Mephistopheles

if you have to dive in and take a close look he's not interested. he wants an investment to be obvious. he understands the numbers by reading the annual report. his accumulated knowledge means there is nothing new under the sun for him. that's why when someone wants to sell him a private business he can make a decision in hours based on his knowledge of the industry, the business, and a quick run through of probably 10 years of data. What I meant by diving in was that he reads the annual reports front to end, 10-Qs, conference calls, and competitors reports as well. I agree that the accumulated knowledge from doing this for his entire life can mean that he can now make many decisions without doing much research AT the time of purchase. Nevertheless, I bet he takes a very close look at SEC filings and conference calls of all his major equity positions, whenever they are released. This is how he discovered that Wells Fargo takes a $1.5 billion GAAP amortization charge that should not be counted as a real expense.

This surprised me: "That follow-up shareholder asked them about metrics and screening for stocks, and Buffett and Munger both said they don’t really look at numbers." I thought Buffett dives into the financial statements like none other.

If you don't mind, can you explain what is the deep moat and barriers to entry in this business? Thank you A combination of these factors which has historically kept new entrants out of getting into this business: > Exotic & somewhat rare tool materials (Tungsten, Cobalt, Tantalum etc.), high temperature processing which has lead to blurred lines between Science and art > Metalworking application specific development of tool materials (commonly called grades); As the world experimentsand develops products with ever newer alloys, the tool grade development has gotten ever so complex. It is a true web, and the way the web is weaved is learned only by those weaving it, and those are the few left in the field. (ISCAR, Sandvik et al) > The sales channels (closely tied to application development) is also a deep web of people to people selling, is part of the web-weaving. The cost of trying/switching out tool materials is not something many users are willing to take on. The combination of these factors and the skills based on experience makes it an "art" type industry where historically few have ventured into. I would like to hear from others who may have direct or indirect experience within this industry for their opinions. Thank you! Very interesting !

lol, asked for money to short with... So the BRK short is asking the CEO of BRK to invest money in his fund which is short BRK? Was he really expecting a yes?

Lol Doug Kass criticizes Buffett for not doing enough due diligence???? And for thinking of the BAC investment in the bathtub?! LOL "He wants to know what Buffett says about his research and process in making investments given there are legendary stories of his past due diligence, including of American Express, where he hired advisers. That contrasts to the $5 billion he put into Bank of America in 2011 which Buffett has admitted he decided in the bathtub would be a good idea and called."

Completely agree! In fact, I was thinking about making a post saying just this, but you beat me to it. Who cares what he thinks about the economy?! Personally, I would love to learn more of Munger's own investing style, or what his typical work day is like. There is so much more to learn from Munger than what he thinks of Ben Bernanke.

If you don't mind, can you explain what is the deep moat and barriers to entry in this business? Thank you

When they say read 500 pages a day of material, that's an exaggeration right? He means skim for the most part right? No way in hell I can ever see myself being able to read that much in a day!

What? +1

But didn't Gates quit his day to day duties in order to focus on the foundation? It's hard to see him being CEO of Berkshire then, which is a full time job. But then again, if he is a great capital allocator now, the job might not require him to do much else than what he already does - tons of reading.

How about asking him the metrics he uses to decide on pay for some of the big executives. I'm interested in knowing what metrics decide Ajit Jain or Matt Rose's pay. He went into detail last year of Ted and Todd's compensation structure.

I remember that Buffett said... if Charlie, Warren and Ajit are ever in a sinking boat – and someone can only save one of them – swim to Ajit (Jain). That's true - his reason was that Ajit has added the most value to Berkshire out of the 3 of them. I would disagree with him there :)

Thanks for posting this, Sanjeev! I'd love to see Ajit as the new CEO, but I'm not sure how plausible that is. I remember from a Buffett interview, I think from when he was in India, someone asked Warren if Ajit would make a good Berkshire CEO. Buffett replied that he would give him the job in a heartbeat but he knows that Ajit would much rather keep his current job.

So are you saying there is a tangible reason why women 35-60 are turned off by amazon? I'm assuming that almost everything that is offered on Ostk can be bought on amazon. Or if not, amazon seems to be willing to sell anything and everything. I get what you're saying about this board and how it thrives even though there are much bigger boards out there. But I'm having trouble seeing how this applies to retail, particularly Internet retail. What attracts the niche customer to Ostk? and if amzn provides the same goods currently or eventually with cheaper or faster service, why would people stick with Ostk?

Glenn, don't you know that this company has no moat and is not a very profitable business! ;D That Patrick Byrne is one crazy mofo...it will never make money. A couple of guys from the Motley Fool OSTK board can kiss my ass, along with Sam Antar, Gary Weiss and Tracey Conen. Five straight quarters of profitability! Cheers! Hi Parsad. I used to own this stock when it was extremely cheap at $5 and sold prematurely between $7-10. Would you be able to expand on what the moat here is? I am having trouble seeing how OSTK will be strong and thriving 10 years from now as Amazon gets larger and larger. Thanks. Their margins and operating costs are lower than Amazon's. Like Costco, they will make money and exist even though Walmart is the dominant player. Cheers! Do you mean to say the margins are higher? I haven't done much research on Amazon, but one concern I have is: what about them willing to expand at all costs; so you said that their operating costs are higher, but it seems as if they don't really care to make much income at all in the short run. And in the long run, if they are large enough, are you afraid of them having the scale advantage over OSTK? Also, AMZN is building distribution centers in major metropolitan areas, so I'm wondering what are your thoughts on them providing quicker shipping than other internet retailers in the future, which may provide a threat for OSTK. Thanks!

