jbs

Berkshire Hathaway Fits the Buffett Good Business Standard

A competitive advantage is NOT the ability to increase prices, etc etc. The ability to increase prices is a sign that a competitive advantage exists!

The excess property insurance operations you are talking about (at Berkshire) have a major competitive advantage -- capacity.

When you get into the low severity high frequency insurance (that's Geico) then there's a different competitive advantage. Geico's product is a commodity. In that case, Berkshire leverages the brand and network to write huge volumes. I would suggest that Geico's selling model and brand makes up the competitive advatange. This enables low cost operations.

"Most insurance companies do not have competitive advantages over one another"
I have to disagree with this also. The ability to differentiate varies significantly depending on the type of insurance being written (and the extent to which the coverage has been commoditized).

Lastly, Berkshire is Buffett's company so it should come as no surprise that Buffett thinks it comprises good businesses.

Berkshire Hathaway Fits the Buffett Good Business Standard

Buffett is spelled incorrectly in the title...

Why Volatility and Beta Matter

"In other words, a major decline in a stock may make the price a substantial discount from its previous level, but that does not mean that there is not a lot of risk"

I don't think anyone in their right mind would dispute this. It's a pretty solid argument. But Buffett doesn't contend that because a stock has dropped it is less risky. He has said that just because a stock drops doesn't make it MORE risky. These are very different assertions and should not be treated as the same. Also, he defines "discount" as a discount to intrinsic value, which is significantly different than "discount from previous price" as you have defined it.

Finally, as I have pointed out before, you are defining "risk" differently than the Motely Fool. Many value investors define it as "likelihood of permanent loss of capital" whereas you are referring to it as "variability." This difference in your definitions is important and was overlooked in this article.

This is not to say that the MF article was perfect - it certainly wasn't.