Xerxes
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Posts posted by Xerxes
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We can add Masayoshi Son to the list of folks who sold Nvidia too early in 2018, during the crypto winter. In fact he did it brilliantly using derivative hedging that went into money when Nvidia' share price collapsed.
And for whatever reason, he never invested into Tesla. That I cannot understand, neither as a strategic investor nor as a gamble (i.e. through SB Northstar)
That being said he sold ARM to Nvidia for $40 billion in Sept 2020, mostly in stock. That stock portion has appreciated a whopping 150% since, effectively giving Softbank a windfall, if the deal goes through,
Chipmaker Nvidia has agreed to buy Arm Holdings, a designer of chips for mobile phones, from SoftBank in a deal worth $40 billion, the companies announced Sunday. The deal will include $21.5 billion in Nvidia stock and $12 billion in cash, including $2 billion payable at signing.
Nvidia to buy Arm Holdings from SoftBank for $40 billion (cnbc.com)
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so then i guess i sold my shares to you in March 2020 ... LOL
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Since the other thread is running hot. I will post this here.
I thought this statement from 2018 was worth the re-highlight, with the excess free cash flow being defined as the $2 billion of earning minus the $300 million, which comes to theoretically $1.7 billion . The issue is they haven't been hitting 15% for a while pre-Pandemic era, and between minority buyback and debt re-payment, the vision has not hold.
We maintained our dividend in 2018 at $10 per share. As I have mentioned to you before, we are focused on using our free cash flow to buy back stock so it is unlikely our dividend will be increased soon. A 15% return on equity implies earnings of approximately $2 billion, so paying approximately $300 million in dividends would leave us with $1.7 billion for stock buybacks and tuck-in acquisitions. Since we began paying dividends, we have paid cumulative dividends of $113 per share
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On a different note here some data point since the share issuance to buy Allied World in 2016-17. Another way to think about the benefit of the buyback is to see them as payback what they took from the cookie-jar back in 2016.
Importantly, the FFH common shares they issued in 2016-17, I am guessing 3 million shares, were issued at a much higher multiple to book value than today. So with this tender offer and the current buyback in place, they are buying back what they issued then at a much lower multiple to BV.
Said differently, they would be effectively lowering their acquisition cost of Allied World, if they are able to continue to swallow up 3 million share, bigger than today' tender offer for sure, but the direction is clear.
2015 2016 2017 2018 2019 2020 cash flow for dividend common/preferred 265.4 271.8 282 328.3 323.8 319.7 cash flow from operations 1258.2 2734.2 -1924.3 1355.4 139.8 net earning -394.7 1614.9 817.9 1971.2 37.4 share count 22.2 23.1 27.8 27.2 26.8 26.2 -
I had NVIDIA at about $120-130 (pre-split) cost, what got my attention was an article on The Economist that explained tailwind on its graphic heavy product vs. the Intels of the world. Nowadays everyone knows that but just three years that was eye opening. I bought it and even held it through the crash, when they had too much inventory piling up due to the Crypto winter in '18-19, but unfortunately I let it go (along with Bank of America) in March 2020. Somehow I deluded myself that I needed to lock-in my NVIDIA's paper profit to raise cash, as oppose to selling some other thing to raise cash that was threading close to its cost. I work in aerospace, so my world was melting in front of my eyes so rapidly, that i felt to need to raise cash. Now thankfully bought it heavily into tons of thing starting April 2020 and again fall of 2020, but never NVIDIA and missed 4 bags since.
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be quick guys, this is going to go behind the dreaded Fire/payWall very quick
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looking back to this thread, i dont think anyone identified Nvidia, fast approaching $800 billion market cap
While I realize being part of FANG and having a $1 trillion market cap are not the same, still ....
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On 11/16/2021 at 11:55 PM, LearningMachine said:
Interesting to see BRK trade in and out of CVX.
I know Buffett has been looking at oil price for decades. I wonder if he keeps track of marginal production cost, and goes in when oil companies are priced assuming oil price below marginal production cost and gets out when oil companies are priced assuming oil price above that? Or, wonder if he is going in when he gets worried about inflation, and comes out when he is less worried?
