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100 Shares

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    Interview with Allan Mecham

    in General Discussion

    Posted

    1.  Do you look at other manager's13F filings for ideas? If so, who?

     

    2. How much time do you spend researching an idea before you are willing to invest?

     

    3.  Are you always a passive investor or do you talk with management outside of the conversations/information available to all investors? (Some stakes approach 5-10% control of companies)

     

    4. How do you see the relative value between documents like the 10K,10Q, proxy  statement, etc compared to earnings calls, presentations/events (webcast, slides) and shareholder letters?

     

    5. 

    Manual of Ideas Top Ten Interviews

    in General Discussion

    Posted

     

    We are avid readers of Corner of Berkshire and Fairfax.  Please suggest additional fund managers you would like to see interviewed.  Cheers!

     

    Kevin Byun from Denali Investors

     

    Sahm Adrangi from Kerrisdale Capital

     

    Jesus Dominguez & Luís De Blas from Valentum (Spain)

     

    Álvaro Guzman from Az Valor (Spain)

     

    Francois Rachon (giverny capital)

    Q3 results out

    in Berkshire Hathaway

    Posted

    The Kraft Heinz transaction is spelled out on page 11. Two questions

     

    1) at the bottom of the page, earnings are shown as negative, but then totaled as a positive $110MM for Berkshire shareholders.  Don't get this.

     

    2) BRK is using the equity method yet only owns 26.8% of KHC. What are the ownership guidelins to use the equity method? I would have guessed you needed over 50%? Or in this case since we are partnering with 3G and the combined ownership is over 50% it's ok?

     

    Thanks in advance.

     

    Equity method accounting is for when you own 20-50% of a company. https://en.m.wikipedia.org/wiki/Equity_method

     

    So that's the accounting method. Buffett might view it differently for intrinsic value purposes. For example in the 2014 Annual Report, they owned 30% of USG but he lists it in his investments along with KO, AXP, etc and not as part of pre-tax non insurance earnings.

    1.2x P/BV entry point

    in Berkshire Hathaway

    Posted

    It's important to note that although the current market value of UNP is 73B, Morningstar values UNP at 99B if you have access to their premium accounts. Given the earnings differences, I would agree with you that BNSF should be less than UNP, not about equal as Morningstar says.

    I Hate this Post

    in Berkshire Hathaway

    Posted

    It'll be interesting to see who wins the race: the tortoise or the hare :)

    I think PSX in their presentation has stated they have some goals to increase profits in the next few years too. I was just struck how similar the valuations are yet the FCF is not the same at all.

     

    The valuations aren't similiar! I just looked it up in more detail than my previous post because I was curious. Berkshire announced PCP acquisition on Mon Aug 10. The corresponding equity market values on Friday Aug 7 were 26.6B for PCP and 42.2B for PSX. This is nearly 60% more. Everyone's comments about PCP having better growth prospect and areas to deploy capital are likely true but the bottom line is that these aren't similiar size acquisitions that could have been interchangeable. Using your FCF numbers of 1.7 and 3.6 make te multiples for these businesses 15.6 and 11.7, so hardly double the free cash flow for the same price.

    Chou-Eveillard-Miller in Barrons

    in General Discussion

    Posted

    Also legacy positions make them diversified. They aren't going to sell See's just because as the book value has grown, See's become more negligible. But when you look at new positions, they are making big concentrated positions. I believe Coke was about 30% of book value and Burlington was about 20% of book value at the time of purchase.

    BRK Intrinsic Value

    in Berkshire Hathaway

    Posted

    I valued BRK recently and this is how I look at it.

     

    In 2015 Berkshire produced Cash from Operations of $32.010 Billion. They spent $15.185 Billion in Capital Expenditures but many of these were growth capex. I come up with a rough estimate, but with the various businesses it would be hard to get a precise figure, of about $8.9 Billion of Maintenance Capex for Owner Earnings of $23.1 Billion.

     

    But this number does not include Berkshire's look-through earnings which are very significant. Of Berkshire's equity securities only the dividends show up on the consolidated financial statements. So, I went through and calculated my estimate of OE for ALL of Berkshires securities, Berkshires ownership of the company, and then what their earnings would be if they were sent to Berkshire.

     

    I came up with $6.6 Billion of look-through Owner Earnings, again a rough figure with lots of assumptions but I'm comfortable with it.

     

    So in 2015 I believe Berkshire had around $29.795 Billion in OE. And around $37 Billion of excess cash (Buffett has said he won't got below $20 Billion).

