Buffet’s Seven QuotesBy Derek On February 27, 2012 Under Broker Notes
From: Derek Hillen
Sent: Monday, February 27, 2012 11:18 AM
“Sing a country song in reverse and you will quickly recover your car, house and wife.” Warren Buffet
Over the weekend Warren Buffet released his much anticipated “Letter to Shareholders,” which I have read. This is an annual event for the millions of Buffet watchers. Comfortably written from the “the cradle of capitalism,” as he calls Omaha, Nebraska, I gleaned the following seven takeaways and interesting quotes from the Oracle, including how sex will solve the housing crisis…
1) His successor has been revealed to the board – but not to shareholders. Probably no company other than Apple is so closely identified with one man than Berkshire Hathaway is with 81 year old Buffet. All he says on the subject of succession is that it will be “seamless.”
2) Warren is still a big believer in America. 95% of the $8.2 bn spent on property, plant and equipment by Berkshire last year was spent in the US. “A fact that may surprise those who believe our country lacks investment opportunities,” as he puts it.
Sex and Housing
3) He admits he was wrong to call a US housing recovery last year but that it is coming because of “hormones.” “Everyday we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over.” Warren says that day is fast approaching and the drop in US unemployment that results will surprise many.
4) A substantial portion of the letter is devoted to the insurance business, which makes sense considering Berkshire is one of the biggest players in the P&C market. Unlike many analysts, however, Buffet manages to make the industry sound interesting and he skillfully weaves in one of his folksy jokes to make the point that good underwriters need independent minds, “a mindset akin to that of the senior citizen who received a call from his wife while driving home. “Albert, be careful,” she warned, “I just heard on the radio that there’s a car going the wrong way down the Interstate,” “Mabel, they don’t know the half of it,” replied Albert, “It’s not just one car, there are hundreds of them.”
To His Mangers: Don’t Leave.
5) Although a tiny part of his portfolio, Warren always includes the Nebraska Furniture Mart (80% stake) in his letter. He is full of admiration for the founding family of NFM and in particular the matriarch, Rose Blumkin, who started it all back in 1937 with $500. “She sold me our interest when she was 89 and worked until she was 103. (After retiring, she died the next year, a sequence I point out to any other Berkshire manager who even thinks of retiring.)”
6) In a business empire that sells everything “from lollipops to jet airplanes,” Berkshire is going to get more involved with alternative energy. The company has committed $6 bn to wind energy development alone and last year decided to invest $3 bn in two solar projects in California and Arizona. “Many more wind and solar projects will almost certainly follow.”
Make My Day
7) Finally, in May when Berkshire Hathaway holds the largest shareholders meeting in the country, for the first time Warren is starting “The Newspaper Tossing Challenge.” Always interested in money, Buffet claims as a teenager he delivered half a million papers of the Omaha World-Herald (how much of the world can you see from Omaha, I wonder?), and now that he owns it wants to show he can still throw a newspaper. “Any challenger whose paper lands closer to the doorstep than mine will receive a dilly bar.” Do you think you can beat Warren Buffet? Here’s your chance as he’s taking on all comers. “Take your best shot. Make my day.”
Roxy Wong likes what he sees in Asustek’s (2357 TT) recent Q4 results and has raised his target price from $308 to $328. Q1 guidance is in line and Roxy believes new product launches this year, including an Ultrabook and smart phones will lead to rising market share. Asia accounts for 44% of sales, mainly SEA, and that growth driver will continue to underpin further top line gains for the company. Trading at 10X PE, Asustek has also raised its dividend payout ratio which could imply a 5% yield at current levels. With EPS growth this year of 18%, Asus remains a Buy.
Derek Hillen, CAIA