How do we adjust for Last Twelve Month (LTM) or Trailing Twelve Month (TTM)? Is the adjustment the same for Balance Sheet?
Check out the graphic below to understand more:
Sunday, June 11, 2017
Monday, May 1, 2017
BERKSHIRE 101: An introduction to Warren Buffett's $400 billion empire
Very well written summary of how Warren Buffett and Charlie Munger grow this 'GIANT' (by Yahoo Finance)
Berkshire Hathaway (BRK-A) (BRK-B) was a struggling textile company when
Warren Buffett first invested in it in 1962.
Today, it’s a $400
billion behemoth. In Buffett’s own words, it’s a “sprawling conglomerate,
constantly trying to sprawl further.”
The companies in
Berkshire’s portfolio vary greatly. But one thing ties them all together:
Buffett says they’re about “maximizing long-term capital growth.”
Here’s a brief
introduction to Berkshire Hathaway.
The insurance business is the backbone of the
company
After it acquired
National Indemnity in 1967, Berkshire relied on its insurance businesses to
power much of its expansion.
As Berkshire has
gotten bigger and diversified its businesses, its insurance operations have
become a smaller contributor to earnings than in the past, currently making up
26% of total company earnings. But they remain an important part of the
company’s access to a permanent capital base by generating what’s known as
“float.”
“Float” is money
collected up front that is not paid out until later. In Berkshire’s property
& casualty (P&C) insurance businesses, premiums are collected up front,
but claims are paid out often years or decades later, allowing the float to be
used for investments.
Today, Berkshire’s
insurance group consists of four segments: GEICO (auto insurance), General Re
(reinsurance), BH Reinsurance Group (retroactive reinsurance through subsidiaries),
and BH Primary (focused on commercial markets, led by National Indemnity Co).
The property and
casualty insurance business has faced headwinds—including deteriorating
pricing and margin compression. But 2016 posted solid performance, with GEICO
in particular making a comeback. Last year, GEICO suffered from higher
personal auto claims (as a result of more low gas prices and more driving), and
this year it accelerated new business efforts.
Berkshire’s insurance
float was only $1.6 billion in 1990, and sat at $91.6 billion as of 2016. It is
now over $100 billion, including the $10 billion reinsurance deal with
AIG (AIG).
Equity portfolio
Berkshire’s investment
portfolio represents Buffett’s long-term conviction ideas.
At the end of 2016, about
60% of his equity portfolio was invested in five companies—Wells Fargo (WFC), Coca-Cola (KO), IBM (IBM), American Express (AXP) and Apple (AAPL), a position he
initiated last year and built up even more recently
Buffett also made a big bet on airlines last
year, diverging from his position in the past. He significantly increased
his positions in Delta (DAL), United
Airlines (UAL) and American
Airlines (AAL) while adding a
big stake in Southwest Air (LUV).
Shift to non-insurance businesses
Berkshire has evolved
from its early years, when it was an insurance-driven company driven by
outperformance on investments. It is now a large conglomerate that
includes many non-insurance businesses.
The railroad business
now comprises 22% of Berkshire earnings. Burlington Northern Santa Fe Railroad
(BNSF), which Berkshire acquired
in 2009 for $44 billion, is one of seven major railroads in North
America and carries 17% of all inter-city freight. Berkshire has been investing
heavily in this business.
Utilities businesses
comprise 10% of Berkshire earnings. BH Energy owns four utilities
servicing customers in 11 Western/Midwestern states, two electricity
distribution companies in England, two interstate pipelines, a renewable energy
business, and a residential real estate brokerage firm.
Berkshire’s
manufacturing, service and retailing (MSR) operations, 35% of total earnings,
include everything from candy to jets. Companies include food supply chain
company McLane, manufacturing businesses (like specialty chemicals company
Lubrizol, industrial components company Marmon, flooring company Shaw
Industries, and paint and coatings company Benjamin Moore), service and
retailing businesses (including NetJets, See’s Candies, Borsheim Jewelry
Company, the Pampered Chef, and Oriental Trading Company), recently acquired
battery maker Duracell, and aerospace components manufacturer Precision
Castparts, which Berkshire
bought in 2015 for $37 billion.
