Author Topic: What are you buying today?  (Read 2195680 times)

longinvestor

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Re: What are you buying today?
« Reply #1210 on: June 25, 2015, 07:32:25 AM »
CSTM, MU, CHK and BRK/B (Berkshire is now as oversold as it was at the 2009 and 2011 lows, despite only a minor correction).

Can you explain your thinking behind your view that BRK is as oversold now as in 2009/2011? Thanks.

BRK is now as oversold as it was in 2009 and 2011 on the multi-day money flow index, a good long term contrarian indicator how much capital flows in and out of a stock. Often times, this happens in a later stage of the bull market when a stock after a strong up movement becomes highly oversold after a 6 month consolidation or correction period, only to use this as a springboard for a rapid move upwards.

BRK/B is definitely not as undervalued as it was in 2009 or 2011, but is still reasonably priced, with an intrinsic value around $167 per share. It should be noted that the p/b ratio becomes increasingly less relevant, since the percentage of BRK/B's free cash flow derived from non-insurance operations grows rapidly and will continue to do so in the future, so that using a 1.2x p/b multiple yardstick will cause many lost opportunities to buy the stock cheaply, as that particular ratio will only be reached during severe market distress.
The 1.2x becomes a red herring with each year passing. Earnings, especially retained earnings, ballooning while BV is marked to original cost makes the 1.2 look silly. All they are saying is that they won't buy back shares if it  isn't a 50 cent dollar. Just like anything else they'd buy.


Zorrofan

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Re: What are you buying today?
« Reply #1211 on: June 25, 2015, 01:28:58 PM »
Shorted TNA (Direxion Daily Small Cap Bull 3X Shares) and bough KMI

Thanks,
Lance

Lance,

Regarding KMI, I am considering lightening up as I am anticipating another "taper tantrum" when the FED finally raises rates this fall. Also worried about the high payout ratio, they are paying out the vast majority of their cashflow.....your thoughts?

cheers
Zorro

Lance

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Re: What are you buying today?
« Reply #1212 on: June 25, 2015, 08:14:25 PM »
Hi Zorro - I think it probably moves lower when the Fed raises and am watching the payout ratio.  I sold my position in full in April and will likely ease back into it as/if it moves lower.  My recent purchase was about 20 percent of what I previously held.

Thanks
Lance

Fowci

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Re: What are you buying today?
« Reply #1213 on: June 25, 2015, 11:11:01 PM »
CSTM, MU, CHK and BRK/B (Berkshire is now as oversold as it was at the 2009 and 2011 lows, despite only a minor correction).

Can you explain your thinking behind your view that BRK is as oversold now as in 2009/2011? Thanks.

BRK is now as oversold as it was in 2009 and 2011 on the multi-day money flow index, a good long term contrarian indicator how much capital flows in and out of a stock. Often times, this happens in a later stage of the bull market when a stock after a strong up movement becomes highly oversold after a 6 month consolidation or correction period, only to use this as a springboard for a rapid move upwards.

BRK/B is definitely not as undervalued as it was in 2009 or 2011, but is still reasonably priced, with an intrinsic value around $167 per share. It should be noted that the p/b ratio becomes increasingly less relevant, since the percentage of BRK/B's free cash flow derived from non-insurance operations grows rapidly and will continue to do so in the future, so that using a 1.2x p/b multiple yardstick will cause many lost opportunities to buy the stock cheaply, as that particular ratio will only be reached during severe market distress.
The 1.2x becomes a red herring with each year passing. Earnings, especially retained earnings, ballooning while BV is marked to original cost makes the 1.2 look silly. All they are saying is that they won't buy back shares if it  isn't a 50 cent dollar. Just like anything else they'd buy.

Retained earnings are included in book value - not quite sure what your point is?

Shawn

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Re: What are you buying today?
« Reply #1214 on: June 28, 2015, 02:50:50 AM »
Large caps like Walmart and ExxonMobil are getting cheaper, prompting a closer look and possibly an investment.

Is it me or are P/E ratios starting to lower ?

longinvestor

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Re: What are you buying today?
« Reply #1215 on: June 28, 2015, 04:42:56 PM »
CSTM, MU, CHK and BRK/B (Berkshire is now as oversold as it was at the 2009 and 2011 lows, despite only a minor correction).

