Value investors typically maintain a long term focus but it is a rare to find anyone who entirely ignores quarterly results. The second quarter was ugly with the Dow Jones Industrial Average falling 10 percent and the S&P 500 falling 11.9 percent. Berkshire Hathaway’s equity portfolio was not immune from the negative sentiment with an estimated decline of 10.6 percent (excluding dividends), which essentially mirrors the fall in the broad market. Read this post for more details.
Earlier this week, Noble Corporation announced that it has entered into an agreement to acquire Frontier Drilling in a cash transaction valued at $2.16 billion. Frontier is a privately held independent drilling company with a fleet of three dynamically positioned drillships, two conventionally moored drillships, one deepwater semisubmersible drilling rig, and one dynamically positioned floating production, storage, and offloading (FPSO) vessel. In addition, Noble has entered into an agreement with Shell that favorably impacts backlog. Read this article for more details.
When Nick Swinmurn initially pitched his idea for an online shoe store, Tony Hsieh thought it sounded like “the poster child of bad Internet ideas.” Intuitively, it seems obvious that customers prefer to try on shoes prior to making a purchase. However, the statistics on the size of the paper mail order catalog business for shoes convinced Mr. Hsieh to give the idea more thought. Delivering Happiness: A Path to Profits, Passion, and Purpose is the story of how Zappos rose from obscurity to achieve a $1.2 billion valuation when Amazon.com acquired the company in 2009. Read this article for a book review.
When Apple unveiled the iPad in late January, many observers speculated that Steve Jobs may be on the verge of delivering a device capable of saving newspapers from an inexorable decline. It is difficult to visit an Apple Store to test the iPad without being impressed by the elegance of the device and the possibilities that exist for delivery of news. The form factor of the iPad makes the experience vastly superior to reading news on a traditional computer. However, the iPad is not salvation for the industry. Read this article for more details.
France was eliminated from the World Cup today after losing to South Africa. This was welcome news in Omaha given Berkshire Hathaway’s $30 million exposure to a French victory in the World Cup. Warren Buffett discussed the unusual bet in an interview with CNBC on March 1. Ajit Jain, who specializes in writing insurance for unusual risks, was credited with underwriting the policy. The purchaser of the policy was not disclosed. Read this article for more details.
U.S. District Judge Martin Feldman overturned the Obama Administration’s six month deepwater drilling moratorium this afternoon citing the “immeasurable effect on the plaintiffs, the local economy, the Gulf region, and the critical present-day aspect of the availability of domestic energy in this country.” Read this article for more details.
The Economic Times of India has reported that Berkshire Hathaway is making a modest entry into the Indian insurance market through a purchase of a corporate agency. Berkshire will set up a wholly owned subsidiary in India which will operate a corporate agency selling auto insurance policies issues by Bajaj Allianz General Insurance. The subsidiary will invest Rs 500 million, or US $10.9 million to set up the necessary infrastructure. Read this article for more information.
Most of the headlines over the past week regarding the Deepwater Horizon disaster have focused on the $20 billion escrow account that BP was forced to set up for victim compensation. However, the far more important development from a public policy perspective is the steady stream of information now coming to light regarding the well design that BP decided to use. The clear weight of the evidence points to human error as the cause of the disaster. Read this article for more details.
Warren Buffett worked in relative obscurity for most of his early career, but his success began to attract significant attention by the 1970s. While Mr. Buffett had not reached celebrity status at that point, dedicated readers of business publications such as The Wall Street Journal should have been familiar with his approach and track record. Modern search engines provide efficient access to news archives so we decided to run a quick search of the Wall Street Journal to see when a reader would have been first exposed to Mr. Buffett’s track record. Read this article for more details.
Value Line Investment Survey is one of the best ways to gain exposure to a large number of companies in an efficient manner. Value Line provides stock screening tools but the strength of the service is in the information packed one page company reports. Read this article for information on how a value investor can leverage Value Line Investment Survey.
Tony Hsieh is known for taking an unconventional approach to management. Nothing proves this point more clearly than his standing offer to pay new hires at Zappos $2,000 on their first day of work if they agree to quit. The logic is that he would rather not have employees working at Zappos who are inclined to accept such a short sighted offer. When Mr. Hsieh sold Zappos to Amazon.com for $1.2 billion last year, he insisted on unconventional terms as well.
We are pleased to announce a special offer for students who wish to purchase The Rational Walk’s Berkshire Hathaway 2010 Briefing Book which was released on February 28. The regular price of the book is $24.95, but students may now purchase the product for only $9.95 representing a sixty percent discount. Read this article for more details.
Last Friday, we presented a profile and analysis of Ensco plc. At that time, the latest fleet status report was dated May 14, 2010 and was nearly a month old. The company provided an updated fleet status report (pdf) today and the details for the Gulf of Mexico fleet are mostly unchanged. Read this article for more details.
On Thursday, June 17, BP CEO Tony Hayward will testify before the House Committee on Energy and Commerce. In preparation for the testimony, the Committee Chairmen sent Mr. Hayward a letter listing a series of alleged procedural lapses that could have contributed to the Deepwater Horizon disaster. The letter is worth reviewing because it raises issues regarding the general safety of deepwater drilling and steps that should be taken prior to lifting the moratorium. Read this article for more details.
Ensco International plc is an offshore contract drilling company that provides services to oil majors and independent oil exploration firms. The company has historically focused on jackup rigs designed for relatively shallow water but has devoted the majority of capital expenditures in recent years to build up a fleet of semisubmersible rigs capable of deepwater operations. Ensco has a fleet of 45 mobile offshore drilling units comprised of four semisubmersibles, 40 jackups, and one barge rig. In addition, the company has one new semisubmersible unit ready for deployment in August and three semisubmersible units scheduled for delivery in 2011 and 2012. Read this article for more details.
Whitney Tilson is convinced that BP is simply too cheap to ignore at current valuations. Given the steady stream of negative headlines due to the massive Deepwater Horizon oil spill, BP shares are quickly approaching a 45 percent discount to the stock price that prevailed during much of April. Mr. Tilson makes it clear that BP shares could certainly fall even further, but he believes that the dividend should be safe. Read this article for more details and to view Whitney Tilson’s comments.
Roger Lowenstein did not succeed in being first to market with his book on the financial crisis. However, it is fair to say that The End of Wall Street represents one of the best portrayals of the events leading up to the subprime meltdown that ultimately triggered the unprecedented collapse in September 2008 and prompted the type of government intervention previously considered unthinkable in America. Mr. Lowenstein’s book is well suited for a reader who is unfamiliar with the details of the crisis and is looking for a concise presentation with the right balance between a careful accounting of the facts and the personalities involved in the crisis. Read this article for a review of the book.
Steve Eisman’s accurate predictions during the subprime mortgage bubble, as profiled in The Big Short, have prompted investors to take notice regarding his recent criticism of the economic model of for-profit universities. Mr. Eisman’s presentation at the Ira Sohn Investment Research Conference focused on the similarities between the subprime bubble that imploded in 2007 and the current popularity of for-profit universities. Read this article for more details.
