gfp

Thanks Heilko - that's true, they did recently offer the option to pay half upfront and half closer to your stay for reservations over $250. Curious why you don't think the float aspect of the business is very important? Seems they are holding a revolving fund of several billion dollars of other people's money at any given time - an amount that continues to grow. Sounds useful for a high growth company that doesn't need much capital to grow as it is. At least useful for founders and early investors who want to minimize dilution.

I have no idea what valuation AirBnB is looking to get at their IPO, but as it is discussed as a likely 2019 IPO, and it is the first IPO I have been interested in in quite some time, I thought I would start a thread. Perhaps others have interest in this business model. Bill Gates has mentioned before the difference between AirBnB's network / platform effect and that of an Uber or Lyft. Basically, Uber has to be the dominant network (of drivers/users) in each local market. It can be number one in the USA but struggling in Asia, etc.. But AirBnB is a truly global platform. The property owners go where the renters are, and vice versa. My favorite part of the AirBnB business model, and the likely reason it hasn't had to take gobs of venture capital financing in, is the enormous float that the company generates. When someone books an AirBnB rental, their credit card is charged in full. AirBnB then holds that money - say for an average of 2 months or more - and then pays most of it to the AirBnB host the day after the guest actually checks in to the property. The more the platform grows, the more float sits with AirBnB. It's better than the payroll processors (ADP, Paychex, etc) - which are often cited as enjoying the benefits of float (but usually only when interest rates are rising). As I mentioned elsewhere, my wife has some AirBnB rentals (she is the host, but never sees the renters - self check in/out, stand alone properties). When she launched these rentals, they were on VRBO and AirBnB simultaneously. Both companies allow you to easily sync your calendars so that a property is not double-booked. She got 98% of the rentals from the AirBnB platform. VRBO was worse on payment transparency to hosts and a few other things that would turn off hosts. So she quickly dropped them all together. We've had AirBnB guests from all over the world and have stayed in AirBnB properties all over the world. It's tough to unseat the dominant global platform on something like that. Risks include increasing local regulation - AirBnB is seen as the enemy of neighborhoods with actual neighbors, affordable housing, etc. But in my experience it is hard to put the genie back in the bottle on stuff like this. The Float and the dominant global network are what attracts me to this business. Anyone else have thoughts on it, while we wait patiently to see a price?

I am watching this stock too, but isn’t the relatively small premium to the current market cap ( rumored purchase price is $11B, current market cap is $9.8B) a concern. That’s just a 12% premium to the current price. This seems to be a difficult business to run and really not worth as much than thought. Sold out of Arconic today at 20.20, break-even for me. Deal set to be announced between 21-22 per WSJ. Would expect a decent spread to remain until closing. No loss but still a disappointing premium. Good call Spek.

I don't know for sure, but what I read there describes a hurdle rate with a high water mark and no clawback of previous incentive allocations to the gp. Which is also what you read from it

Is this "insider buying" or issuer repurchase activity?

4 posts above yours

I literally just posted a link to Doug Kass asking this exact same question during the annual meeting, with Warren’s answer. He’s pretty clear that Howie is there for one specific reason *edit: I should add as well that there is a very good chance that Howard will also be the executor of an estate that will still hold a de facto controlling stock position for some time, unless Warren lives a whole lot longer.

I understand the criticisms, but I do believe Warren has a clear reason for making Howard non-executive Chairman (and Bill Gates Lead Independent Director) and I am sure that Warren considers his reason rational and based on specific experience on many corporate boards. It is more about making sure a future CEO is not chairman. He trusts Howard to remove a CEO if it is ever required to preserve the culture. I'm pretty sure they've talked it over once or twice... https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=12&cad=rja&uact=8&ved=2ahUKEwjOnvDt_-rfAhVGQ6wKHRoABK8QwqsBMAt6BAgCEAc&url=https%3A%2F%2Fbuffett.cnbc.com%2Fvideo%2F2013%2F05%2F04%2Fis-buffetts-son-howard-buffett-qualified-to-be-berkshire-hathaway-non-executive-chairman.html&usg=AOvVaw0dEXOeMEf7VAo77HjnJVGi - by the way, I have a shortened screen name, used to post as 'globalfinancepartners' - no skeletons in the closet that I know of

Likewise.. Is there some negative to someone changing their "handle" on the message board from their real name to "Og"? I have thought I should change my own ridiculously long and meaningless handle to something shorter, since it is just an accident of history (an old yahoo email account used to get a free trial subscription to Weldon's Money Monitor in the late 90's, which became my default name on chucks_angels yahoo board). If I were to change my handle to gfp, would that upset someone?

Just a quick update that I did the math on Berkshire's approximate Apple cost basis as of end of Q3 2018. I know you did the same, John, but I couldn't really see an exact number in your spread sheet. Maybe I am reading it wrong. Anyway, here is the last know Apple position at Berkshire and it's cost basis: 255.16 million shares, total cost basis of $36.209 Billion, for an average cost basis of 141.91 / share. This excludes pension fund holdings. The first 166.713 million shares were disclosed in the AR as having a 125.73 / share average cost. *** edit: this is kind of funny since the low from 1/3/2019 was $142/share. ***

Another RE brokerage acquisition (this one was already a franchisee): https://www.businesswire.com/news/home/20190109005685/en/HomeServices-America®-Announces-Acquisition-Berkshire-Hathaway-HomeServices

If you were willing to pay the ask why didn't you enter a limit order at the ask?

yeah, I don't use it. They are constantly sending messages - 'try adaptive algo' and the more annoying 'warning, you have used a market order!' when I use market orders. I know when I want to use a market order. I don't need a warning against it each time. By and large, regular old limit orders work best for me at IB. Much better than the firms that route to citadel or god knows where and orders sit unexecuted.

