# Q&A: Punch Card Update, Hingham Risks & Berkshire Dividends?!

## Метаданные

- **Канал:** Investing with Tom
- **YouTube:** https://www.youtube.com/watch?v=tQLSRVOF1P8
- **Дата:** 04.08.2023
- **Длительность:** 21:39
- **Просмотры:** 3,216

## Описание

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Time Stamps:
0:00 - Q&A time!
0:43 - Hingham risks
4:02 - Dividend reinvestment
5:03 - WACC & discount rates
6:45 - Speculative investments
9:19 - Company quality metrics
10:27 - Downside protection first
13:42 - Sharing ideas with others
16:05 - Berkshire valuation
18:20 - Coal miners
19:27 - Punch card investing channel
21:05 - Thanks for watching :)

Enjoy :)

Disclaimer:
I am not a financial adviser. This video is for education and entertainment purposes only. Seek professional help before making any investment decision.​

## Содержание

### [0:00](https://www.youtube.com/watch?v=tQLSRVOF1P8) Q&A time!

well it is monthly q a time here yet again on the channel a couple of days ago here on YouTube I put up a community post to collect your questions for this video so thank you to everyone who did ask one if you're interested in getting a question potentially answered in a Future q a video uh just keep an eye out for my community posts here on the channel you should be able to turn notifications on for the channel that way you'll be notified anytime I upload a video but also anytime I put up a new community post that's where I always collect the questions for this video so be sure to get in quick next time if you want to get a question answered but if you enjoyed this video and haven't subscribed to the channel already please be sure to do so and without further Ado let's answer some of your q a questions first question here from Jack what do

### [0:43](https://www.youtube.com/watch?v=tQLSRVOF1P8&t=43s) Hingham risks

you consider to be the biggest risks for hafs which is Hingham Institution for Savings in the short and long term um yeah sure of course anytime I talk about individual stock on the Channel please do your own work on it not investment advice or anything of the source out but in terms of hanging risks in the short and long term in the short term I think the big elephant in the room is simply interest rate risk so Hingham runs a very liability sensitive balance sheet at the bank basically what that means is when the costs of funding change self-interest rates go up they're forced to pay higher rates on federal Home Loan Bank advances on money that they borrow there and also they're forced to pay higher rates on just customer deposits as well those rates changed very quickly if interest rates go up so their costs immediately can rise but also if interest rates go down they cost pretty immediately fall on that and kind of fund inside at the bank but there's quite a lag for those um same interest rates and yields to change on the asset side so for Hingham to earn more money or higher interest rates on the loans and mortgages and so on that they write are typically on uh commercial and residential real estate so that kind of timing mismatch does create some risks and some opportunities that worked really well for them during covert for example when interest rates got cut really fast a lot of the costs dropped out while the yields they were getting on their loans was kind of slower to come down so they earned a lot of money through that period of time but in the last year or so as interest rates have come up reasonably quickly the cost of funding at the bank have gone up a lot and I've struggled to kind of pass those higher rates through at the same Pace on the asset side so in the short and even medium term I think that's a pretty big risk at Hingham and something to watch very closely and the long term assuming um kind of the yield curve normalizes and interest rates are relatively stable over time that doesn't really matter I don't think if they stay higher if they stay low it's just kind of the rapid movement can cause weird stuff for him assuming that they're reasonably stable over a long period of time I think in the long term some of those risks will alleviate um it's just you know if rates stay at these levels for a few years it might take Hingham some time to correct potentially a couple of years um we'll just have to kind of wait and see how that looks in the long term um there's a lot of things I think to really like at Hingham they have very low cost operations and they have great management of credit risk so uh very few of their loans tend to become non-performing for example but they do have you know some key man risk and so on there's a couple of people at the bank from the Gorgon family that are big owners of the bank and make a lot of management Capital allocation decisions um if something would have happened to one of those people or they were to move on to something else that's sort of a long-term risk on the qualitative management side as well so again do your own work on the stock if you're interested in it but those are a couple of thoughts on rests short long term for hanging next question here from

### [4:02](https://www.youtube.com/watch?v=tQLSRVOF1P8&t=242s) Dividend reinvestment

Gage hey Tom do you reinvest your individual stocks dividends I would guess not because you wouldn't want dividends reinvested at overvalued prices but maybe I'm wrong uh yeah sure a couple of different sort of categories of Investments for me personally um with some of my ETF Holdings which are just long-term Holdings of index funds essentially those do have dividends just set up to automatically reinvest and buy more of the index through the couple of different ETFs that I have with individual stocks where I get paid a dividend there probably are some situations where I would prefer to have the dividends reinvested but just with the Brokers I use and so on that's not really an option um so yeah from the individual stock Holdings the money just goes to cash basically and next time I want to buy a stock I use some of that cash sitting there from dividends to kind of do so yeah reasonably simple setup on that

