Buffett/Berkshire - general news

[fareastwarriors]

On 8/6/2023 at 6:03 AM, Spekulatius said:

I had no idea that Berkshire has a business makes boats. A friend of us bought a used boat from Forest River and took us out on a lake yesterday.

 

 

Looks like a beautiful day on the water. Work hard, play (relax) harder!

[DooDiligence]

On 8/6/2023 at 8:03 AM, Spekulatius said:

I had no idea that Berkshire has a business makes boats. A friend of us bought a used boat from Forest River and took us out on a lake yesterday.

 

 

Pontoons are the best!

[Ulti]

https://rationalwalk.com/a-very-strange-public-offering/

 

Interesting article on Brkb issuance in 1996

[yesman182]

22 hours ago, Ulti said:

https://rationalwalk.com/a-very-strange-public-offering/

 

Interesting article on Brkb issuance in 1996

I had never seen the quote where buffet said "The very best we hope for is – on average – to double Berkshire’s per-share intrinsic value every five years, and we may well fall far short of that goal." So in 1996 is was shooting for 15% annual growth. 

[Munger_Disciple]

2 hours ago, yesman182 said:

I had never seen the quote where buffet said "The very best we hope for is – on average – to double Berkshire’s per-share intrinsic value every five years, and we may well fall far short of that goal." So in 1996 is was shooting for 15% annual growth. 

 

Berkshire (stock price) CAGR since 1996 is roughly 11.1%. Pretty decent though short of the 15% Buffett aimed for in 1996. Most likely the result of very low interest rates from 2001 onwards. 

Edited August 14, 2023 by Munger_Disciple

[Luke]

 

Moves for this Quarter!

 

 

 

[longterminvestor]

7 hours ago, yesman182 said:

I had never seen the quote where buffet said "The very best we hope for is – on average – to double Berkshire’s per-share intrinsic value every five years, and we may well fall far short of that goal." So in 1996 is was shooting for 15% annual growth. 

Berkshire's Intrinsic Value is an internal yardstick and very much independent of the value of the business.  Mr. Buffett's hurdle for any business is 15% return day one and compound from there - believe that is an Alice Schroeder quote.  

[gfp]

For anyone that is curious about Berkshire's Q2 activity in Foreign stocks other than BYD, here is Gen Re's Q2 activity - no equity purchases.  Sales of Nestle, Munich Re, and Allianz.  (one page pdf attached)

gen re q2 page 159.pdf

[gfp]

This is an excerpt from National Indemnity's 2nd quarter NAIC filing, with the pages showing the investments acquired and disposed during the quarter.  You can figure what price they got for the early sales of ATVI ($79.57 average per share).  They also sold some Munich Re shares in NICO.

 

Also an interesting new derivative security with a 3 year term that seems to be effected if there is another earthquake in Chile.

nico q2 naic pgs 178 181.pdf

Edited August 16, 2023 by gfp

[BiggieCheese]

Thank you gfp! Have you found the Japanese trading houses held in other insurance subsidiaries or are you under the impression that the $2.8b of purchases during the quarter is the total for Berkshire during Q2?

[Cigarbutt]

1 hour ago, gfp said:

This is an excerpt from National Indemnity's 2nd quarter NAIC filing, with the pages showing the investments acquired and disposed during the quarter.  You can figure what price they got for the early sales of ATVI ($79.57 average per share).  They also sold some Munich Re shares in NICO.

 

Also an interesting new derivative security with a 3 year term that appears to pay off asymmetrically if there is another earthquake in Chile.

nico q2 naic pgs 178 181.pdf 377.29 kB · 6 downloads

This (new derivative) seems to be related to a World Bank issue (of cat bonds and catastrophe swaps) to help Chile deal with its own issues. The cat swap seems to pay a 4.75% per year risk margin in exchange for payout risk to Chile (through the Bank).

 

Case-Study-Chile-2023-CatBond.pdf (worldbank.org)

-----

Personal note. i'm in the middle of renewing various personal insurance contracts including home insurance. During quite a lengthy conversation, i included most things in the home contract tentative agreement but somehow declined the coverage related to direct damage from an earthquake. Now seeing this picture, i'm no longer sure. Also, it reminds me that it can be a pain to hold (re)insurers when the hurricane season is about to start. Think long term, they say.

[gfp]

1 hour ago, BiggieCheese said:

Thank you gfp! Have you found the Japanese trading houses held in other insurance subsidiaries or are you under the impression that the $2.8b of purchases during the quarter is the total for Berkshire during Q2?

 

I think that is all of the Japanese activity there in NICO but I haven't pulled the Columbia Insurance subsidiary filing for Q2 yet so I can't say for sure.  I'll let you know if I see them anywhere else.  The filings are at https://insdata.naic.org but they cost around $4 USD each so I post them to save the other nerds the $. 

[hasilp89]

these are great @gfp thank you for sharing.

[gfp]

I took a look at the Columbia Insurance filing for q2 and the only new information there was that they bought and completely sold Pulte Group during the quarter as part of the homebuilder basket someone is doing.  

 

This filing makes it look like they bought some Apple stock in the quarter but they really didn't.  This is just a transfer from Brilliant National Services, one of the bankrupt asbestos liability shells that BRK put out the press release about earlier this year.

columbia ins q2 pgs 177 178.pdf

[mjm]

do know strongest earthquake ever recorded was in Chile

[BiggieCheese]

Thanks again gfp!!!

[jbwent63]

I apologize if this has already been covered, I didn't scroll back...

I was thinking about the Pilot acquisition in re-reading the Q2 10-Q. BRK paid $8.2 B for about 41%, valuing the whole enterprise at about $20B, yet the earnings were only $186M for three months (pre-tax) and $322M for 5 months. Assuming no seasonality, pre-tax of $800M yields a pre-tax multiple of about 25X. I own ATD and it doesn't trade at that multiple. What am I missing? Thanks.

