Buffett/Berkshire - general news

[gfp]

11 minutes ago, yesman182 said:

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.

 

I noticed that too.  Sort of surprised they did a taxable cash deal when he had the option to do a tax free swap into Berkshire shares but way to go Greg!  New hockey rinks for everyone!

[backtothebeach]

Income from operations B$ 8.166, up 19% from a year ago. That's quite impressive.

[yesman182]

14 minutes ago, gfp said:

I noticed that too.  Sort of surprised they did a taxable cash deal when he had the option to do a tax free swap into Berkshire shares but way to go Greg!  New hockey rinks for everyone!

It seems unreasonable to not swap into Berkshire shares. Why pay hundreds of millions in taxes? Wouldn't we rather have Greg invested in Berkshire than sitting on a mountain of cash. On one hand I am glad Greg isn't heavily invested in one part of the conglomerate, but why not swap into Berkshire's shares to his net worth grows as the company grows. 

 

I understand Berkshire doesn't like to issue shares, but this seems like the perfect time to do it. I wonder if Greg did this in hopes that the last few remaining owners of Mid America will follow suit? 

[John Hjorth]

Yesmans great observation is in the 10-Q on p. 20, last paragraph.

 

Like gfp I would be surprised if this transaction was done on a taxable basis, if the shareholder agreement has had the option to do it as a tax free swap of BHE shares for BRK shares [A or B].

 

I think that the transaction was perhaps done as a tax free share swap, ref. the horisontal line named "transaction with noncontrolling interests" totalling USD M (1,032) in "Consolidated statements of changes in shareholders' equity" on p. 5.

 

 

Edited August 6, 2022 by John Hjorth

[gfp]

I do think it was a taxable cash deal with Greg Abel.  A long term capital gain.  I'm sure a chunk is going towards philanthropy as well.  There is a certain badge of honor for Berkshire executives to purchase their Berkshire shares with their own hard-earned after tax money.  Just like Ajit did and just like Warren did.

 

It will be nice to see Greg buy some shares in the open market when he is allowed to.

[John Hjorth]

Well, EDGAR as of now contains no filing for Mr. Abel for a BRK transaction in June.  Thus, It must have been in cash.

[adesigar]

Maybe my numbers are wrong but was it a 10 billion buyback in the last 3 months. Actually mostly in the last month or so

Edited August 6, 2022 by adesigar

[valueinvesting101]

Valuation of BHE as per last repurchases done by the company in 2020 was around $53.3 billion. It seem to have increased a lot to about $87 billion if 1% stake is valued at $0.87 billion . Seems like very high jump and out of step with earlier increases in the BHE valuation. I wonder if it was done at higher valuation to account for taxes. 

 

BHE Annual report mentions:

 

Quote

Net cash flows from financing activities for the year ended December 31, 2021 were $(3.1) billion. Sources of cash totaled $2.4 billion and consisted of proceeds from subsidiary debt issuances. Uses of cash totaled $5.5 billion and consisted mainly of preferred stock redemptions totaling $2.1 billion, repayments of subsidiary debt totaling $2.0 billion, distributions to noncontrolling interests of $488 million, repayments of BHE senior debt totaling $450 million and net repayments of short-term debt totaling $276 million.

What is this 'distributions to noncontrolling interests of $488 million'?

[gfp]

59 minutes ago, adesigar said:

Maybe my numbers are wrong but was it a 10 billion buyback in the last 3 months. Actually mostly in the last month or so

 

I think your numbers are wrong.  A little over a billion dollars worth during June and then another half billion or slightly less spent after quarter end through July 26th.

Edited August 6, 2022 by gfp

[rolling]

7 hours ago, gfp said:

 

I think your numbers are wrong

My numbers say 1B in June, and zero in april and may. Did not find july data, though. 

edit: my mistake,sorry

Edited August 6, 2022 by rolling

[gfp]

15 minutes ago, rolling said:

My numbers say 8B in June, and zero in april and may. Did not find july data, though. July numbers attending to stock price most likely took it to the 10B someone mentioned

 

June: 

 

2397 at 425,870.54 = $1.02 billion

plus

25,462 at 276.75 = $7 MILLION dollars worth

 

(there is also a press release that spells it out "approx. $1.0 billion was used to repurchase BRK shares during the quarter")

Edited August 6, 2022 by gfp

[rolling]

Sorry. 7M in B shares seemed ridiculous só I misread to 7B. 

