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How much and how fast will it go back up?


Mandeep
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Gals and Guys,

 

I'm setting a goal for myself for the next 8 years. I would like to invest in depressed but great companies right now.

I want to triple the money that I'm putting in. This seems pretty possible if you take a random stock like USB.

If this stock goes back to 9ish it is not unlikely to see it trading at 27 or more in the future (I believe it was a $35 stock before this stuff hit). I'm using this as my average.

I would like my portfolio value to be $400k by 2017, which means I need to put in $133k, or $17k per year (not taking account that the market might go higher before I can put the whole $133k in).

 

These are my picks: AXP, GE, WFC, BAC, SWECY, DIS, COP. Any others you guys recommend?

Do you guys think this is possible? Any other thoughts?

 

 

Thanks,

 

Mandeep

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Me personally I don't think you're gonna see pre-2007 times for a while, maybe 3-5 years out. Which would make that about 2011 or 2012.

 

Right now the banking system needs to be sorted out, housing has to get back on track, and after bubbles like that, it may take a while.

 

When we start getting out of this mess, the next thing might be inflation. So maybe the 70s inflation style markets might come back again.

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Arbitragr's tag line probably covers it: "worry top down - invest bottom up"

 

We have know way of knowing what the stock markets will do going forward. 

 

Add Fairfax Financial (FFH); maybe BRK until 2017.

The financials you have are IMO good long term prospects.  That being said they are essentially not analyzable other than on the basis of their franchise safety right now.  You may want to build those positions very slowly: AXP, WFC, GE, BAC (imo the weakest).  As I said, at the present time, their balance sheets are mostly an unknown so you are buying the franchise and the hope they will not be diluted by the government (that is my concern with BAC). 

 

Dont know SWECY

 

Others ideas: JNJ, KO (relatively cheap); SPY (index ETF) - maybe a good proxy for financials.

 

I hold in various forms, small positions in AXP, WFC, GE, huge position in FFH, and SPYs (2011 calls)

 

From this bottom tripling should not be too difficult in your time frame. 

 

 

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Guest Broxburnboy

I don't think we are at a bottom yet and any buy and hold purchases now would be premature. The inventories of unsold

assets are still huge. JF Tardiff of Sprott says it better than me:

 

http://www.sprott.com/pdf/marketcomment/oppcomment.pdf

 

The current stock price levels in some sectors (mostly commodities) may be sustainable, but the others look shaky.

 

I doubt we will see the S&P indexes at 2007 levels (inflation adjusted) for many years, perhaps a decade or more, it's

becoming more clear that the problems are deep and systemic. Over the past 18 months, value portfolios (including

my own) have taken a beating and most have reverted to the mean of popular indexes. Most of the vaunted value funds are down

over 50% or more over this period. There remains an unrealistic expectation that these portfolios (and the value investment buy and hold paradigm)

will rebound to previous record highs. Its becoming more clear that to prosper in the new bear scenario, an investor needs to hedge and trade rallies and

sectors.

There is no guarantee that passive investments such as high yielding corporate debt will survive inflation and further delevering.

 

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Thanks to all,

 

It makes sense and I will make these changes...

 

Broxburnboy, how much further do you expect it to go down? I will not purchase at 1 time, but I didn't think you could get any lower of some of these financials. GE went 6 bucks, AXP went to 9, and I believe wells was at 7.50. If this is not the bottom, the next stop may be zero for these select financials. 

Don't you think?

 

I agree that some may be more expensive, but one can always purchase at different times, averaging their position down.

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Guest ericopoly

I've said this before, but as long as you are happy making 40% this year you can write puts on most of those names and be hedged against the first few dollars of slide in their prices.

 

44% gain for the $14 strike WFC put that expires in October.  It hedges you against the first 31% drop in the stock (hedged down to $9.70), and you only need the stock to go up by a single penny in order to get your full gain (so you are not speculating in order to get your gain).

 

That expiry date is only 7 months away.  If you instead buy the stock you need a share price of $20 to match this.  Of course, the shares were $30 at the end of 2008 and could be back at that number by October.  Can you be perfectly happy if you make 44% while some other person makes 114%?

 

You don't seem like you are trying to double your money this year though if you say you are perfectly fine with tripling over 8 years.  I mean, 44% gets you on pace for that, no doubt.   After all, you would only need to earn roughly 10% per annum if you can pick up a quick 44% in the next 7 months.

