March 3, 2013 Comments

Berkshire Hathaway is updated and rated (lower) Buy at $102.05. For the reasons given in the report this rating may be conservative. By my reading, Buffett has hinted (but not stated) that the intrinsic value is closer to the $130 range.

Buffett’s much anticipated annual letter came out after the close on Friday. As always it was chock full of investment wisdom.

Berkshire had an excellent year although Buffett, in typical fashion called it a sub-par year because it slightly trailed the S&P 500 this year in terms of the increase in book value per share.

The entire annual report runs to 109 pages (not excessively large by the standards of large companies and considering it includes the 24 page letter form Buffett). I read the entire thing. Years ago I had assumed that Buffett himself was not much involved in the writing the official parts of the annual report. I was wrong. Buffett’s fingerprints are all over the report including even the notes to the financial statements. He has a particular succinct style of presenting information. No words are wasted. No doubt, his CFO and controller write much of it, but they follow the Buffett format and it seems clear that he edits it.

Over the years I have read a huge amount of negative comments about Buffett. The indisputable fact is however that he is one of the greatest investors and CEOs in history. People would be wise to spend their time learning from him and not bashing him.

A subscriber asked about whether U.S. stocks should be purchased in a U.S. dollar investment account. The answer is yes. Unregistered accounts (taxable accounts) usually offer the ability to set up a U.S. dollar account. The strategy then would be to move some money to that account and then buy the U.S. shares. You will incure a currency conversion fee. But thereafter the money can be left in that U.S. dollar account even if you later sell the stock or dividends are received. This avoids further currency conversion costs. In registered accounts, TD Waterhouse offers the ability to automatically do “wash trades” whereby U.S. stocks are funded from a U.S. dollar money market account and no further currency conversion costs apply. If the U.S. stock is sold the money goes automatically back to teh U.S. money market account. Other discount brokers may require you to call in each time to request the wash trade (as TD used to require) or may not offer this.


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