Calculating investment returns from growth stocks - returns from dividends and share buybacks, returns from retained earnings (reinvestment by the company) and returns from organic growth.

The calculation in the short run is not that hard to do.

1.  First you have to know where the money is going.

• Is WMT expanding in Mexico or is WMT expanding somewhere in Europe where it has no competitive advantages. 
• You can look at the simple economics with and without infrastructure costs and you see the returns if they have to build the infrastructure are about 7% to 8% which is below their cost of capital (Kcost). 
• If they can add stores to an existing infrastructure (stores near existing supply depots and other WMT stores), then the returns are more like 17% to 20%.
• But you ought to know enough about the economics of growth stocks, so you know those numbers. 

2.  You know what the reinvestment return is. 

• If the return is 20% after tax and their cost is 10%, what each dollar they reinvest worth?   $2 because they are earning 2x the cost of capital.  
• So what you are going to do is take that reinvestment return—that 5% that is reinvested and multiply it by the difference between the capital return and cost of capital.
• If they are earning 7% and Kcost is 10%, they are destroying at the rate of 3%.

3.  Is reinvesting in cash a good idea—no.

• A crappy return. 
• The longer they hold that cash the lower the return is in terms of reinvestment.   
• You are losing the return on that cash. 

So you look at the earnings return, what you get in cash, the fraction that is distributed either through buy backs and dividends and the fraction that is reinvestment and the value creation characteristics of the reinvestment.    

 

4.  Then certain companies get returns essentially without much investment--which is that if you own a franchise, even without conscious expansion, that franchise will sometimes grow.   The incremental investment involved is negligible. 

• When WMT sees an increase in SSS, it typically doesn’t have to build any new stores. 
• Especially if it is a price increase, its doesn’t have to add new people or add SKUs.
• What is the capital investment required for that increase in sales?  Only inventory.
• If their inventory turns are 8 times, then for every $1 of sales, they make about 7.5 cents in profit.
• That organic growth generates returns of about 16%. 
• They are higher than that in reinvestment because typically they will refinance two-thirds of the inventory investment with debt.
• So you will be getting returns of 150% on the capital you invest to support that organic growth. 

Why don’t returns get bid away by entrants whose store economics have improved?  That is where the existence of a franchise is crucial. If there were no barriers to entry, then gains would be get competed away by additional competitors.  So it is only growth behind those barriers that creates value.  

 

5.   You want to look next—you have your cash return, your investment return and then the return from organic growth and compare that to the return of the market to get a feel for your margin of safety is in terms of returns–then you want to see what will change that picture in a sustainable way.

 

 

Recap: 
Verify the existence of a franchise

Cash earnings return is 1/P/E.

Identify Cash distribution in terms of dividends and buybacks

Identify organic (low investment growth)

Identify investment return-multiple a percent of retained earnings

Compare to the market representing D/P & growth rate.

Identify options positive and negative.


Notes from video lecture by Prof Bruce Greenwald
http://csinvesting.org/wp-content/uploads/2012/06/greenwald-vi-process-foundation_final.pdf

Growth creates value only when the company has a competitive advantage. If there were no barriers to entry, then gains would be get competed away by additional competitors.

Why don’t returns get bid away by entrants whose store economics have improved? 

• That is where the existence of a franchise is crucial.
• If there were no barriers to entry, then gains would be get competed away by additional competitors. 
• So it is only growth behind those barriers that creates value.  

When you look at growth, this is what you look at: 
1.  First is verify the franchise.  If you don’t have a franchise, then growth is worth $0.

• Look at historical returns, share stability. 
• Look for sustainable competitive advantages. 

2.  Then calculate a return. 

• You don’t look at a P/E ratio, you look at an earnings ratio.
• If you are paying 14x earnings, it is a 7% if that P/E ratio stays the same and the earnings stay the same. You pay 11 times, it is 9%. 8 times, then 12.5%.  

3.   Out of that return there are two things that can happen to you—the first is that give it to you in your hot little hand in cash. What are you getting in cash?

• If it is a 8 times multiple, it is a 12.5% return.   
• The dividend is 2.5% and you are buying back 5% in stock per year, you are getting 7.5% in your hot little hand.
• If dividends and buyback policies are stable, then what are you getting.
• There are not stable then you have to estimate what they will be over time.  
• But you want to know what fraction of the earnings get distributed.
• So if 11 times multiple and they historically distribute a third of the earnings, 1/11 is a 9% and 1/3 of that is a 3% distribution. 

