I just thought I would ask the same question over and over and over and over and over and over again. It seems to be the thing to do on this board.
Why do I refer to everyone else as "experts," when everyone knows I am the only real expert here?
Why doesn't uncle get this? Why doesn't he read the yahoo board (or does he...)?
Why is the sky blue?
Why is anything anything?
" To the extent possible, we would like each Berkshire shareholder to record a gain or loss in market value during his period of ownership that is proportional to the gain or loss in per-share intrinsic value recorded by the company during that holding period. For this to come about, the relationship between the intrinsic value and the market price of a Berkshire share would need to remain constant, and by our preferences at 1-to-1. As that implies, we would rather see Berkshire’s stock price at a fair level than a high level. Obviously, Charlie and I can’t control Berkshire’s price. But by our policies and communications, we can encourage informed, rational behavior by owners that, in turn, will tend to produce a stock price that is also rational. Our it’s-as-bad-to-be-overvalued-as-to-be-undervalued approach [= may disappoint some shareholders
Let me play.
A very real business exists. It is an international business, but its offices are in New York, USA. Over the last several years, the people running this business have been selling the lower-margin businesses and have been buying/entering into new, higher margin businesses. Because of this, revenues are falling, but profits are rising. This has been the theme over the last hundred years or so. This is the only way a technology business survives over time.
While all this “business shifting”, “lowering revenues”, and “rising profits” has been is going on, the business has generated $15.7 billion per year in free cash flow (average over the last 5 years). The highest year was $17.3 billion in 2009 and the lowest year was $14.6 billion in 2008. Over the same last 5 years, the people running this business have taken some of the free cash flow generated and have bought back $59.2 billion in shares and have raised the dividend on the remaining shares.
Currently, Yahoo shows that this business has 1.09 billion shares outstanding. This equates to $14.40 of free cash flow per share. How much would someone pay for that? Currently, Mr. Market is paying about $182.00. This results in a free cash flow yield of about 8%.
Again, the profitability of the business has gone up at the same time. How can this be? Sleight of hand? Or, is the business a cash cow, surrounded by a rather large moat with alligators in it? I will leave this to Mr. Market.
In those immortal words of Bugs Bunny, "what a maroon!"
The way I remember this is that BRK marked KFT (and all of their equity holdings) to market, as GAAP requires. What was at issue was that the mark was less than what BRK paid for KFT. Buffett argued that according to GAAP, because they were not selling, did not require them to write down their cost basis. Any difference would be dealt with at the time of a sell. The SEC pressed the issue, so they wrote down the basis. That reduced yearly earnings, which saved BRK on their tax bill that year. Within a few months, the market value of KFT went back above BRK's cost basis. This resulted in increased earnings the next year, which resulted in a higher tax burden. Nothing of any substance resulted. ;)
The Top 10 U.S. Patent Winners of 2013:
1) IBM 6,809
2) Samsung 4,676
3) Canon 3,825
4) Sony 3,098
5) Microsoft 2,660
6) Panasonic 2,601
7) Toshiba 2,416
8) Hon Hai 2,279
9) Qualcomm 2,103
10) LG Electronics 1,947
I see your point, but disagree. ROE is a great metric, IF you use it as an indication of how much money (earnings) must be fed back into the business to maintain current profitability. Businesses that earn abnormally high ROEs are required to feed less earnings back into the business, than do others, to maintain current profits. These earnings are therefore available to be given back to shareholders or invested in new opportunities.
IBM announced today that it once again led the United States in the number of patents. That's an achievement in its own right, but this is the 20th year in a row that IBM has lead the list.
It wasn't particularly close. Here's the top 10, from IFI claims. IBM's total was bigger than Accenture, Amazon, Apple, EMC, HP, Intel, Oracle/SUN and Symantec combined.
I seem to remember that the B's were split on Jan 22, 2010. Since Jan 25, 20010, BRK-Bs are up about 49%. Since that day, the S & P 500 is up about 68% excluding dividends. Why why why??????
I bought KO for the first time in 2008-2009 market collapse. I have been satisfied with my purchase so far and have added to it when I could buy at reasonable prices. The only thing that bothers me about KO is that they continue to pay a dividend. YYYYYYYYYYYYYYYYY
DP, I wonder why WEB did not mention what price-to-revenue he paid for the farm and commercial real estate?
Buffett and Munger Annual Meeting 2013 Q&A
Question: Climate change and its impact on companies. If asked what would underwriting experts at insurance companies advise you are emerging risks to your many enterprises by climate change? Do you have thoughts on carbon price debate?
Warren: If you have noticed, the climate is getting a lot warmer in recent years. Obviously, Charlie knows more about science than I do, which is not saying a whole lot. But my general feeling is that there is a reasonable chance that ppl worried about warming and co2 effect are right. But I don’t know enough that I can say as an expert. I don’t know but I’m willing to assume that there are a lot of very smart ppl who think that and its reasonable assumption. I don’t think makes real difference in assessing insurance rates from year to year. We have a general tendency to be pessimistic in assumptions about the likelihood of natural catastrophes but we would have a general bias if no carbon were going on, we would assume it’s going to be somewhat worse. Global warming in terms of lease setting price of insurance year to year is not a real factor. General pessimism bias is something of a factor.
Why does uncle buy the stocks of businesses at a price that results in an initial rate of return of at least 15% when he could buy those that result in an initial rate of return of 11%?
He should listen to me.
Why doesn't he listen to me?