Berkshire Hathaway

[nippur72]

report annuale 2009

è uscito il report annuale del 2009!!

http://www.berkshirehathaway.com/reports.html

P.S. Come by train!

 

[nemo17]

Qualche estratto dalla lettera di Buffett :

Warren Buffett released his annual letter to shareholdersthis morning along with Berkshire Hathaway’s 2009 annual report. Our full package of analysis on Berkshire Hathaway will be available soon as part the Berkshire Hathaway 2010 Briefing Book. For now, this article highlights several notable statements that were made in the shareholder letter regarding Berkshire’s results, management philosophy, and future plans. Mr. Buffett also includes his usual commentary on broader economic issues.

Berkshire’s Valuation

There were a few areas in the letter where Warren Buffett clearly states that Berkshire Hathaway is worth far more than book value. With Berkshire Hathaway A shares closing on Friday at $119,800, the share price is certainly trading above year end book value of $84,487, but this was not the case only a few months ago. A history of Berkshire’s price to book value ratio for the past decade will be included in the forthcoming briefing book. Berkshire’s price to book value ratio is still quite a bit lower than the average ratio of the past decade.

Quote:
In aggregate, our businesses are worth considerably more than the values at which they are carried on our books. In our all-important insurance business, moreover, the difference is huge. Even so, Charlie and I believe that our book value – understated though it is – supplies the most useful tracking device for changes in intrinsic value.



Mr. Buffett made a comment specific to the insurance subsidiaries value vs. carrying value:

Quote:
Our property-casualty (P/C) insurance business has been the engine behind Berkshire’s growth and will continue to be. It has worked wonders for us. We carry our P/C companies on our books at $15.5 billion more than their net tangible assets, an amount lodged in our “Goodwill” account. These companies, however, are worth far more than their carrying value – and the following look at the economic model of the P/C industry will tell you why.



The question of why Berkshire was willing to issue shares to pay for part of the Burlington Northern acquisition has been a topic of much speculation over the past few months. Here is what Mr. Buffett has to say on the topic:

Quote:
In our BNSF acquisition, the selling shareholders quite properly evaluated our offer at $100 per share. The cost to us, however, was somewhat higher since 40% of the $100 was delivered in our shares, which Charlie and I believed to be worth more than their market value. Fortunately, we had long owned a substantial amount of BNSF stock that we purchased in the market for cash. All told, therefore, only about 30% of our cost overall was paid with Berkshire shares.

In the end, Charlie and I decided that the disadvantage of paying 30% of the price through stock was offset by the opportunity the acquisition gave us to deploy $22 billion of cash in a business we understood and liked for the long term. It has the additional virtue of being run by Matt Rose, whom we trust and admire. We also like the prospect of investing additional billions over the years at reasonable rates of return. But the final decision was a close one. If we had needed to use more stock to make the acquisition, it would in fact have made no sense. We would have then been giving up more than we were getting.

Industry Growth vs. Investment Returns

Many investors routinely make the error of identifying a major change in technology and society and automatically assuming that businesses operating in such sectors are good investments. We have seen this again and again over the decades with the most recently example involving the dot com collapse. This excerpt from the letter addresses the issue:

Quote:
Charlie and I avoid businesses whose futures we can’t evaluate, no matter how exciting their products may be. In the past, it required no brilliance for people to foresee the fabulous growth that awaited such industries as autos (in 1910), aircraft (in 1930) and television sets (in 1950). But the future then also included competitive dynamics that would decimate almost all of the companies entering those industries. Even the survivors tended to come away bleeding.

Just because Charlie and I can clearly see dramatic growth ahead for an industry does not mean we can judge what its profit margins and returns on capital will be as a host of competitors battle for supremacy. At Berkshire we will stick with businesses whose profit picture for decades to come seems reasonably predictable. Even then, we will make plenty of mistakes.



Autonomy of Operating Subsidiaries

Berkshire’s model of delegating significant authority to operating subsidiary managers is not without risk. Here is what Mr. Buffett had to say on this topic in general terms, while still asserting that the Berkshire model is better than the bureaucratic alternative:

Quote:
We tend to let our many subsidiaries operate on their own, without our supervising and monitoring them to any degree. That means we are sometimes late in spotting management problems and that both operating and capital decisions are occasionally made with which Charlie and I would have disagreed had we been consulted. Most of our managers, however, use the independence we grant them magnificently, rewarding our confidence by maintaining an owner oriented attitude that is invaluable and too seldom found in huge organizations. We would rather suffer the visible costs of a few bad decisions than incur the many invisible costs that come from decisions made too slowly – or not at all – because of a stifling bureaucracy.



Although NetJets is discussed in another part of the letter, one gets the sense that the policy of delegation may have not worked so well for Berkshire’s fractional aviation unit:

Quote:
NetJets’ business operation, however, has been another story. In the eleven years that we have owned the company, it has recorded an aggregate pre-tax loss of $157 million. Moreover, the company’s debt has soared from $102 million at the time of purchase to $1.9 billion in April of last year. Without Berkshire’s guarantee of this debt, NetJets would have been out of business. It’s clear that I failed you in letting NetJets descend into this condition. But, luckily, I have been bailed out.



Dave Sokol, the enormously talented builder and operator of MidAmerican Energy, became CEO of NetJets in August. His leadership has been transforming: Debt has already been reduced to $1.4 billion, and, after suffering a staggering loss of $711 million in 2009, the company is now solidly profitable.



