Buffett/Berkshire - general news

[JPerez]

They are counting the 80 million  warrants as shares for ownership purposes.

If you take that away it looks like they owned 0 shares other than the 11 million they got as a dividend earlier. So nowhere near the 10%.

They might owned oxy shares in other entities that are not listed in the prospectus.

 

[gfp]

Interesting - thanks for the clarification.  If that is correct, Berkshire has sold something like 19 million OXY shares that they previously owned, plus at least one batch of 11 million that they had previously been paid as pref. dividends.

[scorpioncapital]

So something like get paid in shares, sell them to recreate the dividend and maybe on the tail-end of the option expiry if the price has risen, get the dividend back and keep the remainder as an equity holding. If things look just as bad in 8 or 9 years, just sell it all out via the shares and consider it a dividend-equivalent? If they got paid entirely in stock instead of dividends what break-even price would recreate their current dividend of 8%?

[gfp]

The OXY shares are issued at 90% of the VWAP for some number of days preceding the dividend declaration.  So they are issued at different prices each quarter.  Berkshire appears to be selling them - perhaps even before they are delivered as they have sometimes done in the past.  I would not be surprised, if OXY has it right in this registration filing, to learn that Berkshire was pre-selling the dividend shares and ending up with a zero share position upon delivery. (not counting the warrants of course, which are at a very high strike)

[sleepydragon]

The OXY shares are issued at 90% of the VWAP for some number of days preceding the dividend declaration.  So they are issued at different prices each quarter.  Berkshire appears to be selling them - perhaps even before they are delivered as they have sometimes done in the past.  I would not be surprised, if OXY has it right in this registration filing, to learn that Berkshire was pre-selling the dividend shares and ending up with a zero share position upon delivery. (not counting the warrants of course, which are at a very high strike)

 

May not be a bad idea for Buffett to keep the shares at this price though. Berkshire shareholders can own a big part of the Permian Basin which could be the future Saudi.

I just finished reading “ Saudi America: The Truth About Fracking and How It's Changing the World”, which was recommended from the Annual meeting. Interesting Buffett read this book and still invested in OXY.

 

 

[nickenumbers]

I generally don't like puff recycled information news...  but this was well written and a fair amount of current and new information for me.

 

Buffett and Gates have a 1 hour conversation once a week.  Who knew??

 

https://finance.yahoo.com/news/heres-what-bill-gates-and-warren-buffett-talk-about-during-covid-19-121314292.html

[villainx]

I generally don't like puff recycled information news...  but this was well written and a fair amount of current and new information for me.

 

Buffett and Gates have a 1 hour conversation once a week.  Who knew??

 

https://finance.yahoo.com/news/heres-what-bill-gates-and-warren-buffett-talk-about-during-covid-19-121314292.html

 

Now that you shared that, I just imagine a timer for both of them to say, time's up, see ya next week.  Not that I don't think either are great conversation partners, but I don't talk to anyone other than my spouse and kids for any meaningful amount of time.

 

=P

[villainx]

Also, with the criticism for Buffett not doing anything during the March lulls.  I got to thinking ... neither of the Ws made meaningful buys either?  Or has this already been addressed?

 

Buffett himself might wait for clearer signals.  But it would be easier for the Ws to make purchases?  Do you think they share same wait and see approach?  Is it institutionalized, in which case, is there enough contrarian/independent thinking? 

[Mephistopheles]

Also, with the criticism for Buffett not doing anything during the March lulls.  I got to thinking ... neither of the Ws made meaningful buys either?  Or has this already been addressed?

 

Buffett himself might wait for clearer signals.  But it would be easier for the Ws to make purchases?  Do you think they share same wait and see approach?  Is it institutionalized, in which case, is there enough contrarian/independent thinking? 

 

Doesn't answer your question, but I am really curious to see what the latest share count is per 10-Q. So far we have seen that Buffett bought back $5 billion of stock Q2, the most ever (I think), and now we are seeing huge purchases of BAC. Perhaps Buffett's outlook has changed, and he bought back at an even faster pace in July.

[wescobrk]

It would be nice to know what changed his mind as he is buying at higher prices here than in March, April and May.

[Gregmal]

Probably the fact that there is significantly more clarity now and in some stocks, such as banks, only a marginal price improvement. The $17 low wasn't really an actionable price as it was more or less intra-day(s). Basically a low $20s number on BAC could be called the lows. So he's been a buyer at basically the same prices give or take 5-10%.

[thepupil]

well he is about $50B pre-tax of AAPL wealthier. needs to buy everything else to rebalance.

 

A whole lot has changed for the better since March.

 

Lieutenant Dan got me invested in some kind of fruit company. So then I got a call from him, saying we don't have to worry about money no more. And I said, that's good!

[gfp]

Also, with the criticism for Buffett not doing anything during the March lulls.  I got to thinking ... neither of the Ws made meaningful buys either?  Or has this already been addressed?

 

Buffett himself might wait for clearer signals.  But it would be easier for the Ws to make purchases?  Do you think they share same wait and see approach?  Is it institutionalized, in which case, is there enough contrarian/independent thinking?

 

I assume by "W's" you are referring to the junior investment managers Ted and Todd?  We don't know what they did after 3/31 so far except for limited cases where disclosure was required. 

 

One of them bought more Liberty Sirius for example -

https://www.sec.gov/Archives/edgar/data/315090/000120919120032183/xslF345X03/doc4.xml

https://www.sec.gov/Archives/edgar/data/315090/000120919120033068/xslF345X03/doc4.xml

https://www.sec.gov/Archives/edgar/data/315090/000120919120034157/xslF345X03/doc4.xml

 

and then exercised their rights in the rights offering -

https://www.sec.gov/Archives/edgar/data/315090/000120919120035265/xslF345X03/doc4.xml

 

We'll know more later. 

 

[CassiusKing1]

 

Lieutenant Dan got me invested in some kind of fruit company. So then I got a call from him, saying we don't have to worry about money no more. And I said, that's good!

 

This is gold Jerry!

 

Thanks for the chuckle!

[gfp]

RIP Doris Buffett - Warren's older sister has died at 92

 

https://www.nytimes.com/2020/08/05/business/doris-buffett-the-familys-retail-philanthropist-dies-at-92.html

 

https://omaha.com/news/local/doris-buffett-philanthropist-and-sister-to-warren-buffett-dies/article_0c8e10a9-b750-5636-96d3-2119e0d0c8c4.html#tracking-source=home-top-story-1

[John Hjorth]

In a way - in some dimensions - she was the diametrical opposite of her younger brother, but still a basically good person.

 

"Retail philanthropist" here comes to mind. Imagine going through many letters every day from people in need, to reach an individual decision.

 

RIP.

[gfp]

Maybe I should have posted it in the BOMN thread?

 

https://www.sunshinelady.org/sunshine-ladys-charitable-work-for-warren-buffett-clouded-over/

[thepupil]

obviously won't happen, but I think it would be legendary for Berkshire to just unload all it's AAPL stake and be like

 

"yea we're still bearish, 260 yards of cash seems right, haterz gonna hate"

 

at 15% of volume assuming no block trades, it would only take 40-50 trading days.

[Jurgis]

Maybe I should have posted it in the BOMN thread?

 

https://www.sunshinelady.org/sunshine-ladys-charitable-work-for-warren-buffett-clouded-over/

 

Interesting article.

 

It seems that genetically Warren is not in a good shoes. Dementia, cancer and cardiac problems. OTOH Doris lived to 92 and Warren seems to be mostly fine still.

[Xerxes]

https://www.bnnbloomberg.ca/berkshire-hathaway-showing-signs-of-an-appetite-ahead-of-earnings-report-1.1476873

 

Sell side estimate is $6 billion share buyback

[gfp]

We sort of already know it is less than that through quarter end since the filing that telegraphed the ~$5.3-5.4 Billion in buybacks was in July.  But maybe analysts are looking for a to-date and not quarter-end figure.

[John Hjorth]

We'll know for sure tomorrow [at some time, depending where you are], right?

[Liberty]

https://brooklyninvestor.blogspot.com/2020/08/is-buffett-really-bearish.html

[Cigarbutt]

https://brooklyninvestor.blogspot.com/2020/08/is-buffett-really-bearish.html

Interesting, as always.

From the link:

"It is amazing to think it was above 100% before the Gen Re merger. BRK back then was a leveraged play on Buffett's stock-picking skills, and any investment in bonds offered free incremental points on ROE above all that. No wonder why returns were so high back then."

"So, this piece of evidence doesn't really show any bearishness on Buffett's part, or at least compared to the last 20+ years."

i submit that two considerations should be kept in mind:

The previous era referred to was before the 1996 irrational exuberance speech.

The next twenty years may be very different from the last ones.

i don't see why BRK would not become a leveraged play again, given the right circumstances.

[wabuffo]

i don't see why BRK would not become a leveraged play again, given the right circumstances.

 

Is it possible we have gotten the idea of insurance float all wrong?  Despite Buffett's denial, brooklyninvestor highlights powerful evidence that BRK typically holds cash and fixed income amounts roughly equal to total insurance float, year-in and year-out.

 

In my BRK valuation models (variation of 2-column method), I've always deducted 20% of total float as non-working capital from total after-tax value of investments per share) to get my fair value estimate.  But what if it is really 100%?  Then my fair values have been overstated (and so have everyone else's).  When I try this adjustment (20% to 100%), my fair value estimates go from BRK being perpetually undervalued to BRK being mostly fair-valued with just a few periods of slight undervaluation (eg. 2015-16).

 

This approach would be consistent with Buffett's methodology going all way back to Blue Chip Stamps.  I always assumed that Buffett redeployed BCS's cash and fixed income investments into an investment in See's Candy - but that's not what actually happened when I got my hands on the annual reports.  Instead, Buffett used the unredeemed stamp liability as pseudo-equity and levered up the balance sheet to buy Sees.  He didn't really touch BCS's investment portfolio - other than tinkering with some of the fixed income investments for a bit of higher yield.  It was only many years down the road, when it was clear the redemption liability was wildly overstated (and in fact the IRS began prodding BRK to take profits (and pay income taxes) on the "breakage" that Buffett really began to redeploy/shrink the investment portfolio.

 

It is a bit of an a-ha! moment for me given the blog's reminder and my recent acquisition of the old BCS financials.  I'm gonna have to go back and re-tool my BRK valuation models.

 

wabuffo