biaggio

Thanks Alertmeip "The Embedded Value (EV) of a life insurance company is the present value of future profits plus adjusted net asset value. It is a construct from the field of actuarial science which allows insurance companies to be valued." Would one then add the present value of future profits to the equity values I calculated above for the various scenerios? MFC was earning ~$5B pretax before...it does not seem right that you would add a multiple of this to valuation based on book value, as doesn t the insurance company need that book value to generate the pretax profit....i.e, would that be double counting If true could you add say a multiple of 7 (x $5 billion=$35 billion= $20/share for future profits) to the above scenerio? Would embedded value be the same(close to ) as IV for investment purposes? EV-~$23-26 ($20 for PV of future profits + net asset value)per share if market tanks?? This seems too good to be true (and probably is)

Is there a price where it may be worth buying? You have to wonder what the management has been thinking. They seem to be doing the opposite of FFH, where the FFH boys are thinking about all the possible scenerios + risks and hedging appropriately. Could this be the start of MFC's so called "7 lean years" like what FFH had? With a buying opportunity at a lower price. So far what I have learned is: -excellent franchise -all their businesses are doing well, except for the mark to market accounting charges due to their sub-optimally hedged exposure(51% hedged now up from 26 %) to markets+ interest rates. Am I right to assume that if interest + equity markets remain unchanged then no further charges will need to be made + you'll have a company earning $5 billion pretax (assume they will have same profitability before current mess). According to co. "net income sensitivity to a ten per cent market decline was $1.1 billion" & sensitivity to a one per cent decrease in government, swap and corporate bond rates across all maturities with no change in spreads has increased to $2.7 billion as at June 30, 2010" They currently have $18 billion in equity ($27 billion stated equity less goodwill + intangibles) if: i. scenerio 1 50% decrease in markets + 1% decrease in interest rates: 5 x $1.1 billion/10% decrease=will cost MFC $5.5 billion +1% decrease in interest rates=$2.7 billion $8.2 billion loss of equity =leaving $9.8 billion or $5.50/share in shareholder equity 90% decrease like in Great Depression=$9.9 billion cost to balance sheet + 1% decrease in int rate=$2.7 billion =$11.6 billion cost to MFC =leaving $6.4 billion or BV $3.63/share If they lose 30% of equity they'll need to raise money to keep their mandatory capital above 150 (MLI MCCSR of 221 per cent at June 30) Bottom line: at $14 probably not a good place to be if you think we re in for lower interest rates + lower markets...but maybe at some point at <$6-8 it may be worth looking at??? if markets + interest rates increase they'll be able to hedge more, reduce risk, will be worth more. above may be an oversimplification from an amateur

Seth Klarman: Don't be a yield pig. 1992 Forbes article...may be a bit off topic posted on http://www.magicformulapro.com/2010/08/05/seth-klarman-dont-be-a-yield-pig-1992-forbes/

transcript of earnings call http://www.sec.gov/Archives/edgar/data/37008/000119380510002113/e607350_ex99-3.htm have read yet

I view the long term Treasury yield as the "risk free rate". As noted this can change quickly, usually I believe on the perception of future value of money (i.e. the amount inflation)...I think one would do well with companies that can increase the prices to keep up with or stay ahead of inflation ... Companies look cheaper because Mr Market believes inflation will be low in the future, whereas in the 80's Mr Market was expecting higher inflation.

http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/can-manulife-get-the-money-back/article1663107/ I am just starting to do some research on MFC. Any comments +opinion appreciated.

I am 32% cash. I would like to get down to 15-20% by end of year (I would like to have cash on hand to take advantage of any corrections along the way. Have been too conservative buying in opportunities presented over the last several months)

Dang that's aggressive.

Stocks have been somewhere in last 12 years, unfortunately there were a lot of round trips. If you bought at a discount + sold at fair or over value you did fine i.e. being a stock picker as you said.

Q2 earnings report http://investor.winthropreit.com/releasedetail.cfm?ReleaseID=496781

"Warren Buffett Deserves A Noble Peace Prize" according to article at gurufocus....http://www.gurufocus.com/news.php?id=102248. WEB may be a better candidate than some of the recent Nobel Peace Prize winners? I think when we read stories of these guys giving away their fortunes I am sure we all think how we can be more charitable.

