Investing Ideas

So i am back with my favourite company. On August 23rd 2006 I calculated that the value of Berkshire Hathaway shares should be at least $120,000. Fast forward to August 23, 2007 and BRK-A closed at $118,800. Not too bad

Market Cap of Berkshire Hathaway = 212 Billion
Value of Individual Berkshire Parts = 246 Billion (Based on the Interim 3nd quarter report. Numbers used are 9 Months Net Profits *(4/3) for full year estimate values)

Recently Buffett has been making a few deals after nearly 1 year of inactivity. The 2 Billion of TXU bonds earning 11.2% and 11.8%. Buying 60% of Marmon for 4.5 Billion. Starting a Muni Bond Insurer. Purcasing ING’s Reinsurance business. All this point to Buffet finding ways to invest Berkshire’s cash hoard. The credit turmoil will create good buying opportunities for Berkshire. Finally at the next Annual meeting Buffet should have a couple of Investment managers lined up to take care of Investments going forward. All of this will add significant value to the shares in 2008.

The A shares of Berkshire Hathaway should sell for $163,000+ and the B Shares for $5400+.
** Investment gains or losses are recognized upon the sales of investments or as otherwise required under GAAP. The timing of realized gains or losses from sales can have a material effect on periodic earnings. However, such gains or losses usually have little, if any, impact on total shareholders’ equity because most equity and fixed maturity investments are carried at fair value, with the unrealized gain or loss included as a component of accumulated other comprehensive income. - From the Report

Disclosure: I own Shares of Berkshire Hathaway

Note: I originally wrote this article late last year after the 3Q Earnings were released but i never published it. It’s a little late since Berkshire will be releasing FY07 earnings soon and Annual Report is due in a month.

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One of the best places to get some great investing ideas is the 2nd Value Investing Congress which is in progress as i write this. The Value Investing Congress is a collection of some of the best and brightest value investors in the country. Most of the the speakers at this congress follow the Graham/Fisher/Buffett form of investing and will be sharing their best investment ideas.

This year the Speakers and their investment ideas are

I cannot guarantee the accuracy of the list above since im collecting the information from other articles and blog posts. The table above will keep getting updated as I find out which other investments have been recommended. Any help in gathering this information is greatly appreciated.

Thanks
Ameya Desigar

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Cramer says diversification is the only free lunch. I agree, diversification is a necessity and is very easy to accomplish. In 1999-2000 people bought Dell, Microsoft, AOL and Cisco and thought they were diversified. The tech sector crashed in 2000 and all their stocks dropped in value. The best way to protect against sector downturns is to diversify. One should also try and diversify such that market cycle do not affect their complete portfolio. Say I diversify my holdings into companies involved in Basic Industry, Energy and Precious Metals. Since all three industries tend to perform well at the top of a bull market and do poorly at the bottom my portfolio is vulnerable to an economic/stock market cycle.

To avoid diversification mistakes and to provide a guide I came up with a wheel. The diversification wheel is not meant as a recommendation of any sector or stock. It is just a quick tool to look at which industries/sectors are similar enough that they may be affected by a sector downturn or the economic cycle.

Click here for the full sized image

To use the wheel click the link above for the full sized image and print it out. You can use the wheel to judge if you are diversified by marking your top holdings on it.

Diversified: If your stocks are in sectors that are roughly spread out equally around the wheel then you are diversified.

Vulnerable to sector downturn: If the sectors are very close to one another you may be vulnerable to a sector downturn.

Vulnerable to market/economic cycle: If the sectors are concentrated in one half of the wheel you may be vulnerable to an market/economic cycle.

Pick a stock to diversify: Mark your existing stock picks. The centre of the section on the wheel which is missing from your portfolio would probably make a good addition to help diversify your portfolio.

The Wheel is a work in progress, any suggestions for improvements to the wheel are welcome and I will try to incorporate them.

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