Txvestor

With a rising share price from a $436 bottom, I think it's more likely someone is buying it up rather than someone selling it down. But I agree the volume has been very high. Compared to some of their other insurer peers, I do think it is relatively undervalued at ~1.15 BV and the lack of headwind that the hedges represented for the past few years. As an example MKL(which had a far less impressive underwriting quarter) trades at a ~1.4 BV valuation.

I dont think markets do sideways for very long. I dont see anything on here that looks flat: http://www.macrotrends.net/2324/sp-500-historical-chart-data I think rb nailed it. Add to that is the fsct that a single party controls all 3branches of gov't and can therefore claim a mandate to make meaningful chnages and actually get something done, and you can explain the optimism. That said there are a lot of unknowns, how effective will trump be, how will he govern, what geopolitical instability might he stoke etc. etc. however at this time mr market is liking the single party control and very high likelihood of a large fiscal stimulus and tax reform. I don't think it is mich more complicated than that.

Yet, if he had bought MSFT when he took his IBM stake, he'd have a double on his hands unlike IBM which has thus fsr been a dud.

If that was the plan however, wouldn't it have made sense to initiate the position earloer this uear when it was trading in the low teens? Its nit like they were hurting for cash at any time in recent memory.

Yes but in the past both have traded above 2x BV. Just not recently. Arguably those days are over for both as their size has grown, but with both companies buying up whole businesses as subsidiaries and probably having decades long investment runways with management fully alligned with shareholders, surely 1.5x BV is not a stretch in this arguably fully valued market. Especially as they both are with solid insurance/underwriting franchises. In general financials have not traded at healthy multiples of BV since the financial crisis.

Luckyone, I too have a sizable long position, but surely that shouldn't prevent one from taking an objective look at the investment profile! These things tend to be quite volatile and Mr Watsa repeats every quarter both good and bad that you can only make sense of the results in the long run. That of course doesn't prevent Mr Market from his manic depressive ways. We should attempt not to be similarly labile in mood. Good luck. ;) FWIW, I think relative to the market, this is a decent buy, and a solid defensive position.

Conaccord took this Q eps down from $12 to -$10 recently. My base case is that the results come in perhaps even worse than that, at perhaps -$20, since the 10yr t bills yields are up around a quarter point since the last quarter, and they have to mark their sizeable bond portfolio to market every quarter, and their hedges have likely gone sideways as equity markets have been range bound, and I'm anticipating no underwriting profits, as cat losses(western canada fires and recent hurricane losses) wipe out their recently consistent underwriting profits. Their equity holding haven't done particularly well either, but of course with such a diverse portfolio, you never know if they mark to market certain gains etc Quess to offset the losses. Absent the last point, we are likely looking at this dropping a bit further after the results this thursday.

Of course it would be better for all including the overall economy if it were simplified. Lest we remind you that Simpson Bowles came up with precisely that as a recommendation. Mr Obama quietly ignored it. He was never Ok with a revenue neutral tax plan as much as he pretends to blame the house republicans, he was the one who refused to take it forward. He demanded an increase in taxes and wanted them further tilted towards the upper income brackets. Never mind the already high nearly 44% percent marginal federal rate paid at this time. Add in state and local taxes and high income earners already are at roughly half on their marginal rates. Contrast that with a sub 20% for the lower income crowd, tax rebates as EITC at the very lowest levels, and the now near 24 percent for the income on capital crowd, divis/LT cap gains. Whats more corporate taxes paid are averaging lower that even that. Why is highly valued work paying such a high rate? Whereas capital and low end labour being treated so kindly? I will tell you why, one has votes and the other has lobbying clout. High income earners get taxation without representation. Remember the total tax take is around 20 percent of GDP. Anyone paying more is the victim of this unfair system and anyone paying less is the beneficiary. Anyone can look at their returns and figure it out for themselves. High income earners averaging 40+% are the ones getting reamed out. Buffett probably never paid anything close ever in his lifetime. Its a bit rich of him telling those paying half their income to pony up more. Don't you all agree?

The level pf hypocrisy is stunning yes. Alas what's worse is the public's gullibility on this topic. One just wonders if it hasn't just degenerated to a gimme mentality for the majority of voters, like Romney said in that leaked tape. If so we as a country are not as far removed from banana republic status as we would all like to believe.

