Southwest Airlines: Warren Buffett’s Rumored Buyout

Recently, there have been rumors that Warren Buffett is considering the outright purchase of Southwest Airlines after Buffett indicated during a CNBC interview that he would not rule out the prospect of owning an entire airline and online rumors suggested that he was in communication with Southwest’s Board of Directors about purchasing Southwest outright for $75 per share.

I will say this about the speculation: If Buffett is contemplating purchasing an airline, it will almost certainly be Southwest. As you may know, Southwest is unique in that: (1) it has a strong cash-positive balance sheet with $3.6 billion in cash and $3.3 billion in debt; (2) it has no preferred stock outstanding or any pension that would require perpetual redress; and (3) Southwest has not had an unprofitable year aside from the 9/11 aftermath, and even managed to earn profits of $140 million to earn $140 million in profits in … Read the rest of this article!

Following Ben Graham

In Security Analysis, Benjamin Graham would distinguish between companies that had recently fallen in price, speaking in terms of “imaginary value disappearing” and “real value becoming unrecognized.” A successful value investor must be able to distinguish instances of the latter from the former.

In my most recent Patreon post, I focus on a company that is currently trading at 8.8x earnings and is primed for a 51% price increase upon a modest return to favor in Mr. Market’s eyes. To become a subscriber, please click here.

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Jesus, John Templeton, and Confucius On Charitable Giving

Although John Templeton, the famous mutual fund pioneer, managed to create a $6+ billion fortune over the course of his lifetime, he never had too many periods in his adult life where he refused to “give until it hurts.” Templeton developed the personal philosophy that giving to others ought to be obligatory and enjoyable, and often argued that intelligent men should have no trouble being simultaneously generous while also getting a little something for themselves.

This is a strong contrast to the Confucian school of thought on charity—namely, that we have a series of obligations that flow outward. The general argument of Confucius is this: our first responsibility is not to be a charitable case ourselves, and once we have our personal matters settled, our obligations flow outward: you take care of your spouse, then kids, then parents, then extended family and closest friends, then friends, then acquaintances, then your … Read the rest of this article!