 

 

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Guest Broxburnboy

I have no idea how much further an individual financial stock will go down, but the point is that they are still delevering

as are just about every global institution and central bank. The end of the asset write downs is not in sight, they may be in

fact picking up steam. It looks like further government intervention is needed and will be given. Buffett himself recognizes that

some of his recent purchases have been premature. He however, unlike the small investor, can protect his original investment by

averaging down in a big way. Other large buyers who have bought  swacks of common equity in financials recently are protected in some

cases by ratcheting provisions which shields them from further equity dilution.

 

If a person must bet on a quick financial recovery, it would seem prudent to hedge the purchase for the worst case scenario.

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Guest ericopoly

but the point is that they are still delevering

 

Is it necessary to stay away from the financials that are not delevering?

 

 

Wells Fargo & Co., which recently acquired Wachovia Corp. of Charlotte, says it extended $51 billion in loans and loan commitments to customers in January.

 

That brings Wells’ total credit extended to customers to $144 billion in the last four months.

 

http://dayton.bizjournals.com/dayton/stories/2009/03/16/daily71.html?ana=yfcpc

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Ya...

 

Remember how templeton got started:

 

he bought $100 worth of every stock trading under 1 buck including the bankrupt ones and made 10 times his investment in 5-6 years.

That's damn good!

 

Anyone buying GM, F, AIG, ETFC, C?

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Preferreds! I'm flogging a dead horse here but if your goal is to do 3x in 8 years, I can think of no easier "couch potato" strategy.

 

E.g. if you are happy buying common stock of financials (e.g. USB or WFC) with the attendant dilution risks, why not buy the preferreds which are trading at about 50% discount to par and yielding approx 10% (USB) and 15% (WFC)? Assuming things go back to normal in 8 years, the preferreds should have doubled back to par value; add your 8 years of dividends with some compounding and you have 3x your money.

 

If another opportunity arises like the last couple of weeks when preferreds were trading at 20-30% of par, you can achieve 3x money without raising a sweat.  :)

 

To be fair, I have not addressed the issue of how you get the full $133K to be fully invested to day! To the extent that you have to build up your capital over the 8 years, tripling will obviously be a tougher hurdle in the out years.

 

So, you may need to achieve 5-6x return on your earlier investments to come up with an average of 3x over the 8 years - in which case, you may have to look into FFH LEAPs (but understand these are options and you may end up with negative 100% returns!).

 

 

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You know what Mandeep,  It is probably not a good idea to ask explicit advice on a message board, even one as good as this one.  Each individual has their own style and abilities and thier own way of applying them.

 

It is better to spend the next ten years investing in the companies you think are the best in terms of value, reading, and learning everywhere (including here) to enhance your future performance.  In 13 or so years of doing this I have probably spent at least 10000 hours reading and observing stock and business related stuff. 

 

You have got several answers from very skilled value oriented investors and they are all different.   

 

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Arbitragr's tag line probably covers it: "worry top down - invest bottom up"

 

 

 

By the way, that tag line is from Seth Klarman ... not me personally. I got it from reading/listening to one of his recent presentations/letters ... I can't remember which one exactly. Seth is hedging for inflation right now and has some gold holdings.

 

Buffett and our heroes preach bottom up, but you'd be suprised how many market calls they make - WEB in particular. The recent "the time to buy US stocks is now" in the NY Times being one of the most obvious. I sometimes wonder what he's getting at. He's been making top down calls nearly his whole career, from the time he got out of the market in '69, to the calls he made to tell readers in the Omaha World Herald to "buy now" in '74, all the way to today. Read Altucher's "Trade Like Warren Buffett" in that chapter where he talks about Buffett making market calls too.

 

Sometimes I wonder whether Buffett's using his God-like platform to exercise a "do as I say, not as I do" philosophy of investing, just so the mom-and-pop investors who know little about the markets don't follow his high risk investments and hurt themselves ... to protect them from destroying themselves b/c they think they can emulate his returns - hence his advocacy for index funds.

 

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The financials you have are IMO good long term prospects.  That being said they are essentially not analyzable other than on the basis of their franchise safety right now. 

 

I know many here are probably holding financials like WFC.

Last year towards the end of 2008, we invested in JPM, WFC, some UK/Euro banks and some commercial property REITS. However a small position only.

 

The investment philosophy was pretty much in similar vein; good franchise value, good management, strong balance sheet and tier 1 ratios, should be able to ride out the crisis and perhaps take market share on the way out.

