shalab
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Posts posted by shalab
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Leverage + high quality business = Good returns. That's it. You can't dispute it.
Leverage + high quality business == bankruptcy as well 8)
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Ultimately, it all depends on P/V and MOS
Do you mind sharing your intrinsic value estimate for DELL and RIMM now and five years from now?
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Dell mix of revenue - ~80% products and ~20% service.
Year over year, Dell's product revenue mix is showing a decline ( corporate, public government and retail customer ) and service revenue is growing at low single digit rate.
Dell is hamstrung by a change in business model.
For dell thesis to work:
- the business shouldnt decline quickly (ala RIMM)
- market should be willing to pay a higher price - ala Ericopoly's volatility trade
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Does anyone know who makes up HWIC now and how it operates? It seems that some of the folks in HWIC have managerial duties and hardly have the time for research and analysis? We also know that decision by committee doesn't work.
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Nice place ;D.
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FFH returns as of Dec 31st 2011:
5 years -> 19.4%
10 years -> 12%
15 years -> 12.4%
20 years -> 16.1%
These are great numbers and I admire Prem for what he has achieved. However I don't expect them to do as well moving forward unless the stock price drops to a low level. The stock price drop is unlikely as the FRFHF poll revealed an IV north of $460 from the believers.
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I think Buffett's approach in terms of purchasing inevitables is that it makes it easier to be certain that you are getting a discount to intrinsic value.
Buying something that looks cheap but later isn't (because the business quickly declines)... isn't value investing. This I believe is what Warren figured out a long time ago and why he went the way of inevitables or in other words businesses with very enduring characteristics.
Some value investors I believe think they are estimating intrinsic value but aren't, yet they do okay anyway because they have a selling disclipline. In other words, they're out after the first large rally. So they are trading volatility but don't recognize it as such.
Great post!
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These guys were selling their coke stock before the financial crisis. So - they are continuing their old plan now...
The sti preferred were a great deal in 2009/2010.
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>Presently, the way online advertising is structured, I believe Google's moat is stronger than Microsoft's was with Windows.
Don't know if it is stronger, but it is right up there. It is not search but it is search + advertising.
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Most intriguing investments of FRFHF
- LVLT
- RIMM
- DELL
- Bank of Ireland
- USG
- FTR
- SD
- OSTK
I think gurus like Chou, Sanjeev also own RIMM, DELL and OSTK.
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Rimm is an opportunity to partner with Prem. It is clear many board members have positions in Rimm. Let us see the numbers from this board to see how things look?
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Giofranchi - Italy has ton of owner(family) operated businesses but it seems to be an issue for the economy? Can you shed some light why that is the case.
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For all the macro folks on the board and the ones that attended the dinner events.
- Prem is bearish on Europe but thinks the Euro will be intact
- Looking at the Greek situation, it is still possible for Euro to be intact but unlikely Greece will continue to use the Euro
- He has invested in bank of ireland which will be affected if Euro disintegrates
- I am sure Prem has a thesis but it seems contradictory to me
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Would like to run it by the fairfax heads on this message board. Since the fixed investment income from insurance holdings is low, a higher premium is generally not warranted unless the growth prospects are immense.
Property/casualty insurance is going to be more competitive as a bunch of big insurers are becoming healthy again (after the crisis) and want to focus on P&C - e.g; AIG, HIG, Swiss-Re etc. Higher competition typically translates to lower profits.
In addition, I don't see avenues for 15% growth in FFH in the current situation, atleast for the next couple of years.
Sir Francis Galton, the founder of modern statistics observed the "wisdom of the crowds" in early 20th century:
In 1906, visiting a livestock fair, he stumbled upon an intriguing contest. An ox was on display, and the villagers were invited to guess the animal's weight after it was slaughtered and dressed. Nearly 800 participated, but not one person hit the exact mark: 1,198 pounds. Galton's insight was to examine the mean of these guesses from independent people in the crowd: Astonishingly the mean of those 800 guesses was 1,197 pounds, accurate to fraction of a percent.
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From the AR:
Among the new exhibitors this year will be Brooks, our running-shoe company. Brooks has been
gobbling up market share and in 2011 had a sales gain of 34%, its tenth consecutive year of record volume. Drop by and congratulate Jim Weber, the company’s CEO. And be sure to buy a couple of pairs of limited edition “Berkshire Hathaway Running Shoes.”
From NYTimes:
http://dealbook.nytimes.com/2012/04/27/for-runners-a-lift-from-warren-buffett/
From the 10k
In 2011, Brooks® achieved #1 market share in footwear with specialty retailers. A
significant volume of the shoes sold by Berkshire’s shoe businesses are manufactured or purchased from sources outside the United States. Products are principally sold in the United States through a variety of channels including department stores, footwear chains, specialty stores, catalogs and the Internet, as well as through company-owned retail stores.
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To stir the pot further:
Popular low-carb authors like Atkins, Eades, and Taubes tend to promote the idea that repeated consumption of carbohydrates causes insulin resistance. This appears to be false. Insulin resistance appears to be caused by excess triglyceride synthesis in the liver.
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I was at the BH meeting and took some notes
Thank you Hawk4Value for the notes. Some of the statements in the notes are amazing, can't believe he can get away with it.
This is going to be a case study for a generation.
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Hester, I live in the 21st century and looking to see how to best make use of the current knowledge to my advantage. I have learned a bunch about investing, diet (thanks to a bunch of posters) and human behavior through this board including yourself ;D. There is nothing personal here buddy :)
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We know what prehistoric humans ate in the same way we know what Dinosaurs ate.
