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Berkshire Hathaway

3 Seats Left ! ~ Sat Feb 17 2018 Mumbai Funda Eq Workshop

3 Seats Left ! ~ Sat Feb 17 2018 Mumbai Funda Eq Workshop

Reserve yours now =>

Fundamental MasterClass in Mumbai Stock Selection ~ Value Vs Price – 2018 ~ Markets Major & Mature ~ Sensex 36000 ~ Taking Stock

Saturday, February 17, 2018

At the previous Funda workshops in June & August 2017  we thread-bared Bombay Dyeing at Rs 70 to assess Value Vs Price in the price range of Rs 70 to Rs 85 & participants got excited to lap it up….in months it raced away to Rs 300 & now stands at Rs 250…of course Markets have been kind too…we had covered over 50 companies across sectors like Yuken,Rama Steel & Grauer on Valuation through Assets & Earnings & Situational Studies like M & A, Delisting & Turnarounds & the outcomes have been quite enjoyed by most participants as the feedback shows……. for what’s Academics & Theory without Action & Application

As Usual there’s already a good mix of participants from retail to HNWI & from FPIs, broking houses,PSUs  & MNC Banks….coming even from overseas & outstation for this Mumbai Workshop

Do try & make it….will be fun interacting fun-da-mentally with all of you on Re-positioning & Reinvestment Risks & on Corporate Governance & Controversies as we play the Corporate Tambola and exercise other Mind Gums on the Magic of Compounding & the holding of Convictions of Fundamental Selections through even steep market corrections especially if fully invested !

When I had announced this workshop just a fortnight ago the Sensex was at a record 36000+ and featured in the Workshop Title…In days since then following a global correction and arguably an uninspiring Union Budget that re-introduced Long Terms Capital Gains Tax the Sensex fell sharply below 34000 with many non large caps taking a hit of even 30 % with Vakrangee decimating over 50% from over Rs 500 to under Rs 200 on Corporate Governance issues

Even Warren Buffett’s Berkshire Hathaway’s Equity Portfolio has taken a US $ 11.2 billion hit ~ of course he’s not bothered ~ should you be when closer home we continue to be suckers in Company Price Run Ups where Quality is clearly suspect & where our PSU Banks continue to reel under the weight of NPAs with SBI announcing a huge Q 3 Loss,the first in many quarters, because of this ? ~ Capitalisation & Consolidation process is on  ~ are PSU Banks potential wealth creators going forward?

What Now ! ?

See You Sat

Cheers !

Warren E Buffett’s Annual Shareholder Letter for Berkshire Hathaway’s Performance in 2009…as always an Inspiring Read

It’s always a ‘Must’ read every year….Living Investment Guru,Warren E Buffett’s Annual Letter to his shareholders of Berkshire Hathaway….his insights,his ‘packing a punch’ at many issues,his confessions,his core heartwarming values,his demystifying the rationale for his investment decisions,his philosophy and his fabulous sense of humour…and he’s all of 79!

Warren E Buffett has never authored a Book…does he need to!…If ever there was a Nobel Prize for Financial Journalism,his Annual Letter would be the Winner every year !

Access his latest one of February 26,2010 below

….and I’m sure you’ll want to become a Shareholder of BH to access the Annual Meet which Buffett himself bills as the ‘Woodstock of Capitalists’!…it’s traditionally held on the First Saturday in May….this year it’s on May 1,2010

Mind you it’s BH share is not cheap….One Original ‘A’ Common Stock is quoted at US $ 124080 !…that’s Rs 57 lakh or Rs 5.7 Million Rupees (US $ 1=Rs 46)….To make it affordable BH issues in 1996 the ‘B’ Common Stock which was prescribed by BH to be valued at 1/30th of the ‘A’ Share but carried only 1/200th of Voting Rights

Interestingly on November 3,2009,BH passed a resolution to splt the ‘B’ Share 50:1 ratio to facilitate small shareholders of Burlington Northern Santa Fe to get the BH ‘B’ share in the acquisition deal,should they opt for it…..This has resulted in the Share Quotation of the ‘B’ Share to be under US $ 83 yesterday (just Rs 3800)…this computes to a pre-split share price of US $ 4150 (Rs 1.91 lakhs)

In 1981,there were just 12 shareholders who attended the Omaha Meet…In 2009 there were 35000 who did !…This year they obviously expect much more….Both ‘A’ and ‘B’ Shareholders get the Annual Report and an Invite coupon attached with it for the Annual meet…they need to fill it and send it back to BH…and within a week their Credentials will arrive for the Meet…As I’ve said,the Meet is always held on the first Saturday in May…this year it’s May 1,2010…and the Report is send to shareholders as on Record Date ,which is normally 60 days before the Meet Date…It takes three days to register you as the shareholder from your date of purchase…so play it safe and buy the BH share by the third week of Feb if you intend attending the BH Meet that year…you will receive the Report early March and can initiate the process to attend the Meet read more

We need Long Term Structured Option Contracts…need to LEAP into LEAPS

I was just wondering…..Currently there is so much volatility in all markets,be it Equity or Commodities…due to earnings uncertainties,anxieties about health of global economy and Financial Systems

Most Experts are advising to think Long Term…Naturally…3 Years + atleast

Then why is it that we have Derivative Contracts structured only for a maximum of Three Months… for Long Term,we need to roll them over and over and over and over again ?