 

You wouldn't believe how much BS that came out of investor relations and management. When we rang them up, they would always talk up their book value and how much their assets were worth, and how they didn't expect loan-loss ratios to exceed say 6-7%.

Low and behold Lehman happens, Bear happens, and a severe recession happens then they suddenly disclose 10-12% loan loss ratios in one day!

We ask them for more disclosure in terms of their assets, and they would only say "we're not ready to provide that information" ...

Then we ask; "do you think you'll need more capital" ... and they say; "currently our tier 1 ratios are X, and it's double the FDIC required ratio, we're very certain that we won't need any capital".

A few months on, the stock price goes down more and more ... housing numbers come out worse than expected, stock price drops more ... in the mean time, executive bonuses are paid out as if we're in a full blown bull market, Citigroup plans to buy a corporate jet! ... and then the next day whaddya know? You wake up the next morning and you hit the email and  you see "X Financial company will be proceeding with a capital raising of X Billion dollars" ... out of nowhere!!

 

Remember when BAC acquired Countrywide? They said ... "this is the deal of the century for us" Lewis said ... coming on national TV and all ... and when Bear Stearns was on the brink of collapse? What did Alan Schwartz come out and say? "We're perfectly fine" he said on CNBC ... and over in the UK --> RBS acquiring ABN-Amro ... "this is the deal of the century, we are NOT empire building" ... eventually RBS almost went bust, mainly because of that deal ...

 

WFC is a culprit just as much as anyone ... back in late 2008, they released their Q3 08 earnings results, which were better than expected ... which is fair enough ... and it was mostly b/c of all the depositors from IndyMac and other regional thrifts that were going bust, that got scared and increased their deposits with WFC that was mainly the reason why their results were quite rosy.

 

Then they go out and say "we think the housing market is starting to recover" and the market goes crazy (and I can give you the exact reports and transcript that state that, b/c I have it in my database) ... so the market pops up, like 24% increase in one day ... then what happens? Lehman happens, recession happens and all the carnage that happened on the back end of 2008 ... and WFC stock drops from $30 to like $11 ...

 

What utter BS ...

 

To be honest with you, management are just as clueless as anyone when it comes to the macro ... I mean ... some of these financials ... man ... they were lending out a large portion of their capital in 2007 at like ... 80-100% loan-to-value ratios!!! ... in a full blown bull market ... when interest rates were extremely low, liquidity is extremely high ... and yields are so skinny that you have reach to the fricking moon just to cover your cost of capital. Anyone who's been in the markets long enough knows that in a full blown bull market, with unemployment low, and liquidity high ... knows that you're probably going to get a bust sometime soon, and that you're probably in a bubble ... and here you have managers who have been in the game for 40 years or so lending and making acquisitions with zero-margin of safety with 80%+ LTV ratios and piling on wholesale debt like there's no tomorrow ... silly if you ask me.

 

Since then we've sold out all our positions in financials b/c it's so hard to trust management. B/c it's so hard to analyze the balance sheets.

I understand that WFC has a strong position with a great branch network and deposit base, but I wouldn't trust the managements of financial companies after that experience. Over in the UK, RBS was just like WFC ... one of the strongest banks not only in the UK, but in the world with one of the best franchises you could get, even better than WFC I would argue ... it's sad to see the sorry state of RBS now, being 70% government owned ...

When we called them, you wouldn't believe how much they would try and prop up their stock price ... the BS they would preach. Half of the financials we called have since gone bust.

 

 

I would only dip back in again if they would disclose more data, and keep their bloody word.

 

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Guest JackRiver

arbitragr

 

Two years ago I purchased a 1 year subscription of Value Line's small and mid cap publication.  As I flipped through the pages it became clear to me that the market valuations placed on the vast majority of these companies where out of whack with their balance sheets, income statements, and free cash flow generating abilities.  Now this isn't true bottoms up analysis and clearly superficial, but the disconnect between price and the financial statements where so large for so many of the 1700 or so companies listed that I was convinced that indexes made up of small and mid cap companies where due for a major correction (I actually started making crazy faces and doing crazy laughs as I went through the value line).  After this process I bought up to 20% of my portfolio in the Ultrashort Russell 2000 pro shares (TWM).  For a few months it waffled back and forth and at times I questioned my position because inflation seemed the order of the day and I had no idea what I would do if people bid up prices further because of inflation expectations etc...  Also, I don't believe in shorting individual stocks because I believe it to be a stupid thing to do, but paired against long positions, I was more forgiving in shorting an index.

