Re:A Professor Who Was Right About Index Funds All Along
by pooper on Saturday October 22, 2016 @01:40PM
(#12769652)
> True, but he (and Munger) generally invest quite conservatively. He doesn't buy for capital gain, but to hold indefinitely. He buys businesses he understands, with financials he understands, for prices he figures reflect a fair discount on the economic value, plus a generous margin of error.
The Bank of America deal shows how good a deal you can get when you can put $5B where your mouth is
> In exchange, Berkshire Hathaway received $5 billion worth of preferred stock yielding 6% a year plus warrants to purchase 700 million shares of Bank of America common stock at an exercise price of $7.14 per share.
apologies in advance for linking to fool.com http://www.fool.com/investing/general/2015/08/19/how-much-is...
Re:A Professor Who Was Right About Index Funds All Along
by jacques_chester on Saturday October 22, 2016 @01:47PM
(#12769687)
Right. In fact the financial crisis was a busy few years for Berkshire-Hathaway. Like everyone else they took a drubbing, but they also unleashed a lot of their unused cash to make deals on generous terms.
It helped that they were structurally inclined to build up cash. As Buffet explains, a booming share market is bad for him: everything is too expensive to buy.
So cash piles up, waiting for good deals of sufficient magnitude to arise.
When a bust arrives, there are bargains everywhere and a lot of money to buy into them.
When full ownership is taken (his preferred option), the original management is almost always left in place. No rules or guidance are given. The subsidiaries work however they worked before acquisition.
That said, after reading through his 50 Berkshire Hathaway letters, the main lesson I drew was: own insurance companies which underwrite for profit under all economic conditions.