Other Notes

Here are some brief notes on other topics, as well as some of Warren Buffett’s famous one liners:

Burlington Northern will be included in the “regulated utilities” segment that currently reports on MidAmerican’s operations. Many Berkshire observers had anticipated a separate “railroad” segment. While Berkshire’s history of providing significant disclosure is reassuring, it is somewhat of a concern that the largest acquisition in Berkshire’s history is not being given an entirely distinct segment through which future results can be measured. We will see how Burlington is presented in the Q1 2010 report which should come out in early May.
In commenting on Berkshire’s tendency to significantly outperform during years when the S&P 500 is down: “Our defense has been better than our offense, and that’s likely to continue.”
Insurance float is up to $62 billion at the end of 2009. “Derivatives Float” was $6.3 billion at year end.
Home Services, MidAmerican’s retail brokerage unit, was profitable in 2009 and will be “much larger” in a decade.
Clayton Homes is facing headwinds due to negative perceptions of manufactured housing that have resulted in mortgage rates that are far higher than site built homes. One gets the sense that Mr. Buffett is preparing to get into the political debate regarding this topic particularly as it relates to FHA loans.
Two options to increase housing demand that the United States wisely decided to not pursue: “There were three ways to cure this overhang: (1) blow up a lot of houses, a tactic similar to the destruction of autos that occurred with the “cash-for-clunkers” program; (2) speed up household formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers or; (3) reduce new housing starts to a number far below the rate of household formations.”
“Are we supposed to applaud because the dog that fouls our lawn is a Chihuahua rather than a Saint Bernard?” Buffett quoting Munger on his views regarding small value destroying acquisitions vs. a large one.
“P.S.: Come by rail” regarding travel planning for the annual meeting.

 

[Capirex85]

Niente di nuovo per me nella lettera, la cosa più interessante è che ha previsto la stabilizzazione definitiva del mercato immobiliare americano per inizio 2011... e se succederà veramente, l'economia USA prenderà il volo

 

[nemo17]

Niente di nuovo per me nella lettera, la cosa più interessante è che ha previsto la stabilizzazione definitiva del mercato immobiliare americano per inizio 2011... e se succederà veramente, l'economia USA prenderà il volo

Non mi esprimo ancora.. voglio fare una seconda rilettura... quello che mi piace sono sempre le stesse cose...imbarazzanti nella loro semplicità...ma come al solito inappuntabili :

Just because Charlie and I can clearly see dramatic growth ahead for an industry does not mean
we can judge what its profit margins and returns on capital will be as a host of competitors battle
for supremacy. At Berkshire we will stick with businesses whose profit picture for decades to
come seems reasonably predictable. Even then, we will make plenty of mistakes.

E messe in pratica ... nel peggio periodo borsistico degli ultimi decenni Berkshire ha gettato semi su semi...


When the financial system went into cardiac arrest in September 2008, Berkshire was a supplier
of liquidity and capital to the system, not a supplicant. At the very peak of the crisis, we poured
$15.5 billion into a business world that could otherwise look only to the federal government for
help. Of that, $9 billion went to bolster capital at three highly-regarded and previously-secure
American businesses that needed – without delay – our tangible vote of confidence. The remaining
$6.5 billion satisfied our commitment to help fund the purchase of Wrigley, a deal that was
completed without pause while, elsewhere, panic reigned.
4
We pay a steep price to maintain our premier financial strength. The $20 billion-plus of cashequivalent
assets that we customarily hold is earning a pittance at present. But we sleep well.

 

[locco68]

GOLDEN OPPORTUNITIES

"We told you last year that very unusual conditions then existed in the corporate and municipal bond markets and that these securities were ridiculously cheap relative to U.S. Treasuries," Buffett wrote. "We backed this view with some purchases, but I should have done far more.

"Big opportunities come infrequently. When it's raining gold, reach for a bucket, not a thimble."

 

[nemo17]

GOLDEN OPPORTUNITIES

"We told you last year that very unusual conditions then existed in the corporate and municipal bond markets and that these securities were ridiculously cheap relative to U.S. Treasuries," Buffett wrote. "We backed this view with some purchases, but I should have done far more.

"Big opportunities come infrequently. When it's raining gold, reach for a bucket, not a thimble."

Bellissima questa frase ! Ha colpito anche me ..grandissimo Warren.

 

[Leite]

oggi alla cnbc:
http://www.cnbc.com/id/35641059

 

[nemo17]

Tesco Rises as Buffett Increases Stake, JPMorgan Lifts Rating

March 1 (Bloomberg) -- Tesco Plc, Britain’s largest retailer, rose the most in a month in London trading after Warren Buffett’s Berkshire Hathaway Inc. disclosed an increased stake and JPMorgan Cazenove raised its recommendation.

Tesco rose 13.4 pence, or 3.2 percent, to 433.1 pence as of 4 p.m. local time. Berkshire said in a Feb. 27 statement that its shareholding rose 3.1 percent to 234.2 million shares, giving the Omaha, Nebraska-based company a 3 percent stake.

JPMorgan analysts raised their Tesco rating to “neutral” from “underweight” today, citing improving domestic and international sales along with “better prospects” for cash flow. The brokerage increased its price estimate to 450 pence.

Today’s share gain is “a combined factor of having a big name like Buffett behind the stock and analyst upgrades,” James Monro, an analyst at Standard & Poor’s in London, said by phone. He has a “buy” recommendation on Tesco.

“For the shares to outperform we believe the company would need to outperform its peers again in the U.K., improve its capital turnover ratios internationally and prove it can boost free cash flow generation without impacting growth,” JPMorgan analysts including Jaime Vazquez said in the report.

 

[nemo17]

Interpretazione di alcuni passaggi della lettera di Buffett :

Well today’s show is kind of part two of Buffett letter weekend. In the last episode I previewed the letter by giving you some background on Warren Buffett and Berkshire Hathaway (BRK.B).

