KPO
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Posts posted by KPO
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8 hours ago, ValueMaven said:
Greg is one of the best Berkshire analysts out there ... so not a relevant comment @KPO
Energy around loving a sell-side analyst on a value forum is unexpected. Of the 7 analysts that cover Berkshire I haven’t seen much in the way of unique insights, but good to hear that you like him.
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3 hours ago, Viking said:
With the Fairfax Q2 report set to be released after markets close on Thursday here are a few of the things i will be watching. What am i missing that others are looking out for?
Insurance:
1.) does top line growth remain close to 20%?
2.) is CR below 95? Below 94?
3.) is hard market still alive and kicking? Outlook for remainder of 2022?
Bond portfolio4.) what kind of increase do we see in interest income?
5.) what changes do we see in bond portfolio?
6.) what is average duration? (1.4 years at March 31)7.) what is amount of mark to market loss? US$400-500 million?
Equity Portfolio
8.) what is amount of mark to market loss? (My estimate is around $1 billion)
Other
9.) share of profits of associates? $200 million?
10.) Book value? Was US$626/share March 31
11.) share buybacks during quarter? (At March 31, 2022 there were 23,810,965 common shares effectively outstanding.)
12.) capital allocation priority moving forward?
- level of debt is ok
- continue to fund growth at subs in hard market?
- buy back stock?
- buy out minority shareholders in Allied World?
Updates/Commentary:
13.) pet insurance sale: on track? To close when? Proceeds to be used for?
14.) Resolute Forest Products sale: to close when? (I think i read Q1 2023 due to needed regulatory approvals)
15.) Stelco dutch auction: will Fairfax be tendering shares?16.) was regulatory approval received to take control of Digit?
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Looking ahead, is Fairfax on glide path to earn $2 billion from underwriting income + interest and dividend income in 2023?Good list. Closing out the swap contracts would be another. At this stage I’d prefer straight buybacks or tenders like they did late last year.
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1 hour ago, yesman182 said:
Curious if you agree with Greg's assessment that "We think Berkshire Hathaway Energy overall is endowed with a narrow economic moat."
I don't know much about regulated utilities, but I find it hard to believe someone is going to come into Iowa and compete with Mid America on price, relationship with the community/regulators or by being more environmentally friendly. Seems like the story is similar out west.
I have a hard time following Greg's logic that BNSF is wide moat and the utility is narrow moat. Id be curious to hear how others feel.
Not sure if this applies to Greg, but it seems like the Value Line and Morningstar analysts usually have unusually broad coverage, so I pretty much ignore anything they have to say in terms of recommendations. Both are fine for historical data though.
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16 hours ago, ACooke said:
Sourcing/time drag is probably my largest concern here too, was hoping I'd grab an idea or two from this thread which has been fantastic so far - great hearing everyone's input. There's been a fair bit of commentary re. risk arb/special situations on some podcasts and blogs lately which is probably the main reason I'm considering throwing a basket together - plenty of stuff floating around and some decent looking spreads.
Do you just equal weight for the most part? I think equal weighting say a 10% chunk or whatever of you're portfolio makes sense if:
- You're not bringing much to the table in regards to likelihood of closure.
- You're not wanting to spend a hefty sum of time on each situation.
I’m not all that precise on the position sizing, but they’ve been roughly equal to date.
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1 hour ago, Gregmal said:
RFP is interesting
Yeah, this one is kind of interesting as there’s probably little risk that it doesn’t close, but it’s not clear to me what I’d end up with on the CVR after taxes (despite being in tax advantaged accounts).
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2 hours ago, boilermaker75 said:
This is a site I look at to find risk arbitrage plays.
http://intrinsicedge.blogspot.com
It has probably been several months since I last checked. I usually do well with these plays so you would think I would be checking this site all the time.
Thanks! I’ll check this out. Sounds like you’re in the same boat as me in not spending much time on these, but still enjoying the outcome.
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4 hours ago, ACooke said:
Has anyone considered throwing together a basket of merger-arbs?
To be forth-coming, I don't bring much to the table in regards to the likelihood of certain deals closing or breaking which is why I'm intrigued by taking a basket approach.
