John Hjorth
-
Posts
5,129 -
Joined
-
Last visited
-
Days Won
14
Content Type
Profiles
Forums
Events
Posts posted by John Hjorth
-
-
-
"The real problem" here is, what's going on in ones brain with regard to "opportunity cost" - the techs have been smoking BRK dearly for quite some time. It's just so increadibly hard to cope with, mentally.
Surprised that you would say that. BRK doesn't seem like a particularly hard hold to me. It does not face any clear existential threats. The intrinsic value marches steadily upwards and the stock price has moved up reasonably as well.
If you hold a retailer in today's environment, you may have real concerns about the business model. Restaurants are hard to hold - something like KONA mentioned here. A high flyer like Tesla. As I understand it, Tesla loses money on every car. Will that turn around at some point? Will government incentives be reduced and hit adoption? Will Tesla be the winner?
If you are looking for 20% CAGR returns over the longer term, you don't hold BRK. There will most certainly be stocks that outperform BRK over the next 2, 5 and 10 years. Some stocks will double over the next 2 years. I hold some that I think have that potential. BRK stock will not double.
On the other hand, BRK is reasonably predictable. It will not only likely survive, but would likely become more valuable if the economy hits the skids (through deals, stock purchases and acquisitions). Very likely to trade materially higher than today in 5 and 10 years.
In general I agree with your post, StevieV,
What I was trying to express, was that it has has been hard for me to suppress my mental propensity to buy the techs. It is that propensity, that I personally find hard to cope with. I like them all [the techs], and what they do for us all, it's just too much GARP investing for me.
-
Demanding absolute consistency in another person is ridiculous. We are all complex human beings that often do and should be allowed to change our minds, act in ways that differ from what we have previously espoused, etc. Please consider that passing judgement on someone for what you perceive as inconsistency might imply that you are expecting them to conform to your simplified model, which may be a byproduct of your mental laziness rather than a failing of theirs.
Tremendous post, snow pea,
Please keep them coming, thank you.
-
Investing is an act of arrogance that everybody is wrong.
With BRK this won't be the first time that everybody is wrong. Funny that the world always finds that out in hindsight. This time won't be different.
I do look forward to the day when we do buy that 50 cent dollar. Now that is a happy thought in my mind with my (very) large position.
btw: As John Hjorth has posted before, SemperAugustus has done the finest job with their in depth analysis of BRK. I re-read the section on under-reported earnings buckets at BRK that in effect add over $100 B of IV. ;)
With regard to the first sentence of your post, longinvestor, I just have to steal the content of a very short post made by rb here on CoBF recently in another topic: "I'll steal that line!" [Please feel free to call it "double-stealing" - for my part! [lol]].
That first line of yours, in your last post in this topic - is to me - just so true. It is all about being consistent to your thesis, and at the same time being factual, looking at the facts, as is.
The facts that matters to you, may be totally different between each of us. We simply can't all be right on this, nor all be wrong.
- Again, I hereby nominate you, longinvestor, as candidate to the CoBF poster of this week.
- - - o 0 o - - -
"The real problem" here is, what's going on in ones brain with regard to "opportunity cost" - the techs have been smoking BRK dearly for quite some time. It's just so increadibly hard to cope with, mentally.
Personally, I think I'm getting better at this game, - mentally -, over time.
That does not imply, that I'm good at it, yet, nor that I'll ever be.
- - - o 0 o - - -
It's just such a fascinating experience to push ones own mind absolutely to the limit, which is to me, what I'm doing here.
-
valueinvesting101,
I'm pretty sure, you can't find that in the Yahoo clip.
-
I really like the approach of yours to the Berkshire float in post #84, rb,
Thank you for sharing your thoughts.
I had a number inside my head in the same range while I was thinking about doing a calculation based on the information in the 10-Ks and discounting it with a WACC, just by looking on the numbers and without doing the calculations.
So in the area of USD 30B it is, give or take a bit.
- - - o 0 o - - -
Good to have you back.
-
Just hilarious, Jurgis! [ : - ) ]
- - - o 0 o - - -
On a more serious note:
I really want rb to chime in here, on:
1. His thoughts about the discounting of the float liability,
2. His further comments about the piece by SlowAppreciation.
- - - o 0 o - - -
I hope that rb is just having a good time off the board in the summer period up there in Toronto.
-
Added to BRK.B - quite some, based on the discussion in the topic: "Berkshire - cheap?"
-
I hope your are right, longinvestor.
I think within the last almost five years, there has only been one day beside this, where I have been allocating more capital than today. That day was the day after the Brexit vote, buying SAN.
Today I added to BRK.B, because of the talk and discussion in this topic. No more fooling around with buying in drips.
USD relative to EUR has been down quite some today, also [important for me as an European investor], likely because of all the talk about the political gridlock in the US with the health care reform.
-
SlowAppreciation,
Semper Augustus February 2017 Client Letter, p. 35, top schedule. 4 methologies.
-
Great discussion - thank you all,
- - - o 0 o - - -
I think I read somewhere in the past, that Bershire lags analyst coverage... - not! It's actually one of the best covered companies in the world! - due to this board! That's meant as a compliment to my fellow board members!
