Buffett/Berkshire - general news

[Spekulatius]

On 8/27/2022 at 10:59 AM, ValueMaven said:

@Xerxes Thank you.  Yes - most here are aware that this might have happened.  BYD has been a massive homerun for Berkshire.  Charlie loves BYD, but you can tell Warren is less so, and historically has defered to Charlie on the position.  I'd love for them to realize the $8B gain and blow it back into capex projects at BHE.  

Buffett is way less enthusiastic about China in general than Munger.

[wabuffo]

Charlie has also been selling part of the BYD holdings that DJCO owns for the past year or so.

 

Bill

Edited August 30, 2022 by wabuffo

[gfp]

Yep, Berkshire Hathaway Energy has started selling some BYD.  1.33 million HK shares so far.  Not terribly surprising and possibly a Greg Abel decision.  Maybe some of the capital could be used to repurchase BHE minority interest.

 

Happy Birthday Warren!  Seems like there is a hurricane and no electricity every year, so it's nice to have power for a change on 8/30 lol

 

 

Here is the filing:

https://di.hkex.com.hk/di/NSForm2.aspx?fn=CS20220829E00231&sa2=ns&sid=2508&sd=30/08/2021&ed=30/08/2022&sa1=cl&scsd=30/08/2021&sced=30/08/2022&sc=01211&src=Main&lang=EN&tk=ds

 

So it looks like they have sold about 6.3 million shares in total.  225m shares held for years, now showing 218.719 million held as a of a few days ago.  Could be lower today.

 

Interestingly, it looks like Berkshire Hathaway Energy has sold at least $220 million USD worth of BYD as of this filing date.  A bit more if the realized prices were higher.

 

 

By the way, BHE's BYD shares are held at a Nevada LLC called Western Investment Group.  Nevada has no state corporate income tax, which is why Apple holds substantially all of their investment dollars in a Nevada subsidiary.

Edited August 31, 2022 by gfp

[ValueMaven]

Really interesting.  Thanks for sharing that!

[gfp]

BHE is down to 207.14 million BYD shares (HK:1211).  For whatever reason the number of shares sold being reported by the press are consistently understated because of the way the filing form rules work for the HK exchange.

 

https://di.hkex.com.hk/di/NSAllFormList.aspx?sa2=an&sid=2508&corpn=BYD+Co.+Ltd.++-+H+Shares&sd=02/09/2021&ed=02/09/2022&cid=2&sa1=cl&scsd=02%2f09%2f2021&sced=02%2f09%2f2022&sc=1211&src=MAIN&lang=EN&g_lang=en&

 

 

Berkshire Hathaway Energy has realized at least $615 million USD in proceeds from selling BYD shares as of 9/1.  They have sold 17.86 million HK:1211 shares.

Edited September 2, 2022 by gfp

[ValueMaven]

Thank God!!  Let's hope they start getting more aggressive.  I think its a combo of Warren/Munger/Abel saying enough is a enough...think about it - the BYD gain alone is equal to 2yrs of BHE CAPEX ... it's been a massive homerun

Edited September 2, 2022 by ValueMaven

[jbwent63]

1 hour ago, gfp said:

BHE is down to 207.14 million BYD shares (HK:1211).  For whatever reason the number of shares sold being reported by the press are consistently understated because of the way the filing form rules work for the HK exchange.

 

https://di.hkex.com.hk/di/NSAllFormList.aspx?sa2=an&sid=2508&corpn=BYD+Co.+Ltd.++-+H+Shares&sd=02/09/2021&ed=02/09/2022&cid=2&sa1=cl&scsd=02%2f09%2f2021&sced=02%2f09%2f2022&sc=1211&src=MAIN&lang=EN&g_lang=en&

 

 

Berkshire Hathaway Energy has realized at least $615 million USD in proceeds from selling BYD shares as of 9/1.  They have sold 17.86 million HK:1211 shares.

There are so many things the press either gets wrong or is too lazy to figure out. Just another example of spending a little time, understanding how the rules work, and reporting proper information. It's unfortunate that the sale had to be telegraphed, and the value dropped so much as a result, but the gain is still huge and a big win for BHE.

[yesman182]

5 hours ago, jbwent63 said:

It's unfortunate that the sale had to be telegraphed, and the value dropped so much as a result, but the gain is still huge and a big win for BHE.

Yeah, did they not have the option to enter their shares into the trading block years ago? I understand that years ago they didn’t want to sell. Are the rules set up forcing someone to telegraph? 

[aws]

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.

[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