racemize

all this news and worry for the past few weeks over a $1 billion dollar suit? Side note: never thought I would not care about $1 billion dollars...

It seems like the sweet spot is after the big value guys go in (BB) and before/during these analyst comments.

They are now 3 weeks out on the pre-order, though I don't know how many they had available initially.

here's the BB presentation from the other thread: http://www.fairholmefunds.com/sites/default/files/120815%20SHLD%20Presentation.pdf Shouldn't we move this whole thread over to the investment ideas?

GW can drastically underestimate the value of companies, e.g., see Geico for BRK where they bought the first half at a cheap value and then later bought the remaining half for a lot more--had the first half been on the books with its GW, the GW portion would not match the value paid for the second half at the later time. On the other hand, GW for poor acquisitions is worthless. I only give GW value for companies where the acquisitions are good (essentially only BRK at this point). I usually also evaluate on FCF and ignore book, as you are saying, which is simpler anyhow. It is nice to have multiple models for valuation though, as you can pick the most conservative one for determining whether to buy.

Not trying to derail your conversation here, but I was pretty concerned about Greenblatt's magic formula reported results and that study as well. I still don't understand why Greenblatt didn't post specifics on the formula--I was worried he cherry picked the best day/month specific date combo with the highest results.

Should you even rebalance? Buffett has an analogy about selling your superstar on rebalancing (advocating instead to just let the good ones roll). On the other hand, they are all fantastic and there is volatility, so perhaps rebalancing makes sense. I'm personally using a good bit of my portfolio to purchase positions in these (although I don't have MKL) whenever they get close to book, hoping for an edge over a mechanistic strategy. Hopefully, this isn't too much of a "driving looking at the rear view mirror" type of deal though...

I don't really understand the argument, taxes are only levied on profits, so by reducing your workforce/not growing, you are reducing your profits in the first place. Let's say he makes $2 in profits now, and pays $1 in taxes. He could grow it to $2.5, but now that the rate is 55% instead of 50% (random numbers) he chooses to layoff people and shrink, reducing his $2 to $1.75. Now he makes less money because of his choice rather than more money, even with the change in taxes. If his changes did not affect the $2, then why didn't he do that in the first place? Why not grow and reduce the fat?

Please don't tell me you are as stupid as Jon Stewart and think that balancing the budget equates to extinguishing the debt lol I don't think that's very fair--he did screw it up on the debate, but there is no way he actually thinks that. I think he just had an issue in the heat of the moment.

great video. I love the RSA animations.

I wonder what debt we would have without the wars, or at least the Iraq invasion. That's probably easy to figure out. Wikipedia, here I come.

One thing I'll pitch in here, I think most of us that were buying WFC were doing so at the 23-28 range rather than the current prices, so while there was a discrepancy in valuation between the banks, WFC had much better price appreciation prospects at that time. Also, I'm on board with most of the comments on banks and switching. I switched from BofA a few years back (god they were horrible, hopefully they have improved) to a local bank and haven't really looked back. It was an extraordinary pain in the ass, exacerbated by me buying a home very soon thereafter. Just wildly speculating here, but I wonder what percentage of WFC or any bank's customers would potentially be affected by "cross selling"? It seems like you have to have a decent net worth for there to be things to cross sell to you, no? What are all the cross-sell products that you can do for an average person? Banking+mortgage+credit card? Anyway, it didn't work for me, I have separate companies for every different financial transaction type, though when I had BAC, I did use their credit card.

It seems like the deleveraging cycle we're going through has to last a while longer and resultingly, we won't have a lot of general growth in the next few years. After that though, it seems like prospects should be generally agreeable (e.g., still have technology going for us). I'm not sure how long that first phase will take though.

I think it is just a way to ensure that you value cash more as you have less of it. If you are 100% cash, it is important to get stocks, and a double will do fine (but of course, higher is better). As you get to 10%, your money is more dear, so it should be restricted to those allowing for at least 3-5x. That sort of thing.

Saw a couple of articles on inflation in Iran. Probably not too useful for our investing, but here's the link: http://www.nytimes.com/2012/07/02/world/middleeast/inflation-plagued-iran-prepares-for-worse.html?pagewanted=all

apparently moore was feeling feisty after the debate.

