A big weekend.
The enigma speaks to the masses tomorrow morning. I hope that you will take the time to read, and then read again, one of the most important documents of every year. So, before you visit SI, read Barron's On-Line, or "drop your kids off at the pool" ... visit:
berkshirehathaway.com
For those of you who think this is some goofy spam thing, I am sorry. I am not sorry that I posted this, I am sorry that you do not get it. I have no vested interest in BRK -- though I wish I did ... Perhaps, he will buy HMN and give me some stock! Dare to dream!
Again, WB is not an individual. He is an enigma ("a mystery, wrapped-up in riddles" for the TV generation). The approach that he/Munger/Simpson take should teach us valuable lessons -- though we do not have the float of GenRE, National Indemnity, and GEICO with which to play. Nor do we have the flows from See's Candies, The Buffalo News, Borsheim's, Nebraska Furniture Mart, International Dairy Queen, etc. The attached caveat is an important facet of the BRK equation and should not be trivialized. The ability to invest a steady stream of cash flows into the equity markets at any level ... GenRE will generate cash whether the Market is hitting new highs or new lows ...
Something I wrote some time ago ... I did not buy it then, nor am I buying it now ...
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Berkshire Hathaway is still not inexpensive. However, if you are truly a long term investor, it will prove be a great investment. They beauty of Berkshire Hathaway is that the fundamentals of the business do not correlate with the broader stock market. First and foremost, Berkshire Hathaway is the most overcapitalized and profitable insurer of risk in the entire world. The insurance operations which include National Indemnity (so-called Super Catastrophe Reinsurance), and GEICO (direct, personal auto ... you've seen the advertisements) are tremendous cash flow generators. These businesses (along with See's Candies, Borsheim's, The Buffalo News, Nebraska Furniture Mart, Dairy Queen) provide Buffett et.al. with a powerful stream of cash that is then invested in some of the world's finest businesses: Coca Cola, Gillette, Freddie Mac, Washington Post, Walt Disney, American Express, Gannett, Guinness PLC, etc.
If the broader market were to correct/collapse, the share price of Berkshire Hathaway will surely adjust downward in the short term. As a long term holder of Berkshire Hathaway, you can always take comfort in the fact that Buffett et. al. are adding to their positions in some of the greatest companies in the world at lower prices -- a good thing! Berkshire can do this because of the tremendous cash flow that the firm generates. Mutual funds do not have this luxury when the market corrects. In fact, just the opposite occurs: shareholder redemptions cause most funds to sell shares to meet the redemptions at lower (and consequently, more attractive) prices.
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Still, I will wait for an incredible market correction, or the passing of Mr. Buffett before I own this great business (or more ideally, CNBC coming out with an unfounded story that Mr. Buffet has passed away ... thus providing one the opportunity to get BRK at a discount from today's valuations).
Just more rambling.
--Duker
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