Charlie

Great analysis form another board. :) Berkshire Hathaway reported the company's net worth during the first half of 2011 increased 3.4% with book value equal to $98,716 per A share as of 6/30/11. The $5.7 billion increase in shareholders' equity was due primarily to $4.9 billion in net earnings and the impact of favorable currency translation. During the second quarter, Berkshire's operating revenues rose 11% to $37.1 billion which included $1.68 billion from a reinsurance contract with a unit of AIG. Under the contract, Berkshire agreed to reinsure the bulk of AIG's U.S. asbestos liabilities with a maximum limit of indemnification of $3.5 billion. With the exception of the Finance and Financial Products group, all of Berkshire's other business units reported revenue gains during the second quarter, including double-digit gains at Burlington Northern Santa Fe, Marmon and the other businesses. Burlington's 17% revenue increase during the second quarter to $4.8 billion reflected 13% higher average revenues per car/unit as well as an increase in cars/units handled and higher fuel surcharges driven by higher fuel costs. In 2011, most of Berkshire's manufacturing businesses experienced increased levels of business and improved operating results, although the rates of improvement were uneven. Of all the manufacturing businesses, IMC Metalworking, an industry leader in the metal cutting tools business with operations worldwide, delivered the largest increase in revenues for the second quarter and first six months of 2011 reflecting greater than expected customer demand, especially in the automotive markets. While most of Berkshire's businesses point to a continued economic recovery, the building product group continues to be negatively impacted by slow construction activity, especially in the single-family housing markets. In addition, revenues from Berkshire's manufactured housing and finance business (Clayton Homes) declined 19% in the second quarter as revenues from home sales were hammered 30% lower. Unit sales in 2011 declined about 22% with the average price per home sold also dropping. Clayton Home's operating results continue to be negatively affected by the ongoing soft housing markets and the surplus of traditional single family homes for sale. Nevertheless, Clayton Homes remains the largest manufacturing housing business in the U.S. and expects to continue to operate profitably even under the current depressed conditions. Berkshire's operating earnings declined 12% during the second quarter to $2.7 billion while net earnings were up 74% to $3.4 billion, primarily due to a swing to a $713 million gain on investment and derivatives compared to a $1.1 billion loss in the prior year period. The investment gain in the 2011 second quarter included a pre-tax gain of $1.25 billion, or $806 million after-tax, from the redemption of Goldman Sachs 10% Preferred Stock. A 12% gain in second quarter operating earnings of the non-insurance businesses was more than offset by a decline in insurance investment income and underwriting losses from estimated catastrophe losses primarily from the earthquakes in Japan and New Zealand. Leading the way for the non-insurance businesses was the manufacturing, service and retailing group, which increased net earnings 18% in the second quarter to $789 million. Berkshire's small retailing group had a gem of a quarter with second quarter pre-tax earnings rising a shiny 64% to $46 million reflecting improved operating results from the jewelry and home furnishing retailers as well as higher earnings of See's Candies, primarily attributable to the timing of the later Easter holiday in 2011. Marmon's second quarter pre-tax earnings rose 25% to $273 million with nine of the eleven business sectors producing similar or increased earnings. Other manufacturing pre-tax earnings increased 18% to $643 million, which reflected higher earnings of IMC, CTB and Johns Manville, partially offset by lower earnings at Shaw, Acme and certain of the apparel businesses. Given the magnitude of the first quarter catastrophe losses, as well as the potential for additional losses from the upcoming hurricane season, it appears that for the first time in nine years, Berkshire will have an underwriting loss in 2011. This doesn't change Warren Buffett's expectation that over time the insurance operations will break even, and Berkshire will get the benefit of the free use of float. However, the cost of float for the first six months of 2011, as represented by the ratio of the underwriting loss to average float, was about 2%. Float approximated $71 billion as of 6/30/11, an approximate 8% increase since year end. Insurance investment income declined 9% to $995 million in the second quarter since the 12% Swiss Re investment and 10% Goldman Sachs preferred stock were called with the funds now invested at the lower rates available today. Investment income is expected to decline further when the 10% General Electric preferred stock is called later this year. Berkshire's railroad, utility and energy businesses are capital intensive with $2.6 billion spent on capital expenditures during the first half of 2011. Capital expenditures for the remainder of 2011 are estimated at $4.7 billion for MidAmerican and Burlington to be funded from cash flow from operations and debt proceeds. Aggregate borrowings of the railroad, utilities and energy businesses were about $32.3 billion as of 6/30/11. Berkshire's balance sheet continues to reflect significant liquidity and a strong capital base of $163 billion. Excluding utility and finance investments, Berkshire ended the first quarter with $157.5 billion in investments ($95,391 per share) allocated approximately 42.1% to equities ($66.4 billion), 22.1% to fixed-income investments ($34.8 billion), 8.3% to other investments ($13.1 billion-including preferred stocks), and 27.5% in cash ($43.2 billion). Free cash flow increased 58% during the first half to $6.5 billion, primarily due to an increase in insurance float. During the first half, Berkshire was a net seller of approximately $646 billion in fixed-income investments and a net purchaser of $4.2 billion in equities. Berkshire's financial strength allows Buffett to make significant investments which should provide substantial future returns. Buffett is seeking acquisitions in the $5-$20 billion range. In March, Berkshire announced it was acquiring Lubrizol, an innovative specialty chemical company, for approximately $9 billion in cash with the deal expected to close in the next one to three months. Lubrizol reported 2010 sales and earnings of $5.4 billion and $732 million, respectively. In June 2011, Berkshire acquired the non-controlling interests in Wesco Financial for $543 million consisting of cash of approximately $298 million and 3.25 million shares of Berkshire Class B common stock. Berkshire Hathaway appears undervalued currently trading at $107,300 per A share and $71.25 per B share. Based on current business fundamentals, I expect Berkshire's A shares to trade between $112,000-$163,000 per share and the B shares to trade between $75-$109 per share.