### [5:03](https://www.youtube.com/watch?v=tQLSRVOF1P8&t=303s) WACC & discount rates

front next question here from mammoot why didn't you calculate weighted average cost of capital and discount rate and your last DCF video uh yeah very good question I get this on most of the intrinsic value calculation videos that I do um long story short I basically subscribe to the Buffett school of thought on the way to approach discount rates and discounted cash flows so Buffett has the view that you know cash that is produced and distributed from a steel company for example spins exactly the same as cash that might come from a technology company or a newspaper company or any other type of company um you know people will use different discount rates typically based on how risky they view a company and how volatile its share price is using beta and various things but the Buffett manga school of thought is that all cash from all companies spends the same and risk really comes from not knowing what you're doing and not being able to you know get comfortable with projecting out the future cash flows of a given business so for that reason I tend to compare things all on a pretty Level Playing Field with discount rates so just to scan things at the same rate pretty much across the board I know that is not what they'll teach you on business school and it's um you know not the common sort of MBA type approach but that's the way that I kind of think about it like Buffett and manga I would much rather earn a lumpy 12 or 13 than a you know more steady seven or eight percent for example so you sort of see that reflected in just the Simplicity of discount rates and uh discounted cash flows that I do question

### [6:45](https://www.youtube.com/watch?v=tQLSRVOF1P8&t=405s) Speculative investments

here from Banksy hi Tom would you ever consider a place or room for speculative investment in your portfolio ever um yes I think I probably would uh it sort of depends how you Define speculative I suppose um if I think that there's a good understanding in my head of kind of the odds of a particular enviousment working out and maybe there's a high probability that the company goes down a lot or goes to zero and there's a lower probability that the company goes up but if it does go up it goes up a lot and kind of probabilistically thinking uh you know given the odds of downside and upside and the payoff in either direction it still is a like statistically good bit to make I think it is probably something I would do I would just size it probably quite small again it would depend on the situation but if for example you know I find a company where I think there's a 50 chance of it going to zero and up 20 times you know statistically that's a good bit to make and it probably does sort of deserve some spot on the portfolio but um that's all a fairly theoretical answer to be honest I can't think of a situation yet at least when I've actually done that uh there's been a couple of situations where I probably could have um but I've ended up passing um just because I couldn't quite get comfortable with the odds in either direction but that that's sort of how I think about it Warren Buffett has said in Berkshire annual meetings in the past for example that he would bid on a coin flip if um you know the odds were 50 but the payoff was better than 50 50. I think that was um to a lot of people in the audience of that made in kind of like a weird take from Buffett I don't think they had quite comprehended that that's the way he thinks he's thinking about downside upside um you know probabilities versus the payoff in either direction manga in a similar manner many times as said we're not necessarily trying to bid on the best horse we're trying to make the you know best investment which doesn't necessarily mean you always buy the company that's most likely to succeed uh you give you a good turn which that's kind of where price and odds and things comes into it as well so to answer your question in theory yes I would consider some space in the portfolio for a more speculative investment but it would have to be sized appropriately and it's not something I've really done to date next

### [9:19](https://www.youtube.com/watch?v=tQLSRVOF1P8&t=559s) Company quality metrics

question is from Jay Sawyer Financial what are the metrics you use to spot a high quality company uh yeah it's pretty basic I would say a high return on invested capital or a higher return on equity and ideally the ability to keep reinvesting at those High rates for a very long period of time so you know if a company produces a 30 return on Equity but they have no ability to deploy any more Capital that's nowhere near as attractive as a company that earns a 30 return on equity and has a very long runway for growth maybe there are restaurant chain that can clearly open uh you know much more stores and can three or four or five x their store count over the next decade that type of thing is very attractive that's really what builds um wealth and long-term you know stock Investments is the ability to earn high Returns on Capital and to kind of keep doing it again and again and just compound into uh you know a big machine that earns a lot of money basically so yeah in terms of quantitative metrics on company quality uh pretty straightforward that's kind of the way I think about it okay

