Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 1
Given the thread on who are really good value investors versus posers, who would the esteemed members of this Board nominate?
Jim - is excluded. He has already demonstrated his bona fides.
No. of Recommendations: 0
Buffett,
Munger,
Lu,
Klarman,
Gayner,
Smith.
Russo
No. of Recommendations: 1
And who would I give my money to.... only Buffett, IMO he stands head and shoulders above the rest. He is unfortunately stymied by the size of Berkshire and so returns overall are average. If he had several billion to manage he'd be hitting it out of the park I think.
No. of Recommendations: 1
apart from the obvious investors Buffet etc. I like following Norbert Lou and Francois Rochon.
They tend to invest for the long run and you can pick some decent ideas
No. of Recommendations: 1
I remembered more than 15 years ago I was thinking how could I apply my engineering background to value investment in the high tech industry. I couldn't pull trigger on any of the now-obvious high flyers: Apple, Microsoft, Google, Facebook, etc. There are two mistakes made:
1. I could not be certain on how strong is the moat, and never be sure how long the growth would continue
2. I put too much focus on the current-valuation, those companies had never been cheap.
No. of Recommendations: 1
It's a tough one. Im quite lenient, there's a range of outcomes and I'm conservative with growth. If I think a company can maintain 12-15% EPS growth then I'm happy to pay 20x last few years average earnings if it's 10% it's more like 15 times. Eg when Alphabet fell to 17-18 it's attractive, Meta at 20 and below then that was attractive, it's about consistency of those earnings and growth eg how sustainable is the business model and what's the moat. Sometimes it goes wrong like with BABA and the earnings halve. It'll take longer..... As long as you get more right than wrong you should be OK.
That's all I do and filter the companies that meet that model from the super investor picks. It leaves a very shortlist of companies perhaps 10-15 that I like max and only a handful at a valuation that's attractive at the time.
No. of Recommendations: 8
1. I could not be certain on how strong is the moat, and never be sure how long the growth would continue
2. I put too much focus on the current-valuation, those companies had never been cheap.
If #1 is true, then you probably did the right thing by avoiding them, despite leaving money on the table.
If one had to have only one skill in investing, it's the ability to see around corners to see where a firm's moatiness is headed. If 5-10 years later it's still true that nobody is successfully competing with and undercutting their oddly high return on assets and equity, it will work out well. So just concentrate on finding those.
And, perhaps more importantly, staying away from the ones where you don't have that certainty, even realizing that many of them will do very well. If you can't see the moat and ramparts clearly, and the investment works out well, you were just lucky. Missing out on those is not an error, it's prudence.
The ones I kick myself for are the ones where I WAS that certain, and I didn't invest, and they (predictably) made a fortune for their shareholders. Or, perhaps more annoying, the ones where I closed the position for a quick profit.
Jim
No. of Recommendations: 0
And which are those, certain / closed position early?
And looking back in those experiences how has your investment methodology changed now?
That's why I've moved more towards the coffee can approach, although sometimes I invest and change my mind when Prosus jumped from 40's back Upto 70's I lightened up and when Meta jumped from 100's to 300's again I lightened up a bit and purchased Alphabet with the Prosus proceeds and Tencent with the Meta proceeds, the reason being I'm happy for them to be coffee can stocks. Since I sold Meta and Prosus have dropped back a bit but I'm happy to hold the rest and see what happens. So if I take the coffee can approach there's even fewer companies in that camp!
No. of Recommendations: 12
And which are those, certain / closed position early?
I am sometimes good at spotting a good deal and buying, but then I take a profit when it's no longer offering that discount margin of safety instead of leaving well enough alone. I have done that with any number of firms. Others, I have simply sat on my hands waiting for it to be conventionally cheap, waiting forever. I do lots of dumb things.
Some of them are great firms, others just seemed great to me, at least at the time--obviously my picks are not always good ones.
Google is the poster child. I stared for a decade or more before buying any.
Some picks I bought, then sold too soon to benefit from their long run returns. ATD.TO, Dollar Tree, Carmax, Apple. Some I've never owned, like DOL.TO or Costco.
Dollar Tree is a very good example.
I was buying in the stretch 2007-12-31 through 2008-01-08. I did do a table-pounding post at the time, on the Falling Knives board, though nobody cares.
That built my first "core" position at prices (3:1 split adjusted) in the range $7.64 to $8.69. Murphy's law dictates that the biggest buys were at the highest price, so my weighted average entry was a bit over $8.40. There is no dividend, so the math is easy: since then the return has been 18.18%/year compounded for 15.64 years, despite the 12% drop in the last week. That's a pretty good result for any stock pick, if I do say so myself. But did I get that? No, I traded around the position for a while, and within a couple of years I had none, using the money to buy other things.
I did get back in again on other dips, and repeated several times. When it was really cheap, I occasionally bought calls. My IRR has been wonderful, but as mentioned, ignoring the leverage I probably would have been better off just buying that once and sitting on my duff thereafter.
I have become pretty good about throwing in the towel and bailing on something I no longer believe in or fully trust, whether it's a good price at the time or not. I don't just sit and wait for something good to happen to a pick I no longer believe in. I had nice profitable exits from WFC, Tesco, BAM. Also WMT at the end of one bubbly run. My fundamentals uneasiness is sometimes beneficially magnified by my tendency to want to sell when a price is good. Others I bailed and took the loss, like my most recent position in BABA (nice small loss as it was just some high strike calls). Or Nokia, back in þe olden days. And IBM of course.
Jim
No. of Recommendations: 0
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1. I could not be certain on how strong is the moat, and never be sure how long the growth would continue
2. I put too much focus on the current-valuation, those companies had never been cheap.
If #1 is true, then you probably did the right thing by avoiding them, despite leaving money on the table.
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In retrospect, I should have just looked at them from a consumer point of view and forgot about the high-tech, that would probably be easier to understand, just like Buffett did years later on Apple. And, I could have spread out among a few top picks, without very high certainty on each.
No. of Recommendations: 1
Very interesting.
So how do you view DG now are you looking on a 1-2 year basis or 5 to 10 yrs out?
No. of Recommendations: 16
So how do you view DG now are you looking on a 1-2 year basis or 5 to 10 yrs out?
Well, as mentioned, I am often dumb, sometimes predictably so. I expect I'll slightly-less-than-double my money relatively quickly and cash out. Again. 18 months, wild guess??
The time frame till I do my dumb selling depends somewhat on what's cheap at the time. For example, I've bought a whole lot of DG right now because the shortish term outlook for Berkshire doesn't seem unusually good.
The super simple case fro DG:
(1) I figure they'll probably make over $11 a share next year. If not then, then shortly thereafter.
(2) They'll probably trade at over 20 times earnings within 18 months. If not then, then probably not all that long after, and earnings are likely to trend higher till it happens.
So, 11*20= $220, which is up 42% from $155. Without any leverage, that's 19%/yr compounded if it takes two years. My baseline expectations for Berkshire's price in the next year are more in the range of inflation plus 2%, give or take a few percent. I like to be pleasantly surprised, so I certainly haven't sold out. But my near term expectations are modest.
Jim
No. of Recommendations: 3
Given the discussion about the bump in covid earnings I'd settled on the following.
I took last 5 years earnings per share to give an average of $8.80 grew these by 8% over the next 5 years(challenging environment) and because of this gave a slightly lower multiple of 18.
12.93 x 18 = 232 8.4% compounded over the next 5 years from where we are today.
