Buffett/Berkshire - general news

[VersaillesinNY]

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https://www.bbc.co.uk/programmes/p0b4hdtb

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Steven Pinker, Tim Harford, Charlie Munger

Edited November 30, 2021 by VersaillesinNY

[ValueMaven]

https://www.barrons.com/articles/apple-stock-berkshire-hathaway-51638371498?mod=hp_DAY_7

[fareastwarriors]

https://www.bloomberg.com/news/articles/2021-12-03/berkshire-s-munger-says-now-is-even-crazier-than-dotcom-bust?srnd=premium

 

Berkshire’s Munger Says Now Is ‘Even Crazier’ Than Dotcom Bust

[RadMan24]

AFR https://www.afr.com/markets/equity-markets/fund-managers-target-unloved-tech-shares-20211203-p59el0

 

Mr Munger did not provide a stock pick, but did reiterate his support for Costco, the low-cost retailer, which he believes could rival Amazon in online shopping.

 

“I think Costco will eventually be a huge internet player,” he said. “People trust it, they have enormous purchasing power to reduce prices, they’re into very efficient forms of distribution.”

Costco’s ability to pass on rising costs to consumers would also insulate the business from sharply rising inflation, which in the US touched the highest level in three decades in October.

“The best you can hope for is that the inflation will be slow,” he said. “It makes investment very difficult.”

[ValueMaven]

Apple hitting another ATH right now at $171 vs. Berkshire's cost of ~$35 or so just 4 years ago.  This is becoming a very high quality problem for Warren

[yesman182]

23 minutes ago, ValueMaven said:

Apple hitting another ATH right now at $171 vs. Berkshire's cost of ~$35 or so just 4 years ago.  This is becoming a very high quality problem for Warren

Problem? You think he cares if 50% of his portfolio is in Apple? 

[Munger_Disciple]

30 minutes ago, yesman182 said:

Problem? You think he cares if 50% of his portfolio is in Apple? 

 

I believe Warren looks at any holding as a % of total asset base of Berkshire including wholly owned businesses (2021 AM), not as a % of marketable security portfolio.  

[ValueMaven]

Bottom line is that Buffett is sitting on a massive homerun/pool of liquidity ... think about it - Berkshire is getting $1B a year alone in dividends + Apple's buyback.  I just wonder how big of a position this will grow into.  It's about 45% of the equity portfolio alone.

[ugadawg_98]

17 hours ago, ValueMaven said:

Bottom line is that Buffett is sitting on a massive homerun/pool of liquidity ... think about it - Berkshire is getting $1B a year alone in dividends + Apple's buyback.  I just wonder how big of a position this will grow into.  It's about 45% of the equity portfolio alone.

True. And the triple play of Apple’s buyback plus Apple’s dividend, plus BRK’s buyback just adds rocket fuel to that return.

[Swedish_Compounder]

It is really interesting when thinking about the long term effects of these two layers of buy backs. 

 

Actually, Berkshires three largest stocks (Apple, American Express and Bank of America) seem committed to making large buybacks over time. Also, Berkshire seems to want to buy back 4-5% annually. 

 

I have been looking at the un-distributed earnings from stock component from 2011 to 2021E. I estimate that this component has increased by roughly 13% CAGR per BRK B share during those ten years when BRK simultaneously built a mountain of cash. If BRK had repurchased 4,5% of their shares per year, the figure would be more like 17% CAGR. And then the largest components of the 2011 stock portfolio consisted of IBM, Wells Fargo and Coca Cola, which were no great components. 

 

If Apple, Bank of America and American Express have a good operational performance the coming 10 years and continue buying back stock and BRK get the chance to buy back at 4% or more a year, the un-distributed earnings from investees component could have a much stronger development than it did the last 10 years. It is also not impossible that they get the chance to add another holding which consistently buys back it stock, further improving the new formula for success. 

[ValueMaven]

Well said!! @Swedish_Compounder - I totally agree 

[omagh]

6 hours ago, Swedish_Compounder said:

Actually, Berkshires three largest stocks (Apple, American Express and Bank of America) seem committed to making large buybacks over time. Also, Berkshire seems to want to buy back 4-5% annually. 

 

I have been looking at the un-distributed earnings from stock component from 2011 to 2021E. I estimate that this component has increased by roughly 13% CAGR per BRK B share during those ten years when BRK simultaneously built a mountain of cash. If BRK had repurchased 4,5% of their shares per year, the figure would be more like 17% CAGR. And then the largest components of the 2011 stock portfolio consisted of IBM, Wells Fargo and Coca Cola, which were no great components. 

@Swedish_Compounder Great point that you make here! There are probably a few other factors to consider...