He has gone in and out of XOM multiple times before. If memory serves right, he also went into COP once, but then, had to sell at a loss because inflation didn't materialize and oil price fell a lot that time.
he is trying to catch the ex-dividend dates for a 5% on a round-trip
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Same here. Thanks for the discussion. I am holding mine in RRSP so saved from all this tax talks but they are interesting.
The negotiation with two pension funds must have taken over a year. There is a roadmap that got us where we are today, and the current market environment, TRS, actual monetization, paper-funny-money monetization, tender offer for FIH and now for FFH, all part of that road map.
Why they decided to crystallize a portion of Odyssey Re NOW, and fund their buyback at cost of 8%? (minus 2% dividend saved), as oppose to do the buyback drip and drab via excess free cash flow over several years, just means they expect their P&L to runs hot in 2022, so want to torque that share count accordingly ... or so is my hope.
Another way to think about it is the following: the TRS is the rocket, and everything in this compressed roadmap is jet fuel. It makes no sense for Fairfax to setup TRS with its quarterly cash requirement (whichever it goes) just for the fun of it. That things needs rocket fuel, so that they can close it profitably.
I cannot believe that the man for 10 years held out on his deflation swaps is out there to juice the share price with this tender offer (as a short term thing without an overall roadmap), eventhough i think the last dollar value of the last trading day of the year does have an importance from a reporting point of view to him.
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35 minutes ago, Parsad said:
Prem has often talked about Singleton and Teledyne. This is Fairfax's Teledyne buyback moment! Cheers!
I am with you, but at the moment, to be fair, i see this as Fairfax's FIH buyback moment rather than Teledyne moment. The Teledyne moment needs to have a sustainable continuous source of excess FCF to fund the buyback (ala Berkshire today). A step in the right direction and at the right time before close of the 2021 year.
Viking previously alluded to that end of year need to show price.
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On 11/13/2021 at 7:44 PM, Xerxes said:
So value added by FFH's heavy-hitter Associates come in play only (1) if the management at some point monetize a sliver of the holding or (2) accounting rules are changed such that Associates get that mark-to-market. Since the latter is impossible and the former would only come into play when FFH is ready to monetize, than clearly it is that uptick in earning that needs to be there to lift the valuation by multiples.
Thanks everyone for your response. I think you are more or less all hinged on BV as a proxy
i still take issue with the scale of earnings coming from Resolute vs. the combined Atlas/Eurobank. No wonder the RPF, the dog, is being kept around, as it is contributing a lot to the paper profits.
On the news this morning. wasn't Odyssey, the crown jewel ? But if they can get full value from it (without making interest payment to OMERS etc.) to fund their tender offer and while at it jack-up the BV, than that cannot be bad.
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50 minutes ago, Spekulatius said:
Yes, that's one of the neversells that needed to be sold at some point. I got sucked in GE as well by Immelt's GDP+ model of how GE will evolve and later before the bottom fell out in 2018. It's good example of how a great sounding narrative patches over an incapable leadership and issues with the business
My friends & contacts when they were buying GE like 10 years ago, were saying "dude, this is GE" .... kind of the same way today I tell my new contacts and friends when i was buying lots of Berkshire in 2020-21, "dude this is Berkshire". Again not comparing, as they are world' apart, but just to say all that glitters is not gold and General Electric outshone the 1990s so much that it had 10 years of inertia past Jack Welch cooking-jarring days.
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I am certainly not comparing Berkshire with the likes of General Electric, but I bet in the late 90s, owning General Electric was seen as "owning work of art", in beautiful canvas if you will, autographed by Jack Welch himself. As if it was a trophy.
In the early 2007, i was going to an investment club (physically, pre Meetup days), and i recall some of the Elders in those meeting, took a lot of pride of their ownership of General Electric and their inheritance of those shares from their parents. And that was in 2007, already about a decade from the Jack Welch days and already one leg down on the long term stock chart. Yet the Faithful continued to believe the magic of General Electric even as the mighty conglomerate unraveled in an ever glacial pace, as it died by a thousand cuts over the long term.
