2015年12月21日
2015年9月1日
2015 第二季 (May to Aug) 投資績效
1. 這一季中國股市大跌，接著經濟狀況開始有衰退的疑慮。在此狀況下，礦業股不太可能會有轉機。所以先處分了 VALE，再看情況處分 SOUHY 。
和 VALE 比起來，BBL 的管理階層在現金流量方面的管理看起來比較好。過去十幾年，不論是市場衰退或成長，現金股利都能維持成長。目前的管理階層也承諾會維持股利成長的政策。負債比率和信用評等看起來也都還能維持住。所以如果要保留礦業股，應該要保留 BBL。以股利殖利率來說 (目前約 7%)，BBL 的股價也是在歷史低點。風險在於，低點之後還有可能有更低點，而鐵礦砂價格不知會維持在這樣的低價多久，太久也是會影響現金流量。
2. 1)這一季新聞報導傳出，在目前中國經濟前景不明的狀況下，北京不會強要地方政府整併產能過剩的鋼鐵廠。而是會透過自由市場競爭的方式，讓鋼鐵業自行整合。避免產生大規模失業的問題。
2) PKX 第二季獲利在鋼鐵價格持續滑落的情況下非常差，估計到明年也不會好轉。韓國母公司的獲利似乎在技術領先的狀況下還能繼續維持，但過去幾年獲利大好時的國外轉投資，現在開始拖累整個集團。新的 CEO 承諾會逐步處分不賺錢的海外投資，但按其計畫需要到 2017 才能完成。
3) 考量上述中國過剩產能還會維持相當長一段時間，而 PKX 雖然是全球技術最好的鋼廠，未來幾年仍然會受到海外轉投資拖累，看起來鋼鐵業或 PKX 本身都不會有轉機，決定全部處分。
3. PCP 在八月被 Buffett 以每股 $235 買下，不過交易要到明年才會完成。
4. 6 月開始台股下跌，到 8/24 全球股市大跌。這段期間提供了很好的買點，但是實際上並未大舉買進。主要是因為從這次中國經濟景氣疑慮看起來，全球經濟復甦的狀況不佳：新興市場受到原物料大跌和美元升值影響，可能陷入衰退；中國經濟景氣有疑慮；歐洲一直都不好，現在靠著 ECB QE 撐住。只有美國看起來還在緩慢復甦中。
這樣看起來，過去五年的股市，不論是台股或美股，實際上都是美國 QE 撐起來的。現在美國要升息了，而復甦的影子在美國以外國家都還沒看到，過去五年靠美國 QE 撐起的股價、PER 或股利殖利率很有可能都還是高估。因此看起來必須要重新評估選股和估價的標準，而不能就過去的名單和估價直接買進：
1) 放棄景氣循環股如礦業股和航運股，至少不要再買進。因為景氣不會很快回來；
2) 優先考慮成長股，如 PEG 低於 1 的股票
3) Blue Chips ：用以評估俗價的條件如股利殖利率及PER 要更嚴格。
2015年3月1日
2014 第四季 (Dec 2014 to Feb 2015) 及全年 (Mar 2014 to Feb 2015) 投資績效
1. 礦業股 BBL 及 VALE
這一季趁著鐵礦砂價格大跌，增加了 BBL 的部位並買進 VALE。但其實手上還有一大筆礦業基金，整體說起來，放在礦業股票的比重偏高 (overweight)。BBL 和 VALE 以景氣循環股常用的評價方式 PBR 來看，都已經跌破過去十幾年來的低點。三大鐵礦砂不顧價格大跌，反而大幅增產的目的在於逼迫高成本的小礦商退出市場。雖然不知道低點會持續多久，但是在三大礦商仍有獲利的情況下，評估目前已經在低點，再下跌的風險不大。在目前礦業股低點的情況下，贖回礦業基金顯然是不划算，不如再投入一部份資金，期待下半年到明年回升的時候可以彌補一點損失，到時候順便贖回礦業基金。
值得注意的是，雖然三大礦商佔海運鐵礦砂的 70% ，但實際上三大礦商佔全球鐵礦砂銷量僅有 30%。也就是說，有一半的鐵礦砂是在本土透過陸運銷售的。三大礦商的生產成本雖然低，但是加上海運費用，與本土礦商相比就不一定划算。三大礦商的優勢在於鐵礦砂的品質比各國本土礦商要好，鋼鐵廠煉製成本比較低，也比較環保。
