KinAlberta

Maybe it's just a case that: just as there's believers in the EMH there are believers in the stress kills young hypothesis and maybe both are somewhat simplistic. :-)

What about the rate of book value growth as a predictor?

^^ Future cash flows is all that matters (for long term holders) - predicting them is the tough part. So I'd say it depends on the cash flow generating nature of the assets and their combined longevity plus the people, the brand, etc. Software employees don't get valued as capital assets but are treated as expenses and the patents, 'branding', etc. if successful have very high market high value for a while. On more commodity based products like electricity from a power plant the book value is likely more meaningful - high capital, low labour. Replacement cost might be even more meaningful in terms of a going concern consideration. Inputs, say coal reserves for a power plant might be valued at some very low historic cost and ownership as an asset might enhance cash flows going forward. (Solar plant gets its fuel for free - not even a labour expense as with software firms so that one to think about should technology improve - but then there's inventory/storage costs due to the rotation of the earth.)

One thing - he sure seems to be one to never accept conventional wisdom. I've heard he reads for hours but then also heard on some interview that they had to basically run along with him for a day or two as he move about. Some book, maybe Snowball also mentioned him playing tennis. I sure enjoy his sense of humour: “I checked the actuarial tables, and the lowest death rate is among six-year-olds. So I decided to eat like a six-year-old.” The octogenarian adds, “It’s the safest course I can take.”

Book value is always thrown out there as a measure of value yet so much can affect a book value I thought I'd see what people think of it as a measure, its strengths, weaknesses, etc. Too me the rate of book value growth should be a better indicator but is it? Maybe not for cigar butt investing. Anyway, everyone's thoughts please. Some articles (based on AAII research)... The Importance of Book Value by Charles Rotblut, CFA http://www.aaii.com/journal/article/the-importance-of-book-value?adv=yes FINDING THE WINNERS AMONG LOW PRICE-TO-BOOK-VALUE STOCKS By John Bajkowski http://www.aaii.com/journal/article/finding-the-winners-among-low-price-to-book-value-stocks And coincidentally a what worked article that just seems to have been published today... (I was looking for an AAII article published last June) Does Complexity Imply Value? AAII Value Strategies From 1963 To 2013 Posted By: VW StaffPosted date: February 27, 2015 http://www.valuewalk.com/2015/02/does-complexity-imply-value-aaii-value-strategies-from-1963-to-2013/ http://www.alphaarchitect.com/blog/2014/10/20/backtesting-13-aaii-value-strategies-what-wins/ April, 2007 IT'S HARD TO BEAT LOW PRICE-TO-BOOK by LARRY http://www.austinbug.com/larvaluebug/archinvest4-07.html

Companies can trade below 1X book for years and some of those companies may not be dividend payers so your need for cash may not align with market conditions. Off the top of my head, some other considerations: dividend tax credits, capital gains taxes (and LIFO/FIFO issues), trading commissions, odd lot liquidity issues (mostly with remaining odd lot position).

I think the flaw here is that those sellers may have to sell below BV one of these days in order to fund living expenses. The nice thing (from their perspective) about the divi is it's predictable and allows them to hold the shares essentially permanently. Not suggesting the firm should be run for retirees, but receiving a dividend and selling shares are not necessarily equivalent from their perspective. I think dividends should be viewed from an income replacement/expense coverage perspective first. Return maximization be damned, you want your cash flow to cover your expenses so you can survive. So you need to look at your utility and food costs, etc. first. If you need to buy imported products then aligning some cash flow via geographic diversity in your investments might hedge any future increases in your import goods costs. Utility costs can be affected by oil and gas costs. Health care costs by other factors. Once your pensions and investment cash flows have provided some assurance there, then you can look at buying investments that will maximize your return - over the long run. If you look only at maximizing your return (over the long run), you have to be prepared to sell investments (i.e. sell shares in low-to-non-dividend payers) to sustain you. The huge problem here is that you may have to sell those shares in a down market if you are not adequately diversified and lack other cash flow. (Of course dividends and share sales are somewhat the same thing but dividend policy adds stability and predictability to corporate decision makers and dividends can sometimes even be irrationally sustained by a corporation without impacting the share price, whereas selling shares purely exposes you to market pricing which is influenced by many factors - unpredictable factors. If you're a believer in value investing and consequently a non-believer in the traditional EMH then you'll really kick yourself if you have to sell shares at below intrinsic value in any market. I welcome any criticism of my thinking above.