Hey this is Geoff Gannon and you’re listening to the Investor Questions Podcast. The show that answers questions from investors like you. If you have a question you’d like answered call 1-800-604-1929 and leave us a voicemail. That’s 1-800-604-1929 .

Well today’s show is kind of part two of Buffett letter weekend. In the last episode I previewed the letter by giving you some background on Warren Buffett and Berkshire Hathaway (BRK.B).






Today I’ll go through the letter picking out the best parts. Now when I say best parts I’m talking about the most useful parts to an investor trying to learn from Buffett. The media can pick up on other stuff. That’s fine. What we care about is becoming better investors.

Let me start by saying that you need to forget something I told you in the last episode. I said that Buffett would give you two yardsticks - or buckets of value - to use in estimating Berkshire’s intrinsic value. Those buckets were investments per share and pre-tax earnings per share.

Well guess what?

He didn’t give you those buckets. You can calculate it using numbers in the annual report. But it’s not in the letter where I said it would be.

Enough talk about what’s not in the letter. Let’s start talking about what is in the letter.

The first part I found interesting is the bit about Steve Ballmer and Jeff Immelt. Let me read it to you:

“Even evaluations covering as long as a decade can be greatly distorted by foolishly high or low prices at the beginning or end of the measurement period. Steve Ballmer of Microsoft and Jeff Immelt of GE can tell you about that problem, suffering as they do from the nosebleed prices at which their stocks traded when they were handed the managerial baton.”

What Buffett’s talking about here is how to judge a CEO. A lot of times people look at the stock price. And they say that if over 10 years or so the stock went nowhere - well then the CEO did a bad job. I mean isn’t it’s obvious he did a bad job. Right?

Buffett doesn’t think so. And he gives two good examples. He talks about Steve Ballmer and Jeff Immelt. Buffett thinks a lot of both guys. And their reputations are pretty good. But their performance in terms of the price of their stocks since they took over - not so good. In both cases you’d have to judge them to be failures.

Buffett’s point is that sometimes stock prices get so far away from the actual value of the business that it can take years and years for reality to set in. And when reality does set in it makes the guy running the place look like he’s done a bad job.

You can think of examples like Cisco (CSCO) where the company was doing well before the stock really took off in a crazy way and the company was doing well after the stock came crashing back to earth. If you chart the progress of the business and the stock through the 1990s and 2000s - at least in the case of Cisco - you won’t see much of a connection.

So you can’t always judge a business by its stock price. Or a CEO by how well his stock does. Even if we’re talking 10 years or more. You need to have some other number to look at.

And that’s how we get to intrinsic value. But what are we talking about? Is it earnings? Is it free cash flow? Is it book value?

Buffett doesn’t tell us which it is. Because he can’t. It’s not going to be the same for every business.

When we talked about Microsoft (MSFT) I told you that stock’s intrinsic value came from its free cash flow. And I believe that. But I don’t believe Berkshire’s intrinsic value comes from its free cash flow. In fact I basically told you that last time. I said Buffett would talk about pre-tax earnings per share and investments per share.

Well he didn’t talk about those things. Instead he talked about book value. And he told you about all the ways book value fails to get at the truth.

“…book value at most companies understates intrinsic value and that is certainly the case at Berkshire. In aggregate, our businesses are worth considerably more than the values at which they are carried on our books. In our all important insurance business, moreover, the difference is huge.”

Buffett is clearly saying book value is not a good measure of intrinsic value. It lies. But then he goes on to tell you that book value - or at least the change in book value - is how he wants you to judge his performance at Berkshire.

Does that make sense? I think it does. And for exactly the reason Buffett gives. He says that he doesn’t want to see where the arrow lands and then paint the bull’s eye.

And he has a point. Because if you read a lot of annual letters from CEOs - you start to notice a pattern. They tell you about the things they’re going to do and the things they’ve done. And in a lot of cases the two don’t match up. The stuff that doesn’t work out gets dropped from letters real fast. And the stuff that does work gets hyped up even more.

They’ll talk about sales one year and free cash flow the next. They’ll say how important it is to buy back a lot of stock and then they’ll tell you what a great move it was to issue a lot of stock and buy up their biggest rival. Maybe they’re right both times. But we need something to measure. We need something to compare results to.

We need promises. Or we need targets. Or we need yardsticks. What we can’t have is ten different numbers all measuring different things and all mattering just as much. No one can keep track of ten different numbers. And those numbers are going to be at odds from time to time.

Sometimes you have to give up sales to keep your profits high. Most times that’s not true. Usually they both go in the same direction. But as we saw with Microsoft - you can grow sales without growing profits. That company put a lot into its online business. And it does bring in some revenue. But there aren’t any profits.

So if we judged Microsoft on sales we’d see it one way. If judged it on free cash flow we’d see it another way.

Buffett uses book value. Or at least he uses the change in book value. That’s how he measures Berkshire’s performance. Is that the right thing to do?

I don’t know. It’s obviously not perfect. It’s not the first thing I would look at. And I don’t think it’s the first thing Buffett looks at either. But when he has to boil everything down into just one number that anyone can understand - well then I think book value makes sense. At least it’s exact. It’s objective. No one can accuse him of picking different targets from one year to the next.

On page 4 Buffett talks a bit about Berkshire’s performance when measured by book value. He admits it’s been really good. And he even says that Berkshire has done a lot better in bad years than the S&P 500. He expects that to continue. And he says Berkshire’s defense is better than it’s offense.

