Buffett/Berkshire - general news

[NeverLoseMoney]

31 minutes ago, aws said:

So what is the explanation for why the details of the sales are not reported? The link shows two sales totaling 3 million shares that have detail, but no explanation for the other decrease of 15 million shares from their reported holdings.

I think they only have to report the individual trade that puts them below a reporting threshold, not all the trades that happened before that final trade. That's why the trades that put Berkshire slightly below 20% and slightly below 19% were reported. Not sure what those thresholds are exactly in Hong Kong, but I think that's how it works. If you go below 5%, you don't have to report any further sales IIRC.

[gfp]

5 minutes ago, NeverLoseMoney said:

I think they only have to report the individual trade that puts them below a reporting threshold, not all the trades that happened before that final trade. That's why the trades that put Berkshire slightly below 20% and slightly below 19% were reported. Not sure what those thresholds are exactly in Hong Kong, but I think that's how it works. If you go below 5%, you don't have to report any further sales IIRC.

 

Yeah It's something like that.  That's why there were no further filings from Li Liu after he crossed below 5%

[Dynamic]

Do we think BHE will have to pay tax on their realized capital gains in BYD Co Ltd (HKG:1211)?

 

I'm wondering whether their accumulated wind and solar tax credits might reduce or even eliminate the tax liability on the realized gains. I have only the most basic understanding of US corporate taxation so I'd appreciate any better informed thoughts from the hivemind.

[gfp]

2 hours ago, Dynamic said:

Do we think BHE will have to pay tax on their realized capital gains in BYD Co Ltd (HKG:1211)?

 

I'm wondering whether their accumulated wind and solar tax credits might reduce or even eliminate the tax liability on the realized gains. I have only the most basic understanding of US corporate taxation so I'd appreciate any better informed thoughts from the hivemind.

 

BHE has an extremely negative tax rate and consolidates taxes with Berkshire.  So ultimately the capital gains tax gets paid by BHE.  It will have the effect of reducing or eliminating the tax benefit that Berkshire receives from BHE for a bit.  It may be material to the Scott family minority shareholders, but those shareholders selling back shares to the company may also be one of the reasons for liquidating some BYD shares.  We'll find out later.

 

No state capital gains taxes will be due because BHE holds the BYD shares in a Nevada LLC called Western Capital Group.

[Dynamic]

Thanks, @gfp very helpful

[woodstove]

I'm no expert on BYD, etc, but here's my simplistic take on why a BYD partial sale:

 

-- When originally investing in BYD, WEB/CTM wanted to buy 25 pct position, founder wanted them to limit to 10 pct.

 

-- Over time, due to BYD buybacks I presume, position crept from 10 pct to 20+ pct.  Likely WEB/CTM were asked to reduce position to below 20 pct -- their role is to be silent partner.  So they sold 1 pct as a courtesy.  I do not expect a big further reduction in BYD position, except to keep below some threshold (something between 10 and 20 pct) as a fraction. 

 

-- Still a great business, and getting better all the time.  Why not continue to hold as big an economic interest as BYD is comfortable with?

 

Interested in others' takes on the business logic, as distinct from tax implications, etc.

 

Unfortunate that had to telegraph the possibility of selling, but I imagine the securities laws in China require a partner who wants to register a holding as available for sale, to register all shares held?

 

Thanks!

 

[gfp]

1 hour ago, woodstove said:

I'm no expert on BYD, etc, but here's my simplistic take on why a BYD partial sale:

 

-- When originally investing in BYD, WEB/CTM wanted to buy 25 pct position, founder wanted them to limit to 10 pct.

 

-- Over time, due to BYD buybacks I presume, position crept from 10 pct to 20+ pct.  Likely WEB/CTM were asked to reduce position to below 20 pct -- their role is to be silent partner.  So they sold 1 pct as a courtesy.  I do not expect a big further reduction in BYD position, except to keep below some threshold (something between 10 and 20 pct) as a fraction. 

 

-- Still a great business, and getting better all the time.  Why not continue to hold as big an economic interest as BYD is comfortable with?

 

Interested in others' takes on the business logic, as distinct from tax implications, etc.

