aws

It only works when there is a business involved, and the business has to be a substantial part of the total deal (I think at least one third of the total deal value). In the Graham deal Berkshire bought a TV station and obviously they bought Duracell in the P&G deal. It's probably only worth bothering when you have one side with a very low cost basis in the shares so the tax savings are material to the overall deal size.

It's given all the gain back now. It actually traded for $100 when premarket trading opened. Would have been nice to be up early enough in the morning to short that.

My trade platform is showing quotes on options for gold futures out thru 2026, so yes 5 year options there are possible. GLD only goes out thru 2022 so less than two years. I can't imagine getting those prices quoted in the article even scaling up for current market prices. That would be like buying $2500 calls for $10, and the quote I am seeing is more like $300 for that option. The longest duration option you could actually buy for a premium of 1/2% and a strike price 35% out of the money is the December 2020 call, so only a bit more than five months of runway.

My back of the envelope calculation has Q2 book value at 164.67, so based on today's closing price we would be trading at 1.08 times book. This is based on a presumed 28.7b net increase in book value from the equity portfolio, estimated by the change in portfolio value since 3/31 after adjusting for the sales we know about and the additional deferred tax liability on the unrealized gains. Not surprisingly the vast majority of the gains are from Apple, which alone increased in value 28b pretax. Then I just assumed operating earnings would breakeven for the quarter. That may be way too conservative, so you could maybe add another $1 or $2 per share but in any case it's not going to have anywhere near as big of an impact on book value as the much more obvious change in the stock portfolio. The 28.7b stock represents a 11.81 EPS and that adds to the prior quarter ending book value of 152.86 gets me to the 164.67.

I'm a CPA and I certainly do not think the designation did anything for me as an investor, so I would not be pursuing it if that is your only goal. The tests cover topics that a mile wide and an inch deep, so the few that are applicable to investing could be learned by pretty much anyone independently. Since I worked in public accounting for many years it was still worthwhile professionally though. I was always a good test taker so I had no worries about failing, and the studying process took probably 300 hours total.

I think AAPL is overvalued as well, but I still see no logic in your including the cash in the calculation. If he sold all the Apple and retained that as cash, then your ratio would appear much worse as the look-through earnings numerator would have decreased but the cash+portfolio denominator would stay the same excluding taxes.

Yep, and closer to 21% actually. 88.7b Apple value out of 426b market value for Berkshire. I have started to short some Apple to reduce the massive overweight position implied by my Berkshire holdings. Unfortunately I started shorting when Apple was around 310, but at least I was able to add some this week above 370 to help my average. I think the only other time in recent memory a stock was so overweight in their portfolio was Coke in the 90s. But the environment in that time was almost the opposite of what it was now. Berkshire had something like 1/3rd of their net worth in Coke, which was on fire like Apple is now and it was seriously boosting Berkshire's net worth, but then the market further juiced things by pricing Berkshire at 2x book value, even though that book value was built largely on a stock that was pretty overvalued at the time. But Buffett was able to make hay from that situation by floating the B shares at a very high price (even though he came right out and said it was at a price he wouldn't buy them at), and then again by issuing a ton of stock to acquire Gen Re. So when Coke was pumping the book value Berkshire got probably much more credit than they deserved in terms of its own market price, and this time with Apple they are getting no credit whatsoever for owning it and are languishing with the other financials at price/book ratios not seen in many years.

Berkshire seems to keep finding a way to get relatively cheaper. In the past month or so the market cap is up $25 billion, but Berkshire's investment portfolio is up about the same $25 billion, so Berkshire as a business is the same price it was at the lows in May. Much of that growth is Apple, which at the current market values represents 20% of Berkshire. It's not like I need to sell or anything and actually I'd like to buy quite a bit more, so I shouldn't really mind, but sometimes the simian part of your brain just wants to see numbers getting bigger. It's getting to the point now that I want to use Berkshire as a proxy for cash in my portfolio, where if I sell something else I immediately roll the proceeds into Berkshire. It's about 1/3rd cash anyway.

Today's low close prompted me to ask a simple question I sought to answer. When was the most recent day in the past where if you had the choice of buying either the S&P 500 or Berkshire and holding until today that you would have been better off with Berkshire? That is, which would have had the better returns up to today, for each and every day in the past 20 or so years? So I quickly pulled the daily close for each Berkshire and the S&P 500 total return index from Yahoo and calculated the returns for each to see which days were better for which. Out of the past 4636 trading days since 12/13/2001 (the day before the S&P generally started taking over), the returns to date have been better for Berkshire on just 10. So 4626 times you'd have been better off buying the S&P, roughly 99.8% of the time. The most recent day where Berkshire was better was 4/20/2006, and if you held since then you'd have 1.3% of outperformance to show for it. Now while this isn't telling you anything you don't already know about relative performance, I did think that was a striking figure that I thought I'd share.

By tomorrow morning I'll own another 100 shares when the $170 put I sold gets assigned, which will result in my cheapest shares since 2016. I also have more short puts out there for future months, from $165 down to $110 so maybe I'll get them much cheaper still if this price action keeps up.

Apple keeps on trucking, and now Berkshire's stake is worth 80b at the current market value. That's about 19% of Berkshire's market cap. It's not quite a big as weighting as coke was back in the 90s, but it's getting there.

Post earnings these calculations of what you get for free are growing. At 174/sh the market cap is 423b and cash is up to around 143b after selling the airlines, and the portfolio is in the 195b range. You get everything else for 85b right now, and if there are a few more weeks like this one where the portfolio value keeps going up but Berkshire keeps going down, maybe you'd get the whole company for free.

