Guest longinvestor Posted March 6, 2013 Share Posted March 6, 2013 Embedded in many of the annual letters lies a central investing theme BRK has followed: Be the lowest cost/unit producer in whatever business you are in. This is the key ingredient to the moat like quality all of his investments. From Walmart/Costco to BNI to the Utilities to Geico and even the BRK HQ! The moat gets deeper as BRK ploughs more and more capital into the business to entrench the cost/unit advantage in ways that no one else can duplicate. Going by Munger/Buffett's recent statements about Wind/Solar energy likely getting "10X" what they invested in 2011-12, at $ 50B to 100B of capital to be invested over the coming years, this has got to be the one with the most attractive cost/unit differentiator for BRK. It would surely be an interesting question for them to answer at the meeting. Link to comment Share on other sites More sharing options...
bargainman Posted March 6, 2013 Share Posted March 6, 2013 There's also the built in advantage of their AAA/AA credit rating. A friend worked for Clayton homes, and he said they could basically access credit at insanely low rates since they were part of BRK. Their competitors had no such advantage. Link to comment Share on other sites More sharing options...
jay21 Posted March 6, 2013 Share Posted March 6, 2013 There's also the built in advantage of their AAA/AA credit rating. A friend worked for Clayton homes, and he said they could basically access credit at insanely low rates since they were part of BRK. Their competitors had no such advantage. From what I remember, BRK issues the debt to get the low rate. They then add 100 basis points for Clayton to use the funds. Link to comment Share on other sites More sharing options...
ourkid8 Posted March 6, 2013 Share Posted March 6, 2013 You are correct and this is a great system to provide businesses with the compeititive advantage. I just hope Fairfax strives to achive the AAA credit rating to help all their current and future subs have this wonderful competitive advantage. S There's also the built in advantage of their AAA/AA credit rating. A friend worked for Clayton homes, and he said they could basically access credit at insanely low rates since they were part of BRK. Their competitors had no such advantage. From what I remember, BRK issues the debt to get the low rate. They then add 100 basis points for Clayton to use the funds. Link to comment Share on other sites More sharing options...
Guest longinvestor Posted March 6, 2013 Share Posted March 6, 2013 You are correct and this is a great system to provide businesses with the compeititive advantage. I just hope Fairfax strives to achive the AAA credit rating to help all their current and future subs have this wonderful competitive advantage. I keep reading on this board how Fairfax has better risk/reward than BRK. FFH is very early in owning operating businesses. BRK has a 15-20 year headstart. BRK is already there, FFH hopes to get there. There is another thing, businesses come seeking to become part of the BRK family, this is only in the dreams of others with capital. Even post-Buffett, if the ownership culture is retained, this will likely continue. The powerful combination of permanent capital access & "Leave management alone" are the anti-thesis of today. Just go and ask any business owner who sold to PE on how they feel seeing what happened to their business post-sale! Link to comment Share on other sites More sharing options...
SouthernYankee Posted March 6, 2013 Share Posted March 6, 2013 Quote from: bargainman on Today at 07:33:33 AM There's also the built in advantage of their AAA/AA credit rating. A friend worked for Clayton homes, and he said they could basically access credit at insanely low rates since they were part of BRK. Their competitors had no such advantage. From what I remember, BRK issues the debt to get the low rate. They then add 100 basis points for Clayton to use the funds. -I believe BRK was able to buy Clayton Homes at a reasonable price (much lower than their shareholders wanted) because of the situation where Clayton could not get financing on its own. They were just like any other company in that industry, weak. With Berkshire behind them, though, their positive attributes showed more clearly. Link to comment Share on other sites More sharing options...