 

Unfortunate that had to telegraph the possibility of selling, but I imagine the securities laws in China require a partner who wants to register a holding as available for sale, to register all shares held?

 

Thanks!

 

 

 

Berkshire was only 20% of the Hong Kong listed share class, not the entire company.  Berkshire's ownership percentage has gone down over the years, not up.  Berkshire originally bought 10% of BYD and it became 7.7% over time with dilution.  After the first two batches of disclosed sales, Berkshire holds 7.1% of BYD.  

 

I would bet that this sale is a valuation call and that it is more than a courtesy trim.  Over time I would expect more shares to be sold.

Edited September 6, 2022 by gfp

[woodstove]

gfp...  Ok, thanks for clarifying.  I did not know that.  My main source of BYD news is Mazor's Edge website.  BYD seems a company that keeps making good moves, getting market share, etc.  I can understand reducing exposure to political risks, if any, but as a valuation call on the business, it seems inconsistent.  However, that's why WEB et al are driving this bus!

[gfp]

17 minutes ago, woodstove said:

gfp...  Ok, thanks for clarifying.  I did not know that.  My main source of BYD news is Mazor's Edge website.  BYD seems a company that keeps making good moves, getting market share, etc.  I can understand reducing exposure to political risks, if any, but as a valuation call on the business, it seems inconsistent.  However, that's why WEB et al are driving this bus!

 

 

That's a cool website, I had never heard of Mazor's website.  Reminds me of the old Brk News email feed that used to come out of France years ago.

 

As for a valuation call being inconsistent - selling stock doesn't mean you are going to be correct on the future stock price moves, but Warren has a lot of experience looking at $100 Billion USD market cap companies.  Call him old-fashioned but he likes them to earn more than $1 Billion USD per year.  He wasn't thrilled about paying 100x earnings for treasury bonds either.  He wouldn't have made the initial BYD investment without heavy prodding from others in the first place.  He wouldn't even let the Costco position ride.

[scorpioncapital]

can it also be a china risk call?

[Parsad]

Possible Berkshire bolt-on acquisition:

 

https://www.cnn.com/2022/09/06/business/kohler-death-wisconsin/index.html

 

The brand would fit, as would the business and revenues.  Not that many 4th generation businesses that are successful.  Cheers!

[DooDiligence]

2 hours ago, Parsad said:

Possible Berkshire bolt-on acquisition:

 

https://www.cnn.com/2022/09/06/business/kohler-death-wisconsin/index.html

 

The brand would fit, as would the business and revenues.  Not that many 4th generation businesses that are successful.  Cheers!

 

Nice find!

 

I'm reading Cunningham's, "Berkshire Beyond Buffett: The Enduring Value of Values" and coincidentally, just finished reading the section about Nebraska Furniture Mart, Jordans, Star, etc.

 

I couldn't put the book down as it lead into the multi-generational jewelers Ben Bridge and Helzberg.

 

It's very interesting to see explanations of what would lead these families to sell to Berkshire.

 

I hope Byron Trott doesn't snap this one up like he did Whataburger.

[gfp]

Poor Susie had to sell an A-share just to have some folding cash for the bills.

 

https://www.sec.gov/Archives/edgar/data/0001891497/000089924322030098/xslF345X03/doc4.xml

[Thelilyinvestor]

Maybe I am late to this but... does anyone know with certainty if Buffett sold his holdings of the 5 japanese trading companies? They do not appear on any filing

[Dynamic]

Only securities traded in the US (including ADRs) are included in the SEC's list of securities and CUSIP Numbers that are to be shown on 13F filings.

Foreign holdings such as BYD Co. Ltd. (1211.HKG) may show up periodically in local filings instead according to local rules (such as changing their holding by a whole percentage point), as you'll have seen recently on these forums.

 

The last filing where I saw some of the Japanese Trading Companies was on page 7 of the Chairman's Letter in the 10-K for year end Dec 31, 2021, published this February. They show up in the largest 15 equity holdings table.

