Opportunities of a Life Time?

The best investments I have made over the years tend to be the ones where the investment case is really simple and obvious, requiring only basic common sense and at best secondary-school arithmetic. In almost every case, the opportunity presented itself in a wider market downturn and the main thing I had to overcome to profit is just the emotion of buying in fear, particularly the fear of a good price turning into an excellent price after my purchase.

Berkshire Hathaway is one such example. I made my first purchase in Nov 2012 for US$85.30 per share (class B) and at a time when the Australian dollar is slightly higher than the US dollar (1 AUD buys 1.04 USD to be precise; I earn my income in AUD so the exchange rate matters to me.). Incidentally, my own purchase took place a month before Berkshire bought back around $1.3 billion at a slightly higher price in Dec 2012. Six years on, BRK.B is my largest single holding with a share price of US$192.10 (after falling from a recent high of US$220) and 1 AUD currently buys 0.70 USD. This is a compounded return of 19.67% per annum, not bad from a no-brainer investment at the time, one in which I did not lose a single night of sleep in 6 years.

It has been a long time between beers, so to speak, but the bear market is once again upon us, and I can sense that fear in me again, the fear of seeing good prices turning into excellent prices.

There are some really obvious opportunities in front of us at this moment.

Berkshire Hathaway’s valuation is again looking like a no-brainer. It is currently trading below the last announced share buy-back price of around US$207 per share, after the Berkshire board removed the 1.2 times book value limit. To make it really obvious, Ajit Jain, the number 3 at Berkshire, has just announced a personal purchase of $20 million worth of shares. For an easily digestible and compelling valuation of Berkshire Hathaway, I refer the reader to Whitney Tilson’s always up-to-date valuation at https://www.tilsonfunds.com/BRK.pdf. Suffice to say an investment case doesn’t come simpler than this.

Over at Platinum Asset Management, Chief Investment Officer Andrew Clifford has been screaming investment opportunities of a life time to anyone who would listen. If, like me, you are a believer in the long-term China and Asia story, a story of investment in education, technology and the unleashing of the Asian entrepreneurial spirit, then it’s hard to look past the attractive valuations currently on offer like Ping An Insurance at 11x earnings, Samsung Electronics at 5.5x earnings, and many others on Platinum’s list. Short-term issues like the trade war will eventually pass — Trump and Xi’s social contract with their constituents will make sure of that — and it’s hard to see the Chinese economy and all those that depends on it not being bigger and better in 10 years’ time.

Sometimes strong decent long-term investments are there in plain sight for all to see, and all it takes is a little courage to act.


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