Valuebo

Relevant for some companies discussed here like LUK (National Beef) and FTP. These are huge issues. http://www.telegraph.co.uk/news/worldnews/asia/china/9605048/China-now-eats-twice-as-much-meat-as-the-United-States.html

Should you even rebalance? Buffett has an analogy about selling your superstar on rebalancing (advocating instead to just let the good ones roll). On the other hand, they are all fantastic and there is volatility, so perhaps rebalancing makes sense. I'm personally using a good bit of my portfolio to purchase positions in these (although I don't have MKL) whenever they get close to book, hoping for an edge over a mechanistic strategy. Hopefully, this isn't too much of a "driving looking at the rear view mirror" type of deal though... Well, if you believe you are able to value them based on some kind of BV measurement and they are indeed all fantastic, I think it would make sense. Maybe once every few months would be way too short. Once every year is probably much better to achieve higher returns because you will gain more in those times of irrational under- & overvaluation. Maybe a combination of rebalancing percentagewise and rules on buying and selling based on BV with option to get in cash (max xx %) and not limited to specific dates would give the best returns, idk. I'm not taking into account taxes on gains and losses as I don't have them here in Europe, so that would probably make a huge difference and then letting your winners run makes a lot more sense. http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1350072000000&chddm=996268&chls=IntervalBasedLine&cmpto=TSE:FFH;NYSE:LUK;NYSE:MKL&cmptdms=0;0;0&q=NYSE:BRK.B&ntsp=0&ei=7zl4UJjQNqeMwAPgGw If anyone did the math in any way, let me know! -- Btw, at current prices I'm rooting for $LUK to be the biggest gainer in the next 5-10 years. Just a wild guess. But obviously it isn't comparable with the three insurers.

Did anyone ever check what returns would have been if you just bought MKL, BRK, FFH (and maybe LUK and others), each equal part of portfolio and rebalancing every few months/year?

Thank you Eric, very good point. That performance by Steve sure is funny (in a very sad way...)!

16,3% CAGR in BV in last 20 years for FFH against stated goal of 15% CAGR in the future. The difference is only 1,3% and not "far from what Prem achieved in the past" as giofranchi stated.

Yes, I agree MrB! And the first thing I pointed out is that Mr. Watsa stated goal is to compound book value at 15% annualized, far from what he achieved in the past. I just looked it up; 1,3% difference from the last 20 years. Just trying to be critical here giofranchi, I'm a big fan of Prem Watsa and his team. ;)

Giofranchi, first year BV increase was 180% in 1986 if I remember correct. The last 20 years was something of 16,xx% including a massive gain from the CDS bet and that was with a capital base that was a lot smaller. I do believe FFH currently is positioned exactly as it should and with a lot of potential in increasing the volume in its insurance operations. But don't just assume 15% CAGR going forward is a given.

It doesn't look very convincing! An author bragging about his philanthropy seems like a big red flag. Also, a book of 250 pages (excluding appendixes) discussing almost 50 subjects...? How good can those insights be? No one is an expert on 10 subjects, let alone 50. And if you have to discuss each subject in a few hundred words, you are going to disappoint a lot of knowledgeable people. One of the reviewers claims it's a page-turner, but that doesn't seem hard with 100-150 words per page. :D Maybe others here have read it and can convince me..

This: http://www.a-n-v.be/wp-content/uploads/2012/09/samsung-galaxy-s-iii-anti-iphone-5-ad-full-size.jpg

Great! I just send a PM.

Somehow I forgot to reply after reading everyone's posts some two weeks ago. I just reread the topic and found it very helpful. It gave some structure to my thoughts (concerning what I want to achieve, my expectations, etc) and provides great new insights. Obviously the title of this topic was poorly chosen. Everyone serious about investing and beating the market should be passionate about it and not experience it like work. I wouldn't put in another 5 minutes if it wasn't the thing that was on my mind most of the time as some bizarre obsession. I absolutely love the intellectual and emotional challenge and the amount and variety of things to learn and master. Luckily, it seems that everyone understood what I meant by it despite my poor ability to express myself clearly in English. I could reply to individual posts but feel that I have little value to add to such intelligent observations. I'm bookmarking this topic to reread it again sometime in the future. Thank you all. ;)

Seems like it was deleted. I made an account but couldn't open the topic. Then I found this: http://www.wallstreetoasis.com/blog/industry-primers-not-ready-to-go Perhaps anyone here saved them on their pc? Would be a great help. Btw, the discussion about whether or not it improves your results is nice, but shouldn't you mainly read it because you are interested in the industry? I couldn't be bothered to read much if I did it simply to achieve better returns.

Thank you for the tip Packer, I'll look into it. I've already read 'Competition Demystified' this year but plan to read as much as possible on economic moats as I believe it's a very crucial issue. I'd love to discover new 'hidden champions' in the small cap spectrum one day but understand that is extremely hard to do and often requires a lot of industry knowledge. I'm especially intrigued by companies like WD-40 that can somehow corner their niche market.

Just read the first part of the book (first 190-ish pages) today and I agree that it's mainly a book for beginners. But I am taking some small points into my checklist of things to consider (on accounting tricks and one or two on management). Some chapters aren't that useful (ex. DCF chapter) or don't have enough (if any) nuance. Most chapters (for ex. the one on moats) are way too short. Maybe the second part of the book offers more value.

Interview from 13 september. http://www.businesscycle.com/news_events/news_details/5142#.UF8X5lbHSWM.google So I guess he has almost 18 months (till the end of 2012) for his prediction to be correct? Even is he is "right", where is the value in his service?