 

Anyway, long story short, this was a macro type of investment decision (shorting an index I feel implies macro type thinking), but I wasn't really having macro thoughts.  It was really based on bottoms up analysis, albeit superficial analysis.  I have never been one to flip through manuals previously, and I too had always felt that Buffett was making macro calls even though he has said repeatedly he doesn't give it much thought.  I'm not even sure what the point of this post is other than to say that if you look at enough companies from the bottom up that strange enough it will give you insight into the macro picture.  Or maybe that's just obvious.  Or maybe that just happens at extremes. 

 

Yours

 

Jack River

 

 

 

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Guest JackRiver

I actually believe Buffett when he says he doesn't think about the macro when he buys into a business.  If you think about it it makes perfect sense, as most of you are already fully aware.

 

If you find a business that you understand well, that has economic characteristics that give it durability, run by honest and capable people, and selling at a fair price, then it would be pure folly to pass on the business because you felt that the economy was topping out.  The key is the price you pay and the businesses you choose because an excellent business purchased at a fair price will in the long run average out to the same good result whether or not you purchased it during an economic boom or economic bust or somewhere in between.  And I guess at the extremes you would have to have some understanding of the normalized earnings power of the business, or you'll end up like the masses extrapolating peek or trough earnings. 

 

The point of my post above was that what may appear as a macro decision is in reality a micro decision.  That is to say, Buffetts past decision may look so timely in relation to the macro environment mainly because booming macro environments produce premium stock prices and bust macro environments produce discounted stock prices (this obviously applies to asset prices in general).  And if you are set up to buy at fair or cheap prices and you know the value of the businesses you are interested in then those fair or cheap prices will be more numerous at the bottom and less numerous at the tops, but to an outsider it will look like you are making macro calls.  BTW there was an interview Buffett gave about a year and a half ago on Fox business where he suggested the economy/markets where in a middle ground somewhere and that it's tough to tell what will happen from that position.  Sort of a no man's land, and I think you can see this in his investments during that period.

 

Sorry to drag this out, but there is an additional add on to this.  That is, you don't sell during economic and price booms. Why?  Because your cost basis (price) was right to begin with, you understood ahead of time that there will be boom and bust periods (for the economy and the company), and you don't find excellent businesses often enough to let one go that you were fortunate enough to purchase at a good price.  Okay enough of my drivel.  Does the board have an ignore button?

 

Yours

 

Jack River

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Yep, Another Buffett myth blown completely apart.  He has always used economic analysis particularly at times of great flux in the economy.

 

No, not really a myth.  What Buffett does with Berkshire is very different than what he may have done in his partnership days, early stages of Berkshire, or currently in his own personal account.  Berkshire for some time now, has to operate under the assumption that Buffett won't be here in a decade.  Thus "buy & hold" is what has to be reinforced in shareholder's minds, because that is what the vehicle is now.  It has to run autonomously because that is pretty much what will be happening when he's gone. 

 

It also happens to be a public trust in many ways, since virtually all of his stake will go to charity.  It can't operate based on exploiting macroeconomic factors because that means someone has to actually make active decisions.

 

Finally, the "buy & hold" philsophy is espoused for very obvious reasons in economic terms, because Berkshire is trying to acquire private businesses where the owners probably don't want to depart with their stake.  The fact that Berkshire promises to never sell those businesses, is what gives these owners the comfort of selling to Buffett.  Otherwise they would probably tell him to take a hike! 

 

So "buy & hold" has a very specific mandate, that probably doesn't apply to the investor with some ability.  It really became the twisted mantra with which mutual fund and investment companies sold their wares.  Buffett tried to turn that around by encouraging those without much aptitude for investing to buy and hold index funds instead.  Cheers! 

 

 

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Guest longinvestor

The fact that Berkshire promises to never sell those businesses, is what gives these owners the comfort of selling to Buffett.  Otherwise they would probably tell him to take a hike!

 

This is why Buffett is actively pursuing German Mittelstand companies. ISCAR fits this mold as well. Nothing scares the Mittelstand more than the alternative, which is corporate takeovers ala private equity/ large multinational/Bank takeovers. Like Oil & water.

