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What are you buying today?

LowIQinvestor

By LowIQinvestor
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Castanza
Castanza

Agreed, enjoyed the writeup. I've been accumulating a position as well. 

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thepupil Newbie

thepupil

Posted
Posted

I'm tired of addressing the low rates = high multiples argument so I won't really go into the details.

 

haven't high quality companies in Europe and Japan traded at nice multiples throughout the low rates and low growth?

 

I can't find data over time, but I'd point out that "quality" companies in these parts do trade at a healthy 19x earnings. They don't trade at 40x instead of 20x because rates are zero instead of 1 or 2%, but it's not like they trade at 10x or 13x either.

 

I mostly agree about your point about banks. I think low rates/growth are an argument for multiples of high quality super long duration assets holding up, not necessarily banks trading at high earnings multiples. japanification/europification will not be kind to banks (though I think American banks are in much better shape)

 

MSCI Japan Quality is at 19x versus MSCI Japan at 13x

https://www.msci.com/documents/10199/83875536-eccc-410e-ac69-0e56010de620

 

MSCI Europe Quality is at 19x versus MSCI Europe at 13x

https://www.msci.com/documents/10199/3bc1a893-9602-45da-ba28-24220cec261f

 

MSCI EM Quality is at 18x versus MSCI EM at 13x

https://www.msci.com/documents/10199/a032d7c7-e72a-4f02-b95a-6aaa77fcd152

 

 

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Spekulatius Newbie

Spekulatius

Posted
Posted

I have been buying Markel. Never thought I would be given a chance to get it at a cheap price again, but here we are. Looks like it's slightly better value than Berkshire to me as well.

 

Some on this board hate FRFHF/FFH, but what are your thoughts on MKL relative to FFH? Do you just like the S&P500 plus portfolio returns Markel delivers better than the deep value dumpster-diving Prem prefers? FFH seems pretty cheap right now too, and I've considered adding to my baby position.

 

There is a whole lot more pessimism built into FFH right now because people don't believe the investment results will be good going forward. From 60% of book, they don't have to be great to get a decent return in the equity. But I think investing is hard, and Prem is fundamentally a good investor who made a couple large bad bets (particularly deflation hedge which might have become pretty valuable around now) which really dented performance. If you back out the losses from that large bet, results are only mediocre since 2010.

 

BRKB> MKL>> FFH, imo.

 

Based on current prices, risk adjusted..

 

Also worth a look: TRV , CB (own a bit TRV).

 

Today, I added some BRKB

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TwoCitiesCapital Newbie

TwoCitiesCapital

Posted
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I'm tired of addressing the low rates = high multiples argument so I won't really go into the details.

 

haven't high quality companies in Europe and Japan traded at nice multiples throughout the low rates and low growth?

 

I can't find data over time, but I'd point out that "quality" companies in these parts do trade at a healthy 19x earnings. They don't trade at 40x instead of 20x because rates are zero instead of 1 or 2%, but it's not like they trade at 10x or 13x either.

 

I mostly agree about your point about banks. I think low rates/growth are an argument for multiples of high quality super long duration assets holding up, not necessarily banks trading at high earnings multiples. japanification/europification will not be kind to banks (though I think American banks are in much better shape)

 

MSCI Japan Quality is at 19x versus MSCI Japan at 13x

https://www.msci.com/documents/10199/83875536-eccc-410e-ac69-0e56010de620

 

MSCI Europe Quality is at 19x versus MSCI Europe at 13x

https://www.msci.com/documents/10199/3bc1a893-9602-45da-ba28-24220cec261f

 

MSCI EM Quality is at 18x versus MSCI EM at 13x

https://www.msci.com/documents/10199/a032d7c7-e72a-4f02-b95a-6aaa77fcd152

 

Only in recent years have European equities hit that level - primarily after the 2017 "everything" rally based on my holdings in them. And it's not even widespread - sure you get 20x in Germany, but not all across Europe as a whole.

 

Japanese equities have traded at elevated profit multiples for a period of time, but the EBITDA/EV relative to US corporations is WAY lower given the large cash balances and limited leverage - so still much safer - and also basically an occurrence of the doubling of the index over the last 5-7 years or so.

