Author Topic: Semper Augustus letter  (Read 28728 times)

karthikpm

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John Hjorth

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Re: Semper Augustus letter
« Reply #21 on: March 06, 2017, 05:59:11 AM »
Christopher P. Bloomstran, Semper Augustus Investments Group LLC, released a new Client Letter on 12th February 2017 with the title: "Symphaty for the Dog - 2016 Letter to Clients: Challenging Dogma, Death of the Profit Margin, and a (Brief) Berkshire Redux".

[longinvestor linked to it in the recent BRK IV topic on this board - thanks!].

It is - like the 2015 Client Letter discussed earlier in this topic - at least to me, a very good read for BRK investors, and also very entertaining!:

Just an example here as an appetizer: p. 5:

Quote
... While we sincerely doubt any preternatural correlation with our writing about Prince and his untimely demise last year, we played it safe regardless by awarding this year’s theme to the Stones, because everyone knows they’re going to live forever, especially Keith Richards, the co-author of Sympathy, the epic lead guitar and occasional lead vocalist. With a dedicated effort, I finally finished Keith’s memoir, Life, last year. It was written with James Fox in 2010, and occupied a place among the stack on the nightstand for four years. It’s an incredibly incoherent but interesting history, especially for a lifelong Stones fan. Keith’s remaining brain cells allow him to recount wandering stories while Fox interprets. I found you could only read a few pages and then had to decompress and set it aside for a few days, or weeks, but couldn’t help but come back at times ...

To me, that actually gave me association as being the best description I have seen for how I have felt while reading the last two books from Mr. Taleb! - Without implying other similarities to any extent! And from what I have read so far of Mr. Talebs next book "Skin in the Game", that does not appear to be much different.

- - - o 0 o - - -

There are a lot of interesting topics covered in the Semper Augustus 2016 Client Letter - BRK-related and general. Perhaps we could continue discussing the Letter in this topic.

- - - o 0 o - - -

My take on this, based on these two Semper Augustus Letters: I will start buying BRK again, after a break of about a half year, based on the prevailing market conditions, and the recent relationship between market price and intrinsic value of BRK.
« Last Edit: March 06, 2017, 06:13:43 AM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

Valuehalla

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Re: Semper Augustus letter
« Reply #22 on: March 06, 2017, 08:39:43 AM »
According to Semperaugustus valuation and the BRK letter, the situation is like this:

On 31.12.2016, per B share:
BV (not KHC adjusted)     114,74 $
IV  app                           209,00 $
Marketprice                     162,98 $
GAP app 28 % upside potential to reach IV

1.3.2017, my estimation, per B share:
BV (not KHC adjusted)      118,80 $ (incl. est. InVestGains, BAC, APPL accumulation, minus defferred tax, plus operative
IV app                             216,00 $
Marketrpice                      177,28 $
GAP app 22 % upside potential to reach IV
BRK FFH MKL LVLT CTL BAC WFC BMY MRK MCD MO PM

longinvestor

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Re: Semper Augustus letter
« Reply #23 on: March 06, 2017, 12:07:26 PM »
The Semper augustus letter is good! Here are my endorsements of their insights,
1. They've held BRK continuously since 1999. Surely, besides improving the depth of their understanding of their anchor holding, they increasingly see just how much better BRK is versus their other holdings! This is my single biggest lifetime lesson. The contrast is so stark but you have to experience this over a long period of time. Clearly they've. Going down the rabbit hole of BRK's numbers is their way of not suffering from anchoring in past convictions. You have to do that with all investments. Even with gravity defying BRK.

2.  I really applaud them for sharing this insight with their clients. In Poor Charlie's Almanac, Munger talks about how this could be conflicting for a money manager. If you hold, say 50% in a single position, what's to keep your client from doing the same without having to pay you for it? If Semper Augustus manages to do this for such a long period, more power to them. What do you say about their long term clients? You get what you truly deserve. More power to them for that!

3. The contrast they draw between the S&P index companies' terrible track record with retained earnings versus BRK's is the elephant in the room. At the end of the day the BRK that is unfolding today is all about this. Why they will continue to leave others in the dust. To hell with size or other urban myths. We'll see in due course.


