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Newsletter - April 8th, 2023

Dear Reader,


Attached is our latest list of stocks generated from basic value screens (low p/e, ev/ebitda, debt/equity, etc.), which don’t meet our investment criteria - and our reasoning.


This may help you avoid a few ‘value traps’ or stocks that aren’t sufficiently attractive compared to the opportunities available today.


For reports of stock ideas that pass our quantitative and qualitative standards, join at the link below:



 

Notes from 2011 Berkshire AGM below:

 

2011 Berkshire AGM


Notes at timestamps below:



25:45 Utility CAGR


When setting up a "special compensation arrangement" for the managers of MidAmerican Energy (Berkshire's utility operation), Buffett sets a benchmark based on 5-year compounded gain in earnings from a high base - "a figure no other utility company in the US was going to come close to" - 16% CAGR in earnings per year. Insightful.



47:45 Go to hell tomorrow


You can always tell a man to go to hell tomorrow. Hard to practice but worth remembering.



1:17:15 Negative News


Was talking to an old boss of mine yesterday who asked: "Isn't it a bad time to invest in stocks?"


There's always negatives but capitalism has significant resuscitative power - just seek value and hold.



3:13:00 Lubrizol Economics

Berkshire paid $9bn for $1bn of pre-tax earnings - Buffett's quantitative thinking before pulling the trigger on a high ROIC (40% pre-tax) business - chimes with his threshold of 9-10x pre-tax earnings for control acquisitions.



3:35:30 Satisfactory Deals


Don't benchmark opportunities against the best deal you ever made but simply to what is "satisfactory" under current conditions i.e., the best deal you can make today.


May need to to adjust standards, even lower them (to a limit), in bull markets.



4:06:15 Allowances for lack of understanding


You just need to know enough about a situation where you feel okay going in at a big discount - and you have the staying power to hold it out. The size of the margin of safety provides cover for some ignorance.


Reminds us of how he valued his LTCM bid:


 

Until next time, Cheers!

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