     

    If you think about what Berkshire's Earnings will look like say 5 or 10 years from now, and the current stock price I think it looks interesting. In a world where not much is interesting at the moment.

     

    I do something very similar. I start with net income and add back looks through earnings (minus dividends that already show up in Net Income) plus intangible asset amortization minus investment capital gains/losses. Using this I get $23.3B in earnings.

     

    Either way, I think we get to the same conclusion of "the current stock price I think it looks interesting. In a world where not much is interesting at the moment." With the lower of the two numbers (23.3B), Berkshire is trading at 14 P/E ratio. I much favor graham's side by side comparison of two options to trying to put a precise number on intrinsic value. Berkshire next to the S&P500 at 20x, KO at 25x or PG at 22x all seem like no brainers to me (Berkshire compared to other stable growth with strong balance sheets and diversified businesses).  The side by side comparison would include more than a P/E ratio, but I think we all get the point that in terms of large caps with very predictable futures, I have yet to see anything with similarly relatively attractive valuations.

    Transferring Brokerage Accounts

    in General Discussion

    Posted

    I switched from Fidelity to Merrill Edge within the last year. I found that if I transferred in the shares from Merrill rather than sending them out through Fidelity, I could do it for free. I also left some stocks in Fidelity to avoid closing the account and paying that fee. So in the  end I ended up paying no switching costs.

    If you are unable to watch Buffett on CNBC - tweets on Omaha World Herald

    in Berkshire Hathaway

    Posted

    Here all are the ones I could find:

     

    http://www.cnbc.com/id/15840232/?video=3000358324&play=1

    http://www.cnbc.com/id/15840232/?video=3000358341&play=1

    http://www.cnbc.com/id/15840232/?video=3000358372&play=1

    http://www.cnbc.com/id/15840232/?video=3000358342&play=1

    http://www.cnbc.com/id/15840232/?video=3000358326&play=1

    http://www.cnbc.com/id/15840232/?video=3000358344&play=1

    http://www.cnbc.com/id/15840232/?video=3000358329&play=1

    http://www.cnbc.com/id/15840232/?video=3000358350&play=1

    http://www.cnbc.com/id/15840232/?video=3000358345&play=1

    http://www.cnbc.com/id/15840232/?video=3000358346&play=1

    http://www.cnbc.com/id/15840232/?video=3000358347&play=1

    http://www.cnbc.com/id/15840232/?video=3000358351&play=1

    http://www.cnbc.com/id/15840232/?video=3000358352&play=1

    http://www.cnbc.com/id/15840232/?video=3000358348&play=1

    http://www.cnbc.com/id/15840232/?video=3000358349&play=1

    http://www.cnbc.com/id/15840232/?video=3000358359&play=1

    http://www.cnbc.com/id/15840232/?video=3000358239&play=1

    http://www.cnbc.com/id/15840232/?video=3000358370&play=1

     

    POLL: When Buffett is gone, whither BRK's intrinsic value?

    in Berkshire Hathaway

    Posted

    I think Munger captured it well and I certainly agree.

     

    "Berkshire would almost surely remain a better-than-normal company for a very long time even if

    (1) Buffett left tomorrow, (2) his successors were persons of only moderate ability, and (3) Berkshire never again

    purchased a large business." - Munger

     

    I am young and new to investing. When I first bought Berkshire shares about 2 years ago, I bought them because of what Buffett has built not because of Buffett. In the current state, Berkshire intrinsic value gains year to year are from growth of the permanent subsidiaries and stocks. Decades ago, those didn't exist, the IV growth was from capital allocation and making those wise decisions that make Berkshire what it is today.

     

    I think anyone that is buying for Buffett should think twice about doing so.

    Brokerage Recommendation

    in General Discussion

    Posted

    Definitely IB.  But, I remember there was a tech start up trying to create a free brokerage.  I signed up with their beta accounts alerts, and now I haven't heard about them in awhile.

     

    Was it this one:

     

    https://www.robinhood.com/

     

    Robinhood was launched today. I'm personally not that interested since I get free trades with Bank of America Preferred Rewards, but this certainly could be disruptive for the brokerage industry. They are backed by Google and the potential savings for small time investors is incentive enough to ditch their traditional brokerage and give it a try, that how BOA got me to switch over to them from my old brokerage.

     

    http://techcrunch.com/2014/12/11/robinhood-free-stock-trading/

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