Chris Bloomstran And Berkshire Hathaway

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Chris Bloomstran And Berkshire Hathaway
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During their recent episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discussed Chris Bloomstran And Berkshire Hathaway. Here’s an excerpt from the podcast:

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Chris Bloomstran And Berkshire Hathaway

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Jake: Yeah. Then the last thing I want to hit was, Chris Bloomstran has this incredible understanding of Berkshire that he walks through, lays out all this nuance. He’s owned it for 20 plus years, and he’s done really well on it, deservedly so. I know this guy who manages money, and he bought Berkshire in the early 90s and, to be charitable, I would say that this guy doesn’t seem to be the exact highest wattage bulb of all the bulbs available. No disrespect, but he has owned Berkshire since the early 90s in a huge way. He just basically outsourced a bunch of his portfolio to Berkshire-

Tobias: Smart.

Jake: -and he’s crushed it, and he’s gotten great returns. I was trying to think about, is there any other game, is there any other situation, any other environment where the person who does all the work and has crazy nuance gets the exact same result as the guy who’s just like, “I like this Buffett guy. I’m just going to go with that.’” Those two end up in the exact same place by riding the same train. I can’t think of anything that has that.

Tobias: Buffett’s got a 100 grand a year on top of that, don’t forget that.

Jake: Yeah. Well, so to push it even further, so this guy, I’m being a little disparaging about. There was another guy who we all agree is very, very smart, and he did this exact same thing, but he pushed basically all of his net worth in on this guy, and his name’s Charlie Munger.

Tobias: That’s good, that was smart.

Jake: He was managing a fund and he realized, “Oh my God, this guy’s probably– if he’s not better than me at this, he’s at least more motivated to get up and do it every single day than I am. He’s just a deal junkie. He can’t get enough of it. I’m going to let this guy do it for me, even though I could probably do it myself.” That turned him into a billionaire. He got to just have a front-row seat to watching his wealth turning into a billion. He helped nudge along the way obviously, but what a genius. Here we have geniuses and maybe not so much genius all ending up in the same place. I don’t know what to do with that. I don’t know where that leads me. I don’t know what the takeaway is, honestly, but I find it to be very fascinating.

Bill: Buy good businesses with good managers and let them run?

Tobias: Yeah.

Jake: Yes, right.

Bill: I mean, compounders?

Tobias: At the right price, yeah.

Bill: Okay. I’m just saying.

Tobias: You got Li Lu to– I think Li Lu’s six or seven baggers for whatever he gave him, 500 or a billion. He did all right there, too.

Bill: Munger’s smart. If I could be anyone, I’d be Munger.

Tobias: Yeah. Don’t have to do the work.

Bill: He drives around in a Bentley and he’s got this big ass community for he and his friends and he’s always enjoyed his money. That guy’s smart. You can’t take it with you. It’s a sucker’s game to try to make the most.

Tobias: Can’t argue with that. Should we take some questions?

Bill: Not to mention, think about real quick, think about Buffett, and I love you, Buff Dog.

Jake: Thanks for listening.

Bill: All he wanted to be probably was the richest man in the world at one point. Then, what happens? Bezos comes up, and then Elon Musk. Imagine how much it must grind Buffett’s gears in private [crosstalk] to have Elon Musk [crosstalk] Oh, I think I would be very upset. You think somebody that takes that much pride in their craft doesn’t get a little pissed off that Elon Musk just passed them?

Tobias: To give you on credit though, the only way you get there is you leave it all on the table, and you’ll let it ride for a really, really long period of time.

Jake: You borrow against it to buy jets and mansions.

Bill: Yeah. Well, he let it ride.

Tobias: Well, fair enough. That’s how you do it. I don’t think there’s much chance of him get– I don’t know where how much margin he’s got against this stock, but I don’t think there’s much chance of him getting a margin call against it.

Bill: Not anymore.

Tobias: If it goes down to fair value, I’d be in trouble.

Bill: Got the S&P buy, dawg.

Tobias: Yeah, that’s true.

Jake: Yeah, I’m the bigger bag holder.

Tobias: [chuckles] Hit us with some questions, we’ll–

Jake: We’ll flail away at them.

Tobias: Yeah, we’ll mumble quietly to ourselves. If Buffett held on to all of his stock, does he remain the richest? Anybody know the answer to that?

Bill: I don’t. I don’t know how much he gave away. I’ve got to think Bezos would be worth more.

Tobias: You got a question from the brewdawg.

Jake: Oh.

Bill: I do?

Tobias: We all do. I guess, it’s not you, Bill, you didn’t put that in. With a CAPE ratio where it is, how much dry powder do you set aside before worrying about cash drag?

Jake: That’s not a Bill question. [laughs]

Bill: The answer is none.

Jake: [laughs]

Tobias: Yeah. I don’t think you want to use the CAPE for much really, honestly. It’s not particularly useful.

Bill: [laughs]

Jake: It’s not useful for timing.

Tobias: No, it’s not useful for timing. That’s it.

Bill: Yeah. You want to sit in cash right now? Oka

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

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The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates. It examines several financial statement items that other multiples like the price-to-earnings ratio do not, including debt, preferred stock, and minority interests; and interest, tax, depreciation, amortization. The Acquirer’s Multiple® is calculated as follows: Enterprise Value / Operating Earnings* It is based on the investment strategy described in the book Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, written by Tobias Carlisle, founder of acquirersmultiple.com. The Acquirer’s Multiple® differs from The Magic Formula® Earnings Yield because The Acquirer’s Multiple® uses operating earnings in place of EBIT. Operating earnings is constructed from the top of the income statement down, where EBIT is constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–earnings that a company does not expect to recur in future years–ensures that these earnings are related only to operations. Similarly, The Acquirer’s Multiple® differs from the ordinary enterprise multiple because it uses operating earnings in place of EBITDA, which is also constructed from the bottom up. Tobias Carlisle is also the Chief Investment Officer of Carbon Beach Asset Management LLC. He's best known as the author of the well regarded Deep Value website Greenbackd, the book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014, Wiley Finance), and Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012, Wiley Finance). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law. Articles written for Seeking Alpha are provided by the team of analysts at acquirersmultiple.com, home of The Acquirer's Multiple Deep Value Stock Screener. All metrics use trailing twelve month or most recent quarter data. * The screener uses the CRSP/Compustat merged database “OIADP” line item defined as “Operating Income After Depreciation.”

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