Why would he criticize the trade deficit? Interest rates are at record lows and our currency is currently stronger than average. Our buying power is at a historic high while debt is the most inexpensive it's been in history. Running a trade deficit isn't only not a problem right now, it's likely the right thing to at this point in time. Now, if the deficit is perpetual and never shifts back the other way to neutral or a surplus over the years, then that begins to be an issue. But at the current time, I simply don't understand the criticism that's levied at the deficit. You can't be serious. By your logic, a weak and moribund economy causing low interest rates, a fed policy of buying Trillions of dollars in long dated bonds, international insecurity and feudalism, causing a temporary fleeing of non entrepreneural capital to the US, justify running a trade deficit 'as the right thing to do'. With logic like that, who needs any planning. Markets have long been known to indulge in mass insanity and when the wake up cometh, its very quick, dramaric and draconian. Volatility is a function of such excesses. The US should absolutely be aiming to grow BALANCED and hence SUSTAINABLE trade. We have not done that and we quite simply mst course correct.

Has the look of a very good and strategic acquisition for fairfax. We know the price paid, but does anyone have any information on the LATAM division. Book value, combined ratios, total float etc.

A few points. 1)Buffett speaks of his PERSONAL tax returns. The vast majority of his wealth is tied up in his stake in Berkshire, what he does with its tax returns is far more pertinent than what he does with the peanuts in his personal tax returns. 2)The P&G share swap for duracell was mentioned. He has done many such deals over the years. His recent swap of the majority of his Washington post stake for Berkshire Hathaway shares in that company's overfunded pension plan and a few profitable local TV channels was another. Considering his Washington post stake appreciated something like 100x. Pretty much the entire stake was taxable, and the treasury got nothing. There is a lot of hypocrisy in the system. Hard working professionals pay marginal rates approaching 50%(state and federal). And these corporate entities, and owners of capital who spend their time growing it, pay 24% or less if and when they choose. Its a bit rich of them to lecture those trying to climb the ladder, about "fair share" economics. When I see a wealth tax of 2% on assets above a Billion, Buffett can lecture the rest of us about paying more in taxes. Why does the media not point out that someone with 60000Million, whose net worth grew to 66000Million paying 1.8M is personal income taxes is insane. Buffett amd co. are amazing escape artists and sivert the publics attention very well. And like someone pointed out above, the vast majority of the public are completely ignorant about these issues.

To his credit, Dalio does advise that every investor have an allocation to gold. Who knows - which is really better? A deflationary spiral or a hyperinflationary bust? Policy makers want a modestly inflationary environment than either of those two outcomes. I'm just not sure they have the means to get it right. If you've ever lived through a hyperinflationary bust, you realise very quickly that it is very hard on the average person, and on a global scale for the US will lead to at the very least a loss of the role of the USD as global reserve currency. That my friend is an incalculable loss. Atleast deflation will bot result in that. The Federal Reserve is playing with fire.

This will not just be a disaster for investors, it will be for the entire economy and civil society eventually if they do it. It will kill the entire productive sector of the economy, and truly render currencies worthless. If a currency is not an adequate store of value, people will quickly find alternatives and then gov't will find it more and more difficult to govern, and leading to chaos. Gold does appear to have a role in an investor portfolio if this thpe of asinine economic policy is to be reckoned with.

It would be clear by then via the 13F, whether Alan exited, added or maintained his OUTR position. It is such a great case study in value investing, and would like his opinion on that company irrespective of his current involvement.

This one has been on my radar for some time, but never been 'at the right price'. It has recently had a pullback along with financials more generally. I believe it to be a very well run bank. Any thoughts on whats a 'right price' for such a company with a fair bit of growth runway ahead of it?

You are probably correct in assuming that he is super convinced. However the issue is that super convinced, then super wrong is how you make super losses. :) You have to be right damn near 100% of the time when you take such high AUM % positions.

I think they've probably decided they have utterly outgrown the capacity of Omaha to host the event. The attendees go up year after year, and i think they were over 40k last year. They were even suggesting airBnB etc to shareholders. Now they probably feel they have to do this to perhaps reign in the attendance. Will be interesting to see if it works!

What are your thoughts on SOTP value investing vs picking quality and letting it run. An investment in LUK is a bet on management but in terms kf quality of the franchises, well lately they have not been doing well. How does your thought process work for such situations.

What are your thoughts on the more rapid than anticipated decrease in Outerwalls revenue numbers lately and does the decrease in stock price strengthen your initial investment thesis ie more stock buybacks for the stockholders. What metrics do you look at when guaging progress management is making with this investment. Does the recent debt covenant disclosure from Distribution now alter your investment thesis on its ability to benefit from the cyclical downturn.

