jorden23
2021-08-12
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Alphabet Inc. And Buffett: Why He Regrets And Why He Never Bought<blockquote>Alphabet和巴菲特：为什么他后悔以及为什么他从未购买</blockquote>
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{"i18n":{"language":"zh_CN"},"detailType":1,"isChannel":false,"data":{"magic":2,"id":895344043,"tweetId":"895344043","gmtCreate":1628726479682,"gmtModify":1631891649584,"author":{"id":3582261505147752,"idStr":"3582261505147752","authorId":3582261505147752,"authorIdStr":"3582261505147752","name":"jorden23","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":12,"crmLevelSwitch":0,"individualDisplayBadges":[],"fanSize":2,"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"extraTitle":"","html":"<html><head></head><body><p>Like thanks</p></body></html>","htmlText":"<html><head></head><body><p>Like thanks</p></body></html>","text":"Like thanks","highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":1,"repostSize":0,"favoriteSize":0,"link":"https://laohu8.com/post/895344043","repostId":1164396246,"repostType":4,"repost":{"id":"1164396246","kind":"news","pubTimestamp":1628726291,"share":"https://www.laohu8.com/m/news/1164396246?lang=zh_CN&edition=full","pubTime":"2021-08-12 07:58","market":"us","language":"en","title":"Alphabet Inc. And Buffett: Why He Regrets And Why He Never Bought<blockquote>Alphabet和巴菲特：为什么他后悔以及为什么他从未购买</blockquote>","url":"https://stock-news.laohu8.com/highlight/detail?id=1164396246","media":"Seeking Alpha","summary":"Summary\n\nWarren Buffett admitted in 2019 that he made the wrong call in not buying Google, now known","content":"<p><b>Summary</b></p><p><blockquote><b>总结</b></blockquote></p><p> <ul> <li>Warren Buffett admitted in 2019 that he made the wrong call in not buying Google, now known as <a href=\"https://laohu8.com/S/GOOG\">Alphabet</a>.</li> <li>This article analyzes the reasons for his regrets – the wide moat, the autonomous growth prospects, and the incredible high and consistent ROCE that he missed.</li> <li>The results show that GOOG still offers potential return close to double digits in the long term even with the current elevated valuation.</li> <li>And finally, we will reflect on this investment regret, which seems to offer more insights on the business of GOOG and value investing than some of his investment success.</li> </ul> <img src=\"https://static.tigerbbs.com/5dc8d6cf86e99572d606fdc2326cc2de\" tg-width=\"1536\" tg-height=\"1024\" width=\"100%\" height=\"auto\">Prykhodov/iStock Editorial via Getty Images</p><p><blockquote><ul><li>Warren Buffett在2019年承认，他没有购买谷歌（现在被称为<a href=\"https://laohu8.com/S/GOOG\">Alphabet</a>.</li><li>本文分析了他遗憾的原因——宽阔的护城河、自主的增长前景以及他错过的令人难以置信的高且持续的ROCE。</li><li>结果显示，即使目前估值较高，从长远来看，GOOG仍能提供接近两位数的潜在回报。</li><li>最后，我们将反思这次投资遗憾，这似乎比他的一些投资成功更能提供对GOOG业务和价值投资的见解。</li></ul>Prykhodov/iStock社论来自Getty Images</blockquote></p><p> <h3><b>Thesis and Background</b></h3> Warren Buffett admitted in 2019 that he made the wrong call in not buying Google, now known as <a href=\"https://laohu8.com/S/GOOG\">Alphabet</a>. He regrets not having \"some insights into certain businesses\" especially given Google was making \"a lot of money\" at the time of its IPO from Geico. This article analyzes the reasons for his regrets - the wide moat, the autonomous growth prospects, and the incredibly high and consistent ROCE that GOOG enjoys and he missed. And his investment regrets seem to offer more insights on the business of GOOG and value investing than some of his investment success. Lastly, this article also shares my thoughts on why he never bought GOOG after he had those insights, and my reflections on its implications of value investing under the current market.</p><p><blockquote><h3><b>论文和背景</b></h3>Warren Buffett在2019年承认，他没有购买谷歌（现在被称为<a href=\"https://laohu8.com/S/GOOG\">Alphabet</a>他后悔没有“对某些业务有一些见解”，特别是考虑到谷歌在GEICO IPO时赚了“很多钱”。本文分析了他遗憾的原因——宽阔的护城河、自主增长前景，以及谷歌享受但他错过的令人难以置信的高且持续的ROCE。他的投资遗憾似乎比他的一些投资成功更能提供对GOOG业务和价值投资的见解。最后，本文还分享了我对他为什么在有了这些见解后从未购买GOOG的想法，以及我对其在当前市场下对价值投资的影响的思考。</blockquote></p><p> <h3><b>The moat and the network effects</b></h3> Google derives more than 80% of its revenue from advertising, but it is not an advertising company. Its true moat is in its \"free\" search services, where it totally dominates, as seen in the chart below. As seen, Google has been maintaining nearly 90% market share of the global search traffic - and it has been maintaining such dominance for OVER A DECADE!</p><p><blockquote><h3><b>护城河与网络效应</b></h3>谷歌80%以上的收入来自广告，但它不是一家广告公司。其真正的护城河在于其“免费”搜索服务，在该服务中它完全占据主导地位，如下图所示。正如所见，谷歌一直保持着全球搜索流量近90%的市场份额——而且它已经保持了十多年的主导地位！</blockquote></p><p> <img src=\"https://static.tigerbbs.com/ce762e8d299e63677d69af4856189893\" tg-width=\"640\" tg-height=\"394\" width=\"100%\" height=\"auto\">Source: Statista</p><p><blockquote>资料来源：斯塔蒂斯塔</blockquote></p><p> Furthermore, it is unlikely that such dominance would change in the future (barring any major regulation or antitrust legislation change) due to the so-called \"network effects\". The network effects refer to the fact that the value of certain products or services increases as more people use it. In other words, certain networks become increasingly more valuable or it becomes bigger. Not every network enjoy this magic feature, and as a matter of fact, most networks suffer a diminishing marginal rate of return - i.e., the additional return decreases as the network becomes bigger. A chain restaurant network is an example. As the network becomes larger, the nodes begin to compete against each other for customers and the return diminishes.</p><p><blockquote>此外，由于所谓的“网络效应”，这种主导地位在未来不太可能改变（除非任何重大监管或反托拉斯法发生变化）。网络效应是指某些产品或服务的价值随着更多的人使用而增加。换句话说，某些网络变得越来越有价值或者变得越来越大。并不是每个网络都享受这种神奇的功能，事实上，大多数网络的边际回报率都在递减——也就是说，随着网络变大，额外的回报会减少。连锁餐厅网络就是一个例子。随着网络变得更大，节点开始相互竞争客户，回报减少。</blockquote></p><p> But certain networks, like the search services Google provides, enjoys this magic trait - the network becomes more profitable as it becomes bigger. There is nothing new about the concept. It was true of railways, telephones, and fax machines. All these examples share these common traits: A) the larger the network becomes, the more valuable it becomes (one segment of railway linking city A and B is far more valuable when this segment also links to other railways linking other cities); and B) the larger the network becomes, the higher the switching cost (if everyone uses a fax machine and you do not want to use one, good luck to you).</p><p><blockquote>但某些网络，如谷歌提供的搜索服务，享有这种神奇的特性——网络越大，利润就越高。这个概念没有什么新意。铁路、电话和传真机都是如此。所有这些例子都有这些共同的特征：a）网络变得越大，它变得越有价值（当连接城市A和B的一段铁路也连接到连接其他城市的其他铁路时，它的价值要高得多）；B）网络越大，交换成本就越高（如果每个人都使用传真机，而你不想使用传真机，祝你好运）。</blockquote></p><p> Again, there is nothing new about the concept. But the internet age dramatically amplified the potency of the network effects. Once a lead is established - for whatever the reason, smart AI algorithms, advanced ML algorithms, or just dumb luck (GOOG certainly had benefited from all three) - the network effects would just kick in, take over, and compound itself.</p><p><blockquote>同样，这个概念没有什么新意。但是互联网时代极大地放大了网络效应的威力。一旦建立了领先优势——不管出于什么原因，智能人工智能算法、先进的ML算法，或者只是运气不好（谷歌肯定从这三者中受益）——网络效应就会开始发挥作用，接管并自我复合。