S2S

I happened to have a conversation on this very topic with an august investment advisor half an hour ago; "getting the right clients" is about easier said than done. If anything, it's about the hardest thing to do in this business; trust (and a decent track record) can take decades to establish. There's a massive survivor bias when one thinks of Klarman, Berkowitz et al.

re: hedging When price of the underlying asset is inflating, hedgers will miss out on some of the upside. There are industry players who have the testicular fortitude to be more discretionary with their hedgebooks (ie Devon was unhedged last year for the longest time... except they do nat gas. We all know how that worked out). The SandRidge guys aren't/can't afford to be market timers, which is fine with me. If you take Ward at his word, SandRidge's CBP and Mississippi assets still generate decent IRRs at $60 crude (provided they can drill and hold all their leases). And their more recent contracts were initiatied at ~$100 delivery price. Not too shabby. The "miss" is due in part to the surprisingly long and harsh cold front that hit Texas earlier this year, in part due to analysts' modeling a flat revenue progression from quarter to quarter this year vs. the company's ramping up from a lower base... Again, a good enough explanation. All in all, an okay quarter if you ask me. What matters here on out seems to be when/how Ward & Co will raise the money. Drill, baby, drill.

To be fair to the Fox Newsers on this board, Rush Limbaugh and Glenn Beck have both jumped in on the lovefest http://www.nydailynews.com/news/national/2011/05/02/2011-05-02_rush_limbaugh_glenn_beck_shower_praise_on_president_thank_god_for_president_obam.html

Many have done so. Obama himself referenced Bush in last night's speech. And according GWB's press release, he was one of the first people to receive the news directly from Obama; that must mean something, no?

100bps+ surge on S&P500 futures: http://www.businessinsider.com/us-stock-futures-surge-on-news-of-bin-laden-death-2011-5 Parsad - well said.

Bronco - do you really believe that JNJ is an easy to understand business? Its Consumer division has received a disproportionate amount of media coverage (albeit not always for the right reasons), but contribution to profits is modest relatively to the Medical Devices & Diagnostics (DuPuy, Ethicon, Lifescan etc) and Pharma businesses, the latter might be the swing factor given the high-risk, high-reward nature of drug pipeline. If you find a diversified pharma or HC equipment business "simple", you would be one of the smartest people I know. Easily.

^^ it's business as usual for JNJ. Their track record in M&A is okay, but nothing to write home about. They scoop up smaller companies to enter new markets and/or for their pipelines, and rarely with synergy/cost cutting in mind. Thus JNJ pays up, and their deals often turn out okay, but take a while to become accretive.

Since we can't get enough of WEB ;D. From Professor David Kass's blog: http://blogs.rhsmith.umd.edu/davidkass/uncategorized/warren-buffetts-qa-with-university-of-maryland-mba-students-march-11-2011/ Enjoy,

SD - using your very criteria, the mutual fund industry would come out even worse; on aggregate its members have underperformed their benchmarks (which, I should say, are rather straightforward vs. the more sophisticated bogeys used by different HFT strategies) for more than 30 years and most investors are aware that the industry, again on aggregate, is structurally deficient. Yet such phenomenon is not going anywhere. I reckon the topic is more of a mental exercise than anything, but if history is indication, one might need a lifetime investment horizon to realize profit on a targeted industry short.

Of course there's that risk... hence some variation of "Past performance is not a guarantee of future performance" on every money manager's public document. ;D The flip side of the coin is that Buffett, Watsa, Cummings et al would just be average Joes if one is not cognizant of their paper trails. Here's where I think a solid understanding of the manager's process, discipline, strength/weakness etc etc. That's why the more information you have, the better. Speaking of which, you might already have Morningstar or ValueLine access via your alma mater (I do, but fortunately don't need it). Use it.

The first thing I'd do is to get a Morningstar subscription. They provide a wealth of information on money managers AND individual securities. The fees pay for itself in no time. Other than board favorites such as Fairholme, Longleaf, Oakmark, Yacktman, Weitz etc there're dozens of funds with stellar track records: Ariel, Artisan, Fidelity Low Priced, Calamos, Thornburg. And so on and so on. Good luck!

As long as a company is "in play", someone will see good enough reasons (cheap credit + any combination of synergies, off-shoring, levering up, slashing R&D, margin expansion, tax arbitrage etc.) to pony up for it. Barbarians at the Gate, anyone? ;D

Bronco - if one replaces "Apple", "Google" with "Microsoft", at any point over the last 10 years, your above post would ring equally true. There're virtually no limits to how long well-run businesses stay around. Whether one makes money in stocks of such companies, however, is a different animal. Agreed.

Is ~ 15x cash flow really "crazy valuation"? The concern here is that they're spending like a drunken sailor. Perhaps they have to, given Google's current status as THE PLACE from which Facebook/Twitter/other Valley startups poach talents. Consider this excerpt: "Dorsey came back to Twitter after the company had tried and failed to lure two senior product managers from Google. In both cases the company was fairly close to closing the deal when Google made counteroffers, showering them with restricted stock grants that are reported to be worth more than $50 million in each case. (Clearly, product people are in high demand in Silicon Valley.)" (http://tech.fortune.cnn.com/2011/04/14/troubletwitter/) The corollary is that when they stop spending, operating leverage will emerge in a big way with continued 20%+ revenue growth. But will they, now that Larry Page, an engineer, is running the show? On a related note, I'm all for Google's using their vast resources to spur innovation. "The best minds of my generation are thinking about how to make people click ads" (http://www.businessweek.com/print/magazine/content/11_17/b4225060960537.htm). That does suck.

