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Dynamic

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  1. I hold some ATVI myself in a tax free account and have considered adding to Berkshire or Markel using the proceeds. It has held up pretty nicely against a declining market as merger arbs tend to, but I've been on the fence about whether to switch or not. A central estimate of a Berkshire's 1 year return might well be close to the possible 6-9 month returns offered by ATVI if the merger proceeds but I quite like the market neutrality of the position in case Berkshire gets even a little cheaper and I decide to really load up, to lock in not only the 1 year returns but the subsequent long term compound returns of inflation+7-9% that we might expect after that. I think my hysteresis would like the return of the alternative to be just a little more juicy before I switch.
  2. Thanks gfp, that's a nuance I hadn't picked up on.
  3. Only securities traded in the US (including ADRs) are included in the SEC's list of securities and CUSIP Numbers that are to be shown on 13F filings. Foreign holdings such as BYD Co. Ltd. (1211.HKG) may show up periodically in local filings instead according to local rules (such as changing their holding by a whole percentage point), as you'll have seen recently on these forums. The last filing where I saw some of the Japanese Trading Companies was on page 7 of the Chairman's Letter in the 10-K for year end Dec 31, 2021, published this February. They show up in the largest 15 equity holdings table. Those large enough at year end to be shown there were (with Over the Counter Markets equivalent listings tickers and share count): OTC:ITOCF 89,241,000 2021 10K portfolio, p7 of Chairman's Letter, an increase from 2020 10K holding OTC:MSBHF 81,714,800 2021 10K portfolio, p7 of Chairman's Letter. OTC:MITSF 93,776,200 2021 10K portfolio, p7 of Chairman's Letter. which were slightly greater holdings than I had estimated until the report came out. Of these, only Itochi had made the 2020 top-15 holdings list, IIRC. Those not large enough to be disclosed in the top 15 positions with my very approximate best guess holdings sizes are: OTC:MARUF 88,600,000 Approximately 5.1% stake - my own guess based on press release. OTC:SSUMF 63,800,000 Approximately 5.1% stake - my own guess based on press release. There are some other foreign holdings such as Societa Cattolica, an Italian insurer that has been bought out recently, so I imagine Berkshire pocketed cash proceeds from the acquisition and will show a realized gain in Q3's 10-Q. This exact position has never been reported, though a press release about Berkshire's investment gave an indication of the holding's size. Most websites purporting to show the Berkshire portfolio completely ignore the New England Asset Management portfolio (read cover page of Berkshire's 13F-HR filing and NEAM's filing to understand this). NEAM, for example, shows a small position in the UK listed firm Diageo plc, but they're shown because they're held via ADRs and thus reported in the 13F. The other thing done on the table on page 7 of the Chairman's letter is to remove holdings by Berkshire's pension funds which aren't beneficially owned by Berkshire shareholders. I have been able to confirm these using 13D and 13G filings, where code EP refers to Employee Pension funds. BYD however, is shown in full even though Berkshire only owned 91.1% of Berkshire Hathaway Energy which holds that position. The portion applicable to Shareholders' Equity would have been 91.1% of the BYD holding shown, and would now be about 92.1% of the amount shown since Berkshire bought out Greg Abel's 1% stake in BHE. The same 92.1% applies to Berkshire Shareholders' share of BHE's earnings.
  4. Do we think BHE will have to pay tax on their realized capital gains in BYD Co Ltd (HKG:1211)? I'm wondering whether their accumulated wind and solar tax credits might reduce or even eliminate the tax liability on the realized gains. I have only the most basic understanding of US corporate taxation so I'd appreciate any better informed thoughts from the hivemind.
