michaelservet

My Modest Buffett Prediction

"Doesn't Buffett advise stearing clear of conglomerates, but isn't his Berkshire Hathaway a conglomerate? What makes his conglomerate different from say a GE?"
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Berkshire works at a different level on the value scale (eg, private < public share < control < synergistic) ... and Berkshire is a different kind of conglomerate. There's no 'conglomeration' or attempt at synergies (and conglomerate discounts don't apply). In other words, Berkshire has the ability - and has used it - to sell to synergistic conglomerates (its former Gillette and ABC units are good examples). It often buys companies at the lower end of the value scale (privately owned).

Of course Berkshire has other attributes, but Buffett's fairly unique value arbitrage formula is one. Instead, GE, JNJ, P&G etc, frequently 'pay up' for strategic purchases, then go for synergies -- hence a conglomerate discount would apply. Unlike Berkshire, there's no higher-level buyer for their units.

As to float...that's another relevant discussion (tomorrow's lesson)









On Feb 01 03:50 PM Jolly_Rancher wrote:

> Large oil companies have a lot of cash now. Why don't they do the
> same thing? Same for large drug companies. What makes insurance such
> a different source of capital that it can fund general market investment?
> Doesn't Buffett advise stearing clear of conglomerates, but isn't
> his Berkshire Hathaway a conglomerate? What makes his conglomerate
> different from say a GE? Didn't GE try the same thing with insurance
> and banking, that is, use the excess cash flow to fund investment
> in diverse businesses, including general equity investment? Finance
> tells us that the cost of capital is the same whether generated internally
> or through external mechanisms. Why is insurance float cheaper than
> oil or drug float or simply going to the bank and borrowing?

Why You Should Short Companies Doing Share Buybacks

Short??

How is this short-selection strategy working for you?

While it's certainly important to understand what's happening when a company buys back its shares - whether it makes sense or not - this seems like an extraordinarily high risk methodology.

Misleading April Retail Numbers: Invest In Discounters

I believe your data selection may be somewhat skewed (probably upward), because the population you are drawing from excludes companies that have discontinued same-store-sales reporting (Macy's, Sears, etc).

As quarterly data becomes available, it would be interesting to update the chart with some of those that have discontinued monthly reporting. The picture may be even worse than the monthly data suggest.

Buffett's Advice to the Berkshire Faithful: Buy Index Funds

Actually, Buffet said that diversified funds - using Vanguard as an example - were the best approach for amateur investors (he didn't imply that amateurs were ignorant), however, there was no good reason for professional investors to diversify.

One exception he noted - through a different question - was that with pharmaceuticals you may as well buy the basket rather than try to figure out the relative values of individual pipelines (for example, trying to guess whether J&J vs. Pfizer vs. Sanofi would be the company to have the breakthrough drug)