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My question wasn't so much to determine weather it is cheap or not.
But the trigger for re-rating.
BAM is valued via its asset management business (multiple on FRE) + its carry + maybe also its invested capital.
While, BAM and FFH are completely different businesses, I would think that Fairfax also has an operating earning portion (we can argue what the can be) + potential monetization + etc. The market does not care about the second bucket "i.e. potential monetization", because much like BAM's carry, these are lumpy. If and when it comes, the market (and the accounting, i might add) will both recognize it then ... but wont bother with till.
So it is the earning of the big associate (in absence of a re-rate on the bond portfolio, which is perhaps further in the future) that really need to get a lift.
From Q3 earning: "Consolidated share of profit of associates of $227.3 million principally reflects share of profit of $82.0 million from Resolute, $43.3 million from Eurobank and $20.3 million from Atlas Corp."
Compare the scale of the dollar value of the earning coming from Resolute vs. what is coming combined from Eurobank and Atlas. I think, it is pretty well understood that the latter two' earnings are on an inflection point (I get that), but TODAY, they are collectively lower than the earnings from Resolute !
So why should the market care TODAY about Atlas and Eurobank, and give it credit in Fairfax market value ? if the stock market is severely undervaluing Atlas itself, does it really surprise anyone that it is also discounting through FFH's own share price, Atlas's picture just gets muddier when seen through Fairfax.
Bottom line, we need to see a good uptick of earning from Eurobank and Atlas (not their stock price going up, ... earnings) before seeing anything in term of "credit" given by the market on Fairfax valuation.
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Thanks for posting. I really like the work that they are doing and the impact that they are having. Compare that some guy sitting in NYC flipping options and stocks like burgers. That said, this is not only long term, it is very long term, before any major investor gets excited about the stock. Market value is at about 60% of its BV. The difference between this entity and FIH is that, for this one the current Helios operator have an incentive to close gap. (or rather more incentive than say FIH, not to say that FIH does not have an incentive)
At September 30, 2021 common shareholders' equity was $593.6 million, or book value per share of $5.44 with 109,107,606 shares outstanding, compared to $599.7 million, or book value per share of $5.50 with 109,118,253 shares outstanding, at December 31, 2020, a decrease of 1.1%.
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The pace has been different in Japan for sure.
Social employment for all trumps maximizing shareholder value in Japan. And I imagine same is for Korea.
Incidentally, great piece on Samsung, not related to break-up, but what it looks to be next chapter.
Samsung Electronics wants to dominate cutting-edge chipmaking | The Economist
I would argue that Alphabet, Amazon and the rest of them are also conglomerate. But that is because that combination adds value (at least for now). And that is not only exclusive to Big Tech, David Sokol is building an old-school conglomerate.
What are going away are the legacy conglomerates where clearly they were past their time and relics of the past. (cough Berkshire ? cough Fairfax ? cough)
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Viking,
How should Berkshire (the industrial conglomerate that it is today) be valuated in your opinion ? based on sum of parts ... or a multiple off its operating earning. At which point in its history did it make sense to shift from SOTP to multiple or vice versa for Berkshire. I know folks use both ways now.
Now, what about FFH ?
I am asking because the FFH-portion of the earnings from Atlas and Resolute looks about the same range, which was surprising to me given the disparity between the two in terms of management quality and size of the business. FFH owns about the same % of each of them. Perhaps RPF has its earning at its cyclical high while Atlas has it a cyclical low so seem to coincide at this moment in time. Which would mean there has to be a serious growth in Atlas's earning (as envisioned by Prem) and that would lift the base-line of that multiple valuation.
I say that because market clearly does not care about SOTP when it comes FFH. So value added by FFH's heavy-hitter Associates come in play only (1) if the management at some point monetize a sliver of the holding or (2) accounting rules are changed such that Associates get that mark-to-market. Since the latter is impossible and the former would only come into play when FFH is ready to monetize, than clearly it is that uptick in earning that needs to be there to lift the valuation by multiples.
To be clear, i am talking about accounting earnings and not the "dividend & interest" line item, which is real cash.
