RSS feedWell, it seems that my PEG analysis has reached a bit of a snag. The absolute valuation model is proving difficult to construct and it’ll be some time before I figure it out exactly. Thus, I’m going to take a bit of a hiatus from it. I apologize to those who were waiting eagerly for a more concrete result. Though, I do hope that at least some of it was instructive.
Moving on to a few other things, I have a little reading assignment for you all. Last Friday, two of my favorite publications released new editions. What are they? The shareholder letters of two of the greatest investors of our lifetimes of course - Warren Buffett and Eddie Lampert.
If you haven’t read Warren Buffett’s shareholder letters, you must. They’re all available online going all the way back to 1977 at the Berkshire Hathaway website. In these letters, Warren Buffett provides great insight into his investing strategy, analysis of Berkshire Hathaway’s business strategy, and general insights into the economy as a whole. This year’s letter doesn’t disappoint with looks into Berkshire’s holdings in PetroChina, American Express, Coca-Cola, and Wells Fargo. It also has a great little section on Warren Buffett’s belief that a company with a strong competitive advantage ought not to require large capital investments to produce outsized returns.
Eddie Lampert, not quite having the same track record as Warren Buffett, offers yet another great perspective into how one merges being an investor with being a business man. It’s clear that he’s on his path to emulating much of Buffett’s success albeit with a slightly more risky approach. While both emphasize capital allocation and cash generation as the two most important aspects of properly managing a business, Buffett has long stuck with the more conservative approach of going after strong businesses trading at value prices. Lampert, on the other hand, seems to be making a habit of going after the turn around. First, with his master stroke in buying K-Mart and eventually using the bankrupt company to take over Sears and, now, with the combined entity itself. Unfortunately, 2007 marked a snag in Lampert’s grand plan with profits decreasing and Sears looking increasingly unable to compete in the current retail world. This, however, makes his shareholder letters all the more interesting and he publishes them a little more regularly than Buffett does his. Catching up won’t take as long as Sears Holdings has only been operating since 2005, but all his letters are archived for easy access as well.
