shalab

2010/11 could be a soft year for insurers. Dont think there is a catalyst in the near term to push the prices up significantly. http://www.reuters.com/article/idCNN1516567620100115?rpc=44

Sanjeev said it right. I would say even Munger would agree with that. In the almanac and elsewhere, he has said many times that there is nothing wrong in investing in something like google if you can handicap the odds. You invest if the odds are in your favor. As the line goes - "people in glass houses don't throw stones", Whitney Tilson serves a market that exists. He has shared many of Munger's lectures and transcribed them for free in the internet. I learned more by reading those lectures than I did reading the snowball. There were some interesting points in the snowball but I paid for it. cheers! Shalab

The table is interesting. Insurance sector as a whole is undervalued but as Sanjeev mentioned, the sector carries with it some risk. The interesting thing with BRK is that it hasn't recovered with other stocks such as WSC or FFH.

Sanjeev, well said! Yahoo! is a goner, it is only a matter of time. Their services have degraded significantly ever since Carol Bartz took over. People who used to use Yahoo! services are migrating in droves to Google/Bing. I myself have switched over from using Yahoo! mail to GMail.

This is a great list. I would add a few more. 1. Is the debt to equity ratio comfortable 2. Is the ROE or P/B acceptable 3. How much can the ROE; P/B fall? 4. Can this company withstand negative to low earnings for a few years because of special situations 5. Can the free cash flow increase over time 6. Is the management handling reinvestment of invested capital prudently 7. Is the business facing tailwinds or headwinds right now 8. What is the prospect of facing tailwinds or headwinds two-five years from now 9. What is the impact of further competition - will it erode margins and competitive position 10. What is the margin of safety in the current investment, is it quantitative or is it qualitative 11. Who are the major holders of stock in the company; do you know them. 12. After putting everything together, is it possible to assign a probability of failure. 13. How much of the portfolio would you put on this stock 14. Would you buy this if the stock went down in price by half in six months 15. What is the probability of the stock going to zero.

Thanks Sanjeev! You have an awesome city which deserves some premium. It may also be the Whistler effect where the build out and winter olympics is fueling the craze. Even plain sites in Vancouver island (but with water front views ) were insanely priced.

I have visited Vancouver, B.C a few times on pleasure. ( on the way to whistler or Victoria ). Incredibly beautiful city with awesome views and restaurants. I won't mind living there. I checked out some real estate prices there about three years back - it looked expensive even from the American standard where there was a huge bubble going on. At that time, people said that most of the buyers were from the US and were responsible for the prices to go up. Not sure if it is true. cheers! shalab

> 90K to 95K/A share I included non controlling interests in this calculation, it would be about 4K less without including non controlling interests, still looking at 20%+ gain in book value with 2%+ gain in share value.

Giving out dividends is a good idea for people holding BRK, FFH paying out dividends is a good mix in the portfolio.

My guess is that BRK book value is somewhere between 90K to 95K/A share at the end of last quarter. No way to say for sure but most likely in that range without large hurricanes. Interestingly enough, I think BRK book value kept pace with SP500 this year within a couple of points although the stock didn't. SP500 increased ~8% in Q4 which should impact BRK book value too. I am looking at 20%+ gain this year for BRK. I think the stock is cheap now, even cheaper than the Katrina time. Happy new year! Shalab

What are the board members top picks for the new year?

Why BRK is undervalued, from the same report: Averages for the past ten years: Current price to book value 1.3x Minimum price to book value 1.0x Maximum price to book value 2.0x Median price to book value 1.6x However, the price paid for BNI is not exorbitant, if free cash flow levels remain at 2009 levels. Berkshire should get a better deal on interest rates which should atleast 100 million in free cash flow. This means that the price of good will ( after subtracting the increased book value ) vs free cash flow is around 12. This isn't great in the short term but longer term if the inflation picks up and cash flow gets better, things should turn out ok.

Even with deeper recession, the yield from bnsf is better than the interest being paid or the interest on cash through treasury bonds - ala Bill Gross. The downside is the berkshire shares being doled out which clearly are undervalued. I think BNI is will likely work out ok in two-three years time. Already the freight traffic in December is trending up compared to 2008 December, if the trend lasts, it should be ok. I think the trend with takeovers is becoming clear, Geico and Gen Re took several years to fix as is the case with SNS which is a Biglari play. Except in the case of family run businesses which sell for liquidity, I don't think one can expect to get a good deal from acquiring publicly traded companies right off the bat.

http://www.reuters.com/article/idUSTRE5BN1OS20091224 [shadow=red,left][/shadow]

Shows how the press and hedges work - did SEC do anything about this insider trading, probably not. They caught hold of the galleon guys but let go others. Chanos is a buddy of Spitzer - apparently they were in the call girl network together.

Some interesting stuff here: http://globaldocuments.morningstar.com/documentlibrary/Document/aa3f3ec939ed3616.msdoc/original BNSF share holder meeting on Feb 11th. On BNSF valuation: Mr. Buffett discussed a transaction in which 40% of the consideration would be paid in Berkshire common stock and 60% of the consideration would be paid in cash. Mr. Buffett expressed his belief that fair value for BNSF’s common stock was in the mid-$90s per share, and that therefore the $100 per share price he was contemplating was, in Mr. Buffett’s view, as high as Berkshire could pay. Mr. Rose requested that Mr. Buffett increase the merger consideration above $100 per share. In response, Mr. Buffett informed Mr. Rose that $100 per share was at the very top of the range that he was willing to pay for BNSF and therefore Berkshire would not be willing to increase the merger consideration. In that discussion, Mr. Buffett confirmed to Mr. Rose that Berkshire would agree to a collar on the stock portion of the consideration, such that the value of the stock portion of the consideration would be fixed at $100 per share so long as the shares of Berkshire Class A common stock traded between approximately $80,000 and $125,000 per share. Interesting also is the total income growth scenarios (EPS) - if the recovery starts in 2010, it is 18% compounded to 2014, if it is in 2011, it is 14% till 2014. If there is no recovery or a deeper recession, the earnings would be negative. Interesting also is the combination of balance sheets to see how things can look. From 2008 balance sheet, the merger can add 1K/A Share and from 2009, it can add about 550/600 dollars including the dilution. Given the low multiples Berkshire fetches, this should mean increased share price of anywhere from $6000/share to $12,000/share immediately including dilution.

Looks like Munger was right afterall ;D My congressman ran on the platform to oppose TARP and won. I am going to send him this article ::)

djco, wsc and brk.b all fit the bill. All these have steady/increasing cash flows which makes it better IMO.

Not sure the reasons for expanding the board, is this succession planning for Munger?

FWIW Bezos of Amazon also writes an annual letter which is an interesting read.

FWIW, Bezos also writes shareholder letters. They are interesting to read as well.

Apparently highest growth this holiday season though it still trails Amazon. I checked a few titles and it seems Walmart is cheaper. http://seattletimes.nwsource.com/html/businesstechnology/2010536739_walmartceo18.html

Switch to Gieco ;D

I voted no as it didnt have the interest rate noted. 9 yrs at 2% is a good deal but not sure if I want to be hitched to FFH all the while. If you have the option to go with MPIC funds, then I would vote yes ;D

He asked everyone to buy C. He expects it to triple in three years. This morning, C is down. cheers! Shalab