Saturday, February 27, 2010

The Oracle's Annual Letter To Shareholders

Warren Buffett's annual letter to shareholders was released early yesterday morning. The annual letters are Buffett's way of communicating with his shareholders. Buffett has been writing these letters to shareholders for over fifty years. The letters dating back to 1977 can be found here at Berkshire Hathaway. If you have never read any of them, I highly recommend doing so. Buffett speaks in a simple mans English and not the typical wall street analytic jargon that one needs to decipher. Buffett used the past year or so to put more dollars to work, and that he did. Berkshire invested in Goldman Sachs preferred shares and General Electric preferred shares both netting a 10% yield. He recently consummated the deal to buy the rest of Burlington Northern Santa Fe shares that he didn't own. He further increased his stakes in the largest retailer WalMart ($WMT), the number two waste company Republic Waste ($RSG) along with his good buddy Bill Gates who happens to be the largest shareholder of Republic Waste. Buffett has been a busy man over the last year and a half and certainly in the media more.

Here are some recent articles on the Oracle of Omaha...

Berkshire reports higher Sanofi, Tesco stakes

Author currently long $BRKB and $RSG

Operating like Berkshire Hathaway: Alleghany Corporation

While most eyes have been on Berkshire Hathaway ($BRKA), ($BRKB) lately and rightly so. Their are other companies that operate in a similar fashion to Berkshire one being Alleghany Corp. ($Y) . Alleghany is one of those companies that fly under the radar. Alleghany is an insurance company that takes the "float" (which is money that doesn't belong to the company, but are premiums taken in from policy holders and paid out to policy holders). Alleghany's principal business is insurance, however with the access to this float (or cash) they reinvest the money in other businesses, much like Berkshire does. Alleghany has over 60 publicly traded company's amongst its investment portfolio.

"Alleghany's objective is to create stockholder value through the ownership and management of a small group of operating businesses and investments, anchored by a core position in property and casualty insurance. Alleghany is managed by a select company staff which seeks out attractive investment opportunities, delegates responsibilities to competent and motivated managers, defines risk parameters, sets management goals for its operating businesses, ensures that managers are provided with incentives to meet these goals, and monitors their progress.

The operating businesses function in an entrepreneurial climate as quasi-autonomous enterprises.

Conservatism dominates Alleghany's management philosophy. Alleghany's philosophy shuns investment fads and fashions in favor of acquiring relatively few interests in basic financial and industrial enterprises that offer the potential to deliver long-term value to the investor."

An interesting fact is that these guys at Alleghany were in Burlington Northern Santa Fe long before Buffett & Co. They have since divested their shares in Burlington and now hold over $825 million in cash in which they can use for future investments. Also they have NO debt and have managed to weather the last couple years quite well. They like Buffett use book value as their yard stick and not the actual price of the stock. The stock ($Y) trades at a discount to its current book value of $306.71.

We shun investment fads and fashions in favor of acquiring relatively few interests in basic financial and industrial enterprises that offer the potential to deliver long—term value to the investor... Alleghany Corporation

Author currently long $Y

Saturday, February 13, 2010

The Dhandho Investor Sells Ternium, Buys Capital Source!

Mohnish Pabrai aka the Dhandho Investor just released his 13F-HR filings seen here. Pabrai exited out of all of his Ternium ($TX) position. He had this in his portfolio since August 2007 quarterly filing. Pabrai started a new position in Capital Source ($CSE). Pabrai usually has around 15-20 different stocks in the portfolio. As of his latest filing Potash Corp ($POT) and Teck Cominco look to be his two largest holdings.

Pabrai made somewhat of a name for himself between 1999 and 2007 when he racked up returns that far outpaced the market. But as 2008 rolled in, the Pabrai Funds rolled over with the market taking a pretty big hit. However over the last year the Pabrai funds have enjoyed a nice move up along with the market but well out pacing it.

Mohnish Pabrai runs a group of partnership funds based on Warren Buffett's original Buffett Partnership Fund which existed between 1956-1969.

Author currently has NO positions in the issues mentioned

Thursday, February 11, 2010

Lampert's Sears Holdings Unlocking Some Value

It Looks like Eddie Lampert is unlocking some of Sears Holdings ($SHLD) value. What value? For most onlookers Sears is nothing but a washed up retailer, playing second fiddle to the likes of WalMart ($WMT) and Target ($TGT). But too the value investor their is a different story. For those not familiar with Eddie Lampert, he is the acting CEO of Sears Holdings and a Hedge Fund manager with over 20 years of successful investing experience. When Lampert took hold of Sears via Kmart and merged the two earlier this decade most hailed Lampert as the stock climbed to new heights. But over the last few years in one of the worst economy's since the Great Depression most have grown impatient wondering when and what he will do.

The Value that I was referring to is the DieHard battery brand which is owned by Sears and was exclusively sold only through Sears outlets. However now Sears will start selling DieHard through other retailing outlets (read here). This gives Sears another channel which could equate to more dollars down the line. Remember that Sears holds other brands that could later be sold through other retailers. Brands such as Craftsman tools, Kenmore appliance, and Lands End.

Relevant Articles:

Author long SHLD

Tuesday, February 9, 2010

Buffetts Latest Move!

Warren Buffett's Berkshire Hathaway Inc subsidiary International Dairy Queen, the ice cream retailer is planning in 2010 to open its first stores in Egypt and Macau. Berkshire bought Dairy Queen in 1998. Buffett frequently snacks on DQ desserts followed by an ice cold Cherry Coke. Coca Cola (KO) is Buffetts largest publicly traded equity posistion.