Berkshire Hathaway

  • 31 Mar
    Don’t Give Up On Stock Picking. Do It The Right Way.

    Don’t Give Up On Stock Picking. Do It The Right Way.

    • Passively managed funds are extremely dangerous as their positive performance is self-reinforcing due to the huge positive net inflows.
    • But don’t jump to actively managed funds as, on aggregate, they will always underperform the market in the long term because they are the market.
    • The only solution is to invest like a business owner. You can do this by investing yourself or by finding an active manager who has the same principles.

    Introduction

    A recent Wall Street Journal article described how BlackRock (NYSE: BLK) is switching to robots from using humans to improve its stock picking for its actively managed funds. BLK’s reasoning is that its stock picking unit lagged in performance and has had many withdrawals that cut assets under management to $275 billion from $317 billion in the last three years despite the S&P 500 surging 27% in the same period. The hope is that robots will perform better at lower cost. More →

  • 24 Mar
    Using Intrinsic Value To Measure Portfolio Performance

    Using Intrinsic Value To Measure Portfolio Performance

    • The market is irrational and can’t be used as the only measure of investment performance.
    • Imagine if all the businesses you own suddenly delisted, you’d look at their value in a different way.
    • Intrinsic value is based on the business owner perspective which is essential for reaching healthy long term returns.

    Introduction

    This past Tuesday was a bad day for stocks with both the Dow and the S&P 500 falling more than 1%. This isn’t very significant for now, apart from the fact that it broke the longest run the S&P 500 has ever seen without a 1% decline (64 days in comparison to 34 days in August 1995). However, it’s an excellent introduction to today’s topic on how we measure investment performance. More →

  • 01 Mar
    Value That’s Measured In Millions

    Value That’s Measured In Millions

    • My goal for what I write on Investiv Daily is to increase yearly returns by 4 percentage points for those who want to remain invested in the U.S. and diversified across sectors, by 8 percentage points for those who want the same but dare to go international, and by 12 or more percentage points for those who want to look at specific stock investments.
    • History, statistics, the Buffetts of the world, macroeconomics, cycles, etc., show that returns of above 16% on an annualized basis are possible, so why should you settle for average?
    • The current investing environment praises index or average investing. However, I would wait for a complete business and market cycle to pass before praising an investment strategy. It’s fun how quickly people have forgotten about 2001 and 2009.

    Introduction

    You probably know that I’ve been writing here on Investiv Daily for a while now. Apart from the content and commentary that I publish here, I have a very specific goal in mind. My goal is to eliminate the word “average” from your returns and without increasing your risk. More →

  • 21 Feb
    Buffett Put $12 Billion On Stocks, But He Didn’t Buy Into <i>This</i> Market

    Buffett Put $12 Billion On Stocks, But He Didn’t Buy Into This Market

    • Stocks grew on positive sentiment after Buffett disclosed his optimism and spent $12 billion.
    • His purchases included Apple, and an extremely cheap sector.
    • Passive investing without thinking is what allows for such heterogeneity in valuations. For investors like Buffett, it’s easy money.

    Introduction

    At the end of January, market bulls rejoiced when Warren Buffet disclosed in a Charlie Rose interview that he had bought $12 billion of stocks since Trump’s election. Since then, the market has jumped another 3% on positive sentiment as even the greatest low risk investors of them all is buying into this market.

    A few days ago, however, Berkshire Hathaway disclosed—in their obligatory holding statement—what Buffett actually bought. This, of course, hasn’t been as publicized as has the fact that he bought $12 billion of stocks, but as always, journalists prefer to focus more on what’s sexy than on what’s important.

    Let’s see if we can learn something from what the Oracle of Omaha has been buying in this market which is constantly breaching all-time highs. More →

  • 27 Jan
    What See’s Candy & WhatsApp Can Teach Us About Creating Shareholder Value

    What See’s Candy & WhatsApp Can Teach Us About Creating Shareholder Value

    • Stock option compensation rewards management if the market does well, business performance is almost irrelevant.
    • BlackRock and Vanguard are becoming more assertive in the implementation of better governance policies. However, it seems it’s only a rhetoric given that they own 9% of corporate America.
    • Two examples show how CEOs can have opposing attitudes toward shareholder value.

