zarley

Mind sharing your math on that? $16 billion on the balance sheet and $11 billion off (feel free to check. I could be off) http://www.sec.gov/Archives/edgar/data/1310067/000131006713000013/shld201210k.htm Page 47. Thanks to tooskin for the heads up. Most of that $11 bil is already on the balance sheet. Based on a 2 second look the only amounts not there are the operating leases and a small amount for royalty fees. There are also some guarantees. Exactly. Adding the two numbers together results in a lot of double counting. A quick review of the tables reveals that. This thread is approaching the LVLT thread in terms of misinformation and poor analysis (on both sides of the argument). :(

Ron Johnson is available. :P

What do most people value the liabilities at? Sears values them at around $17 billion, and equity around $2.5 billion. What were you saying about 4x upside?

Good read. Thanks for the link. This reflects my general feeling at the moment, but it hasn't worked it's way into my overall asset allocation since I like the stocks I own . . . And, just for fun you can see some pictures from the wedge on a reasonably big day (last week) here: http://photography-on-the.net/forum/showthread.php?p=16010606#post16010606

Which one has pricing power and more predictable future prospects?

BRK -- 36.8% WDC -- 18.6% L -- 13.25% MSFT -- 12.4% FFH -- 7.2% FAIRX -- 6.6% Cash -- 2.65% AAPL 2.5%

There aren't many people who don't like upside volatility. I like Marty Whitman's idea that risk should always be qualified with an adjective. The search for one unifying risk measure is likely futile and perhaps dangerous if it stops people thinking about the different risks they face. Amen. There are many kinds of risk; most are not measurable in any real way. Ex ante, you're lucky to understand them in a very general way.

Barrons highlights an analyst report that responds to Chanos: http://blogs.barrons.com/techtraderdaily/2013/05/09/stx-wdc-needham-blasts-weak-unclear-chanos-remarks/?mod=BOLBlog WDC is still my second largest holding . . . I tend to see things the same way as the analyst, not surprisingly. It's fair to say that I didn't hear exactly what Chanos said, but the reports about his presentation did seem like he made some pretty weak arguments (that have been around since at least the beginning of htis thread). I don't know the details of the management stuff at STX, but I'm pretty comfortable continuing to hold WDC at this point.

Thanks for sharing netnet. That's a nice collection of articles and a good variety of ways to look at BRK. Although I take issue with a bit of what they put together, they ultimately land on a fair value estimate of $187,500 per A share ($125 per B share). This happens to be exactly where my slightly modified two-column spreadsheet winds up for current value. It's also right in the neighborhood of the basic two-column approach they said they didn't like. It is also almost right on the "More Conservative" scenario for the Intrinsivaluator (http://www.creativeacademics.com/finance/IV.html). So, quibbling aside, the end result is quite reasonable to me.

In short -- Nope. The experience of 2008/09 for BRK and FFH should be a good example of how strong companies like BRK and perfectly positioned companies like FFH still get taken to the woodshed in a significant market correction. Perhaps they didn't get hit as badly as the rest of the market, but they weren't a hedge. BRK held up a little better early on, but peak to trough still lost 50% during the correction. Having cash available in late 2008 and early 2009 to buy insanely cheap stocks did much better than BRK through 2010. Buying SHLD under 30 and Timberland and Gentex under $10 and seeing them double and triple by the end of 2010 was much much better than holding BRK. Cash and puts can be good hedges for market risk, but even the best stocks are not. That's my lesson from 2008/09 anyway.

8K: http://www.sec.gov/Archives/edgar/data/927066/000119312513204531/d533361d8k.htm Standstill Agreement: http://www.sec.gov/Archives/edgar/data/927066/000119312513204531/d533361dex991.htm

Summary of a Gartner study on the HDD vs SSD choice for enterprise users: http://www.storagenewsletter.com/news/marketreport/gartner-ssd-hdd Largely consistent with the themes laid out by WDC and Seagate, I think. Key points include SSD speed benefits not needed in all storage uses, and thus not worth the cost. Building the capacity for NAND development to replace existing HDD storage is infeasible due to cost for the foreseeable future. I expect that ASP and margins for HDD will compress over time, but overall demand for storage continues to grow exponentially and HDDs will have a huge share of that. Still long WDC, but a little sad about lightening up my position a few months back. :(

Here's a link to a short story about it. Not much more info than the OP though . . . http://www.businessinsurance.com/article/20130425/NEWS04/130429867?tags=%7C306%7C76%7C78

Oh the regret of selling too soon. As far as problems go . . . it's not a bad one to have.