Its finance
businesses, 8% of earnings, focus largely on the manufacturing and financing of
homes and the leasing of transportation equipment. They include Clayton Homes,
UTLX, XTRA, and other leasing and financing activities.
Acquisitions accounted
for about 60% of Berkshire’s earnings growth in the past 20 years,
according to Morgan Stanley.
As Morgan Stanley’s
Kai Pan points out, Berkshire has a “managers as owners,” mentality, a
decentralization that allows each unit to focus on long-term goals.
Additionally, Pan highlights, each unit maintains an economic “moat” in its
respective industry, separating it from competition to some degree.
More acquisitions are
likely on the horizon for Berkshire, which has an estimated $60 billion in
excess capital.
Valuation
Buffett’s preferred
method for evaluating the attractiveness of investments and businesses is
intrinsic value, which represents the sum of all of discounted cash flows that
can be taken out of a business during its remaining life. The investor
Whitney Tilson sees the current intrinsic value at $300,000 per share,
significantly above the recent share price of $247,520.
Book value is another
approach used to value Berkshire. However, Buffett has noted that the metric
has underrepresented Berkshire’s intrinsic value because of the number of
operating businesses Berkshire has acquired, which are held on the books at
cost.
A book value
calculation does, however, provide a floor for investors. Berkshire has an
open-ended share repurchase program that authorizes management to repurchase
shares if the stock price drops below a price-to-book ratio of 1.2x.
Beneficiary of stimulus
As Morgan Stanley’s
Kai Pan points out, Berkshire has large exposure to Industrials and Financials
and thus will be a major beneficiary of the administration’s “pro-growth”
policies and tax reform, if they pan out.
“Given Berkshire’s
outsized exposure in Industrials and Financials, it is not surprising that BRK
shares have rallied +22% post-election vs. +14% for the S&P 500,” Pan wrote
on March 20. “A potentially lower US corporate tax rate would also aid
earnings. A 20% tax rate could boost BRK earnings by ~14% vs. its current ~30%
consolidated tax rate,” he added.
The
bottom line: Berkshire’s business
has transformed over the years, but remains focused on long-term return and the
efficient use of capital.
Wednesday, April 26, 2017
REITs and rights issues: Dilutive or not?
REITs and rights issues: Dilutive or not?
A very good write up by the infamous AK71 from ASSI.
A very good write up by the infamous AK71 from ASSI.
Wednesday, April 5, 2017
Bill Gates, Warren Buffett And Oprah All Use The 5-Hour Rule-An hour a day (or five hours a week)
https://www.evernote.com/shard/s112/sh/22e1ab14-987f-4e18-bfd8-3050d4ff7a53/168992c2b93ac789b5bede5f4155a7c9
Top business leaders often spend five hours per week doing deliberate learning.
Many of these leaders, despite being extremely busy, set aside at least an hour a day (or five hours a week) over their entire career for activities that could be classified as deliberate practice or learning.
How the best leaders follow the 5-hour rule, they often fell into three buckets: reading, reflection, and experimentation.
1. Read
2. Reflect
3. Experiment
Top business leaders often spend five hours per week doing deliberate learning.
Many of these leaders, despite being extremely busy, set aside at least an hour a day (or five hours a week) over their entire career for activities that could be classified as deliberate practice or learning.
How the best leaders follow the 5-hour rule, they often fell into three buckets: reading, reflection, and experimentation.
1. Read
2. Reflect
3. Experiment
Sunday, April 2, 2017
Friday, March 31, 2017
Monkey Business
|
Pareto Principle, the 80/20 Rule
The 1 Percent Rule: Why a Few People Get Most of the Rewards
By James Clear | Continuous Improvement, Habits
Sometime in the late 1800s—nobody is quite sure exactly when—a man named Vilfredo Pareto was fussing about in his garden when he made a small but interesting discovery.
Pareto noticed that a tiny number of pea pods in his garden produced the majority of the peas.
Now, Pareto was a very mathematical fellow. He worked as an economist and one of his lasting legacies was turning economics into a science rooted in hard numbers and facts. Unlike many economists of the time, Pareto's papers and books were filled with equations. And the peas in his garden had set his mathematical brain in motion.
What if this unequal distribution was present in other areas of life as well?
