The Buffett Blog

Great update on Berkshire holdings here, noting a probable discount to fair value of .73 for the stocks as a whole. Plus throw in the operating businesses…

Here is a link to an academic article for those few who stubbornly believe the Oracle is a coin flipper. The academics prove the absence of luck, risk adjusted.

Best quotes:

1) From 1993 Letter to Shareholders: “The strategy we've adopted precludes our following standard diversification dogma. Many pundits would therefore say the strategy must be riskier than that employed by more conventional investors. We disagree. We believe that a policy of portfolio concentration may well decrease if it raises, as it should, both the intensity with which an investor thinks about a business comfort-level he must feel with its economic characteristics before buying into it. In stating opinion, we define risk, using dictionary terms, as "the possibility of loss or injury."”

2) The authors state: “His philosophy places emphasis squarely on the determinants of value: the estimation of future cash flows and growth rates which is also consistent with his principle of investing in businesses that he understands and is not difficult to predict. “

One of my favorite Buffett quotes: “I invest in the absence of change.”

Like Bill Miller in his recent note here, I’m a buyer of stocks in 4Q. Weitz agrees in his 3Q letter, here, where he was adding to Budweiser, the best recession hedge I know.

If you haven’t considered the market that I think is headed into a 1982 bull market (exiting price instability, 30% of index trading below book value, etc), consider Japan. It is the only place in the world I know of where a bank account trades at a P/E of 200x (price:100, yield/earnings:50cents on 50bps yield), and the market trades at 25x. I think we will read in 10 years time about the pricing ‘mistake’ in Japan, echoing Buffett when he wrote about how US stocks looked so cheap in 1980/81. We’re a couple years into it, but that’s my view.

Finally, if you don’t read Gross at PIMCO and Mauboussin at Legg Mason, do so. Here is Bill’s latest, here, and a great one by Mauboussin is here.