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During their recent episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discussed NYSE:BRK.A / NYSE:BRK.B and Tech. Here’s an excerpt from the podcast:

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Bill: The one thing that– Buffett is most definitely not a quant Robinhood investor, negative, sir. Anyway, I guess that the one thing that I keep going back to as I watch the business unfold, I understand that tech’s not in his circle of competence per se, but what I don’t understand is why they’ve been so unwilling to swing it at some of the tech companies that are pretty easy to identify and have been, at least for the last five years. I understand that you could say, “Well, he doesn’t want to take a zero and you can’t have a permanent impairment of capital,” but on any given insurance risk, you could get screwed. So, I don’t understand why that level of scrutiny is applied to investment sometimes. It’s hard for me to reconcile.

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Tobias: That’s interesting. He takes a probabilistic approach to insurance, but not the same-

Bill: Yeah, but–

Tobias: -approach to investing.

Bill: Yeah, I don’t understand why they seem to me to be so focused on making these concentrated bets that they make them when there’s almost no risk, but if you look at the history of the equity markets, and you listen to what he says about buying an index, and over time America is going to work, why would that– there seems to be a disconnect in logic to me.

Tobias: You would say take a smaller bet on something that has the good economics that a Google does if you can get it at the right price, which maybe you have been able to on occasion over the last 10 years, since they started discussing it as a mistake.

Bill: Yeah, and maybe you think that–

Tobias: Put $5 billion into it.

Bill: Yeah, right. Then, maybe you buy another $5 billion if you’re down a bit, as long as the business is good enough. Rather than just accumulating all this cash waiting to deploy it when it’s pretty clear there’s not an elephant big enough that’s going to hit the market. In March, I thought he’d get a shot, maybe that’s what he was waiting for, and maybe the government bailed everybody out. That’s why you see $24 billion of buybacks this year. That’s very possible. But that’s the only thing that I don’t know.

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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