Apr 232018
 

I am quoted in the Washington Post on the 10-Year Treasury Note.

“The 10-year is potential competition for stocks,” said David Kass, a professor of finance at the University of Maryland.
 
“The 10-year is very visible,” Kass said. ”Financial markets tend to focus on the 10-year rate as a form of long-term interest rates.” 

 

 Posted by at 5:17 pm
Apr 152018
 

A very interesting article in today’s Washington Post discusses the issue of stock buybacks by corporations.

Stock buybacks along with cash dividends enable companies to return capital to shareholders.  Stock buybacks are a tax efficient means of doing so.  Whereas cash dividends are taxable to shareholders, stock buybacks are not (unless shares are sold with a capital gain).  Since stock buybacks reduce the supply of outstanding shares, they should increase the price of these shares over time.  However, Warren Buffett has stated that a company should repurchase its own shares only at prices below its intrinsic value.  Specifically, Buffett will repurchase shares of Berkshire Hathaway at prices below 1.2 times book value.  At Berkshire’s closing price of $295,891 per class A share on April 13, it traded at 1.4 times its book value of $211,750 as of December 31, 2017.  Buffett considers Berkshire’s intrinsic value to exceed 1.2 times book value and is allowing for a “margin of safety”.

Many companies buy back their shares on a regular basis.  To the extent that these shares are being purchased at prices above their intrinsic value, Buffett would conclude that shareholder value is being destroyed.

Intrinsic value for a specific company can be estimated by performing a discounted cash flow analysis based on projected future free cash flows and an appropriate discount rate.

 

(Note:  This blog post has been published by Investing.com.)

 

 Posted by at 11:15 am
Apr 132018
 

CNBC’S “WARREN BUFFETT: INVESTOR, TEACHER, ICON” 

This CNBC original documentary takes viewers inside the story of Warren Buffett’s extraordinary success.  With a blend of wisdom and common sense, Buffett is more than just one of the most successful investors in American history.  He’s also a teacher who has had a tremendous influence on people around the world.  Correspondent Becky Quick profiles Buffett and some of the many people whose lives have been influenced, and even changed, by his investment advice and life lessons. Some are famous, and others unknown – everyday folks, some running small ventures, who feel a connection to one of the wealthiest people on the planet.  Quick meets a young man who attributes his recovery from an opioid addiction in part to Buffett’s principles of ethics and integrity, and profiles NFL superstar Ndamukong Suh, who has been mentored by Buffett as he pursues business interests he hopes will carry him beyond his pro football career.  CNBC cameras also follow Buffett to Washington D.C., as he visits the neighborhood where he lived as a teenager and got his entrepreneurial start delivering newspapers in the 1940’s.

 Posted by at 10:33 am
Apr 122018
 

I am quoted in the May 2018 issue of Kiplinger’s Personal Finance – “What Would Warren Do?”

“Still, at its current price, Teva would not be the bargain for you that it was for Buffett. Teva’s average price was roughly $14.50 a share during the fourth quarter, says David Kass, University of Maryland finance professor and longtime Buffett watcher. If you bought now, you’d pay more than 30% more than Buffett did.” 

 

 Posted by at 8:47 pm