Value Blog Review, one of The Eight Best Investing Blogs, has a review of another one of the eight best investing blogs – Controlled Greed.
Value Discipline discusses Janet Lowe’s “Warren Buffett Speaks”.
And, finally, if you haven’t read Max Olson’s two-part series on Warren Buffett’s investment in See’s Candy, please do so now:
Read Quality Without Compromise, Part I
Read Quality Without Compromise Part II…
Read moreGannon 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.
The article, entitled “Quality Without Compromise, Part II“, is an excellent complement to Max’s earlier article, “Warren Buffett and the Washington Post“.
Read moreGannon 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 article, entitled “Quality Without Compromise, Part I“, is an excellent complement to Max’s earlier article, “Warren Buffett and the Washington Post“.
Read moreJohn Bethel of Controlled Greed (one of The Eight Best Investing Blogs) directs his readers to Jim Grant’s piece in The New York Times, and I will do the same to my own readers:
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.
See The Eight Best Investing Blogs…
Read moreWarren 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.
For full details on Berkshire’s holdings please see Streetinsider.com 13D Tracker: Summary of Berkshire Hathaway’s 13F, GuruFocus: Warren Buffett Buys Bank of America, Dow Jones…, and Bloomberg: Berkshire Bought Stake in Dow Jones.
See the 13F here.…
Read moreOne of The Eight Best Investing Blogs, Cheap Stocks, has a good discussion of St. Joe (JOE). Highly recommended.
Fat Pitch Financials reports the results of a poll conducted at Value Investing News, which asked “As a shareholder, would you rather have buybacks or dividends?”
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.
Finally, the Motley Fool has an interview with Sardar Biglari of Western Sizzlin (WSZL).…
Read moreHere’s another company in the profit falls, stock rises category – Building Materials Holding Corporation (BLG).
Yesterday, I mentioned Hanes Brands (HBI). That was a post spin-off “restructuring” story. This is a housing industry story.
I know what you’re thinking – I’m supposed to write about these stocks before they go up.
I just couldn’t resist mentioning this additional example of a company with a falling profit and a rising stock.
Remember, earnings are only half the equation – there’s the price component as well.…
Read moreYesterday, one of The Eight Best Investing Blogs, Streetinsider.com 13D Tracker, posted on Sardar Biglari’s opposition to the proposed buyout of Applebee’s (APPB) by IHOP (IHP).
Regular readers of this blog know that Mr. Biglari is both Chairman and CEO of Western Sizzlin (WSZL), a publicly traded holding company, and The Lion Fund, an investment partnership (or “hedge fund”). While at Western Sizzlin, he made a concentrated bet on Friendly’s (FRN) that paid off well. That seems to be his modus operandi – bet big and be heard.
This approach may sound similar to the one favored by many other “activist” investors – and perhaps it is, but based on what Biglari has done in his brief time at Western Sizzlin and some comments he made, I think it’s likely that (at Western Sizzlin) he will favor a more concentrated (i.e., less diversified) approach than almost all other activist investors.
That makes each mention of one of his investments a little more interesting. Generally, the more concentrated an investor’s portfolio, the more promise each position has as a source of good ideas for other investors.
Enough background – here’s the post from Streetinsider.com 13D Tracker.
Related Reading
Friendly’s To Be Acquired for $15.50 in Cash
Friendly’s CEO Resigns; Largest Shareholder Requests Seats…
Read moreI wrote about Hanes Brands (HBI) on Monday. If you didn’t read that post, click here.
The company reported its earnings and the stock is up $3.85 (or a little over 14%) as I write this. Obviously, the share price ($30.50) will be out of date by the time you read this – most likely there will be a lot of shares changing hands today.
I didn’t “call” this one. I just liked the stock long-term, because as I wrote on Monday:
This is a good business with a lot of debt and a lot of temporary, transitional stuff obscuring the company’s true earnings power.
That point was made clear today. The headlines weren’t nearly as positive sounding as those that typically herald a double-digit percentage gain: “Hanes Brands Profit Tumbles 57 Percent“.
I would have gone with “Hanes: Profit Falls; Stock Rises“.…
Read moreThe Wall Street Journal reported Berkshire Hathaway (BRK.B) acquired a less than 5 percent stake in Kraft Foods (KFT).
The article didn’t report any further details. The source of the information was not named. As usual, Buffett declined to comment.…
Read more