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shalab

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Everything posted by shalab

  1. Bang on regarding saving the empire for kids. This company is meant for his kids and their kids and grand kids. This is not about shareholders. I am surprised people spend a bunch of money to attend these meetings. It is the usual - unicorn and utopia story sells. My view is 5 years is a solid time frame for shareholders to evaluate management (and i do not view this time frame as ‘short term’). I also question the usefulness of including FFH returns from their first 10 years of existence given how different the company is (much larger) and all the changes with the people working at the company and with the economy (10 year bond yields at 2.5% and stocks trading at high end of historical PE multiple etc). Yes, Prem hit the ball out of the park back then but its usefulness in helping investors understand where FFH is going over the next 5 years is minimal from my perspective. My view is FFH keeps on buying textile mill type investments year after year. They do not seem to be learning and adjusting their investment style over time. Over many years Buffett learned and slowly adjusted his investing style in a way that was fairly predictable for investors. I have little ability to explain what FFH is doing with its investments and little confidence that FFH will do well moving forward. As i have said before, i do like what FFH has done in building out its insurance businesses and underwriting looks solid. In the past this was investors primary concern with investing in FFH. But unfortunately what they are doing on the investing side is now the primary problem. I also get the feeling that there is some empire building going on at FFH with shareholders (and shareholder returns) being a lower priority. Prem seems focussed on building a company that will be here in 100 years. He does not seemed focussed on making decisions that will grow shareholder value over the next one, two or three years. So the company continues to get bigger and shareholders continue to earn poor returns. I wish Prem would focus more on growing book value (which would benefit shareholders) and focus less on getting bigger ‘and being here in 100 years’.
  2. Good one to read. 91 million users of the platform, 3.9 million drivers, 15 million use uber eats. This can really challenge/disrupt AMZN - it is only a matter of time before they can use advertising and deliver other products.
  3. A good book by Leon Panetta A person of integrity - a fiscal conservative that helped balance the budget, helped save the pristine coastlines of California and helped create the University of California Monterey. https://www.barnesandnoble.com/w/worthy-fights-leon-panetta/1118663257#/
  4. People holding FRFHF have been very happy so far - it has essentially been flat for the past five years with a dividend yield of 2%/annum. As Biglari has shown, it is not the returns that matter, it is the ability to sell a story that does.
  5. USD/CAD is at 1.335 - this is artificially high. Currently the Canadian interest rate is at 1.75% a full 50-75 basis points lower than the US interest rates Canadian central bank can achieve several goals by increasing the interest rates to be on-par with the US: - allow Canadians to buy assets overseas more cheaply - including investing in US equities - make imports cheaper from the US and other countries - burst the housing bubble, making the properties more accessible to average people
  6. shalab

    Brexit

    +1. EU is a quasi democratic body whose main economic engine is Germany. Some people in this board look to Germany as the beacon of democracy, human rights, free enterprise, free trade etc. It is anything but that. EU should let Britain exit cleanly with access to EU markets. They are playing hard ball to make it difficult for others to leave.
  7. Agreed with volatility being a friend of the investor. I am getting cash ready for the next event which could happen 3-6 months out. However, USA interest rate hikes have implications beyond the immediate interest payment. E.g:, USDCAD is at 1.34. EURUSD is at 1.13. Given 50% of SP500 earnings are from abroad, this has implications on trade and investments. Huh? What have the Fed hikes to do with politics ? Powell was chosen by Trump, by the way. Anyways, I can’t see how a 2.5% interest rates (real interest rate is 0.5-1% after inflation) can cause a problem. It sure seems to be a preferable situation Europe, where interesting rates are virtually nil and the economic is crawling to a halt nevertheless. My guess is that the recent drop in LT interest rates in The EU is caused by Brexit uncertainty, which is an exogenous event for the US. I also note think that every value investor should love volatility.
  8. In addition, 70% on this board supported rate hikes. It shows how politics can turn ones head into cabbage, ala Munger.
