Valuebo

http://www.google.com/finance?q=NYSE:LUK Seriously? :o

Lol at "young men". At whom is he referring, 16-year olds? I got interested when things started plummeting in 2008. I believe that had a significant impact at how I look at risks and (value) investing in general. That's funny. ;D

@ Moore: 50 out of 10000, not 50 in total. Right?

I agree. I think this is the future. http://www.asus.com/Eee/Eee_Pad/Eee_Pad_Transformer_TF101/ Exactly. For practical use in a working environnement the keyboard without a mouse and little screen is unhandy but that can easily be solved. Why not install simple 3th party stations including a keyboard (with integrated projector/beamer (?) for a bigger screen when installed at your desk) and mouse where the user/employee simply has to attach his "tablet" into a frame. There are enormous advantages for many companies and individuals in the mobility this alternative offers and I don't see why desktops would remain the preferred medium of use.

Thanks for the link. I printed it directly and started reading so procrastination couldn't get a hold of me. ;D Just read the first part and find it very interesting so far. It's the kind of paper I like to highlight and make remarks in so that I can put it away nicely to reread later to get a better understanding of the concept or to simply refresh my memory. All lot of recent investments (if not most) by Prem, Warren and others definitely fall into the category of UUU investments. Glad to ride along in the "sidecar" of such skilled practitioners. :)

Aren't those two completely dissimilar measurements of performance? Why not instead measure Berkshire share price performance vs the book value growth (+ dividends) of the S&P500 companies over that period? Berkshire's price gained 5.5% annually. Did the S&P500 book value growth (including dividends paid out) do better than this? You raise a valid argument Eric. Just pointing out to the system Buffett uses to measure Berkshire's performance against the market. I believe that over time it gives a correct image of reality. Here you see a longer list from this year's letter: I am sure that in very strong bull markets Berkshire might start to underperform in some years based on this comparison. But in general it will still grow at least at market pace for some time to come. @Packer: Correct but I think the effect was limited on Berkshire's ability to grow BV even more. No excessive amount of cash was deployed compared to investments in place before the crisis in my opinion. In aggregate both businesses and stocks just turned out to be quite recessionproof. It is true that the only reason for the great outperformance the last 5 years (06-10 period) was the crisis. That is just what happens, in good times (03-07 period for example) outperformance will look lean or nonexistent and in bad times outperformance will be boosted. In reality the truth of true out/underperformance is somewhere in between as markets hover between over/undervaluedness.

Good point which I totally missed! Define crazy cheap. I doubt BRK is something that will ever get "crazy cheap". It's like waiting for something like KO to trade at 3x earnings without hitting a severe depression. It just won't happen. Mr Market's short-sightedness works in both ways. I'll try not to be suprised by whatever happens and take advantage of it. BRK BV growth from 2006-2010 = 10% annually S&P 2006-2010 dividends inc. = 2,3% annually That was in an overal bad period. BV growth of more than 10% will occur again in better times. People are overfocusing on size and growth. They claim BRK isn't interesting anymore because of the diminishing returns while the company is still outperforming as we speak. You will always find companies that grow faster and performe better. It's all relative compared to the ultimate price you pay for the value you get in return. Because I'm still in my early days of investing, I can't find anything that has a better combination: very high probability of a correct assessment of calculated IV (this one just applies to me... ;x), 55-67.5 cents on the dollar, still growing at slightly market outperforming pace, extremely safe with topmanagement. Anyone who can is smarter than me atm and that is fine! ;)

Exactly, a move toward IV will occur someday. I don't really care when as long as BRK is able to increase BV at a decent pace while waiting. I don't think Tilson is to optimistic tho. I have read other analysis where people claim BRK is worth $180k/share and more as well. Especially when you look at the potential a hardening insurance market and the improvement of US housing for example. If things turn out to be not as bad as a lot of people think, all of a sudden a lot of hidden value will be unleashed in the form or new earnings (insurance, housing and general improvement over time), stock holdings that gain significantely (WFC etc), value from warrants on BAC, GE, GS; etc. I have no accurate estimate on IV and I don't believe it can be done anyway. I believe BRK is anywhere between 55-67.5c on the dollar at current prices unless the economy evolves into shit the coming months/years. I will probably be selling well below $160-180k/share so it doesn't really matter. Btw, if I am not mistaken Berkowitz has almost 7.5% of FAIRX' assets in BRK. That is even more than his BAC investment which he believes is trading at 2 times pre-tax earnings before provisions. Do I really believe he has 7,5% of the fund's money in something that is only 75c on the dollar (just an example for the sake of my argument) while he can pick up stuff at 20-40c on the dollar? Of course he is diversified and he can always sell things like BRK for cheaper stuff if we go down even further, that is probably part of the reason for holding such a big position in BRK, BAM, LUK etc. But I bet he would prefer more cash instead if it was only at 70-75c on the dollar atm. To me it simply proves the level of undervaluation of some securities like BRK. :-X

