Over two years ago, Warren Buffett mentioned that he owns 1,000,000 shares of J.P. Morgan in his personal account. He expressed his admiration for the CEO Jamie Dimon, but he did not go into much detail explaining why he thought J.P. Morgan was a great investment. If I had to guess his answer, I suspect it would be this—J.P. Morgan continues to mint money even though the headlines about the company are frequently negative and the company had to cut the dividend during the financial crisis. The gap between actual business results and perceived business results exists when it comes to many banks, and J.P. Morgan is no exception.
Even during the worst of the financial crisis, J.P. Morgan remained profitable. It made $3.6 billion in profits in 2008. The issue is that the company was on the hook for paying out $6 billion in dividends to shareholders (based on … Read the rest of this article!
If you have ever purchased anything through Amazon, you may have noticed that the expected date for delivery is often two or three weeks ahead of the time you made your purchase. Just now, I was looking at items that would be purchased on March 17th and would come with an expected delivery date of March 29th. Usually, these items arrive by the 23rd or so.
Have you ever wondered why Amazon does this? If you only give it a passing thought, you might figure that Amazon is trying to take advantage of the underpromise/overdeliver psychology tendency that often causes satisfaction. If they tell you that an item will arrive on the 23rd and it arrives on the 23rd, you will think that the item arrived when expected. If the expected delivery date is March 29th and you receive the good on … Read the rest of this article!
One of the hard parts about studying companies is recognizing how singular transactions can change the risks associated with the business even though the outward appearance remains the same. It is hard recognizing in real time that the General Re acquisition began Berkshire Hathaway’s shift from relying on stock portfolio dividends towards relying on sourced profits from operating companies. It is hard recognizing in real time that Harley Davidson had grown its financing empire to such a point that more money came from the financing on customers’ motorcycles than came from the actual sales of motorcycles.
Obviously, as General Electric shareholders long remember, the company reached a point in which half of its profits came from GE Capital and the other half came from GE Industrial. Even though most analysts consider the breadth of GE’s financial operations to be a problem, my opinion is that there is nothing wrong with … Read the rest of this article!
Usually, when it comes to stocks with high growth rates, I don’t get to show my full appreciation for the business because the P/E ratio is something obscene (thus obliterating the margin of safety principle and deterring investment) so it sounds like I’m against the company even if I am impressed by its story, profit margins, and future. Facebook’s P/E ratio is 73, and you know what I think about that, but today I’d like to talk about the company’s business developments.
The long-term viability of Facebook is something that I’ve put in my “too hard” pile because I can’t figure out its moat. On one hand, I study the data that shows slight declines in usage among teens and people in their early 20s. About three years ago, Facebook piqued with the young crowd in which 98% of the 18-24 demographic had an active Facebook account. Now, that figure … Read the rest of this article!