Whitney Tilson and other value investors have been suggesting that over the next several years the market is likely to be range bound due to global economic uncertainty. The below shows that more investors are moving away from stock pickers as the belief that individuals will be able to separate themselves from the pack fades.

While I agree that markets will likely be range bound, I believe that individuals will still be able to outperform. The argument below rests on those that believe that the fees they pay to hedge funds or mutual funds will be the difference in performance between index funds and hedge funds and mutual funds. As an individual investor picking stocks this is not a concern.

I continue to believe that individual investors will be able to outperform the markets over the next few years by searching for high yielding under valued stocks. The dividends may well wind up being the difference.

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OMAHA, Neb., Sep 26, 2011 (BUSINESS WIRE) – Berkshire Hathaway Inc. BRK.A +3.77% http://www.marketwatch.com/investing/stock/BRK.A?link=MW_story_quote BRK.B +4.07% http://www.marketwatch.com/investing/stock/BRK.B?link=MW_story_quote -Our Board of Directors has authorized Berkshire Hathaway to repurchase Class A and Class B shares of Berkshire at prices no higher than a 10% premium over the then-current book value of the shares. In the opinion of our Board and management, the underlying businesses of Berkshire are worth considerably more than this amount, though any such estimate is necessarily imprecise. If we are correct in our opinion, repurchases will enhance the per-share intrinsic value of Berkshire shares, benefiting shareholders who retain their interest.

Berkshire plans to use cash on hand to fund repurchases, and repurchases will not be made if they would reduce Berkshire’s consolidated cash equivalent holdings below $20 billion. Financial strength and redundant liquidity will always be of paramount importance at Berkshire.

Berkshire may repurchase shares in open market purchases or through privately negotiated transactions, at management’s discretion. The repurchase program is expected to continue indefinitely and the amount of purchases will depend entirely upon the levels of cash available, the attractiveness of investment and business opportunities either at hand or on the horizon, and the degree of discount from management’s estimate of intrinsic value. The repurchase program does not obligate Berkshire to repurchase any dollar amount or number of Class A or Class B shares.

This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which contain words such as “expect,” “believe” or “plan,” by their nature address matters that are, to different degrees, uncertain. These uncertainties may cause actual future events to be materially different than those expressed in our forward-looking statements, including with respect to the duration of the repurchase program. We do not undertake to update our forward-looking statements.

Berkshire Hathaway and its subsidiaries engage in diverse business activities including property and casualty insurance and reinsurance, utilities and energy, freight rail transportation, finance, manufacturing, retailing and services. Common stock of the company is listed on the New York Stock Exchange, trading symbols BRK.A and BRK.B.

SOURCE: Berkshire Hathaway Inc.

“Berkshire Adds Depth To Bench” WSJ 9/13/11 page C1

http://online.wsj.com/article/SB1000142405311190435350457656637289448357 8.html

The major over hang on BRK stock has long been the key man risk associated with Warren Buffett and the lack of a clear succession plan.

Buffett has been taking steps to eliminate the overhang in recent years.

A few highlights:

Mr. Weschler founded Peninsula Capital in 1999 after working at W.R. Grace as an assistant to the notoriously tough Chief Executive Peter Grace; later, he worked at a private-equity fund in Virginia. After W.R. Grace filed for bankruptcy protection in 2001, Mr. Weschler’s fund bought more than 5% of the stock at an average cost of around $2 a share, according to SEC filings and an investor in the fund. W.R. Grace closed yesterday at $34.29. Among Peninsula’s other large holdings: television outfits DirecTV http://online.wsj.com/public/quotes/main.html?type=djn&symbol=DTV and Liberty Media as well as DaVita http://online.wsj.com/public/quotes/main.html?type=djn&symbol=DVA , a provider of kidney care.

According to an investor in Peninsula, Mr. Weschler recently told shareholders that $100 invested at the fund’s inception on Jan. 14, 2000, had grown to $1,134, net of all fees, by last month. Over the same period, $100 invested in the Standard & Poor’s 500-stock index grew to $104.08, according to Morningstar, an investment-research firm.

Mr. Buffett, who turned 81 at the end of August and remains in good health, has no plans to relinquish any of his roles at Berkshire.

“A Long – Term Case for Stocks” WSJ 9/12/11 page C1

http://online.wsj.com/article/SB1000142405311190410340457656374077774953 6.html

Good quick article to remind you that you can’t predict short term market gyrations, but long term investors will likely do well.

A few quick highlights:

“People ought to take a longer view and think in terms of years and even decades,” Prof. Sylla says. “Most people are quite pessimistic right now. I am saying: The market may go down from here. It may go up. But if you look at the long sweep of history, this seems like a good time to buy because the average return is down near the bottom” and is likely to go up.

Using 10-year averages of annual market returns, including dividends and adjusted for inflation, Prof. Sylla and his colleagues found that U.S. stocks have risen and fallen in surprisingly consistent waves for more than 200 years. The pattern has become even steadier since World War II.

When 10-year-average annual returns dip below 5% and especially when they turn negative, as they did in 2008 and 2009, markets tend to bottom out and begin a recovery, the figures show. Years later, returns top out as investors get overconfident, with average returns above 15%. The market patterns might be related to swings of economic performance and investor confidence.

“Stocks: Playing Offense – Carefully”
By Bob Levisohn

A good quick read that points out that the defensive sectors of the SP 500 – utilities, telecom, consumer staples and health care – are up 1.1% over the past six months vs an 11.6% decline for the SP 500 overall.

The article goes on to suggest that the under performance of the more economically sensitive sectors has made them approach value territory. The implication is that unless investors think we’re headed toward catastrophe, portfolios should not be defensive.

The article quotes forward PE estimates of 10.9x for the SP 500, 13.5x for staples, and 9.1x for energy shares. While I put little faith in forward PEs and would probably argue that the “E” should come down somewhat going into year end, the article goes on to detail several more “Grahamian” measures and suggests that even if the US does enter into recession much of the stock market damage may have already been done.