Buffett/Berkshire - general news

[gfp]

Yowza, that will be a healthy book value print for Berkshire with a pre-tax $26.6 Billion gain on Apple in the 3 month period.

 

$58.6 Billion pre-tax year-to-date.

[Dynamic]

Yes, I think Berkshire's equity portfolio outperformed the index by about 2% this quarter. A bit less if you were to include KHC and OXY common stocks. I wouldn't be at all surprised to find Berkshire's portfolio had a better dividend yield too.

 

It must be near certain to post a record Book Value per share when the 10Q is released, too 

[Spooky]

Anyone have any intel on share buyback prices lately?

[valueinvesting101]

Looks like Berkshire total asset base will cross 1 trillion this quarter. Market cap should follow it in 2025. 

[gfp]

16 hours ago, Spooky said:

Anyone have any intel on share buyback prices lately?

 

Not sure what you mean by share buyback prices.  If you are asking about Berkshire repurchase activity, it looks from Buffett's 13D following the charitable contributions, as of 6/21, there were approximately 6.81 million fewer B-share equivalents outstanding vs. 3/31.  The calculation is imprecise due to rounding.  That pencils out to an estimated $2 Billion - $2.3 Billion of repurchase activity in Q2 through 6/21.  

[Spooky]

Thanks gfp. That gives a possible range of roughly $307 - $341 per B-share for the recent buybacks.

[gfp]

4 minutes ago, Spooky said:

Thanks gfp. That gives a possible range of roughly $307 - $341 per B-share for the recent buybacks.

 

Yeah but those dollar amounts were a total estimate by me.  The price range for the actual quarter (310-341 -ish) are the possible prices.  The average price is whatever it turns out to be.  We hope he bought all 6.8m B-share equivalents in the low 320's but that is unlikely..

[Spooky]

I don't think my limit order at $315 is getting filled

[Malmqky]

15 hours ago, Spooky said:

I don't think my limit order at $315 is getting filled

I still have a $300 limit order sitting there partially filled…maybe in a few months

Edited July 3, 2023 by Malmqky

[gfp]

You know boilermaker mike would be getting paid for those standing limit orders!  Don't give 'em away for free

[Matthew Lembo]

interesting, how does one get paid for a standing limit order? By selling puts?

[gfp]

2 minutes ago, Maxwave28 said:

interesting, how does one get paid for a standing limit order? By selling puts?

 

Yes, by selling puts over and over (don't go out too far on time to expiry, just enough to collect an acceptable premium).

[Matthew Lembo]

Thank you. 
what do you think is an acceptable premium?

 

Sorry for the basic questions, haven’t ever considered this strategy before. 

[gfp]

I'll have to defer to @boilermaker75 on his strategies for selecting the specific contracts to sell.  I don't usually sell puts but I also don't leave unexecuted out of the money limit orders in place.  Boilermaker has made a profitable consistent operation out of harvesting these premiums on stocks he would be happy to own (and immediately start selling calls against if he wanted to be lighter on them).

 

By acceptable premium, I mean don't do it for 10 cents or something and pay a commission on top of that.   "acceptable premium" will vary with the amount of time, price and volatility risk you are taking on.  I'm not a big fan of selling long dated puts on individual stocks unless there is a specific strategy that involves it.  I would stick to weeklies out to 2 months max.

[Dynamic]

Yes, I've used boilermaker's approach a number of times to enter long term positions and also to juice returns on one merger arbitrage so far. In that case I was assigned then sold short duration calls to get further premium and potentially another bite.

 

In most cases something over 18% annualized, or more typically well over 20% is where I start to get interested, so long as I'm a willing buyer at the effective entry price (strike minus premium plus commission). I usually go for one to four weeks duration, must often 1 to 2. Boilermaker seems to really like weeks with fewer trading days than normal.

 

Occasionally I've rolled my puts to different strikes or expiration dates or both but mostly I let them run to expiry.

[Matthew Lembo]

20% makes sense to me. Thanks for the input. 
 

I’ve always struggled with the fact that selling outs exposes one to black swan events for little premium. 
 

Is that a fair analysis? 

[sholland]

55 minutes ago, Maxwave28 said:

20% makes sense to me. Thanks for the input. 
 

I’ve always struggled with the fact that selling outs exposes one to black swan events for little premium. 
 

Is that a fair analysis? 

conventional wisdom says only sell puts on stocks you want to buy anyways. When Buffett owned part of BNSF he sold $70 puts. I am obliged to pass on this tale of caution from Charlie Munger:

I knew a guy who had $5 million and owned his house free and clear. But he wanted to make a bit more money to support his spending, so at the peak of the internet bubble he was selling puts on internet stocks. He lost all of his money and his house and now works in a restaurant.

[Munger_Disciple]

1 hour ago, Maxwave28 said:

20% makes sense to me. Thanks for the input. 
 

I’ve always struggled with the fact that selling outs exposes one to black swan events for little premium. 
 

Is that a fair analysis? 

 

Its like picking up pennies in front of a steamroller. As long you make it, you keep the pennies. Plus it adds hidden leverage & a potential liability that comes due at usually the most inconvenient time. You can win a few pennies many times which tend to get wiped out with one big loss. 

