(a) "We like pessimism because of the price it produces. Optimism is the enemy of rational buyer."

• Approach stock prices as a long term buyer just like how you approach food price
• Appetite to buy (consume) exists even when prices are low

(b) Stock price as a currency for M&A in stock

• Intrinsic value versus market value
• Market value >> Intrinsic value shouldn't be the only driver for M&A

(c) Toad and princess analogue to M&A

• Cannot take cigarette butt approach to investing
• PE of target may be attractive but merged entity may see rerating of PE

(d) Pitfall of judging retained earnings and dividend policy of group company

• Aggregate result may be poor but core business might not be

(e) "Just because you paid 6* book value, doesn't change the RoCE of manager"

• Assess performance by their RoCE and not your price per share
• Best business returns typically come from company doing the similar thing today as they were doing 5-10 yrs ago

(f) Focus on economic characteristics of target company

• competitive strengths and weaknesses
• quality of people
• no need to visit facilities

(g) The tale of Gotrocks and Hadrocks (importance of direct investing):