- - - o 0 o - - -
Personally, I have a habit of thinking of the float and the deferred taxes in the Berkshire balance sheet as financial obligations basically free of interest [without discounting them], however the nature of those obligations separately are very different, and and the same time a bit similar.
I have never moved myself into the for me mentally unknown territory to try to estimate their net present value. If I should try to do it with the float, I would most likely use the provision triangles that we have access to from the 10-Ks, and try to discount the payouts using a WACC.
This approach is basically a calculation based on a liquidation perspective of the liability, based on hindsight [histocal experience] projected to the future, the provision triangles are naturally dynamic over time etc.etc.
After all, what rb is pursuing, is a method for doing a rough estimate of the overall discount to apply to the Berkshire float, so I think - with all the flaws inherent in this method - that it's better to try that than just doing nothing, if you're pursuing to do the discount.
Edit:
The percentage table on lower part of p. 91 in the 2016 10-K will be where to start, and then decompose total float on GEICO, Gen Re, BHRG & BH Primary to do the math.
Edit 2:
Total float year end 2016 is stated to USD 91.6 B, ref. the February 25 2017 Press Release. At p. 87 at the top in the 2016 10-K there is a specification of the part of the float, totalling USD 76.918 B, ref. that separate post in the Berkshire balance sheet year end 2016.
-
Valuing BRK on book makes less and less sense as time goes on. It used to be mostly insurance cos with a portfolio of publicly traded stocks and a few operating businesses on top, but now it's also bunch of very large operating businesses of various kinds. The two-column valuation method makes most sense, IMO.
I certainly wouldn't compare the book value of BRK to GOOG or whatever...
Q: Do you think the equity positions in Berkshire will do better for Berkshire going forward or the wholly-owned businesses?MUNGER: Well I think that wholly owned businesses will because we won't be paying any taxes on selling and I think they’ll continue to grow and I think they'll do better. I think the wholly owned businesses of Berkshire—or the the 80% owned or what have you—are on average, better than the S&P. So I think we'll do better in that part than the S&P. And I don't think our stocks located in a corporation subject to taxation will do enough better than the S&P when paying the taxes. But if we're buying the stocks with the float in some insurance company, of course it changes.
But no, I would say that of course, if you buy Berkshire, you should not be buying it on the strength of its little insurance portfolio.
People who buy Berkshire—when you bought Berkshire back 30 or 40 years ago you were getting a bunch of marketable securities that did this, count em up and the businesses were free. Of course those people made a lot of money. We outperformed the market by miles in those days and the businesses did well. And now, we've got businesses that are averaging out doing well and our marketable securities are a small percentage of our cap.
There were years when we had more marketable securities per share than our book value per share. Now, it’s quite different. And of course the market at its present modal—it’s a different world. The one thing about Berkshire that's interesting is we do get some opportunities that other people don't get. If you're 3G and want a partner for your next deal, who the hell are they going to come to? They know we're a good partner, so we see stuff other people don't see. That helps.
You get $106/share in Investments/cash, and ~$9/share in earnings. So at $170/share, you're paying around 7x Op earnings per share for a very diverse group of businesses, earning stable, predictable earnings, which have been selected by the greatest capital allocator of all time. The group probably earns 15-20% on capital, and while growth may be limited, I don't expect it to lag the S&P.
So as others have said, I think ~11-12% annual return from today's price is a reasonable expectation. This is why I hold Berkshire in my 401k rather than an S&P index fund.
This. This piece by SlowAppreciation, combined with the two Semper Augustus Client Letters about intrinsic value of BRK was the documents that gave me conviction to continue to add to BRK going forward.
Very much appreciated, SlowAppreciation, thank you for sharing. Damn good work. Please give your GF a gentle hug from me, it appears from your blog, that she is giving you a hand on your work.
-
I apologize for a non-constructive reply here, Boilermaker75.
If you read the December 12, 2012 Press Relase from Berkshire, it's all about the word "may".
"may" here is not the same as "will", it's not in any way an automatic mechanism, and Mr. Buffett stated at the last AGM, that Berkshire would not "prep" its own stock in that situation.
I think some fellow board members has called it a "soft floor" under the stock.
It all depends on the given capital allocation alternatives in that specific and particular situation.
-
Please read the topics in this forum about the 1.2 x BV share buy back treshold for BRK, Boilermaker75,
It has been discussed in all details and depth on here. It's obvious, based on your posts here about it - stated with all due respect - that you have not done that.
-
Your post makes perfect sense at least to me, rb.
Without the intention to nitpick your post, insurance float stands at USD 105 B at the end of 2017Q1, and I have a fairly strong propensity to add approx. USD 82 B [deferred taxes] to that amount as leverage, free of cost, and basically free of covenants, if the insurance operation does not start to stray away. [Mr. Jain will see to that.]
Book equity at that time was approx. USD 293 B.
If any of my fellow board members here on CoBF know of a company with similar properties, please contact me.
-
Exactly what boilermaker75 said.
-
I'm in Berskhire, and it's the by far largest position - right now about 21% on overall basis.