How do we know that? Also, there were plant eating dinosaurs ;D. If anything, I would think the prehistoric humans ate in a similar way as the chimps, the closest relative to the modern human.
CHIMP'S DIET:
Chimpanzee diets are composed mainly of ripe fruits but vary according to the time of the year and abundance of specific food items. They will spend many hours a day eating about 20 different species of plants and up to about 300 different species during a one year period. They do not store food and will eat it at the place they find it. They also enjoy eating young leaves particularly in the afternoon. In long dry seasons when fruit is scarce, tree seeds, flowers, soft pith, galls, resin and bark become an important part of their diet.
They also eat many different types of insects, however termites are the most nutritionally important. Termites are collected either by hand or with tools which are modified by the chimp and specifically used for this purpose. Many zoos, including the Honolulu Zoo, have built termite mounds to simulate this natural behavior of feeding. See our termite mound enrichment. Females spend twice as much time eating insects as males do. Birds are occasionally eaten. Mammals such as monkeys, pigs and antelope are also eaten, particularly by males, but along with termites only account for about 5% of their diet.
Hunting style varies from one population to another depending upon the type of habitat. The amount of cooperation between males in a group will affect the hunting success. An abundance of fruit in a particular area where there are a large number of monkeys, will result in a higher hunting success rate; mostly because the chimps will have the highly needed energy from the fruit to pursue the monkeys. Most carnivores have a less than 50% success rate when hunting; however, the success rate for chimpanzees hunting red colobus monkeys is between 50 and 80%.
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I was looking at the def14a from BH - Biglari is the highest paid employee of BH by an order of magnitude.
His compensation for the past three years came in at:
4.922 million
2.122 million
.515 million respectively
In the past year, 15% of the pre-tax operating earning went to pay Biglari.
Operating earnings rose by 23% YoY including trading income but Biglari compensation went up by 132%. Nice to have hedge fund compensation scheme in a traditional business.
He is yet to hit the 10 million cap which will take another year to breach. I expect him to fully increase the upper limit to 20 or 30 million.
cheers!
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When you read articles like this you get the feeling that Alice and her entourage is barking up the wrong tree.
http://finance.fortune.cnn.com/2012/03/23/fidelity-warren-buffett/
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How wealth is concentrated in a few hands most of which is inherited from their parents or grand parents.
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Lot of good discussion.
BRK book value at the moment - roughly $71 is my calculation at end of trading today.
Why BRK is interesting, as twacowfca mentioned, BRK is an appreciating asset going for a discount. A very solid asset at that. There is no life without risk and every asset has a risk associated with it. This includes your house, car and even the bank deposit. But compared to an average SP500 company, BRK is less risky.
Let us say BRK grows at 8% a year for the next ten years and retains all earnings with no dividends. Let us also assume that it doesnt pay a dividend and the retained earnings don't earn a cent. At 12B/year on the average cash flow after tax; we are looking at 174 B in retained earnings. If the retained earnings yield some returns; we are looking at doubling of market cap without considering buy backs.
BRK mentioned the big-four - AXP, KO, IBM and WFC as going to appreciate roughly 8% per year for the next decade in the annual report.
Let us look at how good KO has been for BRK as an example.
KO new dividend for 2012 is $2.04.
$2.04 x 200M = $408,000,000 - the amount of dividend Berk will receive in 2012.
Basically, Berkshire will receive a 31% dividend on the ORIGINAL investment of $1.3B.
$408M/$1300B = 31% - all the impact of years of internally compounded growth.
From the annual letter:
Finally, we made two major investments in marketable securities: (1) a $5 billion 6% preferred stock of Bank of America that came with warrants allowing us to buy 700 million common shares at $7.14 per share any time before September 2, 2021; and (2) 63.9 million shares of IBM that cost us $10.9 billion.
Counting IBM, we now have large ownership interests in four exceptional companies: 13.0% of
American Express, 8.8% of Coca-Cola, 5.5% of IBM and 7.6% of Wells Fargo. (We also, of course,
have many smaller, but important, positions.)
We view these holdings as partnership interests in wonderful businesses, not as marketable securities to be bought or sold based on their near-term prospects. Our share of their earnings, however, are far from fully reflected in our earnings; only the dividends we receive from these businesses show up in our financial reports. Over time, though, the undistributed earnings of these companies that are attributable to our ownership are of huge importance to us. That’s because they will be used in a variety of ways to increase future earnings and dividends of the investee. They may also be devoted to stock repurchases, which will increase our share of the company’s future earnings.
Had we owned our present positions throughout last year, our dividends from the “Big Four” would
have been $862 million. That’s all that would have been reported in Berkshire’s income statement. Our share of this quartet’s earnings, however, would have been far greater: $3.3 billion. Charlie and I believe that the $2.4 billion that goes unreported on our books creates at least that amount of value for Berkshire as it fuels earnings gains in future years. We expect the combined earnings of the four – and their dividends as well – to increase in 2012 and, for that matter, almost every year for a long time to come. A decade from now, our current holdings of the four companies might well account for earnings of $7 billion, of which $2 billion in dividends would come to us.
"The secrets to Buffett's success" in The Economist
in Berkshire Hathaway
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Gio - looks like you know what you are doing - why don't you launch yourself to orbit and come to the U.S like the other famous american Enrico Fermi that originally hailed from your country?