Glenn, don't you know that this company has no moat and is not a very profitable business! ;D That Patrick Byrne is one crazy mofo...it will never make money. A couple of guys from the Motley Fool OSTK board can kiss my ass, along with Sam Antar, Gary Weiss and Tracey Conen. Five straight quarters of profitability! Cheers! Hi Parsad. I used to own this stock when it was extremely cheap at $5 and sold prematurely between $7-10. Would you be able to expand on what the moat here is? I am having trouble seeing how OSTK will be strong and thriving 10 years from now as Amazon gets larger and larger. Thanks.

I'm curious, when did Buffett mention vice stocks? Past AGMs? Don't recall this, though have heard him talk about how many letters from gamblers he gets (when talking about state lotteries). I think it's mainly Charlie, who has mentioned in several interviews that Berkshire would never invest in a casino because it's a dirty business. Buffett I think once said that he would never be in the tobacco business, but he doesn't mind owning a retailer (referencing Costco) that sells tobacco. I think they were once offered to buy a tobacco company, and even though they liked the economics, they chose against it for moral reasons. EDIT: As far as when they've said it, I'm not sure, but I'm trying to do a google search. Well Berkshire does own McLane Company which is probably the largest wholesale distribution company in groceries and that includes a massive business in tobacco. See some details: http://www.forbes.com/forbes/2000/0821/6605054a.html. Walmart sold McLane to Berkshire in 2003 for $1.45B. Seems a little counter-intuitive that distributing tobacco would be okay but not manufacturing it? I don't disagree. Maybe it's more of an image/reputation thing more than a ethical decision. Manufacturers, not distributors, are the ones who look evil in the face of the public, and maybe that's why Buffett doesn't want to get involved.

I'm curious, when did Buffett mention vice stocks? Past AGMs? Don't recall this, though have heard him talk about how many letters from gamblers he gets (when talking about state lotteries). I think it's mainly Charlie, who has mentioned in several interviews that Berkshire would never invest in a casino because it's a dirty business. Buffett I think once said that he would never be in the tobacco business, but he doesn't mind owning a retailer (referencing Costco) that sells tobacco. I think they were once offered to buy a tobacco company, and even though they liked the economics, they chose against it for moral reasons. EDIT: As far as when they've said it, I'm not sure, but I'm trying to do a google search.

Yes, for MSFT, neither Todd or Ted are allowed to buy it - Buffett mentioned that in an interview once. Not sure about the vice stocks. And I don't think that alcohol counts as a vice stock, at least for Buffett. They used to own Anheuser Busch several years ago. And they also own a liquor distributor. I think casinos and tobacco are the two that Buffett avoids.

If you weren't good friends with Bill Gates, would you invest in MSFT at these prices?

Ethical indeed. I think Buffett and the board should reduce their salaries/fees to $0. It wouldn't make a difference to them, but it would make for an astonishing story.

I suppose the emphasis is on the bear as opposed to credentialed. The last I remember reading of him was when he accused WEB of "style drift" in late 2008 for having written those index put options. He didn't seem particularly conversant with either WEB/Berkshire at the time, so his impeding presence as an invitee at this year's meeting is odd. Best, Ragu I thought the same thing. Maybe Buffett wants to embarrass him pubicly.

i still think it's brilliant business to own the company that creates diabetes (KO) and the company that treats it (DVA) Sugar isn't a direct cause of diabetes. Binging on cola or other forms of sugar may cause obesity and/or insulin resistance which in turn may result in the development of diabetes, but in general sugar is not a cause.

Whitney Tilson has used the same method in his calculation. However, over the last couple of years Tilson has used a more conservative multiplier of 8 on pre-tax earnings per share. So Tilson's method would be 114k+8x8k=178k I think your method is probably closer to the true intrinsic value, but even with a conservative calculation Berkshire is still selling well below intrinsic value. Although, Tilson does account for underwriting profits whereas Buffett does not. So all in all, if he uses an 8 multiple, the IV calculation is probably very similar to Buffett's.

I'm not convinced that actual value investing is that popular. Sure, a lot of people claim to be "value investors," but very few of them actually go through financial reports or do much in the way of independent thinking and evaluation regarding the underlying businesses. It seems like most of these so-called "value investors" just look at the P/E, follow charts to see if the price is below historical averages, or listen to other people that claim to be "value investors" and then hop on the bandwagon with regard to those ideas. Even worse, many of these so called "value investors" get greedy or fearful along with the crowd at exactly the wrong times. Value investing will never become popular because it defies human emotion. Seth Klarman once said that even if the entire investing community learned everything about Warren Buffett and went to Omaha every year, value investing would still not become popular.