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Guest JackRiver

Parsad

 

I don't agree with your post.  Specifically, I don't agree with your statement, "So "buy & hold" has a very specific mandate, that probably doesn't apply to the investor with some ability."

 

Stay with me here.  If an investor is able to identify 2 or 3 businesses that carry with them economic durability/longevity, sound management and corporate culture, and trading at such a discounted price that it is reasonable to assume 10% to 12% average annual returns for 30 years, then why would you ever entertain selling before its runs that course.  (this of course assumes you are right in your initial appraisal of the business)

 

It's really just a numbers thing and a lot of folly.  If you believe the above is possible, that is, to identify 2 or 3 companies that meets the criteria, and that you can do so with foresight and not just dumb luck, then you are already rich.  Taking this as a given, any attempt to alter this course will leave you much less certain of your end result and quite possibly much the poorer and none the wiser.

 

I'll follow up with some examples (numbers) in another post, unless someone else beats me to it.

 

Yours

 

Jack River

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The statement that Buffet doesn't sweat the macro stuff is equivalent to the statement that he doesn't engage in market timing. It's as simple as that. If you think about it, market timers have only two tools: technical analysis of prices AND macro speculation. Anybody who looks at a company based on its fundamentals and has some understanding of business cycles is not engaging in those 2 activities. But I'm sure Buffet does consider business cycles, that is clear in every industry, you have up years and down years. But buying despite this is what he does as long as it meets a hurdle rate.

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You know what Mandeep,  It is probably not a good idea to ask explicit advice on a message board, even one as good as this one.  Each individual has their own style and abilities and thier own way of applying them.

 

I have to disagree with you on this, Al.

 

There can be no harm to an intelligent and open-minded investor of exposing himself to various ideas/concepts/styles of investing as long as he does not follow anyone blindly. The more he is aware of, the more likely he will find something that suits his temperament/inclinations.

 

That's what most of us have done - your 10,000 hours of reading being a case in point. Like you, I've spent countless hours reading about investing - some useful, lots useless, others downright dangerous - and I find that I'm still learning.

 

I have learnt lots from this board and I think it is it a great resource for anyone - beginner or experienced - who is interested in becoming a better investor.

 

Thanks again to Sanjeev for making this possible.

 

 

 

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Parsad

 

I don't agree with your post.  Specifically, I don't agree with your statement, "So "buy & hold" has a very specific mandate, that probably doesn't apply to the investor with some ability."

 

Stay with me here.  If an investor is able to identify 2 or 3 businesses that carry with them economic durability/longevity, sound management and corporate culture, and trading at such a discounted price that it is reasonable to assume 10% to 12% average annual returns for 30 years, then why would you ever entertain selling before its runs that course.  (this of course assumes you are right in your initial appraisal of the business)

 

It's really just a numbers thing and a lot of folly.  If you believe the above is possible, that is, to identify 2 or 3 companies that meets the criteria, and that you can do so with foresight and not just dumb luck, then you are already rich.  Taking this as a given, any attempt to alter this course will leave you much less certain of your end result and quite possibly much the poorer and none the wiser.

 

I'll follow up with some examples (numbers) in another post, unless someone else beats me to it.

 

Yours

 

Jack River

 

Hi Jack,

 

No there is nothing wrong with what you are proposing.  What it does leave you open to though is market volatility such as what we are currently experiencing.  Look at Wesco for example...COST, KO, AXP & WFC.  That's pretty much it for the last ten years, and Wesco has done perfectly fine.  But the portfolio naturally experiences tremendous volatility during that ten years. 

 

Buying well below intrinsic value and then selling when the investment is at or above mitigates that market risk.  Yes, you may pay slightly more in taxes, but generally returns will be slightly better while volatility will be less.  Even Buffett suggested that he should have sold Coca-cola when it was over $80/share back in 1998.  If someone offered me two times book or better for Fairfax, I would be a seller, not a buyer.  This is not present day Buffett, but old school Ben Graham.  Cheers!   

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Even Buffett suggested that he should have sold Coca-cola when it was over $80/share back in 1998.