 

IIRC many smart people blew up (example: Victor Niderhoffer blew up twice) with variations of this put writing strategy.

Edited July 5, 2023 by Munger_Disciple

[Blugolds]

Also always the risk that you sell puts at a price you'd like to own the stock, and then the stock takes off on you, you made the premium on the puts but lost on the run up. Thats happened to me a couple times. There are worse problem to have, but I've missed out on quite a bit over the years because I was being "greedy" waiting for just a little better entry price that never came. 

 

Always think of that quote by Buffett that you should spend the majority of your energy making the right pick of a partner to marry and not worrying too much if you overpaid for the ring. Price you pay matters..but focus more on what you are buying because if its something that you want to hold, .50-$1 or a couple bucks isnt gonna matter 5-10yrs from now. 

 

That being said, when BRK starts to get priced attractively I do sell puts. Looking back through the years some I have been assigned and it went great, and some were not assigned and in hindsight, I would have been much better off if they would have! 

 

Bought quite a bit of BRK back in 2020 for instance, I would call it a significant amount, all >$200 and >$300k. Also sold quite a few puts..but should have just been buying > $200. Rather than selling puts in $5-$10 increments dreaming of getting BRK for $150 or less. 

 

Like @gfp said, I keep it tight, usually weeklies → 1 month or so depending on the situation and I wouldnt say I do it regularly. 

[bizaro86]

I've done it a few times on BRK (once in spring 2020 which is probably my biggest mistake by $ value ever). I was fine to buy BRK during covid lows at the prices assigned, but there were so many better bargains I sold all the BRK, realized large losses, and reinvested elsewhere. That worked out better than keeping the BRK but not nearly as good as not writing the puts to begin with.

 

That said, I still do so occasionally, although more often with stocks that have more "controversy" around them, as the premiums/implied volatility is higher. JOE is one I've made money selling puts in the last year, for example, and I would have been fine getting assigned at the $40 strike.

[boilermaker75]

@gfp Exactly, only on companies I would not mind owning, or already own. If I don’t want to own the stock I am put to it is because it got me to a larger position than I wanted or put me on margin (always slightly). I then write covered calls till assigned.

 

@Dynamic Exactly, what I look for is about a 20% return and as short a duration as possible. Typically, 1 day to 4 weeks to expiration.

 

@Munger_Disciple. I am not picking up pennies in front of a steamroller. 99% of my put writing has been on a small universe of stocks, mainly BRK, WFC, and BAC. There are exceptions, risk arbitrage opportunities as Dynamic mentioned. During BRK’s purchase of BN I was writing a lot of puts on BN. During Sam Zell’s purchase of the Tribune CO I was writing a lot of puts on the Tribune. Recently I was writing a lot of puts on MSGE. 

 

Edit:I think writing puts is the best way to do risk arbitrage because there is no timing uncertainty, you pick the expiration date..

 

@Blugolds11 That is the downside, not getting a position and the stock taking off. Surprisingly this has only happened to me once. Many years ago when MCD was trading in the $90-100 range I was trying to acquire some for LTBH. I made some put premiums but never got my position in MCD

Edited July 5, 2023 by boilermaker75

[Munger_Disciple]

5 hours ago, boilermaker75 said:

@gfp Exactly, only on companies I would not mind owning, or already own. If I don’t want to own the stock I am put to it is because it got me to a larger position than I wanted or put me on margin (always slightly). I then write covered calls till assigned.

 

@Dynamic Exactly, what I look for is about a 20% return and as short a duration as possible. Typically, 1 day to 4 weeks to expiration.

 

@Munger_Disciple. I am not picking up pennies in front of a steamroller. 99% of my put writing has been on a small universe of stocks, mainly BRK, WFC, and BAC. There are exceptions, risk arbitrage opportunities as Dynamic mentioned. During BRK’s purchase of BN I was writing a lot of puts on BN. During Sam Zell’s purchase of the Tribune CO I was writing a lot of puts on the Tribune. Recently I was writing a lot of puts on MSGE. 

 

Edit:I think writing puts is the best way to do risk arbitrage because there is no timing uncertainty, you pick the expiration date..

 

@Blugolds11 That is the downside, not getting a position and the stock taking off. Surprisingly this has only happened to me once. Many years ago when MCD was trading in the $90-100 range I was trying to acquire some for LTBH. I made some put premiums but never got my position in MCD

 

@boilermaker75 If I understand your strategy correctly, you are writing short dated, cash secured puts on a few stocks like BAC, WFC & BRK. So you are effectively trying to earn a decent short term profit on idle cash in excess of ST T-Bills. If you get these stocks put to you, what do you do?  Hold them (if so how long) or sell them immediately and take a loss? 

[Ulti]

brief interview with Chris Davis

 

https://webreprints.djreprints.com/2396947.html

 

[Spooky]

Thanks for sharing, I hope the board and new guard will be able to protect what Warren and Charlie have built.

[UK]

https://www.barrons.com/articles/berkshire-is-ready-for-hurricane-season-the-stakes-are-high-for-insurers-c6c1e06b