gfp
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Posts posted by gfp
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Shoe Dog was pretty fun and a very quick read. (Phil Knight of Nike)
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I don't know for sure, but it may be this one or another by this author ->
Charlie mentioned a book that he read at the end of the interview: Well, I read a book by a Chinese-- economist who had worked in the World Bank. And his general idea was that we had learned better how to help a poor nation develop. There was a lotta stupidity in the early days when we'd give some very poor and backward nation a big steel plant. Of course, it wouldn't work. And-- I think this economist was right. So I think generally speaking-- there's a lot that's right in the world.
Does anyone know the name of the book? Thank you!
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Ha! That's a great one. You know he actually does sign all his correspondence "Mr Warren Edward Buffett Billionaire investor"
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I’m enjoying the video of the meetings from the 90’s. Audience questions are from people like Bill Ackman, Christopher Davis and a bunch of Omaha locals (at least in 94). Steve Burke did us all a huge service lobbying Warren to get those videos online!
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Its the difference between dividends reinvested and compounded, vs not. Annualized S&P return is something like 8% since 1942, but with dividends reinvested, compounding, it comes a lot closer to 12%
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So many of the shareholder questions were from Chinese nationals and children. A few questions from the Chinese folks were ok - trade relations, why not look to buy chinese businesses, etc. The worst was probably from the Chinese woman who works at a 'family office' for high net worth Chinese. "You two would be my dream clients" ??? why? "Do you have family offices and what do they do for you?" give me a break...
I have to agree with the complaint often voiced here that the quality of the questions is just not good. Very few substantive issues about the business are being addressed. Unfortunately the journalists and analysts aren’t helping that much - they tend to delve into the weeds rather than asking big-picture, difficult questions.
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I put this link the another thread as well, but it is definitely a new development to have many years' footage of entire annual meetings posted on the internet. I had heard this was going to happen, but assumed yahoo was going to get the footage. Looks like Becky was the winner on this one -
CNBC Berkshire archive - video footage of entire annual meetings from before the yahoo livestream started, plus CNBC interviews, etc:
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One thing I always enjoy is when someone asks about their access to the 'dry powder' they currently show. This year it was about insurance regulators only allowing a certain amount of dividends out of the ins. companies per year without special request/approval. Of course, cash does have to be outside the Ins. company to buy and cancel BRK shares, but it probably isn't necessary in order to buy them. They can be distributed to the parent and cancelled later.
But my point is that they don't want to spit out a number (Charlie has accidentally spit out, 'we could do a 150 billion dollar deal tomorrow if one came along' last year) - but they were clearly indicating that they will have no problem at all getting creative and closing an enormous acquisition if one were to be possible. This year he mentioned partners would line up - like FFH uses OMERS and others - even though it would be unlikely that BRK would require partners. If debt markets stay like this, obviously that can and will be used as a major lever. And, of course, one of the reasons BRK cash seldom goes down by much - even during years with large acquisitions like PCP - is that the amount of time between a deal being announced and it ultimately closing can end up bringing in another $25+ billion in cash to Berkshire. Float growth, maturing securities, free cash flow from subsidiaries.
Through relatively short term (2-10 years) debt issues, Buffett would have no problem "pre-spending" some of Berkshire's future earnings power on the right deal. Compared to the current situation it would be a luxury.
And capital doesn't have to be dividend-ed out of the Insurance companies to make acquisitions. There is no problem if NICO ends up owning another large operating business.
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Cnbc has footage and other stuff from past annual meetings, not available previously. They call it their new 'warren buffett archive' ->
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Why do you say that? Because you think the market will sell it off based on the Q? I doubt we are that lucky this time, especially after an entire weekend to think it over / have it explained by the boss. But it would be nice if it did happen. I'm not holding my breath...
Great opportunities to buy ahead
On another note - I found this interesting: "Our consolidated effective income tax rates for the first quarter of 2018 and 2017 were 29.7% and 27.2% respectively"
Could have been related to the big AIG policy last year, or some other anomaly. Just wasn't expecting an increase in effective tax rate in the first quarter or the corporate tax cut..
edit: Also, nice to see GEICO appears to be back to underwriting profits. Price increases (less than competitors but still increases) appear to have cycled through the renewals. Revenues at GEICO were up over 15% vs Q1 2017. (while still profitable on an underwriting basis, the bulk of GEICO's Q1 underwriting results appear to be from favorable development of short-tail prior years' loss estimates)
another note on tax rates: last year BNSF earned $1.345 billion pretax and $838 million after taxes in Q1. An effective rate of 37.7%.
This year, BNSF earned $1.5 billion pretax and $1.145 billion after taxes, an effective rate of ~24%.
I was interested to see how the growth at GenRe was developing, since it has really taken off since Ajit was put in charge. Premiums earned were up 49% at GenRe compared with Q1 2017! On a lot fewer employees.
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Charlie and Warren have only met once in the last 2 years.
I believe it was something more like 2-3 times per year. We know they have been together at least once a year because of the annual meeting. And it turns out there is also one off-site directors meeting each year.
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Thanks for the link to the full interview! Sounds like cash levels will be down slightly due to the equity buying, primarily the 75 million additional Apple shares, more than offsetting the PSX sale. He mentioned that IMC and TTI are up big with the world economy accelerating. Sounded like he hasn't bought any GE at this point.
