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Another Buying Opportunity In Berkshire?


Parsad
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I love it when one numbnuts after another comes out to criticize Buffett.  Now its Dennis Gartman.  What intrigues me is how he talks about net asset value, yet criticizes Buffett for a 45% loss in share price.  Shareholder equity was down only 9.6% last year, which was nearly 28% better than the S&P500.  And that's even after Buffett admits he made a couple of errors.  Cheers!

 

http://www.cnbc.com/id/31494704

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Shareholder equity was down only 9.6% last year, which was nearly 28% better than the S&P500.  And that's even after Buffett admits he made a couple of errors. 

 

 

While that is true, a gain of 50% in the S&P500 (merely recovering the ground lost last year) would leave Berkshire's shareholder equity behind.  Too much of Berkshire is privately held and not marked to a bid for these kinds of 12 month comparisons to be terribly meaningful.

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Gartman who?:  here we go again; it never ceases to amaze me how shameless and blasphemic those greedy fellows are to make a buck.

they are obviously riding the volatility of the times and after locking their minute glory on tv, thet make a quick buck on their negative advertising. The theory of valuation is dead, it is all about predicting the swings they say. I feel bad for the victims of their scams.

Well I guess I have to scrape up some cash to buy some more brk and ffh now.

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I have bought and sold Berkshire 3x over the past decade.  First buy was in early 2000, second buy was around the time all the other Euro reinsurers had no capital left from the Nasdaq crash and I expected BRK to gain share, also price was decent - that must have been around 2002/3 or so; and then again in 2005ish.  Anyway, I probably made around 25% compounded annually on average for the three purchases and sales (average hold about 1 to 1.5 years roughly) with the last one being the worst performer and the first two probably doing better than 25%.

 

I haven't looked under the hood in detail lately but my sense is to wait for something around $2300 for the Bs or around $70000 for the As.  That's my sense, but even at that price, I think ORH is likely a better deal right now and that is why I haven't really bothered to analyse BRK in detail at this point.

 

My investment partner wanted some BRK and I was telling him to buy ORH instead.  Anyway, he gave me some cash to invest and wanted it in BRK.  I wanted to wait for a lower price, but he wanted it in there at current prices, so I put it in at 2900 on the Bs which price I did not like.  His call though.  We agreed I could put the rest in ORH.  So far ORH is up and BRK is down and I am pretty sure that outperformance will continue.

 

 

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I also have started watching BRK again. Back when the b's were trading at US$2,300 the CAN$ was about $0.80 so the cost in Can$ = $2,875. Today with BRK trading arounf US$2,750 and the CAN$ at $0.87 the cost in Can$=$3,161. In Can$ terms, BRK is only 10% off its bear market low (20% off in US$ terms).

 

Currency moves affect the Can$  traded shares of FFH is a big way. It is a US stock. Yes, it is traded on the TSE, but its moves are driven by NYSE thinking. With FFH going to CAN $400 last year, we can attribute 15% or $60 of this move to currency. More recently, FFH falling from CAN $320 to CAN $280, I estimate that about $30 of the move was currency driven.

 

I am still trying to decide how to overlay currency into my investment decisions. Up until now it has not played a large roll.

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Hi Viking,

 

I tend to use Purchasing Power Parity (PPP) as an overlay to my US stock purchases.  Our currency here in Australia has certainly been manic over the last few years.  In order to keep this in perpsective I divide my fair value of  BRK, FFH and ORH currently by 0.80/0.69 (PPP) to get a currency adjusted valuation.  On this basis I figure that I have approximately 16% more purchasing power so my maths work something like this based on what I figure is IV

 

BRK IV = US120000  est from JKish's intrinsivalutor, BRK Price = US82500 (based on 30 b's)   -> 82500/(120000*1.16) So my currency adjusted IV is 59%

FFH IV =1.4 x 255 = US357  FFH price = US242    ->242/(357*1.16) = 58%

ORH IV = 1.4 x 43.8 = US61.32 ORH price = 42.3  -> 42.3/(61.32 * 1.16) = 59.5%

 

PPP is a very course metric but ultimately seems to at least be a long run anchor point on currency movements.

 

The usual caveats apply in that you need to be mindful of "printing presses"  and the shortcomings of using basic IV measures such as multliples of book value and the intrinsivaluator.

 

Cheers

nwoodman

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Dennis Gartman is basicaly a commodity advisor who sells a newletter which is widely read and manages a little dough on the side. His BRK call is a pair trade he is long GS and short BRK his thesis is Warren is over the hill and better to invest with a bunch of short term really bright traders. I think dissing Warren is a favorite pastime of those with a traders mentality. The stock charts for BRK and FFH appear to have an extremely close relationship for the last 3 months. The most interesting observation I can make is given BRK's position in GS the more profitable his call the less sense it makes.

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