### [10:27](https://www.youtube.com/watch?v=tQLSRVOF1P8&t=627s) Downside protection first

next question here from mbm446 hi Tom thanks for all the detailed information you put in your videos I really enjoy them thanks very much uh all super investors and the punch card gang talk about protecting your downside first and the outside will take care of itself how do you apply this principle in selecting companies and paying a reasonable price I'm sure even Buffett has sold stocks at a loss in the past or held them for many years without much material gain doesn't that violate the principle Phil Town's emotional rule of investing says that a stock would go down once you buy it doesn't that come with downside of risk flying margin of safety would reduce the downside risk but definitely not eliminate it can you please elaborate on this thanks again and keep producing great content cheers uh yeah good question I guess what um what we're trying to say there is that if you take care of the downside uh the upside should take care of itself is um essentially if you were to calculate the intrinsic value for a company and you know calculated that it was worth approximately a hundred dollars a share just as an example maybe you thought at somewhere in a range of 80 to 120 but you know roughly a hundred dollars if you can buy that company in the market for 40 or 50 dollars the long-term uh kind of chance of you losing money is greatly diminished versus if you paid two or three hundred dollars for those same shares now that does not mean at all that the stock price can't go down to 30 or 20 or 10 or 5 and it certainly doesn't mean that you can't be wrong about your valuation as well you know you might think that a company is worth 80 to 120 but you may be completely wrong about the future cash flows of the business and maybe infected only is worth 30 or 40 dollars a share so that's kind of what we're getting at there is if your analysis is correct and you're buying something at a big discount to intrinsic value the likelihood of long-term loss assuming that you're correct about your 100 valuation is greatly diminished and um you know if the market over time agrees with your valuation then um you know the share price might go from 40 or 50 back up to roughly 100 or about what you valued it so that's essentially all that I think the super investors are saying and all the Phil town and the punch country crew are saying so you can definitely be down uh Mark to Market on your Investments and still be right in the long term I've had stocks where I've been down 50 percent and they've over the long term turned out to be doubles instead they've kind of gone up four times from the lows that they got down to after I bought them um so yeah there's there will still always be short-term downside risk but if you're right on the business you should do okay over time assuming the market eventually agrees with you but mistakes are going to be par for the course you are likely to lose money over time and invest in if you're picking individual stocks that's just how the game kind of goes even the best investors in the world lose money from time to time and even the best investors in the world uh you know can buy a stock hang on to it for several years and have very lackluster returns so if we can learn from those mistakes that's always nice but that's the gene principle that we're talking through there okay

### [13:42](https://www.youtube.com/watch?v=tQLSRVOF1P8&t=822s) Sharing ideas with others

next question is from Freeman 61312 hey Tom I know Buffett manga as well as propriet spear attribute a lot of their success to having a good friend to use as a soundboard for ideas do you have a trusted person to share ideas with if so uh how do you meet them and what unique perspectives do you each bring to the table uh yeah sure I have a few people that I talked to about stocks reasonably regularly most of them I've met through YouTube so whether they're on the punch card show or they're people that I've met through the podcast or a range of different things there's lots of different people I talk to and it probably varies depending on what company I'm looking at as well uh often there'll be a reasonable amount of overlap with me and someone else in terms of like we have a shared interest in a given company so they can both be good and bad you know if that person's coming in with quite a positive view of the company and you're a little more skeptical initially um that can be both good and bad you've got to take what people say with grain of salt and so on but uh yeah I do have a few people I kind of talk through ideas with I certainly make the final decision of course and I have checklists to um make sure Investments are meeting all the points that I want them to make before I put hard-earned money to work and so on um but yeah to be honest most of the people that I share ideas with I've really met online through doing this YouTube channel or doing the podcast or what have you if you don't have that luxury I've also found the likes of the value investors Club very good or just speaking to people on Twitter who are sharing their ideas you know you can just search stock tickers on Twitter and find pretty intelligent people talking about uh you know different companies that you might be interested in it's pretty rare that I type A ticker symbol into Twitter and don't find someone talking about it even if it is kind of an older tweet so that's the way I've tended to approach it at the same time I also have investments in my portfolio that um is you know 100 my own work and I've basically never talked to anyone about so it really just depends on the company um occasionally you'll look at weird stuff that no one else you know is interested in and occasionally you'll talk about really well-known companies that a lot of people are interested in so um yeah I definitely do try to talk to people if I can but um you know at the end of the day I've got to be the one trying to think through the situation rationally and of course I've got to be the one to make the final decision next question is from