  9. We have inverted yield curve now - comparing 3 month treasury to the 10 year treasury https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield Fed still thinks they can have a rate hike in 2020
  10. 1-2 Billion after-tax is difficult without gains from investments. (let alone 3B). I would take out income (net realized gain from investments) from equity/stock sales. Where will the money come from? It is one to dream big and another to make it happen. Then you would have to assume that there won't be further dilution. Overall, I don't see chances very bright to get 15% on equity on a continuous basis. It may happen one year because of gains in stocks or investment gains. There are simpler and better opportunities out there.
  11. This is also a year when the cash declined at the holding company and debt increased. As noted in page 19 of AR Financial Position The following table shows our financial position, excluding consolidated non-insurance companies, at the endof 2018: Holding company cash and investments (net of short sale and derivative obligations)1,550.6 Borrowings – holding company3,859.5
  12. Regarding BIAL ( or KIA ) being a good business, yes it is. However, many parts of the business is regulated by the government and rightly so. Here is an article about the profit it made in 2017-2018. There is pressure on the government to reduce or cut the UDF (usage development fee) which has been the major source of profit. https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/bengaluru-airports-profit-soars-33-to-rs-848-crore/articleshow/67037829.cms
  13. With FRFHF reporting, I always dig deeper. The headlines, including Prem's comments are unfortunately misleading. Here is an example: In page 11, Watsa says: Henry Singleton from Teledyne was our hero as he reduced shares outstanding from approximately 88 million to 12 million over about 15 years. We began that process by buying back 1.1 million shares since we began in the fourth quarter of 2017 up until early 2019 – about half for cancellation and half for various long term incentive plans we have across our company Page 83 of the annual report: Diluted number of shares at the end of 2018 - 28.397 million Diluted number of shares at the end of 2017 - 26.1 million Using the diluted shares, I get a book value of 414 at the end of 2018. Reducing 10 dollars paid out as dividend, the book value is at 404.
  14. vinod1, I am curious if you use book value multiple for other stocks in your portfolio, if not why not? I am curious to know as I see many people put an anchor with book value on BRK stock. However, they have no problems issuing buy recommendations for MSFT or AMZN which has lower earning yield and much higher P/B rations.
  15. khturbo - can you find any utility selling for book value in the market? If yes, I would like to know the names. You value Geico as follows: I value Geico by taking TTM premiums of $34.1 billion, multiplying them by a 5% profit margin (being a bit conservative relative to the 94.1% CR historically), subtracting a 21% tax rate, and giving that income stream a 25x multiple. That gets a value of $33.7 billion. Progressive which is smaller than Geico has a market cap of 42 B and P/B of 4.0. Overall, I feel you are undervaluing a lot of assets significantly compared to the market. However, I hope there will be more selling and the prices drop as I and my family will be net buyers for the next 2-3 decades atleast
  16. Looks like there is a revival in Detroit: https://www.barrons.com/articles/detroit-economic-revival-51552076257?mod=hp_LEAD_2 Same going on in other rust best cities - e.g:, Buffalo, NY https://www.goerie.com/entertainmentlife/20161225/buffalo-revival-spurs-revisits Cleveland: https://www.cleveland.com/business/2015/01/cleveland_is_enjoying_economic.html
  17. +1 India is essentially run by a couple of hundred billionaire families and their businesses. They are called the modern maharajas. Modi government hasn't delivered on some of the reforms they promised (e.g:, removing retro-active tax on mergers) and they change the law to favor some of the above families. This was also the case with the previous government. USA/India trade has gone up to 150B/year in 2018. Direct foreign investment is at 45 Billion in 2017. It won't matter who comes to power, this trend will continue.