 

Those large enough at year end to be shown there were (with Over the Counter Markets equivalent listings tickers and share count):

OTC:ITOCF    89,241,000    2021 10K portfolio, p7 of Chairman's Letter, an increase from 2020 10K holding
OTC:MSBHF    81,714,800    2021 10K portfolio, p7 of Chairman's Letter.
OTC:MITSF    93,776,200    2021 10K portfolio, p7 of Chairman's Letter.

which were slightly greater holdings than I had estimated until the report came out. Of these, only Itochi had made the 2020 top-15 holdings list, IIRC.

 

Those not large enough to be disclosed in the top 15 positions with my very approximate best guess holdings sizes are:

OTC:MARUF    88,600,000    Approximately 5.1% stake - my own guess based on press release.
OTC:SSUMF    63,800,000    Approximately 5.1% stake - my own guess based on press release.

 

There are some other foreign holdings such as Societa Cattolica, an Italian insurer that has been bought out recently, so I imagine Berkshire pocketed cash proceeds from the acquisition and will show a realized gain in Q3's 10-Q. This exact position has never been reported, though a press release about Berkshire's investment gave an indication of the holding's size.

 

Most websites purporting to show the Berkshire portfolio completely ignore the New England Asset Management portfolio (read cover page of Berkshire's 13F-HR filing and NEAM's filing to understand this). NEAM, for example, shows a small position in the UK listed firm Diageo plc, but they're shown because they're held via ADRs and thus reported in the 13F.

 

The other thing done on the table on page 7 of the Chairman's letter is to remove holdings by Berkshire's pension funds which aren't beneficially owned by Berkshire shareholders. I have been able to confirm these using 13D and 13G filings, where code EP refers to Employee Pension funds.

BYD however, is shown in full even though Berkshire only owned 91.1% of Berkshire Hathaway Energy which holds that position. The portion applicable to Shareholders' Equity would have been 91.1% of the BYD holding shown, and would now be about 92.1% of the amount shown since Berkshire bought out Greg Abel's 1% stake in BHE. The same 92.1% applies to Berkshire Shareholders' share of BHE's earnings.

[Thelilyinvestor]

48 minutes ago, Dynamic said:

Only securities traded in the US (including ADRs) are included in the SEC's list of securities and CUSIP Numbers that are to be shown on 13F filings.

Foreign holdings such as BYD Co. Ltd. (1211.HKG) may show up periodically in local filings instead according to local rules (such as changing their holding by a whole percentage point), as you'll have seen recently on these forums.

 

The last filing where I saw some of the Japanese Trading Companies was on page 7 of the Chairman's Letter in the 10-K for year end Dec 31, 2021, published this February. They show up in the largest 15 equity holdings table.

 

Those large enough at year end to be shown there were (with Over the Counter Markets equivalent listings tickers and share count):

OTC:ITOCF    89,241,000    2021 10K portfolio, p7 of Chairman's Letter, an increase from 2020 10K holding
OTC:MSBHF    81,714,800    2021 10K portfolio, p7 of Chairman's Letter.
OTC:MITSF    93,776,200    2021 10K portfolio, p7 of Chairman's Letter.

which were slightly greater holdings than I had estimated until the report came out. Of these, only Itochi had made the 2020 top-15 holdings list, IIRC.

 

Those not large enough to be disclosed in the top 15 positions with my very approximate best guess holdings sizes are:

OTC:MARUF    88,600,000    Approximately 5.1% stake - my own guess based on press release.
OTC:SSUMF    63,800,000    Approximately 5.1% stake - my own guess based on press release.

 

There are some other foreign holdings such as Societa Cattolica, an Italian insurer that has been bought out recently, so I imagine Berkshire pocketed cash proceeds from the acquisition and will show a realized gain in Q3's 10-Q. This exact position has never been reported, though a press release about Berkshire's investment gave an indication of the holding's size.

 

Most websites purporting to show the Berkshire portfolio completely ignore the New England Asset Management portfolio (read cover page of Berkshire's 13F-HR filing and NEAM's filing to understand this). NEAM, for example, shows a small position in the UK listed firm Diageo plc, but they're shown because they're held via ADRs and thus reported in the 13F.

 

The other thing done on the table on page 7 of the Chairman's letter is to remove holdings by Berkshire's pension funds which aren't beneficially owned by Berkshire shareholders. I have been able to confirm these using 13D and 13G filings, where code EP refers to Employee Pension funds.

