Econ data: 08 week 46

- USA Weekly new jobless claim rise to 516k, 7 yr highest (worse than expect, 484k), continue jobless claim rise to 3.9M (worse, 3.85M)
- USA Oct retail sales drop 2.8% (worse, -2.65%)
- China Oct CPI (inflation) fall to 4.0%, give room to cut interest rate further

Corp info: Berkshire Hathaway 3q08 result

- Premium dropped mainly due to $7.4B non-recurring retroactive reinsurance agreement with Equities made in 07 and not in 08, exclude this non-recurring issue, revenue up 0.4% vs 3q07 instead of 8% drop.
- Its fixed maturity securities asset balance looks great, do not have any material impairment charge (like other bankers or insurers)
- Other than Goldman Sach & GE, in Oct, Warren purchased $4.4B of 11.45% sub-notes & $2.1B preferred stocks of Wrigley (M&M chocolate and Eclipse gum)

Wal-Mart 3q08 results

- Report strong sales up 9.4% vs 3q07, mainly driven by international market, but US division do have 7.1% up. Outlook fall on bad global economy and strong US$ will offset the international sales growth
- Strong profit up 11.2%, gross margin up from 5.10% to 5.54%, which shows a great cost management for a worldwide department store when the commodity price up that much during the year
- Wal-Mart is the world's largest retail store with strong sales in tough market situation, and one of the Dow Jone component stock's price continue to rise in 2008;
- It is good to hold, but from a value prospective, i think there are lots of under value stocks better than Wal-Mart;

Corp info: HSBC 3q08 results

- It did not publish any financial statement for 3Q, just some highlight, Tier 1 capital remain strong at 8.9% in 3q08 (8.8% in 2q08 & 9.3% in 4q07);
- It is the largest bank in the world, the 1st one to disclose issue on sub prime mortgage, 1st one to fund its CDS pool. It has a pretty global diversify asset portfolio.
- HK$80 or US$51.3 seems attractive, main concern is whether it can keep the growth in market such as Middle East, Hong Kong & China at the same time minimize / stop its loss in America & Europe.

Econ data: 08 week 45

- USA unemployment rate rise from 6.1% in Sep to 6.5% in Oct (worse than expectation, 6.3%)
- USA job creation in Oct is -240k (worse, -200k)- USA weekly jobless claim rise to $481k (worse, $478k) while continue jobless claim reach $3.84M (worse, $3.75M)
- BoE cut interest rate by 150 bps to 3.0% and ECB cut 50 bps to 3.25% (good)
- China announce it will increase government spending / cut tax in total of RMB$400B to boost up economy. Emphasis mainly on construction, therefore, I don't think it will trigger a huge rise in equity market, but for sure it will keep China GDP above 8% in the coming 2 years.

Berkshire Hathaway 3q08 results

Finl data: 3q08 revenue fall 8% (mainly on insurance premium), profit fall 77% mainly due to fall in gain / loss on investment (it sold Petro China in 3q07 which recognized a huge gain of $2B) and $2.2B loss in derivative on equity index put option (sell position). During the period, its cash flow position fall by $14B, excluding huge acquisition in 08, it actually up $3B, net cash flow as of Sep 30, 08 is $33B which equal to 27.5% of total equity or 11.7% of total asset.

Issue: total equity only fall 0.5%, once again, Warren Buffet managed its portfolio well to loss 0.5% only in 2008 while S&P 500 has already dropped by 34% as of Sep 30, 08. According to Warren, he thinks the current equity market situation is good to acquire/invest even though he is not able to catch the lowest point. In Oct, Warren invested $5B in Goldman Sech at $115 & $3B in General Electric at $22.5 with 10% special dividend each. However, those 2 stocks are underwater now trading at $75 & $17.81. (Historically, if a person follow exactly of what Warren's buy/hold/sell within 6 months, that person will have an average of 20% return per year in the past 50 years - compare to 26% of what Warren making.)

