gfp
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Even at the great recession Buffett got BRK-only prefs at ~9% coupon. Considering that a once-a-huge-crisis opportunity, why and how future opportunities be better than that (so you could get to 10+% return)? (Contra argument: float is like leverage so 9% on that is levered return for the company.)
Seems like the return on those great recession prefs was substantially above the 9-10% dividend yield. They all included warrants - even the RBI preferred shares paid back today ($3.3 Billion cash coming to BRK today), came with penny warrants on QSR stock.
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The gates foundation is required to sell shares. They have been selling them much slower than would be required, as they have received some accommodation - but they are still required to sell and Warren was aware of the rules governing “excess business holdings” or whatever it’s called. Basically you can’t concentrate a foundation in a single stock so that foundations aren’t used to control companies (obviously abroad the rules are different, ikea etc..)
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Yes, they were one of the largest shareholders - although he sold most of his shares before the deal was approved but after it was announced.
Didn't BRK own BUD until BUD was acquired?
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Berk has owned DEO for a long time, off and on. These particular shares may be from T&T, not sure. Berkshire, of course, was a major investor in Anheuser Busch before the 3G guys made their bid just before the financial crisis.
As others mentioned - the quotes were about wholly owned subsidiaries and it’s not totally clear if he would frown on T&T making equity investments in those industries. I could see them skipping tobacco present day. But beer is definitely fair game
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Diageo is coded the same as the other Berkshire Holdings in the Gen Re New England Asset Management holdings table. Everything coded the way Diageo is coded is a Berkshire holding, so I'm willing to bet that these particular Diageo shares are also held by Gen Re / Berkshire - and not a holding of some fund managed by New England Asset Management for others. Check the info-table ->
They didn't sell any BAC shares. For some reason 21 million shares held at General Reinsurance don't show up on Berkshire's filing.
https://www.sec.gov/Archives/edgar/data/70858/000119312517280738/d411721dsc13ga.htm
They show up under "New England Asset Management" ->
https://www.sec.gov/Archives/edgar/data/1004244/000108514617002458/0001085146-17-002458-index.htm
Other Berkshire holdings in that filing (which are in addition to the reporting holdings on sites like dataroma) are -
4.217 million shares of Apple
21 million shares of BAC
227,750 shares of Diageo
431,063 shares of GS
4.386 million shares of USG
2.954 million shares of Verisk
24.3 million shares of Wells Fargo
Why do u say Diageo is a Berkshire holding?
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purchased February 2018 150 strike call options on Apple at 21.68 average cost. this is a trade obviously
update - added more of same at 20.25, new average cost is 20.967
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$480 Billion market cap seems about right. Not crazy low, could be a little low. If they were willing to use leverage to buy a $150 billion business it would look too low in retrospect.
Low turnover might stabilize the price, but in my experience Berkshire tends to level out in market value for a while and then make fairly quick reappraisals higher as some perception changes a bit. Because of the nature of continually hitting all time highs and a lot of long term, low basis, holders - Berkshire's share price tends to respond a lot to violating round number options strike price levels (190 for example) because people are forced to cover their short 'covered calls.' If this FIFO law comes into being, that would only exacerbate those type of moves going forward.
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By "TBV" are you referring to tangible book value? Or just book value / shareholder equity?
Book Value is what it is because of huge liabilities he calls insurance 'float'. Most people think it has some value greater than negative $113 Billion.
Tangible book value is lower still because of huge sums of goodwill and intangible assets that result from buying high quality companies in their entirety at prices higher than their identifiable tangible assets. You know, their durable competitive advantage, market position, trade names, etc etc etc
Unless it starts to look like Berkshire develops a reputation for overpaying for acquisitions, tangible book value doesn't have a lot of utility for a company like BRK.
Yep to you both!
Oddly enuf I'm up 3.something% on the ownership stake (meaningless stat.)
It's truly the ONLY company I feel totally comfortable doing this with.
Market cap < replacement value
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Quick question; does the capital structure serve to hold TBV in this ridiculously low range?
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Isen't Berkshire World Champion in deferring taxes by the way? -I do not recall ever having read any other balance sheet with such a large figure stated for deferred taxes.
I haven't seen a company with that big of a deferred tax liability either. Obviously it is a consequence of rarely, if ever, selling anything large and a half century of acquisitions. Even Precision Castparts came with ~$7.5 Billion of "income tax, principally deferred" - so a lot of this liability is never to be realized even if the equity portfolio was completely liquidated.