</blockquote></p><p> It is a self-sustaining positive feedback loop: more users in this network will lead to more relevant and accurate search results will be, which will make the network lead to an even better and more valuable for the users, which will attract more new users to join and make it harder for existing users to leave, which again will lead back to more users and an even larger network.</p><p><blockquote>这是一个自我维持的正反馈循环：这个网络中更多的用户将导致更相关和更准确的搜索结果，这将使网络对用户来说更好和更有价值，这将吸引更多的新用户加入，并使现有用户更难离开，这将再次导致更多的用户和更大的网络。</blockquote></p><p> <h3><b>The perpetual growth prospects</b></h3> If you, like this author, are a long-term investor who subscribes to Buffett's concepts of owner's earning, perpetual growth rate, and equity bond, then the long-term return is simpler. It is \"simply\" the summation of the owner's earning yield (\"OEY\") and the perpetual growth rate (\"PGR\"), i.e.,</p><p><blockquote><h3><b>持续增长前景</b></h3>如果你和这位作者一样，是一个长期投资者，认同巴菲特的所有者收益、永久增长率和股权债券的概念，那么长期回报就更简单了。它“简单地”是所有者收益收益率（“OEY”）和永久增长率（“PGR”）的总和，即，</blockquote></p><p> Longer-Term ROI = OEY + PGR</p><p><blockquote>长期ROI=OEY+PGR</blockquote></p><p></p><p> Because in the long term, all fluctuations in valuation are averaged out (all luck at the end even out). And it doesn't really matter how the business uses the earning (payout as dividend, retained in the bank account, or repurchase stocks). As long as used sensibly (as GOOG has done in the past), it will be reflected as a return to the business owner.</p><p><blockquote>因为从长期来看，估值的所有波动都被平均掉了（最后所有的运气都被平均掉了）。企业如何使用收益（作为股息支付、保留在银行账户中或回购股票）并不重要。只要明智地使用（就像GOOG过去所做的那样），它就会体现为对企业主的回报。</blockquote></p><p> OEY is the owner's earnings divided by the entry price. All the complications are in the estimation of the owner's earning - the real economic earning of the business, not the nominal accounting earning. Here is a crude and conservative estimate, I will just use the free cash flow (\"FCF\") as the owner's earning. It is conservative in the sense that rigorously speaking, the owner's earning should be free cash flow plus the portion of CAPEx that is used to fuel the growth (i.e., the growth CAPEx). At its current price levels, the OEY is ~3.2% for GOOG (~31.6x price to FCF - no cheap at all, but wait for the PGR part).</p><p><blockquote>OEY是所有者的收入除以入场价格。所有的复杂性都在于对所有者收入的估计——企业的实际经济收入，而不是名义上的会计收入。这是一个粗略而保守的估计，我将使用自由现金流（“FCF”）作为所有者的收入。它是保守的，因为严格来说，所有者的收入应该是自由现金流加上用于推动增长的资本支出部分（即增长资本支出）。按照目前的价格水平，GOOG的OEY约为3.2%（FCF价格约为31.6倍-一点也不便宜，但请等待PGR部分）。</blockquote></p><p> The next and more important item is the PGR. To understand and estimate it, we will need to first estimate the return on capital employed (\"ROCE\"). Note that ROCE is different from the return on equity (and more fundamental and important in my view). ROCE considers the return of capital ACTUALLY employed, and therefore provides insight into how much additional capital a business needs to invest in order to earn a given extra amount of income - a key to estimate the PGR. For businesses like GOOG, I consider the following items capital actually employed:</p><p><blockquote>下一个也是更重要的项目是PGR。为了理解和估计它，我们需要首先估计已用资本回报率（“ROCE”）。请注意，ROCE不同于股本回报率（在我看来更基本、更重要）。ROCE考虑实际使用的资本回报，因此可以深入了解企业需要投资多少额外资本才能获得给定的额外收入——这是估计PGR的关键。对于像GOOG这样的企业，我认为以下项目是实际使用的资本：</blockquote></p><p> 1. Working capital, including payables, receivables, inventory. These are the capitals required for the daily operation of their businesses.</p><p><blockquote>1、营运资金，包括应付账款、应收账款、存货。这些是其业务日常运营所需的资本。</blockquote></p><p> 2. Gross Property, Plant, and Equipment. These are the capitals required to actually conduct business and manufacture their products.</p><p><blockquote>2.不动产、厂房和设备总额。这些是实际开展业务和制造产品所需的资本。</blockquote></p><p> 3. Research and development expenses are also considered as a capital investment for such a business.</p><p><blockquote>3.研发费用也被认为是此类业务的资本投资。</blockquote></p><p> Based on the above considerations, the ROCE of GOOG over the past decade is shown below. As seen, GOOG was able to maintain a remarkably high and stable ROCE over the long term: on average 55% for the past decade. Thanks to such ultra-high ROCE, it only requires a bit of reinvestment to fuel future growth, as elaborated in the next section.</p><p><blockquote>基于上述考虑，GOOG过去十年的ROCE如下所示。可以看出，GOOG能够长期保持非常高且稳定的ROCE：过去十年平均为55%。由于如此超高的ROCE，它只需要一点再投资就可以推动未来的增长，如下一节所述。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/3789be736d72b1083205f654bae2bc4d\" tg-width=\"640\" tg-height=\"409\" width=\"100%\" height=\"auto\">Source: author and Seeking Alpha</p><p><blockquote>资料来源：作者和Seeking Alpha</blockquote></p><p> <h3><b>The financial flexibility</b></h3> Buffett said multiple times that there are businesses which, at the end of the day, point to a bunch of depreciated properties and equipment and tell the investors, \"these are our profits.\" He hates his business.</p><p><blockquote><h3><b>财务灵活性</b></h3>巴菲特多次表示，有些企业最终会指着一堆折旧的财产和设备告诉投资者，“这些是我们的利润。”他讨厌他的生意。</blockquote></p><p> GOOG is the exact opposite of such businesses - it generates plenty of cash and at the same time only needs a very low level of reinvestment to fuel further growth. First, GOOG is essential debt-free. Interest expenses are negligible compared to profits. Then as seen in the chart below, the business generates so much cash that it has so much financial flexibility in terms of capital allocation. As seen, in recent years, GOOG only needs 18% of its operation cash (\"OPC\") to cover the maintenance CAPEx. GOOG does not pay a dividend (even though it can easily afford it).</p><p><blockquote>GOOG与此类业务完全相反——它产生大量现金，同时只需要非常低水平的再投资即可推动进一步增长。首先，GOOG基本上是无债务的。与利润相比，利息支出可以忽略不计。如下图所示，该企业产生了如此多的现金，以至于在资本配置方面具有如此大的财务灵活性。可以看出，近年来，GOOG只需要18%的运营现金（“OPC”）来支付维护资本支出。GOOG不支付股息（尽管它很容易负担得起）。</blockquote></p><p> So this leaves awhopping 72% of the OPC to be dispensable cash, and the company can choose what to do with it: reinvest to fuel further growth, retain it to the bank account, pay a dividend, pay down debt, buy back shares, et al. It obviously makes total sense to reinvest all of it to fuel further growth given its 55% ROCE. At this ROCE, $1 reinvested would be fuel $0.55 of additional earning! But the problem is that for businesses at this scale, there are just not that many opportunities to reinvest the earnings. As a result, GOOG has been allocating a large part of the remaining earning, on average 37% in recent years, to buy back shares. Such repurchases, besides reflecting the confidence of the management in their own business and the cash generation capability, again also signals the lack of good reinvestment opportunities that could move the needle.</p><p><blockquote>因此，这使得OPC的72%成为可有可无的现金，公司可以选择如何处理它：再投资以推动进一步增长、将其保留在银行账户中、支付股息、偿还债务、回购股票等。鉴于其55%的ROCE，将所有资金进行再投资以推动进一步增长显然是完全有意义的。在这个ROCE，1美元的再投资将带来0.55美元的额外收入！但问题是，对于这种规模的企业来说，将收益进行再投资的机会并不多。因此，GOOG一直将剩余收益的很大一部分（近年来平均为37%）用于回购股票。此类回购除了反映管理层对自身业务和现金产生能力的信心外，也再次表明缺乏可以推动变革的良好再投资机会。</blockquote></p><p> But all things considered, with 55% ROCE, GOOG does not need that much reinvestment to grow. My estimation is that GOOG has been reinvesting about 10% of its earnings to fuel future growth. With a 55% ROCE, it could maintain a 5.5% PGR (PGR = ROCE * fraction of earning reinvested = 55% * 10% = 5.5%).</p><p><blockquote>但综合考虑，凭借55%的ROCE，GOOG不需要那么多再投资来实现增长。我估计，GOOG一直将其收益的10%左右进行再投资，以推动未来的增长。在55%的ROCE下，它可以保持5.5%的PGR（PGR=ROCE*再投资收益比例=55%*10%=5.5%）。