Author Topic: Buffett letter?  (Read 28237 times)

longinvestor

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Re: Buffett letter?
« Reply #50 on: March 06, 2013, 07:24:06 AM »
Embedded in many of the annual letters lies a central investing theme BRK has followed: Be the lowest cost/unit producer in whatever business you are in. This is the key ingredient to the moat like quality all of his investments. From Walmart/Costco to BNI to the Utilities to Geico and even the BRK HQ! The moat gets deeper as BRK ploughs more and more capital into the business to entrench the cost/unit advantage in ways that no one else can duplicate. Going by Munger/Buffett's recent statements about Wind/Solar energy likely getting "10X" what they invested in 2011-12, at $ 50B to 100B of capital to be invested over the coming years, this has got to be the one with the most attractive cost/unit differentiator for BRK. It would surely be an interesting question for them to answer at the meeting.
« Last Edit: March 06, 2013, 07:26:52 AM by longinvestor »


bargainman

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Re: Buffett letter?
« Reply #51 on: March 06, 2013, 07:33:33 AM »
There's also the built in advantage of their AAA/AA credit rating.  A friend worked for Clayton homes, and he said they could basically access credit at insanely low rates since they were part of BRK.  Their competitors had no such advantage.

jay21

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Re: Buffett letter?
« Reply #52 on: March 06, 2013, 07:38:44 AM »
There's also the built in advantage of their AAA/AA credit rating.  A friend worked for Clayton homes, and he said they could basically access credit at insanely low rates since they were part of BRK.  Their competitors had no such advantage.

From what I remember, BRK issues the debt to get the low rate.  They then add 100 basis points for Clayton to use the funds.
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ourkid8

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Re: Buffett letter?
« Reply #53 on: March 06, 2013, 07:43:30 AM »
You are correct and this is a great system to provide businesses with the compeititive advantage.  I just hope Fairfax strives to achive the AAA credit rating to help all their current and future subs have this wonderful competitive advantage.

S

There's also the built in advantage of their AAA/AA credit rating.  A friend worked for Clayton homes, and he said they could basically access credit at insanely low rates since they were part of BRK.  Their competitors had no such advantage.

From what I remember, BRK issues the debt to get the low rate.  They then add 100 basis points for Clayton to use the funds.

longinvestor

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Re: Buffett letter?
« Reply #54 on: March 06, 2013, 08:00:34 AM »
You are correct and this is a great system to provide businesses with the compeititive advantage.  I just hope Fairfax strives to achive the AAA credit rating to help all their current and future subs have this wonderful competitive advantage.

[/quote]

I keep reading on this board how Fairfax has better risk/reward than BRK. FFH is very early in owning operating businesses. BRK has a 15-20 year headstart. BRK is already there, FFH hopes to get there. There is another thing, businesses come seeking to become part of the BRK family, this is only in the dreams of others with capital. Even post-Buffett, if the ownership culture is retained, this will likely continue. The powerful combination of permanent capital access & "Leave management alone" are the anti-thesis of today. Just go and ask any business owner who sold to PE on how they feel seeing what happened to their business post-sale!


SouthernYankee

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Re: Buffett letter?
« Reply #55 on: March 06, 2013, 09:19:49 AM »
Quote from: bargainman on Today at 07:33:33 AM
There's also the built in advantage of their AAA/AA credit rating.  A friend worked for Clayton homes, and he said they could basically access credit at insanely low rates since they were part of BRK.  Their competitors had no such advantage.

From what I remember, BRK issues the debt to get the low rate.  They then add 100 basis points for Clayton to use the funds.


-I believe BRK was able to buy Clayton Homes at a reasonable price (much lower than their shareholders wanted) because of the situation where Clayton could not get financing on its own. They were just like any other company in that industry, weak. With Berkshire behind them, though, their positive attributes showed more clearly.

valueinvesting101

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Re: Buffett letter?
« Reply #56 on: March 06, 2013, 02:12:42 PM »
Embedded in many of the annual letters lies a central investing theme BRK has followed: Be the lowest cost/unit producer in whatever business you are in. This is the key ingredient to the moat like quality all of his investments. From Walmart/Costco to BNI to the Utilities to Geico and even the BRK HQ! The moat gets deeper as BRK ploughs more and more capital into the business to entrench the cost/unit advantage in ways that no one else can duplicate. Going by Munger/Buffett's recent statements about Wind/Solar energy likely getting "10X" what they invested in 2011-12, at $ 50B to 100B of capital to be invested over the coming years, this has got to be the one with the most attractive cost/unit differentiator for BRK. It would surely be an interesting question for them to answer at the meeting.

Where did they make that statement?

redskin

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Re: Buffett letter?
« Reply #57 on: March 06, 2013, 02:26:33 PM »
Embedded in many of the annual letters lies a central investing theme BRK has followed: Be the lowest cost/unit producer in whatever business you are in. This is the key ingredient to the moat like quality all of his investments. From Walmart/Costco to BNI to the Utilities to Geico and even the BRK HQ! The moat gets deeper as BRK ploughs more and more capital into the business to entrench the cost/unit advantage in ways that no one else can duplicate. Going by Munger/Buffett's recent statements about Wind/Solar energy likely getting "10X" what they invested in 2011-12, at $ 50B to 100B of capital to be invested over the coming years, this has got to be the one with the most attractive cost/unit differentiator for BRK. It would surely be an interesting question for them to answer at the meeting.

Where did they make that statement?

During the annual meeting last year, Buffett said he could see Berkshire allocating $100 billion to the utility over the next decade.  I don't think it was specifically wind/solar.

jay21

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Re: Buffett letter?
« Reply #58 on: March 07, 2013, 07:38:00 AM »
Quote from: bargainman on Today at 07:33:33 AM
There's also the built in advantage of their AAA/AA credit rating.  A friend worked for Clayton homes, and he said they could basically access credit at insanely low rates since they were part of BRK.  Their competitors had no such advantage.

From what I remember, BRK issues the debt to get the low rate.  They then add 100 basis points for Clayton to use the funds.


-I believe BRK was able to buy Clayton Homes at a reasonable price (much lower than their shareholders wanted) because of the situation where Clayton could not get financing on its own. They were just like any other company in that industry, weak. With Berkshire behind them, though, their positive attributes showed more clearly.

I can't recall if that is true or not, but I think that subprime lenders do a lot better when backed by a capital allocator entity like BRK.  Another example is LUK and Fairfax backing ACF.  When companies are locked out of a debt market, that's when you want to be making loans. Can't wait to see what LUK and JEF do.
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longinvestor

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Re: Buffett letter?
« Reply #59 on: March 07, 2013, 10:18:42 AM »
Embedded in many of the annual letters lies a central investing theme BRK has followed: Be the lowest cost/unit producer in whatever business you are in. This is the key ingredient to the moat like quality all of his investments. From Walmart/Costco to BNI to the Utilities to Geico and even the BRK HQ! The moat gets deeper as BRK ploughs more and more capital into the business to entrench the cost/unit advantage in ways that no one else can duplicate. Going by Munger/Buffett's recent statements about Wind/Solar energy likely getting "10X" what they invested in 2011-12, at $ 50B to 100B of capital to be invested over the coming years, this has got to be the one with the most attractive cost/unit differentiator for BRK. It would surely be an interesting question for them to answer at the meeting.

Where did they make that statement?

Trying to find the link, actually I remember it was Munger who said they like renewable energy a lot. He said the costs are high now but certain to keep going down over time, so it will be a good investment. He compared renewables to Ethanol which he called "dumb" because it takes more energy to get less out.

I distinctly remember the 10x quote but cannot put my hands on it. I will keep looking.