Libs

Sorry, didn't realize a subscription needed. But it's easy to find on your own....

I remember in '99 a similar article pointing out the absurdity of telecom valuations relative to the entire market. of course they crashed soon thereafter. To sum up: Entire online ad market = $134B revenue Market cap of top players (81% market share) = $724 B Really interested in others' thoughts on this. I was frankly suprised by it. http://online.barrons.com/article/SB50001424053111903536004579459602820639332.html?mod=googlenews_barrons

$15B net operating earnings last year, ex investment gains. Wow. When Buffett says IV far exceeds BV, and he would buy aggressively at 1.2 X BV, in my opinion he is shouting from the rooftops to buy now (we are ~1.25 X now, maybe even less given 2 months of 2014 results). His willingess to give this signal is rare, and quite valuable for obvious reasons. I also believe BRK will beat the S+P fairly handily going forward. Its cheaper and better-run than the index as a whole. As Global Financial Partners put it: "There are no leaks." Thats exactly right. You dont have to worry about massive mistakes, chicanery, bad capital allocation decisions, or surprises as an owner. And if the world goes to hell in a handbasket, Berkshire will pick up the pieces and come out stronger on the other side. Its just really hard for me to see going wrong here owning/buying at these levels.

He didn't exit because he saw a collapse coming, he exited because everything was overpriced. As I understand it. So it wasn't a market call.

Great thread. I lost 25% of my net worth in one day ~2002. I believe the stock was named ASW or ACLN. They supposedly sold used European cars in Africa....but in fact it was an arms-smuggling operation. I kid you not. There were red flags everywhere that I ignored. Herb Greenberg had writtten several bearish articles which I also dismissed. I believe it was the only stock delisted for fraud from the NYSE in the last 25+ years. It could have been even worse; I was staring at my screen in disbelief as the stock plummeted, and at just that moment we had a fire alarm go off in the office. I had to leave. What to do? A friend said: Just sell it; you can buy it back later if it turns out the allegations are untrue. I sold, and it subsequently went to zero. So, yeah, I had 40% of my portfolio in an arms-smuggling operation and lost 60% on it. What a rube I was. The phrase "Too good to be true" has been seared into my brain ever since.

I don't think Buffett bought any shares when WFC was bottoming in early 2009. But guess who did- Kovacevich. He bought 1MM shares at $8! He almost nailed the very bottom. I like Stumpf, but K sure looks like he could still be on the job. Great banker.

What made you choose those 2 rather than some of the other beaten down stocks around that time? These were the two I felt I knew the best. There's a story, of course.....and it's etched in our family lore. Sunday March 8(?), 2009, the wife and I are at a car wash and I say, "look, I won't do this if you say no, but Wells Fargo and AXP are down to $10 and they are worth probably 3X that amount. The market thinks they are going under. I don't. I want to put 1/3 into each." She shocked me with an immediate "yes." So I was prepared to make the trade Monday morning....I didn't sleep well, and woke up at 3 AM. Absent-mindedly I turned on CNBC, and bam, there was Buffett. And he basically endorsed them both, you know, the way he tells you without actually saying 'buy the stock.' One thing he noted was their $40BB pre tax pre-provision income and how the company was selling for like 3 X that. Every once in a while we go back to that car wash and reminisce ;D P.S. Some one rudely pointed out later that if you just bought an index of small-cap stocks at that same time, you would have made even more.

Those are some sick results. Well done. I am a concentrator for sure; I can handle volatility. For instance right now I'm 30% WFC, 30% BRK, 15% DTV, 10% GS, 10% LRE.L. For 10.5 years, returns are 14.2% annualized = 6% outperformance. For 13.5 years ( when I started), the outperformance is 9% per year. Most of this outperformance can be attributed to just two events/decisions: 1) Heavily owning BRK in 00-02 as it went up and the market tanked. 2) In March '09 putting 1/3 of my portfolio each into WFC and AXP at ~$10 each. So have I been smart or lucky? Munger has said getting rich only takes a few decisions...and I was extremely confident in those choices, but still...I would say someone with simliar results spread over many decisions would be on sounder footing. Nonetheless, I'll take it ;D

OM You make good points. But.....I'm still sticking with 12% for two reasons: 1) Berkshire is pretty well moated-up. I'm not terribly worried about margin declines for our businesses. 2) While reported earnings have grown by 17%, undistributed earnings have grown at ~16% CAGR since 2002. ( FWIW at YE 2002 equities were valued at $28B; now, at $100B....prettty impressive considering the lousy stock market, and Buffett's focus on buying companies outright during that time.) So, if the two pillars of look-through earnings have grown at 16-17% CAGR during a tough decade, I think 12% is reasonable going forward. I guess what I'm saying is, the big picture stuff - primarily the culture and capital allocation discipline - are so good at BRK, it's probably been a mistake to get too granular on these projections....If you went through this exercise for the last 50 years, I'll bet you would have emerged with very rational projections that would have, indeed, fallen far short. Bottom line...I'm hoping for 15%, expecting 12%, and etching in 8% with a branding iron :)

Sorry, page 22.

<Are your operating earnings including your 15 B estimate for 2013 pre-tax or after-tax.> After-tax. From page 25 of the report. I just deduct the investment gains / losses. http://www.berkshirehathaway.com/qtrly/2ndqtr13.pdf

I think this report is rather remarkable. How many companies this size have been able to grow earnings this fast ( and they seem to be accelerating)? I've jotted down quarterly operating earnings for 13 years now. I include insurance underwriting gains/losses, and exclude investment gains/losses. You can't get this from the annual letter, because Warren excludes underwriting results. Here they are, annually, starting in 2000: $1.8B $1.5B $3.9B $5.4B $5.1B $4.98B $9.3B $9.6B $9.6B $7.7B $11.1B $10.8B $12.6B $15B? (2013) A lumpy but terrific 17.6% CAGR - through 2012 - in a fairly miserable 13 years for the U.S. economy. ( One thing I like about tracking these numbers every quarter is the perspective it gives you. For instance, BRK 'only' grew operating earnings by 5% Y/Y. But Q2 in 2012 was huge-it was 32%, 21%, and 100% above the three previous Q2's). So here we are, halfway through 2013, and BRK has posted $3.8 B and now $3.9B...if mother nature copperates, we will probably crack $15B for the first time. The Heinz $$ starts flowing now, too ( $700MM / yr, I think). Every three years or so, BRK seems to 'vault up' another few billion. Looks like the new level is around $15B. That will be a floor in a few years, if 50 years of history mean anything. If you take the undistributed earnings from the equities, that runs around $4.1B this year.* Add it all up and you're around $19B in look-through earnings ( I don't know why Buffett dropped that metric). So how much is BRK worth? Well, I would say this beautiful contraption, given its management, safety and track record of growth, is surely worth 15 X earnings. So if you believe in the look-through model, that's $285B, pretty much exactly where we are. Fairly valued, but 2 years ago if you'd have told me BRK would be at $177,000 I'd have said it would be overpriced. I don't believe that. If I had to choose between buying and selling, I'd be a buyer. I think they can still grow earnings at 12% for some time now, and maintain that multiple. I'd be happy to make 12% going forward with the bulwark of my portfolio ( at this stage of my life). P.S I notice interest income is up for the first time in many quarters. Because of dividends...good to see. *After subtracting a 10.5% tax (I'm told by smarter people than me) BRK would pay if they were distributed to BRK.