Bonnie: << Any opinions on this thread about Aetna? She's a poorly
managed company with an incredibly good business - just
double bottomed at book value. >>
A few months ago, I saw a guest on Wall Street Week who runs a
Value fund. I can't remember the guest or the fund. The one
thing I recall is his being asked by Lou if he liked any
insurance company stocks. He said no, because he didn't
understand how they keep their books. I though to myself:
Neither do I.
Buffett, obviously, does. In this regard, he feels that one of
his most important investment criteria, good management, is
especially important with an insurance company:
"Insurance companies offer standardized policies which can be
copied by anyone. Their only products are promises. It is not
difficult to be licensed, and rates are an open book. There are
no important advantages from trademarks, patents, location,
corporate longevity, raw material sources, etc., and very little
consumer differentiation to produce insulation from competition.
It is commonplace, in corporate annual reports, to stress the
difference that people make. Sometimes this is true and
sometimes it isn't. But there is no question that the nature
of the insurance business magnifies the effect which individual
managers have on company performance." [Emphasis added.]
(See: berkshirehathaway.com
porc --''''> |