Not so sure about paying too much attention to this. One of his previous investments that he touted as a long term buy and hold was SHOS, sears hometown and outlet stores. Compared it to ACE hardware, its franchisee high ROIC model etc. This was before he stopped discussing specific investments in his letters. That thesis clearly did not play out the way he projected it to do. I suspect he is long out of that investment since it obviously did not seem to hit his returns, but thats difficult to track since I'm not aware of any 13f filing needs since I think he is below the threshold.

I am a bit confused by your post, I can't figure out if you argue against the fact that BRK can get 10% returns in general or on PCP in particular. In general it's not hard for BRK to get 10% returns on capital deployed. They can get 10-12% in BH Energy and that one is more or less guaranteed by the gov't. That business also has a long runway and a structural advantage over the competition. They could easily sink 100B in that business at 10% return over the next 10 years or so. About PCP they stole the company. Not only they bought it way below value, PCP has a long runway too. They are one of those firms that can make critical components than no-one else can and those components go into very expensive applications. They have great materials technology and the future of industry is all about high tech materials. To use a very bad analogy PCP is like the Google of industry. And PCP will be way more valuable inside of BRK cause the management at PCP is great at doing acquisitions and now they have access basically to unlimited funds so BRK can double up by doing tuck ins at PCP. Also oil and gas is a small part of PCP and the aircraft fleet is the oldest its ever been. So I don't understand what your concern about oil and gas or china is regarding BRK or PCP? Like Original Mungerville says you'll see very clearly how he'll get >10% on PCP in the next several ARs. Stay tuned. OK fair enough. I was just asking because i guess I do not have that 2nd order thinking. If he does get all that right, that would be great, and i certainly have followed him long enough that I can't say it is not possible. However, I wasn't as bullish on PCP as that, and when i saw that he bought it at not far from a price it traded at for a 52 week high in light of recent business headwinds it seemed expensive. He himself said he paid up, which means he strongly believes in its future prospect cuz despite Charlie's influence, he remains a tight wad at heart. He certainly is not going to get 10% on the 30+ billion he has employed right away, but i guess time will tell if he can over the course of time.

Don't kick yourself too hard, because you will get more than 5-7% return even if the multiple holds - so good to try and factor in the following: - BRK is providing no dividend right now, but it is safe to say the Buffett's minimal return on capital deployed is probably 10%. - This means all retained earnings will eventually get deployed at 10% return minimum. - You have retained earnings growing 5 -7 % which means that that amount that will be deployed at 10% is also growing. The key with valuing BRK correctly, is to factor in that 10% return on new capital employed into your valuation. The earnings yield is 7% right now - so you that is your base yield at these prices. To that you add new capital invested at 10%. So that means your answer has to be between 7-10% return. Now, having said that, if BRK also grows float, by say 2% a year and insurance is half the business, you might get an extra 1% with that. So we might say new capital may actually be invested at 11% - ie 10% + 1% from insurance float. Basically if all new earnings were immediately invested in 10+1% opportunities, and the current multiple held, your return would be 11%. If none of those future earnings get invested ever, and because cash earns 0%, your return would be your 7% (or inverse of the p/e). So your return is probably closer to 11% if you think Buffett will be able to continually deploy capital and 7% if he just sits on cash and doesn't ever pay a dividend. Anyway, factoring the above in to your analysis will improve it. Do you think Buffett is getting/going to get 10% on capital deployed? I doubt it, and one of the reasons i was surprised at the deal. I understood that he thought it was a good business but given the headwinds in Oil/Gas and China, and the numbers PCP was posting lately, surely $235 was a high price. I just wonder if this will outshine other investment opportunities he might have had coming down the pike. He will almost certianly have to hunker down for a couple of years to reload the elephant gun, and if those years happen to be turbulent, there will be missed opportunities.

I agree it was the most superficial rubbish of an article i've read in a while. Not that I'm particularly bullish on BRK after the run its had in the last 2-3 yrs but nonetheless this incoherent article was non sense. On one hand it speaks of the cash juggernaut that it has become, and on the other it mentions that WEB isn't quite finding the same deals as yesteryear. Any of us would love to have owned BRK for any of the decades he speaks of there. To my mind owning BRK is like owning the S&P, but you could expect a point or two outperformance over time. There are tons of capital allocation choices for successors including investments in subsidiaries, acquisitions, share buybacks, dividends etc. and you can bet that the culture of Berkshire is such that going forward the management will appropriately weigh each of those options in deploying those undeniable cash flows. That last point alone will distinguish them by atleast a couple of percentage points over their collective S&P peers.