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/3ce10644f6a839cad98e8bb2073a5259\" tg-width=\"640\" tg-height=\"313\" width=\"100%\" height=\"auto\">Source: author and Seeking Alpha</p><p><blockquote>资料来源：作者和Seeking Alpha</blockquote></p><p></p><p> Now we have both pieces of the puzzle in place to estimate the long-term return, as shown in the next chart. At its current price levels, the OEY is again estimated to be ~3.2%, and the PGR is about 5.5% as mentioned above. So the total return in the long term at the current valuation is about 8.7%, pretty decent even with the current relatively expensive valuation.</p><p><blockquote>现在，我们已经有了估计长期回报的两块拼图，如下图所示。按照目前的价格水平，OEY估计约为3.2%，如上所述，PGR约为5.5%。因此，按照目前的估值，长期总回报率约为8.7%，即使在目前相对昂贵的估值下，也相当不错。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/0c20f61c6521f8bf7c4a24c580fcf293\" tg-width=\"640\" tg-height=\"423\" width=\"100%\" height=\"auto\">Source: author and Seeking Alpha</p><p><blockquote>资料来源：作者和Seeking Alpha</blockquote></p><p> <h3><b>Then why he never bought GOOG (so far)?</b></h3> So in summary, here are my thoughts on why Buffett regrets on GOOG. It is a business that meets all his criteria as an autonomous and perpetual compounder - wide moat, high switching cost, high ROCE, lots of cash generated and only a little cash required, and a toll bridge role in the business ecosystem - and he missed all of that.</p><p><blockquote><h3><b>那为什么他（到目前为止）从来没有买过谷歌？</b></h3>总而言之，以下是我对巴菲特为何对GOOG感到遗憾的想法。这是一家满足他的所有标准的企业——自主且永久的复合护城河、高转换成本、高ROCE、产生大量现金且只需要很少现金，以及在商业生态系统中的收费桥梁角色——而他错过了所有这些。</blockquote></p><p> Then the next interesting question for me was that - why he never bought it? The valuation was not that far from his typical entry zone as late as 2011 (when the PE was below 20x). But he never bought, why?</p><p><blockquote>对我来说，下一个有趣的问题是——为什么他从来不买？直到2011年（当时市盈率低于20倍），估值才与他的典型进入区域相差不远。但他从来没有买过，为什么？</blockquote></p><p> The short answer is of course I do not know. I can only stipulate. And I think one possible reason is that he found a better idea - <a href=\"https://laohu8.com/S/AAPL\">Apple</a> around that time he regretted GOOG. His AAPL investment was detailed in my other articleand I won't go into details here. In summary, he was able to purchase AAPL under what I call the Buffett's 10x Pretax Rule - the observation that many of his largest and best deals were purchase with a price below or near 10x pretax earning. Besides AAPL, the list also included <a href=\"https://laohu8.com/S/KO\">Coca-Cola</a>, <a href=\"https://laohu8.com/S/AXP\">American Express</a>, <a href=\"https://laohu8.com/S/WFC\">Wells Fargo</a>, <a href=\"https://laohu8.com/S/WMT\">Wal-Mart</a>, Burlington Northern, and even his recent $25B repurchases of BRK.A as analyzed in my other article.</p><p><blockquote>简短的回答是我当然不知道。我只能规定。我认为一个可能的原因是他找到了一个更好的主意-<a href=\"https://laohu8.com/S/AAPL\">苹果</a>大约在那个时候，他后悔了谷歌。他对AAPL的投资在我的另一篇文章中有详细介绍，我不会在这里详细介绍。总之，他能够根据我看涨期权巴菲特的10倍税前规则购买苹果公司——巴菲特的许多最大和最好的交易都是以低于或接近10倍税前收益的价格购买的。除AAPL外，该名单还包括<a href=\"https://laohu8.com/S/KO\">可口可乐</a>,<a href=\"https://laohu8.com/S/AXP\">美国运通</a>,<a href=\"https://laohu8.com/S/WFC\">富国银行</a>,<a href=\"https://laohu8.com/S/WMT\">沃尔玛</a>、Burlington Northern，甚至他最近以250亿美元回购BRK.A，正如我在另一篇文章中所分析的那样。</blockquote></p><p> As seen from the chart below, he was able to purchase AAPL around 10x pretax earning around 2016~2107. And AAPL features an even higher ROCE than GOOG. As a result, it was no-brainer and he must felt more comfortable with the AAPL idea - judging from the fact more than 1/3 of BRK's book value is in AAPL stocks currently.</p><p><blockquote>如下图所示，他能够在2016年至2107年左右以税前收益的10倍左右购买AAPL。AAPL的ROCE甚至高于GOOG。因此，这是显而易见的，他一定对AAPL的想法感到更满意——从目前BRK账面价值的1/3以上是AAPL股票这一事实来看。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/84025fb81cb58b014a81ed7374eab50d\" tg-width=\"640\" tg-height=\"359\" width=\"100%\" height=\"auto\">Source: author and Seeking Alpha data</p><p><blockquote>资料来源：作者和Seeking Alpha数据</blockquote></p><p> It is also interesting to look at the following chart, comparing the PE vs ROCE of a few large positions in Buffett's BRK portfolio together with GOOG. This chart shows three of the large BRK holdings that I have written about recently ([[V]], [[AAPL]], and [[ABBV]]). The ROC data are directly pulled from my previous analyses, and in case you want to see the details of how I got these numbers, you can look up recent articles under these tickers. I am not sure what the picture will look like as we add more data points on it (I do plan to organize my notes on his other major holdings and add more data points onto this plot).</p><p><blockquote>看看下面的图表也很有趣，它比较了巴菲特BRK投资组合中几个大头寸与GOOG的PE与ROCE。这张图表显示了我最近写的三只大型BRK持股（[[V]]、[[AAPL]]和[[ABBV]]）。ROC数据直接来自我之前的分析，如果您想了解我如何获得这些数字的详细信息，您可以在这些股票代码下查找最近的文章。我不确定随着我们在上面添加更多数据点，图片会是什么样子（我确实计划整理我对他其他主要持股的笔记，并在这张图上添加更多数据点）。</blockquote></p><p> But with the few data points I have now, I cannot help drawing/seeing the green line - what I call a Buffett value line. It is a line linking ABBV and AAPL - a good business at a good price and a high-quality business at a high price. So from a value investor point of view, it only makes sense to make investments along this line or below it. Because investment along this line or below represents a trade-off between quality and price that is equivalent or better than ABBV or AAPL. It makes no sense to invest above this line, as anything above this line represents an inferior trade-off between quality and price - we'd be better off to just invest in ABBV and AAPL.</p><p><blockquote>但凭借我现在掌握的几个数据点，我忍不住画出/看到了绿线——我看涨期权的巴菲特价值线。它是连接ABBV和AAPL的一条线——物美价廉的好业务和高价的高质量业务。因此，从价值投资者的角度来看，只有沿着这条线或低于这条线进行投资才有意义。因为沿着这条线或以下的投资代表了质量和价格之间的权衡，相当于或优于ABBV或AAPL。投资高于这条线是没有意义的，因为高于这条线的任何东西都代表着质量和价格之间的劣质权衡——我们最好只投资ABBV和AAPL。</blockquote></p><p> So this Buffett value line really is my other stipulation why he does buy into GOOG. As good as the business this, it is at least not better than other investments that he saw/sees.</p><p><blockquote>因此，巴菲特的这条价值线确实是我为什么买入谷歌的另一个规定。尽管这笔生意很好，但至少不比他看到的其他投资好。</blockquote></p><p> Finally, if you are wondering about why he is still holding V given it is far above the value line, the answer is again I really do not know. There are so many aspects that need to be considered with a position of V's size in his portfolio - tax liabilities, alternative investment candidates, opportunity cost, et al. I know I would trade V for ABBV and/or AAPL myself under current conditions. But I simply do not know what his considerations are.</p><p><blockquote>最后，如果你想知道为什么他仍然持有V，因为它远远高于价值线，答案是我真的不知道。V在其投资组合中的地位需要考虑很多方面——纳税义务、另类投资候选人、机会成本等。我知道在目前的情况下，我会用V换ABBV和/或AAPL。但我根本不知道他的考虑是什么。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/381b3149493c4a406c9faa82348300f7\" tg-width=\"640\" tg-height=\"411\" width=\"100%\" height=\"auto\">Source: author and Seeking Alpha data</p><p><blockquote>资料来源：作者和Seeking Alpha数据</blockquote></p><p></p><p> <h3><b>Conclusion and final thoughts</b></h3> This article analyzes Buffett's regrets for not buying GOOG earlier. Indeed, GOOG is a business that meets all of Buffett's criteria as an autonomous and perpetual compounder - wide moat, high switching cost, high and consistent ROCE, lots of cash generated and only a little cash required, and a toll bridge role in the business ecosystem - and he missed all of that. The analyses show that GOOG still offers potential return close to double digits (about 9%) in the long term even with the current elevated valuation.