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Fascinating discussion
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2 hours ago, Spekulatius said:
GE Aviation doesn’t have the cash and Warren Buffett isn’t selling.
I think GE’s crown jewel is GE Healthcare not GE aviation.
Admittingly, i got a bias toward aerospace.
That aside, my limited understanding of GE Healthcare's history tell me that the actual 'crown jewel' of the GE Healthcare was sold to Danaher (Larry Culp's old outfit) for a cool $20 billion cash that went to pay down the debt at the group level. Prior to Larry's taking over as CEO, John Flannery who was the CEO for a limited time tried to spin of Healthcare with that crown jewel in it. That was deemed the wrong strategy by the powers be, since at the time, a melting GE was not going to capture any of the windfall of that spin off, only GE' shareholder would have. To be more accurate it was not a full spin off, it was akin to raising equity with an IPO and spining off the rest. So some equity would have remained with GE.
Long story short, when the Larry Culp regime took over, they stopped that, and decided to in fact to get hard cash for that business by selling to Danaher. So the spin off today does not have that business in it.
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33 minutes ago, gfp said:
I don't think Gates has had to file details of the foundation sales recently but I could be wrong. Back in 2018 this was the type of daily volume they were selling - something like 1.75 million B shares per month during this 2 month period. Gates Foundation doesn't sell A-shares, of course, as Warren only donates B-shares to the foundations.
thanks, was fully unaware that only B shares were being donated
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32 minutes ago, RunPacoRun said:
That's my conclusion too. Warren stated regularly in the annual letters how much he admired Singleton as a capital allocator, particularly with regards to repurchasing 90% of Teledyne shares at a bargain. Charlie stated in an annual meeting that he and Warren were "avuncular" when compared to Singleton. Hence, I suspect Warren wanted to give a fair warning to all shareholders regarding the strategy behind the share repurchases without explicitly saying they're engaging in a Teledyne 2.0. Based on what I read about Singleton, he just did what was in the best interests of the shareholders who didn't sell, although he didn't communicate what he was doing and why, which meant "too bad" for Teledyne shareholders who sold too early.
I still think Buffett should have used Elon Musk playbook and done a Twitter poll asking if he should do buybacks. What better way to disclose
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Is it possible that in some way he is buying his own personal shares, indirectly.
i.e. Bill Gates is offloading an annual % of A-shares, and the buybacks are sucking that extra float
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For what is worth from Bloomberg. An interesting yardstick.
"Berkshire spent nearly $20 billion more repurchasing its own stock since the middle of 2018 than it deployed accumulating its Apple stake through the end of last year. In total, Buffett poured about $51 billion into buybacks since a change to its policy more than three years ago, and appears to have continued snapping up at least $1.7 billion of stock since the end of September. "
Billionaire Warren Buffett’s Berkshire Buy Backs Exceed Cash Spent on Apple - Bloomberg
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The crown jewel is GE Aviation, but Buffett is probably by now all against anything remotely close to aerospace.
The healthcare division will be a stand alone as a tax-free spin off, which means GE probably looked at potential buyer paying cash and had to weigh in the offer value vs. the tax it had to paid. And chose a tax-free spin off. About 7-8 years ago, UTC went through the same exercise but did find a willing buyer for its Sikorsky division. The offer was high enough to offset the tax bill.
The GE power/renewable needs to be hammered into a division before its spin-off. They need to put some lipstick on that pig before floating it to Wall Street, so really who wants that.
All in all, they have not shared much about the capital structure of the new companies either. It is my firm belief that GE Aviation would need to scale-up once it freed itself of these two spin-offs.
EDIT: in fact, who knows maybe Larry Culp will be buying Precision Castparts from Uncle Warren for his new GE Aviation
Fairfax 2021
in Fairfax Financial
Posted
The one hurdle to Atlas' appreciation is Fairfax and Washington Family outsized % ownership. Those shackles needs to be reduced so that the caged bird can fly again. But cannot be reduced at the moment because it is undervalued.
That hurdle was also there for Stelco from the PE shop point of view that owned a big stake in it. But the tsunami of cash coming in allowed Stelco to cash out the PE shop. So we are good there,