But he also adds a big warning. He says Berkshire will not match its past record. The company’s growth will slow down. It already has. Berkshire’s advantage over the S&P 500 has shrunk. And it will shrink even more.

I can’t argue with that. No one can. Big fast growing business eventually become big slow growing businesses. There’s no way around that.

That’s an important point. And one you should remember when thinking about other big businesses. I brought it up when I talked about Microsoft. And you’ll hear me bring it up again and again. Big businesses simply don’t grow as fast as small businesses. And almost all businesses will grow more slowly - in percentage terms - over the next decade than they did over the last decade. Don’t forget that. Most investors do.

Starting on page 4 there’s a section I love called “What We Don’t Do”. Every company should have one of these. Because what someone tells you they won’t do usually means a lot more than what they say they will do.

Everyone tends to say the same things about what they want to do. But having to pick the things that could be useful but that you’d still refuse to do - I think that’s a great idea. It clearly defines who you are.

Buffett lays down a few rules. He admits he hasn’t been perfect in keeping to them all. One rule in particular jumps out. I’ll read it to you:

“Just because Charlie and I can clearly see dramatic growth ahead for an industry does not mean we can judge what its profit margins and returns on capital will be as a host of competitors battle for supremacy. At Berkshire we will stick with businesses whose profit picture for decades to come seems reasonably predictable. Even then, we will make plenty of mistakes.”

One big mistake was NetJets. That company has been a disaster for Berkshire. And Buffett went into detail this year telling us just how bad it is.

A funny thing about NetJets is that of all the businesses Berkshire owns it’s probably the one that gets the most praise from management books. Two books I read recently mention NetJets. A book called Hidden Champions of the 21st Century talks about NetJets dominating its industry. Which it does. And a book called Blue Ocean Strategy talks about the way NetJets created a blue ocean in fractional ownership of jets. Which is totally false.

The ocean NetJets swims in isn’t blue at all. It’s about as red as any business ocean gets. I’ll let Buffett tell you about it:

“The major problem for Berkshire last year was NetJets, an aviation operation that offers fractional ownership of jets. Over the years, it has been enormously successful in establishing itself as the premier company in its industry, with the value of its fleet far exceeding that of its three major competitors combined. Overall, our dominance in the field remains unchallenged.”

“NetJets’ business operation, however, has been another story. In the eleven years that we have owned the company, it has recorded an aggregate pre-tax loss of $157 million. Moreover, the company’s debt has soared from $102 million at the time of purchase to $1.9 billion in April of last year. Without Berkshire’s guarantee of this debt, NetJets would have been out of business.”

What both books fail to understand is that NetJets is fundamentally a bad business. It is not a success. It’s a failure. And it would’ve been bankrupt by now if Berkshire wasn’t there to bail it out. No one has succeeded in fractional ownership of jets. And you have to wonder if anyone ever will.

The NetJets purchase was a mistake. Now everyone makes mistakes. And I’m not trying to beat up on Buffett. I just think people have gotten the NetJets story wrong. It is not a success story. It’s a mirage.

From the outside it may look like a success. NetJets really does dominate its industry. But what’s dominance of the fractional jet ownership industry worth? Nothing. At least not yet.

And even if it becomes worth something - Buffett will have still been wrong to buy it in the first place. No business can fail to give you any return for more than a decade and then make your investment pay off. It just doesn’t work that way. Losing those first 10 years of compounding your money means the investment will be a dud even if it’s a huge success in year 15 or 16. At that point it doesn’t matter. Much less impressive businesses will have been growing steadily for those 15 years. And those are the ones you should have bought.

Again - I’m not trying to beat up on Buffett. His acquisition track record is good. But NetJets is a failure. And yet it’s the Berkshire owned company I hear the most about in management books. Why?

Because one thing management experts hate to talk about is how inherently good or bad an industry is. You don’t want to tell someone they can manage their business in the most amazing ways and still they won’t earn the same returns as a really average manager in a much better industry.

But it’s true. And since I mentioned two books that got this wrong - I want to mention one that got it right.

Michael Porter wrote a couple books on competition. I’m not going to tell you to read them because I don’t really think they’re worth your time. They’re not practical enough for the average investor. And a lot of what he wrote about has been worked into other people’s books.

So you don’t have to buy Porter’s books. But you do have to give him credit for saying right up front that the first and most important thing when talking about competition is looking at the industry.

How good or bad is it? Because that’s going to determine a lot about the future of any company in that industry.

For an investor - I think it’s always a good idea to start by thinking about the industry instead of thinking about any one company. You want to buy businesses in industries where everyone can do okay.

You don’t want to buy businesses in industries where it’s winner take all. Unless the winner has already been crowned. And you can buy that winner at a good price. And even then you want to make sure you don’t have a NetJets on your hands.

NetJets is the winner in the fractional jet ownership business. But the guy who invested in NetJets is the loser.

Investors can’t get sucked in by companies like NetJets. You need to look at the cold hard facts. NetJets had great competitive advantages. It still does. But it’s been a terrible investment.

So one thing you can learn from Buffett’s letter is not to make the same mistake he did. Look at the industry you’re buying into and steer clear of those with no history of profits. Look for industries where you can be the third or fourth runner up and still do okay.

What matters to investors isn’t whether the business they invest in wins or loses compared to the competition. What matters is profits. And NetJets doesn’t have any of those. At least not consistently. And not taking all 10 years together. It’s a decade later and NetJets has lost as much as it’s made for Berkshire.

So NetJets is a big loser as far as investors are concerned. Make sure you remember that. And make sure you don’t make the same mistake Buffett did. Because if the world’s best investor can get sucked in by the appeal of a business like NetJets - you can too.