</p><p><blockquote><h3><b>结论和最后的想法</b></h3>本文分析了巴菲特没有早点买入GOOG的遗憾。事实上，GOOG是一家满足巴菲特所有标准的企业，即自主且永久的复合护城河、高转换成本、高且一致的ROCE、产生大量现金且只需要少量现金，以及在商业生态系统中的收费桥梁角色——他错过了这一切。分析显示，即使目前估值较高，从长远来看，GOOG仍能提供接近两位数（约9%）的潜在回报。</blockquote></p><p> And finally, this article shared my reflections/stipulations on this investment regret of his, which seems to offer more insights on the business of GOOG and value investing than some of his investment success. Underlying all his decisions is the same value-driven philosophy and long-term thinking.</p><p><blockquote>最后，这篇文章分享了我对他的投资遗憾的思考/规定，这似乎比他的一些投资成功更能提供对GOOG业务和价值投资的见解。他所有决策的背后都是同样的价值驱动理念和长期思考。</blockquote></p><p></p>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alphabet Inc. And Buffett: Why He Regrets And Why He Never Bought<blockquote>Alphabet和巴菲特：为什么他后悔以及为什么他从未购买</blockquote></title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 12.5px; color: #7E829C; margin: 0;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlphabet Inc. And Buffett: Why He Regrets And Why He Never Bought<blockquote>Alphabet和巴菲特：为什么他后悔以及为什么他从未购买</blockquote>\n</h2>\n<h4 class=\"meta\">\n<p class=\"head\">\n<strong class=\"h-name small\">Seeking Alpha</strong><span class=\"h-time small\">2021-08-12 07:58</span>\n</p>\n</h4>\n</header>\n<article>\n<p><b>Summary</b></p><p><blockquote><b>总结</b></blockquote></p><p> <ul> <li>Warren Buffett admitted in 2019 that he made the wrong call in not buying Google, now known as <a href=\"https://laohu8.com/S/GOOG\">Alphabet</a>.</li> <li>This article analyzes the reasons for his regrets – the wide moat, the autonomous growth prospects, and the incredible high and consistent ROCE that he missed.</li> <li>The results show that GOOG still offers potential return close to double digits in the long term even with the current elevated valuation.</li> <li>And finally, we will reflect on this investment regret, which seems to offer more insights on the business of GOOG and value investing than some of his investment success.</li> </ul> <img src=\"https://static.tigerbbs.com/5dc8d6cf86e99572d606fdc2326cc2de\" tg-width=\"1536\" tg-height=\"1024\" width=\"100%\" height=\"auto\">Prykhodov/iStock Editorial via Getty Images</p><p><blockquote><ul><li>Warren Buffett在2019年承认，他没有购买谷歌（现在被称为<a href=\"https://laohu8.com/S/GOOG\">Alphabet</a>.</li><li>本文分析了他遗憾的原因——宽阔的护城河、自主的增长前景以及他错过的令人难以置信的高且持续的ROCE。</li><li>结果显示，即使目前估值较高，从长远来看，GOOG仍能提供接近两位数的潜在回报。</li><li>最后，我们将反思这次投资遗憾，这似乎比他的一些投资成功更能提供对GOOG业务和价值投资的见解。</li></ul>Prykhodov/iStock社论来自Getty Images</blockquote></p><p> <h3><b>Thesis and Background</b></h3> Warren Buffett admitted in 2019 that he made the wrong call in not buying Google, now known as <a href=\"https://laohu8.com/S/GOOG\">Alphabet</a>. He regrets not having \"some insights into certain businesses\" especially given Google was making \"a lot of money\" at the time of its IPO from Geico. This article analyzes the reasons for his regrets - the wide moat, the autonomous growth prospects, and the incredibly high and consistent ROCE that GOOG enjoys and he missed. And his investment regrets seem to offer more insights on the business of GOOG and value investing than some of his investment success. Lastly, this article also shares my thoughts on why he never bought GOOG after he had those insights, and my reflections on its implications of value investing under the current market.</p><p><blockquote><h3><b>论文和背景</b></h3>Warren Buffett在2019年承认，他没有购买谷歌（现在被称为<a href=\"https://laohu8.com/S/GOOG\">Alphabet</a>他后悔没有“对某些业务有一些见解”，特别是考虑到谷歌在GEICO IPO时赚了“很多钱”。本文分析了他遗憾的原因——宽阔的护城河、自主增长前景，以及谷歌享受但他错过的令人难以置信的高且持续的ROCE。他的投资遗憾似乎比他的一些投资成功更能提供对GOOG业务和价值投资的见解。最后，本文还分享了我对他为什么在有了这些见解后从未购买GOOG的想法，以及我对其在当前市场下对价值投资的影响的思考。</blockquote></p><p> <h3><b>The moat and the network effects</b></h3> Google derives more than 80% of its revenue from advertising, but it is not an advertising company. Its true moat is in its \"free\" search services, where it totally dominates, as seen in the chart below. As seen, Google has been maintaining nearly 90% market share of the global search traffic - and it has been maintaining such dominance for OVER A DECADE!</p><p><blockquote><h3><b>护城河与网络效应</b></h3>谷歌80%以上的收入来自广告，但它不是一家广告公司。其真正的护城河在于其“免费”搜索服务，在该服务中它完全占据主导地位，如下图所示。正如所见，谷歌一直保持着全球搜索流量近90%的市场份额——而且它已经保持了十多年的主导地位！</blockquote></p><p> <img src=\"https://static.tigerbbs.com/ce762e8d299e63677d69af4856189893\" tg-width=\"640\" tg-height=\"394\" width=\"100%\" height=\"auto\">Source: Statista</p><p><blockquote>资料来源：斯塔蒂斯塔</blockquote></p><p> Furthermore, it is unlikely that such dominance would change in the future (barring any major regulation or antitrust legislation change) due to the so-called \"network effects\". The network effects refer to the fact that the value of certain products or services increases as more people use it. In other words, certain networks become increasingly more valuable or it becomes bigger. Not every network enjoy this magic feature, and as a matter of fact, most networks suffer a diminishing marginal rate of return - i.e., the additional return decreases as the network becomes bigger. A chain restaurant network is an example. As the network becomes larger, the nodes begin to compete against each other for customers and the return diminishes.</p><p><blockquote>此外，由于所谓的“网络效应”，这种主导地位在未来不太可能改变（除非任何重大监管或反托拉斯法发生变化）。网络效应是指某些产品或服务的价值随着更多的人使用而增加。换句话说，某些网络变得越来越有价值或者变得越来越大。并不是每个网络都享受这种神奇的功能，事实上，大多数网络的边际回报率都在递减——也就是说，随着网络变大，额外的回报会减少。连锁餐厅网络就是一个例子。随着网络变得更大，节点开始相互竞争客户，回报减少。</blockquote></p><p> But certain networks, like the search services Google provides, enjoys this magic trait - the network becomes more profitable as it becomes bigger. There is nothing new about the concept. It was true of railways, telephones, and fax machines. All these examples share these common traits: A) the larger the network becomes, the more valuable it becomes (one segment of railway linking city A and B is far more valuable when this segment also links to other railways linking other cities); and B) the larger the network becomes, the higher the switching cost (if everyone uses a fax machine and you do not want to use one, good luck to you).</p><p><blockquote>但某些网络，如谷歌提供的搜索服务，享有这种神奇的特性——网络越大，利润就越高。这个概念没有什么新意。铁路、电话和传真机都是如此。所有这些例子都有这些共同的特征：a）网络变得越大，它变得越有价值（当连接城市A和B的一段铁路也连接到连接其他城市的其他铁路时，它的价值要高得多）；B）网络越大，交换成本就越高（如果每个人都使用传真机，而你不想使用传真机，祝你好运）。</blockquote></p><p> Again, there is nothing new about the concept. But the internet age dramatically amplified the potency of the network effects. Once a lead is established - for whatever the reason, smart AI algorithms, advanced ML algorithms, or just dumb luck (GOOG certainly had benefited from all three) - the network effects would just kick in, take over, and compound itself.</p><p><blockquote>同样，这个概念没有什么新意。但是互联网时代极大地放大了网络效应的威力。一旦建立了领先优势——不管出于什么原因，智能人工智能算法、先进的ML算法，或者只是运气不好（谷歌肯定从这三者中受益）——网络效应就会开始发挥作用，接管并自我复合。</blockquote></p><p> It is a self-sustaining positive feedback loop: more users in this network will lead to more relevant and accurate search results will be, which will make the network lead to an even better and more valuable for the users, which will attract more new users to join and make it harder for existing users to leave, which again will lead back to more users and an even larger network.