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Investor Education
Market Return After Exceptional Years
Dollar Cost Averaging Tool
Dow Theory: The Formation of a Line
Dividend Capture Strategy Analysis
Golden Cross – How Golden Is It?
Debunked – Death Cross
Work Smart, Not Hard
Charles H. Dow, Father of Value Investing
It's All About the Dividends
Dow Theory: Buying in Scales
How to Avoid Losses
When Dividends are Canceled
Cyclical and Secular Markets
Inflation Proof Myth
What is Fair Value?
Issues with P-E Ratios
Beware of Gold Dividends
Gold Standard Myth
Lagging Gold Stocks?
No Sophisticated Investors
Dollar down, Gold up?
Problems with Market Share
Aim for Annualized Returns
Anatomy of Bear Market Trade
Don’t Use Stop Orders
How to Value Earnings
Low Yields, Big Gains
Set Limits, Gain More
Ex-Dividend Dates -
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Historical Data
1290-1950: Price Index
1670-2012: Inflation Rate
1790-1947: Wholesale Price Cycle
1795-1973: Real Estate Cycle
1800-1965: U.S. Yields
1834-1928: U.S. Stock Index
1835-2019: Booms and Busts
1846-1895: Gold/Silver Value
1853-2019: Recession/Depression Index
1860-1907: Most Active Stock Average
1870-2033: Real Estate Cycles
1871-2020: Market Dividend Yield
1875-1940: St. Louis Rents
1876-1934: Credit-New Dwellings
1896-1925: Inflation-Stocks
1897-2019: Sentiment Index
1900-1903: Dow Theory
1900-1923: Cigars and Cigarettes
1900-2019: Silver/Dow Ratio
1901-2019: YoY DJIA
1903-1907: Dow Theory
1906-1932: Barron's Averages
1907-1910: Dow Theory
1910-1913: Dow Theory
1910-1936: U.S. Real Estate
1910-2016: Union Pacific Corp.
1914-2012: Fed/GDP Ratio
1919-1934: Barron's Industrial Production
1920-1940: Homestake Mining
1921-1939: US Realty
1922-1930: Discount Rate
1924-2001: Gold/Silver Stocks
1927-1937: Borden Co.
1927-1937: National Dairy Products
1927-1937: Union Carbide
1928-1943: Discount Rate
1929-1937: Monsanto Co.
1937-1969: Intelligent Investor
1939-1965: Utility Stocks v. Interest Rates
1941-1967: Texas Pacific Land
1947-1970: Inventory-Sales Ratio
1948-2019: Profits v. DJIA
1949-1970: Dow 600? SRL
1958-1976: Gold Expert
1963-1977: Farmland Values
1971-2018: Nasdaq v. Gold
1971-1974: REIT Crash
1972-1979: REIT Index Crash
1986-2018: Hang Seng Index Cycles
1986-2019: Crude Oil Cycles
1999-2017: Cell Phone Market Share
2008: Transaction History
2010-2021: Bitcoin Cycles -
Interesting Read
Inside a Moneymaking Machine Like No Other
The Fuzzy, Insane Math That's Creating So Many Billion-Dollar Tech Companies
Berkshire Hathaway Shareholder Letters
Forex Investors May Face $1 Billion Loss as Trade Site Vanishes
Why the oil price is falling
How a $600 Million Hedge Fund Disappeared
Hedge Fund Manager Who Remembers 1998 Rout Says Prepare for Pain
Swiss National Bank Starts Negative
Tice: Crash is Coming...Although
More on Edson Gould (PDF)
Schiller's CAPE ratio is wrong
Double-Digit Inflation in the 1970s (PDF)
401k Crisis
Quick Link Archive
Category Archives: Warren Buffett
Munger, Buffett, and Dow Theory
Posted in BRK-A, Charlie Munger, Dow Theory, Warren Buffett, Wesco Financial, wsc
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Berkshire Hathaway 13F: Q4 2020
Can you spot the classic “value” purchase?
Below are the shares that Berkshire Hathaway added to their portfolio and the lowest price within the fourth quarter of 2020. The last five years are shown for the relative value for the respective stocks. The stocks are shown in order of largest increase to Berkshire Hathaway holdings.
Verizon (VZ)
T-Mobile (TMUS)
The Kroger Co. (KR)
Merck & Co. (MRK)
Marsh & McLennan Co. (MMC)
AbbVie Inc. (ABBV)
Bristol-Myers Squibb Co. (BMY)
Chevron Corp. (CVX)
RH (RH)
Posted in BRK, BRK-A, Warren Buffett
Buffett Buys Japanese Brokerages; Rate Thesis Intact
It was announced that Warren Buffett has accumulated shares of Japanese brokerages.
As we’ve long stated, the secular trend in rates is up:
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“A single rate increase by the Federal Reserve in no way makes for a trend. However, markets often lead the way and what initially seems “bizarre” is only a natural change in regime, a change that we haven’t seen since the early 1940’s (December 16, 2015.).”