I liked his comments on the feed-ins determining popularity of broadcast anchors. Pretty funny that the morning shows that were most popular were predicted by which ran Johnny Carson the night before!

wow, he was awfully cheery in that video. I sure hope he does well, as he is one of the few value investors available in my 401k.

I'm not too familiar with this one--do you mind elaborating?

Dejavu... I read almost the same thing about RIMM not too long ago. That is, people saying the IT department would never switch their Blackberriers to iPhones. *shrug* I have no opinion on Dell, so may the best analysis win. Sure, but it seems like phones that people use for business and personal is quite different than the infrastructure used by the company. E.g., IT has complete control over its own servers and presumably all desktops that remain on company premisis. Laptops->tablets maybe a different story though.

So, I've been reading Munger's Wesco letters (they are quite repetitive). However, while reading, I found the following section pretty interesting: Consolidated Balance Sheet and Related Discussion As indicated in the accompanying financial statemtents, Wesco's net worth increased, as accountants compute it under their conventions, to $2.22 billion ($312 per Wesco share) at yearend 1998 from $1.76 billion ($248 per Wesco share) at yearend 1997. The $459.5 million increase in reported net worth in 1998 was the result of three factors: (1) $395.8 million resulting from continued net appreciation of investments after provision for future taxes on capital gains; plus (2) $71.8 million from 1998 net income; less (3) $8.1 million in dividends paid. The foregoing $312-per-share book value approximates liquidation value assuming that all Wesco's non-security assets would liquidate, after taxes, at book value. Probably, this assumption is too conservative. But our computation of liquidation value is unlikely to be too low by more than two or three dollars per Wesco share, because (1) the liquidation value of Wesco's consolidated real estate holdings (where interesting potential now lies almost entirely in Wesco's equity in its office property in Pasadena) containing only 125,000 net rentable square feet, and (2) unrealized appreciation in other assets (primarily Precision Steel) cannot be large enough, in relation to Wesco's overall size, to change very much the overall computation of after-tax liquidation value. Of course, so long as Wesco does not liquidate, and does not sell any appreciated assets, it has, in effect, an interest-free "loan" from the government equal to its deferred income taxes on the unrealized gains, subtracted in determining its net worth. This interest free "loan" from the government is at this moment working for Wesco shareholders and amounted to about $127 per share at yearend 1998. However, some day, perhaps soon, major parts of the interest-free "loan" must be paid as assets are sold. Therefore, Wesco's shareholders have no perpetual advantage creating value for them of $127 per Wesco share. Instead, the present value of Wesco's shareholders' advantage must logically be much lower than $127 per Wesco share. In the writer's judgment, the value of Wesco's advantage from its temporary, interest-free "loan" was probably about $30 per Wesco share at yearend 1998. After the value of the advantage inhering in the interest-free "loan" is estimated, a reasonable approximation can be made of Wesco's intrinsic value per share. This approximation is made by simply adding (1) the value of the advantage from the interest-free "loan" per Wesco share and (2) liquidating value per Wesco share. Others may think differently, but the foregoing approach seems reasonable to the writer as a way of estimating intrinsic value per Wesco share. It immediately struck me that such an evaluation could easily be applied to Berkshire, although Berkshire at this point is much more complex than Wesco was then. Turns out, someone had already done the analysis for 2011 and 2012: http://seekingalpha.com/article/282116-berkshire-hathaway-worth-its-salt http://seekingalpha.com/article/740931-berkshire-hathaway-worth-its-salt-2012-update (As a side note, I had trouble following Dan Braham's line of thinking on this evaluation in the comments of the first article) This evaluation contrasts from the "investments per share" and "earnings from owned companies" approach, which I believe was advocated by Buffett more recently.

my hero--you just made my stock day!

Thanks for that link. I have added you to my already too long list of feeds on google reader. And please don't take offense about what I said about your article. I didn't mean to say that you had actually recommended going all in on those 4 stocks. I was just using it as an example for argument's sake. Ok, I failed at finding the rss link, norm or matjone, could you send it to me?

I did it too a while ago, and I think my result was pretty similar to yours. I think the key to mine was using extremely specific search queries (actual queries that I use). Perhaps most people do very basic searches in their comparison?

wow, finally got it to work. My results: Google, Google, Draw, Google, Google