gfp
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Posts posted by gfp
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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...
- by the way, I have a shortened screen name, used to post as 'globalfinancepartners' - no skeletons in the closet that I know of
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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?
John, I'm kind of confused. What exactly is the issue here?
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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. ***
Getting back to the Apple discussion - I concur with Stubble. Putting such a huge % of BRK's market cap into Apple bothered me from the start. I hope he's done adding. I rarely question Buffett's purchases but the bear case here is worrisome.
I've been trying to find BRK's ( most recent) cost basis in Apple. Does anyone have it?
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Another RE brokerage acquisition (this one was already a franchisee):
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If you were willing to pay the ask why didn't you enter a limit order at the ask?
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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.
If the bid is 20.10 and ask is 20.15, Is it basically putting an order into the market at 20.11, and if not filled, move up 1 cent to try again? I think this kind of activity may cause the market to go up as it is seeing some aggressive bidder coming in. Or is it doing something smarter?
I am really pissed when i put in a buy adaptive order with patient urgency today with a limit of 20.6, and after market opened, it remained at 20.30 bid and 20.49 ask for 8 minutes without getting me filled, and then price went way up to 21.8. I called them to ask what "patient" really means but they refuse to answer.
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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.
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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.
Getting back to the Apple discussion - I concur with Stubble. Putting such a huge % of BRK's market cap into Apple bothered me from the start. I hope he's done adding. I rarely question Buffett's purchases but the bear case here is worrisome.
I've been trying to find BRK's ( most recent) cost basis in Apple. Does anyone have it?
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.
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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...
Does anyone have an up to date estimate of book value? I'm thinking if I could get in at 1.3x or less, I would do it.
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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.
SJ, 10 billion dollars here, 10 billion dollars there, 20 billion dollars there.... Pretty soon we're talking big money. The buyback is what it is. It's been discussed here a lot. It's been suggested it's simple. My feeling, given WB's views of the issue, is that he has designed a smarter buyback system that has been suggested. It's simply not in the man's genes to just do what everyone else does.
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
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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.
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
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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.
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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
With now one trading day left in 2018, based on the reverse engineering of the 2018Q3 market data and data about actual buybacks in 2018Q3, it looks like buybacks for USD ~4 B at an average share price of USD ~201 [at 10 percent of average daily volume, & average buyback price calculated as B share equivalents] for 2018Q4.
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Perfect boring, well run company for Berkshire to buy. Maybe someday..
Spent the last cash the other day to buy Berry Global just below 45
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Adding to Berkshire again this morning. Approximately $470 Billion market cap. Could see some opportunities if we really do enter a protracted bear
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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...
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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.
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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
Also - because it is a 10b5-1 plan, there is nothing but set a cap for Ted or Todd to do. The trading decisions have to be made by the broker without interference or they lose the safe harbor of the plan.
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?
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Yes, the amendment to the plan (removing the 1.2x rule) went into effect after the 2nd quarter earnings were released. The first trade was actually on Tuesday, so they waited an additional day to start - for whatever reason. But that was a one time delay. They didn't want to look like they had material nonpublic information (which of course they always have, but they are trying their best to be "fair")
Going forward there are no blackout periods except the final few minutes of the trading day. So far this quarter, they might have repurchased something like $1.7-1.9 Billion of stock. If they moved the cap up to 218 or something like that, it would be a higher number because they would have been active on additional trading days. If BRK stays below whatever the cap is for the rest of December, the 1.7-1.9 billion number will continue to go up by approximately $66 million per day. That is my guess. We'll figure out more over time.
Just to be clear, there wouldn't be any blackout periods since they are purchasing under a 10b5-1 plan. And we know they are using that type of 'safe harbor' plan because they made repurchases subsequent to quarter end but before filing their 10Q with the SEC.
Thanks for pointing that out for me, globalfinancepartners,
But for 2018Q3 we discussed some time ago, that the new buyback scheme would not get effective untill a certain date in 2018Q3. Am I right that this date was the release date of 2018Q2 10-Q?
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A comment Buffett made at the AGM in the past few years about how CEO’s get it wrong on buybacks (doing it for the wrong reason or simply getting it wrong) has me thinking if the current buyback that is WIP has been assigned to the wards as a developmental opportunity. Thinking Ted and Todd. In essence calculate Intrinsic Business Value. They are likely going to get this task for a longer time to come.
They were unusually specific about this:
"Under the amendment adopted by the Board of Directors, share repurchases can be made at any time that both Warren Buffett, Berkshire’s Chairman and CEO, and Charlie Munger, a Berkshire Vice Chairman, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined."
http://www.berkshirehathaway.com/news/jul1718.pdf
Also - because it is a 10b5-1 plan, there is nothing but set a cap for Ted or Todd to do. The trading decisions have to be made by the broker without interference or they lose the safe harbor of the plan.
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Just to be clear, there wouldn't be any blackout periods since they are purchasing under a 10b5-1 plan. And we know they are using that type of 'safe harbor' plan because they made repurchases subsequent to quarter end but before filing their 10Q with the SEC.
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I would guess that they are repurchasing around $66 million per trading day that the price is below their cap. What we don't know is what the current cap price on the plan is, which means we can't estimate how many trading days they were in the market purchasing shares. We know they purchased some subsequent to quarter end and we know they continued purchasing shares when prices came back down. It is possible that the price cap on their repurchase plan stayed the same, at around 208 per share B share equivalent, in which case they would be active in the market only on days the B shares traded under 208. Or it could be that the cap is as high as 218 per B share or thereabouts (if it is based on a simple multiple of last reported book value), in which case they would have been active buying shares for more trading days and would have repurchased more shares.
I do not think they are varying the buying under the plan with the price at 195 vs 207 per B-share. I think it is a target percentage of average daily volume with a price cap, executed as a 10b5-1 plan by a brokerage firm.
Over time, we should be able to figure out if they based their cap on a simple multiple of last reported book value by looking at the number of days they were active in the market and the corresponding market prices on those days.
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Greg Abel announcing the new CEO for Marmon. Not a surprise, but nice to see Greg is truly the direct report.
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glad y'all found the interview interesting. I definitely got some questions from my fellow jurors in criminal jury duty who were looking over my shoulder wondering why I was reading "RailwayAge" magazine... Last day of Jury Duty is today - unless they keep me on this child sexual abuse case that will last 3 days. Every single case I have been through voir dire on over the two week period has been some dude sexually assaulting a minor girl. Yuck.
Howard Buffett
in Berkshire Hathaway
Posted
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.