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Brk-b. Decided to add some diversification and downside protection while maintaining liquidity (other positions are of very low to very very low liquidity). Small position at just 8-9%. Price as dropped quite a bit (less in euro) but earnings have been retained, so I don't see that much downside in USD. €/USD evolution is for others to guess but my bet is that it will either reduce my losses or reduce my gains.

How did you get at 60% leverage? My numbers got to 23%... which explains the 2017 adjusted ROE of 10.7% (parent adds leverage but for sure assumes some general costs).

As you asked, I'm not answering your question ;D What do you mean by unlevered? - ROA? - after subsiary leverage (ROE)? - after parent leverage (BRK energy leverage)? From what I understand they are granted a defined ROE for each subsidiary. Last time I checked around 10% (someone?). In addition, at parent level (BRK energy) they usually carry some leverage over that leverage (not sure how much... that would be interesting to know... someone?). In addition, BRK itself used to carry some leverage over that (I believe it no longer does: float is on cash, brk finance leverage is mostly to cover manufactured home credits and there is minor leverage at subsidiaries). edit: https://www.berkshirehathawayenergyco.com/assets/pdf/2018-fiic-presentation.pdf edit2: page 18 in the presentation. ROE by subsidiary edit3: page 29, debt by subsidiary and parent debt (6,452M+100M). Total: 35 251M. equity (page 14) 28.2M. So Parent leverages subsidiaries in 23.2%. Interest and some other costs maybe should be eliminated to adjust parent leverage over subsidiaries. Subsidiary ROE a little over 10%

I am no specialist, but my major holding (Ibersol), has done something similar (but at a low multiple) very recently, so here is my opinion: - if debt is low cost (1-2-3%) - if it is a debt fueled acquisition - debt is non callable and - if cash flows will pay the totality of the debt in those 5-7 years you mention Then it is a no brainer. In the end you have a cash generating asset for free. However: - if you cannot pay the totality of the debt in those 5-7 years, then nothing guarantees that you will be able to roll over that debt in the end at a similar cost. So, the following make all the difference: - multiples - safety of cash flows But: Aquisitions are more probably value accretive if you can get medium term very low cost debt. You basically get the first 5-7 years earnings for free and basically you are programming an aquisition for a much lower multiple in 5-7 years.

Seems interesting, but where is the article? Thank you

Bought davita yesterday at 64... It is the first buyback window after the announcement of the sale of HCP and it has pulled back a lot. Low earnings multiple, lower tax rate, low net debt after the deal, cannibal, a big runaway for expansion (international), a growing client base and expectations of profit after achieving scale in international markets.

While I agree that buying a house is not a grat investment (moneywise) that article has 2 very important flaws in in those return calculations: 1- you can not ignore rent. It would be the same as ignoring both dividends and buybacks in the stock market. The final return is totally different, especially because the saved rent can be invested (they already discount the mortgege payment, you would be discounting twice) 2- 7,5% interest rate is a very different thing from a 1,5-2% interest rate (not sure what is the number in the us currently). With such a different discount rate you might reach the conclusion that houses are much cheaper now than they were at the time they used for those calculations (so they pretended to use a favourable comparison but used un unfavourable one) That said, the objective of buying a home is not on the returns, if you do not lose money you should be happy.

Buffett had/ has laggards like every one else operating at similar AUM - the difference was the upside of his winners. Although we don't have details on single-pick gains from the BPL days I think the best modern analogue is M Burry's early days at Scion. In the first year he was up 55% gross while the S&P was down 10% - and that was all because of a single value stock in his portfolio that was a 3-6 bagger depending on the cost basis. A number of his other picks (especially airlines in 2001) went nowhere. This is a power law world. You don't make 55% in a year by owning 10 equal-sized positions that each go up 55%. Buffett did 30% gross at BPL. His claim that he could consistently do 50% a year is bogus in my opinion unless he was managing <1M in inflation-adjusted dollars. He has really done the community a disservice by saying that IMO. His 50% a year claim was in the 50s, before buffett partnership. Those were the years that sent him into his first "retirement" at 26. In fact, he said exactly what you said: "It's a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that."