At the last 10Q there was $82.2 Billion of unrealized appreciation in equity securities and another $1 Billion on the bond portfolio. At 35% that amounts to a $29 Billion deferred tax liability. At 20% it is $16.65 Billion, a savings of over $12 Billion if the tax plan passes and Berkshire gets the 20% rate.
Year end gains look to be higher still, at least so far.
Berkshire's tax rate bounces all over the place between 30% and 20% most of the time. But the tax liability on the unrealized investment gains is usually calculated right at 35%.
I can't speak to the rates used to calculate the rest of that income tax liability. But it isn't nearly as important since it won't be spent. The equities may actually be sold, resulting in a real cash savings. I don't see them selling the land under BNSF's tracks or the property plant and equipment of PCC.
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They didn't sell any BAC shares. For some reason 21 million shares held at General Reinsurance don't show up on Berkshire's filing.
https://www.sec.gov/Archives/edgar/data/70858/000119312517280738/d411721dsc13ga.htm
They show up under "New England Asset Management" ->
https://www.sec.gov/Archives/edgar/data/1004244/000108514617002458/0001085146-17-002458-index.htm
Other Berkshire holdings in that filing (which are in addition to the reporting holdings on sites like dataroma) are -
4.217 million shares of Apple
21 million shares of BAC
227,750 shares of Diageo
431,063 shares of GS
4.386 million shares of USG
2.954 million shares of Verisk
24.3 million shares of Wells Fargo
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700 million is the total number of shares owned by Berkshire. The other share holdings are not additive, they just reflect the ownership chain within Berkshire ‘s organizational structure. Certain BRK subsidiaries are owned by other BRK subsidiaries.
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It really was a great series of interviews. Interesting to hear him say, in talking about his preference for running Berkshire with conservative financing, always having plenty of money around, etc - "I don't want to depend on letters of credit from banks - or anything of the sort", "no too big to fail doctrine to bail us out" in 2006.
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Book Value Per Share = Berkshire Hathaway shareholders’ equity / shares outstanding
BVPS for BRK.A = $308,278 x 1,000,000 / 1,644,789.52 = $187,427
1.2x BVPS buyback threshold = $224,912 for BRK.A
BVPS for BRK.B = $308,278 x 1,000,000 / 2,467,184,283 = $124.95
1.2x BVPS buyback threshold = $149.94
I make it 24% growth since Year End 2016, i.e 1.75 years. That's 13% CAGR. I appreciate that's possibly helped by mark-to-market gains in BV, but it seems pretty high, albeit that such figure can be a little lumpy over a fairly short time period.
Can anyone confirm my calculations?
Berkshire's book value per share has grown 8.9% since year end 2016, but I suspect you meant something else since you also said year end 2016 was 1.75 years ago.
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Restaurant Brands International paying Berkshire back $3.3 Billion in December, and BRK loses another high yielding preferred (9%).
Kinda slipped this one in a press release without mentioning Berkshire at all -
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Sempra's debt going four fold this year.. wow.
what does that mean?
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I don't remember Air BnB ever including the exact address in the listing, but I suppose some 'hosts' put it in voluntarily. If you think it might be an issue, just ask for the exact location / address when you correspond with the host before you book the place. The cleaning fee is nothing new, different people charge different amounts but it is always disclosed in the listing, along with how strict their cancellation policy is, etc..
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I see this old thread was revived. I started investing in 1999 when I got a job in Chicago designing one-page investment reports for an investment/tech startup specializing in separately managed accounts. It was a web programming / graphic design job, but required me to learn what information investors wanted and how they wanted it laid out on a one-pager. (at that age I copied morningstar's and value-line's one-pagers and tweaked from there). Back then I thought it was a big deal to have my web program query the databases and produce a PDF with performance charts, etc, on the fly. Probably not the best way to do that, especially at the time.
Before that I had owned Disney shares, but that was more of a childhood gift from my Dad to get me into investing and to request the cool stock certificate to put on my wall. My father was an investor and option seller. He introduced me to options premiums, credit spreads, and various credit producing combinations when I was in high school (I grew up in a suburb of Chicago, lots of options and futures folks up there), but he passed away when I was in college.
I bought my first Berkshire shares in 2000, and my first big position in Berkshire when the markets reopened following the September 11 WTC attacks. I think I remember 2001 trades being in the $2100/ B share range but I'm not sure. I know there were a block of shares with an 1850 cost basis but I think those were earlier than 2001. I was a full time investor by 2001 and still remember watching the attacks live on CNBC. Started managing accounts for a few family members in 2001.
I was born in 1980, for reference
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Energy.gov: Renewable Electricity Production Tax Credit (PTC).