2. PKX 也是用景氣循環股常用的評價方式 PBR 來評估，已經跌破 2009 金融風暴的低點。Munger 已經處分了 PKX，從 BRK 的申報資料裡還看不出來 Buffett 是否也處分了。但以目前狀況來看，再跌破低點的機率不是很大，先保留這個部分並伺機加碼。
3. 航運股
中航和裕民短期內似乎看不到轉機。原先的預期是在 2015 下半年到 2016 可能會達到損益平衡，但 2015 上半年情況反而轉差。看起來雖然還沒有好轉的跡象，但以 PBR 來看，其股價已經到了歷史低點，再跌的機會也不大。以股息殖利率來看，中航有接近 3%，裕民有 5%。如果到年中或下半年仍然看不到轉機，且有其他更好的機會就處分，但目前先保留。
3. CBI
2014 下半年油價大跌後，一些相關的股票也都跟著大跌，包含提供石化及天然氣建廠服務的 CBI。其實 CBI 的營收來自原油相關部分很少，只是一般市場的印象是 CBI 和石油上游服務有關。另外 CBI 所購併之 Shaw Group 承建的核電廠延後完工時間 (http://www.reuters.com/article/2013/03/04/utilities-southern-vogtle-idUSL1N0BWHQF20130304)，有可能會和承包商 Westing House 及電力公司(Southern Company)有因此所增加成本分攤的法律訴訟。
整體評估：CBI 以 PER 來看股價偏低，值得買進；但 PER 會偏低其實是因為有一些營運上的不確定風險存在，如前述購買 Shaw Group 商譽減損以及 Vogtle 核電廠延後完工增加成本。雖然如此，法律訴訟是營造業常有的事，不盡然 CBI 最後要因此承擔所有增加的成本。自己不是這類營建工程專家，但以公司的規模和營運歷史來看，管理階層應該有能力處理這些問題。
4. WU 在 2014 第三季及第四季獲利開始恢復成長，2015 的展望也不錯。股價的反應很極端，短短幾週內就突破 52 週高點，接近 $20。未來幾季如果繼續上漲，就可以考慮處分了。
5. XIRR
這一季開始用 XIRR 計算投資報酬率，因為資金都是分筆投入，用 XIRR 計算年報酬率，與 S&P 500 TR 或台股報酬率比較較為合理。以 Feb 2013 開始的歷史報酬率來看，我的台股部位年報酬率 19%，美股部位年報酬率 3%。台股部位的表現比股價指數報酬率 14% 要好。美股部位，則因為 2014 投資 Tesco 的損失，比 S&P 500 TR 要差。本年度 (Mar 2014 to Feb 2015)的報酬率，台股部位為 15%，美股部位為 -3%，benchmark 分別為 15% 及 16%。
XIRR 目前並沒有把證券交割戶的閒置資金納入計算。下一步要把閒置資金納進來。但 benchmark 可能就要修改，不能用股價指數報酬來與整體部位投資報酬比較。
6. 目前在觀察的有 NOV 及 PCP
PCP： 其實有 70% 營收來自 BA 或 Airbus 的引擎製造商，只有 20% 與油氣相關。本次下跌是因為大客戶調整庫存及原油下跌影響。商業客機的市場並沒有聽到什麼壞消息，股價很可能是過度反應。
NOV：還要看油價的變化。油價下半年到明年應該就會回升，目前則觀察變化並計算逐步趁低價分批買進。
2014年12月8日
Berkshire Hathaway: The Last Bargain
Summary
- Potential for record operating earnings on Friday.