Also bought GOOG this week... I'm still doing my research and Alphabet topic on COBF seems to be dead...my only reasoning was that it is growing a lot, has 100B net cash and taxes in the US went down, meaning that their net income should increase only through taxes. To be sure I still don't have a meager idea of the roof for their growth... Do you know any good report I could read on their business? Thank you Ps: I wanted to buy BRK instead but I sold at a loss at 210.8 last week and didn't want to lose the tax credit (truthfully I'm not sure I sold at a loss due to the favourable euro-dollar cambial evolution through deal closure on wednesday).

Isn't that only about 10% of his yearly income?

My take is that a much bugger disruptor would be autonomous car. And it is a much more certain disruptor. Why? - it has no physics, chemestry or raw material supply problems. With batteries you can come to the conclusion that you cannot turn rock into gold. - only limitation is informatic innovation, which is no limitation at all - it heavily affects multiple industries, the most disrupted I can think about right now: A) taxi companies (ride sharing services also do, but with AV it is will be much worse) B) car dealerships: there might be a car penetration rate reduction in developed countries due to cheap autonomous ride sharing and, simultaneously, bulk car sales might become the norm (ride sharing companies will have bargaining power and deal directly with auto companies) C) auto insurance in developed countries: less cars, less accidents and bargaining power from big clients D) ...

I agree that meeting the goals is important, but measuring whether in the long run you can outperform a strategy of putting 100% of new cash added immediately into cheap passive indexing, either in absolute returns or in some long term risk adjusted measure (over a whole economic cycle), is a helpful sanity check for whether or not you're right to be an active investor. You can feel great about your investment returns like me in the last couple of years thinking you're way ahead then find that after accounting for new cash added and currency windfalls you only beat the S&P500 Total Return Index by a few percent each year, far less outperformance then you'd have guessed from how well each decision turned out. I suspect it has a lot to do with riding BRK down to $124 in my case before going in even heavier at the market low, and seeing the whole market rise alongside it. So I made some great decisions but only affecting 15-25% of my portfolio and each only being a modest amount better than a decision to buy the index would have been. +1. This is exactly why I track it. If I can't beat an index fund then what am I even doing? According to Fidelity where all of my actively managed assets are (I have my 401K for work somewhere else, but those are in index funds so I don't track those when calculating my returns) I have an annualized return of a little over 12% over the last 10 years and according to Fidelity the S&P500 has done 8.5% annualized over the same period. I wonder how good a return that is considering my time spent. On the other hand I enjoy it, so I guess my hobby pays me a little bit. Beats golf. My opinion is the same. However, it is important to include both market cycles (bull and bear), since our portfolio may be more (or less defensive) than the index. Also agree about the hobby part. However, our concentration is always higher than the index (in my case much much higher) and, as such, the risk is much higher. As such, a slight (in my case substantial) overperformance might be needed to an identical risk adjusted return. If you routinely own 3 small caps, you might need to beat the index by 5% or more just to have a comparable return. If you can, then it is a cheap hobby :)

No pratical experience on this (downturns). My take is that it would be wise to move into cycle resistant or counter cyclical stocks late in the cycle. Maybe not with all the portfolio but at least with a decent part (otherwise you would be trying to time the end of the cycle). This doesn't mean moving from low quality to quality. A good company may be cyclical and a reasonable company may be acyclical. For example, you could buy an highly regulated utility and still keep casinos and restaurants you have in your portfolio. If the cycle continues you make money, if it doesn't you have a way to get the money you need to go deep value. That is what I am trying to do right now: bought an acyclical utility last month at a 10-13 net income (depending on the legality of a recurring extraordinary tax on assets), while keeping the remaining portfolio. My take is I won't lose more than 10-20% on the utility (while some companies would go down 60 to 90% in the same context)

