Saturday, November 12, 2005

Two from the Journal, confirmation on Korea, BUD and BRK still cheap

A nice front page article on Warren from the WSJ. The article confirms what notes from the Tuck meeting already told us: he has been buying Korean stocks in his personal account:

Last year, Mr. Buffett says, he began buying Korean stocks for his personal brokerage account, investing a total of $100 million in roughly 20 Korean companies. He says that the investments were too small to be appropriate for the Berkshire portfolio. "These were not Berkshire-size remotely," he says.

He picked the stocks, which he declines to name, by leafing through a reference book compiled in Korea and provided by Citigroup to some clients. The book devotes a single page to each listed company. "You look for solid-looking companies at very low multiples of earnings, and sometimes with the added bonus of lots of excess cash," he said. After the shares rose in price, he unloaded some of them, though he still calls them cheap.

If you still think Korea is cheap, there is an ETF out there (up 28% this year).

From the same journal issue a very nice profile of Berkshire's specialist at the NYSE:

Mr. Maguire generally speaks with Mr. Buffett -- who is also 75 -- about once every six weeks, and they exchange jokes as often as they discuss business. Mr. Maguire notes that Mr. Buffett has referred to him as the world's greatest specialist. Mr. Buffett's response to that: "I tell Jimmy that if he keeps the spread at 200 [dollars], then I'll call him the world's greatest specialist," referring to the differential between buying and selling prices on A shares.

A document here which I had never seen before but which has apparently been around for awhile: an email from Buffett to a VP of Microsoft circa 1997. Warren's take on MSFT:

“In effect the company has a royalty on a communication stream that can do nothing but grow. It’s as if you were getting paid for every gallon of water starting in a small stream but with added amounts received as tributaries turned the stream in an Amazon. The toughest question is how hard to push prices and I wrote a note to Bill on that after our December meeting last year. Bell should anticipated Bill and let someone else put in the phone infrastructure while he collected by the minute and distance (and even importance of call if he could have figured a way to monitor it) in perpetuity.”

The makes the case for Berkshire being cheap. I agree it's cheap, however I would be very surprised if book value grows by 15% over the next 10 years. (Buffett-buddy Carol Loomis has written a great article about just how hard 15% is to do over the long-term titled " The 15% delusion.)

An interesting bearish piece here where the author argues the stock/bond/credit markets are all trading based on institutional macro factors, not individual company valuations, and many people are bullish and using credit derivatives to hedge themselves - like portfolio insurance in '87.

Morningstar tries to figure out exactly what a moat is.

Some video highlights from the Buffett/Gates Nebraska meeting here.

And you may have noticed we think BUD is cheap. Apparently Barron's does too.

Very useful links. Thanks a lot!
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