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Answers - Stock Investing - New Warren Buffett Letter to Shareholders is a Model for the Rest of Us
Every year the master of stock investing, Warren Buffett takes the time to create a letter which usually runs about 20 plus pages in length. In the latest letter, he lays out for anyone to see, exactly why he is the premiere investor in the world today. Warren Buffett is the best at what he does because he understan
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
ds what he is, and what he is not. In over a half century of investing, he has never bought a technology stock. The Chairman of Berkshire Hathaway believes if he cannot envision what a balance sheet of a company will look like in 10 years, he can’t own it. Since you can’t figure out a high tech company’s balance she
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
t next year, how are you going to figure it out 10 years into the future?
What Buffett had to Say
Berkshire now has annual revenues approaching $100 billion, and 217,000 employees. “Size seems to make many organizations slow-thinking, resistant to change and smug.” Buffett is questioning whether size is the right
What Buffett had to Say
Berkshire now has annual revenues approaching $100 billion, and 217,000 employees. “Size seems to make many organizations slow-thinking, resistant to change and smug.” Buffett is questioning whether size is the right
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
way to go. He does say that Berkshire has become the buyer of choice for many companies seeking to sell themselves. A company bought by Berkshire can still retain its individuality and unique focus. If bought by a strategic buyer, the same company would be torn apart, certain pieces sold off, and employees discarded
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
On the other hand if a company is sold to a private equity firm, it gets loaded up to the gills with debt. The acquirers really only want to own the company for as few years as possible, and then boom, the company gets sold again.
Buffett is a keen observer of human nature. Small things tell him everything. He rec
Buffett is a keen observer of human nature. Small things tell him everything. He rec
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
alled the time in the 1960’s when he bought an insurance company from Jack Ringwalt. The day of the closing, Buffett is sitting at the conference table waiting for the seller to arrive, and the gentleman is late. Finally when he gets there, the seller announces to Buffett that he was driving around the block looking
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
for a parking meter with unexpired time on it. Since Buffett always kept the old management team in place when took over a company, he knew that Berkshire Hathaway was going to be all right with this investment, since this guy was so cheap, his shoes would squeak. The Sage of Omaha loved every minute of it.
Perhaps
Perhaps
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
one out of a hundred investors is aware of this, Buffett always made his biggest money in the insurance industry. Insurance works off of the float that a company has available. You take money in against potential claims in the future. You have the premiums to work with until some day, some portion of these accumula
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
ed premiums, must be paid out in settlements. Now with insurance you have to get a couple of things right.
You have to price the premiums correctly for the potential losses, and you have to invest the premiums until that time comes when you might have to pay them out. It is said that Warren Buffett better than anyb
You have to price the premiums correctly for the potential losses, and you have to invest the premiums until that time comes when you might have to pay them out. It is said that Warren Buffett better than anyb
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
ody in the world can price risk appropriately.
We already know that he certainly can allocate capital to investments better than anyone else. In the insurance business, this means he can invest those premiums on an interim basis better than his competitors.
As for risk, he says, “We remain prepared to lose $6 bill
We already know that he certainly can allocate capital to investments better than anyone else. In the insurance business, this means he can invest those premiums on an interim basis better than his competitors.
As for risk, he says, “We remain prepared to lose $6 bill
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
on in a single event, if we have been paid appropriately for assuming that risk. We are not willing, though, to take on even very small exposures at prices that don’t reflect our evaluation of loss probabilities.”
He then goes on to say, “Appropriate prices don’t guarantee profits in any given year, but inappropria
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
e prices most certainly guarantee eventual losses.”
Newspapers are a poor Business Model
If you know Buffett’s history, you know that he made a killing buying into the Washington Post which is the Graham family newspaper in Washington DC. An $11 million investment in the 60’s, is now worth $1.2 billion. Not a bad
Newspapers are a poor Business Model
If you know Buffett’s history, you know that he made a killing buying into the Washington Post which is the Graham family newspaper in Washington DC. An $11 million investment in the 60’s, is now worth $1.2 billion. Not a bad
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
return at all, but that was then, and this is now. The business model for newspapers has certainly changed. A very bright publisher once said that he owed his newspaper fortune to two basic concepts – monopoly and nepotism.
If you have a town with one newspaper, you have yourself a monopoly. For much of our nation’
If you have a town with one newspaper, you have yourself a monopoly. For much of our nation’
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
history, we got our information from newspapers. People knew the different sections, and there were the ads that were incredibly profitable. If there were several newspapers in a town, the fattest newspaper with the most ads would ultimately dominate, and then the profits would go through the roof. Ads would go up
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
in price every year, even though costs could be held constant.
In the last 10 to 15 years, it’s obvious that people have more choices as to where to get their information than just newspapers. With the Internet, Television, and Radio, newspapers are simply not experiencing increasing readership. As a matter of fact
In the last 10 to 15 years, it’s obvious that people have more choices as to where to get their information than just newspapers. With the Internet, Television, and Radio, newspapers are simply not experiencing increasing readership. As a matter of fact
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
circulation is down across the board in just about every city, and sector in America. The business model simply doesn’t work anymore.
Comments on Compensation
If he is nothing else, Warren Buffett is a straight shooter who calls them as he sees them, and doesn’t mince words. He states that he sets the compensatio
Comments on Compensation
If he is nothing else, Warren Buffett is a straight shooter who calls them as he sees them, and doesn’t mince words. He states that he sets the compensatio
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
n for every major executive that works for him, which is about 80. Some of these people manage billions of dollars individually. He spends no time on it, and has never had anybody leave him. He has sat on tons of boards through the years, and no one, that’s right, no one has ever asked him to sit on a compensation c
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
mmittee. They don’t want him.
When selecting directors for Berkshire’s Board, he wants them, ‘….owner-oriented, business-savvy, interested, and truly independent.” He believes most board members are not independent, that they absolutely need the money that the Board is paying them. For big companies, Board compensa
When selecting directors for Berkshire’s Board, he wants them, ‘….owner-oriented, business-savvy, interested, and truly independent.” He believes most board members are not independent, that they absolutely need the money that the Board is paying them. For big companies, Board compensa
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
tion comes to $150,000 to $250,000 per year. This is a number so large, that for many directors, it’s bigger than what they make from their day job, and basically kills off the concept of independence.
The law says that the directors have to faithfully represent owners. These directors are not doing that. Buffett’s
The law says that the directors have to faithfully represent owners. These directors are not doing that. Buffett’s
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
first question of any potential board member is, “Does he think like an intelligent owner?” Since Berkshire is in the business of running other businesses, they need board members who have “business judgment.” There isn’t much of that around according to master of investing.
Good bye and good luck,
Richard Stoyec
Good bye and good luck,
Richard Stoyec
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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