Berkshire Hathaway

[weijian]

But investment beyond venture's core competence is completely lacking, as they invested in sub-prime mortgages and messed up, thanks to bad advice from bankers.

I started my investing journey a little time just before GFC2008 (one of the many retail guys who helped to create a record in new Spore brokerage accounts in 2007..haha). Post GFC, I was actually surprised to see many companies having to recognize losses on the companies' books wrt to such "non-core" investments. Fast forward to today, I m starting to see more FVOCI/FVTPL assets on the companies' balance sheet in the last few years again. It could be because of the improving risk-free rates OR it could be something else, I am not too sure.

[Big Toe]

Sorry, side track a bit, speaking of FVOCI/FVTPL assets. The very strong SGD is quite detrimental to many assets located outside of Singapore. Those who bought malaysain properties, esp the Johor chinese developer condos suffer a double whammy of assets prices falling a good 50% within a short time frame + the weaker RM Vs SGD. Losses are probably in the region of 60-70+ %. Also my opinion is the Johor condos can more or less be written off, the over supply of housing in Johor is just beyond one's imagination, esp vacant condos. Those within walking distance of CIQ might get a small boost with the opening of RTS, the rest of the "luxury condos" can probably serve as foreign worker dormitories.

Berkshire probably have less of an exchange risk as a large part of its business is done domestically and in USD.

[Behappyalways]

Here’s a full recap of everything Warren Buffett and Charlie Munger said at Berkshire’s annual meeting
https://www.cnbc.com/2023/05/06/berkshir...dates.html

[Big Toe]

Personal opinion. Ajit Jain would probably be a more suitable candidate to run the entire Berkshire Hathaway instead of just the insurance side of it only. Unfortunately he has no desire to run it. He demonstrated expert knowledge not only in insurance but business in general.

This is what I remember, correct me if i am wrong. In insurance, he only underwrites when prices are favorable. In very clear terms, he stated their Property and casualty portfolio is slightly unbalanced with that if a hurricane occurs in florida, they will lose 15B, if it doesnt occur, they stand to gain a few billion. If a hurricane occurs in other states, their exposure would be less compared to other insurers. Also they will not pursue growth over profits.

I like that he does not sugar-coat(in complete contrast to blitz scaling unicorn/start ups), and is in complete understanding of the risks/trade offs. He is somewhat more simliar to Buffett and Charlie, abit less animated.

[weijian]

This is what I remember, correct me if i am wrong. In insurance, he only underwrites when prices are favorable. In very clear terms, he stated their Property and casualty portfolio is slightly unbalanced with that if a hurricane occurs in florida, they will lose 15B, if it doesnt occur, they stand to gain a few billion. If a hurricane occurs in other states, their exposure would be less compared to other insurers. Also they will not pursue growth over profits.

I think the additional (and essential) ingredient would be the financial strength of  Berkshire Hathaway.

Let's say there is a 5% of a massive hurricane incurring 15B payout, and 95% odds of it not happening and collecting 3B of premiums yearly.

So the expected returns would be 0.95*3 (expected gain) - 0.05*15 (expected loss) = 2.85 - 0.75 = 2.1B.

So there are 2 keys to this equation:
(1) Ajit Jain and his team ensuring 5% is good and stick to it, not underpricing their premiums to gain market share.
(2) Berkshire Hathaway able (and giving confidence to clients) to cough up 15B when it is pay up time (and there will be a time to pay up)

In fact, I remember BH does a lot of reinsurance as most other insurers may not be able to cough up 15B (ie. those huge ones) and so the latter give part of this business to the former to reduce their risk. I reckon Ajit Jain and his team will selectively pick (and diversify) their reinsurance clients, Coupled with the earnings power and durability of BH's businesses, it is a pretty tight ship!

[Behappyalways]

面对世界百年大变局，巴菲特投资哲学升级4.0！
https://m.youtube.com/watch?v=9C0pNYA4p7w

[dreamybear]

Warren Buffett: Growth Versus Value Is Stupid
"...And in this video, Warren talks about why comparisons between "growth stocks" and "value stocks" are meaningless and ridiculous....."
https://www.youtube.com/watch?v=bkGj4wPvI7g

[dreamybear]

How does one define arbitrage bet vs value investing ?

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Buffett cut Activision stake before judge approved Microsoft merger
https://www.reuters.com/markets/deals/bu...023-07-17/
"...Berkshire's remaining Activision stake - 14,658,121 shares - is exactly the size it was before Buffett started buying, suggesting that he has exited the arbitrage bet...."

[Wildreamz]

Value investing has become quite nebulous recently. I think Munger's definition is quite appropriate "all intelligent investing is value investing".

By that definition, I think arbitrage is just a subset of value investing in general.

Buffett cutting stake here, probably just means that based on probability of it getting approved, the upside does not justify holding the stock further (risk, opportunity cost etc.).

[weijian]

I believe most parts of the AR was probably written before Munger passed on. So a special eulogy was delivered right at the start of the AR.

Buffett spent some time discussing the mistakes he made of his two biggest investments of buying companies wholesale - BNSF and BHE. At point of purchase, I vaguely remember he said that both companies required huge capital outlays and suited Berkshire, whom was generating huge excess cash. - But 1 decade on, it seems like they are requiring more capital than he thought they needed, but with much lower returns. Coupled this with the fact that Buffett keeps admitting that Berkshire is too big now, are we very close to BH declaring dividends in the near future?

Berkshire Hathaway AR23

Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades. In a way his relationship with me was part older brother, part loving father. Even when he knew he was right, he gave me the reins, and when I blundered he never – never –reminded me of my mistake.

With that focus, and with our present mix of businesses, Berkshire should do a bit better than the average American corporation and, more important, should also operate with materially less risk of permanent loss of capital. Anything beyond “slightly better,” though, is wishful thinking. This modest aspiration wasn’t the case when Bertie went all-in on Berkshire – but it is now.

https://www.berkshirehathaway.com/letters/2023ltr.pdf