2010 For the year 2010 the average annual return for our taxable accounts was a little less than 22%. An average of the non-taxable accounts was up 30%. These results compare to the S&P was up 16%, and the average hedge fund that was up 10% according to the” Wall Street Journal” .The Journal also pointed out that the average managed mutual fund was up by 19% in 2010. Which makes us wonder why “Sophisticated Investors” are so eager to pay the obscene fees charged by hedge funds?
Mother of All Quarters "While all of the above numbers have question marks attached, some things would appear obvious. 2010 will be a strong year for Berkshire, and it could be a record year. Previously, the best year was 2007, with $13.2 billion net. Berkshire has a good chance of a 60% gain over last year’s earnings.
Latin America Going forward, it is our view that selective stock picking will have an increasingly important role for managers who want to allocate in Latin America. In other words, we do not believe the region’s stock market indexes will perform as well in the next ten years as they did in the last ten.
How to Pick a Manager “Most investors take comfort from calm, steadily rising markets; roiling markets can drive investor panic. But these conventional reactions are inverted. When all feels calm and prices surge, the markets may feel safe; but, in fact, they are dangerous because few investors are focusing on risk. When one feels in the pit of one's stomach the fear that a companies plunging market prices, risk-taking becomes considerably less risky, because risk is often priced into an asset's lower market valuation. Investment success requires standing apart from the frenzy – the short-term, relative performance game played by most investors”
Seth Klarman
St. Joe Company From his recent comments and action, it appears the Berkowitz is more interested in the potential for development around the new Panama City Airport than in the resort property (This may in part explain the recent changes to the board of directors). In addition Berkowitz has indicated that he will use St. Joe as a vehicle for purchasing assets that can not be purcahsed directly by Fairhomne Fund. I take this to mean such things as income producing real estate other leveraged income producing assets and perhaps even derivatives.
Berkshires's 2010 Look-through Earnings "Attached is a table of Berkshire’s look-through earnings for 2010. The total was $1,680 per “A” share for 2010 that is up from $1,130 in 2009, or about 49%. Net after tax for 2010 was $7,928 per share so if we add in the look-through portion it would add to $9,607 and a PE of 11.5 as June 15."
Client Letter July - August 2011
More than one way to Make a Buck Yet, Jeremy Grantham says that commodities have entered a “new normal” and if he is correct, any successful investment program will need an effective way to hedge the rise in commodity prices. With Fortescue, it seems that Leucadia does indeed own a successful commodity hedge.
Nasty Month For the month of August, the S&P 500 Average was down 5.7%, and the NASDAQ was down 6.4%. Our biggest position Berkshire Hathaway, managed to reverse its trend for the first half and beat the S&P by 4.1% (-1.6%compared to -5.7%). Let’s hope this is an omen and portends a better 2nd half for our portfolios. Our Best position for August was St Joe Company, which managed a gain of 4.4%.
Client Letter October - November 2011
Behavioral Market Cycles I have written before about secular (long cycle) bear and bull markets in stock prices. These cycles are not caused by celestial phenomenon, Kondratieff Waves, or other mysteries, but are the result of cumulative impact of emotion on investor behavior, the decay of investor memory, and the power of mass hysteria. The chart below gives a clear picture of those cycles since the beginning of the twentieth century.