Thanks Dynamic - I knew you would have an estimated BVPS figure. Float should be up from the MLMIC acquisition plus whatever other float growth Ajit could manage. Berkshire likely continued buying financials during the quarter, just not WFC, BAC or AXP.

Just a quick update that I did the math on Berkshire's approximate Apple cost basis as of end of Q3 2018. I know you did the same, John, but I couldn't really see an exact number in your spread sheet. Maybe I am reading it wrong. Anyway, here is the last know Apple position at Berkshire and it's cost basis: 255.16 million shares, total cost basis of $36.209 Billion, for an average cost basis of 141.91 / share. This excludes pension fund holdings. The first 166.713 million shares were disclosed in the AR as having a 125.73 / share average cost. The exact cost basis won’t be disclosed until the annual report. You can estimate it using last years AR and shares added each quarter since using average quarterly prices.

I don't have a current estimate of BV, but others here probably have a spreadsheet that gets you pretty close. Book value is lower than Q3 mark, which was 152.47 per share on the B shares. I would say low 180's per share will get you your 1.3x number. You don't have to be exactly right about it. Say 182...

It's just a function of how many trading days the stock is below the cap. He isn't making a 'step on the gas pedal' type decision - the market is either offering up Berkshire for a low enough price on more trading days or it isn't. $5 Billion a quarter is doable if the market offers Berkshire below his cap price. But the plan can only purchase so much each day - so it really matters how many days the market allows them to be active purchasers. If only it were $10b here and $20b there.... So far, it's been more like $1b here $500m there. I guess we'll soon see whether he has stepped on the gas pedal. SJ

Just a general data point some might find interesting. Warren makes the decisions for BHFC and has once again chosen to refinance maturing floating rate debt with 30 year fixed debt. Looks like he will get a (pre tax) interest rate of less than 4.5%... Not too shabby. https://www.bloomberg.com/opinion/articles/2019-01-03/is-warren-buffett-sending-a-signal-about-the-bond-market Update with final pricing and quarter billion upsizing: https://www.sec.gov/Archives/edgar/data/1067983/000119312519001670/d663847dfwp.htm 4.3% tax deductible interest on a 30yr issuance

My returns ranged from -5% in the worst portfolio to +5.5% in the best performing one. Most were right at +2.3%. Personal returns were +2%. Negative contributors were Fairfax Financial, Banks, SPB and THO towards the end of the year. Positive contributors were Berkshire, Berkshire derivatives several times, MMAC, and things that were sold during the year.

Thanks for the spreadsheet John. Am I reading it correctly that your spreadsheet would predict somewhere between $4 Billion and $6.25 Billion in Q4 repurchases under the most likely set of 'rules' for their repurchase program? (either 'cap' unchanged from Q3 or 'cap' based on fixed multiple of last reported BVPS) It may disappoint some, but $5 Billion a quarter can be really great for BRK over time. It's just a new, incremental, positive in the mix. They are still looking for operating companies to buy

Perfect boring, well run company for Berkshire to buy. Maybe someday..

Adding to Berkshire again this morning. Approximately $470 Billion market cap. Could see some opportunities if we really do enter a protracted bear

Thanks aws. It could be a bit worse than those numbers, of course, as we would presume that Warren continued buying certain financial stocks after quarter end. The big quarterly mark passing through the income statement will be announced when the annual report comes out - which tends to obscure focus on the 4th quarter alone. In any event, it will be a long time before that comes out. Berkshire is seen as decently defensive and that is probably why it outperformed some stocks during the recent market decline. I think Warren & Charlie pay a lot more attention to the valuation disconnect caused by their insurance and operating companies than the quarterly fluctuations in the stock prices of investees (most of whom are engaged in very large repurchase programs themselves). Here's hoping Berkshire can find a wholly owned subsidiary to add to the collection with this recent fade in enthusiasm and uptick in financing costs for leveraged buyers. I happened across a private company in Chicago called Reyes Holdings. What a gem - would fit perfectly into BRK but why would they ever sell...

This trading day disclosure (which is not required so it's curious that Warren is telegraphing this information) is how we arrive at the theory that there is a cap price and what their average daily purchase volume is on days they are in the market. I should add that a lot of what I post is my opinion, but it's not a totally uninformed opinion. Earlier there were a lot of folks saying Berkshire was going to be buying hand over fist and that just didn't jibe with what Warren has said and done over the years. If he gets some big block trades presented to him and he's not in a blackout period, he can act aggressively on those outside of this trading plan. He probably knows where potential big blocks of stock are - but someone has to want to part with it. If he can average $10 Billion of repurchases annually under this plan it is not going to make much of a difference, but it's better than nothing. We used to get excited when Berkshire announced a $10 Billion cash acquisition! Personally, if we stay below 200/b share I would love to see the company take in a ton of stock, but it would surprise me. Painting the tape into the end of the year is much more of a Biglari thing than a Buffett thing.

They don't have to set an absolute price. It can be a pretty involved formula or something as long as it is laid out ahead of time and not changed later. They can change their size up to a point. I just don't think they are so far. We'll see So for the 10b5-1 plan, they have to set an absolute price (what you call "cap") at or below which to buy and the size? And they cannot do anything fancy like relative price? And they cannot change the size either?