There seems to be a stack of pretty juicy spreads around; presumably many of these will close at close to current terms, and some will break.
Assuming the above is correct and with regards to some of the current spreads - it seems at first pass that a basket of these could net some reasonably low risk, decent, and market-neutral returns.
Would be interested if anyone is playing around with this approach.
Again, I haven't much to add outside of a set of keen eyes.
Great topic. I’ve been doing this off and on for years with 5-10% of my portfolio. I always target cash deals and I hold the positions in my Roth or traditional IRA to avoid creating a tax event. On balance I’ve actually been surprised how well it’s worked out, but I don’t feel like I’ve developed a good repeatable process for sourcing ideas. It’s just sort of been randomly stumbling upon ideas from various sources. I’m actually in a spot where I need some new ideas as CNR, TEN & VG have mostly run their course. I’ve got a bit of ATVI, but if others have ideas I’d be interested.
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What ever happened to this guy? I always enjoyed his stream of consciousness posts.
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21 hours ago, MCR said:
Thanks for sharing. This kind of made me laugh, although I suppose me knowledge of Australia isn’t any better:
”Buffett’s main renewables play so far has been through MidAmerican Energy, based in Dec Moines, Idaho”
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5 hours ago, Spekulatius said:
EV's are the best thing that ever happened to tire companies. It's seriously bullish - all that torque from the electric or hybrid power trains makes for a lot of wheelies on the roads.
They also act as a hedge of sorts if you have a lot of O&G exposure like I do. Do you have a preferred tire company to invest in? I own a little GT, but don’t love the balance sheet.
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MTN under $215
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3 hours ago, Spekulatius said:
I think it's probably important to look back in the late 70's or early 80's. Buffett was involved in a lot of energy / Oils and gas names back them - like Amerada Hess. He traded those quite frequently and successfully, they were not LT holds as all.
Later past 2000 his track record trading energy became much more murky, he dunked on Exxon and COP, but had a home run with Petrochina.
Yeah, my thinking here is that he either rides it as a hedge for a while then peels off a division (most likely OxyChem) in an exchange or he sells once he’s ridden it up enough and potentially oil inflation peaks. That said, my own personal bias is that ESG and things like zero emission mandates by 2035 keep oil well over extraction cost.
Rhetorical question: do tires not cause a form of emissions, particularly on much heavier EVs?
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40 minutes ago, Dinar said:
Thank you, I already own both CP & CN. So will add potash
NTR & MOS are decent options here, but not home runs. I’ve bought a small amount of each as inflation hedges a while back, but more recently a lot of farmers are evidently reducing fertilizer this year rather than taking the unusually high prices the market offers. As a farmer this is a short term fix, which could lead to some pretty terrible humanitarian issues in the less affluent corners of the world in 6-12 months. These are buys if the war drags on another 12+ months, and will generate nice cash flow short term if it doesn’t as the supply constraints will continue for a period of time once the war is resolved.
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1 hour ago, Gregmal said:
For a few years I had a picture of the article from some expert, I forget the guy, who was calling for a “further 20-30%” decline at like 680 S&P in 2009. Reminder to self, don’t ever be that clown.
In 2008-09, the GFC occurred because the entire system was illiquid and propped up by ghost loans and phantom products tied to a housing market that was unsustainable in terms of pricing and supply. The 10 year then was what? Maybe 5%? As a result, major banks failed, housing which is the largest driver of the economy imploded and the market fell like 45-50% from the peak to the trough.
Today, depending on which index you think is most relevant, we re off maybe 25%. Why? Supposedly it’s a 3.5% 10 year and one minute the economy is too hot and needs to be killed and then next minute it’s OMG the economy is headed for a recession? Housing is fundamentally sound, job market strong, unemployment low, individual household balance sheets better than they’ve been in ages….Of course markets can go anywhere short term but it’s a little preposterous and definitely bombastic to currently be acting as if it s a given there is significantly more material downside. And yes, I am aware we can list every current fear, ignore the ytd declines and state that it’s not priced in, and then find further reason to be scared, but idk, I’d rather just look for good solid attractive long term investments than run in that hamster wheel.