  5. The same article for those without a subscription to Barrons. https://jnews.uk/berkshire-hathaways-utility-business-highlights-the-warren-buffett-magic/
  6. Incidentally, my crude Black-Scholes warrant model estimates that with OXY trading at $62.86 per share (was $57.44 at June 30th, 2022), the warrants, thanks to their time value, would be worth something around $33.37 per warrant (was $29.38 at June 30th, 2022). That's now around $2.8bn for the whole OXY warrants position, up from $2.5bn at June 30th. These are only ballpark accurate, and differ by maybe 10-20% from Berkshire's own modelled valuation for the 10-K, where there are significant unobserved inputs. In any case, Black-Scholes tends to ignore a lot of fundamental factors that will be important to the eventual worth of the warrants when they're finally exercised. So called 'Intrinsic Value' in options/warrants terminology is just how much in-the-money they are right now, ignoring time-value, rather different from Buffett's meaning of Intrinsic Value.
  7. I really found a lot of good content in his whole thread about the Q2 report which starts from this post on Twitter.
  8. Actually as a sanity check, I just ran the calculation for year end 2021 using the following inputs: $28.99 Closing Price of OXY on 31st December 2021 $59.624 Strike Price (unchanged) 0.01512 Interest Rate (1.512% risk-free rate = 10 year T-bill rate at year end 2021) 0.37 Volatility (37% per Berkshire's 10-K) 7.003 years to expiry (31st Dec 2021 to 1st Jan 2029 expressed in years) The resulting Call Price valuation, which I hope is a reasonably close proxy for a warrant valuation is: $5.83 per underlying share. With warrants against 83,858,848.81 shares, Berkshire's holding of OXY warrants should be worth: $489 million at 31st December 2021 according to that model. This is a lower figure than Berkshire's $616 million but is at least in the ball-park. Using 7th August 2030 expiry, i.e. 8.600 years to expiry, it's closer: $7.22 per underlying share, $605 million holding valuation, which is fairly close. I guess this sanity check gives you some idea how this is only a rough model and I probably won't match Berkshire's model very precisely.
  9. I've been thinking about the modelled carrying value of the OXY warrants, which do count as part of Berkshire's equity portfolio. The OXY 8% preferred stock issued on 8th August 2019 is carried at $10.0 billion redemption value and Occidental can redeem it after 10 years (2029) at their option, for a 5% premium (i.e. $10.5 billion total) plus any unpaid dividends. The warrants expire 1 year after the redemption of the preferred. Berkshire 10-K page K-103 (p118 of the PDF) states that the warrants are valued based on a warrant pricing model at $616 million at year end 2021, with the inputs being: Expected duration: 7 years Volatility: 37% I'm a bit surprised at 7 years expected duration, thinking that maybe the warrants would expire on 7th August 2030, which is more like 8.6 years, so I'm instead thinking of 1st Jan 2029 as the effective expiry date. From 31st March 2022 that would be about 6.75 years. I would assume a Black Scholes Call Option pricing model is basically the approach they'd use, so I'm offering up something for those knowledgeable about this to critique and suggest modifications. I can do the math behind Black Scholes, but I'm not a finance professional. I ran a Black Scholes Call Option pricing model calculation using the following inputs to get some idea of the potential increase in modelled carrying value at the end of Q1: $56.74 Closing Price of OXY on 31st March 2022 $59.624 Strike Price 0.0251 Interest Rate (2.51% risk-free rate = something like the 2 year T-bill rate, but should I use 1 year or try to match duration to the expiry of around 6.75 years instead by reading off the yield curve?) 0.557 Volatility (55.7% from a simple Google search of OXY stock volatility, but a few sites gave similar volatility or implied vol figures, though I don't really know where I should obtain this input and over what period it should be measured) 6.757 years to expiry (31st March 2022 to 1st Jan 2029 expressed in years) The resulting Call Price valuation, which I hope is a reasonably close proxy for a warrant valuation is: $31.71 per underlying share. With warrants against 83,858,848.81 shares, Berkshire's holding of OXY warrants should be worth: $2,659 million at 31st March 2022 according to that model. The $2,043 million modelled value gain this quarter seems reasonable as they finished Q1 very nearly in the money and with an increased volatility input compared to year end 2021. That additional gain in the portfolio might actually be almost enough to make the Berkshire Equity portfolio break even this quarter (versus a 5% decline in S&P500). Without it, I'd say it's likely to have lost about 1%, which is about 4% outperformance vs the index in Q1. Does anyone think I should change some of the inputs in the model, or does this seem reasonable as the sort of GAAP-compatible valuation model? Obviously, Berkshire's internal thinking is probably more based on fundamentals and various likelihoods of different oil prices and the necessarily sound financial position of the company when Occidental is in a position to sensibly redeem the preferred stock and will completely ignore volatility, but they have to use "industry standard" models like Black Scholes to estimate the fair value of this non-traded warrant on their financial statements. I'd appreciate any input you can provide and I'm happy to recalculate with different inputs as I have the Black Scholes model programmed in, making it easy to change the variables and recalculate.
