Buffett/Berkshire - general news

[IceCreamMan]

5 hours ago, wabuffo said:

https://buffett.cnbc.com/video/2020/05/04/berkshire-hathaway-annual-meeting-qa---may-02-2020.html

5 hours ago, wabuffo said:

I think it's very telling that Buffett avoids the crux of the actual question asked (probably because he has no defense after complaining about the Kraft-Cadbury situation…. )

 

Tsk, tsk Warren...

 

It looks like he explains some of his reasoning in the middle here:

 

BECKY QUICK: All right, this next question comes from Jason (Plawner) in New Jersey. “As both a Berkshire and Occidental shareholder I was encouraged to see your investment in the company, but with passing weeks, it became evident that your investment facilitated Occidental management’s ability to avoid a shareholder vote on the Anadarko acquisition, a very shareholder unfriendly outcome.

 

“This deal proved to be irresponsible and expensive from an OXY perspective, and ultimately, very value destructive for OXY shareholders. In my view, it also permanently hurt Berkshire’s reputation in the marketplace.

 

“Please comment on this unfortunate outcome and tell me why OXY shareholders and other market observers shouldn’t feel this way.”

 

WARREN BUFFETT: Well, yeah. We said right from the beginning — although we didn’t certainly expect the degree of what’s happened — we said, essentially, when you buy into an oil — a huge oil production company — you know, how it works out is going to depend on the price of oil to a great extent.

 

It’s not going to be your geological home runs or super mistakes or anything like that. It is a — it is a investment that depends on the price of oil. And, you know, I — when oil goes to minus $37 — (laughs) — it happened the other day for, I guess, it was the May contract. You know, that’s off the chart, and —

 

If you own oil, you should only own oil, if you expect these prices to go up significantly. I don’t know whether they’ll go up significantly or not. We’re in the transaction.

 

Our commitment was made on a Sunday when the management of Anadarko favored Chevron. And Chevron had a breakup fee of a billion dollars and the Occidental people had been working on it for several years.

 

And it was attractive at oil prices that then prevailed. And it doesn’t work, obviously — it doesn’t work at $20 a barrel — it certainly doesn’t work at minus $37 a barrel — but it doesn’t work at $20 a barrel.

 

And everything the oil companies have been doing, whether it’s Exxon or Occidental or anybody else, it doesn’t work at these oil prices.

 

That’s why oil production is going to go down a lot in the next few years, because it does not pay to drill now.

 

That’s happened at other times in the past. But the situation is, you know, you don’t know where you’re going to store the incremental barrel of oil, and oil demand is down dramatically, and for a while the Russians and the Saudis were trying to outdo each other in how much oil they could produce.

 

And when you’ve got too much in storage, it doesn’t work its way off that very fast.

 

Now, you will have production of oil go down in the United States significantly. It does not pay to drill in all kinds of formations that paid before, and it doesn’t pay — it doesn’t pay to have paid the price that oil was trading at in the ground a year or two ago.

 

And to that extent, if you’re an OXY shareholder, you know you’ve — or any shareholder in any oil producing company — you’ll join me in having made a mistake, so far, in terms of where oil prices went. And who knows where they go in the future.

[Dynamic]

https://www.cnbc.com/2021/06/29/buffett-reflects-on-his-first-meeting-with-munger-im-not-going-to-find-another-guy-like-this.html

 

KEY POINTS

Warren Buffett and Charlie Munger first met over dinner in 1959, Buffett recalled in CNBC's special, "Buffett & Munger: A Wealth of Wisdom."

The now-iconic business partners were introduced to each other through the family of a well-known doctor in Omaha.

"I just knew instantly Charlie was the kind of guy that I was going to like, and I was going to learn from," Buffett said.

[gfp]

HomeServices made an acquisition of a group of franchisees -

 

https://rismedia.com/2021/07/01/americana-holdings-acquisition-homeservices-reach-grows/

 

https://www.businesswire.com/news/home/20210630006040/en/

Edited July 1, 2021 by gfp

[Mephistopheles]

I don't think Buffett was a hypocrite at all. His fidicuary duty is to BRK shareholders, not OXY shareholders. He complained about the Kraft deal because he felt it was value destructive to Kraft of which he was a shareholder. 

[UK]

https://www.wsj.com/articles/biden-to-target-railroads-ocean-shipping-in-executive-order-11625736601?mod=hp_lead_pos12

 

In the case of the seven Class 1 freight railroads, consolidation has given railroads monopoly power over sections of the country where theirs are the only freight tracks, the person said. The executive order will encourage the STB to take up a longstanding proposed rule on so-called reciprocal or competitive switching, the practice whereby shippers served by a single railroad can request bids from a nearby competing railroad if service is available.

