Dan Braem

Berkshire Well Positioned for Buffett's Prediction on Electric Cars

Bobby,

I think for most investors, I couldn't agree with you more. Perhaps a quick list of your favorites (irrespective of price)?

I like JNJ, PEP, MO, CVX, PM, maybe BAC someday, EMR, PG, T. There are others, but I like these.


On Nov 23 10:57 AM bobbybutte wrote:

> As a person who has become financially independent SOLELY on buy
> and hold dividend stocks and reinvested dividends and also along
> term Berkshire holder let me add a few things
>
> Buffett is not the greatest macro economic predictor
>
> He has made some great stock purchases and his the deritive deal
> he did last year will be his greatest ever
>
> Buffetts main business is reinsurance and his strength is he uses
> the float from Geico and the rest to generate large profits like
> he did in corporate bonds in the past year
>
> If he really thought what he did why did he buy COP at such a large
> price with such a large amount of money last year?
>
> This is a great article and i enjoy the authors writings
>
> just reminding everyone that there is generally a disconnect about
> what he says and what web does

Bargains Still Abound in a Few Gold Miners

I don't own any gold stocks - but can anyone provide me an example of a gold stock with a 10% FCF yield (compared to the market cap)?

Berkshire Well Positioned for Buffett's Prediction on Electric Cars

Ravi,

I view BRK's stake in BYD as more of a bonus then a reason to buy BRK. Would you agree?

As usual, Buffett has put together a nice collection of assets for the future. Some may pay off, others may not. But BRK is so financially strong it really is an amazing company.

I have written a book on some of the key business philosophies of Berkshire Hathaway, but for those not super familar with BRK's history, please read Roger Lowenstein's book. A great read in my opinion.

Has Buffett Lost His Mind?

I wrote an article on this deal...why does no one even discuss the advantages of owning the entire company?

Not only does he get a 20% tax advantage to buying the entire company (on all repatriation of profits), he gets to determine how much he can pull out of BNI. After 40+ years of doing deals, you think most investors would realize Buffett prefers owning entire companies, and for good reason.

BNI was not a bargain or a value purchase - everyone knows that. But it is time to look at the big picture. BRK is a big conglomerate, and this is a big conglomerate purchase.

The real surprise to me is that Buffett didn't buy something big in March 2009. Perhaps it was his belief that the financing wouldn't be available.

Bill Ackman's Pershing Square: Q3 Portfolio Update

I am not such a Ackman fan. Very intelligent and well spoken, but that Target investment made me wonder.

It can be interesting tracking the big whales, but keep in mind that someone like Ackman can make noise while other investors cannot.

Will Steak n Shake Become the Next Mini Berkshire Hathaway?

I own a small amount of SNS and FMMH. It will be interesting to see if Biglari uses FMMH as an investment vehicle or maintains a less than controlling interest.

A big part of Buffett's success in my opinion wasn't the cash flow from insurance operations so much, but the "float" that he talks about endlessly in his annual reports. Float = money that is borrowed from policy holders and later paid out in claims, but can be reinvested in the meantime. And of course, as anyone with car insurance knows, the process of paying premiums is recurring. So the float becomes a "permanent" source of funds for investing. Buffett was able to use the float, more so than others, to invest in equities as well as fixed income investments.

I have covered much of this in my book. SNS is such a long way away from becoming Berkshire Hathaway, but it will be interesting to see the company evolve. I look forward to all of the future capital allocation decisions of SNS.

If I were looking toward the future - I would use one of the Bermuda insurance companies as a starting point. Then, all future investments could have huge tax advantages. Imagine BRK with a dramactically lower tax rate. With questions about the U.S. dollar - a company such as SNS could become a more gloabal version of Berkshire Hathaway.

Google: Setting Itself Up for Failure?

Google is the new age Microsoft. They dominate in one area (in Microsoft's case, a couple of areas) and they generate tons of cash. That is the good news.

The bad news is that both Microsoft and Google are, have been, and will be terrible at allocating that cash.

The Google and Microsoft "throw enough sh-t on the wall and see what sticks" philosophy sounds great in the early stages, but wears thin. Both companies will continue to dominate in certain business areas. Both will continue to generate tons of cash in their core businesses. But both companies fail to have a good future strategy. The author has nailed it on this point.

Apple doesn't just see the future, they create it. They execute better than the others.

Berkshire Hathaway Posts Q3 Results: Book Value at Record High

Ravi,

Good article.

I think book value is a nice metric to use, but it should be complemented by other metrics as well. Author does a nice job of pointing that out.

