Munger_Disciple

Good points vinod1. My own reservations regarding Fairfax are as follows: 1. Leverage: FFH has roughy $3 in insurance liabilities for $1 of common equity and another $0.50 mostly in debt. With so much insurance liability leverage, I think they are forced to keep most of the float in fixed income or cash. Obviously when it works, leverage produces great results but the reverse is true also. One major CAT loss, a huge portion of common equity will be wiped out. I really don't like the way annual letter shows underwriting results with and w/o CAT losses as if CAT losses were not supposed to happen and are highly unusual. It is as if management wants shareholders/readers to ignore these insurance losses when they are normal part of being in the insurance business. 2. Invested Assets: Just the fixed income portion of assets is larger than common equity. And it is highly unlikely that FI portfolio will produce great results going forward. And common stock selection has been awful during the last 10+ years. As others pointed out, they like to go for the crappy stuff all the while completely avoiding quality long term investments. 3. Macro Calls: A big negative in my book. One can easily see them making a 2020 US election macro bet for example if past is any indication. 4. Sub-optimal capital allocation: The dividend policy doesn't make any sense especially because they immediately issued more stock many times in the past right after declaring dividends. If they need more capital why not retain earnings? Why force shareholders to pay tax on dividends and immediately dilute them with new stock issuance? 5. Board governance: Too much Watsa family involvement without a clear benefit to the company or shareholders.

Going forward I think Fairfax's insurance & reinsurance businesses will find it harder to generate profits in a low interest rate environment. Their float is not earning much which makes good underwriting even more important and harder to achieve (because of competition). Berkshire has an advantage over Fairfax in this regard. For example GEICO is a low cost growth machine in a commodity auto insurance business and they don't rely as much on earnings generated by float because GEICO float is short-tailed anyway. GEICO cost advantage stems from direct distribution channel. Berkshire is building their primary commercial insurance biz along similar lines and have reduced reinsurance exposure significantly in recent times due to insufficient premiums. Finally, Berkshire is no longer primarily an insurance company with a much stronger balance sheet and very low leverage compared to Fairfax.

From S-1 filing: We dedicate this to the energy of We- Greater than any one of us but inside each of us https://www.sec.gov/Archives/edgar/data/1533523/000119312519244329/d804478ds1a.htm WTF??? They are dedicating the S-1 to the energy of We??

Good post. Given there were no distributions, it was a very sub-par return.

2x return in 13 years! Not a great return unless Applied upstreamed a whole bunch of dividends to the mother ship over the years. Ajit & Warren are probably just getting rid of a "problem child".

Why do you think you can add something new about Berkshire/Buffett given that there is so much readily accessible information (books, annual meeting videos, transcripts, Buffett interviews, etc.) in the public domain already?

Drukenmiller is a smart guy and very much worth listening to. But it seems like his strategy is very sub-optimal from a tax stand point. If he turns over > 100% per year, he would pay a lot of taxes when he is right. When you are compounding at 30% a year I guess it is ok but he says he doesn't make anything close to it these days.

I believe that Warren's Glide lunch is donated by the restaurant owner.

https://www.bloomberg.com/news/articles/2019-05-08/berkshire-takes-tax-hit-as-victim-of-ponzi-type-solar-scheme A bit worrisome given BHE's expertise in renewable energy.

Bill Gross interview with Bloomberg: https://www.bloomberg.com/news/videos/2019-03-02/-a-conversation-with-bill-gross-full-show-3-1-2019-video

My two cents on the annual report: The buyback amount is certainly disappointing. Buffett says on page 7: "Obviously, repurchases should be price sensitive." But there were more repurchases during Q2 2018 and October 2018 (when the BRK prices were higher) than in December 2018. The most generous explanation is that Warren thinks the cash could be better spent on future acquisitions. But then he goes on to lament the lack of opportunities on page 6: "Prices are sky-high for businesses possessing decent long-term prospects. That disappointing reality means that 2019 will likely see us again expanding our holdings of marketable equities." Adding to the confusion, there were no net purchases of common stock during Q4! I am just hoping that this can explained by: 1. Buffett thinks there is a significant possibility of a large deal before 2020, and/or 2. Since Buffett changed the intrinsic value metric from being based on book value to one based on five pillars, he wanted to give sellers an opportunity to digest the 2018 letter and the annual report before he begins a multi billion dollar buyback in earnest.