Just couple intelligent points made here on Berkshire Hathaway's disclosure practices... http://brooklyninvestor.blogspot.ca

He frames things very well right here: Warren Buffett - You've Only Got to Get Rich Once https://www.youtube.com/watch?v=4qOJEQekcnU

"When my grandfather died, they used a trust to transfer the shares to Bill Gates." The human mind at work... And the movie... (via a link in the piece above)

I had shares in VOX360 which was taken out by Dundee, so the benefit is now further diluted but it's still one to watch. Sherritt is of course one to follow. On the announcement I quickly traded CUBA and CPA (Copa Holdings) and made a few bucks. CPA is a potentially decent value even now.

I don't know if they are dispelling myths when someone has gone from one thing to another over their lifetime. i.e. From value investor to manager. Someone can be more than one thing. New book rewrites Buffett legacy in 3 ways By: Matt Krantz June 25, 2014 "A new book by a long-term Buffett watcher has some gems that even devoted Buffett fans might not know. Some of the greatest myths about Buffett are dispelled in the soon-to-be published book, “Berkshire Beyond Buffett,” written by Lawrence Cunningham, a professor of law at George Washington University. ..." http://americasmarkets.usatoday.com/2014/06/25/new-book-spills-3-shocking-buffett-secrets/

Interesting by itself. Very interesting that Buffett's name comes up... Coke hiding secret shares? Feb. 06, 2015 - 7:12 - Wintergreen Advisers CEO David Winters argues Coke is hiding secret bonus shares in their public statements. http://video.foxbusiness.com/v/4036136305001/coke-hiding-secret-shares-/?#sp=show-clips

I have to add a huge qualifier: Unfortunately I have found it incredibility hard to stay partially indexed myself. Sometimes to my financial detriment though importantly I have no compulsion to match or beat any arbitrary market index (which are just stupid artificial self-imposed goals uncorrelated to one's own circumstances, needs and risks) - I prefer sleeping at night. Rebalancing between fixed income and equity indexes would have been a better process. Taking profits and holding cash - is something I've long questioned even though I'm again in that position myself. However, I've long held BRK and added to my position and used it as a market proxy and a benchmark for my own performance. (Have traded FFH for 20 years and held for years too.) I sold out of my indexed funds in the early 1990s because of market fears (and did well in the short collapse) but didn't jump right back into them - that was a mistake. Then again when Nortel became an obscene amount of the Cdn index in the tech bubble I bailed again (sold a lot of Nortel too but because I never understood its extremely high prices, I watched it fall by half before I started to bail at about $65/sh. I should have been indexing the Nortel gains on the way up because the indexes did better on the downside.) Then I did minimal indexing for 8-10 years finally put most of my portfolio into indexes and etfs a few years ago - only to sell because this market has been supported by government/fed intervention and nothing close to free market valuation practices. That scares the heck out of me about the future. (I'm re-reading materials on the 1920s to bone up on possibilities.) Nonetheless, my plan it to get out of holding as much cash and direct share positions as I am now and just lock 80% or so into index funds and forget about them. Then taking profits would be bad.

