It is as difficult to sink a business without debt as it is sink a ship without holes.
- Manlobbi
Personal Finance Topics / Retirement Investing
No. of Recommendations: 5
No. of Recommendations: 8
And from an annual meeting, apparently.
AUDIENCE MEMBER: Like, many others, I read Alice Schroeder’s analysis of Berkshire Hathaway with great interest this last year. And she described her analysis as a toolkit for investors.
And I’m wondering if you see any substantial flaws in any of her toolkit. And in particular, the float-based valuation model that she put together. What are your views on that?
WARREN BUFFETT: Well, I don’t want to comment on valuation.
But I can tell you that Alice is a first-class and serious analyst who spent a lot of time on Berkshire, and probably produced the first comprehensive report, at least that’s been widely circulated, in the history of Berkshire.
It’s kind of interesting that we got to a hundred billion dollars of market value before anybody really published a report about the company, but —
Alice understands the insurance business very well. She’s an accountant, by background. So, she understands numbers. And she did a lot of work on the report. And I do recommend it to you as a toolkit. I make no comment at all about valuation.
Charlie?
CHARLIE MUNGER: Nothing to add.
No. of Recommendations: 5
<<Buffett: “….first comprehensive report, at least that’s been widely circulated, in the history of Berkshire<<
It was THAT good. No less than the report that essentially introduced the world to the unique advantages most intelligent investors now know or take for granted about Berkshire. But did NOT know at all in 1999.
It was a groundbreaking research report. And in my mind set the stage for an awareness of Berkshire’s unique advantages that prompted investors to FLOCK to Berkshire in the Bear market less than 2 years later.
This report and Schroeder’s demonstrated superior knowledge of Berkshire— dwarfing all analysts combined—led to Buffett’s invite to tell his life’s story.. exclusively.
Thanks for sharing this Report! When you read it today its..OK.
Rewind to 26 years ago? It’s..OMG..Berkshire defined for the world.
No. of Recommendations: 11
Alice's report should be required reading for anyone trying to seriously value Berkshire. It shows how conservative the old Two Column method is and even more contemporary sum of the parts valuations. "If I were offered $7Bil for $7 Bil of float and DID NOT have to pay tax on the gain, but would thereafter have to stay out of the insurance business forever- a perpetual non compete- would I accept that? The answer is NO." WEB 1996 A.M...He said this because the float will grow and this was before we had such a long record of getting $171 B of float at less than zero cost. So, using the cash and equities as a proxy for the value of the insurance businesses is conservative to the point of gross under valuation... in my opinion at least
No. of Recommendations: 1
" So, using the cash and equities as a proxy for the value of the insurance businesses is conservative to the point of gross under valuation... in my opinion at least."
Which brings us back to the question I tried to get Buffett to answer for two decades. WHY was he so reluctant to authorize buybacks at material discounts to IV? WHY?
No. of Recommendations: 3
"Which brings us back to the question I tried to get Buffett to answer for two decades. WHY was he so reluctant to authorize buybacks at material discounts to IV? WHY?"
I think the simple answer is that consistently shrinking the shares outstanding also shrinks his 'canvas' as opposed to putting the money to work in outside investments or acquisitions...which obviously expands his life's work.
Is that perfectly rational as a steward of others capital? Maybe not, but we all have our own unique form of humanity and no one is perfect as discussed in another thread here recently.
No. of Recommendations: 1
" I think the simple answer is that consistently shrinking the shares outstanding also shrinks his 'canvas' as opposed to putting the money to work in outside investments or acquisitions...which obviously expands his life's work."
I hear ya , but, buying and promoting Ginny while she was missing 20 quarters in a row, at a heavy salary and benefits, made no sense. Apple has overcome shareholder confiscation by O and Ds, so good for them. I said it at that time and got jumped, as usual. Now, all this cash might outlive him, I hope not, but it might.
