Finally, George of Fat Pitch Financials (yes, another one of The Eight Best Investing Blogs) writes about NCAV (net current asset value) bargain Concord Camera (LENS) and its recent 10-K. Even if you don’t like the stock (or the company – and there’s plenty not to like) you might want to read the post, as true net/nets are currently an endangered species.
Over the next week you may notice some changes to this site as I clear away some of the stuff I haven’t been able to update and prepare to resume some other activities on a regular basis. It’ll all make sense in about a week.
For now, please just bear with me – and don’t worry if some of the site suddenly disappears. It’s all part of an effort to improve the site and keep it current.
Nintendo (NTODY) was mentioned in today’s Wall Street Journal, as its soaring stock price has recently given it the second largest market cap in Japan (for now).
I was generally positive on the company, but (as you’ll see below) I concluded with something far short of a clear endorsement of the stock. You would have done best to disregard my closing remarks; the stock has performed extraordinarily well since I wrote that piece. Here’s how I ended things last year:
So, if you are comfortable with Nintendo’s position in handheld gaming and you truly believe in both the company and the Wii, shares of Nintendo would be a reasonable long-term investment at this price. However, even considering the large amount of cash and securities on the balance sheet relative to Nintendo’s market cap, Nintendo isn’t a “value” style purchase based on past performance alone. Buying shares at the current price is a bet on a brighter future.
While I like Nintendo’s future prospects, it’s usually safer to bet against a revolution. So, I’d have to say Nintendo is a very interesting business that’s priced a bit too high to be a very interesting investment.
With the larger than expected Fed rate cut today, I thought it might be appropriate to add some perspective from Warren Buffett. He made these comments to CNBC’s Becky Quick, before the announcement from the Fed:
Warren Buffett: (Laughs strongly.) I represent a different view, maybe, than your other viewers. I don’t think it makes any difference whatsoever to an investor in stocks what they do today. I don’t care, I wouldn’t care whether they raise the rate in terms of what I would do in stocks. If I knew exactly what they were going to do, I would not change a buy or a sell order that I have in…The important thing in stocks is to buy a stock in a good business at a reasonable price. Anybody that is buying or selling stocks based on what the Fed is doing, or what they think they’re going to do at their next meeting, I think is destined to not having a great financial future. It really doesn’t have anything to do with the value of good companies 3, 5 years from now.
WB:I’ve worried about inflation every day since I learned about the phenomenon, 60 years ago. (Laughs.) It’s always a danger, always a danger. It’s never gone. It’s always in remission, and question is how well do you do over time controlling it. But, the purchasing power of the dollar will go down over time.
Gannon On Investing guest columnist, Max Olson, has written the second article in a two-part series on Warren Buffett and his investment in See’s Candy.
Gannon On Investing guest columnist, Max Olson, has written the first article in a two-part series on Warren Buffett and his investment in See’s Candy.
The shocking fragility of recently issued debt is another singular feature of the 2007 downturn — alarming numbers of defaults despite high employment and reasonably strong economic growth. Hundreds of billions of dollars of mortgage-backed securities would, by now, have had to be recalled if Wall Street did business as Detroit does.
Benjamin Graham and David L. Dodd, in the 1940 edition of their seminal volume “Security Analysis,” held that the acid test of a bond or a mortgage issuer is its ability to discharge its financial obligations “under conditions of depression rather than prosperity.” Today’s mortgage market can’t seem to weather prosperity.
If my selection of the above quote seems to suggest that either Grant’s piece or my blog is focused on the extraordinary nature of this credit crisis, I must assure you that I mean to say precisely the opposite.
How severe is this problem? That’s a question best left to others – I have no special competence in that area – but, speaking of special, the question of just how special this crisis is can be answered quite easily. It’s not unique; it’s not unprecedented – and it is consistent with much of human history.
Have you ever noticed how frequently the word “unprecedented” is used when discussing matters financial and economic, and how rarely it is used in most other fields – fields where the experts are, by longstanding custom, less given to overexcitement?
