BRK.A

Part II: Buffett’s 2018 Letter to Berkshire Shareholders

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Part I of this multi-part series focused on Warren Buffett’s transition away from what we consider arbitrary book value and how the Oracle of Omaha thinks about share buybacks. Let’s dig further into his letter in Part II. << Read Part I By Brian Nelson, CFA It was a long time coming but Warren Buffett has finally done away with book value as a measure of business performance (see Part I), and while we think there’s more to assessing a company than just looking at its market price of course, when it comes to operating entities, assessing intrinsic value, of which the market price is one estimate, remains a critical function of any discerning analyst. Book value, in any case, … Read more

Part I: Berkshire’s 2018 Shareholder Letter Does Not Disappoint

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Warren Buffett was on point in his most recent letter to Berkshire Hathaway shareholders. The company remains one of our favorite ideas in the Best Ideas Newsletter portfolio. By Brian Nelson, CFA Warren Buffett wasted little time getting to the point in his 2018 letter to Berkshire Hathaway (BRK.A, BRK.B) shareholders, released February 23: Long-time readers of our annual reports will have spotted the different way in which I opened this letter. For nearly three decades, the initial paragraph featured the percentage change in Berkshire’s per-share book value. It’s now time to abandon that practice. Brian here. Those that have read my book Value Trap: Theory of Universal Valuation might have predicted as much. Warren Buffett is one of the … Read more

Changes to the Newsletter Portfolios (Best Ideas & Dividend Growth)

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Image shown: In our December 26 note to members, we moved the simulated Best Ideas Newsletter and simulated Dividend Growth Newsletter portfolio to “fully invested” from a cash “allocation” of 30% and 20%, respectively at the high end of the range. It has worked out wonderfully as we keep our finger on the put option trigger in case price-agnostic trading and heightened volatility rears its ugly ahead again, as it did in December 2018. Summary of Changes to Newsletter Portfolios Best Ideas Newsletter: Remove Gilead Sciences (GILD) Add Financial Select Sector SPDR ETF (XLF) at 2.5%-4% weighting Dividend Growth Newsletter: Remove Xilinx (XLNX) Remove Gilead Sciences Add Financial Select Sector SPDR ETF at 2.5%-3.5% weighting Add Health Care Select Sector SPDR ETF (XLV) at 2.5%-3.5% weighting By Kris … Read more

Best Ideas Newsletter Portfolio Not Bad Thus Far in 2018

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Part of what we take pride in at Valuentum is telling things how they are. If things are going great, we let you know. If things aren’t going as good as they could be, we don’t hold back. In the year of crypto and cannabis, 2018 hasn’t been the best year for the simulated Best Ideas Newsletter portfolio, but it hasn’t been bad either.  By Brian Nelson, CFA We wrote up an extensive piece on the background of the simulated Best Ideas Newsletter portfolio earlier this year, and we encourage everyone to have a read of that here (pdf). We made some changes to the goals of the newsletter portfolio prior to the beginning of this year. For starters, we … Read more

In The News: Hurricane Florence, Tariffs and Capital Spending Delays, Kroger and Big Tobacco on the Move

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  Let’s take a look at some of the top stories across the market, including the impact tariffs are having on capital spending plans and bottom lines and recent developments in big tobacco. By Kris Rosemann As Hurricane Florence bears down on the East Coast of the US, risk modeling firm RMS believes US insurers should be bracing for $20 billion in losses. More than 1 million people have been ordered to evacuate the area, and the threat of a combination of storm surge, wind, and inland flooding may prove to be significant as Duke Energy (DUK) estimates 1-3 million customers may be left without power across North and South Carolina. Privately-held Liberty Mutual Insurance and Nationwide Mutual Insurance are … Read more

The Berkshire Breakout

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Image shown: Berkshire Hathaway’s shares have broken out following the release of its second-quarter 2018 results. We continue to believe Berkshire Hathaway belongs in the simulated Best Ideas Newsletter portfolio. Warren Buffett and Charlie Munger have more flexibility to pursue share buybacks, and we’d be flat-out surprised if Berkshire were to buy Southwest outright. Berkshire’s cash balance continues to grow, and we think a stake in Facebook might be the best opportunity for a part of the equity security allocation. By Brian Nelson, CFA Berkshire Hathaway (BRK.A, BRK.B) reported solid second-quarter results August 4 that sent the stock roaring higher, and B-shares of the equity are now but a stone’s throw away from all-time highs of ~$218, trading at ~$206 … Read more

Amazon: The Destroyer of Other Companies’ Profits

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Image Source: Victor Amazon is stepping into the pharmacy business with the purchase of online pharmacy start-up PillPack. The market is implying the move will prove to be more than just a headache for those operating in the drug store/pharmacy and drug-distributor complex. Whether the impact will be significantly material in the coming years remains to be seen, but it’s a big directional negative for impacted parties. By Brian Nelson, CFA We saw the writing on the wall. We had once included CVS Health (CVS) in the simulated Dividend Growth Newsletter portfolio and the simulated Best Ideas Newsletter portfolio, but we ditched the company in February. We couldn’t envision a scenario at the time where things would be getting better … Read more

CVS Health Story Unchanged; Still Okay with Its Removal

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Image Source: Mike Mozart CVS Health continues to face long-term threats to its business, and relatively weak near-term performance expectations have done little to inspire confidence. The company’s long-term debt load has exploded as it prepares to acquire Aetna, and we don’t expect the company to bounce back onto our radar given the materially increased financial leverage amidst other challenges. By Kris Rosemann Shares of former simulated newsletter portfolios idea CVS Health (CVS) continue to face pressure, and its first quarter 2018 report, released May 2, offered little support. Our opinion of the risks facing the company are unchanged, as threats such as Amazon (AMZN) teaming up with Berkshire Hathaway (BRK.A, BRK.B) and JP Morgan (JPM) to form a new healthcare company … Read more

Walgreens Boots Alliance Remains at the Crossroads of a Rapidly-Evolving Healthcare Landscape

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Image Source: Walgreens 2Q 2018 Earnings Release By Alexander J. Poulos The evolving healthcare landscape has been dealing with the threat of a disruptive new competitor entering the market and considerable political risk. Though the need for healthcare remains impervious to economic forces, a clear deflationary trend has descended on the industry that has affected many of the well-entrenched participants. Let’s examine Walgreens Boots Alliance for clues that a shift in sentiment may have occurred in this well known, yet beleaguered sector. We’re watching Walgreen’s equity very closely. The Consolidation Trend Continues One of the often overlooked, but in our view, key dynamics affecting the drug distributers/retailers such as Walgreens Boots Alliance (WBA) is the continued deflationary trends exhibited in … Read more

Cigna, Express, and the Unwinding of the PBM Market

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Given its track record of creative destruction, when Amazon plans to enter a particular line of business, it presents an ominous threat to incumbents. What is often overlooked, too, is that Amazon is more than willing to try new verticals—if they prove promising, additional assets will be devoted to the new line of business, often with fawning media coverage. If Amazon is unsuccessful in its endeavor, however, then it seems as though it will “fail fast” and shut down the project and move on. We found the recent announcement of a joint venture to tackle the healthcare industry as particularly noteworthy. By Alexander J. Poulos Amazon as the Great Disrupter We have marveled at Amazon’s (AMZN) rumored ambition into pharmaceutical … Read more