Rethinking Apple

Between 2003 and 2010, Blackberry saw its profits climb from $0.10 per share to $8.28 per share. The stock, which traded around $10 in 2003, hit a high of $148 in the summer of 2008. In a five-year time period, Blackberry was able to turn every dollar into $14.80. It only required a bit over $67,000 in 2003 to become a Blackberry (then, known as Research in Motion) millionaire five years later.

Today, Blackberry trades around $10 per share. It is as if the past twelve years never happened. The company paid no dividend. And, worst of all, you saw a mini-fortune come and go before your very eyes. This year, Blackberry is expected to lose about five cents per share for a company-wide loss of $26 million this year. That’s actually a significant improvement from the $700 million loss Blackberry experienced in 2013. Both figures are far cries from the $3.4 billion in profit that Blackberry made over the course of 2010.

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Warren Buffett Buys Precision Castparts

When Warren Buffett makes an acquisition on behalf of Berkshire Hathaway, it immediately triggers a hindsight bias reaction that makes you think–oh yes, it was so obvious, how did I not see that coming? The latest news report, covered by the Wall Street Journal, indicates that Warren Buffett is expected to complete the purchase of Precision Castparts for somewhere in the neighborhood of $37 billion.

Some of the commentary about the deal conveyed befuddlement as to why Buffett would be interested in a stock that fell from $275 per share in 2014 to $190 in 2015, and subsequently indicated that Buffett is paying too much by valuing the company in the range of $230 per share. As you can already guess, I regard that commentary as typically short-sighted and ignorant of Precision Castparts’ unusually strong balance sheet and unusually strong earnings per share growth for an industrial.

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