John Hjorth
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Posts posted by John Hjorth
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petec,
It's only based on rough and primitive P/B considerations. Please consider me a FFH amateur.
I have tried several times to do IV calculations for FFH. I can't. Despite being a mini - compared to i.e. BRK -, FFH is now a so complicated structure, and the complexity is increasing year by year.
Position size for me and my family is closer to 4 per cent than 3 right now. [based on accordingly degree of conviction, where I'm about 25 per cent in BRK, and sleeping well at night with that].
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I took the time today to read the full FFH 2016 Annual Shareholder Letter by Mr. Watsa and the 2016 financials.
For me and my family, this is a position nearer 4 per cent than 3 per cent right now. Return so far after holding it for almost four years, adding bits along the way, is a negative zero ex dividends.
I feel the market price of FFH.TO right now is rich, bordering to silly.
However, I feel it right now would be about the worst thinkable time to jump off the wagon. The equity hedges are now gone, the prospects of the international insurance business - especially in Asia and Africa - seem to have a an enormous potential going forward for the long run. Add to that the AW merger/aquistion.
It will be a totally different company going forward the next few years. I'm willing to buy more, if the share takes a material plunge going forward.
Like posted earlier by many other fellow board members I would also like to see a change in the investment style by HW.
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I saw Sanjeev mentioned in the Shareholder Letter by Mr. Watsa. Yes, Sanjeev, you are a truly outstanding human being. Good luck with all your endavours in making life better for other than your self, and may your God be with you in those endavours.
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You didn't address the biggest question on my mind. How much capital did these guys start with. 30% in 10yrs is 14x. So ...... starting with just $200k is going to be $3M. It can tell us a lot about their mentality towards concentration.......
Is "just $200k" typical for investors here to start with? I started as soon as I had my first 10k saved.
Paarslaars,
Perhaps you are mixing up the starting point in time for reference period for performance measurement in the relevant topic with "point in time when started up investing" here, ref. how randomep phrased his post. Those two separate points in time are most likely not identical.
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Berkshire 2017 Bracket Contest.
It seems like even the guys at Berkshire HQ are getting a bit bored. I really hope this thing is insured... - somewhere else!
It's not even 1st April yet.
Perhaps I should have posted this in the topic: "What do folks think or do while markets are at highs?"
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It appears to me, that Jurgis [no critism intended here by that] just after posting the poll has made some adjustments to the poll. My vote ended up in "Won't attend - other". After the adjustments made by Jurgis to the poll my vote would have ended up in "Won't attend - too far" [as a European board member].
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Thanks for posting the poll, Jurgis. I personally consider it a constructive angle for discussion of what Sanjeev has brought up.
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Thanks a lot for all what you're are doing for the CoBF members for so many years now, Sanjeev.
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I've read textbooks on bankruptcy law
Any recommendations?
Business Reorganization in Bankruptcy is incredibly detailed, but it's almost so dry and detailed that I wouldn't advise reading it from an investing practitioner's perspective. Distress Investing and the Vulture Investors are much better for distilling a lot of the concepts in a relatively condensed and entertaining way.
You sound like some kind of law student on this. Get a prip on it, or stay out. The FELP topic comes to mind.
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Brilliant analysis...the best I've seen on Berkshire hands-down. Thank you for posting.
Sincerely,
ValueMaven
It's actually a very good read on BRK.
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... Do something else.
Stare at the same thing everyday, & you cant see the forest for the weeds. If you're retired - use the working day to do what those working cannot do. If you're simply bored - either start up a small business, volunteer for, or get a job talking to people. An investment decision takes 2-3 days at most, not weeks.
SD
At least I fixed the 2016 tax returns of the Lady of the House today. What a hazzle! We have both been laying low because of flu the last couple of weeks. At 13 per cent cash in my personal accounts, and at 16 per cent cash on overall level - before about 35 percent cash coming down to my lab from my MIL estate within a few months.
I don't feel pushed - at all - by the situation.
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Soon it's time to go do the spring cut of my David Austin Roses in the garden.
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... prem said in his letter that the intrinsic value is much higher then the market value . ...
Based on what?
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... Most of us don't need additional ideas - we just need to eat our own cooking. ...
SD
Soo right - +1.
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SAN [the large chunk of the position, that I bought at Brexit Day - sold at 5.80, bought at 3.88].
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Added to SCHO.CPH this morning.
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interesting number. With a portion of that cash, they 've generated about $200 B of earnings so far and another $200B over the next decade. Buffett calls that "rabbits making rabbits!
longinvestor,
It could be mice also - they are also extremely reproductive! I remember a post from you on this board about 1 - 2 years ago, where you posted - with reference to the BRK cash flow : "Just follow the money!" - In short: We are all "money dogs", with the nose in the track - for money!