    Introduction

    Today, we’ll dig deeper into corporate governance as it’s essential for our long-term investment returns.

    We’ve already discussed how buybacks mostly negatively affect long term shareholder value. But apart from buybacks, there are other interesting, more subtle issues that can help us lower our risks and increase returns.

    We’ll analyze what Larry Fink and William McNabb have to say about corporate governance, and we’ll look at a few examples of how CEOs manage their companies in order to show examples of good and bad practices. More →

  • 10 Nov
    Why You Should Switch To Active Investing Now

    Why You Should Switch To Active Investing Now

    • PE ratios in the S&P 500 are all over the place; 7 of the top 20 stocks have PE ratios below 15, 7 from 20 to 30, and 5 above 30.
    • You can buy stable, growing businesses at PE ratios below 15, so why would you stick to passive investing and buying riskier stocks at PE ratios of above 20?
    • Maybe you think passive investing meets the definition of “boring,” something investors such as Buffett advocated. I don’t wish you the excitement of watching your portfolio fall from a PE ratio of 24 to a PE ratio of 15. Therefore, think about rebalancing now before it’s too late.

    Introduction

    Yesterday we discussed how the economy is doing well but that the market isn’t responding accordingly. This is because of the high valuations where only exceptional catalysts can push the market higher while any kind of negative news easily brings it into negative territory. However, by analyzing recent earnings, we have found large discrepancies among sectors in revenue and earnings growth. We understand this is normal for a well-diversified portfolio, but do we have to own more of the overvalued stocks and less of the undervalued stocks as a market capitalization weighted index fund does? More →

  • 18 Oct
    Investing Advice From John Maynard Keynes

    Investing Advice From John Maynard Keynes

    • It’s good to invest for the long run, but don’t let that be an excuse for investing in overvalued stocks as in the long run, we all die.
    • Often shunned as irrelevant, inflation must be considered when investing.
    • Markets are irrational and get more irrational as people think less. ETFs are the perfect example.

    Introduction

    You probably remember Keynes from Economics 101 as his ideas fundamentally changed the way people looked at economics in the first part of the 20th century. Before Keynes, a laissez-faire (let people do as they choose) economy with low or no government involvement, was the norm.

    By studying the causes of business cycles, Keynes came to the conclusion that government intervention is necessary to moderate boom and bust cycles in an economy. He endorsed the New Deal in a letter to President Franklin D. Roosevelt in 1933, and the New Deal remains a perfect example of his theories. More →

  • 14 Sep
    Diversify Like The Big Boys Do

    Diversify Like The Big Boys Do

    • Temporal diversification diversifies your portfolio through time by buying only the assets that are cheap at the moment and avoiding the ones in a bubble.
    • By buying in cycle troughs you enjoy high-dividend yields that allow you to buy other assets that are in temporal distress.
    • This high yield lowers the need to sell and lowers your tax bill.

    Introduction

    Today we’ll introduce you to a new concept—“temporal diversification,” a term that has begun to gain traction, especially in academic circles—that isn’t yet common knowledge but is already being used by the best investors. Using the example of Berkshire Hathaway, we’ll provide an overview of the concept of temporal diversification and will provide some ideas for increasing your returns by diversifying your portfolio not just for the current moment, but for your whole investing life. More →

  • 29 Jul
    Corporate Earnings of the S&P 500’s Top 10: Why It Is Important for You

    Corporate Earnings of the S&P 500’s Top 10: Why It Is Important for You

    • Corporate earnings and fundamentals are variable, pick the stocks that best suit you.
    • There are low PE ratio stocks, high growth stocks, and high dividend yielders – anything you might want.
    • But be aware: some companies engage in buybacks that are detrimental to shareholders’ value.

    Introduction

    When you add up the top ten companies by weight, they account for 17.7% of the total weight of the S&P 500. For investors who are heavily invested in the S&P 500, following the earnings of its top ten companies is essential in order to understand the risks and rewards of being invested in the index. In this article we are going to assess the current market situation by looking at what has been going on with the 10 biggest companies in the S&P 500 index. More →

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