- Operating businesses currently valued at <10x earnings.="" li="">
- Historically cheap on book value, intrinsic value and look-through earnings measurements.
Berkshire (BRK.B, BRK.A) reports 2Q earnings on August 1st, and while I expect record earnings at Berkshire's non-insurance operating businesses given the combination of a huge volume increase at Burlington Northern, increased earnings at Heinz, and the acquisitions of NV Energy, Phillips Specialty Products, and the remainder of Marmon - my reasons for owning the shares are much longer-term in nature. Even as the market has significantly appreciated to above-trend multiples, Berkshire remains historically cheap on a number of different measurements. This discount to history appears unjustified given its expected financial results. Herein, I will briefly discuss three techniques which can be used to value Berkshire Hathaway and triangulate on my thesis that Berkshire is a bargain.
All forward-looking estimates contained herein are my own are subject to human error which inevitably occurs when humans try to predict the future.
Book Value:
Book value is perhaps the most cited of any Berkshire valuation measurement. Over the last 20 years, Berkshire's average price to book multiple has been 1.58x, with a high of 2.23x in 1995 and a low of 1.17x in 2011. Today, based on my book value estimate of $235 billion ($95.50 per Class B share) for the 2nd quarter, Berkshire trades at 1.33x book value. The standard deviation of Berkshire's price-to-book ratio is .28x, which assuming a normal distribution or "bell curve" would mean that Berkshire trades cheaper than its current level about 19% of the time. Inversely, we would expect Berkshire to trade at a higher multiple 81% of the time.
| Year | P/B | Probability distribution |
| 1985 | 1.50 | 39.33% |
| 1986 | 1.38 | 24.68% |
| 1987 | 1.19 | 8.63% |
| 1988 | 1.58 | 50.04% |
| 1989 | 2.02 | 93.86% |
| 1990 | 1.45 | 32.13% |
| 1991 | 1.41 | 27.12% |
| 1992 | 1.52 | 41.33% |
| 1993 | 1.84 | 82.31% |
| 1994 | 2.02 | 94.02% |
| 1995 | 2.23 | 98.83% |
| 1996 | 1.79 | 77.38% |
| 1997 | 1.80 | 78.53% |
| 1998 | 1.85 | 83.03% |
| 1999 | 1.48 | 35.92% |
| 2000 | 1.76 | 73.16% |
| 2001 | 1.99 | 92.69% |
| 2002 | 1.74 | 71.57% |
| 2003 | 1.67 | 62.24% |
| 2004 | 1.57 | 49.31% |
| 2005 | 1.49 | 38.00% |
| 2006 | 1.57 | 47.96% |
| 2007 | 1.82 | 79.59% |
| 2008 | 1.37 | 23.07% |
| 2009 | 1.17 | 7.74% |
| 2010 | 1.25 | 12.21% |
| 2011 | 1.14 | 6.19% |
| 2012 | 1.16 | 7.16% |
| 2013 | 1.30 | 16.15% |
| Current | 1.33 | 19.06% |
| Mean | 1.58 | |
| St. Deviation | 0.28 |
However, this analysis understates how cheap Berkshire has become. Berkshire has initiated a perpetual and essentially limitless share repurchase authorization at 1.2x book value. Since the repurchase authorization has been enacted, Berkshire has never traded at a price that would allow them to repurchase their own shares. Therefore, it is unlikely going forward that Berkshire would reach the price-to-book ratios that it did during 1987 (1.19x), 2009 (1.17x), 2011 (1.14x), and 2012 (1.16x) because Berkshire would be repurchasing their own shares above this level. If we exclude these observations from our data set, Berkshire's mean price to book ratio moves from 1.58 to 1.64x and the standard deviation moves from .28 to .25x. Using this data, we would expect Berkshire to trade at a premium to its current 1.33x book value multiple 90% of the time.