[gfp]

3 minutes ago, jbwent63 said:

I apologize if this has already been covered, I didn't scroll back...

I was thinking about the Pilot acquisition in re-reading the Q2 10-Q. BRK paid $8.2 B for about 41%, valuing the whole enterprise at about $20B, yet the earnings were only $186M for three months (pre-tax) and $322M for 5 months. Assuming no seasonality, pre-tax of $800M yields a pre-tax multiple of about 25X. I own ATD and it doesn't trade at that multiple. What am I missing? Thanks.

 

Off the top of my head, the purchase price was based on multiples of prior year's earnings, which were much higher.  Berkshire shut down some lines of business after acquiring the company.  There was also a change in upper management.  Another very big factor is purchase/acquisition accounting related amortization that kicks in in a major way as soon as Berkshire bought the company and wrote up the value to the implied purchase price.

 

Here's a blurb on the reduced reported profits -

"

Pilot’s revenues and earnings are highly dependent on fuel volumes, prices and margins. Revenues for the second quarter of 2023

and the five months ending June 30, 2023 were $14.8 billion and $24.3 billion, respectively.

Pilot’s pre-tax earnings for the second quarter of 2023 and the five months ending June 30, 2023 were $186 million and $322 million, respectively. Operating and other expenses include depreciation and amortization expense of $243 million in the second quarter of 2023 and $411 million in the five months ending June 30, 2023, a significant portion of which derives from property, plant and equipment and finite-lived intangible asset fair value remeasurements in connection with our application of the acquisition accounting method in 2023."

[Munger_Disciple]

1 hour ago, jbwent63 said:

I apologize if this has already been covered, I didn't scroll back...

I was thinking about the Pilot acquisition in re-reading the Q2 10-Q. BRK paid $8.2 B for about 41%, valuing the whole enterprise at about $20B, yet the earnings were only $186M for three months (pre-tax) and $322M for 5 months. Assuming no seasonality, pre-tax of $800M yields a pre-tax multiple of about 25X. I own ATD and it doesn't trade at that multiple. What am I missing? Thanks.

 

Yes, Berkshire overpaid for the 41% of Pilot they acquired in 2023. As @gfp pointed out, it was based on a formula (of prior years earnings which were artificially high due to COVID effects) so Berkshire's hands were tied. IIRC Buffett hinted at this during the 2023 annual meeting by saying they should have bought the whole company when they purchased their initial stake (but couldn't). 

 

Edited August 26, 2023 by Munger_Disciple

[UK]

https://www.wsj.com/articles/north-dakota-bnsf-railway-friends-of-the-rail-bridge-lawsuit-94d45e70?mod=hp_opin_pos_2

[Munger_Disciple]

Bloomberg article on Berkshire's exposure to FL storms: 

 

https://www.bloomberg.com/news/articles/2023-08-29/buffett-s-bet-on-mild-florida-storm-season-faces-test-in-idalia?srnd=premium#xj4y7vzkg

[longlake95]

6 minutes ago, Munger_Disciple said:

Bloomberg article on Berkshire's exposure to FL storms: 

 

https://www.bloomberg.com/news/articles/2023-08-29/buffett-s-bet-on-mild-florida-storm-season-faces-test-in-idalia?srnd=premium#xj4y7vzkg

seems to be behind a paywall...

[Munger_Disciple]

Berkshire Hathaway Inc. bet big earlier this year that Florida’s reinsurance market would deliver huge premiums with minimal losses. Hurricane Idalia is about to offer a test of that calculus, with months of potential storms left this season.

Warren Buffett’s firm ramped up its reinsurance exposure to the state, looking to take advantage of rising prices. The move has left the firm exposed to as much as $15 billion of losses in the event of a major storm, Berkshire’s head of insurance said in May, while it could lead to several billions in gains.

“We have a very unbalanced portfolio,” Ajit Jain, vice chairman of insurance operations, said at the conglomerate’s May investor event. “What that means is, if there is a big hurricane in Florida, we will have a very substantial loss.”

A representative for the company didn’t respond to an emailed request for comment on Tuesday.

The riskiness of the approach is coming into focus now as Hurricane Idalia bears down on the state’s Gulf Coast, where it’s expected to make landfall Wednesday. Water temperatures are warm enough to set the storm up to intensify further before then, however the sense is that it still won’t deliver major losses for insurers, and thus won’t be a big blow for Berkshire’s reinsurance business.

The Atlantic hurricane season runs through November. Depending on its path, Idalia is forecast to cause a fraction of the cost Hurricane Ian inflicted when it struck the state in September as a Category 4 storm, killing at least 150 people and causing more than $112 billion in damage.

“I am skeptical that this will impact them much,” said Matthew Palazola, an analyst at Bloomberg Intelligence. “This event is not what they were describing when they were talking about a worst case.”

Reinsurance capital has been hard to come by in Florida due to the severity of losses from insurance fraud in the state. When policies came up for renewal on April 1, “prices zoomed up again” and created a window for Berkshire to deploy capital, Jain said at the event in May.

[backtothebeach]

54 minutes ago, longlake95 said:

seems to be behind a paywall...

You can see almost any paywalled content via this page:

https://archive.ph/

 

Just paste the link in the blue box. When you paste, skip the part of the URL behind the ? (if any), which is just session info from the OP.

 

https://www.bloomberg.com/news/articles/2023-08-29/buffett-s-bet-on-mild-florida-storm-season-faces-test-in-idalia
 

Edited August 29, 2023 by backtothebeach

[longlake95]

Thanks beach, I tried that, didn’t seem to work. I’ll keep trying. Thanks