73 Reds

Buffett didn't buy the company for a 5 year hold. And he used overvalued shares to do it. You can cherry pick a time period to be right about just about anything but the bigger picture doesn't distort the ultimate outcome.

Both parties made out well. The issue is really not debatable. I've been doing private deals for decades and there are always issues that arise after a transaction has been closed but as a buyer you anticipate and discount your purchase offer for any such issues. Buffett would have liked a cleaner General RE but he fixed the issues. That's life.

That's fine but your COBF namesake implies that you recall Berkshire's acquisition of General RE with overvalued stock. Worked out well for all parties involved. The definition of what is "overvalued" may be far different even for the same party depending on the circumstances.

Not sure I understand the question. Motivated sellers will accept a viable offer. If there are competing offers and a stock alternative is higher than any cash offers, why would a seller necessarily reject it? After all, once the transaction is completed, the seller can always sell any or all of the shares. And as has been discussed here, the quality and future of the acquiring company has a lot to do with "valuation".

High P/B provides an opportunity to use shares as currency for future acquisitions. Companies like BRK and Fairfax can prosper in any environment and if high valuation is the only thing wrong with the stock, I'd never sell in a taxable account unless the proceeds were needed for something entirely non-investment related.

We agree that management is highly important. In fact it is the most important factor to me in any public equity I would own. Great management neutralizes the notion that "overvalued" stocks must be sold.

@Viking, fascinating story - never heard of him before. Thanks for sharing. The lesson I take from your post is to invest in what you know. If you have a background in a certain field or area, seek out potential investments that others without your knowledge and interests might miss.

I'm not sure that Berkshire is past its prime. The reality is the company has dramatically changed from the days Buffett bought and occasionally sold equities. Companies like BRK and even Fairfax are impossible to value using DCF because there is no way to predict the makeup of each company even several years into the future. Since you are investing in Management's ability to create shareholder value with new purchases/acquisitions, indeed management is the most important asset for each of these companies. I believe there are incredible opportunities in health care and energy on the horizon and there is no reason why BRK could not allocate its vast resources in these and any other future investments where having buying power may once again prove to be an advantage. The main problem for Berkshire is we have long since been living in an era of free or very cheap money, yet even so Buffett has managed to more than hold his own. Which is why Berkshire is probably the best all weather investment one can own.

<< I can live with getting rich slowly and I'm always prepared for an opportunity! Cheers!>> Great mantra! It took me 10 years of poor investment decisions when I was young to figure that out. 2025 portfolio is largely the same as last year's and the 25+ year's before. All well-known household names where the investment thesis is either the same, or better than ever. Only significant add in the past 5 years has been Fairfax.

Been there. The "average cost" is probably skewed downward due to those who quickly succumb to their affliction. For lucky survivors its probably a lot more because of ongoing treatments/scans/therapies/preventative measures for the rest of our lives.

Exactly right. In fact I subscribe to Buffett's philosophy of evaluating whether an investment makes sense with an assumption that it cannot be traded for years. Takes self-gratification of watching a price ticker completely out of the equation and gets you to the heart of investing.

The flip side is in a market downturn for reasons having nothing to do with Fairfax, index funds sell all index holdings, including Fairfax. I think a lot of folks have become complacent to the risk of a longer term broad market downturn simply because we haven't experienced one for a long while.

OK, you took on debt, which adds a dimension of risk and cost and short term perspective. My point is for anyone with a long term horizon the issue is meaningless. FWIW, my investment results improved dramatically when I avoided the urge to trade and to use margin debt.

What is "long term"? Stocks go in, stocks come out. Index composition changes. The stocks that leave undoubtedly underperform while they are in the index. I think the issue is not index inclusion but WHY a stock worthy of index inclusion - whether or not it is added, does well. As said, I don't understand the focus on index inclusion which is merely a consequence of factors that truly are material.

Yep. Hard to understand the infatuation with index inclusion unless your time horizon is 10 minutes. I'd rather see an announcement that Fairfax will NEVER be included in the index - better buying opportunity and as you said, nothing about the company will change. Look no further than Berkshire - Buffett and shareholders could have cared less about index inclusion and performance didn't suffer.

Yeah, you know you've made it when you no longer need or even want to speculate, other than for fun. Can anyone recall any event of widespread speculation throughout history when the eventual outcome has not turned out bad for the last remaining speculators?

Brings to mind Buffett's two most important rules of investing: Rule 1, don't lose money. Rule 2, don't forget Rule no. 1. Easiest way to follow these rules is don't speculate - at least with money you can't afford to lose. Buy productive assets, preferably those that thrive in any economy. Avoid investments that depend solely on human psychology for success. In other words, buy companies that generate essential products and services, and productive, hard assets that provide acceptable returns regardless of variable economic factors. And avoid having to make too many investment decisions; every time you sell something two decisions are required and chances are one of them may be wrong or suboptimal.

Much ado about nothing, IMO. Ignore the stock price if you are in this for the long haul. Put in a limit buy order at whatever price you want to buy the stock and just follow the goings on of the company itself. One of the best pieces of investment advice I ever got is to ignore daily (weekly, monthly etc..) price fluctuations if you are an owner rather than a renter of the stock. Having an owner mentality made all the difference.

So reminiscent of Y2K and the dot.com era.

Notaries in the US have no interest in the document. They are merely acknowledging the indentity of the person signing the document. Almost anyone can become a notary - all that is required is proper eyesight. Notaries in Europe have a much more time-consuming role. More like a Medalion signature guarantee here for things like transferring securities. Medalion guarantees can be difficult to obtain depending on where you live. A little pushback on title insurance. Anyone who owns property here would be crazy not to obtain owner's title insurance, particularly since the cost is a relatively minimal one-time charge. I have seen homebuyers not want to purchase title insurance even when they finance a property where the lender requires mortgagee title insurance. They don't understand that the cost is next to nothing when they are already paying for lender insurance. Interestingly title insurance is the only insurance that provides no coverage for future events; it only insures title up to the date you take ownership. As such, it should be one of the most profitable and easiest risks for title companies to rate.

Yeah, I think we're all open to suggestions. An interesting thought experiment is to consider what would happen if all health insurance was instantly discontinued and every health care provider had to compete for business. Would patient costs go down, particularly for routine services?

The lawyers are partly to blame. And then you've got the profit motive. Shareholders can be a fickle bunch.

I think this discussion is largely circular. You also have to buy food, shelter, clothing, and other necessities. Is there anything more important than your health? Why should we hot have to pay dearly for quality health care? I'd much rather have an insurance driven health care system with the best available health care than a government subsidized system (paid for by the population in the form of higher taxes) with lesser quality health care providers. And when you self-insure you can negotiate the cost of major surgeries and procedures with your provider in advance. The issue is far from cut and dry. Should we suggest that Berkshire and Fairfax stop charging so much for reinsurance even though insureds require such insurance to ensure their very survival in the event of catastrophe?

Several years ago Buffett and Jamie Dimon worked on health care alternatives but eventually gave up. That says a lot.

Well, the average doctor visit isn't $30k or even $10k. And if you are poor and go to the ER, the visit is free.