| Year | P/B | Probability distribution |
| 1985 | 1.50 | 28.51% |
| 1986 | 1.38 | 14.85% |
| 1988 | 1.58 | 39.90% |
| 1989 | 2.02 | 93.50% |
| 1990 | 1.45 | 21.49% |
| 1991 | 1.41 | 16.95% |
| 1992 | 1.52 | 30.55% |
| 1993 | 1.84 | 79.02% |
| 1994 | 2.02 | 93.69% |
| 1995 | 2.23 | 99.04% |
| 1996 | 1.79 | 72.75% |
| 1997 | 1.80 | 74.21% |
| 1998 | 1.85 | 79.94% |
| 1999 | 1.48 | 25.12% |
| 2000 | 1.76 | 67.43% |
| 2001 | 1.99 | 92.08% |
| 2002 | 1.74 | 65.44% |
| 2003 | 1.67 | 54.01% |
| 2004 | 1.57 | 39.09% |
| 2005 | 1.49 | 27.17% |
| 2006 | 1.57 | 37.61% |
| 2007 | 1.82 | 75.55% |
| 2008 | 1.37 | 13.51% |
| 2010 | 1.25 | 5.55% |
| 2013 | 1.30 | 8.20% |
| Current | 1.33 | 10.35% |
| Mean | 1.64 | |
| St. Deviation | 0.25 |
While I find this analysis to be helpful in regard to how Berkshire trades relative to its historical valuation, it is overly mechanical and does not answer the underlying question of whether Berkshire deserves to trade at a discount based on fundamental reasons.
Intrinsic Value:
Buffett has cited two metrics in his annual letter which he describes as being paramount in determining intrinsic value: earnings per share & cash plus investments per share.
By my estimate, Berkshire's operating businesses will earn $13 billion in after-tax earnings in 2014, consisting of $11.2 billion from operating businesses and $1.8 billion in insurance underwriting income. Readers should note, given the large amount of acquisitions it has made, Berkshire amortizes approximately $1.2 billion in intangible assets each year. This charge counts against earnings but does not impact free cash flow nor represent an actual economic phenomenon. For this reason, I tend to back out this expense and its commensurate tax benefit (~$400 million) and estimate Berkshire's actual earnings power at $13.8 billion. Berkshire has 2.46 billion Class B equivalent shares outstanding - so this equates to earning per Class B share of $5.60.
| After-tax non-insurance operating | 2014 Est. |
| BNSF | 3,940 |
| Mid-American | 1,820 |
| Manufacturing, Service & Retail | 4,347 |
| Finance & Financial Products | 1,041 |
| Total operating earnings | 11,148 |
| Insurance underwriting | FY 2014 Est. |
| GEICO | 1,420 |
| GenRE | 536 |
| BHRG | 483 |
| BHPG | 362 |
| Pre-tax underwriting profit | 2,801 |
| Taxes | 984 |
| Net underwriting profit | 1,817 |
| Total earnings | 12,965 |
| Add: After tax amortization of intangibles | 800 |
| Total earnings | 13,765 |
| Class B equivalent outstanding (Billion) | 2.46 |
| EPS | $ 5.60 |
Next we must calculate Berkshire's cash and investments per share. This is fairly straightforward. Based on market appreciation during the 2nd quarter, Berkshire's equity should have a fair market value of ~$123 billion with $30 billion of bonds, $31 billion of hybrid securities and $33 billion of cash ($53 less a stated $20 billion in minimum cash holdings). From this amount I subtract $5 billion of derivative liabilities, $13 billion of holding company debt, and $12 billion as an estimate for the net present value of deferred tax liabilities from investment appreciation. The sum of all of this is $187 billion, or $76 per Class B share.
