zarley
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Posts posted by zarley
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After reading most of the linked article, Mr. Cooperman doesn't really say that earning 13% in stocks takes average intelligence. He thinks average intelligence and a lot of hard work will take you a long way. And he indicates that his current expectation is in the range of 7-8%.
Semantics aside, I agree wholeheartedly with the point that things other than pure intelligence (e.g., proper temperament, hard work, focus, discipline, and a good process) will help your results as much if not more than just being smart. I think Buffett has said similar things -- to the effect that IQ over 120 probably won't help you much if you don't have the right temperament and approach. I know lots of smart people who do self destructive things with their money because they have no process and get whipsawed by emotion.
Additionally, I think smart people who spend all their time around other smart people lose track of what average intelligence means. Being roughly as smart as most of the people around you is not the same as having average intelligence if you hang out mostly with rich people with advanced degrees. If I had to guess, I'd say that the average IQ of the members of this board is well north of 100.
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Rumor I read was that it was announcing/demoing ARM tablets.
http://www.theverge.com/2012/6/14/3085126/microsoft-event-los-angeles-june-18th-windows-rt-tablets
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Great Buffett video. Thanks for sharing.
It won't surprise the readers of this forum, but the question at the end about Berkshire's price was nice and direct.
Q: "Berkshire Hathaway, today is it a buy?"
A: "Well, the businesses it owns are worth more than the current price . . . "
He couldn't quite bring himself to say yes directly.
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Sloppy reporting.
http://en.wikipedia.org/wiki/Berkshire_Partners
Berkshire Partners was founded by Bradley M. Bloom, J. Christopher Clifford, Carl Ferenbach, Richard K. Lubin and Russell L. Epker in 1984. The firm traces its roots back to Boston's Thomas H. Lee Partners, a large-cap private equity firm founded a decade earlier. Since its founding in 1984, Berkshire has raised eight private equity funds with total investor commitments of $11.0 billion since inception.http://www.hoovers.com/company/Berkshire_Partners_LLC/rfxkxxi-1-1njg4g.html
No, not that Berkshire -- the other one. Berkshire Partners is a private equity firm that targets established North American and European companies worth $200 million to $2 billion. It targets varied industries, including industrial manufacturing, consumer products, transportation, communications, business services, energy, and retailing. An active investor, the company usually puts up between $50 million to $500 million per transaction in leveraged buyouts, recapitalizations, privatizations, growth capital investments, and special situations. Its Stockbridge affiliate invests in marketable securities to compliment Berkshire Partners' core private equity activities. -
I'm pretty sure that the referenced Berkshire Partners is not affiliated with Berkshire Hathaway.
It's a LBO shop. http://www.berkshirepartners.com/
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It's not perfect, but you can use a combination of Google News and Google Reader to create and display company specific Google News headlines in Reader as an RSS stream.
For example, you could paste this link: http://www.google.com/finance/company_news?q=NYSE:BRK.B&output=rss into the Google Reader feed subscription field and it will populate Reader with the news stream for Berkshire. It's not not perfect, because I see some sources don't always make it into my company specific news streams and you'll get even passing references to BRK, but it's good for basic real-time news updates.
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There are both professional and amateur investors here, so the answer may be a bit different for each group. I'm an amateur investing my own money and some family money. I've been reading and investing for probably 15 years. I got value religion after spending a lot of time reading about Berkshire and finding Parsad's old board on MSN. It's only in the last 5-6 years that I've developed real confidence in what I'm doing. Honestly, weathering the market of 2008/09 and being able to put money to work under those circumstances as well as selling cheap to buy cheaper was a great test, which I feel I passed.
I'm no longer overly concerned with "beating the market". It's still the yardstick I use to see if I'm adding value (I am), but it's more about process and making good decisions. Feeling confident that I know what I own and have a good basis for my valuation makes a huge difference for me. If I'm confident about my assessment, it will keep me from second guessing myself as prices go down and allow me to add to positions as appropriate rather than panic about a declining stock price.
This is all much more art than science, so I would guess that there will always be doubts. The future's uncertain after all, and you'll never bat 1.000. I think all you can do is keep reading, keep learning, and correct mistakes as quickly as possible.
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Seems to be trading very close or may be below 1.1x book value.
BRK.a buyback at around 117,260 with price at 119,750 (~2% above buyback)
I've got the BRK.b buyback price at around $78.17, so it's a little bit above that right now at $79.25 (~1.4% above buyback).
