For the last 2-3 years, value money managers (like Bill Nygren, David Dreman) have lined up to praise (and buy) Washington Mutual. It wasn't just A prick, it was their No. 1 pick. It might even be The Consensus Value Pick of the last couple of years, if there was a way to compute what stocks the value touts were hawking most aggressively in the media. (It's not just mo-mo guys who "talk their own book." They all do it and hope we pile on with them.) Very low p/e, supposedly excellent and comprehensible busines, etc. I kept waiting to see if Buffett would buy a bunch of WM since its huge enough that he could take a $1-2-3B position. But he never buys WM. This a.m., it warns, fires 5,000 people and is way down __back to $40. Well, it was close to $35 three years ago. In other words, the CHEERY CONSENSUS about Washington Mutual __even though it was a consensus among value investors, all of them proud to be "contraraians"__ has been a mediocre to poor investment. And may sink lower before the selloff is over. OK, if you bought it FOUR years ago, you did great. But, just my impression, even our value heroes mostly jumped on board after it had gone from the teens to the $30's.
I've read those testimonials to WM a dozen times, with Nygren leading the pack, and said, "I must be an idiot not to buy some of that." But I never did. I figured, "That's in Buffett's circle of competence. Leave it to Warren." Once again, I'm glad I just Let Warren Do It. (Now if I'd only let him handle my LVLT "investment" through BRK, too, I'd be one happy camper. But nooooooo...)
At one point, I suspected WEB referred to WM when he said he could not understand footnotes of a bank.
WM's record of derivative gain is ridiculous. As WEB pointed out, it is absurd to evaluate derivative gains every quarter. No, WM didn't do that. It recorded derivative gain each time it had a loss in MSR (Mortgage Service Right). The gain was no small figure but in the range of billion - per quarter !!!
I don't understand derivatives. But this pattern is bothering. I believe WM's problem may potentially be a mini-ENRON !
I think you were right about it being $35 3 years ago.... Hasn't it always been what price you pay, not when you buy?
How about BRKA shares at $84k 5 years ago?
Why hasn't WEB bought more of many things??? WFC, AMEX, KO, G, silver, gold, utilities, pipelines, etc....
Or, why hasn't he bought Mohawk, CEC, HD, Lowes, BRO, MCD etc.??
WEB has repeated many times, he doesn't like banks... (but he dowes owns small positions in suntrust and M & T correct? )
Thanks on the WM info....
and my question is.......
On MRK....Buffett has also not bought
...even the basket that he suggested he
might or should have about the Hillary times
...when pharmas...got inexpensive many years
what is your thought on MRK...if any...
relating to Buffett not buying....
best to you, bdparts
Never studied the drugs. (Taken a few long ago.) @ $35/sh, I'd put a little MRK under the matress. Industries change. (Duh.) For 20 yrs WEB said a TV license was a gold mine. Then, one day, stocks like ABC-Cap Cities weren't a free-lunch anymore. Could this happen w drugs (as a group)? No idea. Though aging Boomers sure ought to prop 'em up, you'd think. We'll buy any pill that promises anything. IOW, no opinion! Always look for your posts.
re:"I've read those testimonials to WM a dozen times, with Nygren leading the pack, and said, "I must be an idiot not to buy some of that." But I never did. I figured, "That's in Buffett's circle of competence. Leave it to Warren." Once again, I'm glad I just Let Warren Do It. (Now if I'd only let him handle my LVLT "investment" through BRK, too, I'd be one happy camper. But nooooooo...)"
I bought WM in late '99 and sold again in early-mid 2001. Not only did my shares soar in value but I managed to fluke a sell on the day when the Aussie dollar hit it's lowest ever value. That was one of the best stocks I ever bought and certainly one of the best I ever sold. Half the gains alone allowed my wife and I to travel the world for a couple of months flying business class everywhere.
Can't say I ever regret buying it and would have to buy it again....if it ever reached a p/e of 5 again.
Actually, you are correct that one would have been relatively idiotic to buy BRKA instead of WM, given that the latter has permitted its shareholders to realize much larger capital gains, as well as dividends:
I'm gald you posted your experience with WM. The person who posted that russ's statements about WM were similar to my statements about BRK was so outrageous that I didn't know where to begin to rebut it. You, unintentionally I'm sure, have done it for me. Thanks! Your investment in WM was certainly better than an investment in BRK during the same time period.
At the right price, it might be wonderful. But it seems to me I've seen it pumped by some of the pros this year at over 40 bucks.
Come to think of it, I have some value stocks that I'm ready to sell. I've tested them out, their price increase was very good. Want 'em?
Yeah, well, some of us have never quite understood the thinking behind labelling Bill "Home Depot" Nygren a value investor.
I checked out WM before, on similar rumors of value. Here's what I found:
Price/3-year-avg E $45/$2.77 = 16
Acquisition P/E .. (P-Cash+Debt)/3-year-avg E = ($45 + $40)/$2.77 = 30
Current ratio < 0.1
Assets / Liabilities = 1.07
doggydogworld pointed out a substantial error in the value estimate that I posted for WM earlier today. For anybody who missed it, ddw noticed that my "acquisition P/E" included assumption of debt as a cost but failed to include the resulting savings in interest expense.
Here's a rough correction of my mistaken line:
Acquisition P/E .. (P-Cash+Debt)/3-year-avg E = ($45 + $40)/$5 = 17
Still not automatically what I'd call "value" but much more "valuable" than my original (& mistaken) value. My apologies for the error.
<<Acquisition P/E .. (P-Cash+Debt)/3-year-avg E = ($45 + $40)/$2.77 = 30>>
If you're going to add net debt back into the acquisition price you need to add net interest paid back into the earnings.
Another thing to consider with WM is portfolio mix. I've not followed them in the least as an investment, but in business dealings with the company, I've only seen them involved in lower grade paper. They may get enough higher grade loans to offset, but it is something any potential investor should take a hard look at to be certain of.
Not sure why a big deal is being made about the 3rd vs 4th quarter comparison. The 4th quarter has always been the weakest one for the mortgage and real estate industry.
On their last conference call, well over a month ago, FNF announced that they were reducing staffing levels (by more than 10%) in their title insurance operations because of decreasing business particularly in refis. I just don't know how WM's announcement could be considered a "surprise."
Do not currently own WM but think that it might be attractive below $40. Would do more DD at that time.
These charts are even better (remember the 3-4% dividends too):
>>>In other words, the CHEERY CONSENSUS about Washington Mutual __even though it was a consensus among value investors, all of them proud to be "contraraians"__ has been a mediocre to poor investment. <<<
Please, Russ - your whole statement is absurd.
The 5-year chart looks even better.
You sound like GHHB talking about Berkshire.
IMO, excellent company that fell into the category of having a small storm cloud on the horizon. I held it for awhile, made some money and moved on when the excesses within their niche continued to grow.