Ravi Nagarajan

Berkshire Hathaway: One Stock You Must Own

The split ratio is 50:1.

News release:
www.berkshirehathaway....

Proxy for special meeting:
www.sec.gov/Archives/e...

Underneath Berkshire Hathaway's Headline Numbers

As you've pointed out, the last time Buffett health rumors surfaced (in 2000), the stock was hammered but at that time, there were other factors pressuring the stock as well. In my opinion, Buffett cannot be replaced. However, Berkshire has a plan in place that does not rely on replacing Buffett. Instead, his job will be divided into two with a CEO coming from one of the subsidiaries and one or more investment officers who have records that Buffett and Munger are comfortable with. I think that Buffett's son and Gates presence on the board should help keep the culture intact.

I don't see any "Buffett premium" in today's quotation for Berkshire but there is no question that he cannot be replaced in terms of value provided to the company. Berkshire's intrinsic value would be lower w/o Buffett, but today's steep discount of price to IV provides investors with a margin of safety.

Underneath Berkshire Hathaway's Headline Numbers

I did not see any details in the 10Q but you are correct that Buffett made this comment at the annual meeting. I wasn't clear at the meeting whether he was referring to Berkshire or his personal account when he said that he was buying corporate bonds.


On May 10 11:22 AM Make Money wrote:

> Thanks Ravi. I enjoy your analysis. I am a long term holder of
> BRK. Buffett indicated that he invested heavily in corporate bonds,
> but, no detail. Any info/analysis?

Underneath Berkshire Hathaway's Headline Numbers

I hear what you're saying. However, if you look at Berkshire's long term track record, it is clear that they are conservative in reserving and the insurance businesses routinely generating underwriting profits over long periods (meaning cost free float). I wrote up some details on this after the BRK 2008 report came out:

www.rationalwalk.com/?...

See here for a spreadsheet containing historical cost of float for the past ten years:

www.rationalwalk.com/w...

Ravi




On May 10 06:39 PM WAKEUP wrote:

> "Berkshire’s insurance businesses posted solid results for the first
> quarter." O.K., but I can tell you, as a veteran of the insurance
> wars, that the results of ANY insurance company, over anything other
> than a protracted period of time are virtually worthless. This is
> directly related to the fact that insurance companies, particularly
> those who write commercial coverages, all hold very substantial amounts
> of their money in reserve for, among other things, something called
> IBNR (Incurred But Not Reported) losses. There is a good reason all
> this money is held in reserve: Commercial risks are so loaded with
> potential losses at any moment in time that it is practically impossible
> to predict with anything close to accuracy what might happen to all
> that reserve money. Millions, even billions of dollars in losses
> can develop literally overnight, any night. For this, and other significant
> reasons, unless you are looking at a minimum of fifteen years' worth
> of data, I wouldn't invest any money in any insurance company. Come
> to think of it, on reflection, I STILL wouldn't invest any money
> in any insurance company, now, because of the crazy accounting methods
> insurance companies are allowed to get away with, currently. These
> accounting methods amount to nothing more than a shroud of secrecy.
> Buyer, beware.

Underneath Berkshire Hathaway's Headline Numbers

All:

The editors put a couple of incorrect tickers in this article.

HURN is the ticker for Huron Consulting but is placed next to MidAmerican Energy under the “Utilities and Energy” heading. MidAmerican is a subsidiary of Berkshire and not publicly traded. Under Manufacturing, Service, and Retailing, there is a ticker of SGR next to Shaw, but this is a different company: The Shaw Group Inc, with is unrelated to Berkshire’s Shaw subsidiary.

Please ignore these tickers as they are unrelated to Berkshire.

Ravi

What's Buffett's Ideology?

"Before I comment, I'd like to know exactly who is writing an article that, on this website, appeared as if Buffett himself was writing."

I was wondering the same thing. This seems misleading to say the least. It is one thing to use an anonymous identity and another to use Buffett's name in this manner.

Electric Car Initiatives Heat Up: Implications for Investors

"One thing that I find aggravating now is the marketing of hybrids as sensible environmentally-friendly but boring vehicles. That’s not the future of hybrids. Electric motors (what will drive the wheels on hybrids) have very high torque (“push” for you civilians) at zero speed. In other words, press the “gas” pedal at the stop sign, and away you go without any hesitation. Note that the Tesla Roadster, which is all electric, can go from 0 to about 60 in about 4 seconds."

Yes, this is exactly correct - electrics can be great performance vehicles.

Right now, the electric hybrid image is really "nerdy" for lack of a better term. In car enthusiast circles, everyone jokes about the Prius. I should know because I own a classic car which is NOT environmentally friendly (www.rationalwalk.com/?...), as well as a late model Mustang which is far and away better in terms of fuel economy.

I have to admit, I'm attached to the sound of the internal combustion engine but I wouldn't mind owning a blazing fast electric either. Who knows, I may prefer it.

Electric Car Initiatives Heat Up: Implications for Investors

For electric vehicles to gain broader appeal, they need to be viable for road trips even through it is true that most people drive daily distances that would be supported on one charge. The idea of just getting into your car and driving wherever you want is deeply ingrained into the culture of the country. That is why the idea of battery exchange stations is very exciting. This could be a complete game changer for electric vehicles:

www.betterplace.com/ou...

Most people do not want a specialized vehicle only for commuting so it is important to have more than commuting range. Given the longer recharge times, the idea of battery exchanges (which takes no longer than filling a tank) could be the solution. Obviously this would require a huge infrastructure investment.