  10. Thanks, I'm not planning to attend this year, but might do so next year especially now I'm retired/a personal investor with no other job. I hold a lot of my Berkshire in an ISA (as does my spouse) with iDealing.com which has never sent me any voting forms. I also hold some Berkshire in Interactive Brokers (UK) which lets me vote my shares online, but I've not seen anything from them about meeting credentials. Good to know that a brokerage statement from either is probably sufficient for the Will Call area.
  11. I concur, 4thed. This site is a great resource and I greatly appreciate Parsad's efforts over a seriously long time. I quickly learned how to navigate round the mobile version, which does seem more ad-heavy than desktop, and to ignore all the google ads for products I've already bought! I had been a little absent around the time of the vote and the change of domain name, and I had actually thought I'd like to contribute financially to the site now I can afford it, but I'm at least happy to see ad revenue providing some recompense to Parsad for keeping it running and all the work migrating over to a generally more usable platform.
  12. This Twitter thread is a very interesting story I hadn't heard before about Merchants National Properties $MNPP This reference to a footnote is amazing
  13. Interesting. I imagine it's possible that some additional small investments are being made in Japan with currency effects largely offset by this cheap debt, but the interest rate is certainly favorable. Last year we did discover the exact holding in Itochu Corp as it came within the top 15 common stock holdings shown on page 7 of the Chairman's Letter portion of the 2020 Annual Report. I suspect this year that Mitsubishi Corp might just make the cut too at around the 14th or 15th largest, while Mitsui & Co Ltd is likely to miss the cut at around 16th-18th largest. Making no assumptions of buys or sells, here's my approximate top 15 list: Probable Top 15 common stock investments to be shown in 2021 Annual Report, approx page 7 of Chairman's Letter. 01 Apple, Inc. $161.2 bn 02 Bank of America $46.0 bn (not inc pref <$0.1bn) 03 American Express $24.8 bn 04 Coca Cola $23.7 bn 05 Moody's Corporatio $9.6 bn 06 Verizon Communicat $8.3 bn 07 U.S. Bancorp $8.1 bn 08 BYD Corp HKG:1211 $7.7 bn (but ~9.1% owned by minority interest in BHE) 09 Bank of NY Mellon $3.9 bn 10 Chevron $3.4 bn 11 Kroger $2.8 bn 12 Charter Communicat $2.7 bn 13 Itochu Corp $2.5 bn (see p7 of 2020AR) 14 Mitsubishi Corp ~$2.4 bn ~ estimated as not in top 15 in 2020 15 General Motors $2.4 bn ============================= Likely to be included in Others ***: 16 DaVita $2.1 bn 17 Mitsui & Co Ltd ~$2.1 bn ~ estimated. Unlikely to make top 15 in 2021. 18 Snowflake $2.1 bn 19 Verisign $2.0 bn 20 Visa $2.0 bn 21 AbbVie $1.9 bn Not including: Kraft Heinz not inc [$11.7 bn] - not part of Equity Investments Carried at Market Occidental 8% pref/warr ~$9.0 bn ~ incl. warrants - part of Others *** - this might be revalued in 2021AR given rise in oil prices in 2021.
  14. While there's still a minority interest in BH Energy I think it will remain there as part of that 'Grove'. The BYD Co HK:1211 stock is technically part of BHE too, so only about 91% owned by Berkshire Hathaway shareholders. I don't think the difference is particularly material in the grand scheme of Berkshire as a whole.
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