The Pareto Principle
At the time, Pareto was studying wealth in various nations. As he was Italian, he began by analyzing the distribution of wealth in Italy. To his surprise, he discovered that approximately 80 percent of the land in Italy was owned by just 20 percent of the people. Similar to the pea pods in his garden, most of the resources were controlled by a minority of the players.
Pareto continued his analysis in other nations and a pattern began to emerge. For instance, after poring through the British income tax records, he noticed that approximately 30 percent of the population in Great Britain earned about 70 percent of the total income.
As he continued researching, Pareto found that the numbers were never quite the same, but the trend was remarkably consistent. The majority of rewards always seemed to accrue to a small percentage of people. This idea that a small number of things account for the majority of the results became known as the Pareto Principle or, more commonly, the 80/20 Rule.
Inequality, Everywhere
In the decades that followed, Pareto's work practically became gospel for economists. Once he opened the world's eyes to this idea, people started seeing it everywhere. And the 80/20 Rule is more prevalent now than ever before.
For example, through the 2015-2016 season in the National Basketball Association, 20 percent of franchises have won 75.3 percent of the championships. Furthermore, just two franchises—the Boston Celtics and the Los Angeles Lakers—have won nearly half of all the championships in NBA history. Like Pareto's pea pods, a few teams account for the majority of the rewards.
The numbers are even more extreme in soccer. While 77 different nations have competed in the World Cup, just three countries—Brazil, Germany, and Italy—have won 13 of the first 20 World Cup tournaments.
Examples of the Pareto Principle exist in everything from real estate to income inequality to tech startups. In the 1950s, three percent of Guatemalans owned 70 percent of the land in Guatemala. In 2013, 8.4 percent of the world population controlled 83.3 percent of the world's wealth. In 2015, one search engine, Google, received 64 percent of search queries.
Why does this happen? Why do a few people, teams, and organizations enjoy the bulk of the rewards in life? To answer this question, let's consider an example from nature.
The Power of Accumulative Advantage
The Amazon rainforest is one of the most diverse ecosystems on Earth. Scientists have cataloged approximately 16,000 different tree species in the Amazon. But despite this remarkable level of diversity, researchers have discovered that there are approximately 227 “hyperdominant” tree species that make up nearly half of the rainforest. Just 1.4 percent of tree species account for 50 percent of the trees in the Amazon.
But why?
Imagine two plants growing side by side. Each day they will compete for sunlight and soil. If one plant can grow just a little bit faster than the other, then it can stretch taller, catch more sunlight, and soak up more rain. The next day, this additional energy allows the plant to grow even more. This pattern continues until the stronger plant crowds the other out and takes the lion’s share of sunlight, soil, and nutrients.
From this advantageous position, the winning plant has a better ability to spread seeds and reproduce, which gives the species an even bigger footprint in the next generation. This process gets repeated again and again until the plants that are slightly better than the competition dominate the entire forest.
Scientists refer to this effect as “accumulative advantage.” What begins as a small advantage gets bigger over time. One plant only needs a slight edge in the beginning to crowd out the competition and take over the entire forest.
Winner-Take-All Effects
Something similar happens in our lives.
Like plants in the rainforest, humans are often competing for the same resources. Politicians compete for the same votes. Authors compete for the same spot at the top of the best-seller list. Athletes compete for the same gold medal. Companies compete for the same potential client. Television shows compete for the same hour of your attention.
The difference between these options can be razor thin, but the winners enjoy massively outsized rewards.
Imagine two women swimming in the Olympics. One of them might be 1/100th of a second faster than the other, but she gets all of the gold medal. Ten companies might pitch a potential client, but only one of them will win the project. You only need to be a little bit better than the competition to secure all of the reward. Or, perhaps you are applying for a new job. Two hundred candidates might compete for the same role, but being just slightly better than other candidates earns you the entire position.
Situations in which small differences in performance lead to outsized rewards are known as Winner-Take-All Effects.
These situations in which small differences in performance lead to outsized rewards are known as Winner-Take-All Effects. They typically occur in situations that involve relative comparison, where your performance relative to those around you is the determining factor in your success.
Not everything in life is a Winner-Take-All competition, but nearly every area of life is at least partially affected by limited resources. Any decision that involves using a limited resource like time or money will naturally result in a winner-take-all situation.