Q1 BRK shareholder equity = 175,997
A equivalent shares = 1.651
BV/A share = $106,600
BV/B share = $71.07
BV/A * 1.1 = $117,260
BV/B * 1.1 = $78.17
While I don't think the estimated buyback price is a real floor (Buffett isn't obligated to buy), I don't really see it getting significantly below that level. I agree that the potential downside is somewhat limited at this point. A market meltdown and/or significant economic downturn would shrink BV, so it's not really a one-way ticket to the upside. But, I'd expect BRK to fare better than most in that kind of scenario.
I added a small amount to BRK this morning.
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And a link to a "script" for the presentation (The Flaws of Finance) is available at GMO's website.
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A nice presentation by James Montier about basic flaws in finance and how they lead to bad outcomes:
How bad models, bad behavior, bad incentives, and bad policies interact to create perfect storms for markets
How physics envy in finance and the abuse of mathematics endanger our industry
What effects these problems have on the finance industry
http://annual.cfaconference.org/2012/05/06/live-stream-session-the-flaws-of-finance/
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Dear all,
You will find hereafter a few more links. ;)
More BRK AGM Notes :
Notes by Peter Boodell
http://www.valuewalk.com/2012/05/berkshire-hathaway-meeting-full-transcript/
Notes by Ben Claremon
(http://covestreetcapital.com/Blog/?p=530)
More Videos :
CNBC (about 119 min video in total) & Transcript: Warren Buffett on Squawk Box
http://www.cnbc.com/id/47322740/
http://www.cnbc.com/id/47322740/print/1/displaymode/1098/
Fox (about 51 min video in total) with Warren Buffett, Charlie Munger and Bill Gates
http://www.foxbusiness.com/watch/anchors-reporters/liz-claman-bio/
Great links.
I read the notes from Boodell; excellent coverage. Close to 29 pages covering 6ish hours of Q&A. Quite a performance by a couple of guys in their 80's. I like the format with the analyst questions thrown in the mix. Buffett was able to answer some specific insurance questions extemporaneously. Makes me think that the breadth and depth of his knowledge and understanding of BRK's operations may be the really irreplaceable thing about Warren.
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Operating earnings' data-ipsquote-timestamp=' which exclude some investment results, were $1,615 a share, missing the average $1,780 estimate of three analysts surveyed by Bloomberg.[/quote']
Berkshire misses earnings estimates.
Operating results were very good. If you look at year over year pre-tax earnings by listed segment they were all up strongly (BNSF +15%, Marmon +21% McLane +24%, MidAmerican +7%). Lubrizol is lumped in 'other' so that isn't a fair comparison, but operating earnings were very good for the quarter. After a quick read, it's hard to see how this was anything but a very good quarter for BRK.
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Thanks for the link. Charlie has to be a tough interview. Standard questions tend toward the obvious, to which Charlie probably has to restrain from blurting out how obvious he finds the answers. Becky looked a bit uncomfortable at times.
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Good discussion with Seagate CEO Steve Luczo from Forbes:
It's a long interview, but worth the read. A couple snippets . . .
On how well financial markets value businesses:
Q: So, Steve, will that give the Street more respect for what you do? Drive companies historically trade at some of the lowest P/Es in the entire stock market.A: Investors don’t fundamentally understand what we do. They tend to think, if things are bad, that’s how they’re going to stay, and if things are good, they’re going to get bad. That’s really been the philosophy. The glass is either half-empty, or its empty. Do I think that’s going to change? I don’t know. There are other big successful technology companies where you scratch your head and say why are they trading at an 8 P/E. Why is Microsoft trading at an 8 P/E? Why is Intel trading at an 8 P/E? I think a lot of it is a different discussion entirely, which is do our capital markets fairly value companies anymore fundamentally, and I’ll tell you my answer is no.
Q: Why not?
A: Because they’re not being price on fundamentals, they’re being priced by the large investment banks for volume. And volume requires volatility. So that’s why all the big firms are in a different camp than the smaller research firms on their perspective of the drive industry. Is it because these are the smart guys, and those aren’t? That doesn’t make any sense. It is because the big banks are motivated by volatility and the boutique firms aren’t. And therefore the research reflects that. So you can create an environment that always creates doubt, with billion dollar market cap swings in a week. It’s insane. Why does that work? Because you have traders who love to make that work. So do I think that changes? I don’t know that I see that changing for our equity markets in general, which is a terrible thing for the efficient allocation of capital. Does it change at the margin for the drive industry, if there is less volatility? Sure, I think it does. It takes time though. It’s going to take time.
On flash memory and the exploding need for storage:
Q: Let’s talk about the impact of flash memory on the drive industry.A: Any analyst who is worrying about that fundamentally doesn’t understand the industry. Flash is a complimentary technology, it’s not a competitive technology.
Q: Intel is out pushing ultrabooks with all their might. Some have drives, and some of which don’t.
