Dynamic

I wonder if Dollar General fits into the Win-Lose category rather than Win-Win as per Charlie Munger's filter described so well in Mohnish Pabrai's excellent University of Nebraska talk recently posted on this YouTube channel. I don't remember the source but I saw a video detailing numerous issues with single staffed stores and lack of corporate support for staff about a year ago. I really appreciate Bloomstran's comprehensive knowledge of Berkshire and his interpretation of the GenRe rationale. I think he has acknowledged that since he was persuaded to release the letters publicly, the Berkshire content has enhanced the name recognition of his fund. Berkshire is an major part with many constituent parts, so it does deserve more coverage than most positions, but I no longer read the whole letter slowly in detail as I did in earlier years.

This Watsa interview from 2011's first edition of the Fairfax Newsletter was interesting, posted here on Twitter/X by FindingComputers. I'm afraid it's only in text as image format so you may need to zoom in and/or rotate a phone if reading it there.

I'm pretty sure nobody knows. If they complete their activity in the confidential treatment they may have the full filing published at any time, possibly via a revised 13F-HR filing for each period or at least the most recent. The other trigger might be reaching a reporting threshold such as 5% ownership or 10% ownership though I'm not certain if they can request that the Form 4 and 13D or 13G filings they submit to the SEC also remain confidential to them and aren't published until later. I expect @gfp would be our expert on this. I've only read some of the rules about confidential treatment. Eventually, either they cease to apply for confidential treatment or it is denied, presumably because the public interest in disclosure is deemed to outweigh the commercial interest in confidentiality.. The 13F-HR must be filed within 45 days of a calendar quarter ending and Berkshire uses the full 45 days, so the 31st March filing will be out on 15th May. Every other quarter comes out on the 14th of a month, being August, November or February, so if it remains confidential we'll find out on May 15th

Yes, and I would want to plan for an even bigger drop to be survivable if I took out a margin loan against it. A 25% loan against a $400 stock would become a 50% loan against the same stock when cut in half to $200, so that's clearly too risky. It could easily fall 60% or 70% in extremis compared to it's current fairly lofty levels, albeit still below IV. Imagine extreme insurance loss events (Pandemic, event like 9/11, or a major war) coupled with rising interest rates and a big recession hitting big names like Apple really hard, perhaps two or three of those at the same time. The worst drop Berkshire has seen is probably not the worst it will ever see. Anything now than about 12.5% loan to value would make me nervous.

Margin debt can be very risky especially if your dealer offers you more margin that Regulation T. In times of major decline they then tend to increase the margin requirements which is more likely to lead to forced sales at the worst time. However, I could imagine that right now with Berkshire B shares over $400 and A shares over $600,000, you could withdraw on margin about 5% of the market value with very little risk, so $20 against each B Share or $30,000 against each A share. If it fell 75% it would still only be a 20% loan to market value and I don't think it's ever fallen to a quarter of a previous high. If Berkshire compounds at say 8% or better in the long run your percentage loan would reduce over time making it even safer so long as the margin interest isn't too expensive. So there are ways it could be done pretty safely so long as you're strict about keeping your limits a very long way from a margin sale in the worst case scenario.

31.4% between FFH.TO and FRFHF. Happy to let it run to at least 60% if it looks like it will continue lumpy but fairly consistent 15%+ ROE, if nothing far superior comes along.