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you know, just your average 42.5 billion dollar investment
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Thats kind of like saying, "What! Omaha World Herald site has a pay-wall? Isn't Berkshire Hathaway making enough money?"
That sucks. Michael Bloomberg not making enough money?
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Added to BRK today as well. Great price around 190. Quarterly report out Saturday morning with new cash balance (should be huge) and quite possibly zero net earnings on the headline number because of the new mark-to-market equities passing through the income statement..
Just buy some more BRK.B, Jeff! It's the perfect time of the year for it - about 50,000 Berkaholics [all of them constantly buying Berkshire, under eternal avarage ins] - coming out of their holes and caves, to go to Omekka - oops, typo here - Omaha - to have a good time and good experience! So the market price goes down because of lack of presence of the usual buyers in the market. -Capital allocation has momentarily switched from Berkshire to beer!
[if you sense a stint of envy in this post, I assure you it is! I will have to settle with Yahoo Finance - not that bad either ...]
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Seems the barrage of Berkshire related news items has begun. WSJ did a piece today on HomeServices -
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Bloomberg.com has a redesign and put in a pay wall after 10 articles starting today:
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The structure was an accident of history. No fees because he was already wealthy and truly wanted to get wealthier alongside his investors, rather than "off of them." A lot of people say that line, but Warren is the only one I've seen actually do it. I personally manage large sums for a few people for no fee - it actually costs me money - but I can't do that for everyone.
So much of what they do - the $50,000 reimbursements for "postage" and personal use of secretarial services, etc - is just to set a good example. They can afford to do that. The ridiculously low salary is to set an example by using an extreme. He doesn't think Jaime Dimon should get $100k, he is using an extreme to set an example.
Berkshire is an accident of history, but the track record and communications record are all in one place. It's his painting, as he says. It is valuable for his legacy to have a single long term repository of his life's work and the scorecard.
To answer my own question a few posts ago: Fairfax India, Greenlight Capital Re, Third Point Re, etc, ALL have more egregious and costly fee structures than the one shareholders of Biglari Holdings are paying. The only difference is that investors put up their money with that fee schedule fully disclosed ahead of time. It was their money and they chose to pay the fees. Biglari chose to add fees (however competitive with the above examples) on other people's money, after the fact. And that is - one of the many things - that rubs people the wrong way.
So back to the original point...1) Why no fees? Why does it make sense for Fairfax India to charge fees, but not for Berkshire (if this is even the case!).
2) Berkshire and some other companies were merged. Technically speaking, what was the reason it didn't make more sense to have an investment vehicle owned 100% by Buffett, Munger & Co.
Interested to hear your thoughts!
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How is Greenlight Re any better than Biglari Holdings' comp structure? Or fairfax india for that matter?
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Is the current market cap $875m ?
I may need to duck and cover after posting this, but I bought some Biglari Holdings today.
I know, Sardar is the worst partner money can buy, but this is just a short-term trade on the assumption that the 20%+ drop in the price of BH is due mostly to the company getting dumped from the Smallcap 600 index. Reading reports of the annual meeting that was held last week, it doesn't look like Sardar dropped any unexpected bombs that would explain the cratering stock price (the dual class stock structure was a foregone conclusion). Volume in the stock today was about 30 times normal volume, which is probably due to index funds selling.
In any case, the next couple of weeks will either make me some money or teach me an expensive lesson.
Is it really that cheap though?
$1.05bn investments, take out $270m for deferred taxes and debt and you have net investments of $780m. Add in $500m valuation on fast food biz (12x normalized earnings), $50 first guard (12x normalized earnings) and a $0 for Maxim. Using a 2m share count (to prevent double counting as repurchased stock is included in investments), you get a total value of $1,330m. Take 20% off that for the Biglari greed discount and you have a valuation of $1,072m. Current market cap is $875m.
This looks a little cheaper than it should, but is it really worth getting involved in for such a small discount?
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thanks for the heads up, I hadn't noticed this. got filled on a small amount of HRG at 9.555
Off to buy some more kwikset products..
SPB
Company guided down and replaced its CEO with its Chairman David Maura who is well-respected as a capital allocator. He stated that much of the guide down in FCF is due to transitory factors, which have been ongoing for about a year at this point.
Announced $1BN share repurchase over 3 years would wipe out ~30% of market cap.
Company will be largely unleveraged after selling its battery and appliance businesses.
Transaction with HRG will allow index funds to own the stock once its no longer controlled.
~10% FCFF yield pro forma for divestitures of battery and appliance business.
Berkshire 2018 Annual Meeting
in Berkshire Hathaway
Posted
So, to my ears it sounded like Warren alluded to the likely possibility of another warrant / preferred deal being announced in the not so distant future. Maybe not a 10% one, but something above market for Berkshire. He mentioned, I believe, not a huge one.
The likely source seems to be QSR, but it could be anyone I guess. He's offered similar stuff to JAB in the past, although they didn't end up getting their deal (Avon I think it was).
Any guesses? I'll throw Domino's pizza out there since there have been rumors. My track record of predicting Berkshire deals is very poor...