Buffett/Berkshire - general news

[ValueMaven]

New: https://assets.empirefinancialresearch.com/uploads/2022/07/Berkshire-Hathaway-analysis-Whitney-Tilson-7-7-22.pdf

 

The most interesting slide to me is slide 10 .. this is also one of the widest gaps to IV in sometime according to Tilson

[yesman182]

8 hours ago, ValueMaven said:

New: https://assets.empirefinancialresearch.com/uploads/2022/07/Berkshire-Hathaway-analysis-Whitney-Tilson-7-7-22.pdf

 

The most interesting slide to me is slide 10 .. this is also one of the widest gaps to IV in sometime according to Tilson

Thanks for posting! I liked slide 21. I think those are very reasonable assumptions. Obviously a lot can change with the equity portfolio, but it doesn't seem unreasonable. 

[yesman182]

On 6/16/2022 at 1:29 PM, aws said:

 

This goes back a ways but some may find it interesting. I think I solved the mystery of the A share buyer today. The answer is that fractional share purchases hit the tape as a whole share. So if someone buys $20 worth of fractional A shares (1/20000th of a share) it still hits the tape as a full share purchase.

 

See this explanation on FINRA's website:

 

Share Quantity

Q101.14: How should a trade for a fractional number of shares, for example, 100.5 shares, be reported?

A101.14: When reporting a trade for a fractional number of shares, firms should delete the fraction and report the whole number, except if the whole number would be 0 (zero). If the whole number would be 0, firms should round up to 1. Thus, for example, for a trade of 100.5 shares, the reported quantity would be 100. Trade reports with a share quantity containing a decimal or a fraction will be rejected. (See also, e.g., OATS FAQ T69.)

Q101.15: Must trades for less than one share be reported?

A101.15: Yes. As noted in FAQ 101.14, where a trade is executed for less than one share, e.g., 1/3 share, firms should round up and report a share quantity of 1.

 

 

I tested this, and I bought about $20 worth of A shares on Robinhood and repeated it as quickly as I could, getting about 20 such orders in. I then checked the tape and each one of these came across as a full share order. So really, there likely has been no increase in the volume of A share traded, but rather it just reflects brokers beginning to offer fractional share purchases.

 

 

WSJ is confirming what you said about the fractional trading. 

https://www.wsj.com/articles/robinhood-was-behind-phantom-surge-in-berkshire-hathaway-trade-volume-study-finds-11658309401?st=fi9k1yuirb7adhg&reflink=desktopwebshare_permalink

 

[ValueMaven]

AXP - massive quarter.  By my estimates Berkshire is now a ~20% equity holder.  

[newtovalue]

Question - now that BRK owns more than 20% of AXP - does it change the reporting to Equity Method? If that is the case - should we see a boost in operating earnings as BRK can now recognize 20% of AXPs earnings.

I understand this doesn't change anything economically - more just curious about the mechanics.

 

ty!

[Ulti]

https://bisoninterests.com/content/f/buffett-buys-oil-gas-stocks  Dont know if this has already been posted but a good historical read.

[jbwent63]

2 hours ago, newtovalue said:

Question - now that BRK owns more than 20% of AXP - does it change the reporting to Equity Method? If that is the case - should we see a boost in operating earnings as BRK can now recognize 20% of AXPs earnings.

I understand this doesn't change anything economically - more just curious about the mechanics.

 

ty!

My understanding is that the 20% threshold is just a guideline at which one would consider equity accounting. Given the size of AXP, and BRK's lack of influence over it (not involved in day-to-day decisions, board members etc.) I would not think that the equity method would apply at this level of ownership.

[gfp]

57 minutes ago, jbwent63 said:

My understanding is that the 20% threshold is just a guideline at which one would consider equity accounting. Given the size of AXP, and BRK's lack of influence over it (not involved in day-to-day decisions, board members etc.) I would not think that the equity method would apply at this level of ownership.

 

That's correct - Berkshire has a bunch of specific agreements in writing with both AXP and the Federal Reserve that would almost certainly exempt them from required equity method accounting.  This letter from 2019 references the many agreements that are in place and their periodic amendments, for example:

 

https://www.sec.gov/Archives/edgar/data/4962/000000496919000036/exhibit_101.htm

[newtovalue]

Great ! Thank you for the info 

[Ulti]

https://africa.businessinsider.com/markets/warren-buffetts-berkshire-hathaway-has-piled-about-dollar27-billion-into-chevron-and/8thjqvq

[ValueMaven]

Greg Warren of Morningstar (one of my favorite Berkshire analysts) is out with some new commentary from a few days ago.  Worth hunting down!

[DooDiligence]

Small but, damn!

 

Justice Department and Consumer Financial Protection Bureau Secure Agreement with Trident Mortgage Company to Resolve Lending Discrimination Claims

 

Mortgage company owned by Warren Buffett fined for race discrimination against homebuyers

 

---

 

They're no longer taking mortgage applications.

