zarley

Are there better opportunities to deploy the funds to? Has anything fundamental changed (other than price)? If the answer to either of those is no, holding is probably the best course. If both are no than holding is clearly the best choice. If you're just feeling defensive and want to lighten up, maybe consider a standing limit order to sell part at an acceptable price, or buy some puts.

Thanks for sharing Ross; obviously a lot of work went into that. In the past when I've done that sort of thing I find that the format or cell locations on data imports changes from time to time. Meaning I have to readjust all the cell references to get the calcs and charts to work out right. Have you had that problem, and if so, how did you overcome it?

I agree this is a really odd move. Reader is one of the top 5 Google services I use. Google just became meaningfully less useful to me. The feedly ap on my tablet looks fantastic. I'm not entirely sold on it, but it does broaden my perspective on what an RSS reader might be. Haven't look at the browser version yet. Since I'm a creature of habit, I will probably check out Old Reader as well.

Missed this earlier, but I feel fine about it :) . . . given my cost basis and the fact that it's still my second largest holding. I may not get that opportunity to buy back under $40. but that's ok. Plus, the price has moved sideways since I sold.

Given A, how is B true? I suspect that A is indeed not true and you're just trying to be cute. I already regret my participation here. Carry on.

Can you see how those two statements are inherently conflicting? Further, are you saying that even the simple two-column method for valuing Berkshire is beyond your ability? How can you think that value is more than BV is you don't know how to estimate it and even question its validity as a concept? I find your comments in this thread baffling.

The annual preferred dividend / total $12 billion investment. Guaranteed is a bit strong, but it does seem like a reasonable near-term floor assuming 3G doesn't kill Heinz. I made a similar observation in the the original thread about the deal. http://www.cornerofberkshireandfairfax.ca/forum/berkshire-hathaway/berkshire-acquires-heinz-for-72-5-ps/msg103947/#msg103947

For $12 billion BRK gets half the equity and a reported annual preferred dividend of more than $700 million. Barring total collapse of the Heinz business, he's got a floor of 6% annual return on the money. If the preferred is structured like the other BRK deals with a 10% call-back fee, if it gets bought back, he'd get $9 billion back. So, he'd have half the equity for $3 billion invested, less the cumulative dividends he's received. So, for example, if the preferred get bought back in 5 years, he'd have all his money back and still have half ownership of Heinz. Doesn't seem too bad to me. . . maybe not as good as the BAC deal or Swiss Re, but nice enough.

onyx1, where did you find the info on the preferred. The few links I've read don't mention it or have any detail. Pieced together from these links: "Berkshire and 3G will each contribute about $4 billion in cash to pay for the deal, with Berkshire also paying $8 billion for preferred shares. The rest of the cost will be covered by debt financing raised by JPMorgan Chase and Wells Fargo." http://dealbook.nytimes.com/2013/02/14/berkshire-and-3g-capital-to-buy-heinz-for-23-billion/?partner=yahoofinance "Berkshire will spend about $12 billion to $13 billion on the deal for the maker of condiments and Ore-Ida potato snacks, Buffett told CNBC. The deal will also be financed with cash from 3G affiliates, plus the rollover of existing debt, and is valued at about $28 billion including debt, according to the statement." http://www.bloomberg.com/news/2013-02-14/berkshire-joins-3g-capital-to-buy-heinz-in-28-billion-food-deal.html?cmpid=yhoo Thanks onyx1, here's the part I missed earlier (from the bloomberg link): "Berkshire and 3G will each have more than $4 billion in equity in Heinz, and Buffett’s firm will also take a preferred stake of $8 billion, which gets an annual dividend of 9 percent, according to three people familiar with the deal. The people asked not to be identified because the terms are private."

onyx1, where did you find the info on the preferred. The few links I've read don't mention it or have any detail.

Looks like 3G Capital -- http://www.3g-capital.com/ is not the small value oriented hedge fund 3G Capital -- http://www.3gcapital.com/. Linking up with a Swiss billionaire makes more sense than a couple young value managers.

Hehe. I actually lightened up a little bit on WDC yesterday. Still my second biggest position, but now more in line with what I see as a "normal" size. The volatility is crazy on this stock, so I wouldn't be surprised to get another opportunity to buy in the mid to low 30's. Between BRK and WDC, it's been a pretty good couple months.

I was thinking something along these lines as well. What is the benefit of formally starting a fund vs. becoming a RIA and managing accounts? I've read that the Interactive Brokers platform for RIAs makes it very easy to run a collection of accunts in a unified way that really simplifies things. I think Ben Hacker may have linked to some of that info here in the past.