  18. USA GDP 2018 highlights: Current dollar GDP 20.891 trillion: Current-dollar GDP increased 5.2 percent, or $1.02 trillion, in 2018 to a level of $20.50 trillion, compared with an increase of 4.2 percent, or $778.2 billion, in 2017 (table 1 and table 3). Saving rate and capital building up at a good pace: Personal saving was $1.06 trillion in the fourth quarter, compared with $996.0 billion in the third quarter. The personal saving rate -- personal saving as a percentage of disposable personal income -- was 6.7 percent in the fourth quarter, compared with 6.4 percent in the third quarter. Details here: https://www.bea.gov/system/files/2019-03/gdp4q18_ini_2.pdf
  19. Not impressed with Greg Warren or morningstar analysts. Someone posted that their "no moat" stocks outperformed the "narrow moat" stocks which outperformed "widemoat" stocks. One of its new empirical findings focuses on Morningstar’s moat ratings as a proxy for popularity. The notion being that companies with wide moats are more popular with investors than those that lack moats. As a test, the rated stocks were sorted into three portfolios each month based on the strength of their moats. The portfolios were equally weighted and their returns tracked from July, 2002 to August, 2017. The wide-moat portfolio generated a compound annual growth rate of 11.15 per cent over the period. Not bad. But the narrow-moat portfolio climbed 12.08 per cent annually and the no-moat portfolio gained 15.40 per cent per year. The no-moat firms beat the wide-moat firms by an average of 4.25 percentage points annually. They had outstanding returns despite their undesirable characteristics.
  20. I get what wabuffo and others are saying, also the P/B metric anchored the stock. The stock was never reached intrinsic value in the past decade. On the plus side, it has allowed me and my family to acquire a great business at reasonable prices. I think there will be significant buy back in the coming years. If the business expands further with other acquisitions it will be great!
  21. Great letter - a lot of wisdom in those pages. Loved the jokes - especially Warren and Charlie spending the money in their old age. There is no one else like that. Absolutely love it that they are going to manage the business for continuing share holders. My extended family and I will be buyers in the next few decades. Berkshire is a tremendous store of value - totally see them beating out SP500 in the next decade. Sempur Augustus says 11-13%/year - I think it can go up to 15% with buy backs. Sempur Augustus values Berkshire five different ways and average is $265/B share. It is probably the most detailed and the best analysis of Berkshire out there. We estimate that Berkshireincreased intrinsic value during 2018 by 12.4%to $668 billion, $57billion over our assessment last year. The gain is remarkable given thedecline in the investment portfolio and what will likely appear as an89% decline in reported net earnings, from $44.9 billion to $5.1billion. Yet even more confusing and remarkable is that the $38billionlossin Berkshire’s stock portfolio (including Kraft Heinz), will exceed pre-tax earnings for the remainder of thecompany, yet the company will likely report a modest profit.
  22. Thanks for all the replies. I think PPP (purchasing power parity) may be the best reason all else being equal. The PPP may be because of taxes or high prices or both. Looking at the examples I cited earlier - looks like the PPP is roughly about 0.75 in USD terms when living in Canada. This shows up in the sales for FB, COST, WMT etc. So even though the Canada GDP is 1.8 trillion, from PPP stand point it looks as though it is 1.35 trillion USD from the sales of these multinationals.
  23. Canada has achieved impressive gains in median wealth and income, where the median wealth has significantly outplaced the U.S - this is very impressive and it needs to be commended. In addition to it, Canada also has higher life expectancy compared to the United States. I am trying to find the secret sauce that has allowed this kind of prosperity. Canada has about 8% of the US GDP and has 12% of the population. When I look at the sales of FAANGM in Canada, the revenue share is lower than that of the US on a percentage of GDP basis Is this because of the lower spending capacity of a canadian family (higher taxes) or because of lower spending - i.e., higher saving? AMZN: looks like sales are 1.5 - 2.0 B which is a small fraction of 230B WMT: sales are around 20B which is around 6% of USA revenue FB: 1.63 B - around 6% of USA revenue AAPL: likely around 5-6% of USA revenue or lower - americas as a whole is 14% of USA revenue including south and north america COST: This might be an exception it has 100 stores in Canada (~1/5 of US) and generates roughly 15% of USA revenue in Canada.
  24. Impact of fed rate increase: https://www.bloomberg.com/news/articles/2019-02-03/dollar-vortex-puts-chill-on-earnings-that-may-worsen-in-spring?srnd=premium
  25. Why FED made a U turn - WSJ: https://www.wsj.com/articles/why-the-fed-made-a-u-turn-perceived-risks-to-growth-shifted-11549108800?mod=hp_lista_pos2
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