Does WEB suffocate this business under a pillow?

 

https://tridentmortgage.com

[gfp]

That business was part of Fox & Roach, a realtor that HomeServices acquired.  Not even sure if HomeServices of America owned Fox & Roach when the alleged redlining took place. (edit: HomeServices bought the company in 2013, the investigation covered the period 2015-2019)

Edited July 27, 2022 by gfp

[ValueMaven]

A representative from Trident’s parent company, a Berkshire Hathaway affiliate, said in a statement that the resolution included no finding of wrongdoing and that Trident “strongly disagree[s] with the agencies’ interpretation of Trident’s prior lending practices.”

“Trident and any affiliated companies have never denied or discouraged access to mortgage loans or other services based on race,” according to the statement.

[longterminvestor]

BRK.A - Berkshire Hathaway Inc Class A Stock Analysis & Rating - NYSE _ Morningstar.pdfMorningstar commentary.  Gregg needs to update his picture.   

Edited July 27, 2022 by longterminvestor
comment

[yesman182]

11 hours ago, ValueMaven said:

Greg Warren of Morningstar (one of my favorite Berkshire analysts) is out with some new commentary from a few days ago.  Worth hunting down!

Curious if you agree with Greg's assessment that "We think Berkshire Hathaway Energy overall is endowed with a narrow economic moat."

 

I don't know much about regulated utilities, but I find it hard to believe someone is going to come into Iowa and compete with Mid America on price, relationship with the community/regulators or by being more environmentally friendly. Seems like the story is similar out west. 

 

I have a hard time following Greg's logic that BNSF is wide moat and the utility is narrow moat. Id be curious to hear how others feel. 

 

 

[Spooky]

That line jumped out to me as strange as well. I think BHE is more fragmented comprising lots of different business units some of which might have very strong moats but others not so much. I do think BHE being able to deploy more capital from the mother ship into renewables earlier that the competition gives them a huge first mover advantage and allows them to strengthen their moat entrench themselves - for instance, the transmission line project that was recently approved, once it is built they will essentially collect royalties on critical infrastructure for years and there won't be a competing project to displace them.

[ValueMaven]

BHE has a negative tax rate.  Not many narrow moat businesses can say that!  He has also said before that BHE is a bit of a crown jewel inside of Berkshire.  Regardless BHE is going to be worth a lot more in 5-10 years in the future.  Let's hope they make a distressed acquisition sometime during the next downturn!  

[KPO]

1 hour ago, yesman182 said:

Curious if you agree with Greg's assessment that "We think Berkshire Hathaway Energy overall is endowed with a narrow economic moat."

 

I don't know much about regulated utilities, but I find it hard to believe someone is going to come into Iowa and compete with Mid America on price, relationship with the community/regulators or by being more environmentally friendly. Seems like the story is similar out west. 

 

I have a hard time following Greg's logic that BNSF is wide moat and the utility is narrow moat. Id be curious to hear how others feel. 

 

 

Not sure if this applies to Greg, but it seems like the Value Line and Morningstar analysts usually have unusually broad coverage, so I pretty much ignore anything they have to say in terms of recommendations. Both are fine for historical data though. 

[ValueMaven]

Greg is one of the best Berkshire analysts out there ... so not a relevant comment @KPO

[KPO]

8 hours ago, ValueMaven said:

Greg is one of the best Berkshire analysts out there ... so not a relevant comment @KPO

Energy around loving a sell-side analyst on a value forum is unexpected. Of the 7 analysts that cover Berkshire I haven’t seen much in the way of unique insights, but good to hear that you like him. 

[CassiusKing1]

BRK reports earnings this Saturday, the 6th.

 

What is everyone expecting to hear?  They've obviously been putting some cash to work this quarter AND you had BRK stock price drop into the 260's to 270's for awhile so buybacks could have happened at a good clip.

 

Will be interesting.

[ValueMaven]

I agree ... will be interesting to see operating income, BHE's tax rate, size of share repos, GEICOs combined ratio, and margins at MSR (how inflation might be playing a role here)...and if big-man added to AAPL 

[Ulti]

https://wealthtrack.com/how-a-concentrated-portfolio-of-global-brand-name-companies-is-faring-in-this-challenging-market/

 

Tom Russo interview... Basic but always good to listen to....Disc why he has an 18% position

[yesman182]

From the 10Q.

 

In June 2022, BHE acquired the BHE common stock held by Greg Abel, Berkshire’s Vice Chairman - non-insurance operations, for $870 million. The purchase was pursuant to the terms of a shareholders agreement between Berkshire, BHE and BHE’s non-controlling shareholders. Berkshire recorded a charge of $362 million to capital in excess of par value for the excess of the consideration paid over the carrying value of the acquired noncontrolling interest.