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“We’ve only included the point in the interest rate cycle that corresponds to the phase that we are entering, coming from an all-time low to an eventual all-time high (November 15, 2015.).”
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“Investors anticipating a general rise in interest rates should feel some comfort in knowing that most manager(s) in the utility sector are ready for what is to come. Rising interest rates are not an automatic death sentence for utility stock prices or earnings. In fact, the early stages of rising interest rates may see utility stocks match or exceed the returns of non-interest rate sensitive stocks, on a total return basis. Only when the outlook is cloudy will it become difficult to offer projections that are in line with prior expectations (September 4, 2014.).”
We’ve also said that Japan outperforms under such conditions.
With this is mind, maybe this is what Buffett & Co. are seeing for the future of the secular trend and beyond.
Posted in inflation, interest rates, Warren Buffett
The First 12 Years: Simons v. Buffett
We got our hands on the latest investment tome by Gregory Zuckerman titled The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution. The book is good but we can’t help but cut to the data to get a better sense of perspective.
Below is a comparison between Jim Simons and Warren Buffett in the first 12 years of published investment performance. Continue reading
Posted in Jim Simons, Warren Buffett
Quote of the Day: Buffett on Buybacks
“..Our endorsement of repurchases is limited to those dictated by price/value relationships and does not extend to the ‘greenmail’ repurchase - a practice we find odious and repugnant. In these transactions, two parties achieve their personal ends by exploitation of an innocent and unconsulted third party. The players are: (1) the ‘shareholder’ extortionist who, even before the ink on his stock certificate dries, delivers his ‘yourmoney-or-your-life’ message to managers; (2) the corporate insiders who quickly seek peace at any price - as long as the price is paid by someone else; and (3) the shareholders whose money is used by (2) to make (1) go away. As the dust settles, the mugging, transient shareholder gives his speech on ‘free enterprise’, the muggee management gives its speech on ‘the best interests of the company’, and the innocent shareholder standing by mutely funds the payoff (Warren E. Buffett. Letter to Shareholders. February 25, 1985. page 3.).”
Robert Rodriguez’s stunning and prophetic April 2005 assessment of Fannie Mae, Freddie Mac, and AIG.
Posted in buyback, stock repurchase, Warren Buffett
Dow 50k by 2023? How about 177k by 2032?
In a USA Today article titled “Dow hitting 50,000 by 2023? Market milestone is within reach, investor claims”, money manager Charles Lemonides says, “…investors ‘should build their portfolios recognizing Dow 50,000 is a real possibility’ by 2022 or 2023.”
This prediction sounds spectacular and harkens back to our January 3, 2018 article titled “Dow 130,000 by 2032.” That article was premised on our November 2012 article suggesting that the secular bear market would end between 2016 and 2023. After further analysis, in March 2013, we concluded that “…If the current implications are correct, we could be on the cusp of a run to Dow 100,000.”
What stands out about Lemonides’ forecast for the next five years? While we were projecting a +12% compounded annual growth rate, Lemonides is forecasting a +15.09% compounded annual growth rate over the next five years. If the +15.09% growth rate is projected out to 2032 then the Dow Jones Industrial Average would sit at 177,200.
IBM: Now That Buffett Is Gone
In April 18, 2012, we said:
“In this case, the dividend has been rising much faster than the stock price, among the many reasons that Buffett might be interested in a technology stock near an all-time high. Now, just imagine what the stock will look like after falling to a 52-week low.”
On July 23, 2015, we said of IBM:
“We think that a value investor would have fun pouring over the data to determine the actual value of IBM. Gould’s Speed Resistance Lines [SRL] indicate that the conservative downside target for IBM is $130. However, we think a process of accumulation at the current price, and below, is a prudent long-term strategy.”
Now that Warren Buffett is no longer a selling point for potential new buyers, what do we think of IBM?
Posted in IBM, Warren Buffett
Y2K: The Top of the Market
In the very first posting for 2018, we covered the prescient comments of Warren Buffett from November 22, 1999 when he said:
“Let me summarize what I've been saying about the stock market: I think it's very hard to come up with a persuasive case that equities will over the next 17 years perform anything like--anything like--they've performed in the past 17. If I had to pick the most probable return, from appreciation and dividends combined, that investors in aggregate--repeat, aggregate--would earn in a world of constant interest rates, 2% inflation, and those ever hurtful frictional costs, it would be 6%. If you strip out the inflation component from this nominal return (which you would need to do however inflation fluctuates), that's 4% in real terms. And if 4% is wrong, I believe that the percentage is just as likely to be less as more (Loomis, Carol. Mr. Buffett on the Stock Market. Fortune. November 22, 1999. accessed: everyday since.).”
