gfp

Proxy is out. Jain & Abel make $16 million each, plus $2m bonus. https://www.sec.gov/Archives/edgar/data/1067983/000119312519076915/d684203ddef14a.htm

Not really newsworthy, but it seems like there is a very odd volume spike on the B shares for today's open. Are others seeing a volume spike on the open this morning? edit: I suppose it is related to index rebalancing today. If so, would expect another market-on-close volume spike.

Hey guys - I was curious as well since I also couldn't reverse engineer the math behind the 24% figure. I asked Debbie Bosanek if it was truly a typo and she had Dan Jaksich, the Controller / VP / principal accounting officer of Berkshire get back to me. I would expect Dan to take over as CFO if Marc Hamburg retires. Anyway, what he said is this: "The 24% increase in pre-tax earnings referred to on page 8 includes the effects of a number of corporate items, such as interest expense on corporate debt, foreign exchange gains/losses on the Euro denominated debt, and purchase accounting amortization related to these businesses."

They come about through mergers and acquisitions primarily - Purchase accounting. When you pay a control premium to acquire a business, you are usually "over-paying" - especially in this highly competitive environment. You must assign the purchase price to the stuff you are acquiring and when you run out of real things to assign value to, you are left with intangibles: goodwill, brand names, customer relationships, yada yada yada. Since these intangibles are not amortized or depreciated regularly any more, they are "tested" periodically for impairment. When the market and the world and the earnings and pricing power dynamics tell you that you can no longer justify $XXX for Oscar Mayer or whatever, you take a non-cash charge to adjust the carrying value to a slightly more defensible value. Kraft was built through mergers and acquisitions and then the Heinz deal was consummated at a price that implied a pretty high value for Heinz (in terms of Kraft's share price). Every deal creates purchase accounting fluff potentially.

https://www.havenhealthcare.com

Probably small, but Berkadia has made an acquisition: https://www.housingwire.com/articles/48362-berkadia-launches-structured-capital-group-by-acquiring-central-park-capital-partners

It would certainly be surprising since they just acquired US Floors a couple years ago and Warren mentioned that it set up Shaw to be a meaningful contributor to Berkshire's earning power in the future. US Floors is a growing supplier of vinyl plank flooring that you can buy at Lowe's - SmartCore, SmartCore Ultra, etc.. I have a feeling that the HR manager in Franklin Tenn. isn't in the know about Shaw Inc level deals and might be trying to say that her facility in Franklin could be acquired. Who knows. Maybe Warren sells half the subs this year. First Applied Underwriters, then Shaw - is GEICO next?!

Yes there may be little truth to the rumor, being rehashed right at the end of the month and all. But if he were going to buy one of the airlines, it would probably be the one that has been profitable for 46 consecutive years. I do not think LUV was the elephant he was working on in Q4, and since he would sell the equity positions in the other 3, it wouldn’t require a ton of cash from the parent. Not like a GE, UPS, BUD or KO would. I guess we’ll just have to be patient

It is certainly possible that the decision to sell is, as they claim, unrelated to the EquityComp issues. Berkshire is pushing bigger and bigger into primary and they will be competing. But they've been competing between their various insurance and reinsurance subs for a long time. Now all of a sudden it's a problem. It could be that since the founders control something like 19% of Applied Underwriters, they were unhappy with the increased future competition (BRK Specialty, BRK GUARD, THREE, etc) and instigated the process. Applied has around a Billion in premiums and still features the Berkshire halo, so it aught to fetch a fancy price (not that it will be material to a half trillion dollar market value parent company) In other news... (hope springs eternal) - Southwest shares caught a bid earlier today when Bloomberg or someone started circulating a rumor that Berkshire wanted to buy the whole enchilada at $75 a share. https://www.fool.com/investing/2019/02/28/why-southwest-airlines-stock-just-popped.aspx I do love Southwest as a customer (although the flights are always free with points, I do pay for early bird check-in)

Here is a good article on BHE and a good estimate of its value based on share repurchases that BHE does directly with Walter Scott's family. Greg Abel's BHE shares, which used to be Sokol's shares before Berkshire facilitated the transfer, are convertible into Berkshire Hathaway common stock. So ultimately Greg will be a large owner of BRK common shares. The Scott family is the only other owner of BHE shares. https://www.fool.com/investing/2019/02/27/the-big-berkshire-hathaway-buyback-no-one-is-talki.aspx

I don't think Bloomberg LP would cost enough to qualify for his characterization. When the interviewers were like, "you could write a check for $100 Billion" - Warren's reply was, "that is true." I think he had something big that was possible. If it was GE it was probably Reinsurance / balance sheet stuff that kept it from being workable at the time. GE has been in talks with Ajit about their insurance liabilities for a while but I don't think GE can stomach the price it would take to shed to BRK.