And it wasn’t just Buffett. A couple management books have talked about NetJets. And that’s another warning for you. Look a little closer at those stories you read in books like that. The authors aren’t looking at things with an investor’s eye. If they were they would see that NetJets is a cautionary tale not a success story.

On page 6 Buffett talks about one of Berkshire’s real success stories: GEICO. He starts by saying that GEICO has an $800 million annual advertising budget. And goes on to say the company has increased market share from 2.5% to 8.1% since 1996. That’s when Berkshire bought GEICO.

Unlike Net Jets - GEICO’s success is real. The company had an underwriting profit in 13 of the last 14 years. That means the $9.6 billion in float GEICO gives Buffett comes with a price tag of zero in most years. It’s free money.

What’s the lesson for investors here? GEICO always had competitive advantages. The other company with a similar position is Progressive (PGR).

Both GEICO and Progressive are focused on selling directly to the customer. They don’t depend on agents. Instead they keep expenses down. And they try to separate themselves from the pack by using advertising to build up their brands.

Buffett says he first became interested in GEICO back in 1951. That’s almost 60 years ago. And there’s a lesson there. GEICO’s big advantage has been around a long time. That’s often the case. The best competitive advantages are simple things. They don’t change a lot with time. Not the ones investors are looking for. The ones you can count on to last.

GEICO is a good example of a Buffett business. It grows over time. It has a clear future. And it has a huge and easy to understand competitive advantage.

General Re is different. It’s one of the least Buffett like businesses in all of Berkshire. It doesn’t really fit with our picture of what Buffett looks for in a business.

But it does one thing well. It gives Buffett a lot of float to invest. And that’s clearly why he bought it. GEICO’s float was $9.6 billion in 2009. General Re’s float was $21 billion. That’s a big difference.

Of course GEICO also had an underwriting profit of nearly $650 million. Which is a lot more than General Re’s profit. And GEICO is a much more consistent business. The two are really very different. And I think it’s harder for investors to learn from Buffett’s purchase of General Re. Because that deal depended on Berkshire’s special ability in taking float and investing it. The GEICO deal is something any investor can understand.

On page 9 Buffett talks about a very important topic. He writes:

“In earlier days, Charlie and I shunned capital intensive businesses such as public utilities. Indeed the best businesses by far for owners continue to be those that have high returns on capital and that require little incremental investment to grow. We are fortunate to own a number of such businesses, and we would love to buy more. Anticipating, however, that Berkshire will generate ever-increasing amounts of cash, we are today quite willing to enter businesses that regularly require large capital expenditures.”

I think this may be the most important passage in the whole letter for investors. Because a lot of investors watch what Buffett does. And they try to imitate him. They try to figure out what each of his moves means. If Buffett buys a railroad - maybe you should too. Right?

Wrong. Berkshire’s needs and your needs are different. Just because Buffett is buying really big businesses - doesn’t mean you should be. Same thing with capital intensive businesses. Think railroads, power plants, and cruise ships. That’s the sort of thing Buffett is talking about here. Most investors are better off buying a stock like Microsoft or McCormick (MKC) than Carnival (CCL) or Union Pacific (UNP). All four businesses have big competitive advantages. They’ve got wide moats.

But two of those businesses - Carnival and Union Pacific - require huge amounts of capital expenditures. Operating systems and spices don’t eat up a lot of cash. Railroads and cruise ships do.

When in doubt stick to businesses with low capital expenditures. Growth at companies like that tends to be profitable for investors. Growth at asset heavy businesses often leads to only so-so returns.

You can see that at the two companies I mentioned. Union Pacific and Carnival both have wide moats. The barriers to entry in their industries are almost insurmountable. It would be close to impossible for a competitor to start from scratch and challenge them in any meaningful way. Their industries will not fragment in the future. They are pretty much future proof businesses.

But here’s the problem. Their assets - and the cash needed to replace those assets - tend to grow in line with their sales. So they’re stuck with only so-so returns on assets and equity.

If you buy stocks like Union Pacific and Carnival at book value or less than book value you should do well. But if you pay much more than book - you’ll find that all the growth in the world may not keep you from earning returns similar to the underlying businesses.

So stick to stocks like Microsoft and McCormick when you can. Buffett did that in his earlier days. If you look at the chart on page 2 of the annual letter you’ll see that the 1970s and 1980s were great decades for Berkshire.

Go back and look at the stocks Buffett was buying then. They were advertising agencies, TV stations, newspapers, and the like. They weren’t railroads and power plants.

So don’t make the mistake of copying the moves Buffett is making today. Instead try to think the way he would if he was in your shoes. That means look for smaller stocks and look for stocks that don’t eat up a lot of cash. Instead look for companies that spew free cash flow year in and year out.

That’s what Buffett did in his best days. You want to copy that guy. Not the guy who has more cash than he knows what to do with. Buffett’s problem isn’t your problem. He has more cash than he knows what to do with. You don’t.

The last quote I’m going to read you comes from page 15. Buffett writes:

“We told you last year that very unusual conditions then existed in the corporate and municipal bond markets and that these securities were ridiculously cheap relative to U.S. Treasuries. We backed this view with some purchases, but I should have done far more. Big opportunities come infrequently. When it’s raining gold reach for a bucket, not a thimble.”

That’s a great quote to end on. Too many investors are too timid when it comes to big opportunities. They spread their bets around and they wait for certainty. Well certainty never comes. And when things look most certain is when prices are highest.

A lot of stocks got really cheap last year. Too many investors who knew better were sitting on the sidelines. They bought a half position and told themselves they’d buy the other half next month when things were a little clearer.