 

https://static.fmgsuite.com/media/documents/2bde00e4-7037-4c39-beb8-9946b2b2dce3.pdf (page 104 onward)

Chris Bloomstran suggested that BRK's cash balances are roughly in line with historical levels (~15% of assets).  It's doubtful that BRK would have allocated 4-5% annually without giving up some other capital allocation choices. 

 

At present, BRK seems to be allocating the remainder of operating earnings less growth capex to share repurchases (per Bloomstran on a podcast if I recall correctly).  So, a dip in operating earnings likely means a dip in buybacks.  As well, any acquisitions would eat into the available capital and may further eat into any share repurchases.  It's very likely that acquisitions would be done in preference to share repurchases.  Let's not forget as well, that BRK has the largest asset base in the SP500 which has come about by a combination of acquisitions and growth capex.

 

I've made the point before that the market is underestimating the compounding story in BRK, so it will be a band of stability and (somewhat) unexpected growth in the portfolio for those who hold.

[gfp]

This isn't news - Berkshire hasn't been rated a triple A credit since 2011, when the United States of America was downgraded - but it still blows my mind that Johnson and Johnson has a higher (AAA) credit rating than Berkshire does.  They literally put a subsidiary through bankruptcy this year to manage potential liabilities and are planning to spin the company into two parts...  Bonkers

https://finance.yahoo.com/news/berkshire-hathaway-finance-corporation-moody-215507873.html

[ValueMaven]

From Lord Bloomstran: Berkshire’s $31B Apple investment is now worth $159B. Wow. With dividends, the position has compounded at 36% a year for ~5.5 years.

[CassiusKing1]

Question:  With Apple being such a large part of Berkshire now, how does everyone feel having such a large piece of BRK tied up in an asset that we have absolutely no control over?  It's becoming more of a partnership than an investment.  

Thoughts?

[ValueMaven]

I'm fine with it for many reasons.  Frankly, it helps balance out the incorrect old-world stigma that has historically plagued Berkshire.  Plus we get $1b a year in dividends, and a fairly aggressive buyback.  

[ValueMaven]

2-3% annual buyback for the next 10-15 years?!

 

 

[ValueMaven]

Fairly sizable outperformance by Berkshire over the last 5 trading days.  BRKB up 2.6%, while the S&P is down 1.6%

[woodstove]

One can wonder if it is a long-overdue recognition of value?  Or one can wonder if it is a shift from bubble-fluff to solid value.  Maybe those are the same concept?  Anyway, seems to be an ongoing rationale for holding BRK.  Although to be frank, a pullback from recent rise (new high??) may happen, if one is so risk-committed that he wants to trade out and hope to be able to come back in at better price. 

 

What is the tradeoff between APPL and BRK?  If one is long APPL and does not need the dividends, does it make sense to sell some APPL and buy more BRK to gain value?  Haven't done the math but seems there might be a bit of that going on.

 

Well, interesting. 

[MCR]

Interesting and entertaining March 2020 article about See's Candies. Don't think I recall hearing before that WEB turned down a $125M offer for See's in 1982. Very wise decision. https://thehustle.co/how-a-small-candy-company-became-warren-buffetts-dream-investment/

[ValueMaven]

Thank you for sharing.  First time I've heard about the See's offer

[oscarazocar]

See's earned $24m pretax in 1982 and $27m pretax in 1983.  Corporate tax rates at the time were 46%, so if Berkshire sold they would be doing so for something like 5x pretax 1983 earnings or 5-6x aftertax proceeds (say 46% tax on $100m net gain = $79m aftertax proceeds vs. $14m net income in 1983.  It wasn't an overwhelming offer, more indicative of how well the business had performed.

 

 

[aceskc]

On 12/14/2021 at 9:48 AM, ValueMaven said:

Fairly sizable outperformance by Berkshire over the last 5 trading days.  BRKB up 2.6%, while the S&P is down 1.6%

What are the chances he has trimmed AAPL at a 3b valuation and piled the proceeds into repurchases ?

[LearningMachine]

22 hours ago, MCR said:

Interesting and entertaining March 2020 article about See's Candies. Don't think I recall hearing before that WEB turned down a $125M offer for See's in 1982. Very wise decision. https://thehustle.co/how-a-small-candy-company-became-warren-buffetts-dream-investment/

Thank you for jogging everyone's memory on this. 

 

This chart reminds me of an axiom that I'll add to the Axioms list in another thread:

[gfp]

https://www.seattletimes.com/seattle-news/northwest/buffett-rejects-bernie-sanders-call-to-intervene-in-strike/

 

Bernie tried to get Warren (Buffett) involved in a PCP subsidiary with striking workers.  Warren declined.  The CEO of PCP is responsible for his business.