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Strategies & Market Trends : Buffettology -- Ignore unavailable to you. Want to Upgrade?

To: James Clarke who wrote (2715)	1/3/2001 2:41:07 AM
From: Moominoid	Respond to of 4690

There is a general lack of understanding of Buffett and Berkshire. Just a couple of days ago I saw BRK being called a "mutual fund" over on the MDD thread. Other misconceptions is that Berkshire doesn't "trade" or that Buffett is averse to technology. He is keen on companies using someone else's technology to gain advantage. I guess one of the most difficult things for me to understand is when Buffett will sell stock from Berkshires large holdings. He does sell stock from these holdings sometimes. I guess I don't know enough yet about this. There are similar misconceptions about Soros for example (who I've read much more about). Classically Quantum invested its capital in lon-term equity holdings and used leverage to trade in commodity and futures markets.

To: James Clarke who wrote (2715)	1/3/2001 6:06:24 AM
From: Jacques Newey	Respond to of 4690

James, Nice post. Some of the very same thoughts have crossed my mind about Buffett and BRK. I was a buyer of BRK in early 2000 and later in 2000 after Buffett indicated in his annual letter that he thought BRK was undervalued. A once in a lifetime opportunity? Despite the significant run up in price, I plan to hold for the long term. BRK is now trading at a level more consistent with historical valuations (1.8 X Book), having risen from 1.2 X in early 2000. I believe there is still room for consistent future capital appreciation (10-15%/yr) in coming years. Here are my reasons for holding BRK: 1.) Continued growth in low (or no) cost float from insurance subs. 2.) A continued and prolonged market downturn - one that Buffett predicted in late 99 - will provide a plethora of equities and whole companies for sale at significant discounts to intrinsic value. 3.) Buffett, pockets stuffed with cash, will be buying loads of dollar bills in the coming years for $0.50 or less. 4.) The world's greatest capital allocator - the "artist" - will be putting the final touches on the canvas he calls Berkshire. I'm betting the strokes of his paint brush in his final years will be his best ones yet. 5.) Owning and following BRK helps to keep me disciplined and informed. Watching Buffett at work reminds my undisciplined self that true investment can only happen when companies are purchased at prices significantly less than their intrinsic value. As for KO and G, I agree that Buffett would not consider buying (the "hold forevers") at these levels. Recent management goofs - Duracell at G - aborted (thank goodness) purchase of Quaker by KO must have Warren really scratching his head. If not for the tax hit, he might be dumping these "no brainers". But then again, Warren sees things that most of us don't. Maybe KO and G are still the darlings that they always were. WEB's just waiting for prices to get irrationally low again. It might just happen given his market prognostication for the next 15 years. I'll continue to wait and watch in wonder.

To: James Clarke who wrote (2715)	1/8/2001 12:02:43 PM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 4690

James, Let's add to the controversy... :-)))) First of all, I sold my BRK holdings. There were couple of reasons. First of all, I always buy too early and sell too early. ;-) Other reasons concern more the discussion on BRK you are trying to stir. 1. I don't like complexity of BRK. The valuation of the company is far from easy. Even Buffett says so when they (with Charlie) give intrinsic value of WSC but not of BRK. Someone like Mike Burry or you may be able to dig through to the bottom. I can't. 2. If one can't value the company, it can be purchased only on blind faith in Buffett. But then the problem is his rather old age. Can his successor manage this superconglomerate? There are reasons to say "yes" and "no", but the answer is not totally obvious. 3. Recent Buffett purchases are much more Graham'y. I was much more comforable with his "Buffett'y" purchases (we could rename that "brand-with-moat-GARP"?). This adds even more to the difficulty to understand BRK. Do I really want to own paint-and-furnishings company? Finally, I am mostly switching to "brand-with-moat-GARP" investing and currently mostly own tech (APCC, INTC, MSFT, SYMC, TLAB). Most likely I am again too early - or maybe totally out of time. I seemingly forgot the adage that "value investing in tech is a train wreck". ;-( Cheers Jurgis