Excellent video. Thanks for sharing.

Are there better opportunities to deploy the funds to? Has anything fundamental changed (other than price)? If the answer to either of those is no, holding is probably the best course. If both are no than holding is clearly the best choice. If you're just feeling defensive and want to lighten up, maybe consider a standing limit order to sell part at an acceptable price, or buy some puts.

Thanks for sharing Ross; obviously a lot of work went into that. In the past when I've done that sort of thing I find that the format or cell locations on data imports changes from time to time. Meaning I have to readjust all the cell references to get the calcs and charts to work out right. Have you had that problem, and if so, how did you overcome it?

I agree this is a really odd move. Reader is one of the top 5 Google services I use. Google just became meaningfully less useful to me. The feedly ap on my tablet looks fantastic. I'm not entirely sold on it, but it does broaden my perspective on what an RSS reader might be. Haven't look at the browser version yet. Since I'm a creature of habit, I will probably check out Old Reader as well.

I have exactly this same sense. I can't/don't do what Eric does. I suspect I'm not nearly as smart, and I know I don't have his risk tolerance. Plus, I never got comfortable with my ability to really understand the big bank balance sheets. So, while I do sometimes kick myself for not going into BAC with leverage, I know it isn't in my wheelhouse. What Eric, in particular, has done does remind me of what Charlie Munger has said from time to time -- that you may only see one or two really great opportunities in your lifetime. When you see them, you must be willing to act in as much scale as possible. Eric may be a walking example of actually doing this, to his significant financial advantage.

Missed this earlier, but I feel fine about it :) . . . given my cost basis and the fact that it's still my second largest holding. I may not get that opportunity to buy back under $40. but that's ok. Plus, the price has moved sideways since I sold.

Given A, how is B true? I suspect that A is indeed not true and you're just trying to be cute. I already regret my participation here. Carry on.

Can you see how those two statements are inherently conflicting? Further, are you saying that even the simple two-column method for valuing Berkshire is beyond your ability? How can you think that value is more than BV is you don't know how to estimate it and even question its validity as a concept? I find your comments in this thread baffling.

The annual preferred dividend / total $12 billion investment. Guaranteed is a bit strong, but it does seem like a reasonable near-term floor assuming 3G doesn't kill Heinz. I made a similar observation in the the original thread about the deal. http://www.cornerofberkshireandfairfax.ca/forum/berkshire-hathaway/berkshire-acquires-heinz-for-72-5-ps/msg103947/#msg103947

For $12 billion BRK gets half the equity and a reported annual preferred dividend of more than $700 million. Barring total collapse of the Heinz business, he's got a floor of 6% annual return on the money. If the preferred is structured like the other BRK deals with a 10% call-back fee, if it gets bought back, he'd get $9 billion back. So, he'd have half the equity for $3 billion invested, less the cumulative dividends he's received. So, for example, if the preferred get bought back in 5 years, he'd have all his money back and still have half ownership of Heinz. Doesn't seem too bad to me. . . maybe not as good as the BAC deal or Swiss Re, but nice enough.

onyx1, where did you find the info on the preferred. The few links I've read don't mention it or have any detail. Pieced together from these links: "Berkshire and 3G will each contribute about $4 billion in cash to pay for the deal, with Berkshire also paying $8 billion for preferred shares. The rest of the cost will be covered by debt financing raised by JPMorgan Chase and Wells Fargo." http://dealbook.nytimes.com/2013/02/14/berkshire-and-3g-capital-to-buy-heinz-for-23-billion/?partner=yahoofinance "Berkshire will spend about $12 billion to $13 billion on the deal for the maker of condiments and Ore-Ida potato snacks, Buffett told CNBC. The deal will also be financed with cash from 3G affiliates, plus the rollover of existing debt, and is valued at about $28 billion including debt, according to the statement." http://www.bloomberg.com/news/2013-02-14/berkshire-joins-3g-capital-to-buy-heinz-in-28-billion-food-deal.html?cmpid=yhoo Thanks onyx1, here's the part I missed earlier (from the bloomberg link): "Berkshire and 3G will each have more than $4 billion in equity in Heinz, and Buffett’s firm will also take a preferred stake of $8 billion, which gets an annual dividend of 9 percent, according to three people familiar with the deal. The people asked not to be identified because the terms are private."