Can you explain your thinking behind your view that BRK is as oversold now as in 2009/2011? Thanks.

BRK is now as oversold as it was in 2009 and 2011 on the multi-day money flow index, a good long term contrarian indicator how much capital flows in and out of a stock. Often times, this happens in a later stage of the bull market when a stock after a strong up movement becomes highly oversold after a 6 month consolidation or correction period, only to use this as a springboard for a rapid move upwards.

BRK/B is definitely not as undervalued as it was in 2009 or 2011, but is still reasonably priced, with an intrinsic value around $167 per share. It should be noted that the p/b ratio becomes increasingly less relevant, since the percentage of BRK/B's free cash flow derived from non-insurance operations grows rapidly and will continue to do so in the future, so that using a 1.2x p/b multiple yardstick will cause many lost opportunities to buy the stock cheaply, as that particular ratio will only be reached during severe market distress.
The 1.2x becomes a red herring with each year passing. Earnings, especially retained earnings, ballooning while BV is marked to original cost makes the 1.2 look silly. All they are saying is that they won't buy back shares if it  isn't a 50 cent dollar. Just like anything else they'd buy.

Retained earnings are included in book value - not quite sure what your point is?

http://www.rationalwalk.com/?p=13422

The above piece captures my thought. Yes, retained earnings are included in BV but as the article above point out, the dominant proportion of the BV understatement come from how accounting requires them to treat their wholly owned business investments. (BNSF, Marmon mentioned but also age-old holdings like Geico). In other words, FV of these businesses is diverging away forever from BV. Retained earnings is the smaller part of BV and getting smaller vis a vis unaccounted FV. Additionally, retaining earnings wisely (making one dollar more than one) is the story of this corporation, no? Turning a dying textile business into this behemoth by wisely reinvesting earnings, no?

At the time of writing of the above article, 44% of retained earnings during BRK's 50 year history were retained since 2009. Make that >60% as of today. Why I believe they are comfortable with buying back shares at 1.2xBV. Estimates of IV suggests that the 1.2xBV is a 50 cent dollar. Look for the 1.2xBV floor to be revised upwards to 1.5x....2.0x over time. It will still be a 50 cent dollar at the time because of BV understatement. Could take 10 more years but in all likelihood it will. It will be irony that as their size precludes them from easily finding 50 cent dollars elsewhere, their own stock may!
« Last Edit: June 28, 2015, 07:18:49 PM by longinvestor »

Lance

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Re: What are you buying today?
« Reply #1216 on: June 29, 2015, 08:23:07 AM »
 AXP, PRU and NCZ (Allianz Convertible & Income Fund)


Thanks,
Lance



vinod1

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Re: What are you buying today?
« Reply #1217 on: June 29, 2015, 09:01:53 AM »
Estimates of IV suggests that the 1.2xBV is a 50 cent dollar.

Hi longinvestor,

Does this mean that your estimate of IV for BRK is 2.4x BV? Just curious, I have never been able to justify much above 2x BV even in my most optimistic scenario.

Thanks

Vinod
The fundamental algorithm of life: repeat what works. –Charlie Munger

drzola

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Re: What are you buying today?
« Reply #1218 on: June 29, 2015, 09:05:34 AM »
Russell Brewery!

Cheers.

longinvestor

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Re: What are you buying today?
« Reply #1219 on: June 29, 2015, 09:22:32 AM »
Estimates of IV suggests that the 1.2xBV is a 50 cent dollar.

Hi longinvestor,

Does this mean that your estimate of IV for BRK is 2.4x BV? Just curious, I have never been able to justify much above 2x BV even in my most optimistic scenario.

Thanks

Vinod

I'm not the numbers type, yet indulged because of boredom that comes with owning BRK. Playing around with assumptions (discount rate, owner earnings etc.), my IV range is between $240,000 and $340,000. The big range supports my vaguely correct posture and I'm comfortable with it. While I may be over optimistic, the market continues to under estimate BRK as the norm. Been buying more.