Newsletter - May 13th, 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:

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Notes from the 2023 Berkshire AGM below:

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2023 Berkshire AGM

Notes at timestamps below:

41:00 Commercial real estate

The market value of a commercial building is "whatever a buyer can borrow without signing anything".

1:43:00 Ben Rosner

Ben Rosner deliberately sold Associated Retail Stores for a "lousy" price (to get back at the widow of his partner who was criticizing him):

$6mn for $2mn in cash, $2mn in real estate, and $2mn in operating earnings (!)

1:53:30 Consumer behavior

Even if you don't understand the technical aspects of a business, understanding of consumer behavior and threats to a business may be enough.

1:56:30 Japanese investments

The stocks were earning 14% on the price, decent dividends/repurchases - Buffett had a basic understanding of the group's businesses, and eliminated currency risk by borrowing at 0.5%. Expects to hold for decades. Smart.

2:16:00 TSMC

Buffett now uncomfortable with location.

Sometimes it's better to just stay away from potential warzones. His investments in South Korea in 2004 did have nuclear war risks but probably less risky than the current situation.

2:19:30 Benjamin Graham

Hard to imagine an investment book (Intelligent Investor) that's selling well after 74 years. (Of course Buffett's endorsement has helped.)

"They (new investment books) don't say anything as important" as what he said in 1949.

2:30:00 Auto Insurance Margins

Are only 4% - tough business

3:47:45 Munger's climate skepticism

"Lots of false claims where much is not known" - this could also mean that several industries are currently undervalued.

3:51:45 Oil

Those oil royalty deals sound interesting. And Buffett's evaluation of Occidental's position in the Permian Basin seems key to his investment decision.

4:23:00 Freedom

To operate and forge your own destiny is a huge luxury in life.

4:24:45 Activision deal falling apart

Buffett announced last year that he was playing the arbitrage between Activision's share price and Microsoft's bid price. The deal falling apart due to UK regulatory refusal is "life in the big city" as Munger would say. Even the best make mistakes.

4:46:30 Automotive winners

Buffett mentioning he was recently reading GM's 1932 annual report (!) - his point here is that nobody can permanently dominate the automotive industry (in the context of zero-emission vehicles).

4:50:00 Federal Reserve

Buffett has no concerns about the Federal reserve - just the fiscal situation. Also interesting that he would revise the 2% inflation objective to zero if he could.

4:59:15 Capitalism

Buffett's view over the years is that we shouldn't mess with capitalism that generates such abundant fruits - but the ones left behind must be taken care of by the government.

However, envy can never be cured.

5:06:15 Fair value changes in securities

Buffett maintains a consistent stance for banks and non-banks that fair value changes in securities should flow through Other Comprehensive Income rather than the Income Statement i.e. no held-to-maturity classification.

Inexplicable rule change by the accounting standard setters.

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Until next time, Cheers!