#64 - The Value Disciple: Tobias Carlisle on Buffett's 3 best deals and why value will come back into favour

Stephen Clapham (0:02)

Hi, I'm Steve Clapham, and welcome to the Behind the Balance Sheet podcast, where we meet leading investors and commentators and educate ourselves about the world of investing and the world. Our mission is to remove some of the mystique around investing and improve our understanding of successful investors' strategies and tactics. Behind the Balance Sheet is an investment training consultancy. We help professional investors up their game in financial analysis, and we have an online school. Over a thousand students, professional and amateur, have taken our courses. Our flagship, Analyst Academy, helped one young analyst land a dream job as a partner of a major London edge fund, and helped another, a successful entrepreneur, improve his investing confidence. He made a seven-figure sum in year one.

Check out the school on our website, behindthebalancesheet.com, where you can also find the show notes to this podcast. And while you're there, don't forget, sign up for our popular and free weekly sub stack. Hit the sign up button on the top right of the homepage.

Most AI tools today are very good at sounding right. The summary is clean, but can you actually trace it back to the filing, the transcript, the specific passage that drove the answer? Or are you just trusting the confidence of the output? For investors, that's not a minor concern. A missed filing, a mis-weighted source, context that got lost somewhere in the retrieval chain, those aren't edge cases, they're how decisions go wrong.

AlphaSense is the AI platform built specifically for this. They own the content, over 500 million curated documents from broker research and expert transcripts to filings and earnings calls. And they own the retrieval layer on top of it. That means every answer links back to an exact verifiable source. Because the answer is only as good as what's underneath it. And with AlphaSense, you know exactly what that is. See it for yourself. Get a free trial at alphasense.com/btbs.

That's alpha a l p h a hyphen sense.com/btbs or Behind the Balance Sheet.

My guest today is Tobias Carlisle, one of the best known advocates of deep value investing and someone I've known for a number of years. His style of investing has had a difficult stretch for well over 15 years now, but he thinks the pendulum may finally be ready to swing back, which is interesting because he hasn't been saying that. His latest book Soldier of Fortune draws a really interesting parallel between Warren Buffett and Sun Tzu. Successful investing is less about maximizing your gains than making sure you never suffer catastrophic losses. We discuss that idea, why Toby thinks investors worry about value traps but forget about quality traps, how many stocks you really need in a portfolio. And we explore three of Toby's favorite Buffett transactions, Gen Re, BNSF and Japanese Trading Houses. Toby explains why Buffett issued stock to buy Gen Re and the real genius behind the BNSF purchase. We also discuss AI, Berkshire's more recent moves and why Toby, who historically has been happy to buy an average or even a poor business as long as the price was right, has changed his own thinking about quality.

So Toby, hi, welcome to the podcast. It's great to be in touch with you again. I haven't seen you since Omaha last year. We had dinner, but we haven't done this on my podcast. We've done an interview on Real Vision before. I always start by asking people, did you always want to be an investor? Where are you like Warren Buffett, collecting your newspaper, run money and investing it into the hot stuff of the day? But I know that's not true of you because you were actually an M&A lawyer, which probably sounds more profitable than being a value investor these days. What made you quit law and get into investing? Was there a single thing or what happened?

Tobias Carlisle (4:23)

Yeah, I grew up in a little country town where I didn't know that anybody could be an investor. It wasn't a job that anybody did. It's not really a job.

Stephen Clapham (4:34)

It's certainly not a job. We are mutual friends. Sure, operates.

Tobias Carlisle (4:40)

And then I went to university in the capital city of the state where I grew up in Australia in Queensland. I went to university in University of Queensland, studied law, came out and practiced law.

I had been reading Buffett at university. Someone gave me security analysis. The original like 1934 edition friend of mine, he likes classical literature. He was like the richest man in the world, owns an insurance company. And I thought, well, that sounds pretty boring. I don't want to do that. And he said, but he's an investor and he describes what he does in these letters that you can read online for free. So I read the letters and it made sense. And at the same time, I was working in corporate law, which at the time, this was early 2000s. It was the, I started on the day of the tech wreck, the day that the tech wreck began. I didn't really know. I wasn't really focused on that stuff, but the stock market fell over. Tech stocks got blown up. I was already thinking as a value guy, because I'd read the security analysis, particularly the chapters on liquidation value and stuff like that.