When the talk is about indexing, I've developed a habit of going to p. 13 - 18 in the Semper Augustus Client Letter of February 2017 about Berkshire. There I study the "Company B", especially it's P/E, and it's P/B.
That's - simply put - my vaccine against indexing.
Berkshire investing is "sitting on your butt and your hands" investing. So is indexing.
Next time hell breaks loose here on Earth again, while indexing one will bleed exactly as the overall market is bleeding. Berkshire will come down some, too, but most likely not as much, because of all the cash and T-bills, the "lazy capital", and also a war chest in a severe downturn or a real crisis.
I consider Berkshire anfragile, in the meaning Mr. Taleb uses the word. The more stress you put it under, the stronger it will come out on the other side.
The drag on ROE for Berkshire from the warchest is to me the opportunity cost for Berskhire being antifragile. Just a special kind of put, built into the stock.
- - - o 0 o - - -
Edit: cubsfan beat me to it - for a part of my post.
-
I found
on YouTube - without the *<beep>* inside it.Much more entertaining than reading the excerpt. lol.
-
Thanks for sharing, LC.
-
If you read the JPM 2016 shareholder letter by Mr. Dimon carefully, nothing of this will be a surprise to you. It's all covered in the shareholder letter, however phrased more politely, but at the same time not in any way disguised.
This is about his own personal integrity, and the integrity of the bank that he is responsible for running. He is to me indeed in his very own league, and he just speaks up, frankly and candid.
There is nobody around - anywhere - to ask him to shut up, as I see things, - and he knows that. Just like Mr. Buffett.
-
Thank you for helping me getting through the day today, LC. It's hillarious.
It's the perfect desciption of me today. I haven't still mentally overcome getting screwed by this beautiful Spanish lady & brunette called Ms. Botin. [<- this is meant as a separate joke].
When did you get rid of SAN, LC? - I see that you have modified your profile signature. [<- This could be a separate joke, too, - at the expense of me, naturally - depending on the content of your reply.]
Yesterday, the Lady of the House did notice in the afternoon - while I was communicating with TwoCitiesCapital in the SAN topic - that her man was sitting behind his monitors, frozen, and his face almost collapsed into the face of an old sour man, and she asked why. I explained it to her, after which I said "... I have no need for a Spanish brunette to screw me ... - it's your job!" [<- That's actually meant as joke, too].
Then she walked away from me, laughing. The anger inside me did build up, so I was almost going ballistic, however I did not react or respond, still. I managed within a couple of minutes to get myself into some state of embarassment in stead.[<- that's joke #4 here, and the real joke here!].
Please say after me: "Spanish corporate government". [<- That's indeed joke #5].
-
-
Cameron,
I apologize for a non-constructive reply to you here.
Mr. Buffet started from the start block with the first partnership with an initial capital of USD 105,000 from the limited partners [family members], and USD 100 of his own. With a 4 per cent watermark, taking 50 per cent of the total profit excess of 4 per cent.
When he was extreme good at what he was doing at that time under such an agreement with the limited partners, he got totally extreme returns on invested capital in the early phase of the whole thing.
One can actually say, that he was levered 1,050 times on the upside [105,000/100, and naturally still subject to the watermark], while at the same time participating in losses equally with his limited partners.
His returns on his own capital account in the early years must been in thousands of per cents, however I have never seen any attempt to do the calculations, most likely because his withdrawals and capital injections to his capital accounts in the partnerships are still today not disclosed.
Link. You have add the "X/42"'s in the agreement to understand the built-in profit sharing mechanism.
This was for the first partnership.
I'm really trying to understand this, but does the fact that the partners get 21/42 not mean that they own 50% of the partnership? Or am I completely off base because under X it says: "A limited partner has no right to substitute an assignee as contributor in his place.", this doesn't constitute ownership?
Cameron,
No, you are confusing the profit sharing agrement with capital acccounts of the general partner and the limited partners. The capital accounts of the partners [general or limited] define the ideal share for each partners share of the whole partnerships net worth.
Hint: Fire up Excel, and try to do some calculations.
Edit:
Tim beat me to it! [ ; - ) ]
-
Cameron,
I apologize for a non-constructive reply to you here.
Mr. Buffet started from the start block with the first partnership with an initial capital of USD 105,000 from the limited partners [family members], and USD 100 of his own. With a 4 per cent watermark, taking 50 per cent of the total profit excess of 4 per cent.
When he was extremely good at what he was doing at that time under such an agreement with the limited partners, he got totally extreme returns on invested capital in the early phase of the whole thing.
One can actually say, that he was levered/amplified 1,050 times on the upside [105,000/100, and naturally still subject to the watermark], while at the same time participating in losses equally with his limited partners.
His returns on his own capital account in the early years must been in thousands of per cents, however I have never seen any attempt to do the calculations, most likely because his withdrawals and capital injections to his capital accounts in the partnerships are still today not disclosed.
Link. You have to to add the "X/42"'s in the agreement to understand the built-in profit sharing mechanism.
This was for the first partnership.
BRK: Oncor Acquisition
in Berkshire Hathaway
Posted
Mr. Buffet is a bridge player - I suppose he is not that bad at playing poker, either.