Welcome, @charlieruane, what a good post. I agree with much of what has been written in this thread and also appreciate the likes of @gfp and @Viking to name but two for their valuable and insightful contributions over many years. I now actually track my portfolio against the index and tech and periodically record how many shares of BRK.B my total portfolio value is equivalent to, as a way of confirming if trades other than my default options of Berkshire or the S&P500 Index are adding value. If not I ought to wait for fatter pitches or give up trying to beat them. I consider Berkshire to be my default investment for up to 100% of my portfolio, internally diversified with trustworthy management, likely to perform at least about as well as the SP500TR without frictional costs (which for me include withholding tax on dividends), likely to outperform in bear markets and something where I understand Intrinsic Value and can buy with margin of safety, unlike the index. My original core holding from July 2003 when I switched accounts to be able to buy US stocks has grown each dollar to $8.23 with no costs, compared to $7.61 for the SP500TR before costs, a 0.42% beat in terms of CAGR and a huge beat compared to my local FTSE100-TRI benchmark. I've added over the years at higher prices, but with much greater margin of safety than my original purchase and very few substantial dips below my most recent buy price. Having to look better than Berkshire has been a tough hurdle for other investments and has helped me reduce underperforming mistakes to an insignificant level, outweighed by outperformers. As for Fairfax I finally made myself comfortable with it last year and bought an initial position. Now with the Muddy Waters opportunity I've gone to a full concentrated position, and even though I consider it cheap, with margin of safety and great prospects for at least 3 to 5 years, I have to limit the initial position size to perhaps 20-30% of my portfolio (again as someone willing to run a highly concentrated portfolio). I'm trying to plan ahead to prepare to hold on to Fairfax and let it compound for me over at least a decade, preferably longer, where I anticipate a lumpy 15% rate of compounding or maybe even a little better. I'm trying to envisage different scenarios and how to think about them in advance. For example my most likely expectation is for it to double in 4 to 5 years, maybe 3 years with luck and a rerating, which might even make it exceed 50% of my portfolio within 5 years and feel a little tempting to reduce (which I intend to resist), but still with better compounding prospects than Berkshire and the index. It's also possible that bad catastrophe losses at any time could impair it's book value dramatically especially due to the inherent float leverage, though I would expect such circumstances to lead to a hard market allowing it to write a lot more well priced business afterwards. I expect Fairfax might suffer a substantial price decline but if it's after say 2026, it's likely to still be well above my buy price this year. I'm trying to prepare myself to react rationally to whatever the future holds and only sell if I'm convinced that Fairfax is permanently impaired or I have a considerably better prospect elsewhere.

So far we're looking like at minimum 229 million USD or at least 0.89% of the market cap and could well be above 1% in reality if those who responded are generally truthful. (EDIT: March 6th update, about 340 million USD minimum, so over 1%) That's based on the first 102 responses weighted by the lower bound of each option. There could be some rounding up but this is probably outweighed by the couple of votes for the unlimited top category, 50m+ which could in reality be considerably higher than the 100m USD I credited it as.

The $125 estimate of normalized earnings would improve imply 12.2% normalized earnings yield at today's close of 1022 USD, which seems attractive, and with 4 years of approx $2 bn in interest and dividends pretty much assured, it seems likely to me that without big cat losses or a disastrously softening insurance market that we could well substantially beat the normalized figure over the next few years and perhaps can build the normalized run rate to something even higher. So 12% ish, is probably a fairly conservative lower bound expectation and there's a good prospect of something in the high teens to maybe lie 20s at least for the next 4 years or so. I've only had a position in FFH (and now FRFHF too) for about half a year since becoming convicted I needed a starter position but I'm glad to have taken the chance to add to my position at about $910 USD last week and make this a high conviction part of my concentrated portfolio.

Cal Year USD gain outperf vs SP500 TR pre tax GBP gain Lowball value USD gain 2016 24.2% 12.2% 54.2% 19.1% 2017 24.8% 3.0% 14.1% 12.7% 2018 25.3% 29.7% 33.0% 49.4% 2019 18.0% -13.5% 13.6% 2.3% 2020 -3.4% -21.8% -6.0% 32.4% 2021 79.6% 50.9% 81.4% 34.2% 2022 24.1% 42.2% 39.8% 38.3% 2023 9.8% -16.5% 3.9% 22.0% cagr 23.5% 10.3% 26.6% 25.5% Regarding calculations, each year I calculate two quite simple returns and take the average of them: Return1 = (YearEndValue / (PreviousYearEndValue + CashAdded)) - 1 Return2 = (YearEndValue - CashAdded)/PreviousYearEndValue) - 1 Average Return = (Return1 + Return2)/2 I report the average of those two in the table above as I've tracked it that way for years. In the last 3 years or so, I've been withdrawing funds to pay living expenses and taxes, so CashAdded is negative, but it still works. More recently I've also started using a unitised approach as outlined here, to account for money in or out https://monevator.com/how-to-unitize-your-portfolio/ which for 2023 calendar year gave a USD return of 9.9% and a GBP return of 4.4%, pretty close to the other method.