 

Buying KO back in 1982 and selling in 1998 (16 years later) would have been more 'buy and hold' than it would have been a 'trading' strategy. This is quite unlike 'flipping' it quickly for something else.  We have entered a point in the market where 'buy and hold' starts to make more sense.  Yes, if one can buy KO at 12x PE and sell it next year for 24x PE then one might want to go for it.  My guess though is that it might take 20 years for KO to again attain a 24x PE status (it may never in our life time attain the kind of PE it had in 1998).  But I think it is reasonable to think the PE can double in 20 or so years -- in which case in itself represents a 4% return.  On top of it you get a 4% yield with earnings + dividends growing at perhaps 4-5% more than inflation.  Personally, I don't own any KO -- but for many investors they would do well today by taking this 12-13% (+inflation) return and just owning it rather than hoping to trade it for something better.       

 

The reason Buffett says he should have sold in 1998 was because it was trading at a very generous price.  Correct me here if I am wrong but I think in 1998 the PE for KO was around 40x?  If in 1998 KO had only been trading at 24x PE, I don't think you would hear Buffett say (in as strong of terms) that he should have sold it.  KO at 40x was quite opportune.

 

 

This is not present day Buffett, but old school Ben Graham.

 

Old School Graham taught to think like an intelligent private business person in buying and selling publicly traded equities.  The only downfall to the theory was that private business people put their businesses up for sale much less seldom than does a common stock operator.  Buffett obviously converted himself to the business ownership aspect -- but with a major cavaet: that he would only buy outstanding franchises.  Don't get me wrong, I have the utmost respect for Graham -- however, if people are buying sub-par businesses do so with eyes open (and perhaps 'trade often' would be good advice).  Time is not necessarily a friend of the sub-par business as it is with the outstanding one -- tremendous margins of safety are of the essense. 

 

UCP/DD

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Old School Graham taught to think like an intelligent private business person in buying and selling publicly traded equities.  The only downfall to the theory was that private business people put their businesses up for sale much less seldom than does a common stock operator.  Buffett obviously converted himself to the business ownership aspect -- but with a major cavaet: that he would only buy outstanding franchises.  Don't get me wrong, I have the utmost respect for Graham -- however, if people are buying sub-par businesses do so with eyes open (and perhaps 'trade often' would be good advice).  Time is not necessarily a friend of the sub-par business as it is with the outstanding one -- tremendous margins of safety are of the essense. 

 

I don't disagree with you at all Uncommon.  Though the operative word is "private" business when it comes to Berkshire.  Public equities have a bid/ask on them every second, of every hour, on every day.  Public businesses don't go on sale that often.  Cheers!

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Guest JackRiver

Parsad

 

I know that Munger has suggested that if he were a younger man with much less money that he would buy things that were undervalued and sell when they reached full value and rinse, wash, repeat.  But Munger's not necessarily being forthright and I can prove it.  But first, the value for an excellent business in the eyes of an excellent analyst will always be range bound, and that range is counterintuitively rather wide.  I mean, if you bring together excellent and honest people you know that the probability is high that they will produce an excellent result, but problem is is that you don't know exactly how excellent.  So it's always going to be difficult to say when an excellent business run by excellent people will be over valued or fully valued.

 

Second (the proof), Munger has held on to Berkshire for over 4 decades (I presume he was a younger man with less money at the beginning of this time period).  Same goes for Buffett.  So Berkshire itself is a real powerful example of their actions over their words.  They had an excellent business purchased at a fair price run by capable people.  Numerous times over this 4 decade long period the case could be made that Berkshire was over valued or fully valued, and if you sold the first time that inclination hit you, you would have found yourself in quite the pickle.  Because not only would Berkshire have gotten away from you (given how difficult it is to figure out what price to buy, back in, once you've sold, that is, if you are even given a lower price opportunity), but you'd equally be tasked with finding another excellent business, and finding an excellent business at a fair or cheap price is not that easy.  

 

Assuming that your excellent business stays excellent then you should never sell.  Clearly I'm assuming that the analyst will be able to monitor the business and make the correct assessment over the years that it remains excellent.  This assumption may seem problematic for you, but it should not be problematic because successfully flipping an over priced business to purchase an underpriced business presupposes an analyst that is making continued correct assessments.  So in both cases we assume the analyst is making correct assessments.  

 

Lastly, Buffett writes a letter to the owners of the businesses he buys.  What he says to them in that letter proves out my point.  You never sell an excellent business (unless you have to for outside reasons).  You are already rich.  Selling it, even for a rich price, just changes the form and leaves you with a wider unknown.

 

I could write more, but hopefully others will comment and besides I'm kind of clogging the board.  Maybe somebody could even demonstrate the mathematical alternatives.

 

Yours

 

Jack River

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