 

So no, I still do not accept that low rates = high multiples. 1-2% inflation = high multiples. You get above or below that figure, multiples come down pretty quickly. 

 

We've been in that band for a few years, despite policy makers' best efforts for 2+% inflation.  What is the likelihood policy makers thread that needle to get it just right in response to this crisis? We're going to fall out of that range which means the entire market likely rer-ates.

 

If it's to the low side, God help the banks. Some European banks are down 80-90-ish % from their pre-08 highs despite surviving, adapting business models, and consolidating what was left of the industry.

 

And while I think "quality" companies are better prepared for this, their priced for it. Christ - Google is at 30x it's earnings despite all of its customers suffering and slashing ad budgets. If Google was 15-20x reduced earnings, I'd buy hand over fist. I'm not touching 30x falling earnings. This will be 2006/2008 all over for Google holders IMO with the exception Google won't be hitting record revenues and earnings through the period as it's stock drops

 

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rb Newbie

rb

Posted
Posted

I think one error you guys are making when thinking about banks and rates is that you are not comparing Apples to Apples.

 

The Japanese are degenerate savers. A large tract of Europe are degenerate savers. Americans are degenerate spenders. One of these things is not like the other.

 

Maybe you should look somewhere closer to home. Pre GFC Canadians have been moderate savers, post GFC Canadians have become moderate spenders. Rates came down, NIM margins contracted a lot. Now check what happened to the earnings of Canadian banks.

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Cigarbutt Newbie

Cigarbutt

Posted
Posted

I think one error you guys are making when thinking about banks and rates is that you are not comparing Apples to Apples.

 

The Japanese are degenerate savers. A large tract of Europe are degenerate savers. Americans are degenerate spenders. One of these things is not like the other.

 

Maybe you should look somewhere closer to home. Pre GFC Canadians have been moderate savers, post GFC Canadians have become moderate spenders. Rates came down, NIM margins contracted a lot. Now check what happened to the earnings of Canadian banks.

But sir, the facts, they are changin'.

https://fred.stlouisfed.org/series/PSAVERT

https://www.jcer.or.jp/english/household-savings-rate-going-up-or-down

Given the evolving age profile , it's hard to see a scenario where Japan does not enter a dis-saving phase.

As far as the outlook for oligopolistic CDN banks and their ability to thrive in a minuscule net-interest-margin world, when a typical CDN is asked why he or she is not saving: "I don't need to save, I have a house". In the US, savings rate started to go up after it was realized that houses were not necessarily piggy banks.

 

 

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Lance Newbie

Lance

Posted
Posted

Over the past few days I sold DIS and added to ALX and WFC.

 

Thanks

Lance

 

What pushed you to sell DIS?

 

Hi HM - I still like DIS in the long term, but prefer ALX and WFC for now.  I bought DIS between $85 and $80 and would likely start buying again under $90.

 

Also, added to WFC and started a new position in DOW.

 

Thanks

Lance

 

 

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HalfMeasure Newbie

HalfMeasure

Posted
Posted

Over the past few days I sold DIS and added to ALX and WFC.

 

Thanks

Lance

 

What pushed you to sell DIS?

 

Hi HM - I still like DIS in the long term, but prefer ALX and WFC for now.  I bought DIS between $85 and $80 and would likely start buying again under $90.

 

Also, added to WFC and started a new position in DOW.

 

Thanks

Lance

 

Got it, that makes sense. WFC has been left for dead.

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Castanza Newbie

Castanza

Posted
Posted

Over the past few days I sold DIS and added to ALX and WFC.

 

Thanks

Lance

 

What pushed you to sell DIS?

 

Hi HM - I still like DIS in the long term, but prefer ALX and WFC for now.  I bought DIS between $85 and $80 and would likely start buying again under $90.

 

Also, added to WFC and started a new position in DOW.

 

Thanks

Lance

 

Got it, that makes sense. WFC has been left for dead.

 

Trump doing his best to put a bullet in the back of their head.

 

https://twitter.com/realDonaldTrump/status/1260206276216266754

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