| Investments ($ billions) | Q2 2014 Est. |
| Equities | 123 |
| Bonds | 30 |
| Hybrids | 31 |
| Distributable Cash | 33 |
| Total cash plus investments | 217 |
| Less: | |
| Derivative liabilities | (5) |
| Holdco. Debt | (13) |
| PV of deferred tax liability | (12) |
| Total liabilities | (30) |
| Aggregate value | 187 |
| Class B equivalent outstanding (Billion) | 2.46 |
| Value per Share | $ 76.02 |
If we deduct the $76 per share in value derived from investments and cash less certain liabilities from Berkshire's current share price $127 dollars, the implication is we are ascribing $51 per share in value to the operating businesses. Considering these businesses should earn $5.60/share, this works out to an earnings multiple of 9.6x earnings. Hopefully, you can appreciate that this appears to be incredibly cheap. It is extremely difficult to find low quality business trading at 10x earnings in today's market, nevertheless high quality businesses with predictable earnings streams like Mid-American and Burlington Northern - which together will generate about half of Berkshire's operating earnings this year.
The S&P is currently trading around 17x earnings (1970 S&P, $115 Earnings), my feeling is that Berkshire's businesses, if they traded as independent companies would likely be valued at a multiple proximate to the S&P 500. However, I tend to be a bit conservative and apply a multiple of 14x, which is a discount to the long-run historical average multiple for the S&P of 15.6x. Using the methodology we derive a value of $78 ($5.60*14) per Class B in regards to the value of Berkshire's operating businesses.
Hence, if we value the operating businesses at $78/share and the cash and assets less associated liabilities at $76/share, this works out to an aggregate value of $154/share. It makes sense to look back and see if this makes sense in the context of Berkshire's historical price-to-book ratio of 1.58x or 1.64x (excluding observations below 1.2x book). Remember that Berkshire's book value should approximate about $95.50 per Class B share in the 2nd quarter, implying that Berkshire would be valued in at 1.61x book value using this methodology. This fits squarely between the two measurements (1.58 and 1.64x) used in the discussion of book value. This is not to say we have found a perfectly precise measurement of Berkshire's inherent value, rather that we can be reasonably comfortable that at 1.33x book value we are getting a pretty good discount to fair value even when using conservative assumptions.
Look-Through Earnings:
Berkshire's stated earnings are punished by GAAP accounting because they are unable to consolidate their proportional share of earnings in equity investments. For instance, Berkshire owns 464 million shares of Wells Fargo. If WFC earned $4.20 this year - that is nearly $2 billion attributable to Berkshire's equity stake of which only $650 million will flow through Berkshire's income statement in the form of dividends. For this reason, I like to add up the earnings power of all of Berkshire's investments and add them to the earnings of the operating business to get a picture of underlying earnings power of the entire concern. Using consensus estimates, I calculate Berkshire's equity portfolio will generate $8.4 in earnings, hybrid securities $1.6 billion, and bonds at $1 billion at a 3% yield.
| Investments earnings | 2014 Est. |
| Equities | 8,413 |
| Hybrid securities | 1,573 |
| Bonds | 1,000 |
| Earnings of investment | 10,985 |
| Operating earnings | 13,765 |
| Total earnings power | 24,751 |
| Class B equivalent outstanding (Billion) | 2.46 |
| EPS | $ 10.06 |
| Multiple | 14 |
| Value | $ 140.86 |
| Add: excess cash per share | $ 13.41 |
| Total value per share | $ 154.27 |
Using my methodology I derive earnings of about $11 billion in Berkshire investments, which added to Berkshire's operating businesses, implies total earnings of ~$25 billion. At a 14x multiple, this implies a total value of $141 per share. However, this analysis excludes any value for Berkshire excess cash of $33 billion or $13/share. Obviously the cash does not generate earnings but it is clearly of value given it could be distributed to shareholders or used to purchase additional businesses. Adding the two numbers gets to $154/share, the same valuation we arrived at in the previous section and a price to book ratio of 1.61 which is entirely in-line with historical averages.
Conclusion:
Berkshire's historic price-to-book ratio, when viewed over a long period, probably provides a reasonable basis off of which to calculate the inherent business value of the Company. Currently, Berkshire's historically low price-to-book multiple along with conservative alternative valuation techniques would imply the shares are undervalued by 20 to 25%. It goes without saying that investors should do their own work and analysis before making any investment conclusion.
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