"What’s something is worth and what one is willing to pay are 2 different things. I would part with my FFH shares at 1.5 book. I wouldn’t be buying at that point. I believe we are all saying that we want Mr. Market to pay us 1.5 book value for FFH. Not we want to pay 1.5 book value for FFH. At 1.5 BV it’s a fair deal. At book or below it’s a great deal. Value investors go for great deals, and then sell them to Mr. Market when they become fair / bad deals. I think everyone here is willing to hold FFH at up to 1.5 BV barring any hidden gains. At that point we will likely have to reconsider." Agree 100%...I was going to right the same response as I was reading the above. Another possible way to look at it, would be how much would we be willing to sell FFH to someone taking it private so that we would never be able to own it. Perhaps it may be worth more than 1.5x BV.(I think we all have a feeling that we can sell at 1.5X, then Mr Market will give us another chance to buy at< 1 x BV) I think we would be all disappointed if HW decided to buyout all the public shares at <1.5 x BV

I have been trying to fight off the bearish/negative sediment in the media and trying to focus on finding underpriced quality companies. I must admit I feel more fearful as Prem is so bearish and especially seeing that he is more worried about deflation than inflation. (this would make sense as I have felt the complete opposite-thinking that we will have inflation) What do you think will happen to great companies like JNJ, KO, V, banks in a deflationary environment. I think it was Yachtman who said he likes those companies because they can raise prices with inflation and deflation (people will still want to buy band-aids, coca-cola, have money in the bank that don t earn any interest/but have to pay interest on any funds borrowed). Any changes in investing philosophy or asset allocation? I have felt that buying long term bonds have to be very dangerous considering how little they pay, and considering how much dollars government is going to have to print in the future.

"Regarding Pfizer, I don't know why Berkowitz sold out." I remember seeing or reading something to the effect that he did not like the recurrent one time expenses that PFE kept reporting.

Thanks BeerBaron, I like your thinking, I am going to keep your approach in mind + may try it with my next position. I am sure buying 10% of your portfolio is motivating in doing lots of homework before hand. I like you idea of limiting "good companies" to 5% (I may have some work to do here as well)

Thanks. Enjoyed the article. I have tried to have a more focused portfolio (~ 10 companies) How do folks here purchase their core holdings? say you want a 10% position + you find a company like what is mentioned in the article + company is selling at a good price (say 40% discount to intrinsic value)-do people just buy the full allotment or do you buy say 2.5% at a tie and average in (I have had the same experience that asoon as I purchase something the price will continue to contract a further 20%). Portfolio size is say 4 x your net income so that 10% is relatively large $$$ some.

Dazel thanks for sharing your idea. I would love to own such a co. I am still stuck on the price. To me it looks fairly valued to a bit expensive. For the sake of my education I reviewed visa's latest 10K and 10Q: I get approx owners earnings of ~$3 if you take 2009 year end. Upon looking at recent 10 Q I noticed they have had good growth and had owner's earnings of ~ $2 for last 6 reported months (would it be fair to extrapulate "FCF" of $4 per share). At current price V would be fairly valued if it grew 15% per year for the next 10 years if you use 2009 FCF of $3 and would be fairly valued if it were to grow at 13% x 10 years using $4 per share. I am using a discount rate of 10% I feel that V could grow at 15%/years 10 years or more, especially with inflation. It just does not see that there is a margin of safety at current price. Then again I know it is better to buy a great company at a fair price(I think this is what Visa is), than a fair company at a great price...I am just such a cheapskate that I would like to have more of a discount. Thanks again

oops. Thanks for the correction

Michigan residents turn to alternative currency http://1440-68131.blogspot.com/

DCG, Dazel, "Visa....at 10000 transactions a minute and the world getting away from paper currency I get gidy...they have the best business on the planet...and monkey could run it." Agree Visa is a great company. I would love to own it + admit that I have not looked at it real close as I always found it fully priced whenever I have started looking at it. Big moat. If fully priced is there a MOS? Thanks in advance.

This is the only message board i visit. I have been to others but have not found them useful. I agree with article found on http://1440-68131.blogspot.com/ by farnam street...I definetely look for others opinions that confirm my beliefs. Its like having valium when some one on the board may confirm your own thinking. The great thing about this board is that there is very good intelligent debates about various ideas which makes you think from another point of view. Personally I try(it is not easy + I find it takes more energy) to pay extra attention to arguments/ideas that I have not thought of-I subsequently go on to to further investigation/reading as is encouraged here. On a side note I check in on Farnham Street Blog daily + find various articles , topic etc very good

"I have watched our largest holding go from 14 to 11 in a matter of minutes, with bids evaporating faster than a quote system can update. Even value investors place stops, and I am sure some were washed out." Misterstockwell, would it be not to our advantage as smaller investors to, being sure of the value you are buying, putting in low bids and being a buyer, rather that trying to compete at their game and stop yourself out. I don t doubt that they purposely get the price down + getting us to panic and selling out to them at a better price. Unfortuneatly for me I have often been caught trying to catch the proverbial falling knife and seeing the shares I just bought at $14 drop + stay at $11. I should probably know this but can the traders and computers actually see the prices that we may be stopped out at or a bid we may have?

Thanks, enjoyed article. What metric do you use to value BAM? Appears to be selling at a ~ 60% discount to BV according to http://www.gurufocus.com/financials.php?symbol=BAM, while free cash flow + earnings are all over the map. 12-15% grower i would think it should sell at 1.2-1.5 x BV for high quality assets + good manager/asset allocator? Is this in your line of thinking? Thanks again

http://www.morningstar.com/#CloseVhpOL -2 more parts to his latest writings

http://news.morningstar.com/articlenet/SubmissionsArticle.aspx?submissionid=98075.xml&page=1