ERICOPOLY Posted November 15, 2013 Share Posted November 15, 2013 When bac hits 20 a share his massive 9 billion profit is a measly 3 percent of the current market cap. He could have bought a lot more, and he still can. Can't he buy until he gets up to a 10% total ownership stake? Link to comment Share on other sites More sharing options...
Guest wellmont Posted November 15, 2013 Share Posted November 15, 2013 I don't think you get a bonus point for oil as an inflation hedge because you need to continually reinvest to maintain production and inflation hits capex hard. Inflation hedges work when your revenues rise over an existing asset base, not one that needs replenishing. Other than that, A1 company in a C3 industry. as a generalization of a theory, the point may have some merit. but when you look at real data, xom was $1.50 in 1978 and it's over $95 today. plus all the dividends. Demolished the s & p and of course the inflation rate. in an inflationary world xom "rules". Link to comment Share on other sites More sharing options...
Guest wellmont Posted November 15, 2013 Share Posted November 15, 2013 In the partnership days and even into the 80's he bought everything half off or more, now it seems the best he can do is buy dollar bills for 90 cents. It's been pointed out his universe is so small now with a near 300 billion market cap. A nice problem to have but obviously returns will be pretty pedestrian in the future (as he has warned) especially since he thinks its reasonable float has probably peaked and may start to decline slightly. true it won't grow as fast. but it will continue to be an excellent store of value and great inflation hedge. if there is nothing to buy he will not buy. he will shift focus to buying 100% of large businesses, he will look at where his own stock is trading, and or consider dividends. Link to comment Share on other sites More sharing options...
Guest wellmont Posted November 15, 2013 Share Posted November 15, 2013 When bac hits 20 a share his massive 9 billion profit is a measly 3 percent of the current market cap. I don't think he likes bac nearly as much as wfc. he took advantage of a special situation. notice he never bought any common. Link to comment Share on other sites More sharing options...
wescobrk Posted November 15, 2013 Share Posted November 15, 2013 "He could have bought a lot more, and he still can. Can't he buy until he gets up to a 10% total ownership stake?" I believe he can but I think it's virtually zero probability he will. The only financial he adds to is wells. I guess anything is possible if it drops below tbv but my guess he won't ever buy common and he will defer the exercise to 2021 unless there is a large dividend as he said recently in an interview. If he is still alive he might exercise just the amount that he doesn't have to put any up front cash if he follows his GE and Goldman plays. That will probably go to his successor unless he can live past his early 90's. On a selfish note, I hope bac drops back to tbv before ccar so I can load up again for the annual pop. I realize it seems unlikely as the market should discount that in and not drop but mr market tends to do things like that. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted November 15, 2013 Share Posted November 15, 2013 On a selfish note, I hope bac drops back to tbv before ccar so I can load up again for the annual pop. I realize it seems unlikely as the market should discount that in and not drop but mr market tends to do things like that. We already did that. Last week it traded down to 3 cents above tangible book value. Look at a 1 yr chart -- it was right about now a year ago that it took off. http://finance.yahoo.com/q/bc?s=BAC+Basic+Chart So, been there and done/doing that. Link to comment Share on other sites More sharing options...
wescobrk Posted November 15, 2013 Share Posted November 15, 2013 "Look at a 1 yr chart -- it was right about now a year ago that it took off. http://finance.yahoo.com/q/bc?s=BAC+Basic+Chart So, been there and done/doing that." I know! I posted that I would buy more and you responded it was at tbv. That was a few days ago. My point is I'm ready to do it again! As mike said in rounders, "I can bust you up all day long" (to KGB at the end of the movie) I can bust up the S&P all day if it keeps doing that with bac:) Link to comment Share on other sites More sharing options...
Uccmal Posted November 15, 2013 Share Posted November 15, 2013 "Look at a 1 yr chart -- it was right about now a year ago that it took off. http://finance.yahoo.com/q/bc?s=BAC+Basic+Chart So, been there and done/doing that." I know! I posted that I would buy more and you responded it was at tbv. That was a few days ago. My point is I'm ready to do it again! As mike said in rounders, "I can bust you up all day long" (to KGB at the end of the movie) I can bust up the S&P all day if it keeps doing that with bac:) It has been a great trading stock. I bought last week, and sold at least the same amount the last three days. Tax time is going to be hell, but there are worse problems. Now for the bad news....pleeeze! Link to comment Share on other sites More sharing options...
Mephistopheles Posted November 15, 2013 Share Posted November 15, 2013 I wonder why he disclosed the position at $3.7 billion instead of keeping it a secret. Given all the talk about size, and since he doesn't believe in making small investments, why not build it up secretly to $10-20 billion? Link to comment Share on other sites More sharing options...
nodnub Posted November 16, 2013 Share Posted November 16, 2013 I wonder why he disclosed the position at $3.7 billion instead of keeping it a secret. Given all the talk about size, and since he doesn't believe in making small investments, why not build it up secretly to $10-20 billion? WEB is going for the classic pump and dump scheme. Watch out for him pumping XOM on CNBC next week. ;D Link to comment Share on other sites More sharing options...
vinod1 Posted November 16, 2013 Share Posted November 16, 2013 I wonder why he disclosed the position at $3.7 billion instead of keeping it a secret. Given all the talk about size, and since he doesn't believe in making small investments, why not build it up secretly to $10-20 billion? I guess that is pretty much close to the position size he wanted. He also said he wanted to invest about $10 billion in IBM and I think he disclosed the position once he got close to that limit. Vinod Link to comment Share on other sites More sharing options...