valueinvesting101 Posted March 6, 2013 Share Posted March 6, 2013 Embedded in many of the annual letters lies a central investing theme BRK has followed: Be the lowest cost/unit producer in whatever business you are in. This is the key ingredient to the moat like quality all of his investments. From Walmart/Costco to BNI to the Utilities to Geico and even the BRK HQ! The moat gets deeper as BRK ploughs more and more capital into the business to entrench the cost/unit advantage in ways that no one else can duplicate. Going by Munger/Buffett's recent statements about Wind/Solar energy likely getting "10X" what they invested in 2011-12, at $ 50B to 100B of capital to be invested over the coming years, this has got to be the one with the most attractive cost/unit differentiator for BRK. It would surely be an interesting question for them to answer at the meeting. Where did they make that statement? Link to comment Share on other sites More sharing options...
redskin Posted March 6, 2013 Share Posted March 6, 2013 Embedded in many of the annual letters lies a central investing theme BRK has followed: Be the lowest cost/unit producer in whatever business you are in. This is the key ingredient to the moat like quality all of his investments. From Walmart/Costco to BNI to the Utilities to Geico and even the BRK HQ! The moat gets deeper as BRK ploughs more and more capital into the business to entrench the cost/unit advantage in ways that no one else can duplicate. Going by Munger/Buffett's recent statements about Wind/Solar energy likely getting "10X" what they invested in 2011-12, at $ 50B to 100B of capital to be invested over the coming years, this has got to be the one with the most attractive cost/unit differentiator for BRK. It would surely be an interesting question for them to answer at the meeting. Where did they make that statement? During the annual meeting last year, Buffett said he could see Berkshire allocating $100 billion to the utility over the next decade. I don't think it was specifically wind/solar. Link to comment Share on other sites More sharing options...
jay21 Posted March 7, 2013 Share Posted March 7, 2013 Quote from: bargainman on Today at 07:33:33 AM There's also the built in advantage of their AAA/AA credit rating. A friend worked for Clayton homes, and he said they could basically access credit at insanely low rates since they were part of BRK. Their competitors had no such advantage. From what I remember, BRK issues the debt to get the low rate. They then add 100 basis points for Clayton to use the funds. -I believe BRK was able to buy Clayton Homes at a reasonable price (much lower than their shareholders wanted) because of the situation where Clayton could not get financing on its own. They were just like any other company in that industry, weak. With Berkshire behind them, though, their positive attributes showed more clearly. I can't recall if that is true or not, but I think that subprime lenders do a lot better when backed by a capital allocator entity like BRK. Another example is LUK and Fairfax backing ACF. When companies are locked out of a debt market, that's when you want to be making loans. Can't wait to see what LUK and JEF do. Link to comment Share on other sites More sharing options...
Guest longinvestor Posted March 7, 2013 Share Posted March 7, 2013 Embedded in many of the annual letters lies a central investing theme BRK has followed: Be the lowest cost/unit producer in whatever business you are in. This is the key ingredient to the moat like quality all of his investments. From Walmart/Costco to BNI to the Utilities to Geico and even the BRK HQ! The moat gets deeper as BRK ploughs more and more capital into the business to entrench the cost/unit advantage in ways that no one else can duplicate. Going by Munger/Buffett's recent statements about Wind/Solar energy likely getting "10X" what they invested in 2011-12, at $ 50B to 100B of capital to be invested over the coming years, this has got to be the one with the most attractive cost/unit differentiator for BRK. It would surely be an interesting question for them to answer at the meeting. Where did they make that statement? Trying to find the link, actually I remember it was Munger who said they like renewable energy a lot. He said the costs are high now but certain to keep going down over time, so it will be a good investment. He compared renewables to Ethanol which he called "dumb" because it takes more energy to get less out. I distinctly remember the 10x quote but cannot put my hands on it. I will keep looking. Link to comment Share on other sites More sharing options...