A: If you want to store anything on it, it will have a drive, or you are going to pay a lot of money for flash. I mean, yeah, if a bunch of rich people in Atherton want to buy a PC for $1,000 that has 128 gigs, then, sure. I just don’t think that is much of the world, and oh by the way, if they have that machine, they have some other machine somewhere that’s got 5 terabytes on it, because I can’t do much with 128 gigs. So those products that are built for speed and mobility, those still need support of mass storage somewhere. And oh by the way, most ultrabooks, or thin and light, which is a different term – ultrabook is an Intel marketing term, so hopefully you’ve received your check this week for using that term – those have certain requirements on performance, and certain budgets on price. And the right answer for that is probably going to be a hybrid drive, because that is the only thing that can get you the performance they’re asking for at the budget they’re asking for if you want any amount of storage capacity.
Q: Sitting someplace on a drive. So, demand for drive capacity will continue to grow.
A: Our industry shipped 100 exabytes of data five years ago, 400 exabytes in 2011, and we’ll probably ship a zettabyte sometime between 2015 and 2016. A zettabyte is equal to all the data that’s been digitized from 1957 through 2010. Everything, however you want to think of it, cards, tapes, PCs, mainframes, client/server, minicomputers – one zettabyte. And we’re going to ship that in one year. So whatever the architecture is, pads, phones, notebooks, ultrabooks, real notebooks, PCs, servers, clouds, one year, a zettabyte – that’s all going to be on rotating mass storage.
Q: And demand will keep ratcheting up from there.
A: By 2020, that number is somewhere between 7 and 35 zettabytes, depending on who you’re talking to – Seagate, which says 7, or EMC, which says 35. There is no amount of flash that can even address one tenth of one percent of that. People get locked in to this view at a device level. Yes, you could have some number of units that are serviced by flash. Let’s hope so. In fact, my bigger concern is that the flash guys can’t figure out how to keep delivering the performance and costs that they’ve been able to as they get to sub-21 nanometers, than it is that somehow they’re going to replace HDDs. Not without literally $500 billion of investment in fabs they’re not. And even then they’d only be scraping the surface.
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I'm surprised SHLD isn't getting more "face time" on this board... For anyone keeping track, over the last 3-4 months Eddie has:
1. Met LP redemptions with AZO & AN stock, effectively making ESL even more concentrated in SHLD.
2. Purchased approx. 5% of SHLD shares outstanding for his personal account.
3. Sold real estate.
4. Announced a rights offering for Hometown/Hardware.
Earlier in 2011 he started selling Craftsmen at Costco and spun off Orchard Supply.
Now there are rumors he may be in the process of selling Lands End.
In short, we've had more activity in the last 8 months than we've had in the last 5 years. Given what's going on with ESL redemptions, Eddie's personal account, and SHLD itself, I think it's at least possible we could be witnessing the beginning of Eddie's "Berkshire moment", right now and in real time. Thoughts?
It's funny. I've managed to both buy the bottom and sell the top (in relatively small amounts) in the last couple months. While I tend to agree that all the recent activity is a good indication that Lampert is moving into the next phase of SHLD's operations, I get the feeling this was forced on him rather than it being his preferred outcome. All of the recent moves combined with a potential sale of Land's End will have shed some good assets from the core business. What he does with the cash he receives will be interesting to see. It may be a Berkshire moment (positive) or it may just be them bailing water from a sinking ship, trying to stay afloat as long as possible (negative, but less likely I think).
I still own a small amount, and if prices get back down to $30-$40 I may buy more, but for now I'm mostly watching.
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Orange County, CA
Originally from Toledo, OH
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I listened to several of her speeches. If I remember correctly what she said is that, Warren got what would be considered insider info nowadays but was not considered insider information at that time. This is basically nothing more than taking directly with managers, etc. Her point regarding being a mere mortal is that he works so incredibly hard, even the gathering of "insider" information, going to insurance commission's office and looking up old records, and all that kind of leg work that very few people did at that time and that is the key to his performance. Her point being it is not like Buffett spends a few hours and just by genius of his insights makes all the money. She wants to highlight the fact that others do not really appreciate the amount of effort he puts in.
She goes on to say that seeing how much effort Buffett puts into his investments, she was discouraged in trying to invest her own money that way, nothing that she cannot compete with someone like this.
This was one of my key take aways from The Snowball. Buffett is incredibly smart. Buffett seems to have a photographic memory for numbers. Buffett is a learning machine, and reads voraciously. Buffett is consumed with investing/running BRK. So, mere mortal, be humble in your aspirations for investing like Buffett. Alice makes the point directly at some point near the end of the book, but I forget exactly where.