4.  What happens to the other 6%?  

• That gets reinvested—there the critical thing about the value is how effective do they reinvest that money?
• So in growth stocks, capital allocation is critical.
• Because (mgt.) is typically keeping most of your money and you care about how effectively they are investing it.      

5.  You want to look next—you have your cash return (3), your investment return (4) and then the return from organic growth.

 

6.  Compare that to the return of the market to get a feel for your margin of safety is in terms of returns–then you want to see what will change that picture in a sustainable way.  

 

 

Recap:  When you are considering buying growth stocks:

 

1.  Verify the existence of a franchise

2.  Earnings return is 1/P/E.

3.  Identify cash distribution in terms of dividends and buybacks

4.  Identify investment return of retained earnings

5.  Identify organic (low investment growth)

6.  Compare to the market (representing D/P & growth rate) - is this positive or negative?

 

 

 

Explanatory notes:

 

Dividends, buybacks & reinvestment of retained earnings:  So you look at the earnings return, what you get in cash, the fraction that is distributed either through buy backs and dividends and the fraction that is reinvestment and the value creation characteristics of the reinvestment.     

Organic growth:  Then certain companies get returns essentially without much investment--which is that if you own a franchise, even without conscious expansion, that franchise will sometimes grow.   The incremental investment involved is negligible.

 

 

 

Notes from video lecture by Prof Bruce Greenwald
http://csinvesting.org/wp-content/uploads/2012/06/greenwald-vi-process-foundation_final.pdf

Value Investing in Practice

Value Investing in Practice Long-term - Fundamental (look at underlying business) (1) Lookintelligentlyforvalueopportunities(LowP/E,M/B) o Mr. Market is not crazy about everything o This is the first step not to be confused with Value Investing (2) Knowwhatyouknow   Not all value is measurable   Not all value is measurable by YOU (Circle of Competence) (3) Youdon'thavetoswing PATIENCE

Value Investing: the Approach Search (Look Systemically for under valuation) Value Review Manage Risk

  Value implies concentration not diversification. (Look for a Margin of Safety)   At worst Buy the Market) There are three parts to being effective:

http://csinvesting.org/wp-content/uploads/2012/06/greenwald-vi-process-foundation_final.pdf

Greenwald Lecture at Gabelli Value Investing Conference

Published on 16 Jun 2014

Professor Bruce Greenwald lecture at Gabelli Value Investing Conference at Princess Gate, London in 2005. He looks at the art of value investing and investment processes.

Understanding Value Investing (video)

Professor George Athanassakos, Professor of Finance and the Ben Graham Chair in Value Investing at Ivey Business School, which he joined in July 2004. He is also the Founder & Director of The Ben Graham Centre for Value Investing.

Speculation

http://www.slideshare.net/thadeshvar/basics-of-wealth-mgt

5 Reasons Why You Should Invest In Malaysian REITs Now

 contributor Finance Oct. 3, 2014

Malaysian property investments have become less attractive these days due to the skyrocketing prices and also the various cooling measures implemented by the authorities. This has set many people from the middle and lower income groups back from buying their first home or investing in property.
However, other than investing in physical properties, Malaysians can consider investing in Malaysian Real Estate Investment Trusts (MREITs). Unlike business trusts, Malaysian REITs are trusts which invest in properties only. They are traded on stock exchanges and are eligible for special tax exemption.

Here are five reasons why you should invest in REITs in Malaysia:

1. Small starting capital

Most property investments require a significant amount of money to start. Even with 90% loan, a RM500,000 property would require at least RM50,000 down payment plus extra for legal fees and stamp duties. For MREITs, you can start investing with as little as RM140 (100 shares of Pavilion REIT at RM1.40).

2. Get exposure to the top shopping malls and commercial buildings

With MREITs, you will be able to buy into the top shopping malls in Malaysia. Malls such as Pavilion (Pavilion REIT), MidValley Megamall (IGB REIT), Sunway Pyramid (Sunway REIT) are all available on Bursa Malaysia. As an individual property investor, you would have little chance of owning such popular shopping malls, other than certain strata title types like Berjaya Times Square. With MREITs, your dream of owning a part of these popular commercial properties can be a reality.

3. Earn regular dividends

Like property rentals, MREITs also generate income in the form of dividends. Since MREITs are usually diversified, vacancy rates are generally low so they are a more stable form of income as compared to physical properties which could have vacancy periods.
The frequency of dividends payout for REITs is quarterly or bi-annually, making them an ideal investment for retirement income. To make it even more attractive, the dividend payout for REITs tend to be pretty high as they need to pay out at least 90% of their net income to be eligible for tax treatment.

4. Ease of buying and selling MREITs

As MREITs are exchange traded, buying and selling them is generally easier compared to physical properties. MREITs are bought and sold like normal stocks so the prices are transparent and the transactions take place instantly. For property transactions, it is normal to take between six to 12 months at least to find the right buyer at the right price and go through the sales and purchase agreement (SPA) process.

5. Minimal effort required

One of the key advantages of MREITs is that there is minimal effort required to maintain these investments. MREITs hire professional management teams to manage the tenants and upkeep of the properties, leaving you to enjoy the fruits of your labour. Anyone familiar with property investments will know that there is in fact a lot of work involved in managing your own properties.
At current market condition, dividend yields of most MREITs are pretty attractive compared to other investments, ranging from 5% to 6%. Given the stability of the dividend income and quality of the properties, MREITs are generally good investments to consider.
About the Author
Calvin Yeo, CFA, CFP is the Managing Director of DrWealth. Dr Wealth is ASEAN’s leading site on personal finance. We offer users high quality articles and research on all areas of Personal Finance including Retirement Planning, Investments, Savings, Insurance etc. In addition, we provide effective and simple to use mobile and desktop software tools that help you track, model and plan all your finances.


http://www.businessinsider.my/5-reasons-why-you-should-invest-in-malaysian-reits-now/#.VC6xE0lXjIU

GDP accurate measure of economic growth

October 3, 2014       

KUALA LUMPUR: There is no denying that consistent economic growth reflected in the country’s Gross Domestic Product (GDP) has increased wages and raised the quality of Malaysians from all walks of life.
Consumers now have more products and services to choose from and higher disposable income, thanks largely to well-managed economic policies that keep creating thousands of jobs for the people.
Without doubt, GDP is an accurate barometer of how well-off we are.
But, detractors who suggest otherwise simply haven’t made the effort to understand the basics of economics.
It’s high time the people started looking at the facts and having their own opinions based on intelligent logic, rather than jumping on the bandwagon of the loudest critics.
GDP figures reflect how our economy performed in the past quarter or year.
Unfortunately, while the majority are able to grasp that positive GDP growth is good for all Malaysians, there is a vocal minority who fail to see this or simply refuse to do so.
Between 2011 and 2013, the Malaysian economy recorded a GDP growth of 5.2 per cent per annum.
For the first half of 2014, GDP was 6.3 per cent, driven primarily by growth of the services, manufacturing, construction and agriculture sectors.

So what do these numbers actually mean?
To figure this out, it’s crucial to understand what GDP is all about.
Malaysia, like most other countries in the world, measures GDP using three methods — expenditure, type of economic activity and income.
With the expenditure method, it is calculated by adding total consumption, investment, government spending and net exports.
Net exports are a measure of the output of goods and services assembled and produced in Malaysia and sold abroad minus the imports.
Consumption is what people spend their money on – goods such as your food, the petrol for your car and the clothes you wear, and services such as hair dressing, visits to the doctor, making calls, sending WhatsApp using smartphones and going to the cinema.
An economy with a healthy level of consumption is one where businesses are thriving.
Thriving businesses creates jobs and there are generally low levels of unemployment.
It also means that money is circulating in the economy which provides for greater revenue as well as higher personal and corporate income.
Investment is linked to job creation – as our productive capacity increases with more investment and job opportunities abound, made more glaring by foreigners seeking their fortunes in Malaysia.
Moreover, money is also coming from foreign direct investments from renowned investors such as Intel, Samsung, Honda and others.
Most of the investments are in the oil and gas sector, financial services as well as the wholesale and retail sectors.
Some of Malaysia’s investment strategies are found within the parameters of the Economic Transformation Programme which aims to make Malaysia a high income economy by the year 2020.
Government spending is evident in more and better infrastructure – from public transport, to healthcare including hospitals, 1Malaysia clinics and education services and schools.
Besides this, it comprises stimulus packages to encourage businesses, and general improvements for civil society in the form of sports, cultural and artistic facilities.
It also includes innovation in government delivery services such as the Urban Transformation Centre – which can be found in Pudu and Sentul in Kuala Lumpur, Kuantan, Melaka, Ipoh and Alor Setar – and the Rural Transformation Centre such as the ones in Gopeng and Kota Bharu.
For the detractors, their main gripe is that they still don’t have enough money for all that their hearts desire. Figures, however, show that Malaysian wages have increased, with the wages to GDP ratio improving from 29.3 per cent in 2008 to 33.6 per cent in 2013.
Wages refer to what employees earn in the course of their job, in cash or in kind, such as salaries and wages, gratuity, bonus, subsidies and benefits.
GDP, in relation to wages, is used as a measure of productivity. Therefore, an increasing ratio of wages to GDP shows that people are now paid more for their productivity than they were in 2008.
In 2012, based on the Household Income Survey by the Department of Statistics, the average household income was RM5,000 per month while the median income was RM3,626 per month.
Two years on, based on the preliminary data, the average household income has risen to RM5,919 while the median income is RM4,258, representing an annual median income growth of 8.2 per cent. A household here is referred to 4.2 individuals.
There are those who claim that the rise in cost of living outstrips wage increases. This is a grossly uninformed opinion.
For the first seven months of 2014, the Consumer Price Index, which monitors the price of perishable and non-perishable goods, averaged 3.3 per cent per annum. This means that the rate of growth in household income exceeded the increase in the price of goods.
Ultimately, this has resulted in Malaysians benefitting from an improvement in living standards, as evident from changing consumer choices and consumption behaviour patterns.
The Malaysian consumer now not only has a higher purchasing power, but also a greater power of choice.
A quick look at the price comparison website http://www.1pengguna.com/ verifies this.
Looking at the price of red grapes with seeds in the Lembah Pantai area, the price on Sept 22, 2014 for a kilogramme of these grapes was RM17.90 in the Village Grocer in Bangsar Village, RM12 at the Jalan Telawi Wet Market, RM9.99 at TMC and RM8.49 in Aeon Big in Bangsar South.
So even when it comes to buying grapes, Malaysians now have a plethora of choices of where they can buy it from and how much it will cost. We certainly didn’t have this same variety of choice a decade ago.
Undoubtedly, economic expansion via the GDP is an accurate measure of the nation’s economic growth underpinned by pro-growth policies that takes into account the welfare of the people.
For sceptics to say otherwise is irresponsible and smacks of attempts to nullify the economic success achieved thus far by Malaysia despite the immense challenges it faces brought on by challenges in regional and global economies. – BERNAMA

PIMCO’s Flagship Fund Sees Its 17th Straight Monthly Outflow, And It Was Massive

PIMCO’s flagship Total Return Fund saw a breath taking $23.5 billion in net outflows in September.
“Of note, the largest daily outflow occurred on the day of Bill Gross’s resignation from the firm, while outflows on the two following days were considerably smaller,” PIMCO said in a press release.
That was the 17th straight month of net outflows for a cumulative total amount of about $92 billion.
All of this is part of the legacy that CIO Bill Gross leaves behind as he heads to Janus Capital.
PIMCO has attracted a lot of attention in recent months, largely because of the unexpected departure of CEO Mohamed El-Erian and revelations of Gross’s unorthodox management style.
Despite the outflows, PIMCO’s fund continues to be massive with roughly $200 billion in assets under management.


Sam Ro Finance Oct. 2, 2014, 4:30 AM
http://www.businessinsider.my/pimco-total-return-fund-outflows-sept-2014-10/#.VC6t90lXjIU

The Bill Gross Blunder That Led To His Demise

 

Joe Weisenthal Finance Oct. 2, 2014, 11:39 PM

 

Bill Gross

In the wake of Bill Gross’ shock departure, Paul Krugman has been hammering on an important point, which is that PIMCO really started hitting the rocks when Bill Gross made a wrong call about interest rates in 2011.
Paul Krugman has written four posts on the topic (here, here, here, and here).
So what’s it all about?
Well here’s the quick and dirty version.
In early 2011, Bill Gross completely exited the Treasury market on the premise that interest rates were going to surge and hit bonds.
The reason he thought interest rates were going to surge was that the Fed was ending QE2 in the summer of 2011. In a note written to investors in March, 2011 he asked:  Who will buy Treasuries when the Fed doesn’t?
The thinking was that the Federal government was running gigantic, trillion-dollar deficits at the time, and that nobody wanted all that US debt, and it was only the Fed buying debt, holding our interest rates down.
That sounded compelling, but actually was pretty flimsy, and even at the time people were criticizing the thinking.
Krugman was criticizing Gross at the time, arguing that interest rates weren’t a function of how much debt the US was offering, but rather about US growth and inflation prospects. And since at the time, we were digging ourselves out of a gigantic economic hole, there was no chance of a pickup in inflation.
So Gross was using a flawed economic model (as were the deficit hawks who insisted that the US had to get its spending down to avoid a Greece-like bond spiral).
When QE2 ended, interest rates didn’t rise… they actually fell, perhaps because the markets interpreted the end of Fed easing as a reason to bet against rising inflation or growth.
This was THE core economic debate of the post-crisis years. The economists like Krugman, who relied on traditional models, correctly surmised that interest rates would not surge and that the debt would be a problem.
Folks like Bill Gross (and Republicans politicians) thought the Fed was distorting the market, and keeping interest rates from surging, and that turned out to be wrong.
And that lead to a period of underperformance for PIMCO, and the start of the turmoil that saw significant outflows, and ultimately the departure of Mohamed El-Erian and then Gross.
These debates mostly aren’t talked about now, but as stated above, this was really the whole story back in the day. And it ended up costing Gross his role in the company he created.

http://www.businessinsider.my/this-was-the-bill-gross-blunder-that-led-to-his-downfall-2014-10/#.VC6t0klXjIU

Legendary Warren Buffett shares his simple investing secrets.

CNBC Excerpts: Legendary Investor Warren Buffett Speaks with CNBC's "Squawk Box" Today

 

October 2nd
WHERE: CNBC's "Squawk Box"

Following are excerpts from the unofficial transcript of a CNBC interview with Billionaire investor Warren Buffett today on CNBC's "Squawk Box." Video from the interview is available on CNBC.com.


BUFFETT ON BERKSHIRE HATHAWAY BUY
I DO HAVE SOME GOOD NEWS AND IT INVOLVES LARRY. YESTERDAY WE SIGNED AN AGREEMENT, BERKSHIRE HATHAWAY SIGNED AN AGREEMENT TO BUY VAN TUYL AUTO WHICH IS OWNED AND RUN BY LARRY AND WE HAVE KNOWN EACH OTHER FOR SOME TIME. LARRY HAS 78 DEALERSHIPS, VOLUME OF ABOUT 9 BILLION.

BUFFETT ON VAN TUYL DEAL
SIX MONTHS OR THEREABOUTS, LARRY CAME BY AGAIN. HE'D BEEN TO OUR ANNUAL MEETINGS AND HE KNEW HE WANTED TO DO BUSINESS WITH BERKSHIRE. AND THIS IS JUST A VERY, VERY GOOD OPERATION. THIS PARTNERSHIP APPROACH THAT HE HAS WORKED EXTRAORDINARILY WELL. HE'S JUST KEPT ADDING DEALERSHIPS OVER THE YEARS. THERE'S AN INSURANCE COMPANY INVOLVED, THERE'S REAL ESTATE INVOLVED. AND HE WANTED TO BE SURE THAT VAN TUYL ENDED UP IN A PERMANENT HOME. SO WE WORKED OUT A DEAL VERY QUICKLY.

BUFFETT ON BILL GROSS
CERTAINLY WHAT I KNOW ABOUT HIS RECORD HAS BEEN TERRIFIC AND IT IS NOT EASY TO RUN, YOU KNOW, HUNDREDS OF BILLIONS OR MAYBE TRILLIONS OF DOLLARS. THAT IS A REAL TASK. SO TO HAVE A GOOD RECORD – AND IT MAY HAVE GOTTEN MORE DIFFICULT AS THE NUMBERS GOT LARGER, I DON'T KNOW. CERTAINLY THAT IS TRUE IN EQUITIES. THERE IS NO QUESTION ABOUT THAT, BEING THE SITUATION IN EQUITIES. BUT HIS RECORD HAD TO BE – HE DIDN'T ATTRACT THAT MONEY JUST ON HIS PERSONALITY.

BUFFETT ON BOND MARKET
STEVE LIESMAN: WHAT DO YOU SEE WHEN YOU LOOK AT THE BOND MARKET TODAY? THE U.S. TREASURY AT 240?
WARREN BUFFETT: WELL I DON'T START SALIVATING, I'LL PUT IT THAT WAY. NO, I MEAN, YOU KNOW YOU ARE GOING TO DO BETTER THAN 240 IF YOU OWN EQUITIES OVER A LONG PERIOD OF TIME. YOU KNOW, AND THEN SO, IF YOU TALK ABOUT 240 FOR TEN YEARS, YOU KNOW, I WOULD JUST LOVE TO TAKE A BET ON EQUITIES.

BUFFETT ON DEMAND FOR CARS
CARS AREN'T GOING LIKE THAT. DEALERSHIPS MAYBE. THAT MEANS EVERY DEALERSHIP IS GOING TO SELL MORE CARS, ON AVERAGE. SO THE PATTERN HAS CHANGED, BUT THE FUNDAMENTAL DEMAND FOR CARS IS NOT GOING DOWN. THE AVERAGE DEALERSHIP WILL DO A LOT MORE BUSINESS NOW THAN IT DID 30 OR 40 YEARS AGO IN TERMS OF UNITS.

BUFFETT ON STOCKS
WE ACTUALLY BOUGHT A FEW STOCKS YESTERDAY, BUT WE BOUGHT THE BUSINESS YESTERDAY, TOO. AND IF YOU TOLD ME THE MARKET WAS GOING TO GO DOWN 500 POINTS NEXT WEEK, I WOULD HAVE BOUGHT THOSE SAME BUSINESSES AND STOCKS YESTERDAY. #####I DON' KNOW HOW TO TELL WHAT THE MARKET IS GOING TO DO, I DO KNOW HOW TO PICK OUT REASONABLE BUSINESSES TO OWN OVER A LONG PERIOD OF TIME. AND A LOT OF PEOPLE DO. #####

BUFFETT ON TESCO
BECKY QUICK: ALTHOUGH, THERE ARE TIMES WHEN THE BUSINESS IS NOT WHAT YOU THINK IT IS, LIKE A TESCO.
BUFFETT: WELL, IF YOU MAKE A MISTAKE –
QUICK: TALKING ABOUT GROCERIES REMINDS ME OF TESCO, THOUGH.
BUFFETT: WELL, YEAH, TESCO WE DEFINITELY MADE A MISTAKE – I MADE A MISTAKE ON THAT ONE. IT WASN'T ANYONE ELSE WHO MADE IT. YEAH, THAT WAS A HUGE MISTAKE BY ME. BUT, I'M GOING TO MAKE MISTAKES. #####BUT I'M NOT GOING TO MAKE MISTAKES BECAUSE I BUY BUSINESSES I LIKE AS THEY GO DOWN IN PRICE.##### I'M JUST GOING TO BE WRONG SOMETIMES ON THE FACTS. BUT THE IDEA OF BUYING A STOCK BECAUSE IT HAS GONE UP, TO ME IS JUST TOTALLY –

BUFFETT ON COCA-COLA PAY
THE NEW PLAN MAKES GREAT, GREAT SENSE. THEY'RE NOT REDUCING THE AMOUNT THEY PAY. I MEAN, A LOT OF PEOPLE WILL GET CASH INSTEAD OF STOCK. THEY RE-EXAMINED THE COST OF THE COMPANY IN TERMS OF GIVING UP SHARES. AND WHICH PEOPLE WOULD BE MOTIVATED BY SHARES AND WHICH ONES WOULDN'T. AND THEY CHANGED THE MIX TO PERFORMANCE SHARES.

BUFFETT ON AMERICAN BUSINESSES
ANYBODY WHO OWNED A CROSS SECTION OF AMERICAN BUSINESS OVER THE LAST 10 YEARS, 20 YEARS, 30 YEARS, 40 YEARS, 50 YEARS, 60 YEARS, HAS DONE FINE. NOW, IF THEY THINK THEY CAN DANCE IN AND OUT, YOU KNOW, AND BUY AND SELL STOCKS, I MEAN, THEY OUGHT TO HEAD FOR LAS VEGAS. I MEAN, THEY CAN'T DO THAT. BUT WHAT THEY CAN DO, IS DETERMINE THAT THERE ARE A NUMBER OF SOLID AMERICAN BUSINESSES, A GREAT NUMBER OF THEM, AND IF YOU OWN A CROSS SECTION OF THEM, AND PARTICULARLY IF YOU BUY THEM OVER TIME, YOU BASICALLY CAN'T LOSE.

BUFFETT ON BURGER KING AND TAX INVERSION
THERE WAS ALL THIS MATERIAL WRITTEN ABOUT HOW TAX MOTIVATED THIS PURCHASE MIGHT BE. ALL KINDS OF COMMENT. I DID NOT READ ONE ARTICLE ANY PLACE. NEVER. WHERE ANYBODY LOOKED UP AND SAW WHAT BURGER KING WAS PAYING IN TAXES. HOW MUCH WAS BURGER KING PAYING IN FEDERAL INCOME TAXES IN THE LAST THREE YEARS? THE HIGHEST FIGURE. NOBODY KNOWS. BECAUSE ALL THEY KNOW IS IT MUST BE A TAX DEAL. THE HIGHEST NUMBER IN THE LAST THREE YEARS THAT BURGER KING PAID IN TAXES WAS $30 MILLION. NOW, THIS IS AN $11 BILLION DEAL. ANYBODY CAN IMAGINE PAYING $11 BILLION FOR A BUSINESS BECAUSE SOMETHING IS PAYING $30 MILLION IN FEDERAL INCOME TAXES. IT WAS NOT A TAX MOTIVATED DEAL.