Note that in 2008 Buffett had $600 million in cash and short term investments in his personal account*. Something makes me think he saw fit to take some profits. (I believe a couple years earlier, maybe about 2005, or 06 he had said in some interview that he was mostly in treasuries because he couldn't find anything cheap.) In the early 1970s he said he got out of the markets (closed his partnerships) because he didn't want to end up with 'mediocre returns'. (Per the footnote in a Fortune article of the day.) Again, he took profits. Still even then he continued on his own investing a bit and owning companies. So he never totally left the market. *It's so cool that the guy has probably become a billionaire twice, though two different routes, first via BRK by never selling a share, and secondly via his personal account doing who knows what.

This might be off topic in this thread, but compounders are also boring to tears. Especially for active investors such as people frequenting this forum. There is no action - you just buy and hold. And hold. And hold. That's why very few people ever held BRK or FFH (or for that matter MSFT, GOOGL, WMT, JNJ, IBM ) for 20+ years. And most of the people who did that are not "investors", but rather employees or in case of BRK old ladies from Omaha. ;) Even most self admitted Berkheads or Fairheads on this forum have traded in/out of BRK/FFH more times than they casually admit. Or at least kept a non-trivial amount of their portfolio in companies that were sold much more often than compounding would call for. ;) Unfortunately action is a drug. A very difficult drug to kick for active investor. It's like playing a lot of games, cards, gambling, etc. The people don't play to win, they play for the thrill. I'm always amazed at people that can't hold index funds, mutual funds and efts, finding some excuse to avoid them completely. Instead they adopt the view that they must be 100% into individual equities and this puts them in a precarious, fearful position when the market starts to move against them. We have evidence that index funds are near impossible to beat so it makes sense to allocate a good proportion one's invested assets and proportionate regular contributions into them. Then if you are any good at investing you will soon overwhelm those indexed investments and can totally ignore them (like the savings invested in a house - you just let it ride through thick or thin. Do the same with half of your savings) - index and forget. If you aren't any good, or are just mediocre you will see the indexed funds move ahead of your own picks. All along the indexed funds will serve as both a benchmark and as an insurance policy. So, with index funds, unless they are in some booming sector I say never take profits. Commodity, tech, precious metals indexes I say take the profits. Individual companies like tech (or anything that lacks recession survivability I say take the profits. You don't want to own something that turns from a good underpriced value at the start of a recession into an technologically obsolete value-trap before a protracted 5-10-15-20 year recession ends. Companies that have a long history of surviving recessions, maybe even growing through recessions, I say buy and hold. (I've held BRK for 20+ years.)

On Buffett's skills. In one Buffett biography the author quoted a friend of Buffett's that said one day Buffett said he was short of money and needed to learn more about options. A short while later Buffett had made a small fortune trading them. (I'd guess Buffett saw an opportunity at the time and was a quick study.) In other places I'd read that Buffett could sum columns of numbers in his head, he'd memorized the name of every company on the NYSE, he had an encyclopedic knowledge of businesses and business, and on and on. Even his very complex trading strategies and past complex cross-holdings seem to indicate an immense capacity to understand and track complex arrangements. On being ruthless, the book Snowball highlighted his negotiating skills. One thing that was mentioned was that in negotiations if his offer was rejected and then later the other player came back saying that they now accept it, Buffett would counter with and even lower offer. Also, Buffett in a video interview a few years ago said that he and Munger just sit back and wait until someone does something stupid and then he 'slaps them down' (or very similar words to that effect). I don't see that as particularly ruthless but maybe more evidence could be offered up. On talking his book. Yes he never misses a chance to praise his companies. However, in the 2008 financial crisis Buffett was accused of talking his book yet he had billions in cash, $600 million in cash personally, had a very opportunistic history, his investment in WFC was relatively strong and bailouts of weaker players lowered their costs to WFCs disadvantage, GEICO would do well, his bonds were doing well, etc. and Buffett spoke optimistically of the market and the economy. At the time I was thinking he was hurting his book not helping it. Further fear mongering like you heard repeatedly by many talking heads would have been the selfish response by a man in his position - but instead he took more of a statesman's like position.