I liked The Snowball (warts and all) but think most of what Alice writes on her blog and for Bloomberg is nonsense aimed at riling up readers/commentors. It's the nature of the financial "journalism" these days. Whatever gets eyeballs is fit to print, even if the author knows it's twaddle.
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http://www.forbes.com/sites/gurufocus/2012/03/15/fairfax-ceo-prem-watsas-favorite-picks/
Prem Watsa is CEO of Fairfax Financial Holdings, a Toronto-based insurance corporation in the likeness of Berkshire Hathaway (BRK.A)(BRK.B) — he uses the float to invest while growing the book value of the company and making acquisitions. Also like Buffett, he pens insightful, widely-read annual letters in which he discusses his company, the economy and investing in general. In this year’s annual letter he said where he saw the stock market heading in the next decade. He also mentioned six of his stocks: IRE, LVLT, RIMM, WFC, USB, JNJ. Watsa invests according to Ben Graham value principles and has earned a 9.6% average return over the last 26 years. His ten-year cumulative average is 154.6% versus 16.4% for the S&P 500.
While Watsa worries about a 1930s-style GDP stagnation in the U.S. as it “digests the excesses of the past 20 years,” he is bullish on common stock for the long term. He is fully hedged as he expects major risks in the next three years, but will gradually remove the hedges as the risks get discounted in common stock prices.
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WDC finalizes Hitachi deal:
http://www.zacks.com/stock/news/71070/WDC+Completes+HGST+Buyout
It took longer and cost more than expected to get through the regulatory hurdles, but it's now a done deal. Need to take some time to see what the details are and what they gave up to finally get it done. Glad to be past it though.
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I expect there will be a number of companies, perhaps public but certainly private, in distress due to low nat gas prices and their capital structure. Hopefully, properties can be bought at very attractive (and even fire sale) prices from these companies by the savvier deal makers who have cash to work with.
I believe the guys at Loews (L) mentioned expecting a similar process to unfold. If they don't feel too stung by their previous purchases, they will probably see some good opportunities to get more assets cheaply.
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None of these analyses give a penny of value to the embedded put at an increasing strike price on average quarter by quarter. Whenever BRK trades close to 110% of BV as it does now, the value of that perpetual put will add at least 20% to 30% to the value of holding the stock.
If one were of a mind to use margin, BRK could be levered up now very likely with less risk than holding a spider without margin.
Andy, now's your big chance! 8)
One small caveat to this though is that Buffett has not committed to buying at 110%. He may, he may not. I think he's clarified that a couple times. In particularly weak markets he may have better opportunities and he doesn't want traders to think he'll always be there to buy at 110%.
With that said, it does seem likely that buying at these levels should result in investment returns at least equal to the growth in BV. But it's not quite riskless.
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Given no news, I guess it's just the random machinations of Mr. Market.
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Closed up 4% on a sharp late rally. Looks very odd; is there news?
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What are the chances they've been quietly cultivating a world class insurance sub that can turn into Lampert's Berkshire Hathaway? My gut tells me it's probably unlikely, but not out of the question.
could they not eventually spin the RE off and continue to handle insurance needs of SHLD but also expand their charter at that point creating a public insurance company and investment vehicle?
Yes they could. But, Sears RE predates Lampert, which makes me think it's purpose and continued operations are about the insurance needs of the business rather than a Berkshire Hathaway type transformation to insurance as a significant contributor to corporate profitability. There's really no way for us to know.
If Lampert's ultimate goal is to remold SHLD into an investment vehicle something like Berkshire Hathaway, how might he do that?
- Spin the retail operations off into their own business
- Own the real estate that the sears retailer uses (or any other use if the retail business is considerably smaller) and take the rent as an income stream
- Own the income stream from the licensed brands
- Have an insurer and use the float
Assuming the retail can be made to work and that the brands have long-term value, that combination might make for an attractive investment vehicle. The insurance float plus a steady stream of rent and royalties might make for the beginnings of a nice mini-Berkshire. In a way pieces of this are already in place, but not in an overt way. And, the cash-burning results of the retail operation are still the big issue to get right.
- Spin the retail operations off into their own business
Cooperman Says Earning 13% in Stocks Takes ‘Average IQ’
in General Discussion
Posted
Well, I don't know what that measures, but I scored 87 by answering 50% unless I was fairly certain I knew the answer. I'd guess I answered 60+% 50. From 0% = I'm positive it's false to 100% I'm positive it's true, 50% = I don't know (and for me I don't care). They characterize that as gaming the score system, but to me that's just the obvious interpretation. Either way, I'm not sure it means I'm really "risk intelligent", just easily bored with trivial factoid questions.