mcliu

The $1 BV of BRK has a much better collection of underlying assets than the $1 BV of FFH.

Not sure if I agree with your assessment. Investing should be prospective based on your expected returns and discount rate. Just because the price is the same as it was 10 years ago doesn't mean it's a good deal. Ex. Intel traded at $74 per share in late 2000 vs. $21 per share today, doesn't mean it's undervalued.

Buffett also knew a lot more today about investing than when he started, so if he did 30% then.. Maybe he's saying based on what he knew today, that if he only had $1 million, he could achieve those returns.

Was merely illustrative. If it's worth $40 and you sell it at $40 waiting for it to get back down to $20, that's not timing....which was my point. I think we all agree on the micro on this point; the issue is applying it to macro (at least if I understand what you are talking about well enough). From my point of view, it is hard enough to figure out IV for an individual company--attempting to know IV on a market level seems very hard, and I certainly don't think I could profit from my own market calls very well (e.g., you can be wrong for a long time before the market corrects). If your system works at a macro level, then I'm glad for you! (As a side question, haven't you been concerned at the macro level for more than a year at this point? Did this cost you gains in the short term that you are hoping to recoup if/when a market correction happens? Basically, is your system yielding you more gains than you otherwise would have?) As to calling it "timing", I think that just comes from a heavy skepticism about whether such macro calling systems are reliable and/or profitable. Micro calls are tricky enough as it is. My attraction to value investing is its simplicity in concept--making macro judgements takes me well out of the simple concept and into areas where we can be easily fooled by trends/models/etc., at least in my opinion. Awesome response, seriously. Yes I effed up early last year. Fortunately, I reversed course quite quickly and learned from it. In a nutshell, I was purely looking at the broad market valuation and concluded the risk/reward was highly unfavorable. What I did not take into account was sentiment (of various forms....). So the overall risk/reward was not in my favor - valuation was, but everyone was so negative that there were only buyers remaining in the short-run. So now I look at both.... Lesson learned - sentiment rules in the short-run.... For example, sentiment became extremely negative after the election. And even though valuations still weren't favorable, I was loading up in order to take advantage of the extreme pessimism. Right now every single aspect is lining up in favor of being defensive (extremely?)... 1. valuations suck - GMO is projecting less than 3% per annum over next seven years 2. optimism is at absurd levels 3. Citi Economic Surprise index is plummeting - i.e. the market is highly susceptible to downside surprise at the moment..... Not saying BAC and AIG are not cheap long-term....I just think things are lining up for a very ugly sell-off that will provide many more opportunities in aggregate that will supercede whatever is available right now. Don't you think there's a certain speculative component when you make the comment that things are lining up for a "sell-off" that may or may not come? I guess you really should take a probabilistic view on if/when/magnitude of a downturn, and the expected returns between now and then.

http://en.wikipedia.org/wiki/Modigliani%E2%80%93Miller_theorem

How do you know the date?

Has anyone considered shorting bonds, particularly those with longer durations? Would love to hear your thoughts. Also, what would the best way to short bonds as a retail investor?

Good catch. :) Anyone know how recent this interview is?

Does anyone invest in emerging market securities (ex. Thailand, Philippines, Brazil, etc..) on this forum? Would love to hear your insights. Particularly on: - Value opportunities (do they exist?) / Market sophistication (more opportunities since investors are less sophisticated? - Logistics of trading (how would you buy/sell from North America?) - Obtaining company data (in English) Cheers,

+1 Just to add my two cents. I think people can recognize that the $/GB for HDDs will drop just as quickly as SSDs especially given the high fab costs/capex going forward for SSDs using under 22-nm transistors.

I'm not sure if my thinking is right, but these capital intensive businesses serve as great compliments to the insurance businesses in that, you're invested with long-term asset/liability matching with highly predictable returns. It enhances your capital intensive business' competitive advantage by providing them with the lowest cost of capital (compared to accessing debt/equity markets) in the industry and it enhances your insurance firms' competitive advantage by providing consistent returns (compared to most investment programs at insurance companies) on your float which increases your pricing abilities in underwriting..