No one likes to be early. No one likes to see falling stocks continue to drop. Especially not when you put a big chunk of your net worth in them. But in a year or two you’re not going to remember you were early. You’re going to remember you were right.

So when you find a sure thing - bet big. It’s not enough to be right. You have to put your money where your mouth is.

 

[Seven Of Nine]

oggi alla cnbc:
http://www.cnbc.com/id/35641059

Grazie per il link Leite, molto interessante

 

[Mirkopor]

dicono sia un po' cara come azione...

Buffett Is Not God; Berkshire Is No Buy
David Serchuk, 03.02.10, 4:30 PM ET


Retail investors of modest means have long had to sit on the sidelines when it came to Berkshire Hathaway. That's recently changed as the common "B" shares of Warren Buffett's firm have become affordable for investors with portfolios of all sizes. But just because you can buy Berkshire doesn't mean you should.

In fact a good case can be made that Berkshire Hathaway's shares are overvalued--just the type of purchase Buffett would avoid. So contends Vahan Janjigian, chief investment strategist at Forbes and a noted Warren watcher, as befits the author of Even Buffett Isn't Perfect.

"In my opinion, if Buffett were completely disassociated from Berkshire, he probably would not invest in it today," says Janjigian. "It is difficult to argue the stock is cheap."

Berkshire's A shares trade at $122,800 and have a trailing price-earnings ratio of 37.3, more in line with tech stocks than insurance firms (the average P/E for property and casualty insurers is 8.3). To be fair, Berkshire is into a lot more than insurance, as its portfolio includes trucking, railroads, candy, soft drinks and furniture, just to name a few diverse industries, but Berkshire's rich multiple also looks rather plump in relation to the overall market; the S&P 500 is trading at 21.7 times trailing earnings.


Here's how Berkshire got here. In anticipation of Berkshire's purchase of Burlington Northern Santa Fe Railroad, Buffett split Berkshire's B shares 50-to-1 on Jan. 21. Eventually the deal was completed with 60% cash and 40% stock. The now more liquid Berkshire Hathaway was made a part of the Standard & Poor's 500 index.

This created a feeding frenzy as institutional investors scrambled to add Berkshire to their index-tracking investments. Since the split, Berkshire's A and B shares are up an identical 17.9%, while the S&P index is down 2%.


Typically when a stock is added to the S&P it ratchets up 4% to 5%, but Berkshire rose by multiples of this, as people gladly pay a "Buffett premium," says Janjigian. Such a premium will disappear once Buffett steps down, and "since he is 79, that may happen in the not too distant future," Janjigian says.

Because Buffett is well past a typical retirement age it is hard to say a current investment in Berkshire is truly long-term. Again this is a violation of how Buffett invests, as he said in his most recent letter to shareholders, "In the end, what counts in investing is what you pay for a business--through the purchase of a small piece of it in the stock market--and what that business earns in the succeeding decade or two."

If you were to invest in Berkshire now you would have just placed a bet on the continued outperformance of someone about to enter his ninth decade and who has yet to make his succession plans public. No doubt Berkshire owns businesses that can profitably produce for decades, but will Buffett?

Janjigian is also disturbed that Berkshire paid for Burlington with stock. "The fact that he could purchase the company only by using a combination of cash and stock shows he really extended himself to do this," he says.

Buffett has used stock to purchase companies twice before; both were bad buys. One was reinsurance firm General Re. After the purchase Buffett saw the firm's earnings decline significantly. General Re also had derivatives contracts that cost almost $500 million to unwind. The other was NetJets, which Buffett concedes had a long history as a money-loser.

Investors should also know that Buffett takes an active interest in corporate risk, including derivatives contracts. "At Berkshire, I both initiate and monitor every derivatives contract on our books. ... If Berkshire ever gets in trouble, it will be my fault," he wrote to shareholders.

This is an admirable stance, but shows Berkshire has many of its most potentially troubling assets in Buffett's capable but aged hands. As we know all too well, these contracts can become toxic fast. No doubt Buffett knows what he's doing, but will his still-unnamed successor?

If there are Buffett skeptics there are always Buffett backers, and they deserve to be heard too.

Ron Roge, the head of investment firm R.W. Roge & Co., says his firm has owned Berkshire for three years, and believes the A shares will ride up to $152,000 and the B shares to $100. He says his firm believes Berkshire will have $93,000 per share of investments and $5,000 of earnings per A share. Roge adds his firm has pegged a multiple of 12 on those earnings, making the firm's intrinsic value higher than its current share price. Knowing this he sees both retail and institutional investors slowly soaking up the stock.


Marc Lowlicht, the head of the wealth management division at Further Lane Asset Management, is also bullish on Berkshire.

Lowlicht says he feels this way because Buffett made some smart deals during the credit crisis. To wit Berkshire now owns 50,000 shares of Goldman Sachs cumulative preferred at the 10% interest rate, plus warrants to purchase 43.5 million shares of common at a strike price of $115. Goldman currently trades at $155.

Less advantageously Buffett also owns 30,000 shares of General Electric cumulative preferred with a 10% interest rate and the right to purchase 134.8 million more between now and 2013 at $22.25. GE currently trades at $15.70.

Buffett is such a fixture in the business world we sometimes forget just how singular he is: master analyst, executive and huckster. Knowing this it is hard to imagine how anyone could fill all these considerable shoes. Will it happen? Not even the oracle can say.