Correct Zarley, he is talking about the two-column valuation which Buffett himself likes to use. http://www.tilsonfunds.com/BRK.pdf Another reason for the undervaluation of companies like BRK, LUK and BAM is that they are excluded from a lot of funds because of the way they are set up. A simple example : the PE ratio in combination with some other metrics just don't cut it, they are left out of the 'value screens' and are overlooked. I read an excellent article/paper on this and other facts some time ago but can't find it in my bookmarks! :( I am not a big fan of Tilson but he was right in 2000 as well. Just a bit early. :D http://www.fool.com/boringport/2000/boringport000214.htm

Cheaper than in 2009 and 2000 (just barely considering the economic situation) is my conclusion as well. Seems like BRK is more subject to market swings since it's inception in the S&P500 in jan 2010 and lately it follows financials rather closely. Also, a couple of weeks ago I checked the performance of BRK's top 5 stock holdings (represents "only" $45b of BRK tho, but surely earnings aren't getting lower..?) and it shows a nice picture. On average the top holdings did +15% but BRK declined 15%. This doesn't show how undervalued BRK is or isn't, but it sure shows how things can change in 1 year. Who knows where the price will be in one year. If the macro situation gets better, I wouldn't be suprised to see another buyback comment in February if the stock is below $75-80. Not that he would buy back stock, but the past shows he likes the stock to at least somewhat represent intrinsic value. Especially after his very clear explanation in this year's letter about their (Buffett & Munger's) calculation of IV. Just my guess! I added even more 3 days ago. No 3/5-bagger but it is free money nonetheless.

Will work fine until it doesn't and then you are f*cked. Kind of what a lot of people did before the Great Depression to buy more real estate or stocks. Pure speculation and very dangerous imo, even if chances of economic disaster like in the thirties are very limited. With Greece and maybe others defaulting it isn't unlikely that dividends get cut if the economic situation should get worser. I wouldn't want to risk that, even if chances are small, unless I can hedge myself for such an event without losing to much upside. Maybe you can if you have plenty of cash aside, I don't know... What do others think? ( I am pro renting something instead of buying tho IF you have a great investing track record and are in an undervalued market with low macro threats. Also because here in Belgium for example real estate prices are getting really inflated as people believe the returns will be equally high as before. This trend looks impossible to substain imo and I believe real estate returns will diminish greatly. )

That takes one argument away! 8) Not that it was valid imo as they already bought back plenty of stock before. Where MSFT seems to be buying back stocks at any price, DELL seems to look at valuation first. Maybe a matter of trust in management's competence (Isn't that a requirement anyway when investing in sectors like technology?) but the numbers don't lie. I have new cash coming in soon and hope I can pick some shares up at current prices as I have no cash left atm.

It even seems TEF is paying a 12,5% gross dividend and is under it's 2009 low. Question is wether their balance sheet can take a hit and how much of their income comes from troubled areas for that dividend to be substainable if things get worser. 60% of operating income seems to come from Latin America in 2010 and is growing. The business in Spain & Europe seem to be in decline. I have no opinion on it tho... Companies like TEF with a lot of PIGS exposure but with strong growth in other markets could be very interesting as the sell-off continues.

The strength in the EUR/USD pair the last couple of months is/was ridiculous given the structural disadvantages Europe has in comparison with the US. There is no way to tell what a fair value would be, but downside for holding USD instead of EUR seems limited. In their sunday edition, Der Spiegel writes that Wolfgang Schaüble is preparing for a Greek default. Of course it will happen, the question is wether they will be able to contain spreading and a general panic. Would love to switch some USD to industrial companies like SIE if they keep the stock and currency beating up for a while. I am down 5.5% for the year, 1.5% more than 2/3 months ago. I can afford being fully invested. Anyway, we'll see how it all turns out. Interesting times!

Always interesting! Will look into it. I just started with The Great Depression: A Diary. I bet it is a much lighter read. ;D If I am not mistaken Prem recommended it as well.

Looks like you are trying to time the market. Like Parsad said, if we can buy dollars for 50c why bother with what the market does in the meantime? Why wait in the iddle hope it gets to 30-40c if IV can increase even in rather depressed times? I don't see why anyone would be invested 90-100% in May/June and would go to 0-50% now, like I have seen many do lately. Everyone knew about the trouble back then, but no one seemed to care because the Good News Show was on. Now we have our portion of the Bad News Show, so be it. I am long 100% in BRK & FFH because: - I am European but feel much saver invested in dollars (100%), I have been buying all the way up to 1.48 and I am lucky to have some weird hedge effect because of it the last couple of days. - I will double/triple my investable cash in the next 2-4 years because new funds will be rolling in every month. There will be plenty of opportunity to buy more with new cash. - I am in it for the long run knowing others are compounding dollars for me. - If things take a turn for the worst I still have the option to shift to even cheaper opportunities.