 

The competitor railroad would pay access fees to the monopoly railroad, but could win the shipper’s business by offering a lower price, using the rival railroad’s tracks and property. The STB proposed a competitive switching rule in 2016 but hasn’t yet acted on it. “The consolidation brought about much-needed rationalization in the system 25 years ago, but the net result is a lot of shippers who are subject to a market-dominant railroad,” said a government official briefed on the White House’s proposal for the STB. But a move to mandate switching would guarantee a battle with the freights and the railroad trade association, the Association of American Railroads, which has long opposed the policy. “Competition remains fierce across freight providers, and any proposal mandating forced switching would put railroads—an environmentally friendly option that invests $25 billion annually in infrastructure—at an untold disadvantage,” Ian Jefferies, chief executive of the railroad association, said Thursday. “Such a rule would roll back the foundational market-driven principle that keeps the industry viable, reduce network fluidity, and ultimately undermine railroads’ ability to serve customers at a time when freight demands have dramatically increased.”

 

In the rail industry, a wave of combinations in the 1990s left the U.S. with just seven Class 1 freight railroads. STB merger rules in place since the administration of President George W. Bush have effectively prevented further consolidation. Still, the White House argues that the current state of the industry leaves railroads with effective duopolies in much of the country, and monopolies at the local level, meaning customers have little leverage to negotiate prices. The White House will also encourage the STB to consider proposals that would compel railroads to offer rates that would better enable shippers to cobble together routes across competing rail networks to lower their costs, and to more readily bring cases to the STB to challenge railroads’ rates, this person said.

[bizaro86]

Canada has this, and we have arguably the most profitable class I railroads. Actually, iirc BNSF uses it to compete for business in Canada.

[ValueMaven]

AAPL hit an ATH a day or two ago.  Getting very little press.  This is has turned into a massive homerun for Berkshire.  Warren knows the consumer extremely well.  

[gfp]

https://news.dominionenergy.com/2021-07-12-Dominion-Energy-and-Berkshire-Hathaway-Energy-Agree-to-Terminate-Sale-of-Questar-Pipelines-Dominion-Energy-Commencing-Competitive-Sale-Process

 

Berkshire - Dominion deal for Questar Pipelines has been called off.  Uncertainty around FTC antitrust approval given as reason.

[ValueMaven]

yea; but only 20% of the total value.  slightly disappointing - but at least they closed on the majority of the assets 

[gfp]

It does make you wonder if merger approvals will be a lot more difficult for BRK Energy going forward.

[bennycx]

Timing seems to coincide with Biden’s new Exec Order

[gfp]

FTC statement on the pipeline deal termination:

https://www.ftc.gov/news-events/press-releases/2021/07/statement-regarding-berkshire-hathaway-energys-termination

[woodstove]

Very interesting statement.  Blocked in 1995 a similar transaction, they say, so this is 26 years later. 

[ValueMaven]

For what its worth Kern River has turned into a MASSIVE homerun for BHE.  Whatever the case might be, still 80% of the deal got done.  It is what it is. 

[ValueMaven]

With all due respect - this statement is a bunch of FTC BS.  How pompous.. 

.  

“Although this outcome preserves competition, it is disappointing that the FTC had to expend significant resources to review this transaction when we previously filed suit in 1995 to block the same combination. Questar Pipeline attempted to purchase a 50% share in the Kern River Pipeline but the parties abandoned those plans shortly after the Commission’s suit. Given our prior action, and the even closer competition that developed between the pipelines since then, this is representative of the type of transaction that should not make it out of the boardroom. The Bureau of Competition will be actively exploring its options on how to curtail this type of re-review to better deploy the Commission’s scarce resources.”

[Xerxes]

On 11/29/2020 at 6:54 PM, Xerxes said:

https://asia.nikkei.com/Business/Business-Spotlight/Warren-Buffett-s-Japan-trade-The-changing-world-of-sogo-shosha

 

 

 

aug3020.pdf (berkshirehathaway.com)

 

About a year out, so how did they do .. even though we don't really know the initial purchase date, but we can assume perhaps the heavy buying would have been post March-2020.

 

"The companies, listed alphabetically, are Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo. These holdings were acquired over a period of approximately twelve months through regular purchases on the Tokyo Stock Exchange"

 

 Mitsubishi (8058), Mitsui (8031), Itochu (8001), Marubeni (8002) and Sumitomo (8053)

38%, 62%, 39%, 29% and finally 20%, respectively, as one year return.

 

Interestingly, looking at these I realized that some of that of them (Ex: Mitsubishi) have a NYSE listing. Not for the whole conglomerate, Mitsubishi Group, which is fact private, but different tentacles (i.e. Mitsubishi UFJ Financial Group), which by itself is worth $70 billion, has a NYSE listing.

