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the1
Registered: Feb 2009
Posts: 2332 |
09-17-12 01:38 AM
The biggest advantage Buffett has is he doesn't have to run his investment shop like a mutual fund. There is no idle cash sitting around dragging down performance, and no redemptions causing sales of stocks he'd rather not sell. If an opportunity shows up all he has to do is tap BRK for the cash. He is fully invested all the time. Put him in a Mutual Fund and his performance would be nowhere near what it is now. That being said, he has a very sound investing philosophy and he's an obviously talented investor.
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newwurldmn
Registered: Apr 2011
Posts: 2662 |
09-17-12 02:58 AM
Quote from billyjoerob:
What would proof look like? Berkshire reported securities holdings in SEC filings. Not clear whether those filings include all of the holdings of the many insurance subsidiaries. It is possible for the subsidiaries to own shares of the parent company, for instance National Indemnity received shares of BRK when Berkshire bought BNSF with Berkshire stock.
It is known, from Alice Schroeders biography, that Buffett admired a man named Wattles, who ran a company called American Manufacturing, which owned partial stakes in a number of below-NAV closed end funds. Those funds in turn owned shares in discounted closed end funds, and as he bought them in, it was a guaranteed way to compound wealth. He also admired an insurance company in California (run by a family called the Ahmannsons) that created a successful company in a publicly traded stock and bought the stock back from unsuspecting investors, who thought the shares were worthless, for pennies on the dollar. So he had the idea in his head that buying back shares cheap within a holding company structure or from unsuspecting investors was a very powerful way to compound wealth. He bought 5000 shares of Berkshire from his mother at pennies on the dollar, for instance.
So no proof on the initial claim.
Any citation for the claim that he bought 5000 shares of Berkshire from his mom?
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StarDust9182
Registered: May 2011
Posts: 513 |
09-17-12 02:58 AM
Quote from Ripley:
..... It has been stated as one of Buffett's mistakes not to buy the insurance company in a separate business entity.
I am curious, why would this be a mistake?
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newwurldmn
Registered: Apr 2011
Posts: 2662 |
09-17-12 03:04 AM
Berkshire doesn't just have public companies. They own a ton of private companies. So there isn't a real thing as NAV.
Secondly, I would think that Berkshire's subsidiaries would be subject to regulations if they bought or sold Berkshire stock.
Thirdly, he made his initial money buying insurance companies for less than their float. He isn't the only one to do it. A guy in Canada did the same thing and made billions. He has money coming to him all the time which is why he can have infinite holding periods. He invests 1MM in KO today. Next year he has another 1MM to invest.
But above that, he's done a good job picking stocks. His investment model works. A lot of people who have followed Graham and Dodd investing have done very well. And unlike Jack Hershey or any other "guru" these guys success is visible, audited, and public.
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StarDust9182
Registered: May 2011
Posts: 513 |
09-17-12 03:24 AM
Quote from the1:
The biggest advantage Buffett has is he doesn't have to run his investment shop like a mutual fund. There is no idle cash sitting around dragging down performance, and no redemptions causing sales of stocks he'd rather not sell. If an opportunity shows up all he has to do is tap BRK for the cash. He is fully invested all the time. Put him in a Mutual Fund and his performance would be nowhere near what it is now. That being said, he has a very sound investing philosophy and he's an obviously talented investor.
Agreed. Another advantage he had was he started very young with a huge capital base because of his doctor partners. (Assuming you invest well and don't go bankrupt, time AKA compound growth and low taxes is a friend.)
He was a good wheeler-dealer and a smart hard-working guy. That paid off big for him. Kudos to his success.
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billyjoerob
Registered: Jul 2009
Posts: 688 |
09-17-12 04:16 AM
p. 395, Snowball by Alice Schroeder:
"He was now [1974] very, very rich but cash poor. The companies he controlled, especially Berkshire, had cash to buy stocks, however. To move some of Berkshire's money to Diversified [a retailing company owned by Buffett], Buffett set up a reinsurance company in Diversified."
So Diversified was a reinsurer of the Berkshire insurance company and therefore received premiums. Diversified would merge with Berkshire in 1978.
"Buffett began to buy stocks for Diversified. Principally he followed the Wattles model and bought stock in Blue Chip and Berkshire. Soon, Diversified would own 10% of Berkshire. It was almost as if Berkshire was buying back its own stock -- but not quite."
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