« Last Edit: March 06, 2017, 12:11:08 PM by longinvestor »

CorpRaider

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Re: Semper Augustus letter
« Reply #24 on: March 06, 2017, 12:21:59 PM »
Yeah, good read.  Checked it out this weekend.  Koster's blog/links is amongst my very favorites.  Interesting thoughts about ROICs and profit margins and the impacts of QE.

longinvestor

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Re: Semper Augustus letter
« Reply #25 on: March 07, 2017, 10:04:17 PM »
Did you guys see his returns?

Since inception net of fees is 5.4% vs 5.1% with the S&P 500. take taxes into consideration and I bet the index wins by a decent margin.

I looked (again) at their returns; They bested the index by a small margin. Notable is that most of that slight out performance was carried by a few years (2001-02) and 2008-09 (they did not lose as much as the index); The index has left them in the dust over the past 7 years. Just like about anyone else!

But I bet they handsomely benefit over the next five years by their big position in BRK!

longinvestor

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Re: Semper Augustus letter
« Reply #26 on: March 07, 2017, 10:13:06 PM »
FANG's and Lemmings ;)

http://www.marketwatch.com/story/facebook-races-past-berkshire-hathaways-market-cap-2016-07-28

Market cap (update)

FANG: $1.44 Trillion
BRK: $431 Billion

Rationality be damned! Oh wait, we haven't been here before, have we? ;)


« Last Edit: March 08, 2017, 07:21:30 AM by longinvestor »

StubbleJumper

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Re: Semper Augustus letter
« Reply #27 on: March 09, 2017, 05:40:15 AM »
FANG's and Lemmings ;)

http://www.marketwatch.com/story/facebook-races-past-berkshire-hathaways-market-cap-2016-07-28

Market cap (update)

FANG: $1.44 Trillion
BRK: $431 Billion

Rationality be damned! Oh wait, we haven't been here before, have we? ;)



Yes, nearly 17 years ago, a full year before the epic tech-wreck, Sanjeev posted the following about Canada's tech-darling, Northern Telecom:

"Icemann, what do all these companies have in common?  Last QuarterTicker Revenues Earnings Market Cap.BBD 3.3B 147M 15.7BBNS 4.6B 465M 17.6BBM 4.8B 497M 17.0BCM 5.9B 676M 15.7BL 4.3B 77M 11.9BPOW 4.0B 132M 6.4BTD 5.4B 41M 21.7BRY 5.6B 578M 23.0B  If you combine all those numbers you get total quarterly revenues of 37.9B, total quarterly earnings of 2.613B, and a total market capitalization of 129B. Nortels numbers ending the same quarter look like this: revenues of 6.8B, earnings of -128M, and market capitalization of 167B. For almost one quarter less you could buy all big five banks, the largest grocery chain in Canada, the largest investment firm in Canada, and the bluest of the blue industrial companies. In the short-term the market is all about style, in the long-term it is about substance. As amazing as NT's growth has been, and it's emergence coincided with an information revolution, it is extremely overvalued. When this humpty dumpty has its fall, all the kings horses, and all the kings men, will not be able to put it back together again! So don't feel so bad that you missed the boat on NT. There are many good companies out there, that are trading at undervalued levels. Some of the ones from above are worth looking at! Many investors, including indexers will suffer the consequences, when NT has an earnings shortfall in the future, and the market rapidly removes the enormous premium applied to its market price. Cheers!"


It was obvious then, and it's obvious now.  Thanks again, Sanj.


SJ

ValueMaven

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Re: Semper Augustus letter
« Reply #28 on: March 12, 2017, 07:50:16 AM »
Brilliant analysis...the best I've seen on Berkshire hands-down.  Thank you for posting. 

Sincerely,
ValueMaven

John Hjorth

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Re: Semper Augustus letter
« Reply #29 on: March 12, 2017, 10:46:55 AM »
Brilliant analysis...the best I've seen on Berkshire hands-down.  Thank you for posting. 

Sincerely,
ValueMaven

It's actually a very good read on BRK.
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai