Longtime investor Mario Gabelli on what he learned from Warren Buffett's 2021 letter

you know he talks about conglomerates and why they're not very good in this letter berkshire hathaway is a conglomerate they operate a little bit differently they'll buy companies and pieces not in their entirety and that allows them to be much more flexible and have a bigger pool of companies that they're looking at but if they're not getting the same valuation for clayton that they would get on the open markets is it worth having all these companies in the conglomerate well there's uh basically the nature of what he looks at is cash flow quality of the cash flow and evaluation on that multiple cash flow so in terms of my reading of it not his uh he doesn't talk about the conglomerates except for the pointing out that investment bankers love it uh pushing an illusion the illusions last for a long time he goes back to the 60s when i was there watching charlie blue dawn jimmy ling uh you know janine and so on the conglomerates had we're looking at things to try to put together a cycle position for wall street but he uses that analogy becky also to talk about today as to how companies are put together how companies are put together for wall street not necessarily for operating cash flow there's a lot of detail for example in clayton he talks about how well they did in the annual but if you go into the details they only sold 2.5 more manufactured housing and when you blend them together under his orchestra leader how does he look at that so i would think the uh in quotes the conglomerate discount uh has value a lot of companies that i follow sell at a discount for what i think the takeover price would be so if you want to take over berkshire you're going to pay a much higher price you're not going to do it because it's unlikely and then what is the benefit of splitting it up when you split it up you got 280 million dollars of which 130 million relates to the float that uh you know he's got in the insurance company so there's a lot of moving parts i i just don't see him coming to that conclusion and i think the uh no i don't either i i don't either the class a share is prevented with the voting structure anyway but i'm just asking if you kind of see that no i don't see it at all i think that you know stay the course it works i you know when i started buying the stock in 1986 i only bought it for my two mutual funds becky i still own it like 240 shares it was the asset fund and the equity trust two of the first that i started in what i do as a methodology uh and uh we get a six thousand dollar cost why do i want to uh split it up if i'm going to monetize it i'm glad he doesn't pay a dividend however observers of our mutual fund would say we have because we hold things that long they say we're not an active manager because we don't have high turnover i you know you can't be you know you can't please everyone all the time yeah i think that was the point in the letter too you want the investors you want he does he talks about his investors in those buckets he puts them in five categories that's the first time he's done that and uh he doesn't talk about cash dividends he's not going to do it but the other thing he doesn't talk about is taxes normally he would talk about how taxes would work and the environment that we're going into on a corporate basis what happens if the short at the book tax for uh on you know unrealized gains goes up how much is that going to impact them for example he marked the uh he increased the value of the book value of his company when he they lowered corporate tax rates so there's a lot of details and you don't want to over analyze one company but so step back 120 billion dollars in one stock one fourth of the company is an apple so when they say he's kind of looking at things like that he's got a barbell operating companies that are going to do quite well in the next two years extraordinarily well uh except for a question mark over insurance there's an accounting rule i don't get into that but critical audit matters cam is the new rules that auditors have to identify companies as what's important they look down and drill into the question of the liabilities in the insurance companies you know how does england dealing with the covet 19 and the insurance companies how are we doing in the u.s what's going to change so there's a lot going on it's a fun annual report to read yep and it's fun having you on to talk shepard smith here thanks for watching cnbc on youtube

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Length: 4min 26sec (266 seconds)

Published: Mon Mar 01 2021