I think you have your logic backwards here. Seth Klarman, one of this generations best investors, and his team of managers/analysts is able to find 20-30 stocks to invest in . . . I think a retail investor working part time would be nuts to think they could match that. I might know 20 decent companies well enough to own them, but I don't own them because the right price hasn't presented its self. I own 5 stocks in my brokerage account because I can't follow 100 stocks closely and I feel comfortable with the safety and future prospects of each. If I'm wrong my returns will be volatile, but I can accept that. If you buy the stocks in any of Graham screens (net-nets, Enterprising investor, Conservative Investor) you WILL beat the market, guaranteed. The problem is that most of them are companies with <50M capitalization. A retail investor can buy them, but not somebody like Klarman. I see your point. I personally tend not to use screens of that sort; I'm uncomfortable buying baskets of stocks in that way. That sort of mechanical screening can work, but I'm not sure it's fair to compare that to what Klarman does.

I think you have your logic backwards here. Seth Klarman, one of this generations best investors, and his team of managers/analysts is able to find 20-30 stocks to invest in . . . I think a retail investor working part time would be nuts to think they could match that. I might know 20 decent companies well enough to own them, but I don't own them because the right price hasn't presented its self. I own 5 stocks in my brokerage account because I can't follow 100 stocks closely and I feel comfortable with the safety and future prospects of each. If I'm wrong my returns will be volatile, but I can accept that.

There has been a little bit of this debate (how much adjusting from reported BV is warranted for purposes of determining a more precise estimate of the current buyback price) on the TMF BRK board. Since I'm lazy, I don't view the buyback price as a floor, and roughly right is good enough for me, I land in the 'just use reported BV' camp. Your adjustments would be reductions to overall BV and the buyback price, so they're a bit more conservative and arguably more correct. But, I'd guess the net effect is pretty close to negligible (although I haven't done the math).

Although, you seem to mix two separate issues. 1) is it appropriate to include non-controlling interest in the shareholder BV calculation? and 2) how should one adjust the reported Q3 equity to approach a current BV estimate? My $89.40 BRK.b buyback price reflects a no on #1 and does no adjustment to the reported Q3 numbers. It may be appropriate to make adjustments as you noted to get to a more accurate "current" BV. But, I haven't done that. straight from the Q3 10Q: shareholder equity = $184,602 million shares outstanding = 1.652 million (A equivalents) BV/A Share = $111,745 Buyback = 1.2 x BV = $134,093 1,500 B shares per A share ==> $89.40

I use the BRK shareholder equity of 184.602B that omits the non-controlling interest line and wind up with a buy-back price of $89.40.

+1 for keepass in combination with dropbox. Although, I'd add a suggestion to use multilevel authentication with both a master password and a keyfile. Of course you should never have your key file in any public cloud type service. Plus, be very careful about your email accounts (e.g., use the gmail authenticator). A hacker won't need to guess or crack your passwords if they get control of your email account and can use it to request password changes to your other accounts. A unique password change account in gmail that you don't use for anything but password change requests is something worth considering (although I haven't gone that far yet).

Ravi (aka Rationalwalk) on the TMF BRK board linked to this little post about BH: http://www.inelegantinvestor.com/2012/12/14/jockey-biglari-and-his-recalcitrant-horse-a-late-scratch-special-meeting-postponed-again-at-last-minute/ In a nutshell: No matter how smart the guy is, or how good an investor he is, or how rich he'll very likely make himself with BH, I'm pretty sure I wouldn't want to be his 'partner' in much of anything.

Amen. I didn't get much past the first paragraph. He's trying way too hard to sound smart. That almost never works.

The wishful thinking and willful denial of reality in this election and to a certain extent this thread is baffling to me. A little reading of Nate Silver (538) and Sam Wang (Princeton) was about all you needed to know where the race was. Back to investing discussion then?

Both good points. All in all, I'm just being cautious in my expectations. If BRK sees $1-2+ billion in losses from Sandy and doesn't see much impact to BV, so much the better. Quite a testament to the BRK model that a storm like Sandy might have little noticeable impact on BRK's balance sheet.

I'm not sure how WEB came up with 110% of BV as the buyback marker. I guess I'd characterize it as a figure that WEB sees as currently (and most likely in the future) well below a reasonable estimate of IV. It sets a clear signal to current owners, and perhaps future managers, as to what WEB sees as a safe and sensible place for BRK to retire shares (instead of finding other things to buy). Your second point about the potential growth in the divergence of BV and IV is true, if the acquired operating companies are purchased at prices below IV. If WEB or someone else goes on a binge buying businesses at prices above IV, then the difference between IV and BV will likely shrink, not grow. Although, I guess you could take a bunch of impairment charges, reducing BV. In that case, even if the IV:BV ratio doesn't change, they both go down together.

I suppose it's not a given that BV must be lower. But, given the magnitude of the sandy related damages, I'd be surprised if BV didn't drop in Q4. Honestly, it's just a mental asterisk I've put on the BV and buyback numbers.