Mephistopheles Posted November 16, 2013 Share Posted November 16, 2013 I wonder why he disclosed the position at $3.7 billion instead of keeping it a secret. Given all the talk about size, and since he doesn't believe in making small investments, why not build it up secretly to $10-20 billion? I guess that is pretty much close to the position size he wanted. He also said he wanted to invest about $10 billion in IBM and I think he disclosed the position once he got close to that limit. Vinod Yea I guess so, but I'm wondering why that would be the case given the very limited universe of ideas there is, and less than a handful of those that Warren "understands, with a good management, and good price". Also he doesn't like to diversify; and this is less than 1% of Berkshire's assets. Just curious of course; I'm sure he has a good reason. Link to comment Share on other sites More sharing options...
twacowfca Posted November 17, 2013 Share Posted November 17, 2013 I cover the stock for my firm - Buffett must've seen my recent report rating it a buy with a 16% projected 5y IRR :) XOM is the Berkshire of big oil - not a care in the world for quarterly results, focus on the extreme long term and high roc, minimal debt and laser-like capital allocation. I've long wondered why BRK hasn't owned this. Not sure why WEB wasn't buying in 2010 when it was below $60....not much has changed since then save the share count. Also have wondered why BRK doesn't have MCD has a top holding. Perhaps just a matter of time. He has owned it for a few years. He bought some after he became disenchanted with Conoco Phillips. Link to comment Share on other sites More sharing options...
Charlie Posted November 17, 2013 Share Posted November 17, 2013 "Also have wondered why BRK doesn't have MCD has a top holding. Perhaps just a matter of time." I think MCD is not a top holding, because eating habits change more than drinking habits and MCD owns a lot of real estate. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted November 17, 2013 Share Posted November 17, 2013 Buffett owned McDonald's in the past and sold out when blue chips were fetching really high valuations a little over a decade ago. Link to comment Share on other sites More sharing options...
bmichaud Posted November 17, 2013 Share Posted November 17, 2013 I think MCD is not a top holding, because eating habits change more than drinking habits and MCD owns a lot of real estate. That's probably right regarding habits, but to the degree that would imply that is why WEB avoids it, I'm not so sure about. MCD has grown 6% a year for a very long time while returning over 80% of earnings to shareholders, thus implying extremely durable moat. Perhaps KO is at 7% and 90%?? Not sure. But the difference is negligible, especially from a valuation perspective when MCD was under operational pressure in the early 2000s. Are you saying the RE is a negative for MCD from WEB's perspective? Link to comment Share on other sites More sharing options...
racemize Posted November 17, 2013 Share Posted November 17, 2013 I have heard him say that there's no taste memory for soda (applied to KO) whereas there is taste memory for burgers (applied to MCD). Not sure how much that is really influencing the decision though. Link to comment Share on other sites More sharing options...
Guest wellmont Posted November 17, 2013 Share Posted November 17, 2013 I don't think it's about burgers. I think it's about the company. He owns dairy queen. doesn't own mickeyDs. He's very choosy about where he puts his money. For example, he owns tons of WFC in brk. But only owns some JPM in his PA. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted November 17, 2013 Share Posted November 17, 2013 If you look at the history of the restaurant industry, the top #10 list changes rapidly over the decades. The wonderful business don't always stay wonderful. I think that the restaurant business is highly management-driven. With consumer foods, the top #10 list doesn't change nearly as much. Link to comment Share on other sites More sharing options...
Mephistopheles Posted November 17, 2013 Share Posted November 17, 2013 In a speech once (I think at University of Florida - it's on YouTube), someone asked him this and he compared KO and MCD. He said he likes KO better because it has better pricing power. He said MCD has to give out prize goodies (such as happy meals) in order to drive customers in, and to that degree Burger King has to do the same, and in that way they are very competitive with each other. In that same speech he mentioned how Cola has no taste memory. EDIT: Here's the speech. Link to comment Share on other sites More sharing options...
WhoIsWarren Posted November 17, 2013 Share Posted November 17, 2013 If you look at the history of the restaurant industry, the top #10 list changes rapidly over the decades. The wonderful business don't always stay wonderful. That's an interesting observation.....one that I wouldn't have guessed if you'd asked me. Can you point me to where I might read some more about this? Link to comment Share on other sites More sharing options...
Charlie Posted November 18, 2013 Share Posted November 18, 2013 "Are you saying the RE is a negative for MCD from WEB's perspective?" yes, ROE of real estate is not good. Buffett owned McDonald´s probably when there was a lot of growth ahead. Link to comment Share on other sites More sharing options...
fareastwarriors Posted November 19, 2013 Share Posted November 19, 2013 http://blogs.barrons.com/focusonfunds/2013/11/19/buffett-likes-exxon-chanos-sees-value-trap/?mod=BOLBlog?mod=BOL_article_full_blog_etf Buffett Likes Exxon? Chanos Sees ‘Value Trap’ Link to comment Share on other sites More sharing options...
fareastwarriors Posted November 20, 2013 Share Posted November 20, 2013 http://www.bloomberg.com/news/2013-11-20/warren-buffett-s-exxon-bungle.html Warren Buffett's Exxon Bungle Link to comment Share on other sites More sharing options...
enoch01 Posted November 20, 2013 Share Posted November 20, 2013 http://www.bloomberg.com/news/2013-11-20/warren-buffett-s-exxon-bungle.html Warren Buffett's Exxon Bungle Haha, he can't be serious. Regardless, not counting dividends, that original ~$173 million dollar purchase would be worth about $3 billion today. That’s a back of the envelope return of 1,946 percent. And while a 44 percent return is good, a 1,946 percent return is better. XOM has compounded about 11% per year since Buffett's sale in 1985. What's the problem again? Link to comment Share on other sites More sharing options...
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