Could you explain this point? Not saying you're wrong, but I'm not clear what you're getting at. Wouldn't a capital light business also do the same? I think the problem with a capital light business that generates significant cash flows is that you need to consistently find places to reinvest the cash. Given the amount of cash flowing into BRK, it's impractical for WEB to consistently find capital light businesses to invest in. With high capital intensity, a significant portion of the cash flow is automatically reinvested, and it's accretive to the value of the business as long as it earns more than the cost of capital.

Isn't the idea of WEB buying capital intensive businesses that they earn a return on capital on the marginal dollar of capital invested that's higher than the cost of capital. Hence, each dollar invested will be worth more in the future than it is today. That way, these businesses can absorb the billions flowing into BRK, without him needed to continuously find new investments. Also, there's probably few attractive non-capital intensive businesses at that scale for WEB to invest in.

Despite the seemingly large cash balance (which is really not so large after excluding debt), how do you guys get comfortable with the management's capital allocation decisions? It seems like the evidence points to: - Poor timing of buy backs (more at the peak, less at the trough) - Issuing dividends instead of purchasing shares - Expensive acquisitions and lack of transparency on acquisition performance (especially given the recent Autonomy debacle at HP)

A lot of conglomerates trade at a discount to NAV. I think the discount/premium is really a function of the value of the management team. http://www.investopedia.com/terms/c/conglomeratediscount.asp#axzz2DzzFi45B

I think there's been a couple of threads on this, but no real conclusive answer. I was just wondering if there's a website that compiles a list of special situation investments that we can look into. Reorgs, spin-offs, split-offs, etc.. If not, is there any analyst research that covers this area? Thanks,

How did you guys get comfortable with Dell's capital allocation skills? There doesn't seem to be much data on the IRRs for the significant past acquisitions. How do you know they will achieve reasonable returns with their large acquisitions? I'm looking at Q2 and it seems like PC business revenue is falling much faster than the Enterprise business. (Is there a way to find operating income by product instead of business unit? That will add more colour to whether Enterprise can actually drive value going forward.)

Comments? His buddy Chanos is/was short DELL, so maybe he decided to get out based on what he believes market sentiment will be for the short term/medium term. It sounds more like he exited based on short/medium-term issues with the non-PC business rather than sentiment. Do you have any insights into the performance of the non-PC business last quarter vs. the quarters prior to that? Thanks. I just don't buy that he exited based on lower than expected non-PC growth versus PC revenue decline. Would he really be making decision on fluctuations in revenue growth in the near term/medium term, given the situation for large enterprise and the public business in light of Europe? That's far too close to what the analysts do each quarter. Now, it does sort of sound like he doesn't think that cash will be used wisely at DELL. That is a different rationale for exiting, but he doesn't commit to that viewpoint. I have no insight in addition to what DELL publicly discloses in its quarterly report and CC. Maybe he's uncomfortable with the downside risks now that a lot of the balance sheet that protects the downside's converted into streams of income that may or may not exist in a few years?

Sorry for the troll, but the Ethics guide says you should refer to yourself as CFA Charterholders. ;D

Would this be available for free anywhere in Canada like at the libraries? What do you guys think of Value Line vs. Morningstar vs. Databases like Capital IQ/Bloomberg?

Dell says that they've done about 10 billion dollars worth of acquisitions since 08, have already collected about 9 billion in revenues and have increased revenues by 90% from time of purchase. Thanks oldye, do you know where I can find more colour on that?

Do you guys know if there's a way to estimate how Dell's acquisitions have performed since their acquisition? Or if there's a way to break-out acquisition revenues/operating income from existing businesses? Also, does Dell breakout gross margins by product line? I find what Dell said about growing EqualLogic's customer base from 5,000 to 30,000 to be quite interesting. If they're able to ramp up distribution/sales at that rate, these pricey acquisitions don't seem that expensive.

Should you be looking at EBITDA when you're an equity investor? Isn't net income what ultimately flows to the stockholder?

DCFs are inherently sound if you can correctly estimate the cash flow and you have an appropriate discount rate. I think the problem is using the CAPM as a basis for determining the discount rate.

Brings to mind whether investors like us are actually able to make better decisions vs. the seller.