WFC

The Banking Industry Is All About Confidence

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Image Source: 401(K) 2012 The “5 Cs of credit” — character, capacity, capital, collateral, and conditions — is a widely-followed framework and generally-accepted guideline for lending to consumers, but for corporate entities, we think another C is much more important: confidence. By Brian Nelson, CFA The financial sector, and the underlying banking industry in particular, is distinctly different than most other sectors like industrials, retail, or healthcare, for example. Unlike the latter industries, banks use money to make money (net interest income), instead of using operating assets like property, plant and equipment (PPE) and raw materials to drive revenue and resulting free cash flow. This means that continued access to money and credit is the primary source of banks’ economic returns … Read more

The Next Banking Crisis? No… Well, Not Yet.

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Image Source: Berit Watkin “Washington Mutual customers withdrew $16.7 billion in cash from the thrift in the past nine days, a huge outflow that led to the largest bank failure in U.S. history, the institution’s regulator said Friday.” — MarketWatch, September 26, 2008 By Brian Nelson, CFA Let’s get this out of the way. We’re not sensationalistic or bombastic. We’re realistic, and we love focusing on the risks of investing because an investor that knows his downside risks is a much better investor than the one that is only looking at sunshine in the rear-view mirror. I’m going to put it bluntly. We’re starting to hear of some rather serious developments in the UK following Brexit. If the UK pound hitting … Read more

Brexit: Secession Bells Are Ringing!

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First Baptist Church in Columbia, S.C., where the first secession convention in the United States opened on Dec. 17, 1860. Source: Library of Congress, Washington, DC. Photo. Encyclopædia Britannica Online. Web. 24 Jun. 2016. Global markets are plunging, and the implosion may still be in the early innings. Market valuations remain stretched among stagnant global economic growth, and “Brexit” may be the catalyst for a correction. In the paraphrased words of the well-known The Day of the Jackal author, Frederick Forsyth: the peasants have spoken. On June 23, the UK (EWU) held a referendum, in which anyone of voting age could take part, to decide whether the country should leave the European Union. The turnout was incredible at nearly 72%, and … Read more

Part III: Nelson’s Evaluation of Berkshire’s 2015 Annual Report

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<< Go back to Part I << Go back to Part II By Brian Nelson, CFA It’s always a wonder to open up on the Berkshire Hathaway (BRK.A, BRK.B) annual report for a large variety of different reasons, but every time I do I can’t help but ponder yesteryear through the table on page 2, “Berkshire’s Performance vs. the S&P 500.” I think I have a unique knack for imagining what might have been if today’s standards would have been applied to Berkshire in the 1970s, perhaps in some ways how many baseball fans may think about whether the legends of the past would have put up the type of numbers that they did if presented with today’s dynamics. For … Read more

Part II: Nelson’s Evaluation of Berkshire’s 2015 Annual Report

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Warren Buffett’s optimism about the future of America remains unending. Image source: /\\ \\/\\/ /\\ << Go back to Part I By Brian Nelson, CFA “If you want to guarantee yourself a lifetime of misery, be sure to marry someone with the intent of changing their behavior.” – a “Mungerism” explaining the importance of identifying good managers when pursuing a hands-off ownership style. We covered quite a bit of ground in the first part of the evaluation of Berkshire Hathaway’s 2015 annual report here, and we’ll cover even more ground in this second installment. We left off with a good conversation about the insurance business, and how part of Berkshire Hathaway’s business strength emanates from its fortress balance sheet and credit … Read more

The Corporate Buyback Conundrum

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The above is a trailing 15-month chart of the broad market index, the S&P 500 (SPY). As you can see, the markets have gone nowhere fast. The fallout in the energy complex coupled with emerging market uncertainty and political unrest in the US is making for quite the choppy market environment. Interestingly, however, since the middle of last year, the Best Ideas Newsletter portfolio has quietly been distancing itself from this broad market benchmark, as strong performance from constituents coupled with a larger cash position in a generally weaker market have paid off. Where indexers focus on controlling costs instead of focusing on generating strong returns with relatively low turnover (and commission and tax implications), the strategy powering the Best … Read more

Recent Add Cracker Barrel Surges Ahead; BHP Cuts

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February 23 was met with intense selling as investors digested news that the crude oil (USO) markets won’t become rational anytime soon. As we had outlined in our opening piece to the Best Ideas Newsletter a few days ago, “,” Saudi Arabia is not going to back down, and the Oil Minister of the member nation of OPEC even went so far as to say he “welcomes new additional supplies,” suggesting that the global glut of crude oil will continue for the foreseeable future. Commodity-oriented equities led the selling pressure. For those that have been reading our work for the past several months, none of this is new “news.” We’ve been warning about the risk for some time, and we … Read more

Dividend Increases/Decreases for the Week Ending July 17

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Below we provide a list of firms that raised/lowered their dividends during the week ending July 17. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Antero Midstream (AM): now $0.19 per share quarterly dividend, was $0.18. Bassett Furniture (BSET): now $0.09 per share quarterly dividend, was $0.08. Carnival (CCL): now $0.30 per share quarterly dividend, was $0.25. Carnival (CUK): now $0.30 per share quarterly dividend, was $0.25. Codorus Valley Bancorp (CVLY): now $0.13 per share quarterly dividend, was $0.125. Computer Services (CSVI): now $0.25 per share quarterly dividend, was $0.22. CONE … Read more

Part I: Nelson’s Notes on Berkshire Hathaway’s 2014 Newsletter

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Hi all, It has taken me a few weeks to get a chance to read the annual newsletter of Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B), and this year’s installment was not a disappointment. For me personally, there’s not a lot of incremental insights that are gleaned, but I like reviewing the newsletter because the annual installment is invaluable for new investors, especially those looking to learn about the markets and how to think about them. What I’ll do below and in future parts is pull out a sentence or paragraph from the annual report and add to it or comment on it in order to provide further perspective. It should make for some great conversation. I’m not sure how many … Read more