</p><p><blockquote>这是一个自我维持的正反馈循环：这个网络中更多的用户将导致更相关和更准确的搜索结果，这将使网络对用户来说更好和更有价值，这将吸引更多的新用户加入，并使现有用户更难离开，这将再次导致更多的用户和更大的网络。</blockquote></p><p> <h3><b>The perpetual growth prospects</b></h3> If you, like this author, are a long-term investor who subscribes to Buffett's concepts of owner's earning, perpetual growth rate, and equity bond, then the long-term return is simpler. It is \"simply\" the summation of the owner's earning yield (\"OEY\") and the perpetual growth rate (\"PGR\"), i.e.,</p><p><blockquote><h3><b>持续增长前景</b></h3>如果你和这位作者一样，是一个长期投资者，认同巴菲特的所有者收益、永久增长率和股权债券的概念，那么长期回报就更简单了。它“简单地”是所有者收益收益率（“OEY”）和永久增长率（“PGR”）的总和，即，</blockquote></p><p> Longer-Term ROI = OEY + PGR</p><p><blockquote>长期ROI=OEY+PGR</blockquote></p><p></p><p> Because in the long term, all fluctuations in valuation are averaged out (all luck at the end even out). And it doesn't really matter how the business uses the earning (payout as dividend, retained in the bank account, or repurchase stocks). As long as used sensibly (as GOOG has done in the past), it will be reflected as a return to the business owner.</p><p><blockquote>因为从长期来看，估值的所有波动都被平均掉了（最后所有的运气都被平均掉了）。企业如何使用收益（作为股息支付、保留在银行账户中或回购股票）并不重要。只要明智地使用（就像GOOG过去所做的那样），它就会体现为对企业主的回报。</blockquote></p><p> OEY is the owner's earnings divided by the entry price. All the complications are in the estimation of the owner's earning - the real economic earning of the business, not the nominal accounting earning. Here is a crude and conservative estimate, I will just use the free cash flow (\"FCF\") as the owner's earning. It is conservative in the sense that rigorously speaking, the owner's earning should be free cash flow plus the portion of CAPEx that is used to fuel the growth (i.e., the growth CAPEx). At its current price levels, the OEY is ~3.2% for GOOG (~31.6x price to FCF - no cheap at all, but wait for the PGR part).</p><p><blockquote>OEY是所有者的收入除以入场价格。所有的复杂性都在于对所有者收入的估计——企业的实际经济收入，而不是名义上的会计收入。这是一个粗略而保守的估计，我将使用自由现金流（“FCF”）作为所有者的收入。它是保守的，因为严格来说，所有者的收入应该是自由现金流加上用于推动增长的资本支出部分（即增长资本支出）。按照目前的价格水平，GOOG的OEY约为3.2%（FCF价格约为31.6倍-一点也不便宜，但请等待PGR部分）。</blockquote></p><p> The next and more important item is the PGR. To understand and estimate it, we will need to first estimate the return on capital employed (\"ROCE\"). Note that ROCE is different from the return on equity (and more fundamental and important in my view). ROCE considers the return of capital ACTUALLY employed, and therefore provides insight into how much additional capital a business needs to invest in order to earn a given extra amount of income - a key to estimate the PGR. For businesses like GOOG, I consider the following items capital actually employed:</p><p><blockquote>下一个也是更重要的项目是PGR。为了理解和估计它，我们需要首先估计已用资本回报率（“ROCE”）。请注意，ROCE不同于股本回报率（在我看来更基本、更重要）。ROCE考虑实际使用的资本回报，因此可以深入了解企业需要投资多少额外资本才能获得给定的额外收入——这是估计PGR的关键。对于像GOOG这样的企业，我认为以下项目是实际使用的资本：</blockquote></p><p> 1. Working capital, including payables, receivables, inventory. These are the capitals required for the daily operation of their businesses.</p><p><blockquote>1、营运资金，包括应付账款、应收账款、存货。这些是其业务日常运营所需的资本。</blockquote></p><p> 2. Gross Property, Plant, and Equipment. These are the capitals required to actually conduct business and manufacture their products.</p><p><blockquote>2.不动产、厂房和设备总额。这些是实际开展业务和制造产品所需的资本。</blockquote></p><p> 3. Research and development expenses are also considered as a capital investment for such a business.</p><p><blockquote>3.研发费用也被认为是此类业务的资本投资。</blockquote></p><p> Based on the above considerations, the ROCE of GOOG over the past decade is shown below. As seen, GOOG was able to maintain a remarkably high and stable ROCE over the long term: on average 55% for the past decade. Thanks to such ultra-high ROCE, it only requires a bit of reinvestment to fuel future growth, as elaborated in the next section.</p><p><blockquote>基于上述考虑，GOOG过去十年的ROCE如下所示。可以看出，GOOG能够长期保持非常高且稳定的ROCE：过去十年平均为55%。由于如此超高的ROCE，它只需要一点再投资就可以推动未来的增长，如下一节所述。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/3789be736d72b1083205f654bae2bc4d\" tg-width=\"640\" tg-height=\"409\" width=\"100%\" height=\"auto\">Source: author and Seeking Alpha</p><p><blockquote>资料来源：作者和Seeking Alpha</blockquote></p><p> <h3><b>The financial flexibility</b></h3> Buffett said multiple times that there are businesses which, at the end of the day, point to a bunch of depreciated properties and equipment and tell the investors, \"these are our profits.\" He hates his business.</p><p><blockquote><h3><b>财务灵活性</b></h3>巴菲特多次表示，有些企业最终会指着一堆折旧的财产和设备告诉投资者，“这些是我们的利润。”他讨厌他的生意。</blockquote></p><p> GOOG is the exact opposite of such businesses - it generates plenty of cash and at the same time only needs a very low level of reinvestment to fuel further growth. First, GOOG is essential debt-free. Interest expenses are negligible compared to profits. Then as seen in the chart below, the business generates so much cash that it has so much financial flexibility in terms of capital allocation. As seen, in recent years, GOOG only needs 18% of its operation cash (\"OPC\") to cover the maintenance CAPEx. GOOG does not pay a dividend (even though it can easily afford it).</p><p><blockquote>GOOG与此类业务完全相反——它产生大量现金，同时只需要非常低水平的再投资即可推动进一步增长。首先，GOOG基本上是无债务的。与利润相比，利息支出可以忽略不计。如下图所示，该企业产生了如此多的现金，以至于在资本配置方面具有如此大的财务灵活性。可以看出，近年来，GOOG只需要18%的运营现金（“OPC”）来支付维护资本支出。GOOG不支付股息（尽管它很容易负担得起）。</blockquote></p><p> So this leaves awhopping 72% of the OPC to be dispensable cash, and the company can choose what to do with it: reinvest to fuel further growth, retain it to the bank account, pay a dividend, pay down debt, buy back shares, et al. It obviously makes total sense to reinvest all of it to fuel further growth given its 55% ROCE. At this ROCE, $1 reinvested would be fuel $0.55 of additional earning! But the problem is that for businesses at this scale, there are just not that many opportunities to reinvest the earnings. As a result, GOOG has been allocating a large part of the remaining earning, on average 37% in recent years, to buy back shares. Such repurchases, besides reflecting the confidence of the management in their own business and the cash generation capability, again also signals the lack of good reinvestment opportunities that could move the needle.</p><p><blockquote>因此，这使得OPC的72%成为可有可无的现金，公司可以选择如何处理它：再投资以推动进一步增长、将其保留在银行账户中、支付股息、偿还债务、回购股票等。鉴于其55%的ROCE，将所有资金进行再投资以推动进一步增长显然是完全有意义的。在这个ROCE，1美元的再投资将带来0.55美元的额外收入！但问题是，对于这种规模的企业来说，将收益进行再投资的机会并不多。因此，GOOG一直将剩余收益的很大一部分（近年来平均为37%）用于回购股票。此类回购除了反映管理层对自身业务和现金产生能力的信心外，也再次表明缺乏可以推动变革的良好再投资机会。</blockquote></p><p> But all things considered, with 55% ROCE, GOOG does not need that much reinvestment to grow. My estimation is that GOOG has been reinvesting about 10% of its earnings to fuel future growth. With a 55% ROCE, it could maintain a 5.5% PGR (PGR = ROCE * fraction of earning reinvested = 55% * 10% = 5.5%).</p><p><blockquote>但综合考虑，凭借55%的ROCE，GOOG不需要那么多再投资来实现增长。我估计，GOOG一直将其收益的10%左右进行再投资，以推动未来的增长。在55%的ROCE下，它可以保持5.5%的PGR（PGR=ROCE*再投资收益比例=55%*10%=5.5%）。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/3ce10644f6a839cad98e8bb2073a5259\" tg-width=\"640\" tg-height=\"313\" width=\"100%\" height=\"auto\">Source: author and Seeking Alpha</p><p><blockquote>资料来源：作者和Seeking Alpha</blockquote></p><p></p><p> Now we have both pieces of the puzzle in place to estimate the long-term return, as shown in the next chart. At its current price levels, the OEY is again estimated to be ~3.2%, and the PGR is about 5.5% as mentioned above. So the total return in the long term at the current valuation is about 8.7%, pretty decent even with the current relatively expensive valuation.