Author Topic: Semper Augustus letter  (Read 56103 times)

gfp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2059
Re: Semper Augustus letter
« Reply #90 on: December 10, 2019, 05:01:12 PM »
Looks like Bloomstran / Semper Augustus has made it on to the dataroma 13f site, for those that are interested -
https://dataroma.com/m/holdings.php?m=SA


Dynamic

  • Hero Member
  • *****
  • Posts: 617
Re: Semper Augustus letter
« Reply #91 on: December 10, 2019, 05:27:54 PM »
Interesting that 37% of the portfolio was in Berkshire (Class A plus Class B) and the rest has considerably smaller position sizes. Nice quality of names in there, and good for further research.
Having said that, Berkshire itself is internally diverse and Bloomstran understands it extremely well. It might have hurt Semper's market value gain on a Year-to-Date price performance basis as BRK.A/B finished 2018 strongly and has been flattish while the market has risen strongly, but it may well be that the coming year will be a great time to have an excess of Berkshire Hathaway if the intrinsic value and book value growth force the market price to break free of its previous highs eventually. I expect his 2020 letter will again have a lot of Berkshire content because again it's looking seriously mispriced despite greatly increasing its value in ways and extent that don't seem to be widely appreciated yet, and somehow I don't see that being likely to change by January or February when he writes his letter. His investors deserve to feel very positive about the future prospects, downside protection and buying opportunities afforded by the discount to IV and the growth in IV even if their portfolio may have lagged the price performance of the soaring index in 2019.

John Hjorth

  • Hero Member
  • *****
  • Posts: 3223
Re: Semper Augustus letter
« Reply #92 on: February 21, 2020, 12:22:32 PM »
I wonder if we will get a Semper Augustus Letter this year?
”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

OracleofCarolina

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 757
Re: Semper Augustus letter
« Reply #93 on: February 21, 2020, 12:25:15 PM »
Yes, look at valueinvestingworld.com

John Hjorth

  • Hero Member
  • *****
  • Posts: 3223
Re: Semper Augustus letter
« Reply #94 on: February 21, 2020, 12:32:39 PM »
Yes, look at valueinvestingworld.com

Thank you so much OracleofCarolina,

Is it possible for you to be a bit more specific with regards to link? -Thank you in advance.
”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

OracleofCarolina

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 757
Re: Semper Augustus letter
« Reply #95 on: February 21, 2020, 12:35:48 PM »
the letter will be posted there later today, if you look at that site, there is a note that it will be there.

Cheers!

longinvestor

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1887
  • Never interrupt compounding unnecessarily -Munger
Re: Semper Augustus letter
« Reply #96 on: February 21, 2020, 08:40:26 PM »
Its up there now. Thanks for the link!

ValueMaven

  • Sr. Member
  • ****
  • Posts: 429
Re: Semper Augustus letter
« Reply #97 on: February 22, 2020, 05:38:53 AM »
It posted .... alll 128 pages - of which Berk is about HALF the letter.  Best analysis out there on Berkshire ... his valuation targets are extremely interesting

Swedish_Compounder

  • Newbie
  • *
  • Posts: 28
  • Capital allocation is fun!
Re: Semper Augustus letter
« Reply #98 on: February 22, 2020, 06:09:58 AM »
There are lots of valuation and details indeed, but does he anywhere evaluate the company the way Buffett stresses more than once in this years letter that he evaluates companies attractiveness - by analyzing the returns on the net tangible assets required for its operations?

Buffett writes that it is over 20% for the stock holdings, on a weighted basis. So one simplification could be to assign 20% to the stock holdings and also analyze the operating entities and in the process not forget to deduct excess cash not required to run the operations.

« Last Edit: February 22, 2020, 06:15:00 AM by Swedish_Compounder »

Cigarbutt

  • Hero Member
  • *****
  • Posts: 2482
Re: Semper Augustus letter
« Reply #99 on: February 22, 2020, 11:47:14 AM »
To add insult to the injury related to the Don’t Fear the Repo section on share repurchases.

The author does a good job at showing how the massive amount of cash allocated to buy back activity has not materially reduced the share count over time overall and in many cases.
An interesting but mostly undiscussed topic is the ultimate value transferred through compensation packages that contain options, RSUs etc. One can infer the “true” value better when looking into the GAAP accounting and the tax accounting basis, something possible when comparing reported earnings and NIPA profits. When the stock award is issued, the value of the grant is estimated using models and expensed during the vesting period. When times are good, the ‘value’ realized from the stock compensation ends up being larger (often substantially larger). One could argue that interests are aligned and people should get what they deserve but often the incentives are short-term in nature and there are problems. Problem#1: The idea of stock-based compensation is for management to accept lower current-period wages and salaries with the expectation that the growth in the market value of the company stock will offset the reduction to their wages. With defining factors often largely more significant than specific company performance (where the wind is blowing), in good times, the value of the stock-based compensation may end up much higher that initially thought or anticipated through GAAP accounting. NIPA reports company profits using a different methodology, using tax accounting reflecting the value of the option or grant upon exercise, which reflects more directly the eventual value of the allocated stock-based compensation. There are periods (leading to the early 2000s and now) when a significant part of the divergence between the reported operating earnings and the NIPA profits diverge significantly, indicating that compensation expense ends up much higher than initially recognized and never shows up in reported company numbers. If compensation expense is not an expense, then what is it? Problem #2: When things go downhill, options, performance RSUs and others get cancelled and a batch of new ones are issued which is effectively a way to legally reprice the instruments and which is a way to make sure that higher than planned expenses in the previous period are not matched by an opposite scenario in the following.

If interested in the technicality:
https://apps.bea.gov/scb/pdf/2008/02%20February/0208_stockoption.pdf

Disclosure: I often discard companies that manifest poor capital allocation decisions (such as share repurchases) even if underlying operations are fine and have recently come to the conclusion that the parent of a relatively illiquid security has a compensation policy that is becoming excessive, in part given the above value consideration.
« Last Edit: February 22, 2020, 12:05:31 PM by Cigarbutt »