Buffett/Berkshire - general news

[omagh]

On 8/29/2021 at 1:49 PM, ValueMaven said:

Great recap: simple, direct, and to the point.  Some of his assumptions are conservative in my view.  Even still Greg is one of the better analysts on Berkshire.  

The reverse compounding of the share repurchases is being undervalued, for sure.  Reducing share count by 5% annually has a tremendous effect on per-share metrics and share valuation.  As humans, we're wired to think linearly rather than logarithmically or exponentially.  After 5 years equity employed is 77.3% and after 10 years, equity employed is 59% of starting.  Meanwhile after-tax earnings continue exponentially growing at reasonable rates (probably 8-10%, per Bloomstran) while the per-share growth compounds at a much larger exponential rate.  With BRK, this is a high-certainty bet.

[DooDiligence]

On 8/27/2021 at 2:51 PM, gfp said:

The part about him flying to Omaha regularly for work on his own dime on NetJets was pretty impressive.  Berkshire is very lucky to have 4 independently wealthy principled people who are extremely talented, devoted to Berkshire and like to keep a low profile.  

 

Speaking of NetJets,

 

www.forbes.com/sites/douggollan/2021/08/26/three-prominent-players-suspend-jet-card-sales/?sh=1b309c8a2409

[Charlie]

Warren Buffett´s $2 Billion Japan Gain Yet to Lure Followers a Year on

 

https://finance.yahoo.com/news/warren-buffett-2-billion-japan-210000151.html

 

 

Cheers!

[Spekulatius]

On 8/24/2021 at 2:59 PM, John Hjorth said:

adesigar,

 

How can we even be sure this is the situation, based on the "black box" reporting - now for years - for the big wholly owned manufactoring companies in Berkshire's belly?

The results were mediocre as long as they disclosed. Several plant explosions. Goodwill writeoffs of several acquisitions.

 

I think the change in leadership is long overdue. Lubrizol is at least a decent business and perhaps a great business if it well run. It should be generating a lot of cash.

Look at ASH or Fuchs Petrolub.

Edited September 1, 2021 by Spekulatius

[Spooky]

On 8/30/2021 at 6:06 PM, longterminvestor said:

Why buy bonds?  Berkshire does not buy bonds for cash flow, they buy for store of value.  and interest rates can only go up which means the price of the bond goes down.  Agree, doesnt make any sense.  

 

Two points here:

 

A) Bonds and cash would do well in a deflationary environment. I wonder what probability weighting Buffet attributes to this outcome in his scenario analysis / mental models. Listening to Powell's speech at Jackson Hole he highlighted a lot of dis-inflationary forces out there and it seems like the Fed's continued dovishness is geared to minimize the probability of this outcome (rather than the inflation scenario).

 

B) Bonds and cash  also have an option value tied to them - if there is another large crash then perhaps some elephants become available at attractive prices.

[wabuffo]

Quote

Why buy bonds?  Berkshire does not buy bonds for cash flow, they buy for store of value.  and interest rates can only go up which means the price of the bond goes down.  Agree, doesnt make any sense.  

 

Buffett has been wrong on this point for over 20 years and cost BRK shareholders a ton of returns by hiding in cash and cash equivalents vs bonds.

 

But maybe he's going to be right this year..... 

 

wabuffo

Edited September 1, 2021 by wabuffo

[Spekulatius]

9 minutes ago, wabuffo said:

 

Buffett has been wrong on this point for over 20 years and cost BRK shareholders a ton of returns by hiding in cash and cash equivalents vs bonds.

 

But maybe he's going to be right this year..... 

 

wabuffo

 

Buffet really should buy gold with some of his cash, as a store of value, but he doesn't like it either.

[ValueMaven]

ATH on Apple this morning.  This is turning into the greatest trade ever.  Up $110B+ ... plus dividends ... I wonder how Berkshire is going to handle this high-class problem.  

[UK]

https://www.wsj.com/articles/railroads-brace-as-regulator-signals-willingness-to-take-on-industry-11630584002?mod=business_lead_pos12

 

The obscure federal regulator that threw a wrench into a $30 billion railroad merger this week could have more in store for the nation’s freight railways—with implications for both business and consumers. Like other federal agencies, the five-member Surface Transportation Board has been tasked by President Biden to root out what it considers to be corporate monopolies that hurt smaller companies and consumers. In a closely watched action, the board in coming months is expected to consider a rule to mandate so-called reciprocal switching, the practice in which railroads can be compelled to share access to their tracks with competitors. That would allow shippers to seek competitive bids for moving freight, which in theory could lower shipping costs and the prices ultimately paid by consumers.

 

Freight railroads oppose the plan, saying it would be detrimental to their operations and profits. Trucking already serves as a competitive counterweight, they argue. Freight railroads also warn that such a mandate could have unintended  consequences, including lower capital investments in infrastructure they are forced to share with rivals.

 

There are also threats beyond reciprocal shipping. Martin Oberman, who was appointed chairman of the STB by Mr. Biden earlier this year, has also mused about the possibility of the STB moving to regulate storage fees at so-called intermodal railroad terminals—which handle containers across multiple modes of transport, like rails, trucks and ships—to address clogs in the supply chain. Intermodal shipping is currently exempt from STB regulation.

 

“This is an industry with very few entrants in it, and they tend to be very monopolistic or, at best, duopolistic,” Mr. Oberman said. ”So we just have to live with the existing limited entrants in the field, but at least build in competition where we can.” “The railroad industry is not just about maximizing profits for railroads, it’s also about the public interest in the economy, and the Congress has made that clear,” he said.