I know just a tiny bit about healthcare, as that's (part of) what brings home the bacon. But I can not profess to even come close to rival the thousands of MDs with years of actual experience in the trade who also happen to be suppliers, end users, researchers, employees, investors, other stakeholders in these companies when it comes to knowledge about drugs, devices, or procedures. So I'd AVOID making judgement calls on brand power or "moats"... or, at least, not place my (likely inaccurate) subjective opinions of such matter as the cornerstone of an investment thesis. Besides, there's the risk of participating in a Keynesian beauty contest: making investment driven by expectations about what other (likely much smarter) people think.

Hah... my problem with shorting puts of these "safe" mega caps is the Black Swan exposure: if/when MSFT gets "put" to you at below $20 or JNJ at <$55, we are probably in another Great Depression... in which case I'd rather have cash handy to pick up distressed small caps than having much of my capital base locked up in these lumbering tanks.

The debacle is not only limited to the McNeil consumer health division.. it's a company wide issue. http://www.businessweek.com/print/magazine/content/11_15/b4223064555570.htm

That'd be consistent with compliance policies at many other investment companies and banks. Unfortunately it would significantly dampen the incentives for great talent to join Berkshire ranks as well.

Andrew Ross Sorkin chimes in. Now we're all holding our breath to hear Alice Schroeder's take. ;D At the time Mr. Sokol personally bought shares of Lubrizol, he had already began trying to set in motion the gears of an acquisition by instructing Citigroup to put a meeting together with Lubrizoil’s chief executive. Of course, Mr. Sokol had no way to know whether Lubrizoil would engage in talks or whether Warren Buffett and Berkshire’s board would be interested in acquiring the company. But in the court of public opinion that doesn’t matter. His intent was to recommend the deal to Mr. Buffett. And even though he had no control of Mr. Buffett’s ultimate decision, he was one of only a select few who were in a position to influence such a transaction. Perhaps most striking, Mr. Sokol said this morning that if he could do it again. He would have bought shares of Lubrizol, but he would not have suggested Mr. Buffett buy the company. http://dealbook.nytimes.com/2011/03/31/the-perception-of-the-sokol-situation/

I agree with bluedevil's interpretation of the letter. I'm sure there are other reasons on Sokol's end, but news of the stock purchase spells nothing but a PR nightmare for Berkshire. Too bad the company lost its Mr. Fix-it over a $3M transaction. Finally there's a day where I don't want to be in Buffett's position. ;D

It's too easy to lump all analysts into a preconceived stereotype if you zoom in on the more public procedures of their job: frequent yet not-always-accurate forecasts (perfect forecasting would require a magic 8-ball, although analysts' incredibly thorough Excel models, if you have seen them, might be closest thing, constant if sometimes unnecessary presence on company calls, other attention (CNBC, Bloomberg appearances) behaviors etc etc As claphands22 allude to, most analyst recommendations are backed by a well-developed and well-researched thesis. Sell-side analysts also do the lion's share in getting clients up to speed with industry fundamentals and the drivers of a company's share price; not to mention the weekly updates that include down to the the minutia of ongoing operations. It's probably fair to say that analyst research not only make their clients' job a lot easier but also enhance informational transparency of the marketplace. Unfortunately, granular detail is typically not available to individual investors, the opinionated public.

Japanese government's first forecast of the disaster cost: ¥16 trillion ($198 billion) to ¥25 trillion ($309 billion) over the next 3 years http://si.wsj.net/public/resources/images/WO-AE935_JECON_NS_20110323181804.jpg http://online.wsj.com/article/SB10001424052748704050204576217852022676740.html Great article, thanks!

That's a little harsh, don't you think? I'm of the opinion that in buying funds, investors are better off using the same "buy low, sell high" mindset that often serves them well in buying individual stocks. Sometimes this means taking a (educated, hopefully) leap of faith and back managers with less-than-stellar recent results or little/no track record at all. That's not to say a guy who, for instance, put his money with Fairholme today will not do well; just that the odds is against his doing better than an early investor.

Hold the personal attacks. I'm in fact a happy Sprint customer. HSPA+ is only "4G" if you believe the sales pitch (for now, anyway) straight from T-Mobile and AT&T. What everyone wants is a LTE network, which only Verizon has partially built out. I believe even Sprint will soon abandon the less efficient WiMax alternative and migrate to LTE at some point. It is relatively inexpensive to upgrade traditional 3G network to HSPA+ standards, which is exactly what AT&T is doing. Hence their joining the chorus claiming HSPA+ as "4G". It's smart move for the present, not so much a few years down the road.

brker_guy, it's the other way around (see page 21 of the presentation): AT&T owns the 700mhz band which is penciled for its coming LTE rollout What T-Mobile has are the 1700mhz AWS airwaves, currently utilized for its HSDPA 3G services AT&T plan is to move T-Mo users to its 850/1900 band and thus free up the 1700 AWS band for additional LTE coverage All told, the 700mhz band AT&T owns is both more plentiful AND of higher-quality (lower frequency => better propagation) than T-Mobile's already occupied 1700mhz From AT&T perspective, the move is more about resolving their current network issues and eliminating a competitor while at it. It is T-Mobile who needs a partner to make up for their lack of 4G spectrum