^ And Golub (GBDC)

Interview: James Grant Talks Deflation, Greece, Stocks, And Weather http://www.valuewalk.com/2015/02/james-grant-talks-deflation-greece-stocks-weather-video/

I frequently come across people that try to make the case that Buffett is an evil genius or just evil or a socialist commie or capitalist pig, or something. So I thought it might be fun to post links to such articles here and let people debate the points. I'll start it with this one (hate to give these things clicks but what can you do): Warren Buffett Sits On $50 Billion Cash-Hoard, Waiting For Bubbles To Pop August 4th, 2014 http://etfdailynews.com/2014/08/04/warren-buffett-sits-on-50-billion-cash-hoard-waiting-for-bubbles-to-pop/

benbuffett, it's harded to believe that Alleghany isn't extensively covered on this board. For one thing, like Bill Gates, they were into railroads long before Buffett.

In an interview a year or so ago, Buffett's daughter said that Buffett finally got another car, but he got a deal on it because it had hail damage.

ourkid8, that looks like great news. The last time I looked, the CRA provided a temporary solution for 2013 and clearly stated that the proposed rules were taking place for 2014. The private securities comment. I was just going by memory - I believe it included things like US T-bills, bonds etc. An article from last year about "transitional" relief.. http://www.bdo.ca/en/library/services/tax/pages/tax-alert-changes-to-foreign-income-verification-statement-form-t1135.aspx UNDERSTANDING THE NEW T1135 Francois Bernier / May 6, 2014 excerpt: "WHAT IS SPECIFIED FOREIGN PROPERTY (SFP)? Subject to the exceptions noted below, SFP includes: -Funds in foreign bank accounts; -Shares of foreign corporations (even if held in Canadian brokerage accounts); -Interests in foreign mutual funds; -Shares of Canadian corporations on deposit with a foreign broker; -Debts owed by non-residents including bonds, debentures, mortgages, and notes receivable; -Interests in a non-resident trust; -Interests in a partnership that holds specified foreign property; -Land and buildings located outside Canada (foreign rental property); -Tangible and intangible properties located outside Canada; -Life insurance policies issued by a foreign insurer; -Precious metals, gold certificates, and futures contracts held outside Canada." http://www.advisor.ca/tax/tax-news/understanding-the-new-t1135-151683 Canada: T1135 Reporting – A Moving Target Last Updated: July 22 2014 Article by Michael Kukelko MNP excerpt: "Why Worry?" "... Form T1135 requires reporting by Canadian resident individuals (as well as trusts and most corporations) of foreign property holdings in excess of threshold amounts (i.e. cost amount more than CAD $100,000) to provide information to the Canadian tax authorities to address these concerns. Generally, the penalty for failure to file a Form T1135 is $2,500 for each instance of failure (i.e. for an individual taxpayer, for each year of failure). ..." "An Opportunity or a Threat?" For 2013 and future years, it is very important for taxpayers to ..." "It's also essential to recognize that many taxpayers, often unknowingly, have not adequately reviewed their potential T1135 filing requirements in 2012 and prior taxation years. ..." "One More Thing Recently (July 8, 2014), CRA released a revised Form T1135 and related guidelines for 2014 and subsequent years. Essentially, CRA is extending the "transitional reporting method," with some modifications, to the 2014 and subsequent taxation year while eliminating the T3 / T5 reporting exception." http://www.mondaq.com/canada/x/329226/Income+Tax/T1135+Reporting+A+Moving+Target

The Canadian CRA's form 1135 is one serious income tax form needing to be completed. It's a MUST DO for those with over $100,000 in certain foreign property, traded and private securities, etc. Last year I understand that the CRA granted some leniency to their requirements, but for the 2014 tax year, they are going to be serious about their reporting requirements. Failure can lead to significant fines and/or penalties. So is anyone thinking about this, properly tracking their transactions, etc. If so could you explain what and how you are doing it?

On my valx example, I see it trading and volume bouncing around on google finance but can't bringing it up on my trading accounts (neither registered nor non-registered accts.).