Liberty Posted March 7, 2013 Share Posted March 7, 2013 Trying to find the link, actually I remember it was Munger who said they like renewable energy a lot. He said the costs are high now but certain to keep going down over time, so it will be a good investment. He compared renewables to Ethanol which he called "dumb" because it takes more energy to get less out. I distinctly remember the 10x quote but cannot put my hands on it. I will keep looking. MidAmerican has made huge investments in solar and wind power. Link to comment Share on other sites More sharing options...
Guest longinvestor Posted March 7, 2013 Share Posted March 7, 2013 Trying to find the link, actually I remember it was Munger who said they like renewable energy a lot. He said the costs are high now but certain to keep going down over time, so it will be a good investment. He compared renewables to Ethanol which he called "dumb" because it takes more energy to get less out. I distinctly remember the 10x quote but cannot put my hands on it. I will keep looking. MidAmerican has made huge investments in solar and wind power. Yes, about $8B thus far. The discussion is over the related statement of them investing 10x that amount over the next decade. Link to comment Share on other sites More sharing options...
Guest longinvestor Posted March 10, 2013 Share Posted March 10, 2013 Reading the letter again, something else that stands out is how quickly Combs/Weschler's kitty is growing. In the letter, Warren talks about increasing their money to $5B each and since the letter was published, that number now stands at $6B each (announced in the CNBC interview). At this rate they will have all of it pretty soon! It must be quite an experience for these two coming from their prior careers! It must be amusing for Todd/Ted to hear their boss come up to them saying "Good job, and oh, here is another Billion" ;D. Berkshire is the only place in the world where this can possibly happen! Warren seems to have settled with these two (no more 3rd and 4th investment lead). Wonder who else was considered for this job? One thing I rather like is that Ted/Todd have not appeared in the press at all. I hope this is no accident and they never talk publicly. The CEO can do the talking. Surely there are lots of people who would like to get into their heads right now. That will be a huge distraction. Link to comment Share on other sites More sharing options...
LC Posted March 10, 2013 Share Posted March 10, 2013 One thing I rather like is that Ted/Todd have not appeared in the press at all. I hope this is no accident and they never talk publicly. The CEO can do the talking. Surely there are lots of people who would like to get into their heads right now. That will be a huge distraction. All the while, of course, Mr. Buffett has been ALL OVER the press! It reminds me of what White Sox coach Ozzie Guillen would do for his team. Ozzie was such a controversial public figure that all the attention was on his antics and outbusts rather than scrutinizing the performance of his team! Link to comment Share on other sites More sharing options...
ericd1 Posted March 14, 2013 Share Posted March 14, 2013 Is there a way to determine what Ted/Todd picks are? Compare previous 13-Fs? Link to comment Share on other sites More sharing options...
ragu Posted March 18, 2013 Share Posted March 18, 2013 Wonder who else was considered for this job? My understanding is that none of the 4 mentioned in the 2007 letter is currently in the running. As for who it was, there is plenty of evidence to suggest that Li Lu of Himalaya Capital was one of the 4. Don't know who the other candidates might have been. Best, Ragu Link to comment Share on other sites More sharing options...
ragu Posted March 18, 2013 Share Posted March 18, 2013 Good points. And, the funny part is that, for example, he tells you to subtract the goodwill for the insurance business -- as you have. But then, you can find something -- like the 2010 report -- where he says that GEICO is on the books for only $1.4 billion of "goodwill" but really you could easily say that it should be on the books for more than $14 billion over carrying value...if you marked it up to what he thinks it's worth. (And, that was two years ago.) Kiltacular, The subtraction of goodwill is not inconsistent with Buffett's idea that the insurance businesses are worth more than they are carried for on Berkshire's books. Goodwill (for the insurance businesses) = Price Berkshire was willing to pay for those businesses' float-generation capabilities If you adjust book to reflect the economic value of float, then you must necessarily subtract goodwill so that you don't end up double-counting the value of the float. Best, Ragu Link to comment Share on other sites More sharing options...
