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I don't think what Buffett does is any more complicated than looking at the market itself, cash, and long term bonds as alternatives and then assuming he can do better, so what is the most attractive thing he can find better than 16x P/E for a 6.5% grower with a 12%-15% ROE (the market)? Apple when he bought it was <10 P/E growing around the same 6-7% rate with an infinite ROE and he deemed the moat to be solid (and was correct). It didn't take a DCF to see it was mispriced on a relative basis if his qualitative judgment was right. Obviously relative to a 3% long bond (then) or 5-6% long bond (now) it was still a much better investment. Obviously relative to cash earning zero (then) and earning 5.5% (now) it was a much better deal. And he must not have had any superior stock ideas, or he wouldn't have bought so heavily. So relative to all alternatives he understood equally well, it was a bargain and he bought it. Obviously all of the assumptions above only make sense if you're thinking in a DCF-adjacent way, but you wouldn't need a model. Valuation becomes more relevant when you have to sell and we all do that poorly including Buffett himself arguably.

This is slightly incoherent. There have been many systems of ethics in human history. Why would "biology" defend the current Western one? The Spartans thought it made "evolutionary sense" to leave weak newborns out to die because it would improve their stock. There is no such thing as ethics derived from biology.

This is fairly simple to explain. The Dawkins’ and Harris’ of the world are simply Protestants who simply left behind the idea of God, but not the morals, values, and expectations associated with a Christian world. It’s not magic - it’s been bestowed on them by a long monotheistic tradition. And they rightfully see it as a pretty good system of ethics. (I say this as an atheist.) When they say “morality” they never really say which morality they mean - because they’re referring to Christian ethics. See the Nazi regime for an example of a truly Christian-repudiating world where people are not held to have equal right to life and liberty.

The % of money you have in stocks should be heavily influence by your spending rate as % of your net worth. If I knew someone spending 15% of their money per year, I'd have them at least 50% t-bills/short term bonds. If they were spending 1.5% of their money I'd have them 90-95% stocks. You never want to be selling into an extreme drawdown. This is why WB provisioned for his wife to be 90% S&P/10% t-bills. In a serious downturn where stocks are very undervalued you just spend the cash-t-bills for as long as you can.

Dealraker, this is an account with a few hundred stocks (just reading your other posts) and you managed to outperform by a few points? That's pretty interesting. Can you share what % of the total is in the top, say 10 stocks?

LOL. Some people just cut right to it.

There are some strange ones here OP so let me suggest a few having taught this subject a bit. Two I do agree with above are DPZ and GIL. Both comparatively easy and importantly for learning, you have familiarity with the product line. HSY and TR. Hersey and Tootsie Roll. Simple candy companies. FAST - Fastenal. Very easy to understand the business but moreover they explain it very well. COST - Costco. Again, a simple retailer. Low complexity and easy to wrap your head around how the stores work, what the strategy is, and why it works so well. CMG - Chipotle. Simple restaurant chain, owns all the stores, you can walk into one tomorrow and understand how it works and what the input costs are. Growth story is easy to understand. Hope this helps!

I don't know what you guys are on about re: margin. I'm not sure if you're understanding the concept of maintenance margin - i.e., the % of equity in the account for a margin call to come in. It's usually 25-30% but I've seen up to 40%, for stocks - which would be rare. This means if you were margined 50/50, you'd typically get a margin call with the securities down ~30%. DJCO has $395M in securities at year end against $69M in margin. They could easily pay off $10M with cash on hand if they needed to, leaving $59M net, but you can use $69M. That leaves $326M equity in the margin account (82.5%). If the securities fall by half from 12/31/21 prices, you're down to $198M gross with $69M margin, leaving $128M equity in the account - still 65%. Even using the 40% bogey, DJCO's securities would have to fall to $115M to get to 40% equity on $69M margin debt, leaving aside the cash. A 71% drop from 12/31/21. Even if Alibaba went to zero and the entire rest of the portfolio were cut in half, DJCO would still not face a margin call. And even in the case of a 70%+ drop, even if by some miracle some idiot broker liquidated the famous Charlie Munger's account, DJCO shareholders would still have $40-60M left over from the liquidation, ready to invest into a bombed-out stock market. Charlie Munger is not an idiot. Without him DJCO would be worth zero today. The guy turned ~$40M into $326M after accounting for the margin.

If I recall you've been very concentrated in the past - what did your portfolio look like in rough overall % of AUM last year if I may ask? Thanks.

Fantastic!