What benefit is there for Germany to be a part of the union? One of the great benefits for Germany to be part of the union is a relatively weak currency. So Germany can export much more. The German Mark would have appreciated much more than the Euro. Charlie

twacowfca, what do you think Berkshire is worth at the moment? I have recently sold most of my other holdings and bought Berkshire Hathaway. At P/B 1,2 and Berkshire coming out of recession the stock is too cheap to ignore. I´m also looking at Munich Re, because in a recent interview Buffett said he is buying a lot of shares of one stock.

Munich Re will not start their new share repurchase plan soon, because of Japan. The old repurchase plan will end next wednesday. (sorry, no english link) ERDBEBEN: Munich Re setzt Aktienrückkauf aus Mi, 23.03.11 16:48 MÜNCHEN (dpa-AFX) - Der weltgrößte Rückversicherer Munich Re legt angesichts der Milliardenbelastung aus Japan sein neues Aktienrückkaufprogramm auf Eis. 'Wir führen das laufende Programm bis zur Hauptversammlung im April noch zu Ende', sagte eine Konzernsprecherin am Mittwoch. 'Mit dem neuen Programm werden wir aber vorerst nicht beginnen.' Damit bestätigte sie einem Vorabbericht des 'Handelsblatts' (Donnerstag). Der Dax-Konzern hatte erst Anfang Februar ein neues Rückkaufprogramm über bis zu 500 Millionen Euro angekündigt, das bis zur Hauptversammlung im April 2012 abgeschlossen werden sollte. Im laufenden Rückkaufprogramm bis Ende April hat die Munich Re bisher Aktien im Wert von 922 Millionen Euro zurückgenommen. Dieses soll der Sprecherin zufolge bis zur geltenden Grenze von einer Milliarde Euro fortgeführt werden. Munich Re hatte wegen des Erdbebens und Tsunamis in Japan am Dienstagabend sein Gewinnziel gestrichen. Die Katastrophen dürften das Unternehmen mit 1,5 Milliarden Euro vor Steuern belasten. Das war deutlich mehr, als Analysten erwartet hatten. Das Gewinnziel von 2,4 Milliarden Euro ist aus Sicht des Vorstands nun nicht mehr zu erreichen./stw/ksb Quelle: dpa-AFX Charlie

I bought more Munich Re shares today. “Any impacts due to major accidents in Japanese nuclear power plants will not significantly affect the private insurance industry,” Munich Re said in a statement today. “In connection with earthquake covers, in Japanese personal lines business only a small portion of the risk is transferred to other countries.” The reinsurer said it’s “far too early at this stage to issue an estimate of economic and insured losses,” reiterating earlier comments. Munich Re shares dropped 3 percent to 108.40 euros in Frankfurt, following a 4.3 percent decline on March 11. Charlie

twacowfca, I think the share buyback volume is a little bit smaller: "The share buy-back programme launched in May 2010 is proceeding according to plan. By the end of January 2011, Munich Re had repurchased a total of 7 million shares with a volume of €752m. Before the next Annual General Meeting on 20 April 2011, shares with an overall volume of up to €1bn are to be acquired." it´s €248m not €1B ;)

http://www.bloomberg.com/news/2010-09-13/buffett-rules-out-double-dip-u-s-recession-says-berkshire-units-growing.html

My positions: 50% BRK.B 10% Tesco 10% COP 10% KFT 7,5% Munich Re 10% Sanofi-Aventis 2,5% JNJ

I think the probability of two stock market crashes in a short time frame are very low. Buffett also said this in a recent interview.

Look at the Berkshire Price at the SP addition (february 12). It went up for nearly one month after the inclusion. So I´m not sure how much index buying is before and how much after the inclusion into the Russell index. But selling at P/B of 1,33 is in my opinion too cheap.

June 14 (Bloomberg) -- Financial companies will displace computer and software makers as the largest industry in the Russell 3000 after the addition of Berkshire Hathaway Inc. when the index rebalances this month. The insurance and investment company run by billionaire Warren Buffett is set to be added to the Russell 3000 and Russell 1000, according to the Tacoma, Washington-based Russell Investments’ website. Berkshire is one of 38 financial companies on the preliminary list. Russell will review and update the additions June 18 and again on June 25 before they take effect. Banks and financial firms will account for 19 percent of the index, up from 15.3 percent last year, making it the biggest increase by industry based on market value. Berkshire will also account for about 1.1 percent of the rebalanced Russell 1000 and will rank in its top 20 companies, according to New York-based Investment Technology Group Inc., which monitors and analyzes changes in indexes for its institutional clients. http://www.businessweek.com/news/2010-06-14/financials-surpass-technology-companies-in-russell-rebalancing.html Cheers!

Russell 3000 - BRK Likely to be Added http://www.reuters.com/article/idUSN1023089420100610 Rule excluding it to be removed. It will be interesting how the share price will be affected. Cheers!