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Subject: Berkshire Hathaway

Berkshire Hathaway (NYSE: BRKA and NYSE: BRKB) is a conglomerate holding company headquartered in Omaha, Nebraska, U.S., that oversees and manages a number of subsidiary companies. The company averaged an annual growth in book value of 20.3% to its shareholders for the last 44 years, while employing large amounts of capital, and minimal debt. Berkshire Hathaway stock produced a total return of 76% from 2000-2010 versus a negative 11.3% return for the S&P 500.
Warren Buffett is the company’s chairman and CEO. Buffett has used the “float” provided by Berkshire Hathaway’s insurance operations (a policyholder’s money which it holds temporarily until claims are paid out) to finance his investments. In the early part of his career at Berkshire, he focused on long-term investments in publicly quoted stocks, but more recently he has turned to buying whole companies. Berkshire now owns a diverse range of businesses including candy production, retail, home furnishings, encyclopedias, vacuum cleaners, jewelry sales; newspaper publishing; manufacture and distribution of uniforms; manufacture, import and distribution of footwear; as well as several regional electric and gas utilities. (Wikipedia Jan 2010)

Post Modern Security Analysis

Intrinsic value

The target of classical security analysis is ‘intrinsic value’, a fuzzy concept defined as the value justified by the facts.

Financial markets have become vastly more complex since the days of Graham & Dodd.

Since the 1960’s, stock prices have generally exceeded ‘intrinsic value’. New techniques are needed now to handle the flood of free investment information.

Post Modern Security Analysis

The heroic, solitary analyst is long gone

The solitary, heroic security analyst is long gone ...

The old-fashioned, heroic security analyst, working alone in a dark room with a stack of annual reports, in a snow-bound house in Omaha, far from Wall Street, is less likely to solve investment riddles today, than fifty years ago.

The analyst of the 21st century must be ready to engage in collaborative research. The future lies in modern knowledge handling technology, including OSINT techniques, crowdsourcing, wiki software, and capital market taxonomy.

Stock buybacks

Warren Buffett attacks buyback schemes

Warren Buffett

In the 2005 Berkshire-Hathaway annual report, Warren Buffet points to the unethical aspects of the buyback-option schemes so common in the US stock market. He noted that “Too often, executive compensation in the US. is ridiculously out of line with performance. … the deck is stacked against investors when it comes to the CEO’s pay. … CEOs understand … that every dime paid out in dividends reduces the value of all outstanding options”

Featured articles on inside pages

Stock buybacks

Stock buybacks dry up

Since 1982, US equities have been driven upwards by stock buybacks. Federal Reserve statistics show corresponding sales of stocks as executives exercised options to take advantage of manipulated prices. More ...

Securities Analysis

Is big bank complexity irreversible?

The root problem with big banks today is organizational and product line complexity. Excessive complexity in banks can be traced to the reorganization of Citibank in 1956, under Walter Wriston, following the advice of McKinsey and Company.
More ...

US Politics

Why are the Super-Rich often liberals?

If we are to believe the old adage that, 'people vote their pocketbooks', why are so many of the Super-Rich ardent supporters of the Democratic Party? Why do the liberal Super-Rich seem to act in a way that is so contrary to their selfish interests and economic well-being? Here I show how capital flow analysis of the Federal Reserve flow of funds accounts provides an answer to this apparent conundrum. More ...

US equities

The productivity vs. population debate

The 'Baby Boomer Bomb' refers to the expected effect of the retirement of the Baby Boomer generation on capital markets, particularly equities. Two proposed 'solutions' to the problem are examined: Boomers being 'saved' by productivity and technology; and, alternatively, by selling their financial assets to the next generation..
More ...

US Bonds

Bond demand exceeds supply for a decade

Over the decade, 1995-2004, the demand for US bonds of all types has surpassed new bond issues in eight of the last ten years. This is the reason that bond prices have held firm, even in 2003, when net new issues reached almost $1.8 trillion. More ...

World Economy

Working off the US trade deficit

Foreigners hold $16.8 trillion in US financial assets as a result of selling more goods to Americans than they buy from them. Since the 'deficit' is in dollars, the US has no problem in 'paying it off'. More ...

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2010-09-07 16:04