Congratulations! Also, I am guilty as charged, in 2017. :P Thank you both for the advice. My wife asked me yesterday if I it was wise to be "investing right now" 1st kid is in his 3rd week). Since I was only selling to pay last year taxes I guess I had to do it... I'll post later my discution (when I have the time). IRR (pre dividend and capital gains taxes but post all other costs) have been approximately: 2ndhalf 2011 and 2012: 20% 2013: 30% 2014: 50% 2015: less 5% 2016: 50% 2017: 160-170% Since I kept adding cash until late 2017 it is hard to know exact numbers. All stock (and a little cash at times) portfolio. Signature says it all 2017 could have been much better if I learnt from december 2012 mistakes (which killed my 2013 results which could have been similar to 2017) Edit: returns in Euro

This is also my understanding. My valuation process isn't very scientific but mistakes come from misunderstsnding the business instead of valuation. As such it is important to understand the accounting and the business. I've been trying (without success) to find books about business models (example: how a construction/retail/oil/bank/restaurant company makes money and how to measure it) because that is where money is made.

Signs of a bull market, this topic is dead for over 6 months. Sold out BRK-B today. I think it is still undervalued but made a decent gain in a month or two and now I'm going back to my small companies corner.

My circle of competence: ultra cheap stocks. You don't need a COC if things are so cheap they hit you in the head. As a result of some of those investments, I believe i leaarned something about auto retailing (you buy and sell new and used cars and you service those cars you sold for some years and with that money you get to pay the real estate, and that is pretty much what i know) and casino operating (you have some gamblers which you treat well and you also have some entertainent and culture offering and sell food and drinks, areas where you lose money, to try to captivate some non gamblers to your business, and that is pretty much what i know). The funny thing is that my understanding of circle of competence is that i don't need to know more than that to invest. You don't need to know how to run the business, you just need to know how they make money and which are the key drivers. I believe Buffett also said that some time ago. Ps: WEB had a class at college where he learned the basics of loads of businesses and how they made money. Does anyone know a book I could read to learn those basics? Thank you

Why do u say Diageo is a Berkshire holding? Diageo is an alcoholic beverage company. If I remember correctly (and I don't think I'm wrong) Buffett stated very clearly he would not own gambling, alcohol and tobacco companies. After that, it would be a big hit for his reputation if he owned diageo and he wouldn't take that risk. He did say that about casinos and tobacco, but not alcohol. He owned Guinness the beer company before. I searched it but couldn't find the quote. You most likely are right then. I even found a quote saying they would own stock in a tobacco company but wouldn't own it downright. Ps: not playing moralist here (i do own stock in a casino operator), i really thought he had included alcohol in that tobacco and gambling quote.

Why do u say Diageo is a Berkshire holding? Diageo is an alcoholic beverage company. If I remember correctly (and I don't think I'm wrong) Buffett stated very clearly he would not own gambling, alcohol and tobacco companies. After that, it would be a big hit for his reputation if he owned diageo and he wouldn't take that risk. Edit: I most likely am wrong, as argued in the folowing posts ;D

Berkshire 2 column intrinsic value has been coumpounding at around 9,5% a year. Without tax change that is the return to be expected on that estimate. With the tax change that number might increase to about 10,5-11%. If you use such an high discount rate berkshire is trading around fair value. However berkshire is safer than many bonds: widely diversified, loads of cash available, conservative capital alocation. In addition, since it does not pay dividends the coupons are automatically reinvested without tax payment. So it is an high grade, tax efficient, coumpounding long term bond. As such the discount rate should be the same you would use for an equally safe bond. That might be around 4%. A discount rate of 6% would be conservative in current environment for such a bond. As such intrinsic value is way higher than current value.

