. This turned him into a big shareholder and he made a lot of money but technically Paypal was not his idea.

2. His goal for life is to bring people to Mars because he is afraid that the Earth at some point in time is uninhabitable. That’s why he founded SpaceX. Tesla and SolarCity are more like an “accident”. Hi heart is in SpaceX.

3. At work level, he seems to be a real Axxxxxx, he fired his 10+ years personal assistant because she wanted a pay raise. I am not sure if you need to be such an idiot to be successful. However after Steve Jobs’ success many tech founders seem to think so.

4. He does scientific mindset and understands a lot of the technology. He never accepts the status quo similar to Steve Job’s “reality distortion” ability. For some reason, reality often follows his wishes. One example for instance is his insistence to use normal, uncertificated tech for SpaceX rockets instead of expensive, certificated stuff. Everyone said it wouldn’t work but it did.

5. Reading the book, it is clearly that he is a very dedicated guy who got much farther than anyone else thought, both with SpaceX and Tesla. In both cases he challenged fundamentally how things are done.

6. Nevertheless I would still never invest in one of his ventures. He always moves “on the edge” and the financial crises almost killed everything he had. There is little “margin of Safety” in what he does.

Overall, after reading the biography I still think that Elon Musk is still an egomaniac and also narcistic founder/CEO but I do now have much more respect of his achievements. And if he comes up

The book itself is written quite well. It starts slow with a lot of (in my view not very interesting) childhood stuff but then gets much better. Overall I definitely can recommend it as one of the better CEO biographies I have read over the years.

 

 

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Silver Chef (ISIN AU000000SIV4) – The “Better Grenke” from Down Under ?

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Following my previous posts on Australian stocks and Australian leasing companies in particular, it is not a big suprise that my first Australian investment is an Australian leasing/financing company called Silver Chef.

The company / the business

Print

Silver Chef is an Australian company which according to the website “delivers equipment funding solutions that help small businesses reach their full potential.”

The company went public in 2005. Some key figures (at 9,20 AUD/stock)

Market cap: 323 mn AUD
P/E 2014/2015: 15,2,
P/B 3,11
Div. Yield 5,7%EV/EBIT 20,2
EV/EBITDA 4,9

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Good or Bad Capital Allocation: Example SAP SE (ISIN DE0007164600)

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In my previous post on capital allocation, I had mentioned SAP as a company which might have overpaid for an acquisition. A reader commented that SAP is a good capital allocator because they increased EPS over the last 10 years.

Increasing EPS itself in my opinion is not a “proof” for good capital allocation. Actually, this itself says nothing at all. If you have a stable business, just retaining earnings and doing nothing will increase EPS as long as interest rates are positive. Good capital allocation is when you create value from retained profits.

The best way to find out if value is created is to look at how returns on equity and return on capital develop over time.

Let’s take a look at SAP over the past 17 years with some per share numbers:

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Deutsche Pfandbriefbank (ISIN DE0008019001) update

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In July last year I introduced Pfandbriefbank as a “forced IPO” special situation. That’s what I wrote at the end of the post:

As I have said in the beginning, PBB is a simple case: I do think that the “forced IPO” of PBB from the German Government has created a typical special situation with good upside potential. This is clearly no “shooting out the lights” grand slam home run. In golf terms I would say that this is a “solid 6 or 7 iron” shot.

Looking at the perfomance of the stock since then, it looks like in Golf language that my “solid 6 or 7 iron” nevertheless “landed in the rough” with the stock being down -23% vs. -9% in the CDAX.

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Capital Allocation & Capital Management – What is good and what is bad

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Everyone who has read Thorndikes book “The Outsiders” clearly knows that capital allocation& capital management is one of the most important factors in creating long term shareholder value. After I watched Thorndike give a briliant talk at Google on this topic, I decided to write down my own thoughts on the topic.

What is CAPITAL ALLOCATION & CAPITAL MANAGEMENT anyway ?

CAPITAL ALLOCATION is simply what you do with your profits/cash inflows once they are in your account. You can do a lot of things with it. Thorndike in the talk above uses 5 uses, I would add another 2 (in bold)

1. Reinvest: Maintain your existing assets/infrastructure/operations
2. Grow organically: Expand your business by buying more machines/outlets/opening stores etc.
3. Expand your business by M&A
4. Pay back liabilities (debt, payables, pension liabilities etc.)
5. pay dividends
6. buy back shares
7. just leave the cash on your account and wait for better opportunities

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Some links

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Tough year: Leucadia’s 2015 shareholder letter

Though year, too: Loews 2015 shareholder letter and  annual report

Kerrisdale Q4 letter with a snapshot of insurance broker Brown & Brown

Great Ted interview with Linus Torvald (creator of Linux)

Former coal giant Peanody filed for bancruptcy protection

Swiss watch makers are still waiting for a recovery

A quick look into the complicated Energy Transfer /Williams NatGas pipeline merger 

 

Kinder morgan (KMI): Asymmetric upside potential

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So let’s move on from focusing on the bad things and look at the the things that I like at Kinder Morgan. While I was writing this post, I found a very good blog post from Glenn Chan from 2 years ago which I can only recommend and includes a lot of interesting points about Kinder Morgan.

The Management:

Rich Kinder, age 71 owns 11% of the company and was famous for paying himself only 1 USD salary during his time as CEO.

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Kinder Morgan (KMI): Slow moving train wreck or Contrarian opportunity ?

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In late 2014 I started looking into oil related companies. I have looked at a couple of energy related companies like explorer Peyto, LNG liquification terminal Cheniere , Consol Energy and Gaztransport. I only bought Gaztransport which I then sold 6 weeks later. As I am still interested in the Energy sector, I will cover some stocks from time to time.

Kinder Morgan, the US pipeline owner/operator looks like another typical potential contrarian “Value investment”.

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What I liked at first sight: Read more

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