Bloomberg Opinion Piece: https://www.bloomberg.com/opinion/articles/2019-02-22/warren-buffett-owes-berkshire-investors-more-than-a-memo

I am very impressed by what the guy achieved especially given where he started from. He is an inspiration to any aspiring young entrepreneur. I also agree that the most impressive thing about his investing is how long he held investments. Plus he seems like a very generous fellow and I admire this quality about him. A major portion of the Forbes article is about his stock market investments. For instance, there was a discussion on how he took on some margin debt to buy dividend stocks and strategies he used to take tax losses, in addition to success in finding and investing very early in Heiko. I did the math just for my own understanding of the underlying returns and not to take anything away from his accomplishments. I then decided to share what I found because I thought it was interesting. I am frankly surprised by some of the reaction to my post and find it bizarre. It is normal that people can have differing opinions of the same article. However we can agree to disagree respectfully. Anyhow this will be my last post on this topic.

You have to use something as a starting point. Otherwise return would be infinite because he like many on this board started with 0.

Sanjeev, I am going to ignore the jackasses comment. But seriously no one is arguing the guy is a great entrepreneur & all. My issue is with the uncritical reporting. Just wanted to show that the reporter hasn't really done her "homework" when she was using phrases like greatest investor etc. MD

So, I have done the math with the following assumptions: (1) He had $50M in 1981 and (2) added $8M per year to the account since 1981. The resulting CAGR is 7.4%, compounded over 38 years to get $2.3B.

Very interesting story. Two tidbits are interesting : he has had a "steady income of $10M a year" for many years, and Heiko is a home run (gone up 160x).

I gave up Microsoft products about 10 yers ago after using them for 18 years before that. I had initially switched to Open Office, an open source Office software and then to Google Apps. All I can say is that I do not miss Microsoft products at all and I am much happier as a result. The Google Apps are way easier to use, have better integration between desktop and mobile use, and are almost free compared to the cost of MS products. I would say that for >95% of people Google products are all they need. There might be some use cases where only Excel would do for instance but in my opinion those cases are becoming rarer every day.

IIRC, Buffett said that he uses the 30-year US treasury bond as the discount rate. He said he mainly uses the DCF framework to compare the investments he is contemplating. Thus he would only consider a new investment if its projected return exceeds that of his next best alternative which he usually has already a position in and understands very well.

I think you are right maybe4less. Here is an explanation from Interactive Brokers: Amendment Requirements for 13G Filers Qualified institutional investors, including investment advisors registered with the SEC or a state, must amend their Schedule 13G within 10 days after the end of the first time their "beneficial ownership" exceeds 10% of the class of equity securities at month end. After that, qualified institutional investors must amend their Schedule 13G within 10 days from when their "beneficial ownership" increases or decreases by more than 5% of the class of securities over the amount held at the previous month end. Qualified institutional investors must also file a Schedule 13D within 10 calendar days after they cease being eligible to file a Schedule 13G rather than a Schedule 13D. In addition, passive investors beneficially owning less than 20% of an equity security must amend their Schedule 13G promptly, within two business days, after acquiring beneficial ownership of more than 10% of the class of equity securities, and after that, within two business days of increasing or decreasing their ownership by more than 5%. You must also file an annual amendment to the 13G if there have been any changes - immaterial or material - to your filed 13G. This must be done within 45 days of year end. You do not need to file an amendment if there have been no changes to the information filed or if the only change is to the percentage of securities owned resulting solely from a change in the number of shares outstanding.

I am tracking the portfolio of an institutional investor who files 13-F quarterly. This institution filed a 13G in June 2018 when they exceeded 5% ownership of a company stock. The 13-F for Q2-2018 reflects this 5%+ position. They recently filed a 13-F for Q3-2018 which shows significantly reduced ownership of the company well below 5% of the company stock. But I do not see an amended 13G filing which reflects the under 5% stock position. I am confused by this and a possible explanation from board members is greatly appreciated. Thanks in advance.

I agree with GFP that it is unlikely that Berkshire bought JPM, given Todd's board position. With respect to BAC, Berkshire will not go above 10% of BAC's total shares. That means that Berkshire might possibly add almost another 80M shares after Sept 30th, which would bring the total to 980M, about 10% of BAC.

Actually there appears to be sales of approximately 2.85B worth of financials during Q3 and $17.85B of purchases for a net purchases of $15B in the "Banks, insurance and finance" category.

My math agrees with yours. I got slightly above 200M BAC shares purchased during Q3 for 6B. They seem to have added a net $15B to financials during Q3 (there were some minor sales of WFC to stay under 10% cap). Pretty big move I think.

Mirror post on the original article: https://www.mirror.co.uk/news/weird-news/business-woman-shares-ridiculous-list-13442122 BTW, I used to play tennis and I really don't understand how Ms. Edwards gets a game of tennis at 7:30am and already leaving for work at 8:30am. That is only an hour to play, shower, dress and leave for work!