 

[Seven Of Nine]

Wal-Mart

Stamattina mi sono fatto un giretto sul sito di Wal-Mart e sono rimasto basito a vedere questi video: http://walmartstores.com/Video/?c=616
Penso che una cosa così in italia non sarebbe possibile, non ce li vedo quelli della Coop a fare la tifo da stadio mentre il loro CEO canta i risultati con la scritta finale "Coop is winning"

Un titolo che terrò in watchlist anche se non ho intenzione di comprare al momento visto di solito underperforma l'indice all'inizio del ciclo economico. E considerando anche che la questione cambio è da affrontare con attenzione visto che WMT è quasi tutta concentrata sul dollaro e per noi europei di certo è meno a buon prezzo rispetto a qualche mese fa considerando il crollo dell'euro/dollaro..

Wal-Mart Hikes Dividend 11%

BENTONVILLE, Ark.-- Wal-Mart announced that it upped its annual dividend by 11% on Thursday.
The retail behemoth will now pay out $1.21 a share over the course of the current fiscal year, compared with $1.09 a share in fiscal 2010.
The first quarterly payment of 30.25 cents will be made on April 5 to shareholders of record on March 12.
Wal-Mart has increased its dividend every year since 1974. In 2009, the company raised its dividend 15% to $1.09 from 95 cents the year prior.

 

[Capirex85]

Buffett Is Not God; Berkshire Is No Buy
David Serchuk, 03.02.10, 4:30 PM ET


Retail investors of modest means have long had to sit on the sidelines when it came to Berkshire Hathaway. That's recently changed as the common "B" shares of Warren Buffett's firm have become affordable for investors with portfolios of all sizes. But just because you can buy Berkshire doesn't mean you should.

In fact a good case can be made that Berkshire Hathaway's shares are overvalued--just the type of purchase Buffett would avoid. So contends Vahan Janjigian, chief investment strategist at Forbes and a noted Warren watcher, as befits the author of Even Buffett Isn't Perfect.

"In my opinion, if Buffett were completely disassociated from Berkshire, he probably would not invest in it today," says Janjigian. "It is difficult to argue the stock is cheap."

Berkshire's A shares trade at $122,800 and have a trailing price-earnings ratio of 37.3, more in line with tech stocks than insurance firms (the average P/E for property and casualty insurers is 8.3). To be fair, Berkshire is into a lot more than insurance, as its portfolio includes trucking, railroads, candy, soft drinks and furniture, just to name a few diverse industries, but Berkshire's rich multiple also looks rather plump in relation to the overall market; the S&P 500 is trading at 21.7 times trailing earnings.


Here's how Berkshire got here. In anticipation of Berkshire's purchase of Burlington Northern Santa Fe Railroad, Buffett split Berkshire's B shares 50-to-1 on Jan. 21. Eventually the deal was completed with 60% cash and 40% stock. The now more liquid Berkshire Hathaway was made a part of the Standard & Poor's 500 index.

This created a feeding frenzy as institutional investors scrambled to add Berkshire to their index-tracking investments. Since the split, Berkshire's A and B shares are up an identical 17.9%, while the S&P index is down 2%.


Typically when a stock is added to the S&P it ratchets up 4% to 5%, but Berkshire rose by multiples of this, as people gladly pay a "Buffett premium," says Janjigian. Such a premium will disappear once Buffett steps down, and "since he is 79, that may happen in the not too distant future," Janjigian says.

Because Buffett is well past a typical retirement age it is hard to say a current investment in Berkshire is truly long-term. Again this is a violation of how Buffett invests, as he said in his most recent letter to shareholders, "In the end, what counts in investing is what you pay for a business--through the purchase of a small piece of it in the stock market--and what that business earns in the succeeding decade or two."

If you were to invest in Berkshire now you would have just placed a bet on the continued outperformance of someone about to enter his ninth decade and who has yet to make his succession plans public. No doubt Berkshire owns businesses that can profitably produce for decades, but will Buffett?

Janjigian is also disturbed that Berkshire paid for Burlington with stock. "The fact that he could purchase the company only by using a combination of cash and stock shows he really extended himself to do this," he says.

Buffett has used stock to purchase companies twice before; both were bad buys. One was reinsurance firm General Re. After the purchase Buffett saw the firm's earnings decline significantly. General Re also had derivatives contracts that cost almost $500 million to unwind. The other was NetJets, which Buffett concedes had a long history as a money-loser.

Investors should also know that Buffett takes an active interest in corporate risk, including derivatives contracts. "At Berkshire, I both initiate and monitor every derivatives contract on our books. ... If Berkshire ever gets in trouble, it will be my fault," he wrote to shareholders.

This is an admirable stance, but shows Berkshire has many of its most potentially troubling assets in Buffett's capable but aged hands. As we know all too well, these contracts can become toxic fast. No doubt Buffett knows what he's doing, but will his still-unnamed successor?

If there are Buffett skeptics there are always Buffett backers, and they deserve to be heard too.

Ron Roge, the head of investment firm R.W. Roge & Co., says his firm has owned Berkshire for three years, and believes the A shares will ride up to $152,000 and the B shares to $100. He says his firm believes Berkshire will have $93,000 per share of investments and $5,000 of earnings per A share. Roge adds his firm has pegged a multiple of 12 on those earnings, making the firm's intrinsic value higher than its current share price. Knowing this he sees both retail and institutional investors slowly soaking up the stock.


Marc Lowlicht, the head of the wealth management division at Further Lane Asset Management, is also bullish on Berkshire.

Lowlicht says he feels this way because Buffett made some smart deals during the credit crisis. To wit Berkshire now owns 50,000 shares of Goldman Sachs cumulative preferred at the 10% interest rate, plus warrants to purchase 43.5 million shares of common at a strike price of $115. Goldman currently trades at $155.