In the 17 years since Buffett’s comments, the stock market has gained +2.27% when adjusted for inflation and compounding of dividends. Even if we included the year 2017 in the picture, the CAGR of the S&P 500 would have been +3.15%. It is easy to say that Warren Buffett is a genius because, after all, look at the wealth that he has managed to amass. But what about the regular people out there? How can they identify a market that has peaked?
One source that we like to cite is the work of the late Richard Russell of Dow Theory Letters (www.dowtheoryletters.com). In his March 22, 2000 letter, Russell Provided what is known as the “Top Out Parade.” That Top Out Parade provided much of the indications that the stock market had peaked. To put the Top Out Parade in perspective, we’ve posted a chart of the Dow Jones Jones Industrial Average indicated in blue the Buffett quote and in red the Russell posting of the Top Out Parade.
Both Buffett’s commentary of the expected performance of the market over the next 17 years and Russell’s observation of the Top Out Parade identified keys area in the market that should have been obvious to everyone.
Below is the original Top Out Parade list as published by Richard Russell on March 22, 2000 in Letter 1298. We think that anyone who tracks similar data will have a decent idea of whether or not we’ve seen some kind of top in the market, provided the indicators do not make new highs. Enjoy.
Berkshire Hathaway: Fairly valued, But…
On May 6, 2012, we posted an article titled “Should Berkshire Hathaway Be Trading at 1995 Prices?” where we constructed an Altimeter for Berkshire Hathaway (BRK-A). At the time we said the following:
Based on the Altimeter, Berkshire is currently undervalued by at least 66% and below the 2007 peak by almost 95%. Those considering the acquisition of Berkshire Hathaway have the following upside targets to consider in the coming 2-3 years, all things being equal:
Since that time, the price of Berkshire increased the +95% by November 2016. The updated Altimeter is listed below:
Dow 130,000 by 2032
Summary
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In 1999, Warren Buffett said that stock market returns would underperform over the next 17 years.
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Cycles indicate that the next 17 years will be a secular bull market.
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Volume data and price recovery were the keys to the change in the trend.
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Magnitude of secular trends in the past point to 10-fold gains in DJIA.
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The work of Edson Gould in 1935, 1979 and today.
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Look for average real compounded annual returns of +12% v. the historical +7% real returns.
Berkshire Hathaway 2018 Targets
On February 5, 2017, we said the following of Berkshire Hathaway (BRK-A) when the stock was trading at $245,646:
“The upside target to fair value is at $287,172.61, be on the lookout for this as the possible upside target for BRK-A in 2017.”
Berkshire Hathaway achieved the upside fair value target on November 30, 2017 and now trades at $297,740. Although the gain has been only +21.20%, there is a high level of predictability in the price action of the stock. Below we outline the overvalued, fair value and undervalued targets of BRK-A for 2018 based on the Altimeter.
Buffett: “Money Has No Utility”
According to an article posted by Yahoo!Finance dated September 20, 2016, Warren Buffett is quoted as saying that, for him “…money has no utility.” To those with $500 million or more, Buffett has the following to say about the extent of pleasure they can get out of their wealth:
“Well, I told one person all they can do with those stock certificates is they can go down once a year and open the safe deposit box, and maybe they can fondle them.”
As far as Buffett’s quote on gold having no utility, well, as the Quote Investigator indicates, Buffett never said such a thing about gold. Although Buffett might have alluded to the concept, there has been no accurate verification of the exact quote.
Posted in Warren Buffett
The Graham Ratio and Application
The core of value investing is to obtain an investment for less than its worth. Professional investors will typically focus on the price to earnings (P/E) ratio which compares the current share price with its per share earnings. Although this is a good gauge, more than one ratio should be considered when assessing an investment. Students of value investing should also be familiar with price to book (P/B) ratio. This ratio (P/B) compares the current share price to the current shareholder equity.
In the book The Intelligent Investor, Benjamin Graham highlights a key concept which combined the two ratios [P/E and P/B] as a gauge on the valuation of a company. These combined ratios are known as the Graham ratio. The computation is elementary, simply multiply the P/E ratio with the P/B ratio. If the product is less than 22.5, the company may be of good value. This thesis is highlighted in Chapter 14 – Stock Selection for the Defensive Investor of The Intelligent Investor. We find this concept to be so compelling that we've decided to back test this ratio against our watch lists from 2012. Continue reading
Posted in Graham and Dodd, Value Investing, Warren Buffett
Berkshire Hathaway: 10-year Price Projections
In our May 6, 2012 posting on Berkshire Hathaway (BRK-A) titled “Should Berkshire Hathaway Be Trading at 1995 Prices?”, we gave price projections based on Edson Gould’s Altimeter using very conservative estimates if BRK-A paid a dividend. As we’ve managed to achieve the middle of the three upside targets set down in our 2012 article, we’re going to list the price that we think BRK-A would be considered undervalued for each of the next 10 years.
Posted in Altimeter, BRK-A, Charlie Munger, Edson Gould, Warren Buffett
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