LC

Just putting this thread up here, I plan on taking a deeper look in the next few days. Company has been listed since the mid 80s. Revenue has grown annually coming out of the financial crisis, although it took them a bit longer to stabilize (into 2010). Probably due to consumer spending habits more than anything. Gross margins around 37% Operating cash flows around 450-550MM range, about 200MM of annual capex. Have been paying an uninterrupted increasing dividend since 2006. Have been net buyers of their own stock since 2011. Currently trading around 13x earnings, or maybe 14-15x adjusted earnings. Anyone have followed or has some thoughts? This is just a cursory glance.

Why apply a normalized tax rate to a one-time asset sale?

Mohnish owes you a license plate.

Yea, I thought it was obvious we were talking about the net value of the float, including the invested assets and any underwriting profits. As you say not even an insane person would pay to assume just the liability. You need to be paid for that.

If the float is $100 but only $90 will be paid out, and you can invest it for an extra $5, why not pay $5 for it? Free ten bucks, no?

You think correct, here are insurance premiums received: 2005 - $21,997 2006 - $23,964 2007 - $31,783 2008 - 25,525 2009 - 27,884 2010 - 30,749 2011 - 32,075 .. 2016 - 45,881 I personally think the assumption being made is a decent one to make. History certainly supports it, both from a premium growth side, and the fact that Buffett has created one of the best insurance machines out there. IMHO and as you mention, only drastic technological changes will alter this trajectory.

I essentially agree with the rest of your post, but I am not so sure about this. I don't know the insurance business that well, but I would think that the profitability of new insurance business is somehow correlated to the current interest rate environment. When cash is cheap, lots of people can write business, which pushes down profitability (I could be wrong here). Buffett notoriously does not want to write unprofitable business. Here is the big assumption that Buffett makes: Owing $1 that in effect will never leave the premises –because new business is almost certain to deliver a substitute – is worlds different from owing $1 that will go out the door tomorrow and not be replaced. As long as new, profitable business can be written, for Buffett (or any other consistently profitable underwriter), this business is like having the ability to draw upon a negative-interest rate revolving loan.

It's value may change. All earnings are not created equal. If you think their underwriting earnings are more or less valuable than their investment portfolio earnings, then I would think their value would change.

I've got a couple of thoughts but it's a bit late here so I'll put one here and mull over the rest for tomorrow. The reason I took out the investing portion when comparing 2 insurance companies is this: Imagine an insurance company with negative underwriting profits. They are essentially a leveraged investment company. They pay X% for financial obligations, and try to invest to make X+Y%. The only value they add is via investing. Take away their investing arm, and they will eventually drown. So their only real asset is their ability to invest profitably. So why write insurance business? To grow AUM. So we can think of the liability associated with float as the cost for an investment manager to increase their AUM. So if we look at it from that perspective, let's go back to underwriting profitably. Imagine investing with a fund manager. You pay him a % to invest with him. At some point you will redeem your investment, but when is that a REAL liability to his business? I can think of 3 scenarios: -your clients will all jump ship in a crisis -your performance is consistently just plain bad and most importantly, -your cannot replace any leaving AUM Maybe I'm rambling but that's a thought I had.

Rb: I don't understand your point (then again I am pretty dense...) If we take your example of company A (underwriting losses) and B (underwriting gains) and simplify the problem: Imagine they both write their first business today. Let's remove all investments of the float, assume they only hold cash. Let's go forward 1000 years of this behavior, and then look at the companies. Company A will now be bankrupt due to underwriting losses. Company B will have printed money continuously. If we go back to time zero, we see the underwriting performance of A to be a huge liability which has wiped out the company, but a huge asset to B.

Isn't Berkshire generally posting underwriting profits, though? Their float is being paid for because they are better underwriters than other institutions. To other firms the float is a liability but for Brk it is an asset, or at least that is how I understand it.

Norm does the best shaggy dog jokes. Here's another great one: I sold SAN on (1) a comment that SD made in the SAN thread and (2) because I think Citi is also undervalued and has a better business. So I've shifted to that.

I'm always a fan of shaggy dog jokes, Norm Macdonald does it best:

Congrats Keith, about time!

Question for the board: I have probably 10? different accounts of various forms (Roth/regular IRAs, 401ks, regular brokerage accts) over a few different brokers (schwab, fidelity, vanguard, etc etc). It's a pain in the butt trying to navigate each one to view the overall performance of a various position. I have been using a spreadsheet and just entering each trade manually, but I am wondering if there is an automated tool or website that people use to make life easier?

I lean towards Poor Charlie's comment. I won't be managing anyone else's money. I'd want to sit down with someone who is a damn good stock picker/businessman, pick their brain for a few hours. Analysis by contrast: what do they do that I don't? how does their thought process differ? etc.

I haven't been to a branch in at least 3 years...

Bought more Citi today

Nyc/den

I agree with Scott. As to being an investment analyst...what do they do that you cannot do from your couch? The answer is not much. I took the investment knowledge, applied it to the modeling space. Helped that I had a background in some heavy math and stats. But overall a very useful skill set: my peers are math nerds without an understanding of the final implications. Have that understanding makes it easier to back into whatever problem we are facing. Also the ancillary skills are useful: communicating a thesis, distilling data points into what is coherent and important. These are useful anywhere.

In my personal investing, I first calculate historical economic cash flows. Then I take a more qualitative approach: read/learn about the business and form an opinion on how stable I think are those cash flows, and do I think they will be growing or shrinking in the future. If I can't get a handle on that, game over. From there it's then about whether the current valuation is cheap, reasonable, or high, as a multiple of the economic earnings I calculated previously. I also think about, If the SP500 multiple is X, do I think this company is better or worse than the average company (and therefore deserves a higher/lower multiple)? For example I had good fortune buying Philip Morris and 3M at market or less-than-market multiples about a year ago. I thought these had better than average business prospects, and the economic earnings multiple I calculated was less than the current SP500 multiple.

Your link supports my argument. From the third sentence of the link you posted: Additionally from the link you posted https://en.m.wikipedia.org/wiki/The_Myth_of_Matriarchal_Prehistory The evidence that matriarchies ever existed is extremely poor and the idea is mostly a wholesale invention and feminists and marxists. Second the current definitions of matriarchy need not even contradict the idea of mostly male leadership since many anthropologists/feminists/marxists redefine matriarchy to mean social roles are relatively egalitarian. This would imply that North America is matriarchal since social roles are relatively egalitarian...however it still has mostly male leadership. Leadership is the extreme of the distribution....not the average. The article lists a bunch of examples: https://en.m.wikipedia.org/wiki/Matriarchy#By_region_and_culture The sentence you quote is more an issue with syntax and the strict definition of matriarchy.

The premise that Y (male leadership) is invariant is false. https://en.m.wikipedia.org/wiki/Matriarchy

Packer recommended to me (years ago now - wow) Shannon Pratt's valuation textbook. It was very comprehensive. Personally I think the best way is practice. I don't really use a DCF in spreadsheet form, but I learn about the company, adjust the financials to reflect true economics, and figure out what I thinl that stream of cash flows will look like and what that is worth.

Not sure I follow...I'm saying Amazon can make headway into the auto parts business because they can probably match the selection and delivery of auto parts stores. Maybe 1 day excess lag time but that may be worth it depending on the price difference.