Berkshire missed earnings in Q4 by quite a bit. While I firmly believe in looking at the bigger picture, the sentence below made me wonder if without Buffett and Munger the peculiarities and irregularities of BRK will be viewed more critically than before, as I feel that this kind of language could fly when out of Buffett and Munger’s mouths, but not necessarily in today’s world. Don’t look down on your customers!
“The amount of investment gains (losses) in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules,” the company said in its earnings release.
I’d already planned to continue plugging dividends into BRK.B but also to re-evaluate after Abel has been CEO for 12 months.
Welcome, you did a great start, came in unknown to a forum thread of ~1400 posts in a well established community and instantly insulted everyone with your current (and may I add, completely faulty) perception.
do you have questions that are more serious about stock picking?
I wasn’t aware that everyone in this community—literally every single person in this thread, wow!—was so deeply wounded by my apparently “faulty” perception.
I’ve already apologized once, but I’ll do it again for good measure. Consider this an apology to everyone. Those of you who weren’t actually offended—if any—can just bank this as credit for the next time I inevitably step on someone’s toes.
Regarding serious stock picking… well, as it happens, I do have some serious questions.
Are there any stock pickers here actually interested in the present value of discounted future cash flows, and the specific price they’re willing to pay for them?
Based on that criteria, what are you currently picking?
For those who couldn’t care less about fundamentals: if your strategy is just “price go up,” I’m not really interested. But since this is such an “inclusive” forum: why do you believe the NGU (Number Go Up) narrative applies to the specific tickers you’ve just grabbed?
To be fair, scrolling back up, I see some posts advocating for companies based on actual valuation. But there seem to be just as many recommending stocks based on nothing but pure market noise.
Look, the initial post is what lured me into this thread. But the recent “analysis”—just a list of tickers like abc, def, ghi and “buy at $X, sell at $Y”—is what triggered my sarcastic contribution.
There’s nothing wrong with technical entries and exits, but maybe try explaining the reasoning behind them instead of just saying “will buy more if it falls” or “exiting at [random dollar amount].”
Stock prices are determined by demand and supply, not valuations. The latter may feed into demand, but there are other often equally or even more important factors determining prices.
Sir, this is a Wendy’s… or shall I say, a FIRE Forum?
Thank you for bringing DCF to the table. I was not offended, just amused at your comment. You’re asking for the “present value of discounted future cash flows” to justify stock picks. If I’m not mistaken, this is just a vanilla DCF, which doesn’t work for every single company. It is great for a standard manufacturer, but completely breaks down when valuing complex structures, like financial hybrids or highly cyclical conglomerates.
Since you asked why my narrative of “number go up” applies to the companies I’ve invested in, let me explain the thesis and why a standard DCF might not cut it.
Trading Houses 2768 (Sojitz) & 8053 (Sumitomo)
Highly diversified, cyclical trading companies. 2768, for instance, is heavily exposed to the automobile sector, but it’s hedged beautifully with chemicals.
Their cash flows are tied to global commodity cycles. Running a standard DCF at the top of the cycle will tell you they’re a great buy. Doing it at the bottom will tell you to sell right before a massive run.
For the valuation, I look at the balance sheet. 2768 has a lot of cash, decent ROE, and was trading below book value when I bought. Even now, I’m paying normal multiples for a fundamentally good company. Same for 8053.
Mega Bank 8306 (MUFG)
A globally competitive mega-bank well-positioned to benefit from the normalization of Japanese interest rates.
You cannot run a vanilla DCF on a bank. Cash is their inventory. You have to go with a Dividend Discount Model or an Excess Return Model.
Deep Value Auto Trap 7267 (Honda)
Yup, a value trap 101 with a book value of roughly 0.56. The market is not confident in their EV transition, and the aerospace division is burning through cash. So, this is just a bet that they’ll continue delivering value with their global motorcycle dominance. I collect my ~4% dividend yield, and if they somehow manage to compete with Mitsubishi or SpaceX on rockets, that’s just a bonus.
Honda is no standard auto manufacturer (none of the Japanese ones are); they operate a massive financing arm issuing car loans. This is one of those financial hybrids I mentioned at the start.
Macro Catalyst
I believe the JPY can lose some more value against the CHF before interest rates catch up, so I’m leveraging the yen to finance the trade.
There’s massive momentum in Japan right now. They introduced a new tax-free investment account (Shin NISA). This, combined with the return of actual inflation, is going to force retail households to exit their 20-year-old cash positions and move into equities. Furthermore, the TSE is actively pressuring local companies to exit their cash positions and return that money to shareholders.
In any case, this is just theory by a random guy on the internet who has a tiny portfolio and doesn’t know anything about the economy or the markets. Truthfully, I think you’ll get everything you need to know by looking at my avatar.
P.S. If you’re genuinely curious about how other people in this community handle these types of valuations without defaulting to a rigid DCF, there’s a great blog post by a fellow forum member that breaks down a much more adaptable framework here: My framework for investment returns
Mit dem Lesen und der Teilnahme an diesem Forum bestätigst du, dass du die Forum-Richtlinien gelesen hast und damit einverstanden bist sowie den Haftungsausschluss auf http://www.mustachianpost.com/de/ akzeptierst.