Well hopefully it works out better than the Oxy deal. I wonder what the market price would be of the preferreds if they traded - probably well below par at this point. And the warrants have to be considered pretty worthless as well, especially if Oxy starts diluting by paying the preferred dividend in shares. I'd certainly take another BAC or GS deal.

I disagree strongly with this. Buffett isn't one to think a pandemic is going to destroy the US economy on a long-term basis, and so therefore a 25% haircut in the price is a huge incentive to be buying back shares, because I seriously doubt he thinks the IV of Berkshire has dropped by that much. After all, what's he saving $120b cash for if not to use in a time like this? Berkshire is much cheaper now in both absolute terms and relative to the market than it has been in years. Even after the pop this week, it's still about 2% lower than the lows in December 2018, despite huge gains in book value since that time. For perspective, the S&P 500 total return index is 15% above the December 2018 low. I'd think he would be spending $5b+ on buybacks this month, assuming he's not been hindered by a blackout period.

Berkshire at 168

I'm wondering why an 8 year old post with no replies suddenly became active after someone posted a four year old blog post cautioning about the source.

No cash would need to change hands to make a special allocation to a partner so you wouldn't need to sell stock unless you were cashing out your share instead of keeping it invested. The balance sheet of the partnership before and after the allocation is the same, it's just how it's divided up that will change. This can be kind of wonky when you are doing the partnership tax return in situations where the gains are all unrealized, because if there is no taxable income to allocate to the manager you have to create phantom income to allocate to them. I think this type of structure works well in theory, but is probably too burdensome to work well in practice for small partnerships. Partnership law is very complex, as is making sure you are following are rules about who can invest in these entities (accredited investors). If you go down this route you would definitely want to start by talking to a competent attorney that works in this field.

I believe under that type of structure you would be taxed on the income when the capital is allocated to you, regardless of whether or not the gains it came from are realized. It should also all be ordinary income instead of taxed at long-term capital gains rates like carried interest. I don't think you can get deferred taxation or long-term rates on anything except private equity type investments held for many years, but those are beyond the scope of anything I work on.

The shares outstanding on July 25th was exactly the same as June 30th, so they didn't repurchase any in the interim either. That's not too surprising since it was only below $210 for a few days toward the end of that period. His average repurchase this year has been at about $201 per share, so it seems like the price would need to be considerably under $200 for a reasonably long period of time for repurchases to be substantial. I've definitely overestimated the degree to which he wants to repurchase shares and the price at which he was willing to do so. This was mostly based on the initial data points in Q3 2018 and all of the talk since that day, but if anything it seems like he is less willing to do buybacks now by any metric than he was a year ago, despite all the talk to the contrary and the continual building of cash. If this were not the case then: 1. His aggressive buyback range would have crept up higher by now, so we'd see repurchases at higher prices 2. That more shares per day would be purchased when it was in that range, especially on the cheapest days In Q3 2018, when he only had the authority to buyback shares for a few weeks, resulted in him repurchasing $927mm of shares over 14 trading days, an average of $66mm/day, at an average price of $207/sh. Nine months later, the book value has finally increased beyond the Q3 18 level. It's now about 2% higher, so you would think that if his appetite to repurchase shares were the same now as it was in Q3 2018, then his aggressive range would be about $211. But he didn't buy any in May until the 28th, forgoing buybacks on days when the price ranged $200-205. When it did break $200 he was buying, but over those four days he only spent $205mm or $51mm/day. Considering Berkshire generates enough cash to do about $100mm in buybacks per trading day over the course a year, this is a paltry amount that would only slow the cash build rather than put excess cash to work. It is disappointing in the sense that it seems like opportunities are being missed, but it's only clear in hindsight that he wouldn't find a better use for the cash, and even then I probably overestimate the impact of the missed repurchases. I certainly hope he picks up the pace of repurchases, but I think I can live it and sleep relatively easy knowing that the cash will eventually go to quite a good use.

'Someone' has been an aggressive buyer of BRK.A today. As I write this BRK.A is outperforming the B by about .7% today. The premium has popped to almost 1% when it was basically nothing a month ago.

I've had the same thoughts when looking back at what happened in the late 90s, long before I was a shareholder. At the time of the Gen Re merger Berkshire was trading at something like 2x book value, and almost half of the book value was made up of KO shares which were themselves overvalued. Issuing stock at that time was definitely not a mistake. The mistake was more likely failing to repurchase stock in the subsequent years at a much bigger discount to offset what was issued.

Boilermaker, why you don’t short longer term put, say 1 year? The put premium will be taxed at long term capital gain and there is a higher chance it will expire worthless. Short options are never LTCG regardless of the duration if they expire worthless. Nor short anything for that matter, as your purchase date is always considered the same as the sale date.

I just compared the total reduction between the 10-K share figure and the 10-Q and backed out the repurchases in the 10-Q and got a net B share equivalent reduction of 140k shares. Not sure about how much they did in issuance. The timing is interesting to me. It seems like they might follow standard blackout period rules, which I believe is no repurchases starting one month before earnings are released.

It was basically nothing after 3/31 - maybe 10 A shares net reduction

https://www.businesswire.com/news/home/20190504005005/en/Berkshire-Hathaway-News-Release http://www.berkshirehathaway.com/qtrly/1stqtr19.pdf First thing I checked - 1.7 billion in stock buybacks