Guys. Guys. Some geek just emailed me a copy of Warren Buffet's original rationale for buying Coke, which he sent to shareholders way back when. Yes. That Warren Buffet. There's also a bombshell towards the end of this thing (it never panned out though!). I think this thing is legit since he got it off the WWW!!
As shareholder's of Berkshire Hathaway I want to keep you informed about my stock market activities of the last month. But before that, I have something to say to those who complained that last year's annual was too long. I APOLOGIZE FOR NOTHING I SAID. Having gotten that off my chest, I want to tell you I have found a stock, The Coca-Cola Co., which I think is just dandy. Let me explain in the same manner that I'd like something complicated explained to me. First off this company is a A STOCK DIVIDED BY A FLOW, and I don't see that too often. Secondly, and more importantly, it is entering what I like to call its LOGARITHMIC GROWTH PHASE. And that's a good thing. While it doesn't pay a RESIDUAL DIVIDEND, it pays a small one every four quarters like clockwork. Please remember, this stock thing I do is not always the sure thing that buying high P/E growth companies is. It is nonetheless, a SURROGATE FOR RISK, and a tough one at that.
While some of you will find it not only useful, but quite fun to UNITIZE A P/E, remember, with ko, THESE NUMBERS ARE NOT P/Es, AND I NEVER USE P/Es. I must say though, I find USING A COMMON HEURISTIC LIKE A YPEG OF 1.00 OR LESS helpful when surveying Coke (I like drinking Cherry Coke too, and as a reason to buy the stock, that is right up there too). THE UNDERLYING ASSUMPTIONS IS THE EMH IN AT LEAST ONE OF ITS INCARNATIONS, which is why this thing's a flat out bargain. Do I normally go out on a limb and buy a stock when THE EV IS KNOWN LIKE THAT? Normally no, but I made an exception because I used to drink Pepsi as a kid.
Let me DECOMPOSE THE MATH for you, fellow shareholders. When I saw the stock falling, I called my broker and executed an ARBITRAGE AGAINST AN ARBITRARY STANDARD, which was difficult, but we did it nonetheless. In the process of GETTING RID OF MEANINGLESS AND CONFUSING UNITS (like Charlie), I had another Cherry Coke and thought about buying some more stock. Always keep this in mind: THE BETA OF MY PORTFOLIO IS AROUND 1.7. For those of you who are REFLEXIVELY DERIDING me for not knowing precisely what my beta is, phooey on you! By the way, it's fun having my wife live in San Francisco since I get to occasionally date one of the hot young Super MODELS that breeze through Omaha. For some reason, they seem to instinctively know that FIRST, THE CONCEPT OF RISK IS DOUBLE BARRELED. But I digress. So hopefully, now you understand why I invested our hard won capital in a company that sells sugary syrup!!
As you know, in the past, Charlie and I have derided THE CONCEPT OF BETA, but we are always learning and are wide open to new ideas. In fact, I no longer am invaded by that silly notion that Charlie and I can beat the market. Why do I say that now after proving for 30 years that I could, and quite handily, thank you? Well, I read it in this book: BURTON MALKIEL'S "A RANDOM WALK DOWN WALL STREET"? SO, LET'S MAKE A SIMPLIFYING ASSUMPTION here. You should only expect the market rate of return from me from this point forward. If you want more, go buy Dell Computer. It is really cheap at 50x F2k earnings. HOW'S THAT FOR VALUE?
Finally, I must inform you that I am resigning from my position as CEO of Berkshire. Given that I can no longer beat the market, I will now do some free lance stuff for JOHN WILEY AND SONS. My first assignment will be to write the forward to VALUARTION COPELAND KOLLER AND MURRIN JOHN WILEY AND SONS, 1996 ISBN#: 0-471-01313-7. I thought a book on VALUARTION might make me nostalgic because you may recall that I did do the forward to Ben Graham's "The Intelligent Investor." But guess what. I'm actually okay with it. I finally realize that Ben was just an old fuddy-duddy who never took a flier.
BUT HERE'S SOMETHING OF A TWIST in conclusion. Many shareholders have commented to me that YOUR MONIKER IS APTLY NAMED. While I have always been SOPHISTICATED, I am much more than that. I AM INSENSITVE TO EXTERNALITIES as well. Many may think my homespun image is really just a put on for the media. Well, critics, LET'S SEE WHAT ELSE YOU CAN TWIST! As chairman, I HAVE A POLICY OF NOT RESPONDING TO AD HOMINEMS but I will make an exception here. HAPPY HOLIDAYS.
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