### [16:05](https://www.youtube.com/watch?v=tQLSRVOF1P8&t=965s) Berkshire valuation

at Value Hunter investing I just wanted to hear your take on this it was a question asked of me a while back and at the time I struggled to provide a good enough reason as value investors we need to look at how much cash we can get out of a business to judge how much to pay for a business value investors also love Berkshire who never pay a dividend I know it is ownership and a real business and we can sum the parts but all that aside if Berkshire never pays a dividend doesn't that mean an investment in Berkshire is simply a hope that the future will be brighter and that one day someone else will pay us more for the shares than we paid in the first place um yeah good question uh I guess yeah Berkshire actually I think did pay a dividend back in like the 1960s Buffett has said it's a massive mistake because he could have invested their cash and turned it into much more intrinsic value um you know by today in 2023 um but yeah Berkshire with that one exception has never paid a dividend but its ability to distribute cash has grown immensely over the years and that's how people are value in Berkshire so um just because they've never distributed any cash definitely doesn't mean uh that there's no value their earning power has gone up year after year and their ability to potentially distribute cash um has grown and that's why the intrinsic value has gone up um so far Warren Buffett has easily met the test of creating more than a dollar of market value for every dollar retained so it's made a lot of sense for Berkshire to just hang on to the cash if that changes at some point we might see sort of the capital allocation framework around dividends and buyback and so on change a little bit of Berkshire but yeah that's basically the explanation is that in the 1960s Berkshire had the ability to pay out some level of cash if they wanted to their ability to distribute cash today is much greater and that's the reason that the stock price has gone up it's not because um Buffett's got just more famous for some reason and you know people are willing to pay more for this year's just to you know be in the same company as Warren Buffett or what have you um it is that the underlying intrinsic value and ability to pay out cash at Berkshire has grown a lot okay let's

### [18:20](https://www.youtube.com/watch?v=tQLSRVOF1P8&t=1100s) Coal miners

take maybe two more questions here uh this one's from Tom Maslin 1500. hey Tom did you ever pull the trigger on any coal companies I've been buying into an ASX listed coal miner as I see Cole been around for a long time valuations uh currently very attractive can you hear thoughts thanks Tom uh no long story short I didn't uh it's a space I looked at for a short period of time I guess that was earlier this year uh yeah valuations look very attractive they were going to be paying out huge dividends some of them were doing Monster BuyBacks as well um I just it's outside of my circle of confidence is the short answer I don't really understand the different types of coal I don't have a particularly strong view about the long-term um you know price of coal or how the coal Market really works so uh the numbers looked pretty compelling in some cases but it's I just don't understand the business it's outside of my circle of competence and that's the first filter I have on my checklist so it did not make it through that filter okay let's do uh one last question here from Quant compounder when will we see the OG

### [19:27](https://www.youtube.com/watch?v=tQLSRVOF1P8&t=1167s) Punch card investing channel

punch card crew all together live on a stream again uh yeah good question I think probably by the time this q a video is out there should be a post on the punch card investing YouTube channel uh sort of Community page there's basically been sort of a change of ownership on the punch card channel so it used to be five of us 20 ownership each it was uh me Frank Brad Karan and Jack that's changed a little bit um you know the five of us over the years that punch card have been going have all had various changes and priorities and life circumstances and so on um so for me personally I've made the choice to focus a little bit more on keeping consistent content coming out here on the investing with Tom Channel and on the podcast channel so Jack is basically the sole owner of punch card at this point and we'll be kind of running the channel and inviting guests and hosting the shows as he's done for a long time and all that sort of thing um the rest of the kind of original punch card crew will certainly still make appearances from time to time um hopefully at some point in the future we can do a show where we get the gang back together and kind of have the original crew on there but it wasn't a particularly like lucra rid of show financially or anything like that so everyone was reasonably comfortable in the end um kind of handing the reins over to Jack and allowing him to keep pushing it forward and hopefully grow punch card out into the future but um yeah I'll still be on there from time to time for sure but I'm probably a little bit less or almost certainly less than I have been in the past okay so those are all

### [21:05](https://www.youtube.com/watch?v=tQLSRVOF1P8&t=1265s) Thanks for watching :)

the questions we have time for in this video thank you very much to everyone who did ask one like I said at the start of the video if you would like to get a question potentially answered in a Future q a video uh turn notifications on for the channel and keep an eye out for my community posts um about once a month that's kind of when I try to do these videos so roughly a month from today or a little bit less than that just keep an eye out for a post up there get in quick and ask it questions and hopefully you can have one answered on one of these videos but that's it for me for this video and I'll see you on the next one cheers

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*Источник: https://ekstraktznaniy.ru/video/53002*