</p><p><blockquote>现在，我们已经有了估计长期回报的两块拼图，如下图所示。按照目前的价格水平，OEY估计约为3.2%，如上所述，PGR约为5.5%。因此，按照目前的估值，长期总回报率约为8.7%，即使在目前相对昂贵的估值下，也相当不错。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/0c20f61c6521f8bf7c4a24c580fcf293\" tg-width=\"640\" tg-height=\"423\" width=\"100%\" height=\"auto\">Source: author and Seeking Alpha</p><p><blockquote>资料来源：作者和Seeking Alpha</blockquote></p><p> <h3><b>Then why he never bought GOOG (so far)?</b></h3> So in summary, here are my thoughts on why Buffett regrets on GOOG. It is a business that meets all his criteria as an autonomous and perpetual compounder - wide moat, high switching cost, high ROCE, lots of cash generated and only a little cash required, and a toll bridge role in the business ecosystem - and he missed all of that.</p><p><blockquote><h3><b>那为什么他（到目前为止）从来没有买过谷歌？</b></h3>总而言之，以下是我对巴菲特为何对GOOG感到遗憾的想法。这是一家满足他的所有标准的企业——自主且永久的复合护城河、高转换成本、高ROCE、产生大量现金且只需要很少现金，以及在商业生态系统中的收费桥梁角色——而他错过了所有这些。</blockquote></p><p> Then the next interesting question for me was that - why he never bought it? The valuation was not that far from his typical entry zone as late as 2011 (when the PE was below 20x). But he never bought, why?</p><p><blockquote>对我来说，下一个有趣的问题是——为什么他从来不买？直到2011年（当时市盈率低于20倍），估值才与他的典型进入区域相差不远。但他从来没有买过，为什么？</blockquote></p><p> The short answer is of course I do not know. I can only stipulate. And I think one possible reason is that he found a better idea - <a href=\"https://laohu8.com/S/AAPL\">Apple</a> around that time he regretted GOOG. His AAPL investment was detailed in my other articleand I won't go into details here. In summary, he was able to purchase AAPL under what I call the Buffett's 10x Pretax Rule - the observation that many of his largest and best deals were purchase with a price below or near 10x pretax earning. Besides AAPL, the list also included <a href=\"https://laohu8.com/S/KO\">Coca-Cola</a>, <a href=\"https://laohu8.com/S/AXP\">American Express</a>, <a href=\"https://laohu8.com/S/WFC\">Wells Fargo</a>, <a href=\"https://laohu8.com/S/WMT\">Wal-Mart</a>, Burlington Northern, and even his recent $25B repurchases of BRK.A as analyzed in my other article.</p><p><blockquote>简短的回答是我当然不知道。我只能规定。我认为一个可能的原因是他找到了一个更好的主意-<a href=\"https://laohu8.com/S/AAPL\">苹果</a>大约在那个时候，他后悔了谷歌。他对AAPL的投资在我的另一篇文章中有详细介绍，我不会在这里详细介绍。总之，他能够根据我看涨期权巴菲特的10倍税前规则购买苹果公司——巴菲特的许多最大和最好的交易都是以低于或接近10倍税前收益的价格购买的。除AAPL外，该名单还包括<a href=\"https://laohu8.com/S/KO\">可口可乐</a>,<a href=\"https://laohu8.com/S/AXP\">美国运通</a>,<a href=\"https://laohu8.com/S/WFC\">富国银行</a>,<a href=\"https://laohu8.com/S/WMT\">沃尔玛</a>、Burlington Northern，甚至他最近以250亿美元回购BRK.A，正如我在另一篇文章中所分析的那样。</blockquote></p><p> As seen from the chart below, he was able to purchase AAPL around 10x pretax earning around 2016~2107. And AAPL features an even higher ROCE than GOOG. As a result, it was no-brainer and he must felt more comfortable with the AAPL idea - judging from the fact more than 1/3 of BRK's book value is in AAPL stocks currently.</p><p><blockquote>如下图所示，他能够在2016年至2107年左右以税前收益的10倍左右购买AAPL。AAPL的ROCE甚至高于GOOG。因此，这是显而易见的，他一定对AAPL的想法感到更满意——从目前BRK账面价值的1/3以上是AAPL股票这一事实来看。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/84025fb81cb58b014a81ed7374eab50d\" tg-width=\"640\" tg-height=\"359\" width=\"100%\" height=\"auto\">Source: author and Seeking Alpha data</p><p><blockquote>资料来源：作者和Seeking Alpha数据</blockquote></p><p> It is also interesting to look at the following chart, comparing the PE vs ROCE of a few large positions in Buffett's BRK portfolio together with GOOG. This chart shows three of the large BRK holdings that I have written about recently ([[V]], [[AAPL]], and [[ABBV]]). The ROC data are directly pulled from my previous analyses, and in case you want to see the details of how I got these numbers, you can look up recent articles under these tickers. I am not sure what the picture will look like as we add more data points on it (I do plan to organize my notes on his other major holdings and add more data points onto this plot).</p><p><blockquote>看看下面的图表也很有趣，它比较了巴菲特BRK投资组合中几个大头寸与GOOG的PE与ROCE。这张图表显示了我最近写的三只大型BRK持股（[[V]]、[[AAPL]]和[[ABBV]]）。ROC数据直接来自我之前的分析，如果您想了解我如何获得这些数字的详细信息，您可以在这些股票代码下查找最近的文章。我不确定随着我们在上面添加更多数据点，图片会是什么样子（我确实计划整理我对他其他主要持股的笔记，并在这张图上添加更多数据点）。</blockquote></p><p> But with the few data points I have now, I cannot help drawing/seeing the green line - what I call a Buffett value line. It is a line linking ABBV and AAPL - a good business at a good price and a high-quality business at a high price. So from a value investor point of view, it only makes sense to make investments along this line or below it. Because investment along this line or below represents a trade-off between quality and price that is equivalent or better than ABBV or AAPL. It makes no sense to invest above this line, as anything above this line represents an inferior trade-off between quality and price - we'd be better off to just invest in ABBV and AAPL.</p><p><blockquote>但凭借我现在掌握的几个数据点，我忍不住画出/看到了绿线——我看涨期权的巴菲特价值线。它是连接ABBV和AAPL的一条线——物美价廉的好业务和高价的高质量业务。因此，从价值投资者的角度来看，只有沿着这条线或低于这条线进行投资才有意义。因为沿着这条线或以下的投资代表了质量和价格之间的权衡，相当于或优于ABBV或AAPL。投资高于这条线是没有意义的，因为高于这条线的任何东西都代表着质量和价格之间的劣质权衡——我们最好只投资ABBV和AAPL。</blockquote></p><p> So this Buffett value line really is my other stipulation why he does buy into GOOG. As good as the business this, it is at least not better than other investments that he saw/sees.</p><p><blockquote>因此，巴菲特的这条价值线确实是我为什么买入谷歌的另一个规定。尽管这笔生意很好，但至少不比他看到的其他投资好。</blockquote></p><p> Finally, if you are wondering about why he is still holding V given it is far above the value line, the answer is again I really do not know. There are so many aspects that need to be considered with a position of V's size in his portfolio - tax liabilities, alternative investment candidates, opportunity cost, et al. I know I would trade V for ABBV and/or AAPL myself under current conditions. But I simply do not know what his considerations are.</p><p><blockquote>最后，如果你想知道为什么他仍然持有V，因为它远远高于价值线，答案是我真的不知道。V在其投资组合中的地位需要考虑很多方面——纳税义务、另类投资候选人、机会成本等。我知道在目前的情况下，我会用V换ABBV和/或AAPL。但我根本不知道他的考虑是什么。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/381b3149493c4a406c9faa82348300f7\" tg-width=\"640\" tg-height=\"411\" width=\"100%\" height=\"auto\">Source: author and Seeking Alpha data</p><p><blockquote>资料来源：作者和Seeking Alpha数据</blockquote></p><p></p><p> <h3><b>Conclusion and final thoughts</b></h3> This article analyzes Buffett's regrets for not buying GOOG earlier. Indeed, GOOG is a business that meets all of Buffett's criteria as an autonomous and perpetual compounder - wide moat, high switching cost, high and consistent ROCE, lots of cash generated and only a little cash required, and a toll bridge role in the business ecosystem - and he missed all of that. The analyses show that GOOG still offers potential return close to double digits (about 9%) in the long term even with the current elevated valuation.</p><p><blockquote><h3><b>结论和最后的想法</b></h3>本文分析了巴菲特没有早点买入GOOG的遗憾。事实上，GOOG是一家满足巴菲特所有标准的企业，即自主且永久的复合护城河、高转换成本、高且一致的ROCE、产生大量现金且只需要少量现金，以及在商业生态系统中的收费桥梁角色——他错过了这一切。分析显示，即使目前估值较高，从长远来看，GOOG仍能提供接近两位数（约9%）的潜在回报。