Less advantageously Buffett also owns 30,000 shares of General Electric cumulative preferred with a 10% interest rate and the right to purchase 134.8 million more between now and 2013 at $22.25. GE currently trades at $15.70.

Buffett is such a fixture in the business world we sometimes forget just how singular he is: master analyst, executive and huckster. Knowing this it is hard to imagine how anyone could fill all these considerable shoes. Will it happen? Not even the oracle can say.

Cara? Non penso. Io la vedo molto vicina al fair value. Certo che adesso è un pò tardi per svegliarsi... quando 1 anno fa le B share erano a 2300 $.

Sicuramente ci sono aziende più sottovalutate in questo momento e che renderanno di più... ma la BRK a sti prezzi a mio modo di vedere ha buone chances di battere l'indice nel lungo periodo.

 

[locco68]

Stamattina mi sono fatto un giretto sul sito di Wal-Mart e sono rimasto basito a vedere questi video: http://walmartstores.com/Video/?c=616
Penso che una cosa così in italia non sarebbe possibile, non ce li vedo quelli della Coop a fare la tifo da stadio mentre il loro CEO canta i risultati con la scritta finale "Coop is winning"

Un titolo che terrò in watchlist anche se non ho intenzione di comprare al momento visto di solito underperforma l'indice all'inizio del ciclo economico. E considerando anche che la questione cambio è da affrontare con attenzione visto che WMT è quasi tutta concentrata sul dollaro e per noi europei di certo è meno a buon prezzo rispetto a qualche mese fa considerando il crollo dell'euro/dollaro..

Wal-Mart Hikes Dividend 11%

BENTONVILLE, Ark.-- Wal-Mart announced that it upped its annual dividend by 11% on Thursday.
The retail behemoth will now pay out $1.21 a share over the course of the current fiscal year, compared with $1.09 a share in fiscal 2010.
The first quarterly payment of 30.25 cents will be made on April 5 to shareholders of record on March 12.
Wal-Mart has increased its dividend every year since 1974. In 2009, the company raised its dividend 15% to $1.09 from 95 cents the year prior.

Anch'io la seguo da tempo...Zio Warren la ha in carico a 52,56 di media....come Kraft la prendo se la pago meno di lui......

 

[nemo17]

Warren Buffett tells Baylor business students: Look at the human element behind the companies

Warren Buffett’s investment advice has as much to do with the human element behind companies as their financial standings, said a Baylor University student who heard the billionaire speak in an exclusive question-and-answer session.

“He doesn’t buy into companies that aren’t passionate about what they do,” said Stephanie Posey, an information systems senior from Magnolia who took part in the Omaha trip. “He can look at someone and tell they are passionate about what they do.”

He also told them, “Make sure you buy a company that can be run by idiots because some day an idiot’s going to be running it,” she said.

Posey traveled with 25 other Baylor students to take part in the Feb. 26 session.

Student groups from the University of Texas, Ohio State, Duke University, Western Ontario, Creighton University and New York University also were at the session in Buffet’s Omaha hometown. Buffett, one of the world’s richest people, hosted seven such sessions with college students last year.

Schools have to apply to take part, and there is a long waiting list. Hope Koch, assistant professor of information systems with Baylor’s Hankamer School of Business, said she had been trying to get Baylor into the program for three years.

Finally, Grady Rosier, chief executive officer with the McLane Co., a Temple firm owned by Buffett’s Berkshire Hathaway conglomerate, stepped in, Koch said.

Rosier got Baylor moved up on the list, she said.

Koch and Karen Mittendorf, assistant director for student services for the graduate business programs, accompanied the students.

Eleven students were from the university’s information systems program, and 15 were Master’s of Business Administration students.

The students toured Buffett’s Furniture Mart in Omaha before the Q&A session. Then came a meal at Buffett’s favorite Oklahoma eatery: Piccolo Pete’s.

The students also picked up some reassuring news about the economy.

Despite the recent, long recession and its continuing high unemployment hangover, things will get better, Buffett told the students.

“America has its ups and downs, but it always rebounds, and that’s just part of life,” MBA student Ty Findley said Buffett told them. “The country’s been through worse, and it always come back.”

Buffett did not directly address current economic policy but answered all questions, including one from a student who said Buffett’s personal politics seemed to clash with decisions made for operating his company, Findley said.

“As a person, he has a right to speak his mind. But when he’s in the building, he’s going to do what is right for Berkshire Hathaway,” Findley said Buffett told them.

Despite his sky-high personal wealth, Buffett’s feet are firmly planted on the ground, the Baylor students said.

Buffett took questions cold, without having them submitted ahead of time; he was humorous, friendly and humble.

“It was pretty cool to see someone with that much money be so down to Earth,” said Isaiah Cisneroz, a junior from Brownwood majoring in information systems.

Another information systems major, Marc Link, of Southlake, said Buffett’s recipe for success isn’t complicated.

“If you do something you like, you usually succeed in that field,” Link said.

 

[Capirex85]

He also told them, “Make sure you buy a company that can be run by idiots because some day an idiot’s going to be running it,” she said.

 

[Seven Of Nine]

Mi rivolgo agli azionisti Berkshire che ne sanno più di me:

Se non sbaglio nel deal Burlington c'è una parte pagata in azioni BRKB; sapete quante sono e quando veranno emesse??

 

[nemo17]

Mi rivolgo agli azionisti Berkshire che ne sanno più di me:

Se non sbaglio nel deal Burlington c'è una parte pagata in azioni BRKB; sapete quante sono e quando veranno emesse??

Esatto.. gli azionisti BNSF potevano scegliere di ricevere anche B share... ma non so poi quanti hanno scelto...magari i numeri definitivi non sono ancora resi noti.