1. I expect earnings and cash flow to stay relatively at this level [2016 level] untill next major aquisition makes a change,
2. Perhaps a major dent on the way forward short term related to Cat Insurance,
3. Economic consequenses of political US hot topics must be expected for BRK [Global trade, corporation taxes etc.] I have absolutely no clue where this will end up.
4. The possibility of a US or global recession. Again, I have no clue.
5. Nuclear event to destroy material value at BRK. Again, I have no clue.
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Not much different from what I'm thinking about what else I've poured money into.
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You're welcome, Valuehalla.
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John, could you pls add your source of the cashflow figures?
Valuehalla,
The source is the Annual Reports on the BRK website. Just grab the 2016 Annual Report, and in the cash flow statement you find the figures for 2016, 2015 and 2014, then you grab the 2013 Annual Report, where you get the figure for 2013, 2012 and 2011, then on to the 2010 Annual Report for the next three years, and so on.
Please note that these figures are after taxes paid, i.e. not including deferred taxes expensed in the income statement.
Over time, I have found that studying the income statement [result of the capital allocation] including movements in book equity, combined with study of the cash flow statement [the capital allocation] is more rewarding towards understanding what's going on in BRK. The balance sheet naturally matters still for details and certain posts in the balance sheet.
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Book Value per share from 1/1/07 - 12/31/16 has grown at a CAGR (not a simple average) at 9.4%.
That is pretty good but not great.
Now Berkshire is bigger and buying Airlines.
I own Berkshire but have modest expectations at this point.
Longhaul,
I don't like these airline investments either ... - but honestly: Does it really matter in the whole picture? - To me, this is just a pretty thing, -with a few freckles ... - and there will most likely be more of them as time goes by.
To me, over time, the balance sheet has become less and less relevant for valuation of this thing. Everybody on this board should by now know that by just reading the board, that there are material hidden values on both sides of the BRK balance sheet - some easy to quantify, others not.
This behemoth has been built by two extraordinary brilliant men, who have been practically all in in this investment the most of their adult life. It's built to generate cash - the more, the merrier - to do new aquisitions.
It's an enormous compounding machine. Period.
And it certainly - by no mean - has lost it's momentum.
Facts:
Cash flow from operating activities this century [uSD B]:
2000: 2.947
2001: 6.574
2002: 11.135
2003: 8.438
2004: 7.405
2005: 9.446
2006: 10.195
2007: 12.550
2008: 11.252
2009: 15.846
2010: 17.895
2011: 20.476
2012: 20.950
2013: 27.704
2014: 32.010
2015: 31.491
2016: 32.525
Total: 278.839 [<- ~USD 279 B!]
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I haven't checked - perhaps XOM to some extent can compete with this ... AAPL was most likely too young and too small at the beginning of the century to come even just close.
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Yes, all the cash and T-bills is a drag right now, also.
Somebody is just waiting for the next turmoil to arrive - spending the time having fun doing HBO stuff and the likes..."The market is down today, so my wife just gave me coins to my 1.89 breakfast at McD, not for my 3.21 breakfast" [or something like that] - Hilarious.
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B share on 31.12.2005 = 59,08 $
B share on 31..12.2016 = 162,98 $
11 years internal rate = 9,66 % p.a. ...so confirmed by my side for John H.
i agree: much upside potential 8) even to close the gap in grow-rates BV and MV
Thanks, Valuehalla, and so far, so good. : - )
And: Yes, that's the real point here, as duly noted by you above: Within the last specific 11 calendar years, the gap between book value and market value has actually shrinked - not widened!
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Hi John Hjorth, my figures above simple avg calculation: all single %-increases/decreases per year added and than divided by 11
Internal rate per B share:
BV 10,16 % p.a. increase over 11 years: beginning 2006 till end 2016
beginning of 2006 BV = 39,57 $; end of 2016 114,74 $ = 11 years, eleventh root of 289,9 % = 10,16 %
Correct?
I agree with you on your calculations and methology, Valuehalla,
My basis for calculation:
Progress numbers on the inside of the front cover of the 2016 Annual Report.
According to those figures USD 100.00 of book value year end 2015 has grown to USD 289.92 of book value at year end 2016. Putting that into the Excel IRR function gives you an IRR of 10.16 per cent over those specific 11 years.
Acid test:
Book value per A share end of year 2005: USD 59,377 [Annual report 2005, p. 55]
Book value per A share end of year 2016: USD 172,108 [Annual report 2016, p.32]
Putting those figures into Excel IRR function gives you an IRR of 10.153 per cent.