I don’t mean to say that everything is surely safe, certain, and normal; rather I mean to say that insecurity, uncertainty, and abnormality are the historical norm. People who tell you otherwise (including those who say such swings in price and sentiment are “entirely unprecedented”, “a one in a million occurrence”, etc., etc.) know too much statistics and too little history – and by history I mean history properly read, which is to say history read as the participants lived it, not history read through the eyes of a modern man who knows how everything ends before it begins. History is only inevitable when read in reverse.
It’s often said (by experts no less) that now is not the time to act because so much is unknown – because so much is uncertain. Humanity has not been blessed with certainty; but even mere mortals are capable of computing the odds on a quote and making a good bet when given the chance.
There may be good reasons to stand on the sidelines, and I welcome their enumeration – but neither uniqueness nor uncertainty ought to be listed among them.
Warren Buffett’s Berkshire Hathaway (BRK.B) has filed a 13F disclosing most (but not all) of its holdings. Information regarding two railroads, Norfolk Southern (NSC) and Union Pacific (UNP), was omitted from the public report and filed separately with the SEC (according to the public 13F).
Changes getting a lot of attention online and in print include:
Dow Jones & Company (DJ): This is a new position. Berkshire held 2,781,800 shares of Dow Jones as of June 30th, 2007. Some people seem confused by this one. They shouldn’t be. It’s simple arbitrage. Shares of Dow Jones have traded below Murdoch’s offer for some time allowing Berkshire to accumulate an arbitrage position in the stock. Buffett felt he knew Murdoch well enough to know he was determined to get the deal done. His comments on the deal reflect this fact. He would never have bought shares of Dow Jones absent the offer from Murdoch. For more on this, see Mohnish Pabrai’s quote in a Bloomberg article on Berkshire’s 13F.
Bank of America (BAC): This is also a new position. Let’s see what might interest Buffett here. We have a very large bank that has had an ROE of about 15% or greater for sometime now while achieving an ROA of over 1% for the past several years. The company is basically a nationwide bank with a lot of customers, but it doesn’t cross-sell very well and certainly hasn’t exploited its customers to the fullest extent possible. Bank customers are surprisingly sticky and thus banking (in the U.S.) is a surprisingly good business.
The company has a huge branch network; it is the closest thing to a national bank you can find in the United States. The retail business is probably what attracted Buffett. This company has a lot of branches and ATMs scattered throughout the United States and thus has daily contact with a great many Americans.
In terms of valuation, it does not appear to be priced higher than U.S. banks as a whole. You also get a cash yield that’s comparable to holding a U.S. Government bond.
Most importantly, the company’s tremendous size (market cap around $200 billion) offers the (now) extremely rare possibility of putting a meaningful amount of Berkshire’s cash hoard to work in this stock. Of course, whether that happens or not will depend on the price of the stock. We’ve seen plenty of “elephants” move out of Buffett’s price range after he acquired the initial stake – at the very least, we haven’t seen a lot come down sharply in price – something which would greatly encourage putting a meaningful amount of Berkshire’s cash to work in a single stock.
Consuelo Mack Wealth Track had Bruce Berkowitz of Fairholme Fund as one of its guests last week. Here’s the video; here’s thetranscript.
GuruFocus is reporting that Warren Buffett’s Berkshire Hathaway added 1.6 million shares to its Burlington Northern (BNI) stake between August 3rd and August 7th. The purchases were made around $80 a share. As of August 7th, 2007 Berkshire held 40,647,730 shares of Burlington Northern – or about 11.5% of the company. Berkshire’s stake in the railroad is worth approximately $3.2 billion at the current market price.
By the way, GuruFocus (an excellent website) has added a fair value voting feature where – when viewing information about any stock – you can provide your view of the fair value of that stock. You can also see the average, minimum, and maximum fair value estimates provided by other visitors to the site. GuruFocus is beginning to use this feature in more interesting ways such as providing a list of the most overvalued/undervalued stocks as voted by visitors to the site and a list of the most frequently voted on stocks.
I thought some readers might be interested in this sort of thing – if you are, go to GuruFocus.com and check it out.