 

My guess would be that Buffett bought Mitsubishi Corporation (8058) and not MUFG (8306/MUFG) nor Mitsubishi Heavy Industries (7011).

 

Mitsubishi UFJ Financial Group - Wikipedia

 

"MUFG holds assets of around US$2,459 billion as of 2016 and is one of the "Three Great Houses" of the Mitsubishi Group[6] alongside Mitsubishi Corporation and Mitsubishi Heavy Industries. It is Japan's largest financial group and the world's second largest bank holding company holding around US$1.8 trillion (JPY 148 trillion) in deposits as of March 2011.[1] The letters MUFG come from Mitsubishi and United Financial of Japan." 

Edited July 14, 2021 by Xerxes

[Dynamic]

I would agree that it appears to be Mitsubishi Corp. (8058) which seems to match OTCMKTS:MSBHF and to be the general trading company, while the other parts of the Mitsubishi Keiretsu seem to be more specialist.

 

I found some OTC Markets listings for all 5, which, while not as good as tracking via the Tokyo tickers, is at least something I can track on Google Sheets using GoogleFinance.
 

OTCMKTS    ITOCF    Itochu Corp
OTCMKTS    MARUF    Marubeni Corp
OTCMKTS    MSBHF    Mitsubishi Corp
OTCMKTS    MITSF    Mitsui & Co Ltd
OTCMKTS    SSUMF    Sumitomo Corp

My guess it that the holdings were worth about $8.3 billion at end of Q2 and about $8.1 billion today, but it's certainly imprecise.

Edited July 14, 2021 by Dynamic

[valueinvesting101]

Warren Buffett's Berkshire Hathaway could bag a 60% profit when Paytm goes public
 

https://markets.businessinsider.com/news/stocks/warren-buffett-berkshire-hathaway-paytm-ipo-profit-digital-payments-india-2021-7

[Munger_Disciple]

Pilot Flying J levering up to buyout the Haslam and Call families.  Looks like a mini levered buyout inside Berkshire: https://www.yahoo.com/finance/news/berkshire-backed-pilot-seeks-3-164604204.html. Haslams will continue to own 20% of the business after 2023. 

[gfp]

Thanks for posting.  This was always the plan but it looks like they moved up the date by a couple years to take advantage of the current cost of money for corporate borrowers.  The Haslams will definitely benefit from the Berkshire Halo on the cost of this debt.

[gfp]

30 minutes ago, Munger_Disciple said:

Pilot Flying J levering up to buyout the Haslam and Call families.  Looks like a mini levered buyout inside Berkshire: https://www.yahoo.com/finance/news/berkshire-backed-pilot-seeks-3-164604204.html. Haslams will continue to own 20% of the business after 2023. 

Also, as a reminder, Pilot Flying J paid out a non-recurring $849 million distribution to Berkshire in Q1, with Berkshire owning 38.6% at that time.  That indicates a $2.2 Billion total special dividend out of Pilot Flying J in Q1 of this year.  Now they are refinancing some of that and accelerating the timetable of Berkshire going to 80%.

 

The Haslams are going to be flush, having already received $1.1 Billion in the Q1 distribution.  Sounds like the Call family will be selling out completely with this deal.

[Munger_Disciple]

1 hour ago, gfp said:

Also, as a reminder, Pilot Flying J paid out a non-recurring $849 million distribution to Berkshire in Q1, with Berkshire owning 38.6% at that time.  That indicates a $2.2 Billion total special dividend out of Pilot Flying J in Q1 of this year.  Now they are refinancing some of that and accelerating the timetable of Berkshire going to 80%.

 

The Haslams are going to be flush, having already received $1.1 Billion in the Q1 distribution.  Sounds like the Call family will be selling out completely with this deal.

 

 I think the families are cashing out sooner to take advantage of current lower rates on capital gains taxes which will almost certainly go up next year if Biden's proposal is enacted by the Congress. 

[Gamecock-YT]

Haslams have to get some money to pay off some more failed university of tennessee coaches. 

[Munger_Disciple]

2 hours ago, gfp said:

Thanks for posting.  This was always the plan but it looks like they moved up the date by a couple years to take advantage of the current cost of money for corporate borrowers.  The Haslams will definitely benefit from the Berkshire Halo on the cost of this debt.

 

You are most welcome gfp!

[boilermaker75]

On 7/16/2021 at 5:31 PM, Gamecock-YT said:

Haslams have to get some money to pay off some more failed university of tennessee coaches. 

 

University of Tennessee has become a graveyard for coaches. That fan base would scare me away.

Edited July 17, 2021 by boilermaker75