 

Mr. Oberman’s focus on competition and skepticism of some of the railroad industry isn’t a departure from his predecessor, Ann Begeman —but his tone is, said Tony Hatch, a veteran railroad analyst.

 

Mr. Oberman also established a new passenger rail working group that is preparing to begin enforcing new on-time performance standards beginning next year. Under those rules, which freights, Amtrak, and the government battled over for a decade, freight railroads could face penalties for delaying passenger trains, which run over freight-owned tracks across most of the country. Rulings favorable to passenger railroads in both matters could help make feasible Mr. Biden’s vision of vastly expanding train travel in the country.

 

Mr. Oberman countered that many of the mergers that consolidated the rail industry 20 years ago included contracts for reciprocal switching among railroads, which have operated without major problems since. “The railroads would prefer that we do nothing ever, except pre-empt everybody else from regulating the railroads,” Mr. Oberman said. “I think the reaction, and I’ve told them, by the way, was way overdone and exaggerated.”

Edited September 3, 2021 by UK

[backtothebeach]

On 9/1/2021 at 4:06 PM, ValueMaven said:

ATH on Apple this morning.  This is turning into the greatest trade ever.  Up $110B+ ... plus dividends ... I wonder how Berkshire is going to handle this high-class problem.  

Another up day for AAPL and down day for Berkshire.

 

I have "real-time" BV, calculated with the stock portfolio and proportional operating earnings up to today, at $215 per B share.

 

P/BV of 1.31.

[maxthetrade]

No question, BRK is pretty cheap again on P/BV, I have real time BV at $217, P/BV at 1.3. Short term pretty oversold, good time to add if you haven't as much exposure as you want.

[adesigar]

16 hours ago, maxthetrade said:

No question, BRK is pretty cheap again on P/BV, I have real time BV at $217, P/BV at 1.3. Short term pretty oversold, good time to add if you haven't as much exposure as you want.

And that’s after the buyback. Without the buyback P/BV would be even lower.

[ValueMaven]

I agree BRK is cheap here as well.  It's stalled a bit into this Covid re-uptick over the last 6-8 weeks, but that will pass.  I'll be increasing my exposure slowly at these levels as well.  

 

Interesting: Over the past 3 months the S&P is up +7.3%, while BRK is down -3.6% 

Edited September 6, 2021 by ValueMaven

[boilermaker75]

13 hours ago, ValueMaven said:

I agree BRK is cheap here as well.  It's stalled a bit into this Covid re-uptick over the last 6-8 weeks, but that will pass.  I'll be increasing my exposure slowly at these levels as well.  

 

Interesting: Over the past 3 months the S&P is up +7.3%, while BRK is down -3.6% 

 

And hopefully the stock buybacks have continued at a good clip.

[CorpRaider]

Thanks for sharing thoughts guys.  I've been buying some over the last week or so.  

[gfp]

Seems like the share price weakness is Ida-related.  Meanwhile Apple continues to do very well.  Will Berkshire make more on Apple in the past week than they lose in Ida-related claims?  Probably.

[UK]

I would ques it is related to this value-growth rotation going on back and forth, which is mostly related to rate expectations, which is mostly related to economy expectations, which is somehow related to maybe delta scare and what not else, and it is only trying to explain past:) and still perhaps nobody on earth knows what will future be:). But I think BRK is quite well positioned, but they are regarded bu market as being more on the short duration side, so lower rate expectations is not as good for BRK valuation (as say for FANGS), but lower valuation is not so bad if BB are going on, so you cannot lose here and god bless BRK BB:)

Edited September 7, 2021 by UK

[ValueMaven]

True.  I added some this AM @ 280.50 or thereabouts.  

[UK]

Kinda: https://www.bloomberg.com/opinion/articles/2021-09-07/goldilocks-low-rates-economy-has-stock-investors-in-a-headlock?sref=uN6cur8D

 

"The rally is driven less by reflation prospects than a return to the pre-pandemic reality of low interest rates, which leaves no alternative to stocks"

 

But I would not pay to much attention to such things, better I think, until some real shit hits the fan, just to stay with mostly win-win situations, like BRK:))

[CassiusKing1]

19 hours ago, ValueMaven said:

True.  I added some this AM @ 280.50 or thereabouts.  

I hope Uncle Warren is doing the same!

[nwoodman]

2 hours ago, CassiusKing1 said:

I hope Uncle Warren is doing the same!

Over a 10 year horizon it probably doesn't matter for an individual's purchase today (10% or 11% CAGR).  However, for Berkshire, I actually hope the reason that the price is correcting is because he has reduced repurchases. This an OK price but not worthy of 5%+ repurchases.  Let the price fall and lose a few weak hands. Very simplistic I know,  but for those with a longer term horizon, this is where we are currently at on a 11% CAGR journey.  That CAGR increases by 1 or 2% if the old boy and subsequent management can do buybacks at the right price.  The big one, is an option on capitalism actually having a role going forwards. 

 

Edited September 8, 2021 by nwoodman

[ValueMaven]

Would you mind sharing this spreadsheet with all of us?  This way we can adjust our own assumptions? 

-VM

[John Hjorth]

On 8/30/2021 at 10:18 PM, John Hjorth said:

Thank you  for sharing, @nwoodman .

 

[adesigar]

Don't know why share repurchases would have reduced. Of the 6 Billion in 2nd Quarter purchases, 3.5 Billion was done in June at an average of $280 per B share. He was even buying in May at $286 per B share.

 

 

[John Hjorth]

Please continue nitpicking with regard to buybacks. Thank you.