I thought the same a few days ago, but... Cons: - lots of debt would need to be issued and big rating downgrade for Bekshire - buying GE financial arm would make Berkshire too big to fail - cultural issues at GE could pass to Berkshire: since GE is so big it would be uncertain whether Berkshire culture would ultimately win - competition issues with Precision Castparts/BNSF could block the deal (very doubtful?) - problems to fix: berkshire doesn't like fixing problems. They like to keep management teams and that couldn't happen with GE (in addition management would be unlikely to agree to a deal that would send them to unemployment) So, a buyout is not happening. What could happen would be Berkshire buying parts of the business, which would mostly avoid all cons I previously presented but there would be an additional one: GE is likely trying to get and auction for those businesses and Berkshire avoids auctions. Anyway: any ideas on potentially interesting GE businesses for Berkshire? Any GE business that could be tucked in with a Berkshire manager?

There might be some tax loss harvesting in IBM. Buffett said it would be stupid to sell now if they could pay less taxes later. The inverse works with the latest blocks of IBM, which are now certainly at a loss. However, it takes time to sell, especially since they are likely to be selling only when it comes closer to 160 and to stop when it is cheaper... In addittion, they essentially switched IBM into Apple, thus maintaining their tech position (even if buffett considers Apple a consumer products business)

Since I am not American I might be off in the tax proposal. However, if I understand correctly, the most important new tax bill points consist on the following: 1) Real estate: reduction in the amount of mortgage interest that can be deducted, a new cap on property tax deductions and limits to the capital gains exemption used by homeowners when they sell. EFFECTS ON BERKSHIRE: a) Positive for Clayton homes: since Clayton is focused on low cost homes it should not be affected, while competitors are b) Negative for Berkshire Hathaway homeservices: lower comission/transaction; less transactions? c) Negative? to other construction related subsidiaries: less deductions might mean smaller homes - less bricks, less paint? 2) Corporate taxes: reduced to 20 percent from 35 percent EFFECTS ON BERKSHIRE a) Positive? for BRK Energy: regulated after tax income means rate adjustment and no effect. Non regulated rates should be eaten up by competition (free market). Lower taxes means competitors will find it harder to use tax credits while Berkshire still has plenty of taxes to pay b) Neutral do BNSF: regulated rates c) Neutral to insurance underwriting: gains eaten up by competition. d) Positive to insurance subsidiaries: higher investment income than competitors' to be enhanced by lower corporate taxes e) Positive to competition protected businesses: BRK focus on competitive advantages might shield some of the tax reduction from competition f) Previous point repeats on BRK portfolio: Coca Cola and other competition protected businesses. g) Positive on BRK portfolio: if a long held stock seems grossly overvalued there is now more incentive to take advantage. h) Positive on BRK portfolio: past non realized capital gains are now worth more- Unimportant if holding period forever, highly important if not i) Positive to BRK on general: lower debt versus competition meant less tax efficiency for BRK. Lower taxes reduce this disadvantage to higher leverage competitors, while keeping the safety of an high cash balance Other important points? Thank you

Brk.b - reducing downside (and likely upside) in my portfolio. Sold some small cap and micro caps and made it my biggest position at over 40%

Yes, it is a matter of extend and pretend. But if they liquidated the loss of confidence in the economy would launch these countries in a recession. In Portugal we have a similar problem, but since the economy has been growing at a quicker pace lately ( sending the unemployment rate from over 17% to less than 9% in a few years), real estate has been recovering. Since most non performing loans are guaranteed by real estate, the banking sector, if given time (with continued economic growth and a little inflation), will end up leaving its underwater position (and also some non performing clients might end up performing). An extended liquidation would have destroyed confidence in the economy: extend and pretend might end up working in the end. Edit: the government (taxpayers) lost some money bailing out the banks, but bank shareholders and junior bonds (to a much lesser extent) have been the biggest bailout, along with continued capital raises by banks which resulted in massive dilution but avoided government intervention in some banks (and massively reduced it in others)