axp, if buffett had been a big buyer of brk rather than ibm, would you be buying ibm or have any interest in ibm ? IF buffett had been a real buyer of brkb in the 70s - 80s over ibm at 170ish we all would have made a huge score including buffetts foundations, in brkb. WHY he didn't understand this CONcept is a true mystery and always will be since that question is not allowed to be asked ??? dear uncle, please do a real interview while you are healthy so we can learn how
you think, thank you, your favorite partner, hc.
We would have been better off if we bought IBM 10 years ago but even today it's a bargain.
13 times earnings
Earnings are growing at 10% plus per year
$16/share in free cash flow which is also the same as their earnings.
2% dividend yield which should double every 6-7 years yet current 10 year treasuries only yield 2.5%
What do they do with all that FCF? Buy back stock at 13 times earnings and raise the dividend every year-in 2004 the dividend was $.7/sh and now it's $3.8
Also, our IBM position acts as a reserve for our insurance operations whereas a share repurchase program would do the opposite unless those shares were bought for less than book value something BRK would never be able to do while Buffett still runs the company.
Yes, over the last nine years, 2003 to 2012, Earnings did grow 9% per year.
And Earnings PER SHARE grew by 14.2% per year!
In my opinion, the PER SHARE growth rate is a joke because it requires that you SPEND some of your earnings each year to buy back shares. That faux growth rate looks like "double counting" to me. More later.
Now look behind the numbers to see why.
While Revenue only grew by a dismal 1.8% per year, the profit margin did expand by 7.2% per year.
So, to fantasize that earnings will continue to grow by 9% per year requires that you also believe that the profit margin will continue to expand ("double" over the next ten years!). Neither I, nor the Value Line analyst, believes that's going to happen!
In brief, here's my interpretation of the analyst's projections for the next five years: Revenue grows 3.3% per year, the profit margin expands 1.9% per year, the payout ratio decreases 0.9% per year, and buybacks reduce the share count by 2.2% per year. If that actually happens, then earnings per share should grow 7.6% and the dividend per share should grow 6.7% per year. Now, I absolutely hate buybacks because, in my opinion, they distort reality. Assume for the moment that there was only ONE share and that WEB owned it, then earnings per share would only grow by 5.3% per year and THAT growth rate would eventually drop to 3.3% once the profit margin had peaked.
how much times book is he buying IBM ? isn't brk a more diversified company than ibm ? Where would ibm be trading today if he hadn't bought so much plus the follow in buyers behind buffett ? ibm would still be in the 170s without buffett and his promoting their stock. Makes little sense tho it does help to goose the indexes which helps to keep our puts out of the money.