DooDiligence

I miss Paul Kangas and Louis Rukeyser.

This is a worthwhile read, especially when attempting to plumb the depths of current market sentiment. I love the way this guy writes and the way he invests. "We didn’t own the FANG’s last year and as such, didn’t reap their 75% gain. We’re ok with that. Did the underlying value of those businesses compound by the same 75% rate? We don’t think so. We have never had a problem watching others get richer faster over short periods of time. For some that’s hard to do. If you owned the S&P 500 last year, those four FANG’s added 4% to the portion of your net worth in the S&P. Investors in the S&P 500 should know that for every $100 invested in the index, $7 are now a bet on the FANG’s. Berkshire gets less than $2. Facebook alone gets more than Berkshire. Would we be better off with a company like Facebook than with Berkshire Hathaway?" (page 11) --- I remember reading through a compendium of Berkshire Letters to Shareholders and it seems like WEB has always underpromised and over delivered. (page 19) --- I know a lot of members here already understand this valuation method so I won't bore you with anything but the summary / preface to his exercise. "Berkshire leaves the investor to determine fair value using the two data points they supply in most years. Our valuation hinges on Berkshire earning an underwriting profit averaging 5% going forward, on Berkshire paying taxes at a cash rate far below the nominal corporate rate for many years, and on the consolidated business commanding a premium valuation due to utilization of little debt, ownership of high-quality assets, extraordinarily low cost of capital, and conservative accounting, among other intangibles." "While simply capitalizing a pre-tax earnings number and adding that value to the value of a portfolio of securities is easy and a great way to come up with a shorthand value for Berkshire, it isn’t sufficiently thorough. Our preferred way to value Berkshire, and the only way to really understand the nuances of the business, is to use a sum of the parts approach." (page 22) --- I just started reading this morning and will continue when I get back from classes. Even though I finally understand the all the reasons for Berkshires enormous advantage in terms of low cost financing, especially in times of high interest rates. I still have a nagging doubt that at some point it will become too unwieldy (and yes, I'm also imagining some kind of unlocked value). WEB has used a forest analogy to describe the business segments, "He divides Berkshire’s holdings into five "groves": its non-insurance businesses that it controls; its collection of marketable equities; its controlling interest with other parties in several businesses; its cash and fixed-income instruments; and its insurance business." https://www.morningstar.com/articles/915303/buffett-says-focus-on-the-forest-forget-the-trees --- Is there a a point at which the forest needs to be managed to avoid a huge fire, and could it include a pruning that throws shareholders a bone (aren't mixed metaphors fun)? I'll keep reading when I get back home and will likely have more idiotic ideas to annoy members with.

www.statesman.com/story/news/politics/politifact/2022/09/06/fact-check-ppp-loans-forgiven-republicans-matt-gaetz-marjorie-taylor-greene/65470173007/

I like this one for the long haul when paired up with my Disney holding. In my imagination, if Disney has to pony up for the rest of the Hulu stake, I still win.

Thoughts and prayers, right?

More SMH because damn, semi designers, fabs and semicaps look cheap, and more importantly, necessary. There will be lumpiness. FWIW, I'm all in now and have set aside a generous pile of untouchable / un-investable cash to cover expenses until early to mid-2025. Those who've been hoarding investable funds can now fully expect to be accommodated with a huge overall market drop.

Would this make a decent summation of the reasoning behind artificially low BV, and the case for not breaking BRK up? A big factor in Berkshires low BV appears to be due to its commitment to offer permanent homes to businesses. Many subs have been owned for a very long time (Sees, Clayton, GEICO, etc.), and are heavily depreciated on the books. IOW, they’re worth a lot more than the value they’re held at (grammar police please). https://en.wikipedia.org/wiki/List_of_assets_owned_by_Berkshire_Hathaway - (a good quick reference list with purchase dates.) Allowing insurance subs to hold equities (part of the zero cost "float" which they get to invest, while knowing they'll have to pay a large portion out in claims at some point). WEB knows that this "money" does not belong to BRK, but to future insurance claims against GEICO, General RE, National Indemnity. Some of these equities have been held for a very long time. I haven’t tried to figure out how recent mark to market rules affect the balance sheet but I’m guessing it causes them to reflect current value on the books. I know there are revolving tax consequences and this rule seems like a great way to muddy the waters to no good purpose. Aside from the book value discussion, a big advantage of the holdco structure is that they get to redeploy cash from subs which have little or no reinvestment opportunities, to those which warrant it and can reinvest at higher ROI's. As assets grow, and they will, the overall intrinsic value will also grow. Breaking Berkshire up would spin out subs at much higher multiples but would also trigger a tax burden that would partially offset the gains. I have my doubts about how significant the offset would be, but I don't question the disadvantage that some businesses would be put due to being cut off from zero cost financing with Berkshires ability to move cash around where it's needed. There’s a significant bit of magic in this. Critics be damned. I started looking at Berkshire back in 2010, when the price was around $70/sh., and look where it is now a mere 12 years later. Not a bad deal!