Here is the BNSF 10-K for those interested https://www.sec.gov/Archives/edgar/data/934612/000093461219000005/llc12311810k.htm $5.45 Billion in cash distributions to the parent in 2018 (not counting cash for their share of consolidated taxes). And yes, they did issue $1.5 Billion in new debt and only $750m was redeemed. Pretax income for BNSF (shows the underlying biz without TCJA distortion) 2018: 6,863 2017: 6,328 2016: 5,693 -------- On the GEICO post above, it was certainly a helpful data point to have Warren essentially assign a lower bound to what he values GEICO at. When you pay a couple billion for something and say Tony added over $50 Billion in value for Berkshire shareholders... You have to assume he has a higher figure in his head. Unfortunately, it's too complicated to separate companies like GEICO and NICO from the other operating companies BRK owns, since they own each other with the regulatory capital / float. Progressive has a $43 Billion market cap at the moment, btw. I believe that is why he didn't assign value to his "5th grove," insurance. It was his way of also not counting a single dollar of liability for that grove either.

Those are all possibilities. But Amex would have to give up Bank holding company status to do a deal with Berkshire.

Bloomberg has said he would sell his interest in Bloomberg LP if he ran for president, or at least if he was elected, if I remember correctly. Maybe Warren would be interested in assisting with that.

Buffett buys it, Gates calls him and tells him his take on it, Buffett reconsiders how much he really understands the future competitive dynamics of the industry and sells. Better than the IBM situation!

Some color on the decisions made in Q4- https://www.cnbc.com/2019/02/25/buffett-says-he-was-close-to-making-a-very-large-acquisition-in-the-4th-quarter-but-it-fell-apart.html

Wow - classic case of "lose reputation for the firm and I will be ruthless" ?? https://finance.yahoo.com/news/buffetts-berkshire-hathaway-talks-sell-201610562.html You don't see these headlines everyday...

Berkshire files two 13Fs, and then there are some pension fund holdings that are eliminated in the Annual Report presentation but may creep in to other SEC filings. Most people just forget about General Re New England Asset Management holdings that are tagged as belonging to Berkshire. Dataroma and CNBC have always had that part wrong.

This was surprising to me and it is a choice Warren made. In October they were only active for 6 days, buying both classes of shares at around $30.6 million per day on average. Then they stopped on October 19th - with prices the same as when they were buying. And they stayed out fo the market the rest of October, when prices declined as low as 197.29 / b share. Then they started buying again 12/13 through Christmas Eve, which is 8 trading days. Surprisingly they only purchased A shares during this period, at an average of about $29.2m worth per day. Why on earth they would not purchase B - shares during this period is a mystery to me, unless these were purchased in blocks that were offered directly to Berkshire and this is just the number that happened to be offered. It seems like there was not an active safe harbor 10b5-1 plan during most of the quarter, or if there was it had a lower cap price after 10/18 and didn't trigger any purchases afterwards. The December purchases seem like they were made outside of the plan, if one existed after 10/18. I suppose Warren knows market participants will try to reverse engineer his buying and it could end up, over time, with a situation similar to the 1.2x rule that kept him from being able to do much. So he changes it up a bit. It could also be that he wanted to get the Annual Report out and now he won't feel as bad about 'taking advantage' of exiting shareholders - his former partners. But that seems like wishful thinking. We'll see over time. Maybe he got bearish like everyone else in December and thought better opportunities would come in 2019. Not very Buffett-like, but we saw Apple freeze up on buying as well. People seemed to get spooked. Why on earth wasn't he buying any shares on 12/26? I can only guess that it's because none were offered to him with a phone call, and there was no active 10b5-1 plan 'automatically' buying on Berkshire's behalf (or there was one but the cap price was lower). We'll see.. I was certainly off in my expectations

its like deja vu all over again around here http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/does-anyone-use-ibkr's-adaptive-algo/

I wonder if Warren wants to regain his AAA credit rating before he passes. The reductions in net debt, cash balances and repurchase restraint seems to show that either Berkshire deserves a AAA rating or Johnson & Johnson should lose theirs as well. It hasn't made much of a difference - even BNSF, where BRK doesn't guarantee the debt, borrows extremely cheaply - but I do think he was miffed when they took him down from AAA.

2018ar.pdf

Only $417 million in share repurchases in Q4. Only active from 10/11-10/18 and 12/13-12/24 - so much for figuring out their plan! Further, they only repurchased class A shares during the fall culminating on Christmas Eve - not what I would have guessed. page K-29 for those interested.

Hey John - they do release 4th quarter numbers as well, just as a press release. Here are last years numbers: http://www.berkshirehathaway.com/news/feb2418.pdf

So nobody answered me on the KHC thread, but it looks like Berkshire's reported earnings in Q4 will be a real shit show. Berkshire's 26.7% interest in KraftHeinz's $12.608 Billion net loss for the quarter will pass through BRK's books under the equity method. That's another $3.366 Billion taken out of BRK's Q4 operating earnings. Then we also have the uncertain results from catastrophe losses. The headline numbers will also be swamped by the large unrealized hit to the equity portfolio. Here's hoping we get an opportunity to buy some BRK next week. Looking forward to the annual letter as always. Enjoy your weekend