jay21

I think his deal works out to better than 6% for him, based on the structure, no? No, I remember from a Reuters Buffett paid for the majority of the company and Heinz management would be replaced by 3G, a private equity firm with ties to Inbev. I don't follow Berkshire that closely because I only have a small position in the company. I read that Buffett was replacing the management from Heinz which is typically out of character for him. What rate would you expect Heinz to grow at under new management? I really like what I have read about Inbev management when I was looking into BUD awhile ago. I think 3G thinks they can improve margins a lot and will see a good return that way. Also, people think 3G knows emerging markets well and can accelerate growth that way. So double digit EPS growth for 5 to 10 years (basically earnings will double and then grow at a lesser rate thereafter).

Up 100, market looking frothy today.

I'll bump this because I came across a nice tidbit: Bond covenant quality declines to lowest level since start of index. Our three-month rolling average Covenant Quality Index (CQI) deteriorated in January to 3.89 from 3.79 in December, resuming the erosion in covenant quality for North American high-yield bonds that began last July. Investors are assuming more risk despite less yield, as average spreads to benchmark yields have tightened. The CQI is “weak” on our five-point scale, in which 1.0 represents strong covenant protections and 5.0 the weakest (see CQ Scoring Key in the Appendix). We began tracking the CQI in January 2011.

I'm a little concerned about BRK's future growth, then I remember they can buy more utilities, buy foreign companies, instate a dividend and repurchase stock. Then I become less concerned.

Huh? Please explain. if they buy profitable companies (with cash or stock) that don't have debt (or modest debt) they will de leverage the hnz capital structure. They will deleverage via margin expansion.

I thought the most interesting comment was how P&G's and Unilever's moat might be shrinking. I'll have to think about that and other branded products. Thanks for the notes!

I estimated BRK to be worth 1.8 BV awhile ago. But this is a stock that I would hold at FV and would sell if it becomes overvalued. There are probably tax implications for a lot of the people on the board as well.

Morningstar for five year data. But the F/S is probably the best place to look.

What do you call all that insurance float? He's been known to dabble in options in his personal account as well.

I believe Buffet could do 30 to 50%. I am sure he would use LEAPs, warrants, and some other strategies to get there instead of buying and holding great companies. I don't think it matters much. I feel the most important question is what type of returns is he capable of with >$200b in equity.

WEB is probably getting some warrants here too: http://www.sec.gov/Archives/edgar/data/1067983/000119312513060036/d487537d8k.htm makes the deal even better

http://www.marketfolly.com/2013/02/warren-buffetts-berkshire-hathaway-3g.html - Berkshire puts $4.4 billion in equity - 3G puts $4.4 billion in equity - Berkshire buys $8 billion of preferred stock - JPMorgan Chase & Wells Fargo with debt financing Great deal imo. Although very highly levered.

So whats the cap structure look like for this? $28b EV $4b debt $8b preferreds leaving $16b of equity? BRK seems to be paying $13-14b total, so maybe $6b common for BRK and $10b common for 3G. Does that sound right?

I did a little bit of work on BK. It seemed like they were trying to franchise more and own less. Also, they highlighted the Brazilian JV as providing a good amount of value. I am not sure how the store upgrades and menu changes are working. Ackman's presentation on BK: http://www.marketfolly.com/2012/04/bill-ackmans-presentation-on-burger.html

I'm still buying BRK and MKL under 1.5 BV. But maybe it is because i can't find anything else!

Seeing as how annual reports should be coming out soon, what ones do you feel are a must read for investors?

Baupost's view as we enter 2013: http://www.institutionalinvestorsalpha.com/Article/3152364/Baupost-Navigates-a-Tough-Yet-Still-Profitable-2012.html "stock market valuations are increasingly expensive but not extreme" Low corporate yields are a "manifestation of the overall interest rate bubble" or at worst "evidence that investors are accepting insufficient returns for the risks they are taking."

I think I remember hearing the 6% somewhere too but can't remember. I think in Lowenstein's or Hagstrom's book there was a remark that he won't use a discount rate lower than 10%.

It is not. There is an expectation of profit in investing, unlike gambling where it is necessary to have an edge to beat the field.

I liked the End of Wall Street

My thoughts are similar to Moore's on a macro level, but that doesn't affect my investing. I am worrying about a shock in rates when people lose faith in Central Banks as opposed to steadily rising rates, which would probably result from improving economies which may cause a neutral effect on multiples. I like well managed insurance companies in this environment who keep a short duration book. Shocks in rates can cause a hardening of insurance rates as capital is taken out of the system. Insurance companies with short duration portfolios will be the ones to take advantage of better interest rates and insurance rates. Also still think there's opportunities in banking, housing, autos, huge moated companies with reliable cash flows/dividends and jockey stocks.

I don't get how they are doing anything wrong though like Ackman was claiming. They are buying shares in arm's length transactions. Am I missing something?

What are people's favorite ways to play the housing recovery? I feel like I missed the boat on this one and most things I look at are getting close to fairly priced.

I've been thinking about the interest rate environment's effect on stock prices as well. I agree that low interest rates should prop up the multiples of most companies in theory, but I do not see outrageous multiples right now. I think it is because people have low expectations for growth. Interest will rise either due to improved economics or due to lack of investor confidence in central banks. Option 1 should have a net effect of 0 on the stock market and Option 2 will be bad for the stock markets ( I think disastrous because this option could shock rates). So caution should be used in theory. I do not really let this effect my investing though. There are still quite a few opportunities imo.

If anyone has a primer on these securities, could you please pass it along? Sorry for the low content thread, but I am looking into one of these and would appreciate any resources someone could point me to.