I have written in other articles that Berkshire Hathaway has evolved in to a great cash flow machine. Insurance, railroad, utilities, preferred investments, stakes in Coke, etc... the most solid company in the United States in terms of cash flow generation and safety.

For all investors, the tough assignment is placing a value on such a great company, and trying to buy well below that value. With Berkshire Hathaway, that is a challenge.

Charlie Gasparino: Another Crash 'Has to Happen Again'

I have written this in my book - there are tax policies and legal policies that are also to blame. Take a look at the Internal Revenue Code - Section 162(m). This tax code section gives massive incentives for managements to lever up their companies. Great idea.

Also, shareholders have very little input into the companies they own. Even somone as big as Carl Icahn can have little influence and get rebuked. How was Jerry Yang allowed to exist in any management role? The system is somewhat of a joke, and managements can basically suck capital out of a company without much of a problem. This is the #1 reason it is critical to find companies with good management (and honorable). Mr. Buffett is role model #1.

Buffett's Big Rail Buy: What It Means for Berkshire Shareholders

John - I couldn't agree more.


On Nov 03 01:27 PM John Lounsbury wrote:

> I think Buffet is making an energy play. He has been more and more
> an energy investor in recent years. Remember his 300% plus gain over
> a couple of years with Petro China? Utilities and pipelines are part
> of the energy investment picture. BNI is part of the same strategy,
> in this case he is buying a coal "pipeline".
>
> I bought BNI in early 2005 in the 40's and got stopped out within
> a few months for a gain of about 12%. This is one case where stop
> loss risk control proved counter productive.

Buffett's Big Rail Buy: What It Means for Berkshire Shareholders

Ravi - good article.

In my book, Building the Next Berkshire Hathaway (page 12) - I note that the future for Berkshire Hathaway is the expansion of its railroad holdings and its utility holdings. Thus, I am not completely surprised by the move.

I am a little surprised by the issuance of stock. Ravi points out the Berkshire philosophy rather well - and Buffett is the one who makes the valuation decision (stock of BNI is worth more than stock of BRK issued). Time will tell.

I would like to point out that future acquisitions may focus on the energy (utility) sector, as well as gas pipeliness. This is a big time contributor to Berkshire that doesn't get a lot of press.

Loews Corp Q3: Reports Profit on Higher Revenues

This is my single favorite investment right now.
Tony P - not sure where you get that they sell wood.

This company is never really reported properly. Loews ownership in CNA is worth close to $10B (on a FMV book basis). Based on market prices, the CNA stake is worth less.

They also have $2B in cash, a 3+B stake in BWP, 6+B stake in DO, and also own a small energy company and Loews hotels.

This is also a company that will never need a bailout.

'Almost All Assets Appear to Be Overvalued' - Bill Gross

Many equities are fairly priced or overpriced. So what?

The trick is to find stocks that are undervalued anyway - why worried about the rest.

Aspen Holdings just reported - stock is $26 and has a book value of $33. That is not overpriced.

Loews, a stock I have written about on this site, is undervalued. Verizon and AT&T appear reasonable.

Why focus on investments I shouldn't make - I would rather hear discussion on investments that I should consider.

Why Apple Is Worth $80

Stefan - while your analysis may be a little simplified, the logic makes perfect sense. I actually use Apple as an example in my book (Building the Next Berkshire Hathaway) - $80 is way too cheap. If the article suggested a $150 price target, there may be more validity. The $80 target is a dream.

On Oct 25 12:12 PM Stefan Sidahmed wrote:

> You discussed DCF a lot, but I do not see one cash flow number in
> this article. EPS does not equal FCF.
>
> $80/share x 914M shares = $73B market cap
> Subtract $34B in cash = $39B Enterprise value
> 2009 FCF was about $9B
> So you are saying Apple is worth 4 x current cash flow.
>
> Does not make sense.

David Sokol Increasingly Looks Like Buffett's Successor

It may sound crazy, so let me clarify. Sokol has received 20M in salaries from 2006 - 2008. If he wants to adopt the Buffett idealogy, he will invest some of that money in BRK stock and let that act as his wealth creation vehicle. For better or worse, that has been the Buffett way.

My point isn't that a $200,000 salary will attract the best talent. My point is that I can see many of the principles instilled by Buffett will be eroded over time. What's next after Buffett leaves? Compensation through stock options? A large amount of share buybacks to enhance the value of those options instead of other capital allocation options?

I fear that many of the business principles that made Berkshire Hathaway unique may slowly disappear.