marazul

In a recent interview, Elon Musk mentioned how part of the AI related backlog is due to the gas turbines and related castings. Precision Catparts might be the leader in the industry. At least believe it was prior to going into Berkshire. Took a look at Howmet, what used to be Arconic/subisidiary of Alcoa I think, and it now has a +$90bn market cap! it was a tenth of that size 5 years ago or so. Think PCC would be highly valued if it were a public company, which would be a turnaround given all the problems since the acquisition. Besides the AI boom, the market for engines is also doing just fine.

Think Berkshire is attractive at this point. Of course it is no slam dunk like it was in 2021 at 1.2x BV, think it even got down below book between 2020 and early 2021. But reality is the market seems quite frothy, and Berkshire at 1.5x BV, lots of cash and a number of productive subsidiaries seems like a good safe bet. It is a similar valuation to where it has traded on average in the post GFC era. Now we have higher rates and a market where all the alternatives seem more expensive, at least compared to prior years. At this valuation, Buffett was a buyer in 2023 and 2024. The best thing that can happen to long term shareholders is for BRK to lag for a while; it would be a good use of capital to repurchase shares. Also, it would reduce pressure on Greg during his first few years. Have been adding once again.

Thank you for the link. This line was surprising coming from Klarman, at least for me: While I’ve never been to a Berkshire annual meeting and have never owned the stock, I did have lunch with Buffett at Gorat’s (a steakhouse, his choice) on my one trip to see him in Omaha 17 years ago."

Difficult to know because Berkshire does not disclose much financial information about subsidiaries, but should be interesting to see if Precision Castparts has been benefiting from the AI boom. They used to have a significant energy business, and if we look at the charts and performance of things like Siemens Energy or GE V one should think they might be benefitting from the crazy demand. Might be an unexpected beneficiary.

Thank you for the information. In a case like this, how does the recovery work. I guess they already distributed the cash to the shareholders at the time of the acquisition. Not sure how it works, my guess is this will be pretty difficult to recover but I have no experience in the field.

Apple is now a huge position as we all know. I don’t see how Berkshire can liquidate Apple as it would add another large amount to the cash pile and take it above $200bn. I was thinking, is handing out the Apple shares to brk shareholders a possibility. This would be a return of capital in form of Apple shares. Makes sense to me and would reduce the pressure on brk. I know brk has said that there is value in keeping it all together. ut not sure if an outsized position like apple can be the exception. Just a crazy idea, who knows.

Cash is fastly approaching the $150bn mark which Buffett has referred in the past as "unjustifiable". If there are no major investments in the next 2 years, Berkshire will just have too much cash. Is there a way for Berkshire to return capital in a tax efficient way for investors? If it is a regular dividend, most investors would get 70 cents on the dollar. Is there a solution for this problem? obviously, besides repurchases. In the past, Buffett has been creative in deferring taxes (e.g. PG-Duracell transaction). I see it unlikely he would just pay the dividend and return 70 cents on the dollar to investors.

Yes, +$50bn is a reasonable estimate. It is one of the best assets in the Berkshire umbrella. Geico is larger than Progressive with 13% share of the US auto insurance market compared to 10%.

I think this overestimates the amount of excess liquidity or net cash Berkshire holds. Important to understand that float is also a type of leverage. So Berkshire has (rough numbers) $120bn of float and $100bn of cash. So +100% of the equity is in wholly owned businesses and public equities. Also, Buffett has mentioned he planes to keep $20bn in cash at all times.

Is there a 25% of daily volume limit on buybacks? Sorry for my ignorance.

If you don´t have any budget constraints would reccomend the new Marriott by the Centurylink stadium.

Difficult to see float growing $8bn per year going forward...

Buffett said that even in a "so-so" economy he expects IV to grow at +8%...that is probably conservative...he has also said that in the last 10 years IV grew by 10% per year and he thinks he can do that in the next 10 years if rates rise a bit...Buffett has always been conservative so maybe 9-11% IV growth for the next decade is a good target

That is correct, there are mistakes on that slide.

Someone here knows how rate regulation works in a case like Oncor, allowed returns, methodology, etc?

Couldn´t agree more with the previous comment. Access to valuablñe info and exposure to so many businesses provides a huge but fair edge/advatange.

PriceSmart & Ambev-Latin America

Hi, As you know, buybacks below BV generally increase IV per share. Some companies have managed to take advantage of Mr. Market´s behavior by buying back a significant amount of shares below tangible book value. I think it would be nice if we come up with a list of these names. -Some of the TBTF banks (i.e. C, BAC, GS) have bought back some stock but they haven´t been as effective because of limits by regulators. -KCG has been buying back stock below TBV of ~$15 AND this is without taking into account the FV of its ownership (17%) in BATS which IPOd today.

In this new ZIRP/NIRP world opportunities are scarce. One area I have been looking at is companies that have the ability to take advantage of this low interest rate environment. These type of companies usually have stable revenues that permits them to lever to 3-5x EBITDA. We are left with a capital structure similar to a PE owned company. The pros of this strategy is that debt is very cheap and good results can amplify returns. On the other hand, leverage works both ways. However, this seems to be an area of opportunity in this environment. Any thoughts on this? Any good names you would like to share? A good example might be Liberty Global or SCI.

NI-CO-This is a great point. Companies that employ debt and have stable cash flows will definitely benefit. Specially, those that debt is a significant portion of the EV.

Think Deere might be a candidate in a year or so.

Classic tax efficiency play. PG shares had unrealized gains, so exchanged the shares for Duracell. No tax leakage in the process. At BRK it will be a cash cow. Cash flows will be tax efficiently redeployed into other ventures.

CFO left around 6 months ago, possibly means zero but would take it into consideration.

think post-deal approval, LBRDK will be the most attractive.

Can someone post the copy of the text, the blog is protected. Thanks in advance.