Be careful assuming that your investment decisions would have been the same had you held 0% cash. I don't think that's true.

Let me get this straight. If Prem & Co do a terrible job managing float (half of the insurance business), aren't very candid about it, make promises year after year that go unfulfilled (we'll stop losing money on shorts, we'll start investing in quality companies, we'll grow BV at 15% over the "long term" etc etc.), continue with this year after year including the current one, and board members have the temerity to point all that out and perhaps even indicate that this means the business isn't worth a premium to book, their "opinion means nothing"? We're only here to talk up the business?

Berkshire wrote down a bolt on acquisition Lubrizol added later.

Alice Schroeder claims Buffett couldn’t recall what color her hair was if she covered it up.

Above all, Buffett hit the g*d damn genetic lottery! If I ate like that it would not be a pretty sight... Funny stuff though thank you.

In a Platonic ideal sense, they are the same. The concept of IV being a very "pure" idyllic concept. (Since no one can predict the next 70 years of any business, I don't care what it is and who you are.) In reality -- in practice -- I have made a useful, non-blurry distinction. Growth focused investors are primarily looking to benefit from the growth in the intrinsic economic value of the company over time, as measured by whatever KPIs you'd choose - cash flow, earnings, revenue, margins etc. Value focused investors, from the early days, focused a great deal more on determining today's fair economic value and trying to buy the stock at much lower than that number, and sell it when it got close to that number. The way the style indexes do it is pretty much nonsense - low P/B ratios and that kind of thing. But I think there is a real difference between the two above and my experience lately has been that many have soured on the discount-from-value approach (as I've described it) and many more have chosen the ride-the-economic-growth approach. You can, of course, find a hybrid strategy - but acknowledging that pretty much confirms that there are two (or more) things to hybridize.

I’m quite sure the Robinhood people don’t know the difference between investment and gambling speculation, and don’t care. So of course Charlie sounds “elitist” to their ear.

Really enjoyed this one, thanks. Besides his smarts, Malone always comes across as a very likeable guy. Tough, but kind and straight forward.

He had said he heard from someone who was trying that approach, and he thought it was a perfectly intelligent thing to do - and yet few would be able to do it. Like you, I can't for the life of me remember where he said it. But I'm here to say you're not crazy! 8)

Yeah, I'm with you. I always say a half-dozen max, for me. I mean, Berkshire has $125B in a single stock. According to financial theory that's insane. Personally, I just cannot get my head around the idea that 30 stocks is "less risky" than 6, if the 6 are reasonably different from one another and are the right sort of businesses. The "risk management" of having a bunch of 2-3% positions is offset by the fact that your winners are not propelling your portfolio forward enough. Unless you have 30 equity stub options or VC plays. Someone mentioned Mark Sellers in here - what he did was nuts. I don't think that's a good example to follow. He missed the concept of fragility. E&P companies are concave to the commodity price. A move from $6 gas to $3.50 gas = bankruptcy unless your costs are totally rock-bottom. At the end of the day, everyone's comfort level is going to vary...lots of ways into heaven.

Slightly off-topic, but people were shitting all over Bruce a few years ago, but he has actually been doing very well lately - of course that doesn't make the news. https://www.morningstar.com/funds/xnas/fairx/performance Up 47% in 2020, top 2 percentile performance for the past 1,3, and 5 years. I like his approach. Really seems to be doing his own thing. His performance over the last few years is no better than ever, he simply had a huge leftover position in JOE after his investor exodus which has gone parabolic within the last six months. I wouldn’t go revising your opinion based on this.

Serious question, if you feel you have no 'edge' (which is a quantitative concept i.e., better odds than average), why are you picking stocks at all? There would be no point.

What did 10k wizard do that SEC EDGAR doesn't?

Same here on the brother-in-law thing. He's bought all the Robinhood stocks. Amazing. Of course, he's done pretty well, so no reason to stop.

The variable that needs to be considered is what you're buying. If your three positions are Mastercard, Union Pacific, and Berkshire, bought at not-crazy prices, you're going to be fine. If your three positions are Twitter, XYZ Gold, and Tesla, I wish you great luck. So before you ask, how many positions can I have - I would ask, how many positions are you >90% sure won't fail? What I think gets lost in these discussions is that if you have 3 stocks and one triples, the others can go to ZERO and your portfolio will retain its value. The key is that the three don't overlap with each other and all go to zero at once. You have to understand something about fragility. This last year was instructive. Six positions is more than enough if you know what you're buying and have an intelligent view of their correlations. More than enough.