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With regard to market price progress, I get an IRR of 9.63 per cent over those specific 11 years. [<- Important: Lower than per share book value progress!]
Please check you calculations.
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Valuehalla,
Have you applied simple avarage calculation or Internal Rate of Return in your post?
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Added a bit to BRK.B today.
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Christopher P. Bloomstran, Semper Augustus Investments Group LLC, released a new Client Letter on 12th February 2017 with the title: "Symphaty for the Dog - 2016 Letter to Clients: Challenging Dogma, Death of the Profit Margin, and a (Brief) Berkshire Redux".
[longinvestor linked to it in the recent BRK IV topic on this board - thanks!].
It is - like the 2015 Client Letter discussed earlier in this topic - at least to me, a very good read for BRK investors, and also very entertaining!:
Just an example here as an appetizer: p. 5:
... While we sincerely doubt any preternatural correlation with our writing about Prince and his untimely demise last year, we played it safe regardless by awarding this year’s theme to the Stones, because everyone knows they’re going to live forever, especially Keith Richards, the co-author of Sympathy, the epic lead guitar and occasional lead vocalist. With a dedicated effort, I finally finished Keith’s memoir, Life, last year. It was written with James Fox in 2010, and occupied a place among the stack on the nightstand for four years. It’s an incredibly incoherent but interesting history, especially for a lifelong Stones fan. Keith’s remaining brain cells allow him to recount wandering stories while Fox interprets. I found you could only read a few pages and then had to decompress and set it aside for a few days, or weeks, but couldn’t help but come back at times ...To me, that actually gave me association as being the best description I have seen for how I have felt while reading the last two books from Mr. Taleb! - Without implying other similarities to any extent! And from what I have read so far of Mr. Talebs next book "Skin in the Game", that does not appear to be much different.
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There are a lot of interesting topics covered in the Semper Augustus 2016 Client Letter - BRK-related and general. Perhaps we could continue discussing the Letter in this topic.
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My take on this, based on these two Semper Augustus Letters: I will start buying BRK again, after a break of about a half year, based on the prevailing market conditions, and the recent relationship between market price and intrinsic value of BRK.
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Couldn't resist posting this, but we are talking about MV and IV converging over the very long term, no? That's today, folks!
It hasen't - to my best recollection - been discussed, from this particular angle, since the release of the annual letter and the 2016 annual report and all the talk about fees: It's the "badly hidden agenda" of Mr. Buffett and Mr. Munger: "Why are you paying all those fees?! - Just send us your money! - by buying BRK stock - We'll manage them - almost - for free."
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I am not ok with the system to multiply the earnings and than add the cash etc.
The cash and also investments is needed to run the company. So these are not 2 independent subjects, which can be simple added.
Why not, Valuehalla?
The income [net] from holding the insurance float at about USD 100 B at the moment is included in the insurance results multiplied with a P/E, thereby putting a net present value on holding the insurance float. The listed investments are primarily held by the insurance subsidiaries, financed by float, so the listed investments and the insurance operation are two separate sides of the same operation.
Furthermore, this two column calculation of IV does not include a discount on deferred taxes booked in the balance sheet as a liability of approx. USD 78 B. That is calculated as if it had to be paid 1st Januar 2017, however nobody knows when or if it will ever come due.
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... Also, "you think like a CPA!" ;D
I read that as a compliment, CorpRaider! [-despite I most likely shoulden't...] ; - )
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Definitely sounds like they are done adding shares of the Airlines. They don't want to go over 10% and have share repurchases to factor in.
Yes, it also sounded to me like this basket of airline stocks was for the long term for BRK [to the contrary to a "generally undervalued" trade]. Time will naturally tell.
Krazy Kommercial real estate around DETROIT!
in General Discussion
Posted
To me, both Cigarbutt and Green King are right. Don't give up, DTEJD1997.
Here we have a term for the behavior mentioned by Green King : Cash thinking.
Also, I'm really surprised to read how things are going on at your place about administrative rulings. It really reads like "Klondike" to me.
Here, we have a separate law in place, that embraces all administrative rulings in the public sector, including administrative rulings about taxes: [In Danish: Forvaltningsloven - in English it would something like "The law about public administrative rulings" - without translating directly.
Don't you have such legislation in place in the US, to protect citizen from being run over by the system with access to almost unlimited ressources?
If your case was here, I would just do one swing at the ball to get it on the other side of the net by sending a one line complaint letter to the state level stating that the administrative tax assessment is invalid because of lack of reason, ref. paragraph 22 in the law.