Comment: price per book fall to historical lowest 1.34, very attractive from a value prospective. Given a 1.9 times historical price / book, it should worth $4900.

Corp info: Shoppers Durg Mart 3q08 results

Finl data: 3Q08 remain strong, sales up 9.8% compare to 3q07, net income up 15.6%. Mainly due to total store square feet rise 12.6% and gross margin improved from 10.7% to 11.2%.

Issues: More capital spending in future if Shopper would like to keep up the growing momentum under the economy difficult situation. On the other hand, it continue to have the dominate position for drug store in Canada. Plus job creation, profit growth in health sector remain healthy at this stage compare to all other sectors.

Comment: Based on estimate 08 EPS $2.61, current price seem a quite higher compare to US drug store such as CVS Caremark or Walgreen. Therefore, from a value investing prospective, it only worth $34per share. If I add growth as one of the evaluation factor, it should worth $57.42 based on historical P/E ratio.

Manulife 3q08 results

Finl data: 3Q result did better than I thought, without new share issue, shareholders equity continue to rise, instead of fall. Seg fund assets balance (the one I worry the most) only fall from 175B in 3Q07 to 166B 3Q08, 5.1% drop. Premium continue to rise by 20%.

Issues: I still wondering why the seg fund asset did not drop. Further investigation need to be done on 4Q result. I think it will have a loss in Q4, which may wash out all its profit completely for the year. In 08, it already put up $600M additional reserve on seg fund due to market movement, but I still think that is too little.

Comment: therefore, based on 1.5 times its 07 embedded value $21.85 (assume all growth in 08 will offset with dividend), target value should be CAD$32.8.

Econ Data: 08 week 44

- USA GDP fall 0.3% in 3q08 vs 3q07, driven by 3.1% fall in consumer spending. Finally became negative (better than expect, -0.5%);
- ISM manufacture index fall lowest to 38.9 (worse, 42), 26 years lowest
- Auto sales drop like crazy, GM sales fall 45% in Oct due to tighter credit approval, let's see how the overall auto sales do today;
- 3 months USD LIBOR fall 16.5 bps to 2.85%, good
- LIBOR-OIS Spread (way to determine the health of the credit market, anywhere between 2% to 2.5% means healthy) narrowed 16 bps to 2.23%, good
- Oil price continue to fall from USD$73/bbl to USD $63/bbl, good to lower inflation, not good for Canada's export
- I still think oil price will rise back to US$100/bbl (demand did not drop and will not drop too much plus US$ may once again fall after interest rate cut & after the credit crisis became stable - cuz lots of settlement is in US$, it trigger the huge rise in Oct.)

Some analyst forecast a deeper fall in consumer spending & GDP in 4q. If 4Q GDP keep as a negative figure, then everyone will able to confirm that USA is really within a recession.

Market info:
Thank God!! Last week is "hello-win" or "Halleluiah" or "thanks giving" week (whatever you want to call) to equity market. All rise!!! (From last week Monday's closed to this week Monday/Tuesday's closed)

- HKG equity market, rise from the lowest 10,676 to 14,384, +35%
- China SSE Comp index rise from 1,664 to 1,706, +2.5%
- USA S&P 500 rise from 840 to 966, +15%
- Canada TSX from 8,537 to 9,721, +14%
- UK FTSE 100 from 3,665 to 4,443, +21%

However, if compare to Sep 30, globe market still fall 19% on weighted average in USD$ :<
Once again, USA is the trouble maker, but for some reason it is also the one who get the least impact (at least in equity market), why? I don't know !!

Petro Canada 3q08 results

Profit up 73%, EPS up 76% mainly due to oil price rise trigger a huge return in its upstream business (even it makes downstream business fall). Its Edmonton's refinery plant will start up in 4q08, but cost expenditure may rise more than expect, also, its Fort Hill oil sand project will cost a lot more than expect, therefore, Petro Canada has decided to fall back and re-visit the growing plan.
Once again,CA$60 is my target value and i did not plan to change.