If you were to boil down Warren Buffett’s latest shareholder letter, he was acting on his famous quote, to be fearful when others are greedy and greedy when others are fearful. In italics, he said there was “no” possibility of eye-popping performance as he basically swore off any big acquisition, due to size constraints as well competition for deals from private-equity and venture capital. Christopher Bloomstran, the co-owner of $477 million investment firm Semper Augustus Investments, is a long-time Berkshire Hathaway
BRK.B,
+0.50%
BRK.A,
+0.55%
investor with nearly a third of its assets in the Omaha, Neb. conglomerate.
That indirectly makes Bloomstran a big investor in Apple
AAPL,
-1.00%,
seeing as how the tech giant is the top holding in Berkshire Hathaway’s portfolio. “We’d prefer a more flexible capital policy, buying shares when they are cheap and sending special dividends to shareholders when they are not,” says Bloomstran in his own 149-page missive to investors, referring to Apple’s “mammoth” stock repurchases even as revenue growth has slowed to 1% per year over the last two years. “If sales growth fails to recover to at least 7% annually, the multiple is certain to shrivel from today’s 30.0x. To my mind, Apple is worth far less than its $3 trillion valuation on $400 billion of slow-growing sales producing profits of just over $100 billion.” Granted, Berkshire Hathaway’s cost basis per Apple share in the fourth quarter was an estimated $35.39 – far below the current price of $182.52. The bulk of Bloomstran’s letter is devoted to Berkshire Hathaway. Bloomstran says Berkshire Hathaway is undervalued. He does say the rest of Berkshire Hathaway’s investment portfolio outside of Apple is undervalued, but that’s not his reason for owning the stock. “Berkshire’s common stock portfolio is far too large to run circles against the S&P 500 anymore,” he says. “The advantage to the stock portfolio is because it is a stock portfolio. The degree of overcapitalization in Berkshire’s insurance operation allows for ownership of a much larger allocation to common equities (and even to an entire railroad every now and then).” Since Berkshire buys companies with durable and growing earning power and doesn’t overpay, its earnings yield is often higher than the yields on bonds that other insurers invest in. “It gro …
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BRK.B,
+0.50%
BRK.A,
+0.55%
investor with nearly a third of its assets in the Omaha, Neb. conglomerate.
That indirectly makes Bloomstran a big investor in Apple
AAPL,
-1.00%,
seeing as how the tech giant is the top holding in Berkshire Hathaway’s portfolio. “We’d prefer a more flexible capital policy, buying shares when they are cheap and sending special dividends to shareholders when they are not,” says Bloomstran in his own 149-page missive to investors, referring to Apple’s “mammoth” stock repurchases even as revenue growth has slowed to 1% per year over the last two years. “If sales growth fails to recover to at least 7% annually, the multiple is certain to shrivel from today’s 30.0x. To my mind, Apple is worth far less than its $3 trillion valuation on $400 billion of slow-growing sales producing profits of just over $100 billion.” Granted, Berkshire Hathaway’s cost basis per Apple share in the fourth quarter was an estimated $35.39 – far below the current price of $182.52. The bulk of Bloomstran’s letter is devoted to Berkshire Hathaway. Bloomstran says Berkshire Hathaway is undervalued. He does say the rest of Berkshire Hathaway’s investment portfolio outside of Apple is undervalued, but that’s not his reason for owning the stock. “Berkshire’s common stock portfolio is far too large to run circles against the S&P 500 anymore,” he says. “The advantage to the stock portfolio is because it is a stock portfolio. The degree of overcapitalization in Berkshire’s insurance operation allows for ownership of a much larger allocation to common equities (and even to an entire railroad every now and then).” Since Berkshire buys companies with durable and growing earning power and doesn’t overpay, its earnings yield is often higher than the yields on bonds that other insurers invest in. “It gro …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]