U.S Income Tax Credits for Berkshire the last three full years, ref. Berkshire Annual report, p. 65:
2016: USD 518 M
2015: USD 461 M
2014: USD 333 M
Those figures from the Berkshire 2016 Annual Report may include other U.S. Tax Credits than the PTC. [i don't know.]
The Production Tax credits for those years were:
2016: USD 398 million
2015: USD 291 m
2014: USD 258 m
2.3 cents per kilowatt hour for a ten year period.
source is BHE's own 10K.
There are also Investment tax credits, which are utilized on projects not claiming the production tax credits. Investment tax credits are deferred and amortized over the estimated useful life of the asset. This is one of the reasons (along with huge bonus depreciation and other routine depreciation and amortization) that BHE, which reports about $2.5 billion in annual net income is actually able to bring in over $6 Billion in cash and make almost $6 Billion in new investments each year without cash inflows from Berkshire and the minority owners (Walter Scott & Greg Abel).
Here are some of the numbers concerning BHE's investments in these areas. These are large investments and the planned large wind investments extend at least to 2019 -->
The Company's historical and forecast capital expenditures consisted mainly of the following:
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Wind generation includes the following:
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Construction of wind-powered generating facilities at MidAmerican Energy totaling $943 million for 2016, $931 million for 2015 and $767 million for 2014. MidAmerican Energy placed in-service 600 MW (nominal ratings) during 2016, 608 MW (nominal ratings) during 2015 and 511 MW (nominal ratings) during 2014. In August 2016, the IUB issued an order approving ratemaking principles related to MidAmerican Energy's construction of up to 2,000 MW (nominal ratings) of additional wind-powered generating facilities expected to be placed in-service in 2017 through 2019. MidAmerican Energy expects to spend $826 million in 2017, $853 million in 2018 and $1.4 billion in 2019 for these additional wind-powered generating facilities. The ratemaking principles establish a cost cap of $3.6 billion, including AFUDC, and a fixed rate of return on equity of 11.0% over the proposed 40-year useful lives of those facilities in any future Iowa rate proceeding. The cost cap ensures that as long as total costs are below the cap, the investment will be deemed prudent in any future Iowa rate proceeding. Additionally, the ratemaking principles modify the revenue sharing mechanism currently in effect. The revised sharing mechanism will be effective in 2018 and will be triggered each year by actual equity returns if they are above the weighted average return on equity for MidAmerican Energy calculated annually. Pursuant to the change in revenue sharing, MidAmerican Energy will share 100% of the revenue in excess of this trigger with customers. Such revenue sharing will reduce coal and nuclear generation rate base, which is intended to mitigate future base rate increases. MidAmerican Energy expects all of these wind-powered generating facilities to qualify for 100% of federal production tax credits available.
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Construction of wind-powered generating facilities at BHE Renewables totaling $456 million for 2016, $246 million for 2015, and $286 million for 2014. The Marshall Wind Project with a total capacity of 72 MW achieved commercial operation in April 2016 and the Grande Prairie Wind Project with a total capacity of 400 MW achieved commercial operation in November 2016. The Jumbo Road Project with a total capacity of 300 MW achieved commercial operation in April 2015.
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Equipment purchases totaling $324 million in 2016 for the purposes of repowering certain existing wind-powered generating facilities at PacifiCorp and MidAmerican Energy and the construction of new wind-powered generating facilities at PacifiCorp and BHE Renewables. The repowering projects entail the replacement of significant components of older turbines. Planned spending for the repowered and new wind-powered generating facilities totals $323 million in 2017, $313 million in 2018 and $740 million in 2019. The energy production from the repowered and the new facilities is expected to qualify for 100% of the federal renewable electricity production tax credits available for ten years once the equipment is placed in-service.
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Solar generation includes the following:
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BHE Solar acquired the 110-MW Alamo 6 project located in Texas in January 2017 for approximately $385 million.
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BHE Solar spent $56 million in 2016 and $3 million in 2015 for construction of the community solar gardens in Minnesota and expects to spend an additional $153 million in 2017 and $6 million in 2018. The completed project will be comprised of 28 locations with a nominal facilities capacity of 96 MW.
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Construction of the Solar Star Projects totaling $10 million for 2016, $689 million for 2015 and $1.1 billion for 2014. Both projects declared July 1, 2015 as the commercial operation date in accordance with the power purchase agreements. Final completion under the engineering, procurement and construction agreements occurred November 30, 2015 and project completion was achieved under the financing documents on December 15, 2015.
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Construction of the Topaz Project totaling $49 million for 2015 and $814 million for 2014. Final completion under the engineering, procurement and construction agreement occurred February 28, 2015, and project completion was achieved under the financing documents on March 30, 2015.