Palantir Posted March 18, 2013 Share Posted March 18, 2013 Is there a way to determine what Ted/Todd picks are? Compare previous 13-Fs? It seems the smaller buys tend to be Ted or Todd's. I believe Todd tends to flip positions more quickly than Ted. Link to comment Share on other sites More sharing options...
Yours Truly Posted March 18, 2013 Share Posted March 18, 2013 Is there a way to determine what Ted/Todd picks are? Compare previous 13-Fs? It seems the smaller buys tend to be Ted or Todd's. I believe Todd tends to flip positions more quickly than Ted. Ted takes concentrated positions (DVA, DTV, LMCA)... and I believe Todd specializes moreso on financial companies Link to comment Share on other sites More sharing options...
compoundinglife Posted March 18, 2013 Share Posted March 18, 2013 Is there a way to determine what Ted/Todd picks are? Compare previous 13-Fs? The easiest way (for me at least) is to watch/read the WEB interviews. People ask him why he bought Intel or GM and he will mention that they were not his purchases. This used to happen all the time with Lou's portfolio, BAC was a Lou position that people always asked Buffett about. AFAIK these are the current holdings that WEB's picks. Anyone see any errors: WFC KO IBM PG WMT PSX MCO WPO COST MDLZ(kraft spin off) KRFT GCI GE USB PSX(cop spin off) COP JNJ Link to comment Share on other sites More sharing options...
jeffmori7 Posted March 18, 2013 Share Posted March 18, 2013 Is there a way to determine what Ted/Todd picks are? Compare previous 13-Fs? The easiest way (for me at least) is to watch/read the WEB interviews. People ask him why he bought Intel or GM and he will mention that they were not his purchases. This used to happen all the time with Lou's portfolio, BAC was a Lou position that people always asked Buffett about. AFAIK these are the current holdings that WEB's picks. Anyone see any errors: WFC KO IBM PG WMT PSX MCO WPO COST MDLZ(kraft spin off) KRFT GCI GE USB PSX(cop spin off) COP JNJ You just omited American Express, his fourth holding :) Link to comment Share on other sites More sharing options...
compoundinglife Posted March 18, 2013 Share Posted March 18, 2013 Is there a way to determine what Ted/Todd picks are? Compare previous 13-Fs? The easiest way (for me at least) is to watch/read the WEB interviews. People ask him why he bought Intel or GM and he will mention that they were not his purchases. This used to happen all the time with Lou's portfolio, BAC was a Lou position that people always asked Buffett about. AFAIK these are the current holdings that WEB's picks. Anyone see any errors: WFC KO IBM PG WMT PSX MCO WPO COST MDLZ(kraft spin off) KRFT GCI GE USB PSX(cop spin off) COP JNJ You just omited American Express, his fourth holding :) Duh! Cut and paste error :) Link to comment Share on other sites More sharing options...
jeffmori7 Posted March 18, 2013 Share Posted March 18, 2013 I would think that both pharma Glaxo and Sanofi are Buffett holdings too, but maybe I am wrong on those ones. Link to comment Share on other sites More sharing options...
finetrader Posted March 18, 2013 Share Posted March 18, 2013 As an idea stealer from other respected investors, I feel like Ted, Todd, BB, and maybe Pabrai are the only one I can steal idea from with a good level of confidence simply because they run concentrated portfolio. Watsa would fit in but then we all know in what type of (controversial to say the least) company he gets into... Ex: I could take an idea from Tepper but then he would have only 2-3% invest in. Link to comment Share on other sites More sharing options...
compoundinglife Posted March 18, 2013 Share Posted March 18, 2013 I would think that both pharma Glaxo and Sanofi are Buffett holdings too, but maybe I am wrong on those ones. Yeah looks like it. GSK goes back to 2007: http://www.dataroma.com/m/hist/hist.php?f=brk&s=GSK and SNY going back to 2006: http://www.dataroma.com/m/hist/hist.php?f=brk&s=SNY Link to comment Share on other sites More sharing options...
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