Do you have Conviction?

I feel uncertain, more uncertain about the future now than I did 20 years ago.

The way it plays out is I have more stocks in my portfolio now than I had 20 years ago.

I know for some people this becomes the issue of don’t you have enough conviction?

And I hate that word in investing, because it puts us on a spot.

So, do you have enough conviction?

Can’t you put all your money in this if you feel that strongly?

No, I never feel that strongly. I don’t have that much conviction. Maybe you do.

And there are investors out there, I think, who overestimate their capacity to value companies and overestimate the capacity of markets to correct and then underinvest.

They might still make money for a while, but at some point in time, their portfolios will blow up

said Aswath Damodaran


Pharma’s 90% Problem

Source: Forbes

There are three main wholesalers, AmerisourceBergen, Cardinal Health, and McKesson Corporation that account for more than 90 percent of wholesale drug distribution in the United States.

With multiple suppliers, wholesalers end up having a lot of bargaining power. Additionally, there are always new suppliers entering the market, who are willing to drop prices further to enter the market. So wholesalers negotiate with the existing players to offer the same price, for them to retain their existing market share—hence constantly hitting the prices.

This leads to almost 90 percent price erosion, from the price at which the innovator sold the drug versus the generic drug prices.


Vesuvius: Only L1 Matters

Source: Investor Meet Transcript of Vesuvius India Ltd

Excerpts Insurance

Insurers as an Inflation Play

But the auto insurance, which we’ve done big through Geico, the average price of our policy when I went in in 1950 was, I don’t know, 50 or 60 bucks, and now it’s over $2,000 a year.

And we even went the whole auto insurance industry went from pricing the stuff for a yearly policy, to changing it every six months. I mean, we are not issuing any 20-year policies or 30-year policy.

And it’s not a special risk for insurers. You just keep adjusting your prices to the risk as the risk changes. And you can argue, I sure as hell don’t wish it on anybody, but you can argue inflation is basically good for insurers because you write – it writes bigger premiums on much bigger coverages.

And that’s actually happened in auto insurance, well, what with the autos have gotten safer, you know, and everybody isn’t driving terribly compared to the way they drive 20 years ago, the accidents per 100 million miles driven, you know, has gone down a lot.

But the price of insurance, auto insurance, has gone up, like, 30 or 40 for one. And it went up – it was going up at a fast enough rate that insurance companies said, “We’re not going to say give you a one-year policy. We’re going to give you a six-month policy.”

said Warren Buffett


The Better Investment

Source : Financial Times