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He's a large net buyer of stocks (AAPL, Airlines, etc) and has spent enormous sums on acquisitions like Precision Castparts. Insurance float growth brings in free cash flow that shows up as cash and cash from operations is higher than reported net earnings. Also, a few people payed him back - like Mars for one.
Just read an article on seekingalpha that highlights the fact that Brk has $100B in cash from around $35B just 7 years ago.
My question is, how did his cash hoard get so huge. Is it from operations and dividends? or is it from stock sales? I just wonder if he is a net seller or buyer of publicly traded securities.
thanks (I know this is obvious from the 10K but I am lazy)
randomep,
Both, but primarily cash flow from operations in the subs.
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Probably best to keep to their interests when selecting a business. If they hate gardening, a nursery is a bad choice; if they despise food service, a restaurant franchise is probably a poor choice, etc...
In my town, New Orleans, we have this lady who brokers a lot of businesses. Your region likely has similar specialists - they are a lot like realtors and many of them will list their stuff on the national websites like mentioned above.
http://www.capitalbbw.com/business/broker/Louisiana/Michelle_Seiler/18/
Like another poster mentioned, these are people self selecting to get the hell OUT of the given business - so buyer beware.
Franchise conventions / fairs will have all the usual suspects for that route. And there is always the motel and convenience/corner store industry, always popular with immigrants.
One of my friends here in town immigrated from Venezuela after meeting her man, a jazz musician in town. They purchased a small bar (less than 700 sq. feet but with outdoor seating as well), with the real estate included (commercial condo technically) for less than $400,000 - most of which was eligible for a commercial mortgage. The business consistently turns out $250,000 per year in cash owner earnings to the husband-wife principals every year, and they have no landlord looking to raise the rent to share in the success. A good deal for sure, but it just shows that opportunities come around and they don't have to be multi million dollar investments to put off a nice comfortable income stream for the family.
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In other news, QBE, the large Australian Insurance company, issued a press release that indicates that Berkshire could see a $900 million payout on a reinsurance contract that Ajit wrote for QBE. QBE exhausted the reinsurance coverage and then some, so BRK could be on the hook for the entire $900 million. Along with the AIG deal amortization and the GEICO numbers, this would almost certainly mean the first full year underwriting loss in quite a while.
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Could be $8 Billion valuation for the whole thing. Not sure. Sales will be much higher than market cap for a company in that business. It probably makes at least $500 million net each year, but I don't have a source for accurate numbers.
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It may be 5 or 6 Billion dollars for the entire company. 38% could be $2.25 Billion, the eventual 80% $5 Billion or so. With few other acquisitions this quarter and what I assume to be a quick closing with Byron as the investment banker and one of the sellers, we will probably find out what Berkshire paid in the annual report cash flow statement.
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Here are some small pieces of the report, which I found on twitter. I do not have access to the report but I follow the company close enough that I don't think Ms. DeWitt has a ton to add. Always interesting to read anything on Berkshire but this is not groundbreaking stuff. Turns out Berkshire is a valuable enterprise designed to compound the per share net worth of the company... Oh- and Greg Abel might be the next CEO. Or it could be Ajit. But probably Greg. Or someone else...
What are you buying today?
in General Discussion
Posted
Hey sorry, didn't see this post until just now. I follow Apple pretty closely and trade it a couple times a year it seems like. I always use pretty deep in the money call options, with low premiums over their intrinsic in-the-money-ness... I put the trade on (and still have the trade on) because I think Apple is going to have a great quarter, I've been impressed to see their supply chain ramp on the iPhone X and I think they sold a ton of phones at a very high average price. My 70 year old mother in law even has an iPhone X on her new Comcast xfinity mobile setup (an amazing deal, by the way).
I also think Apple is one of the largest direct beneficiaries of the tax bill, they have a huge repurchase program, and the stock looked like it was going to break higher (and it did yesterday). Today it was downgraded and traded really well and I added February 160 calls at 16.637 average cost. [edit: added again at 15.90 resulting in new avg cost 16.394]
The calls are obviously much more volatile than the equity but I am not new to options and while I wouldn't recommend others purchase call options basically ever - I do it myself from time to time. Sometimes to hedge, sometimes to take on leverage - usually with in the money calls like these.
it's a speculation and it's one I've done the same way several times. We'll see, but so far it is looking good. I'm not a long term equity investor in Apple anymore, probably because I'm not super interested in 900 billion dollar market cap companies ($490 Billion market cap companies are more my speed LOL)