It’s time that we introduce Long Term Option Contracts…This will enable me to take a call on the Markets or a particular Stock or Commodity for a period of One Year and more by investing merely a fraction of what I would have to now in Spot

For example If I felt the Markets would improve in the next two years,I could buy a Nifty Call at Strike price of 2750 (Current Level) that expires in 2011 at a Premium of ,let’s say,Rs 225…Assuming Contract lot is 50,the contract Value is Rs 137500 and I would have to pay Rs 11250 as premium…That is my Cost….I now have the right,but no obligation, to exercise this Call

So if ,let’s say,Nifty moves up and is at 4000,somewhere in mid 2010,I can square of my contract and sell the Call,at a premium of let’s say,Rs 1025 and profit by Rs 800 which aggregates to Rs 40000 on the contract…a return of 356 % in a year or so !

The above is a hypothetical example and it can be argued that Option Premiums may quote at much higher % levels in this volatility…The Nifty Call of Strike 2750 may not be quoted at 225…but more at 500 perhaps or even more !…that’s an 18% premium !   

Chicago Board Options Exchange (CBOE) has a registered product on these lines and they have trademarked it as LEAPS.It stands for Long Term Equity Anticipation Securities…This product is available in the form of Calls and Puts for 450 common stocks and Ten Indices and the Expiration Date can extend upto 39 months…In fact CBOE even has the VIX or the Volatility Index Options which is the market estimate of expected volatility and is which is computed from realtime  S & P 500 Index Option Bid/Ask quotes  

I believe the SEBI Advisory Committee for Derivatives has already suggested the introduction of Long Term Derivative Contracts…Why the delay in the Suggestion being adopted for Implementation ? The Operations Framework by Exchanges is already in place for Futures and Options so this should facilitate the Introduction of Long Term Expiration Contracts fairly easily   read more

Did Value Investor and Living Investment Legend, Warren Buffett, invest US $ 5 Billion in Goldman Sachs in September 2008 for reasons other than Value !?

On September 23,2008,Warren Buffett’s (WB) Investment Behemoth,Berkshire Hathaway (BH) announced it would invest US $ 5 Billion in preferred stock of Goldman Sachs and would receive 10% annual dividend.It would also be alloted warrants that would give it an option to invest a further US $ 5 Billion in Common Stock at a strike Price of US $ 115 to be exercised inside five years

This was seen at the time as a WB Confidence booster for the US Financial System and the Share Price of Goldman Sachs closed high at US $ 133 after the announcement

What it apparently was,was just a consequence of the tottering US Financial System….The Share Price of Goldman Sachs has since dived to close at US $ 69 yesterday with a Market Cap now at a low of US $ 27 Billion 

There are strong suggestions that this Investment in Goldman Sachs is linked to the Mark to Market Loss Margins on the Bets on S & P 500 and three other Foreign Indices made by WB’s BH in 2007 when Dow Levels were around 13000…Dow has since dropped to 8500 levels

This is the Bets that WB’s BH has made in 2007…he has bet that in the next 15 to 20 years the S & P 500 and three other Foreign Indices would be at higher levels than around the levels  at the time the bet was made..BH has used Goldman Sachs as the Broker and has sold Option Contracts of  ‘Naked Puts’ and got a premium aggregating US $ 4.5 billion for underlying contract values of US $ 37 Billion to a group of undisclosed buyers

As BH has impeccable credit it was not required to put up any collateral margin at the time of the bet in 2007.However alongwith the Dow which has fallen to levels of 8500,so have all the four Indices on which the bets were made and there is a mark to market loss of around US $ 6.7 Billion  till date and the Counter Parties were demanding that Goldman Sachs put up some collateral

Reportedly this Collateral has been provided and disguised by BH as an Investment of US $ 5 Billion in preferred stock of Goldman Sachs  

Apparently Mislead Investors,mislead by leading Investment Experts and Investment Media had followed WBinto Goldman Sachs in September and October 2008 at over US $ 100/share…They have seen an erosion of 40% inside two months

SEC must investigate and exonerate WB if this is not true….but the blemish does remain that a Living Investment Legend like WB has drifted away from his Value Investment Philosophy and speculated with Index based Derivative Instruments…which he has constantly cursed as Weapons of Mass Destruction…the temptation was probably just too much and US $ 4.5 billion premium received looked at the time as money for jam…Of course if the Dow revives and crosses 13000 in the next 15 to 20 years,BH would be back in the money as there will be a recovery of the S & P 500 and the other three Foreign Indices too…till then it’s a notional loss supported by a collateral margin now read more

There’s More Value to Hear Warren Buffett in Person than anybody else

Honestly tell me !…have you truly benefited from attending those “few hour” speeches or seminars or workshops on any subject or topic…no matter who is giving them or organising them!…often paying through your nose for them,especially where overseas experts are involved  !

I was wondering if I was in a minority here when I confess I yet have to find true Value in these….I’ve been to many in the past few years…Jim Rogers and Ohmae among others….One needs to work with them or be associated with them for longer periods to really absorb value

Have you wondered the frequency at which we quote the legendary Value Investor, Warren Buffett these days as he is more alive and surviving than any of us in this financial and investment chaos 

Warren Buffett is one legend I would love to hear….Why has he not yet come into India to share in person some of his fundas ?…..He does not think Long term…he thinks Lifelong and Beyond!…Most of us can’t think beyond Instant Gratification when we really need to create a mindset for delayed gratification

Warren Buffett does not

  • make a living by being a speaker or running workshops and seminars
  • write Books
  • advise and manage on individual portfolios

Maybe this is the Secret of his Phenomenal Success…Quietly applying Theory to Practice…and not preaching just Theory from one audience to another ! Think about it !

Buffett runs Berkshire Hathaway which closed at US $ 113150 yesterday in USA giving a market cap of US $ 175 billion and a P/E of 15+ on a trailing EPS of US $ 7300+…BH holds stakes in companies across many sectors. 


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