In situations like these, being just a little bit better than the competition can lead to outsized rewards because the winner takes all. You only win by one percent or one second or one dollar, but you capture one hundred percent of the victory. The advantage of being a little bit better is not a little bit more reward, but the entire reward. The winner gets one and the rest get zero.
Winner Take All Effects
Winner-Take-All Leads to Winner-Take-Most
Winner-Take-All Effects in individual competitions can lead to Winner-Take-Most Effects in the larger game of life.
From this advantageous position—with the gold medal in hand or with cash in the bank or from the chair of the Oval Office—the winner begins the process of accumulating advantages that make it easier for them to win the next time around. What began as a small margin is starting to trend toward the 80/20 Rule.
If one road is slightly more convenient than the other, then more people travel down it and more businesses are likely to build alongside it. As more businesses are built, people have additional reasons for using the road and so it gets even more traffic. Soon you end up with a saying like, “20 percent of the roads receive 80 percent of the traffic.”
If one business has a technology that is more innovative than another, then more people will buy their products. As the business makes more money, they can invest in additional technology, pay higher salaries, and hire better people. By the time the competition catches up, there are other reasons for customers to stick with the first business. Soon, one company dominates the industry.
If one author hits the best-seller list, then publishers will be more interested in their next book. When the second book comes out, the publisher will put more resources and marketing power behind it, which makes it easier to hit the best-seller list for a second time. Soon, you begin to understand why a few books sell millions of copies while the majority struggle to sell a few thousand copies.
The margin between good and great is narrower than it seems. What begins as a slight edge over the competition compounds with each additional contest.
The margin between good and great is narrower than it seems. What begins as a slight edge over the competition compounds with each additional contest. Winning one competition improves your odds of winning the next. Each additional cycle further cements the status of those at the top.
Over time, those that are slightly better end up with the majority of the rewards. Those that are slightly worse end up with next to nothing. This idea is sometimes referred to as The Matthew Effect, which references a passage in The Bible that says, “For all those who have, more will be given, and they will have an abundance; but from those who have nothing, even what they have will be taken away.”
Now, let's come back to the question I posed near the beginning of this article. Why do a few people, teams, and organizations enjoy the bulk of the rewards in life?
The 1 Percent Rule
Small differences in performance can lead to very unequal distributions when repeated over time. This is yet another reason why habits are so important. The people and organizations that can do the right things, more consistently are more likely to maintain a slight edge and accumulate disproportionate rewards over time.
You only need to be slightly better than your competition, but if you are able to maintain a slight edge today and tomorrow and the day after that, then you can repeat the process of winning by just a little bit over and over again. And thanks to Winner-Take-All Effects, each win delivers outsized rewards.
We can call this The 1 Percent Rule. The 1 Percent Rule states that over time the majority of the rewards in a given field will accumulate to the people, teams, and organizations that maintain a 1 percent advantage over the alternatives. You don't need to be twice as good to get twice the results. You just need to be slightly better.
The 1 Percent Rule is not merely a reference to the fact that small differences accumulate into significant advantages, but also to the idea that those who are one percent better rule their respective fields and industries. Thus, the process of accumulative advantage is the hidden engine that drives the 80/20 Rule.
By James Clear | Continuous Improvement, Habits
Sometime in the late 1800s—nobody is quite sure exactly when—a man named Vilfredo Pareto was fussing about in his garden when he made a small but interesting discovery.
Pareto noticed that a tiny number of pea pods in his garden produced the majority of the peas.
Now, Pareto was a very mathematical fellow. He worked as an economist and one of his lasting legacies was turning economics into a science rooted in hard numbers and facts. Unlike many economists of the time, Pareto's papers and books were filled with equations. And the peas in his garden had set his mathematical brain in motion.
What if this unequal distribution was present in other areas of life as well?
The Pareto Principle
At the time, Pareto was studying wealth in various nations. As he was Italian, he began by analyzing the distribution of wealth in Italy. To his surprise, he discovered that approximately 80 percent of the land in Italy was owned by just 20 percent of the people. Similar to the pea pods in his garden, most of the resources were controlled by a minority of the players.
