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Newsletter - May 6th, 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 the 2022, 2021, and 2020 Berkshire AGMs below:

(Notes from the 2023 Berkshire meeting today shall be covered next week)


2022 Berkshire AGM

Notes at timestamps below:

12:45 One foot in front of the other...

... every day can lead to incredible accomplishments. No master plan or strategy - just rational steady progress.

28:00 Bank runs

Relevant today - banking is a confidence game. The central bank is the ultimate backstop. Park in treasury bills if not stocks.

53:45 Keynes on Markets

Hasn't changed since. The speculative impulse is the lifeblood of markets, which is the reason that methods to exploit it is likely to work long into the future. Sanity or being less irrational is enough.

1:32:15 Get value for your money

Forget market timing.

1:43:15 2nd half of your life

If you're blessed in life, there's no excuse for messing up the second half of your life.

4:33:00 Do what interests you

Lately been thinking of such advice as trite (i.e. just focus on things you're good at) - but hearing Munger, it's the obvious way to operate with an edge in the market.

4:34:45 Oil for the next 200 years

Probably noted before, but oil is likely to be in demand for a long time regardless of government diktats.


2021 Berkshire AGM

16:00 Impermanence of Corporate Dominance

Not one of the 20 largest companies of 1989 made it to the top 20 list in 2021. Competitive advantages aren't a sure thing.

23:00 Winners in a boom

Only three auto companies survived from the 100s operating in the 1920s. A booming industry may change the future - but picking winners isn't so obvious.

25:45 2020 reluctance

Didn't notice this before - but Buffett didn't pull the trigger in the 2020 crisis until monetary and fiscal stimulus kicked in. Similarly his 2008 actions followed Fed and Treasury actions - government will was important.

Implicit in buying stocks before then was faith that the government would act - stating this assumption is important.

1:16:45 Matching rate to risk

Insurance is about matching rate to risk - very similar to stocks. You must pay up for quality.

1:27:00 Treasury auctions

Buffett talks about people bidding for super-safe US treasury bills at 0% yield. Interest rates are like gravity - affects the value of every investment. Best to set a minimum buying threshold regardless.

1:47:15 Buying without insight

Rare compromise in Buffett's investing - buying companies where he doesn't have an edge in evaluation but which are better than US Treasuries as a group. It's practically impossible to sit around waiting for markets to feed you exactly what you want.

On that note, there's a line from the Intelligent Investor that we've found applicable even today: "Once the investor is willing to forgo brilliant prospects—i.e., better than average expected growth—he will have no difficulty in finding a wide selection of issues meeting these criteria." - very true for smaller investors.

2:16:00 Future earning power is all-important

Buffett paid too much in relation to average earnings for Precision Castparts.

Your investment thesis succeeds or fails on how future earning power turns out. Since it's difficult to predict this, especially for secondary companies, it's important to have time limits for holding stocks to weed out losers.

2:18:00 Bad decisions wither away

One consolation is that mistakes, even relatively large ones, wither away over time as the winners take over. Let the winners run without compromising too much on value.

2:19:45 The biggest Risk Factor

Is having the wrong management team, which is socially competent but mediocre in ability. Rationally evaluating management's track record is key.

2:35:00 USA over China

Buffett makes it explicit he expects USA to maintain corporate dominance vs. China in the next 30 years, which is interesting.

3:06:00 Numbers runner in the House

Amusing to hear that the US House of Representatives had a numbers runner when Buffett's dad was in office. The strength of the gambling impulse ...


2020 Berkshire AGM

1:07:00 Mr. Market

Mr. Market "drinks a lot, smokes a little pot, and his numbers are all over the place". You should never put yourself in a position where you're forced to sell and better yet, buy when he offers low prices.

1:30:30 Airline multiples

Bought for $7-8bn when underlying earning power was $1bn - a 7-8x multiple.

Don't feel poorer because of market declines, feel poorer if earning power is significantly impaired.

1:38:30 No half measures

Buffett doesn't trim positions or engage in half measures - all in or all out.

2:26:30 Fickle future

Some businesses will turn out better, some worse - error rate can be high. Allow for it with a margin of safety, and wide diversification.

2:45:30 Oil investing

Investing in large oil companies is predominantly dependent on future oil prices. Permanently low oil prices impairs energy loans and affects the banking industry with their large exposure to oil companies - relevant to all commodity industries.

Buffett's basic thesis is that oil will be more valuable over time.

2:53:30 Never collateral

Buffett never gets into a position where he has to post collateral - never at the mercy of the market. Always playing the master game of exploiting the market.


Until next time, Cheers!


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