BUFFETT ON BURGER KING
IT DOESN'T HAVE ANYTHING TO DO WITH TAXES. I MEAN, IT HAS TO DO WITH THE FACT THAT TIM HORTON EARNS TWICE AS MUCH MONEY AS BURGER KING DOES. AND THE DEAL HAS TO BE APPROVED BY THE CANADIAN GOVERNMENT. IT HAS TO GO BEFORE INVESTMENT GROUP AND THEY HAVE TO SEE A BENEFIT. NOW, WHAT IS THE BENEFIT TO CANADA IF SOME COMPANY THAT EARNS TWICE AS MUCH AS THEY ACQUIRE IS GOING TO BE BOUGHT BY AN AMERICAN COMPANY? I'M NOT SURE HOW YOU GET THAT ONE BY.

BUFFETT ON CHANGING THE TAX CODE
I AGREE THAT THE TAX CODE SHOULD REALLY BE CHANGED. THE INTERESTING THING IS YOU'VE GOT RON WYDEN AND YOU'VE GOT ORRIN HATCH. THEY ARE INTELLIGENT, THEY'RE PATRIOTIC, THEY'RE PERFECTLY DECENT INDIVIDUALS. THEY COULD WRITE A BETTER CORPORATE TAX CODE THAN EXISTS NOW. NEITHER ONE WOULD LIKE IT PERFECTLY WHEN THEY GOT THROUGH. BUT IF THEY WRITE ONE AND IT'S REVENUE NEUTRAL THAT MEANS A LOT OF PEOPLE ARE GOING TO HAVE THEIR TAXES INCREASED AMONG CORPORATIONS. AND THEY WILL BE THE ONES WHO WILL BE LOBBYING LIKE CRAZY.

BUFFETT ON GETTING CORPORATE TAX REFORM
I WILL GUARANTEE YOU THAT RON WYDEN AND ORRIN HATCH DISAGREE SIGNIFICANTLY ON A LOT OF POINTS, BUT I THINK THEY COULD WRITE SOMETHING THAT THEY WOULD BOTH AGREE IS BETTER THAN WHAT WE HAVE AND NOT WHAT THEY WOULD LIKE. AND I WOULD LOVE TO SEE THEM DO THAT. AND THEN I WOULD LOVE TO SEE CONGRESS TAKE IT UP. BUT IF YOU'RE TALKING ABOUT ANYTHING THAT'S REVENUE NEUTRAL. YOU ARE GOING TO HAVE A LOT OF PEOPLE WHO ARE GOING TO PAY MORE. AND YOU KNOW, THEY WILL MAKE OCCUPY WALL STREET, IT'LL BE OCCUPY K STREET, IS WHAT WILL HAPPEN. I ACTUALLY THINK THERE'S SOME CHANCE OF IT GETTING DONE IN CORPORATE REFORM. BECAUSE IT SHOULD BE.

BUFFETT ON U.S. ECONOMY
IT'S REALLY AMAZING TO ME. SINCE THE THIRD QUARTER OF 2009, LOOKING AT OUR BUSINESSES, THEY'VE IMPROVED AT A RATHER CONSTANT PACE. NOW, WE HEARD TALK ABOUT DOUBLE DIPS. WE HEARD TALK ABOUT EVERYTHING. THEY'VE NEVER DECELERATED MUCH, THEY'VE NEVER ACCELERATED MUCH. NOW, AUTOS ARE DOING WAY BETTER THAN AVERAGE. HOUSING IS DOING WORSE THAN I WOULD HAVE ANTICIPATED. BUT IF YOU LOOK AT THE OVERALL, IT'S BEEN REMARKABLY CONSISTENT. AND THE MOOD SWINGS HAVE BEEN SUBSTANTIAL, BUT IT HAS BEEN FIVE YEARS. BUT THIS WAS A RECESSION LIKE NONE WE'D EVER HAD. I MEAN, THIS IS A RECESSION WHERE EVERYBODY THROUGHOUT THE COUNTRY JUST GOT PLAIN SCARED. NOW, WE'VE HAD A LOT OF RECESSIONS WHEN SOME PEOPLE GOT WORRIED OR SOMETHING LIKE THAT AND WE KNEW WE WERE IN ONE. BUT YOU HAD – OUR BASELINE HERE WAS PEOPLE WANTING TO PUT MONEY UNDER THE MATTRESS. AND THAT IS A DIFFERENT SORT OF RECESSION THAN, YOU KNOW, WE'VE HAD IN MY LIFETIME. BUT WE'RE COMING BACK.