Pareto continued his analysis in other nations and a pattern began to emerge. For instance, after poring through the British income tax records, he noticed that approximately 30 percent of the population in Great Britain earned about 70 percent of the total income.
As he continued researching, Pareto found that the numbers were never quite the same, but the trend was remarkably consistent. The majority of rewards always seemed to accrue to a small percentage of people. This idea that a small number of things account for the majority of the results became known as the Pareto Principle or, more commonly, the 80/20 Rule.
Inequality, Everywhere
In the decades that followed, Pareto's work practically became gospel for economists. Once he opened the world's eyes to this idea, people started seeing it everywhere. And the 80/20 Rule is more prevalent now than ever before.
For example, through the 2015-2016 season in the National Basketball Association, 20 percent of franchises have won 75.3 percent of the championships. Furthermore, just two franchises—the Boston Celtics and the Los Angeles Lakers—have won nearly half of all the championships in NBA history. Like Pareto's pea pods, a few teams account for the majority of the rewards.
The numbers are even more extreme in soccer. While 77 different nations have competed in the World Cup, just three countries—Brazil, Germany, and Italy—have won 13 of the first 20 World Cup tournaments.
Examples of the Pareto Principle exist in everything from real estate to income inequality to tech startups. In the 1950s, three percent of Guatemalans owned 70 percent of the land in Guatemala. In 2013, 8.4 percent of the world population controlled 83.3 percent of the world's wealth. In 2015, one search engine, Google, received 64 percent of search queries.
Why does this happen? Why do a few people, teams, and organizations enjoy the bulk of the rewards in life? To answer this question, let's consider an example from nature.
The Power of Accumulative Advantage
The Amazon rainforest is one of the most diverse ecosystems on Earth. Scientists have cataloged approximately 16,000 different tree species in the Amazon. But despite this remarkable level of diversity, researchers have discovered that there are approximately 227 “hyperdominant” tree species that make up nearly half of the rainforest. Just 1.4 percent of tree species account for 50 percent of the trees in the Amazon.
But why?
Imagine two plants growing side by side. Each day they will compete for sunlight and soil. If one plant can grow just a little bit faster than the other, then it can stretch taller, catch more sunlight, and soak up more rain. The next day, this additional energy allows the plant to grow even more. This pattern continues until the stronger plant crowds the other out and takes the lion’s share of sunlight, soil, and nutrients.
From this advantageous position, the winning plant has a better ability to spread seeds and reproduce, which gives the species an even bigger footprint in the next generation. This process gets repeated again and again until the plants that are slightly better than the competition dominate the entire forest.
Scientists refer to this effect as “accumulative advantage.” What begins as a small advantage gets bigger over time. One plant only needs a slight edge in the beginning to crowd out the competition and take over the entire forest.
Winner-Take-All Effects
Something similar happens in our lives.
Like plants in the rainforest, humans are often competing for the same resources. Politicians compete for the same votes. Authors compete for the same spot at the top of the best-seller list. Athletes compete for the same gold medal. Companies compete for the same potential client. Television shows compete for the same hour of your attention.
The difference between these options can be razor thin, but the winners enjoy massively outsized rewards.
Imagine two women swimming in the Olympics. One of them might be 1/100th of a second faster than the other, but she gets all of the gold medal. Ten companies might pitch a potential client, but only one of them will win the project. You only need to be a little bit better than the competition to secure all of the reward. Or, perhaps you are applying for a new job. Two hundred candidates might compete for the same role, but being just slightly better than other candidates earns you the entire position.
Situations in which small differences in performance lead to outsized rewards are known as Winner-Take-All Effects.
These situations in which small differences in performance lead to outsized rewards are known as Winner-Take-All Effects. They typically occur in situations that involve relative comparison, where your performance relative to those around you is the determining factor in your success.
Not everything in life is a Winner-Take-All competition, but nearly every area of life is at least partially affected by limited resources. Any decision that involves using a limited resource like time or money will naturally result in a winner-take-all situation.
In situations like these, being just a little bit better than the competition can lead to outsized rewards because the winner takes all. You only win by one percent or one second or one dollar, but you capture one hundred percent of the victory. The advantage of being a little bit better is not a little bit more reward, but the entire reward. The winner gets one and the rest get zero.