Damn, what an opportunity. Most things I am wondering about are already asked by others, I hope some get picked! Actually it is at 97% now. http://www.bloomberg.com/apps/quote?ticker=GGGB1YR:IND

Thanks Max, great find! :)

Right click on the back arrow on the top left. The last option is history. Which wouldn't be any faster. Still two clicks. :D For a "one touch history button" you can go to history (chrome://history/) and then add the page to your 'bookmarks bar'. :)

To some extent, perhaps. The big differences is in the size of the moats. No one *needs* to buy Dell for much of anything. I would argue that people (businesses, more often) need Microsoft, and then to a lesser extent Cisco. The other two are more similar to Dell. INTC has a lower moat than CSCO? ??? INTC has a very decent moat imo. There is "some" moat in Dell, but do you really need it at its current valuations? How do you value the ownership management at Dell with 15% of shares owned by M. Dell? Most others lack that and that is reflected in worser acquisitions (MSFT, GOOG), serious share dilution with options (CSCO), ... Dell isn't empire building and in it for the quick buck, pursuing higher margin business as we speak. With MSFT & INTC you get decent moat with reasonable upside, with DELL and maybe others (I have no opinion on them) you get a neglectable moat (probably almost none) but possibly more upside. Just my opinion of course.

@ Ross: And DELL doesn't know this? I disagree. Imo the only difference with HPQ is that M. Dell knows there is still value in cross selling hardware with software & services and that full reliance on cloud isn't for tomorrow for enterprises. Chances are a lot of revenue is going to shift from HPQ to others like DELL because a lot of S&M businesses want both hardware & services from the same provider. http://www.crn.com/news/client-devices/231600002/crn-q-a-michael-dells-take-on-hp-the-channel-and-dells-future.htm?pgno=2 Is Dell not shifting to software & services, away from selling hardware? Their acquisitions say otherwise. Enterprise solutions & services revenue rose 27% in 2010 including their acquisition of Perot Systems. Are they focussed on S&S? No, 80% of their revenue still is in their product line. But 30% of their gross margin is coming from services. There is a clear shift to higher margin business, which is in services right now and I believe this trend will continue while revenue from products will stabilise further. I still believe there is a lot of value in cross selling of less profitable hardware & highly profitable services for DELL. Net of net cash, which I believe hasn't been spent stupidly in the past, the PE for this company is under 5. At the current valuation this could be a PE of 4 within 18 months. I would sell out well below a PE of 15, but this company easily deserves >10 imo. If I am not mistaken they have around $3-3,5b left in their share buyback program, they can buy 10-12,5% of the shares with that amount. They can and they will. It is priced for failure over the long term and I just can't see that happening. To me it is irrelevant wether the stocks moves the first two years or not, this isn't a value trap (= one that loses both share & intrinsic value) and underlying business value is only going up atm, not even in decline. Have no position yet, just did some back-of-the-envelope calculation some time ago and the story looks very compelling to me. When I have time I will look into it further.

For me it is option 3 as well, especially misunderstood and/or unloved ones. Just makes the most sense for me and it suits my personality, being slightly risk averse. Not that the other options are riskier per sé, it just seems easier to take hits on a portfolio of high quality stocks and the possiblity of being severely wrong is lower. Also, I lack the experience for the other options and I think you have to grow into them over the years while obtaining more knowledge & expertise. After all, I am just getting started. When looking at value investing from a broader angle I believe it has to suit your personality as a whole to become successful. It just feels like the normal thing to do for me. I can't understand why other people can't grasp the concept of value investing and keep buying high & selling low. For example, as a kid (12-15y old) I used to buy rare games from friends and internet sites and sold them back on ebay to double or triple my money. I always insisted on having a 'margin of safety' and wouldn't buy anything only to get a 20% return (which would have been just a few bucks ;)) because I had to invest time in putting the thing up for auction, go to the post office, pay a fee to ebay,... In warehouses or other stores, I always compare prices automatically and the quantity and quality I get in return. Just a simple habit a lot of people don't seem to have. I could probably think of plenty of situations and habits that I bet other value investors have as well.

What? But Munger told me this is only a tiny investment? Also, Buffett is in it mainly for the 6% coupon, Munger and given2invest made that very clear! 6% is the best he can get in this market, the warrants are just an extra... Right? ::)

Which brings us to the discussing you are having with txlaw. If you want to believe BRK is in it for that 6% return that can be withdrawn any moment by BAC... Fine, I am not going to start that kind of discussing.

Others are emotional, yet you resort to name calling. Keep it up! Not sure what your reality check is all about. Like that claim should be not true now because Buffett got this deal instead of buying the common. What kind of logic is that? This deal is much better for BRK and all it says to me is that Buffett believes it is highly unlikely that BAC goes to zero and that the "asymmetric risk/reward opportunity" is present. He still gets all the upside and almost eliminates the risk as that he would have as a shareholder. +1 In my mind I just upped my IV calculation by roughly +2+3%. ;D