</blockquote></p><p> And finally, this article shared my reflections/stipulations on this investment regret of his, which seems to offer more insights on the business of GOOG and value investing than some of his investment success. Underlying all his decisions is the same value-driven philosophy and long-term thinking.</p><p><blockquote>最后，这篇文章分享了我对他的投资遗憾的思考/规定，这似乎比他的一些投资成功更能提供对GOOG业务和价值投资的见解。他所有决策的背后都是同样的价值驱动理念和长期思考。</blockquote></p><p></p>\n<div class=\"bt-text\">\n\n\n<p> 来源：<a href=\"https://seekingalpha.com/article/4448281-alphabet-google-warren-buffett-regrets-never-bought\">Seeking Alpha</a></p>\n<p>为提升您的阅读体验，我们对本页面进行了排版优化</p>\n\n\n</div>\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"GOOG":"谷歌"},"source_url":"https://seekingalpha.com/article/4448281-alphabet-google-warren-buffett-regrets-never-bought","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1164396246","content_text":"Summary\n\nWarren Buffett admitted in 2019 that he made the wrong call in not buying Google, now known as Alphabet.\nThis article analyzes the reasons for his regrets – the wide moat, the autonomous growth prospects, and the incredible high and consistent ROCE that he missed.\nThe results show that GOOG still offers potential return close to double digits in the long term even with the current elevated valuation.\nAnd finally, we will reflect on this investment regret, which seems to offer more insights on the business of GOOG and value investing than some of his investment success.\n\nPrykhodov/iStock Editorial via Getty Images\nThesis and Background\nWarren Buffett admitted in 2019 that he made the wrong call in not buying Google, now known as Alphabet. He regrets not having \"some insights into certain businesses\" especially given Google was making \"a lot of money\" at the time of its IPO from Geico. This article analyzes the reasons for his regrets - the wide moat, the autonomous growth prospects, and the incredibly high and consistent ROCE that GOOG enjoys and he missed. And his investment regrets seem to offer more insights on the business of GOOG and value investing than some of his investment success. Lastly, this article also shares my thoughts on why he never bought GOOG after he had those insights, and my reflections on its implications of value investing under the current market.\nThe moat and the network effects\nGoogle derives more than 80% of its revenue from advertising, but it is not an advertising company. Its true moat is in its \"free\" search services, where it totally dominates, as seen in the chart below. As seen, Google has been maintaining nearly 90% market share of the global search traffic - and it has been maintaining such dominance for OVER A DECADE!\nSource: Statista\nFurthermore, it is unlikely that such dominance would change in the future (barring any major regulation or antitrust legislation change) due to the so-called \"network effects\". The network effects refer to the fact that the value of certain products or services increases as more people use it. In other words, certain networks become increasingly more valuable or it becomes bigger. Not every network enjoy this magic feature, and as a matter of fact, most networks suffer a diminishing marginal rate of return - i.e., the additional return decreases as the network becomes bigger. A chain restaurant network is an example. As the network becomes larger, the nodes begin to compete against each other for customers and the return diminishes.\nBut certain networks, like the search services Google provides, enjoys this magic trait - the network becomes more profitable as it becomes bigger. There is nothing new about the concept. It was true of railways, telephones, and fax machines. All these examples share these common traits: A) the larger the network becomes, the more valuable it becomes (one segment of railway linking city A and B is far more valuable when this segment also links to other railways linking other cities); and B) the larger the network becomes, the higher the switching cost (if everyone uses a fax machine and you do not want to use one, good luck to you).\nAgain, there is nothing new about the concept. But the internet age dramatically amplified the potency of the network effects. Once a lead is established - for whatever the reason, smart AI algorithms, advanced ML algorithms, or just dumb luck (GOOG certainly had benefited from all three) - the network effects would just kick in, take over, and compound itself.\nIt is a self-sustaining positive feedback loop: more users in this network will lead to more relevant and accurate search results will be, which will make the network lead to an even better and more valuable for the users, which will attract more new users to join and make it harder for existing users to leave, which again will lead back to more users and an even larger network.\nThe perpetual growth prospects\nIf you, like this author, are a long-term investor who subscribes to Buffett's concepts of owner's earning, perpetual growth rate, and equity bond, then the long-term return is simpler. It is \"simply\" the summation of the owner's earning yield (\"OEY\") and the perpetual growth rate (\"PGR\"), i.e.,\nLonger-Term ROI = OEY + PGR\nBecause in the long term, all fluctuations in valuation are averaged out (all luck at the end even out). And it doesn't really matter how the business uses the earning (payout as dividend, retained in the bank account, or repurchase stocks). As long as used sensibly (as GOOG has done in the past), it will be reflected as a return to the business owner.\nOEY is the owner's earnings divided by the entry price. All the complications are in the estimation of the owner's earning - the real economic earning of the business, not the nominal accounting earning. Here is a crude and conservative estimate, I will just use the free cash flow (\"FCF\") as the owner's earning. It is conservative in the sense that rigorously speaking, the owner's earning should be free cash flow plus the portion of CAPEx that is used to fuel the growth (i.e., the growth CAPEx). At its current price levels, the OEY is ~3.2% for GOOG (~31.6x price to FCF - no cheap at all, but wait for the PGR part).\nThe next and more important item is the PGR. To understand and estimate it, we will need to first estimate the return on capital employed (\"ROCE\"). Note that ROCE is different from the return on equity (and more fundamental and important in my view). ROCE considers the return of capital ACTUALLY employed, and therefore provides insight into how much additional capital a business needs to invest in order to earn a given extra amount of income - a key to estimate the PGR. For businesses like GOOG, I consider the following items capital actually employed:\n1. Working capital, including payables, receivables, inventory. These are the capitals required for the daily operation of their businesses.\n2. Gross Property, Plant, and Equipment. These are the capitals required to actually conduct business and manufacture their products.\n3. Research and development expenses are also considered as a capital investment for such a business.\nBased on the above considerations, the ROCE of GOOG over the past decade is shown below. As seen, GOOG was able to maintain a remarkably high and stable ROCE over the long term: on average 55% for the past decade. Thanks to such ultra-high ROCE, it only requires a bit of reinvestment to fuel future growth, as elaborated in the next section.