At best timing markets is a difficult task and at worst it’s foolish for those that have a low stock allocation. I’m actually not buying here, but I understand why folks would start averaging into this and several other quality names. Who am I to question an investing legend, but I never loved the Apple position sizing and I think it carried Berkshire $30-40 per B share above fair value and is now pulling it down. Both are great companies, but that doesn’t mean they’re priceless. I last bought several times between $170 & $180 during Covid (out of pure luck), so would like to see the late 2019 prices of $210-220 before buying again….and this is partially because there are more interesting opportunities currently.
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Not exactly contrarian, but there are some interesting merger arb opportunities like TEN, and of course ATVI, with 30-35% annualized profit potential. Even Y is 2% off the deal price and should close in 4 months or so. Not exciting, but should perform ok on a relative basis with less risk of principal.
I also have to wonder if BA @ $115 and WBD sub-$14 will look like bargains in retrospect when we look back on them 4-5 years from now.
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15 minutes ago, Spekulatius said:
There is defiantly a change in climate. Look for example at the Lake a mead reservoir, which is hlf empty now and the Colorado river system. About 22 million people depend on this water, pretty much Nevada, a good part part Arizona, Colorado and southern California. Many are high growth areas. I am guessing the days that golf courses exist in Phoenix Arizona soon will be over:
Is this climate change or over population in the cities that use Mead and Powell as a water source? Probably some of both, but it’s definitely bad at Mead when bodies start getting exposed from the mob sinking them in the lake back in the day.
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A bit more AIV @ $6.20; Hopefully it will go sub $5.50 again so I can make more serious purchases.
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25 minutes ago, RadMan24 said:
The GMC HummerEV is dope. But if you are worried about recalls and warranty repairs, stop by Ford.
Dope and quality can be two different things. Your Ford choice is probably true, but as someone that has owned two Toyota FJ cruisers, which were made 100% in Japan, I’ve only been to the dealership one time in 15 years……and this was for a door seal issue. That’s quality. The early EVs have had a lot more quality issues than the popular media let’s on….and they rip through tires at a much higher volume due to their 25-35% greater weight relative to similar ICE vehicles. Buy GT I suppose, particularly if you want a hedge for significant oil gains recently! I did.
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5 hours ago, Longnose said:
I questioned this one too but Bill made some decent arguments that I havent looked at and want to look further at.
He stated every car is presold for the next 2 years. Better margins on Electric Vehicles. And current Earnings ratio about 5-6 with a historical of 8-10.
With that baseline it does seem like it could be ready for a realignment. Probably not a massive swing but a decent bump. Which is why I plan on doing my own DD to determine what price I would sell at.
Not sure how the margins will look once warranty related repair/inevitable GM recall costs are baked in. And is anyone else worried about the legal liability of a 9,000 lb projectile that goes 0-60 in 3 seconds? I just think mass markets auto manufacturing is a tough business to generate outsized long-term free cash flow.
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2 hours ago, Miklagard said:
I like this theme.
At the moment I have these stocks on my wish list:
Costco
Jungfraubahn
Gladstone Land
Disney
Skistar
I also have a small position in BRK and Hinghams Institution of Savings. But really looking to add more when price is more decent.
I am again starting to read up on value investing after a couple of years with no room for investing, both due to time and money, and I am thinking a lot about my strategy going forward. I am really leaning on having great business at a decent price, or rather worlds best companies at a decent price. We'll see what happens.
I agree, this seems like an interesting exercise. Sorry I missed your initial post. Better late than never, I guess. Anyway, I like most of your list. I’d add MKL, which I was able to add during 2020 after foolishly selling after it went up about 125% several years ago only to watch it go up further. I’d also add IFF, BA, KO, PEP, UNP & TPL (which I foolishly DIDN’T buy, but seriously considered in March of 2020 at under $450). Live and learn. Investing is the ultimate exercise in continuous improvement. I’d be interested in the thoughts of others on the board.
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What are you buying today?
in General Discussion
Posted
More ALCO under $32 and Atlas preferred (H and I)