Expect the hedges and poor results on positions (rimm, dell, ...) to have an impact on BV. ;)

Take a look at their bond results, managed by Brian Bradstreet. Watsa is not alone in this he's got an amazing small team! BeerBaron Beerbaron, I certainly agree with you. And I would add that, with Mr. Barnard as head of all insurance operation, I now expect FFH’s underwriting results to improve markedly in the years to come. Anyway, I want to stress another idea: in my experience, a business so good that even a fool could run it, is the exception, not the rule. Even better: it is an outlier! I can think of Coca-Cola and… well, don’t make me think too hard! Take, for instance, Burlington Northern or Lubrizol (or many other BRK’s businesses): do you think they are going to produce outstanding results without a great management? I don’t think so. Management is important. And a focused and driven management can make their shareholders rich. No doubt about it. If Mr. Watsa, Mr. Barnard, Mr. Bradstreet, etc. would leave, FFH would cease to be the great business I want my firm to be partial owner of. I know it and I am perfectly fine with that. I look for skilled, reliable, and motivated people in the businesses I manage personally. Why shouldn’t I stress this requirement even more in a business that I do not control? giofranchi Management is always important, even when a fool can run the company. We all know what happened at KO some time after R. Goizueta died... Over the long term, I believe there is no company that can be successful with a fool at its helm. Although companies like MSFT are defying my theory. ;)

:D The same happened in 2011.. FFH is starting to look better imo. Hedges will have lowered BV temporarly but I doubt that is going to last.

I have been thinking about this as well.. I think it comes down to the "business eye".. Klarman said that he thinks Buffett is a better investor than he since buffett has a better eye for businesses. He has the ability to see these things coming before others, and he stays within that competence circle. Think about it, his biggest mistake was buying BRK when he was young, he would probably not do that mistake today. A college student asked him how he manage to do a back-on-the envelope valuation in 5 minutes, buffett responded: "well its 50 years of preparation and 5 min of valuation. So I think it comes down to the exponential learning curve and the skills and abilities to get higher up on that curve. Munger has said that people wont believe how much Warren is reading. Best, I was already planning on starting a discussion on the subject of reading (and thus obtaining knowledge) and I believe this post from Anders (topic: "selling related question") functions as a great introduction. As I am currently halfway in reading 'The Snowball', after reading 'Buffett' by Lowenstein earlier this year, I am becoming more and more aware of the insane amounts of reading that are necessary to become (only somewhat) knowledgeable about business and investing. I'm currently rereading some chapters of 'Security Analysis' and my conclusion is that so far, after two years as a complete novice, I'm absolutely nowhere yet in terms of truly understanding businesses. I'm only 23 and just graduated, but by that age Buffett had read more than I probably will by the time I'm 50! I love learning and sitting still for hours by myself so I enjoy myself, but reality has really hit me hard lately. :) Any insights people want to share? How much do you read? What do you read percentage wise (books, reports, company fillings, industry magazines, ...)? Do you focus on specific industries to become an expert or do you try to achieve knowledge in general business and outstanding analytical skills? Etc. etc. I'm not a book with legs yet... But I'm doing my best! Tom

Macro has many facets. It probably was one of Buffett's major conviction points for buying BNSF to give an example. But you'll never hear him make specific predictions on "the when or the how" as far as I know. --- Giofranchi: A bit off-topic, but I think you will appreciate this post by board member Harry Long: I have no opinion or knowledge on the matter to add but am enjoying the discussion. Thank you.

Tombgrt, I don't know if you are a shareholder or not, but for what its worth I about jumped thru the phone at DELL IR the day of the announcement. I'm sure Longleaf was just in pure shock. I'm not and haven't been so far. That might change in the future. I'm sure they were in shock, just like Prem Watsa probably was. I just don't see how this can ever be a good move. Maybe someone can explain the rationale to me. I believe the company is quantitatively cheap but generally I look for certain qualitative elements. Great management is a plus and capital allocation is just one of the factors. I absolutely love owner-operator companies but they make mistakes too. Just look at DWA and what happened there with all the buy backs, total waste imo..

This was what I was getting at A-Hamilton. The issuance of a dividend was an obvious hint that capital allocation might not be all that great. It seems to me that if they lower buybacks now, that would only reinforce my thoughts on capital allocation at Dell. Why issue dividends now with the business priced at 4-5xFCF and the need to get acquisitions at reasonable prices to increase market share and moat when the opportunity arises? Thank you for your input PlanMaestro, I appreciate it.

From a $30b+ market cap to $19b in six months while the market rallies, intriguing. Will also be interesting to see how much shares they have bought back in the current quarter. Somehow I doubt they are buying more now than six months ago.. I do of course, understand that it isn't so simple. They have to consider additional options and agressively buying back shares might limit other future options. But somehow you always see the general company, even with decent management, buying back shares too high when they should just sit on their hands (not speaking of the last few months for dell of course). What are people's views of M. Dell as a capital allocator considering the acquisitions, buybacks, dividends now,...? (It seems like they are making the right moves business wise tho, no complaints there. It's just a tough business.)

Some sort of Tobin tax would solve that problem, no need for 100% capital gains tax. Here in Belgium we already have a 'taks op beursverrichtingen' for ± 0,2%/transaction and we are ready to implement Tobin tax when other nations follow. :-X

They do have an awful lot of teeth... Thank you for the reminder twacowfca. ;)