BUFFETT ON INVESTING
YOU WANT TO INVEST IN THINGS YOU KNOW. I KNOW BUSINESSES. I DON'T KNOW ALL BUSINESSES. I MEAN, THERE ARE THOUSANDS OF THEM I DON'T UNDERSTAND WELL, BUT I KNOW ENOUGH. AND YOU WANT TO INVEST IN THINGS YOU KNOW. IF YOU DON'T INVEST IN THINGS YOU KNOW, YOU'RE JUST GAMBLING, BASICALLY. AND SO YOU LOOK FOR WHAT YOUR CIRCLE OF COMPETENCE IS. YOUR COMPETENCE MAY BE REAL ESTATE, IT MAY BE FARMING, IT MAY BE BUSINESSES. MINE OVERWHELMINGLY IS BUSINESSES, ALTHOUGH EVERY NOW AND THEN I DO A LITTLE SOMETHING ELSE. SO I DON'T THINK YOU CAN ANSWER SOMETHING LIKE THAT CATEGORICAL. THE ONE THING YOU SHOULDN'T DO IS YOU SHOULDN'T BUY ANYTHING WHERE YOU DON'T THINK YOU HAVE A REASONABLY GOOD IDEA WHERE IT WILL BE IN FIVE OR TEN YEARS.

BUFFETT ON HEDGE FUNDS
I MADE A BET SEVEN YEARS AGO AND I MADE THIS OFFER TO ANYBODY IN THE UNITED STATES. I SAID I BET A MILLION DOLLARS THAT THEY COULD PICK ANY GROUP OF FUND-TO-FUNDS OF HEDGE FUNDS AND I WOULD TAKE THE S&P 500 RUN BY VANGUARD AND THE WINNER WOULD GET TO PICK THE CHARITY THAT THE MONEY WENT TO. AND ALL I CAN TELL YOU IS I'M QUITE AWAYS AHEAD ON THAT BET NOW. HEDGE FUNDS AFTER FEES ARE NOT GOING TO DELIVER, IN MY VIEW, A RETURN AS WELL AS BUYING A LOW-COST INDEX FUND. BUT THEY ARE GOING TO MAKE A LOT OF MONEY FOR THE PEOPLE WHO RUN THEM.

BUFFETT ON VIRGINIA ROMETTY
I THINK SHE IS DOING EXACTLY THE RIGHT THING. YOU KNOW, WE NOW OWN SLIGHTLY OVER 7% OF IBM. AT THE TIME WE BOUGHT IT, I THINK THEY HAD 1.6 BILLION SHARES OUT. NOW THEY HAVE UNDER A BILLION. SHE IS MAKING THE RIGHT MOVES. IT'S A BIG COMPANY. SO MAKING CHANGES IS NOT EASY.

http://www.cnbc.com/id/102054108#.

Coastal Contracts Bhd

COASTAL Quarter Report History

No.	Financial		Revenue		Profit Before		Net Profit		Earning	DPS	NTA	PBTM
	Quarter		(RM,000)		Tax (RM,000)		(RM,000)		Per Share (Cent)	(Cent)	(RM)
2	30/06/2014		242,365		49,220		48,227		9.08	0	2.404	20.3%
1	31/03/2014		224,701		49,738		49,158		10.09	3.4	2.341	22.1%
4	31/12/2013		255,009		48,223		48,977		10.14	0	2.087	18.9%
3	30/09/2013		194,651		39,554		39,507		8.18	3	1.98	20.3%
2	30/06/2013		143,044		32,097		32,033		6.63	0	1.88	22.4%
1	31/03/2013		168,884		31,058		31,105		6.44	2.8	1.78	18.4%
4	31/12/2012		193,652		28,126		28,385		5.88	0	1.73	14.5%
3	30/09/2012		177,135		29,096		30,530		6.32	2.8	1.67	16.4%
2	30/06/2012		160,736		29,784		28,914		5.98	0	1.69	18.5%
1	31/03/2012		232,849		30,320		30,759		6.37	3.8	1.62	13.0%
4	31/12/2011		219,244		52,128		51,594		10.68	0	1.6	23.8%
3	30/09/2011		110,211		36,560		36,657		7.59	4.2	1.49	33.2%