Comparing Private Equity vs. Value Investing (Warren Buffett) ii. Analysis of Multi-bagger Stocks (>10x Returns in the Last 15 Years). Kevin Martelli.

54 KB – 56 Pages

PAGE – 1 ============
A Perspective on Value Investing i . Some Thoughts about a Career in Finance: Comparing Private Equity vs. Value Investing (Warren Buffett) ii. Analysis of Multi – bagger Stocks (>10x Returns in the Last 15 Years) Kevin Martelli Martek Partners Lausanne, Switzerland

PAGE – 2 ============
2 The present document has been prepared by Martek Partners SA with the purpose of sharing information about some of its general views on business analysis and financial markets. Unless otherwise specifically stated, the information contained herein is made available only for the intended recipient, to which this presentation is addressed, for informational purposes only. The information contemplated herein will not represent by any means any offer, diligence or recommendation to buy, sell or acquire any sort of securities or investment funds, nor participating in any other operations, or providing any advising or investment service. It is not contained below shall not be used in isolation to formulate any investment decision nor interest of any other kind. Martek Partners SA recommends you to obtain advice on your investments from a different independent source. Should you have any inquiry regarding your investments, you should seek advice from an independent consultant. Martek Partners SA expressly declines all responsibility towards any person, action or omission, as well as the total or partial consequences derived from third parties, which may be based total or partially on the contents of the present document and shall not be responsible for any damage or prejudice derived from the use or consequence of the use of the information contained herein, including, with no constraints, any loss of benefit or any other direct or indirect prejudice. Important Disclosure

PAGE – 3 ============
3 Key Questions 1. What can be learned by studying how Warren Buffett turned $ 1,000 in Berkshire Hathaway into $18 million over 50 years (1964 – 2014)? How compare to private equity? 2. In evaluating an investment, what are the factors and risks that need to be addressed carefully? 3. Is there a relationship between the volatility of a security and the risk of permanent loss of value? 4. Why the concept of risk – return is very different if you change the time frame from short – term (12 months) to long term (5 – 10 years)? Does it makes sense to evaluate investments with a 12 – 18 months time frame?

PAGE – 4 ============
4 Data in USD000s (k) A unique story of long term value creation, very well described by Buffett and others Many lessons to be learned Age of Warren Buffett 59bn 36bn 17bn 3.8bn 2.3bn 1.4bn 620m 376m 67m 19m 34m 25m 10m 8m 7m 3.4m 2.4m 1.4m 1m 140k 20k 10k 6k 5k 67 billion Some additional facts: – – – Even minority shareholders would have achieved a return of 18, 000x over

PAGE – 6 ============
6 2001 – 08 Investment Banking at Rothschild (Milan) and Credit Suisse (Milan, London) Worked mainly in mergers & acquisitions , but also got exposure to other investment banking areas (e.g. equity capital markets, high yield, debt restructuring) as well as different industries (e.g. media, telecom, consumer, industrial, banking, insurance) In 2006 – 07 I worked on several potential leveraged buyouts with private equity clients in the media / yellow pages business 2008 – 12 Investments Team at Exor (Turin), listed holding company Member of the investment committee of JRE, a joint venture between Jardine, Rothschild and Exor to make private equity investments in Asia 2013 – 17 Launched Martek Partners (Lausanne), advisor to an investment fund in publicly listed companies with a long term value approach A Few Words about my Career Background

PAGE – 8 ============
8 Historical Returns: Berkshire vs. S&P 500 From 1964 until 2014 the stock price of Berkshire Hathaway achieved 21.6% annual return vs. 9.9% of S&P 500 (US equity index) Most equity funds underperform Interestingly >80 – 90% of investment funds fail to beat the S&P 500 over 5 – 10 year periods An interesting paradox The greatest investment return of all time has been achieved by one of the Source: Berkshire Hathaway 2014 annual report and SPIVA 2014 US Scorecard of investment funds 21.6% 9.9% Compounded annual return 1964 – 2014: On risk & volatility Buffett stated that he would much rather earn a lumpy 15% over time than a smooth 12% Berkshire was down 50% 3 times in its history

PAGE – 10 ============
10 1. Being a learning machine : Buffett spends 50% of his time reading . According to his business Warren [Buffett] is one of the best learning machines on this earth. 4. : Berkshire Hathaway invests the premiums of its reinsurance and insurance companies, which effectively provide Berkshire with a permanent and extremely low – cost source of capital 5. Becoming the preferred buyer of companies : since Buffett, unlike private equity players, does not sell his majority – owners who care about their business future prospects, even after they sell them 3. Focusing on long term investing and avoiding permanent loss of capital : Buffett is well known to be indifferent to short term price volatility uncertainty regarding value), but is very much focused on avoiding permanent loss of capital 2. Sticking to his “circle of competence” : Buffett invests only in businesses he understands and is able to predict, avoiding industries that are too competitive or driven by disruptive innovation

PAGE – 11 ============
11 Warren Buffett is not the only one to have achieved great long term returns, here are some other examples of value investors to learn from Seth Klarman , Baupost Capital (investment focus: USA, Global) Mattias Westman , Prosperity Capital Management (investment focus: Russia) Chetan Parikh, Jeetay Investments (investment focus: India) Li Lu, Himalaya Capital (investment focus: Global) Lei Zhang, Hillhouse Capital (investment focus: China) Other Value Investors with Great Track Records

54 KB – 56 Pages