August 4, 2012 Comments

Markets were up strongly on Friday mostly due to a better-than-expected jobs creation number and I think partly due to comments that Germany would not stand in the way of the European Central bank’s meddling in the markets.

Whatever the reason it was a nice way to end the week.

Stantec came out with earnings after the close on Thursday. In response to the good earnings the stock was up 9.9% on Friday to $31.22.

We had last rated it a (lower) Strong Buy at $31.25 on May 27. On May 29 I noted I had bought some more as the price dipped somewhat. Subsequently it fell to as low as $26.50 on July 24. On July 27 I mentioned that I would definitely consider buying it and that it was at $27.85. I own 1500 shares and I wish I had bought more after talking about it on July 27. It’s still a good buy for the long term.

Warren Buffett’s Berkshire Hathaway announced earnings after the close on Friday. The earnings were good with operating earnings before gains and losses on investments up 38%. Along with realized gains on sales of investments of just $81 million there was unrealized market gains of about $6.1 billion. (This is not recognized as earnings.) This is shown in the increase in other comprehensive earnings. This tends not to get noticed much in the financial press.

What will get noticed by the financial press is that Berkshire lost $693 million on mark to market value of derivatives. Those who like to try to knock Buffett down a notch always have a field day with this one. In reality it certainly has no more meaning than the $6.1 billion in other comprehensive gains that go unnoticed. Buffett will almost certainly ultimately make money on these derivatives.

Berkshire’s book value per share has gained 7.5% in 2012 and stands at $107,377 per class A share. (Incredibly enough, these are the same shares that had a book value of $19 when Buffett assumed control of the company in 1965.) The B shares have a book value of $71.58. Berkshire is authorized to buy back shares if the price goes lower than 110% of book value, so $78.74 per share. Berkshire closed on Friday at $85.58. Although our report is not updated I would continue to consider it a (higher) Buy at that price.