BYD however, is shown in full even though Berkshire only owned 91.1% of Berkshire Hathaway Energy which holds that position. The portion applicable to Shareholders' Equity would have been 91.1% of the BYD holding shown, and would now be about 92.1% of the amount shown since Berkshire bought out Greg Abel's 1% stake in BHE. The same 92.1% applies to Berkshire Shareholders' share of BHE's earnings.

This detailed info is excellent! Thank you Dynamic

 

[gfp]

Good summary Dynamic.  Yes, Berkshire still holds over 5% of each of Marubeni, Mitsui, Mitsubishi, Itochu and Sumitomo.  But it is important to remember that Berkshire has paired that Yen currency risk by issuing Yen denominated bonds to fully fund the investments in these high dividend paying, international commodity-exposed investments.  It was one of those clever float-like things that Warren does from time to time that won't move the needle but keep his brain active.  Hopefully this one goes better than the SQUARZ lol.   So far it has gone very well for Berkshire.

 

Berkshire is at 92% ownership of BHE because Berkshire didn't buy out Greg Abel, BHE did (as a share repurchase that also benefits the Scott family shareholders).

 

I don't think Berkshire has to disclose the Japanese investments in official holding reports unless it goes to 10% under a blanket disclosure exemption for 'foreign investment firms' as long as it doesn't go on the board of directors or get too involved.  They did write letters to each of the 5 companies offering cooperation on energy JVs and such.  I wonder if Abel has anything in the works on that kind of stuff.

[Dynamic]

2 hours ago, gfp said:

Berkshire is at 92% ownership of BHE because Berkshire didn't buy out Greg Abel, BHE did (as a share repurchase that also benefits the Scott family shareholders).

Thanks gfp, that's a nuance I hadn't picked up on.

[MCR]

Yesterday, while driving on I-85 in South Carolina near Spartanburg I came across a previously unknown (to me) small BRK bolt-on acquisition from 2014--SmileMakers. It was a nondescript building with its logo on the front and the words "A Berkshire Hathaway Company" printed underneath it. (Don't ask me how I read it that fast driving at 75 MPH.) I mentioned the company to my wife over lunch and it turns out she was very familiar with it. They produce gifts that dentists, doctors, etc. give away to kids. My kids have gotten their stuff for years; she told me my daughter got one when her wisdom teeth were pulled earlier this year.

 

A little digging this morning found a news story from 2014 that the company was purchased by Oriental Trading Company from Staples. Not something we'd likely ever see mentioned in the Chairman's report and too small to move the needle for the parent company, but pretty neat to learn about another way BRK positively impacts people's lives (including my own). 

[ValueMaven]

The idea is/was that Marmon, Precision Castparts, Alleghany, and Oriental Trading could do a lot of these under the radar bolt on acquisitions away from the parent HQ.

[gfp]

Barron's ran a piece about GEICO falling behind on Telematics - nothing new that I saw, but here it is:

https://www.barrons.com/articles/berkshire-hathaway-warren-buffett-geico-51663013589

[DooDiligence]

6 minutes ago, gfp said:

Barron's ran a piece about GEICO falling behind on Telematics - nothing new that I saw, but here it is:

https://www.barrons.com/articles/berkshire-hathaway-warren-buffett-geico-51663013589

 

I can't read the article but from personal experience, I get $142 discount on my policy (enrolled a few years ago), by enabling "Drive Easy" which allows the GEICO app to always access data.

 

See screenshot below for virtue signaling. Zero hard braking or sharp cornering, but I keep my phone in my lap which counts as "in hand", and lowers my score. I'll start dropping it in the console and see if my score improves.

 

[gfp]

Who says there are no synergies between Berkshire subs - Greg Abel will probably be better at keeping his ears open to opportunities to collaborate -

 

https://wvmetronews.com/2022/09/13/berkshire-hathaway-company-to-produce-titanium-aerospace-products-in-jackson-county/

[fareastwarriors]

1 hour ago, DooDiligence said:

I can't read the article

here you go, a free link:

 

https://archive.ph/Bpxr8

[DooDiligence]

6 hours ago, fareastwarriors said:

here you go, a free link:

 

https://archive.ph/Bpxr8

 

Thanks