I suspect they wanted to take the opportunity of him commenting on Berkshire to tag both companies and attract more clicks, so it could be a human. I see the same with Selling Alpha where somebody quotes Buffett and mentions Berkshire as an aside when writing about a different company so the link shows up on my daily email.

Yes, I've used boilermaker's approach a number of times to enter long term positions and also to juice returns on one merger arbitrage so far. In that case I was assigned then sold short duration calls to get further premium and potentially another bite. In most cases something over 18% annualized, or more typically well over 20% is where I start to get interested, so long as I'm a willing buyer at the effective entry price (strike minus premium plus commission). I usually go for one to four weeks duration, must often 1 to 2. Boilermaker seems to really like weeks with fewer trading days than normal. Occasionally I've rolled my puts to different strikes or expiration dates or both but mostly I let them run to expiry.

Yes, I think Berkshire's equity portfolio outperformed the index by about 2% this quarter. A bit less if you were to include KHC and OXY common stocks. I wouldn't be at all surprised to find Berkshire's portfolio had a better dividend yield too. It must be near certain to post a record Book Value per share when the 10Q is released, too

More than once in every 250 years? Presumably they mean once in every 250+ years, i.e. less than 0.4% chance per year. It reads as though they mean greater than one event in 250 years, which would be greater than 0.4% chance per year with no upper limit.

I don't know what types of companies you're thinking of selling @Whensthepaintdry? but my inclination if they are fairly reliable compounders is to try to project normalized earnings in about 5 years, say 2028 or 2029 and see if the price multiple is a bit more reasonable. That might give you a better handle on whether the current price is plausibly correct. With something like Nvidia that seems to have been bid up on AI mania, the Price to 5th year earnings ratio (or its inverse, the 5th year earnings yield) might still look enormously overvalued, indicating that it could be time to sell for overvaluation alone as it would have to shoot the lights out for a decade or two to provide you with even a modest return from today's price. With something trading at 30-40x current earnings but a truly reliable 14% CAGR, earnings would have doubled in 5 years, giving a 15-20x multiple in 5th year earnings, i.e. a 5.0-6.7% 5th year earnings yield which doesn't sound so outlandish, especially if it's still likely to be valued at a high current multiple having achieved that growth rate Even if the current earnings multiple in year 5 declined by a fifth to 24-32x (from 30-40x), you'd still achieve 10% CAGR on your investment, which would be a decent result. To my mind, the Margin of Safety concept applied in both directions, provides what engineers call Hysteresis. This can apply to a thermostatic switch turning on a water heater when the temperature drops, say 2 degrees below the set point then turning it off at the set temperature. With only 0.2 degrees of hysteresis, you'd wear out the switch mechanism by constantly turning it on and off. I'm investing terms, having a larger range of Price to Intrinsic Value between buy and sell price means you rarely incur frictional costs like taxes or end up out of the position and interrupting your compounding, which long term has more to do with the underlying business performance of a great business than with your buy and sell prices. I have had times when moving accounts between providers or taxable and non taxable accounts has caused me to sell at lower prices than I otherwise might. My Apple sale in 2018 for 110% gain in 2 years was one such, partly sold to take advantage of an opportunity I couldn't do within the account where I held it. Since that sale Apple has achieved about 32% CAGR so I had to do very well to beat the effect it would have had on my overall portfolio if I'd retained the 35-40% position Apple had then grown to. I think I had a good deal of luck in the alternative path I took.