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Eric Sprague  

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  • PepsiCo: How 6.18% Core Growth Leads To A 10% Total Return [View article]
    I agree with giofls and Rod MacIver.

    Dividend yield and earnings growth are not additive.
    Mar 29, 2015. 01:13 PM | 1 Like Like |Link to Comment
  • Heinz And Buffett Get 'Krafty' But What Happens Next? [View article]
    Thanks for the article. Whitney Tilson asked about 3G and Kraft in today's Daily Journal meeting.
    Mar 25, 2015. 09:33 PM | Likes Like |Link to Comment
  • Gilead Sciences: An Analysis Using Warren Buffett's Owner-Earnings Equation [View article]
    Again, I think this is a nice article. However, I disagree about the working capital sign. In 2006 and 2014 the company increased working capital and the cash flow statement shows that this decreased cash flow from operations. I think this decreases 2006 & 2014 owner earnings as well such that they are $1,121.81 and $12,539.00 instead of $1,572.01 and $13,575.00 respectively.

    This is similar to http://bit.ly/1v6CT8g where the author originally has owner earnings of $29,065. In the comments he changes this to $27,017 such that the working capital cash flow total of ($1,024) decreases owner earnings (it is not multiplied by -1).

    Using Inventories as an example, the 2006 cash flow statement and balance sheet show they increased by about $350 million. This working capital cost has a negative sign in the cash flow statement and its sign should be left alone as it should decrease owner earnings.
    Mar 22, 2015. 09:52 PM | Likes Like |Link to Comment
  • My Dividend Portfolio: Adding U.S. Bancorp [View article]
    Thanks for the nice article.
    Mar 20, 2015. 06:44 PM | Likes Like |Link to Comment
  • Why I Sold Out Of Exxon Mobil [View article]
    ###
    My fear is XOM will issue additional shares to make an acquisition when the stock price is quite low, instead of repurchasing shares while they are "on sale."
    ###
    It's kind of ironic that you're selling while they are "on sale." However, I understand this situation is more nuanced than that. One of the keys is what you're saying about the importance of management's capital allocation decisions. They're not really on sale if they make bad decisions with acquisitions and other choices.
    Mar 19, 2015. 06:10 PM | Likes Like |Link to Comment
  • Gilead Sciences: An Analysis Using Warren Buffett's Owner-Earnings Equation [View article]
    I forgot to say that this was yet again another nice article.

    You're right, google finance has the same numbers under cash flow.

    I added them up from the 10-K cash flow statement.

    Other:
    + 360 Stock-based compensation expense
    - 482 Excess tax benefits from stock based compensation
    + 484 Tax benefits from excercise and vesting of stock-based awards
    + 22 Change in fair value of contingent consideration
    + 79 Other
    ----------------------...
    463 Total
    *Note that (236) deferred income taxes does not go under other.

    Working Capital:
    - 2,578 Accounts receivable, net
    + 143 Inventories
    - 371 Prepaid expenses and other assets
    - 289 Accounts payable
    + 533 Income taxes payable
    + 2,013 Accrued liabilities
    + 31 Deferred revenues
    ----------------------...
    - 518 Total
    Mar 18, 2015. 05:15 PM | 2 Likes Like |Link to Comment
  • Gilead Sciences: An Analysis Using Warren Buffett's Owner-Earnings Equation [View article]
    What 2014 10-K numbers does Y-Charts use to arrive at $463 for other non cash and -$518 for working capital changes?
    Mar 17, 2015. 06:26 PM | Likes Like |Link to Comment
  • Berkshire Hathaway Valuation For 2014 [View article]
    SanMania,

    Thanks for the comments.

    In this article I use "equity" when talking about stocks on pages 17 and 61 of the annual report.

    #1. Yes, I think the company is undervalued by at least 9%ish right now.

    #2. I asked my accountant about this while writing the article. He said corporations typically don't get that 20% rate like individual investors. Also, Chris Owens used 35% in his excellent http://seekingalpha.co... article that I highly recommend.

    #3. Element III is highly subjective and I wanted to be conservative. Yeah, if Warren can get another big elephant like BNSF then one could argue for a high number here.

    #4. For me personally I'd rather have Berkshire. However, that is in no way an investment recommendation for anyone else.

    Cheers,
    Eric
    Mar 16, 2015. 02:56 PM | Likes Like |Link to Comment
  • Berkshire Hathaway Valuation For 2014 [View article]
    Thanks for all the comments. Putting my ideas in writing forced me to think things through.
    Mar 14, 2015. 02:41 PM | 2 Likes Like |Link to Comment
  • Berkshire Hathaway Valuation For 2014 [View article]
    One complication is that book value has probably gone up since December 31st.

    Looking back at December 31st, 240.2b*1.2 = 288.24b.

    Looking at $brkb today, 145.67 per share = 355.43b market cap.
    That implies there are around 2.440b shares today.
    That implies a per share price of around $118.

    You could do the same type of thing for $brka.
    Mar 12, 2015. 06:22 PM | 1 Like Like |Link to Comment
  • Berkshire Hathaway Valuation For 2014 [View article]
    Berkshire may purchase additional shares in the market or through direct offerings at no more than 120% of book value: http://bit.ly/18EM9Ho

    At the end of December the book value was $240.2 billion. Market cap would need to fall to no more than 120% of that.
    Mar 12, 2015. 05:14 PM | Likes Like |Link to Comment
  • Berkshire Hathaway Valuation For 2014 [View article]
    SamMania,

    You might be right but he also says this type of thing every year:
    ###
    If our revolving float is both costless and long-enduring, which I believe it will be, the true value of this liability is dramatically less than the accounting liability. Owing $1 that in effect will never leave the premises – because new business is almost certain to deliver a substitute – is worlds different from owing $1 that will go out the door tomorrow and not be replaced. The two types of liabilities are treated as equals, however, under GAAP.
    A partial offset to this overstated liability is a $15.5 billion “goodwill” asset that we incurred in buying our insurance companies and that increases book value.
    [AR page 9]
    ###

    He doesn't say 0 every year, he just says "overstated liability" and "dramatically less than the accounting liability."
    Mar 12, 2015. 11:54 AM | 1 Like Like |Link to Comment
  • Berkshire Hathaway Valuation For 2014 [View article]
    Yeah, but I think 3%ish is conservative and I think it is a wonderful company. I'd rather own a wonderful company at a fair price than a fair company at a wonderful price.

    The 2014 AR shows that it came closer to fair value as per-share book value only rose by 8.3% while per-share market value rose by 27%.
    Mar 11, 2015. 12:39 PM | 1 Like Like |Link to Comment
  • Betfair: Unique Competitive Advantage Within The Sports Betting Market [View article]
    I went to the link you provided and pulled up the over/under for Cleveland vs Dallas: http://bit.ly/199ZgS1

    At the time of this writing the over/under is 201.

    Matchbook was the best at 1 on the over and 10/11 on the under. Ten books were tied for next best with 10/11 on both the over and under. At least on this over/under, betfair didn't have anything available.

    I could probably better understand the pricing power of the model if I could see it in action with a simple price example.
    Mar 10, 2015. 05:45 PM | Likes Like |Link to Comment
  • Apple Joins The DJIA: So Let's Analyze What Its Impact Will Be On Funds [View article]
    Thanks for another nice article.
    Mar 10, 2015. 05:25 PM | Likes Like |Link to Comment
COMMENTS STATS
117 Comments
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