[John Hjorth]

1 hour ago, valueinvesting101 said:

Valuation of BHE as per last repurchases done by the company in 2020 was around $53.3 billion. It seem to have increased a lot to about $87 billion if 1% stake is valued at $0.87 billion . Seems like very high jump and out of step with earlier increases in the BHE valuation. I wonder if it was done at higher valuation to account for taxes. 

 

BHE Annual report mentions:

 

What is this 'distributions to noncontrolling interests of $488 million'?

 

Valueinvesting101,

 

Please take a look at BHE Annual report 2021, p. 95.

 

Several of the subsidiaries are participating in joint ventures related to : Natural gas, coal, solar & nuclear [, but not wind, hydroelectric & geothermal].

Edited August 6, 2022 by John Hjorth

[adesigar]

From the 1Q report

 

Number of shares of common stock outstanding as of April 20, 2022:

Class A — 613,707

Class B — 1,285,751,332

 

 

From the 2Q report

Number of shares of common stock outstanding as of July 26, 2022:
Class A — 599,924

Class B — 1,301,126,370

edit
nvm I figured out my mistake. 

Edited August 6, 2022 by adesigar

[DooDiligence]

I love the way this thread lights up on certain Saturday mornings.

Thanks to all who dig in to these buyback numbers.

 

Edited August 6, 2022 by DooDiligence

[ValueMaven]

long term bulls on the name should be very happy with these very strong results.  Operating Income was very strong in a very challenging market.  Buyback was not as aggressive as I thought ... so what??  I dont own the stock for Berkshire to gun it higher through buybacks ... BNSF is a monster asset - and I am looking forward to having the Alleghany deal closed soon!!

[gfp]

One thing I noticed in this report is that towards the bottom of page 7 they mention that a new accounting pronouncement that will go into effect at the beginning of 2023 is currently projected to reduce shareholders' equity by $6-7 Billion (ultimate amount to be based on interest rates at that time).  ASU 2018-12

 

They mentioned it last quarter but this quarter they included an estimated ballpark figure if rates stay about the same.

 

 

Quote:

We will adopt ASU 2018-12 as of January 1, 2023 using the modified retrospective method, whereby revised cash flow and discount rate assumptions as of January 1, 2021 (the transition date) are applied to contracts then in-force, with liabilities then remeasured as provided under the standard. The cumulative effects from discount rate assumption changes as of the transition date will be recorded in accumulated other comprehensive income and the cumulative effect from cash flow assumption changes will be recorded in retained earnings. While we have not finalized our assessment of the impact of the adoption as of the transition date, we currently believe that the changes in discount rate assumptions will have a greater effect on our recorded liabilities than changes in cash flow assumptions. We currently estimate that as of January 1, 2021, the adoption of ASU 2018-12 will reduce our consolidated shareholders’ equity between $6 billion and $7 billion from the amount previously reported, primarily due to the low interest rate environment at that time. However, the ultimate impact of adopting ASU 2018-12 will be based on the discount rate and cash flow assumptions determined as of the January 1, 2023 adoption date. We, therefore, continue to evaluate the effect this standard will have on our Consolidated Financial Statements.

[aws]

Are we at all concerned that maybe something has changed and Greg Abel is no longer the successor? It is a rather surprising transaction that leaves Abel with no skin in the game.

[ValueMaven]

I thought he had a modest size stake in the b-shares?? with his large stake in BHE as well...which we now know what happened too...I would have liked if he swapped his BHE position into BRK stock...what gives?

Edited August 6, 2022 by ValueMaven

[aws]

Modest would be a very accurate description of his Berkshire holdings. He owns 5 A shares in his living trust and a couple thousand B shares in his kid's names. 

 

https://www.sec.gov/Archives/edgar/data/0001646348/000108131618000011/xslF345X02/wf-form3_151640024127980.xml

[ValueMaven]

I agree - however I wouldnt jump to any conclusions just yet regarding Mr. Abel.  Thus far his actions have been A+ from a corporate governance and operating perspective.  

[ValueMaven]

Berkshire paid $870M for Mr. Abel's 1% stake in BHE.  Does that mean that BHE is worth $87B?

[Xerxes]

From Barron’s, on the monthly data within Q2, for lazy folks like me:

 

 

 

[ValueMaven]

Looks like $1B of buybacks in the Q at an avg price of ~$280.  Looks like another $1.4B was bought back in July ... 

[aws]

7 minutes ago, ValueMaven said:

Looks like $1B of buybacks in the Q at an avg price of ~$280.  Looks like another $1.4B was bought back in July ... 

 

July purchases were 1,119 A share equivalent, so around $470 million worth.