\nSource: author and Seeking Alpha\nThe financial flexibility\nBuffett said multiple times that there are businesses which, at the end of the day, point to a bunch of depreciated properties and equipment and tell the investors, \"these are our profits.\" He hates his business.\nGOOG is the exact opposite of such businesses - it generates plenty of cash and at the same time only needs a very low level of reinvestment to fuel further growth. First, GOOG is essential debt-free. Interest expenses are negligible compared to profits. Then as seen in the chart below, the business generates so much cash that it has so much financial flexibility in terms of capital allocation. As seen, in recent years, GOOG only needs 18% of its operation cash (\"OPC\") to cover the maintenance CAPEx. GOOG does not pay a dividend (even though it can easily afford it).\nSo this leaves awhopping 72% of the OPC to be dispensable cash, and the company can choose what to do with it: reinvest to fuel further growth, retain it to the bank account, pay a dividend, pay down debt, buy back shares, et al. It obviously makes total sense to reinvest all of it to fuel further growth given its 55% ROCE. At this ROCE, $1 reinvested would be fuel $0.55 of additional earning! But the problem is that for businesses at this scale, there are just not that many opportunities to reinvest the earnings. As a result, GOOG has been allocating a large part of the remaining earning, on average 37% in recent years, to buy back shares. Such repurchases, besides reflecting the confidence of the management in their own business and the cash generation capability, again also signals the lack of good reinvestment opportunities that could move the needle.\nBut all things considered, with 55% ROCE, GOOG does not need that much reinvestment to grow. My estimation is that GOOG has been reinvesting about 10% of its earnings to fuel future growth. With a 55% ROCE, it could maintain a 5.5% PGR (PGR = ROCE * fraction of earning reinvested = 55% * 10% = 5.5%).\nSource: author and Seeking Alpha\nNow we have both pieces of the puzzle in place to estimate the long-term return, as shown in the next chart. At its current price levels, the OEY is again estimated to be ~3.2%, and the PGR is about 5.5% as mentioned above. So the total return in the long term at the current valuation is about 8.7%, pretty decent even with the current relatively expensive valuation.\nSource: author and Seeking Alpha\nThen why he never bought GOOG (so far)?\nSo in summary, here are my thoughts on why Buffett regrets on GOOG. It is a business that meets all his criteria as an autonomous and perpetual compounder - wide moat, high switching cost, high ROCE, lots of cash generated and only a little cash required, and a toll bridge role in the business ecosystem - and he missed all of that.\nThen the next interesting question for me was that - why he never bought it? The valuation was not that far from his typical entry zone as late as 2011 (when the PE was below 20x). But he never bought, why?\nThe short answer is of course I do not know. I can only stipulate. And I think one possible reason is that he found a better idea - Apple around that time he regretted GOOG. His AAPL investment was detailed in my other articleand I won't go into details here. In summary, he was able to purchase AAPL under what I call the Buffett's 10x Pretax Rule - the observation that many of his largest and best deals were purchase with a price below or near 10x pretax earning. Besides AAPL, the list also included Coca-Cola, American Express, Wells Fargo, Wal-Mart, Burlington Northern, and even his recent $25B repurchases of BRK.A as analyzed in my other article.\nAs seen from the chart below, he was able to purchase AAPL around 10x pretax earning around 2016~2107. And AAPL features an even higher ROCE than GOOG. As a result, it was no-brainer and he must felt more comfortable with the AAPL idea - judging from the fact more than 1/3 of BRK's book value is in AAPL stocks currently.\nSource: author and Seeking Alpha data\nIt is also interesting to look at the following chart, comparing the PE vs ROCE of a few large positions in Buffett's BRK portfolio together with GOOG. This chart shows three of the large BRK holdings that I have written about recently ([[V]], [[AAPL]], and [[ABBV]]). The ROC data are directly pulled from my previous analyses, and in case you want to see the details of how I got these numbers, you can look up recent articles under these tickers. I am not sure what the picture will look like as we add more data points on it (I do plan to organize my notes on his other major holdings and add more data points onto this plot).\nBut with the few data points I have now, I cannot help drawing/seeing the green line - what I call a Buffett value line. It is a line linking ABBV and AAPL - a good business at a good price and a high-quality business at a high price. So from a value investor point of view, it only makes sense to make investments along this line or below it. Because investment along this line or below represents a trade-off between quality and price that is equivalent or better than ABBV or AAPL. It makes no sense to invest above this line, as anything above this line represents an inferior trade-off between quality and price - we'd be better off to just invest in ABBV and AAPL.\nSo this Buffett value line really is my other stipulation why he does buy into GOOG. As good as the business this, it is at least not better than other investments that he saw/sees.\nFinally, if you are wondering about why he is still holding V given it is far above the value line, the answer is again I really do not know. There are so many aspects that need to be considered with a position of V's size in his portfolio - tax liabilities, alternative investment candidates, opportunity cost, et al. I know I would trade V for ABBV and/or AAPL myself under current conditions. But I simply do not know what his considerations are.\nSource: author and Seeking Alpha data\nConclusion and final thoughts\nThis article analyzes Buffett's regrets for not buying GOOG earlier. Indeed, GOOG is a business that meets all of Buffett's criteria as an autonomous and perpetual compounder - wide moat, high switching cost, high and consistent ROCE, lots of cash generated and only a little cash required, and a toll bridge role in the business ecosystem - and he missed all of that. The analyses show that GOOG still offers potential return close to double digits (about 9%) in the long term even with the current elevated valuation.\nAnd finally, this article shared my reflections/stipulations on this investment regret of his, which seems to offer more insights on the business of GOOG and value investing than some of his investment success. Underlying all his decisions is the same value-driven philosophy and long-term thinking.","news_type":1,"symbols_score_info":{"GOOG":0.9}},"isVote":1,"tweetType":1,"viewCount":2667,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":10,"xxTargetLangEnum":"ORIG"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/895344043"}
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