Opinion
What a busy weekend! Saturday’s menu included the Berkshire Hathaway annual report, the Kiama sevens, Six Nations and Super Rugby, though maybe in a different order of appearance.
Like many other Roarers who pored through the Oracle of Omaha’s 140-ish page annual letter for tidbits and wisdom, I read it on Sunday before a full day’s worth of rugby catch-up to do on the couch.
We’ve all read about Buffett’s love of Coke and McDonald’s, his penchant for snacking during meetings and that he lives in the same house he bought in 1958 in Nebraska.
Buffett’s down-home tone and affability make most of his appearances and letters feel as if you know the man, which of course they are designed to do. He’s likeable, he’s relatable, he’s fun and you get the sense, real or otherwise, that he’s interested in your success.
You probably don’t know Bill Gates’s address or diet or that of Jeff Bezos (who is looking ripped as heck), but Buffett has this air of familiarity that is as masterful as it is useful. Perhaps Eddie Jones could take a leaf out of his book.
In a flight of fancy, I imagined what Warren would say if he watched the Six Nations with me. What lessons would be transferable and which stocks would represent the Six Nations teams?
It’s easy to have a look at the New York Stock Exchange and draw comparisons between the teams and shares. It’s far more challenging to look at Berkshire Hathaway’s 13F filings and compare them to the teams, but that’s the aim here – comparing Six Nations teams to shares that Buffett and Berkshire are currently invested in.
On a side note, Buffett probably wouldn’t approve of my snacks – no Coke and certainly no McDonald’s. The spread mainly consisted of biltong, cold beer and some chocolate picked up in Italy a few weeks ago.
Enough preamble, fellow stockheads, but beware: none of the following constitutes financial advice; it’s just an attempt at some fun.
This 6N has some similarities to the NYSE in that it’s been choppy. Some winners have stayed winners and some plucky teams have gained good ground.
It’s more interesting when comparing both to look at the long-term picture. I’m sure you can hear Uncle Warren’s voice there. In fact he says in his 2022 report:
“The lesson for investors: The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders”
Just a few winners to work wonders? Or a few wins?
Yes, we are talking about Italy. Which is personally my favourite team to watch. If you had kept an eye on the under-20s Six Nations in 2020, you might have seen Italy beat Wales and lose by a point to Scotland before the competition was forced to conclude due to COVID. Some names from those squads may be familiar – Paolo Garbisi is certainly the biggest name along with Stephen Varney, and of course Captain Michele Lamaro did his stint with the juniors in 2017 and 2018. Ange Capuozzo was in the 2019 side with Garbisi as well. Talk about blooming.
Buffet’s message has been the same for 20 years: invest in multiple pockets and the performance of the winners will outshine the ones that don’t perform. After beating Australia and Wales last year, Italy has been a contender in all of the matches so far in the 6N, running France and Ireland closer than both of those teams would like to remember.
(Photo by Bob Bradford – CameraSport via Getty Images)
They are volatile, exciting and prone to leaps forward as the market underestimates them. But on the whole they’re on a trajectory that’s clearly upward.
A comparison in the BRK portfolio may be Occidental Petroleum, ticker: OXY. Berkshire bought into Occidental Petroleum in 2019 with a $10 billion purchase and has added to its stake through 2022. The 12-month return on OXY is north of 30 per cent, which the Italian fans would probably be happy with as a comparison. Are they 30 per cent more dangerous? More exciting? More likely to win? Very probably.
Most importantly, there is a sense of optimism around this team – hope if you prefer – that they will continue to get better. Let it run.
Profitability is good, growth is good and from a momentum standpoint they have done well. How much more they can do is up to the market – or opposition in this case.
Who’s next to the earnings confessional? Maybe you can guess from this quote:
“One advantage of our publicly-traded segment is that – episodically – it becomes easy to buy pieces of wonderful businesses at wonderful prices. It’s crucial to understand that stocks often trade at truly foolish prices, both high and low. ‘Efficient’ markets exist only in textbooks.”
You may be tempted to think this stock pick is Ireland, but how could it be when Scotland has made some of the sharpest investments recently?
Let’s take a quick look at the financials of Scotland: the Afrikaner Android Duhan ‘Lomu’ van der Merwe, Sione Tuipulotu, WP Nel, Pierre Schoeman, Jack Dempsey, Kyle Steyn and Chris Harris. Dare we add Hamish Watson and Huw Jones? Okay, he counts as Scottish. Would any of the above make the national side of their country of birth? Easy answer on Watson, Harris and perhaps Tuipulotu – probably.
DVD Merwe was part of the Junior Boks set-up, and one feels that a real trick was missed here. Many of you may recall that his brother Akker is a highly underrated former Springbok with less than a handful of caps for the national side (does he wonder whether he should have traded green for blue?). There is a story behind Duhan which one day we’ll get to hear.
What do we have though? They are a team that has increased in value through acquisition, strong leadership and great marketing to both players and the market. In this they are similar to Berkshire – they ignore the rockstars and find solid assets to buy that have potential and then unlock that potential through leveraging their in-house systems and funding. We probably can’t compare Scotland to Berkshire though. Berkshire has never been an underdog and Scotland have been and remain a bit of an underdog.
Scotland has also been more aggressive in the number of purchases than BRK has, and BRK does not spend on marketing like Scotland does. To explain this further: Scotland has ‘invested’ in at least eight top-line players; BRK tends to generally make small investments when they buy shares balanced by big stakes in one or two companies like Apple in recent times.
My pick would be Verisign. They make a quality product, have an aggressive buyback program – pun intended – good marketing and strong company growth that may have reached its peak. There are a lot of parallels.
Ticker here is VRSN with a 70 per cent share price growth since 2019.
That’s two down. Go and read the 2022 report if you haven’t and then let me know how close you think the matches are to the Berkshire portfolio.
Join The Roar rugby editor Christy Doran, former Wallaby Matt Toomua and a cast of regular and special guests as they look at the biggest issues in the game on The Roar Rugby Podcast. If you’re looking for great odds on the next game check out Aussie bookmaker PlayUp. Chances are you’re about to lose. Set a deposit limit.
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