Winner Take All Effects
Winner-Take-All Leads to Winner-Take-Most
Winner-Take-All Effects in individual competitions can lead to Winner-Take-Most Effects in the larger game of life.
From this advantageous position—with the gold medal in hand or with cash in the bank or from the chair of the Oval Office—the winner begins the process of accumulating advantages that make it easier for them to win the next time around. What began as a small margin is starting to trend toward the 80/20 Rule.
If one road is slightly more convenient than the other, then more people travel down it and more businesses are likely to build alongside it. As more businesses are built, people have additional reasons for using the road and so it gets even more traffic. Soon you end up with a saying like, “20 percent of the roads receive 80 percent of the traffic.”
If one business has a technology that is more innovative than another, then more people will buy their products. As the business makes more money, they can invest in additional technology, pay higher salaries, and hire better people. By the time the competition catches up, there are other reasons for customers to stick with the first business. Soon, one company dominates the industry.
If one author hits the best-seller list, then publishers will be more interested in their next book. When the second book comes out, the publisher will put more resources and marketing power behind it, which makes it easier to hit the best-seller list for a second time. Soon, you begin to understand why a few books sell millions of copies while the majority struggle to sell a few thousand copies.
The margin between good and great is narrower than it seems. What begins as a slight edge over the competition compounds with each additional contest.
The margin between good and great is narrower than it seems. What begins as a slight edge over the competition compounds with each additional contest. Winning one competition improves your odds of winning the next. Each additional cycle further cements the status of those at the top.
Over time, those that are slightly better end up with the majority of the rewards. Those that are slightly worse end up with next to nothing. This idea is sometimes referred to as The Matthew Effect, which references a passage in The Bible that says, “For all those who have, more will be given, and they will have an abundance; but from those who have nothing, even what they have will be taken away.”
Now, let's come back to the question I posed near the beginning of this article. Why do a few people, teams, and organizations enjoy the bulk of the rewards in life?
The 1 Percent Rule
Small differences in performance can lead to very unequal distributions when repeated over time. This is yet another reason why habits are so important. The people and organizations that can do the right things, more consistently are more likely to maintain a slight edge and accumulate disproportionate rewards over time.
You only need to be slightly better than your competition, but if you are able to maintain a slight edge today and tomorrow and the day after that, then you can repeat the process of winning by just a little bit over and over again. And thanks to Winner-Take-All Effects, each win delivers outsized rewards.
We can call this The 1 Percent Rule. The 1 Percent Rule states that over time the majority of the rewards in a given field will accumulate to the people, teams, and organizations that maintain a 1 percent advantage over the alternatives. You don't need to be twice as good to get twice the results. You just need to be slightly better.
The 1 Percent Rule is not merely a reference to the fact that small differences accumulate into significant advantages, but also to the idea that those who are one percent better rule their respective fields and industries. Thus, the process of accumulative advantage is the hidden engine that drives the 80/20 Rule.
Monday, March 13, 2017
Six Chinese Billionaires Spring Up With Delivery Fortunes Worth $47 Billion
Chinese parcel billionaires have amassed a total net worth of about $47 billion...
Amazing...Shuttling parcels around for Alibaba and other retailers is creating China’s latest wealth explosion, with a surge in shares of S.F. Express making Wang Wei the country’s third-richest man.
Amazing...Shuttling parcels around for Alibaba and other retailers is creating China’s latest wealth explosion, with a surge in shares of S.F. Express making Wang Wei the country’s third-richest man.
Sunday, March 12, 2017
‘Becoming Warren Buffett’ Documentary - 2017
https://www.facebook.com/BillionaireInsider/videos/735675593267839/
Free Online Document Translator
Free Online Document Translator - Preserves your document's layout (Word, PDF, Excel, Powerpoint, OpenOffice, text)
Subscribe to:
Posts (Atom)
-
https://indexes.nasdaqomx.com/docs/fs_ndx.pdf https://www.youtube.com/watch?v=R80FtG2kX9o US-Domiciled : 30% dividend tax Irish-Domicile...
-
Top 8 ETFs to buy for Singapore Investors in 2025 (by Financial Horse)
-
Good rotation Don't rush the PULL Avoid these 3 mistakes
