· On Wechsler and Coombs compensation (new investing dudes): Additional data points on Wechsler and Coombs compensation: They take a $1 million salary home, get paid 10% of their outperformance against the S&P (e.g.--if they outperform by 10%, they get 1% of that outperformance), and get a 25% split of the other guy's take. These stats are figured on a rolling 3 year basis. [more]
· WEB on GOOG and AAPL: Both look very tough to dislodge, excellent companies, and I wouldn’t be at all surprised to see them earning a lot more money 10 years from now. But I couldn’t get to the level of conviction that I would ever buy them. But we wouldn’t have predicted what would happen with AAPL 10 years ago, and we can’t predict the future. And what do we know about computers? Nothing. [more]
Buffett took on the gold issue, again. His quote: "It's very hard for an unproductive investment to be a productive investment over a long period of time."
I agree Something that has little industrial use, does not produce anything, and does not serve "something" cannot be judged as fundamentally valued. That sounds about right. It might be worth more, but how should I know?
Just mused that he thinks BNSF's competitive position has improved over the past years. Couldn't agree more. Think for a second on railroads: They're truly one of the most unbelievable asset footprints out there. The regulatory, practical, and capital barriers associated with reconstructing nationwide rail network are almost inconceivably huge. And with oil prices higher than $100, I'm reasonably certain they're going to earn huge returns for some time to come. [more]
"It sounds to me that if that 84 year old man is making a decision on his investment based upon his politics, he belongs on Fox." [more]
"If you told Charlie and me that you'd have a 50:1 ratio of oil to natural gas, I think we'd have asked you what you were drinking."
Nothing to add. I couldn't agree more.
WEB on U.S. banks: They've taken most of the abnormal losses in their portfolios, whether forced or voluntarily. They've got liquidity coming of their ears. The American banking system is in fine shape. [more]
On the repurchases: Basically said that they're never consciously encourage people to purchase shares, but that at 1.1 times book, they believe it's significantly undervalued. And so, that's why they're willing to. In practical terms, it makes great sense. You might argue the businesses value are understated on an equity basis, and they're going to earn at least 10% returns on equity over a long-enough time horizon.
"That ability to commit very large sums, and that people know you can commit those funds, is a huge feather in your cap. Berkshire would possess that ability when I’m gone. That opens a lot of doors for you." [more]
Shares now sell for 1.14 times book value. That's a very small margin above Buffett's 1.1 times repurchase threshold. Barring some catastrophic event, or a totally overstated book value (which I don't think is the case), that provides quite an interesting margin of safety.
Also note: The fun doesn't stop at Berkshire. Joe and I will also be attending the Value Investing Congress tomorrow and Monday--the new school equivalent to the BRK annual meeting. Check my take of what we might see and hear, here: http://www.fool.com/investing/general/2012/04/24/inside-the-minds-of-the-value-investing-elite.aspx. [more]
Front and center will be talk of succession on the operating businesses, where some degree of clarity's been assigned to the investing succession. I'll put forth a somewhat provocative point: It doesn't matter. At all. Berkshire's operating businesses are best-in-class--at least the large ones--General Re, GEICO, Burlington Northern, and MidAmerican with great managers. In some sense, a monkey could effectively operate them and generate reasonable returns on capital. [more]
Just spent an hour roaming the floor, and it's everything you might expect. A veritable celebration of the Berkshire brands: from Justin Brands, Burlington Northern, Brooks (which had awesome dry fit running shirts--a pic of Buffett with the phrase, "A Good Run for Your Money"), and so on. Buffett was roaming the floor with a tide of people in pursuit, each clinging to his every word. [more]
Good morning from the press booth at the Berkshire annual meeting. It's kind of an odd scene, for what is sort of a P.T. Barnum meets capitalist lovefest, or perhaps it's not. Security, and just about every element of the original entry, is tightly monitored. It's kind of what you've come to expect from a machine the likes of Berkshire. Everything is managed, and according to plan. And as a shareholder, I kind of appreciate it. What's more amazing is that we're the first people in here. The interesting part, if you think about it, is that this isn't just a celebration of capitalism: This is an elaborate theater, intended to celebrate--no proselytize--the gospel of Berkshire. [more]