More BRK.B, DPZ and GOOGL

I forgot what happens when you offer a permanent home for businesses. I'll just enjoy my slice of Omaha.

In a semi-traditional sense, BV should reflect what's left over in an orderly liquidation. Berkshire is obviously an ongoing concern. The replacement value of BRK's individual businesses is not reflected in BV and I'm curious if, and how much, hidden value exists based on the assets. I'm also trying to figure the factors that keep BV so low in comparison to other metrics, which seem reasonable based on the business. I've been reading through old BRK threads and think I kind of understand, and I should probably just forgo the mental accounting gymnastics. If more members with bonafide street cred (you are one such individual), responds with, "just keep adding, never sell and be happy", I'll drop the subject.

Is it due to the way the capital base is structured? I understand the zero cost "float" which Omaha gets to invest, and I get how a lot of this "money" does not belong to BRK, but to future claimants. I get the advantage of the holdco structure, which allows Omaha to redeploy cash from subs which have little or no reinvestment opportunities, to those which can reinvest at higher ROI's. I can see how breaking Berkshire up and spinning subs would rerate them at higher multiples, but might also trigger a tax burden that some argue would offset the gains. I have my doubts about this, but I don't doubt the disadvantage that some businesses would have due to being cut off from zero cost financing due to Berkshires ability to move cash around where it's warranted. My "semi-autist" confusion comes in not understanding why Berkshire trades barely above book while P/E and FCF yields look fair for the overall business. Is book value artificially low due to the capital structure or is there some other reason? Did I already answer my own question but fail to connect the dim witted dots? There are those (I think they're either idiots or hucksters), who deride Omaha's performance. I started looking at Berkshire back in 2010, when the price was around $70/sh., and look where the assets, IV and equity price are now (just a mere 12 years later). Full disclosure: I am NOT a finance pro (obviously), and BRK is a bit over 16% of my portfolio.

I hope you kill it with these. I have stinker bids in on the equity of both.

Can you understand me Baby don't you hand me a line Although it doesn't matter You and me got plenty of time Hold me, hold me, hold me…

A little something for the inflation is transitory crowd.

Word. What worked before will not any more.

SCOTUS Get’s Served a Bloomin’ Onion

Also seems like a demonstration of commitment.

I'm up to 16.1% BRK.B with half in an IRA (at $195) and half in taxable (at $274). Seems like a good backstop and I'll likely be adding more in taxable.

Greg Abel buying A shares. www.sec.gov/Archives/edgar/data/1067983/000108131622000039/xslF345X03/wf-form4_166482914221983.xml

I tried growing crabgrass but the centipede keeps choking it out

dimethylamine salt does the job for sure

Same, re: the balance sheet and personal experience with their products.

I'm a lawn freak and used to use Scotts products but switched to WalMart's Expert Gardener brand quite a few years ago. I battled weeds for a long time using Scotts Bonus S Southern Weed and Feed with virtually no effect on weeds, and yes I do follow the directions on the bag. Now I use the Expert Gardener fertilizer product(s) + 4 to 6 week applications of Spectracide Weed Stop for lawns with a hose end sprayer and the results are significantly better than Scotts. The war on weeds is never ending and you gotta use the right weapons. My lawn is green and lush at half the price. --- edit: that reminds me, I'm buying winterizer today.

Here's a few interesting threads on Reddit: ---

I'm assuming the "excluding auto" cohort will see the biggest portion of claims? When I switched to GEICO for auto, a few years ago, I tried bundling home and auto but they wouldn't write a homeowners policy. I was very happy to see this.