Buffett/Berkshire - general news

[Spekulatius]

On 9/27/2024 at 11:47 PM, UK said:

https://stansberryresearch.com/articles/the-short-case-for-berkshire-hathaway

 

 

The article or VIC thesis makes some good points. You can also add Lubrizol and PCP to the list of subsidies that seem to have fallen behind. I think the recently higher multiple in combination with Berkshire subs underperforming peers is a recipe for the stock underperform the index going forward.

Edited September 29 by Spekulatius

[John Hjorth]

On 9/28/2024 at 5:47 AM, UK said:

https://stansberryresearch.com/articles/the-short-case-for-berkshire-hathaway

 

I personally think the way to assess this overall situation [lack of performance at certain subsidiaries for the time being], is - at least to some extent - overestimating the role of Mr. Buffett here and understimating the roles of Mr. Abel and Mr. Jain.

 

Please note the development in their bonuses :

 

 

Those gents are on the payroll for USD 20 M each with operational responsibilities.

 

Personally I feel quite confident, the man at the top is asking persistently 'what can we do about it, and what are we doing about it?'. If investments are needed to fix issues they will be done, this has always been first priority capital allocation since Berkshire became 'big'.

 

It will certainly be interesting to follow and study going forward.

Edited September 29 by John Hjorth

[DooDiligence]

5 hours ago, John Hjorth said:

 

Personally I feel quite confident, the man at the top is asking persistently 'what can we do about it, and what are we doing about it?'. If investments are needed to fix issues they will be done, this has always been first priority capital allocation since Berkshire became 'big'.

 

It will certainly be interesting to follow and study going forward.

 

Warren be getting egregious and tapping the till. Old boy needs to pay for his own Hoveround. Time to hit the exits.

Edited September 29 by DooDiligence

[Hektor]

1 hour ago, TB said:

We recently switched from Geico to Progressive after being a loyal customers with no insurance related issues

I feel it will be interesting to see how the Progressive rates will compare to Geico rates after a couple of renewals.

[DooDiligence]

44 minutes ago, Hektor said:

I feel it will be interesting to see how the Progressive rates will compare to Geico rates after a couple of renewals.

 

I switched from GEICO to Progressive in Jan 2023. It pains me to say that the rates are still great.

[Green King]

Geico is being run like a declining business. Maybe the next few decades are not so rosy for auto insurers. It is better to take out the capital from the business.

The expanse ratio is 8.7% for me it's unheard of in this industry. 

The problem was they hadn't invested enough to get better pricing. 

Edited September 30 by Green King

[KPO]

Interesting to see WEB use stock to buyout the Walter Scott family BHE interest. I like the move at these levels. 

[Spooky]

9 minutes ago, KPO said:

Interesting to see WEB use stock to buyout the Walter Scott family BHE interest. I like the move at these levels. 

 

Agree, this looks like a no brainer. Happy Berk now owns 100% of the energy division.

[Hektor]

24 minutes ago, KPO said:

Interesting to see WEB use stock to buyout the Walter Scott family BHE interest. I like the move at these levels.

Quote

 

According to a Tuesday regulatory filing, Berkshire Hathaway Energy will acquire 4.42 million shares of its voting common stock and a $100 million bond maturing in 2057, in exchange for the $2.37 billion in cash and a $600 million, one-year note.

 

Scott's family will also receive about 1.6 million Berkshire Class B shares, worth about $737 million as of Monday's close.

 

 

[adesigar]

49 minutes ago, KPO said:

Interesting to see WEB use stock to buyout the Walter Scott family BHE interest. I like the move at these levels. 

 

Didnt BRK pay a much higher price to Greg Abel a couple of years ago? Has the value of BHE dropped in the last 2 years?

Edited October 1 by adesigar

[KPO]

16 minutes ago, adesigar said:

 

Didnt BRK pay a much higher price to Greg Abel a couple of years ago? Has the value of BHE dropped in the last 2 years?

Yes to both. I suspect part of it is the wildfire lawsuits impacting the valuation. Also, the share issuance is beneficial to the Scott family from a tax perspective, so they may have taken a bit less for the equity portion of the transaction. 

[villainx]

7 minutes ago, KPO said:

Also, the share issuance is beneficial to the Scott family from a tax perspective, so they may have taken a bit less for the equity portion of the transaction. 

 

How beneficial?  Like zero taxes beneficial?

[KPO]

2 minutes ago, villainx said:

 

How beneficial?  Like zero taxes beneficial?

Deferred taxes on any capital gain vs. an all cash buyout. If/when they sell the Berkshire shares they will likely have gains to pay taxes on, although they may get some benefit from a basis step up.

[villainx]

That's interesting.  I assume they got step up around time Abel sold his 1%? So that would have set valuation a little higher than today's sale price.  So it would have been tax neutral, no?  (That's if I'm following the timeline correctly from above posts) But I guess I don't know the internal workings of the Scott trust.

Edited October 1 by villainx

[KPO]

19 minutes ago, villainx said:

That's interesting.  I assume they got step up around time Abel sold his 1%? So that would have set valuation a little higher than today's sale price.  So it would have been tax neutral, no?  (That's if I'm following the timeline correctly from above posts) But I guess I don't know the internal workings of the Scott trust.

Possibly. I’d have to look at the timeline closer as his passing likely catalyzed a valuation reset, and Abel’s transaction may have reset it again.  I don’t have access to the trust details, but if their current valuation was based on the Abel sale mark, I’m curious as to why they took Berkshire equity, particularly near an all time high. 

[Munger_Disciple]

Wow! After reading the filing, BRK paid $650 per BHE share, a very big mark-down from $1,174 per share they paid for Abel's shares in 2022. That's a 45% mark-down!!

 

This may very well mean that BHE may be pulling back on utility investments significantly. 

Edited October 1 by Munger_Disciple

[KPO]

9 minutes ago, Munger_Disciple said:

Wow! After reading the filing, BRK paid $650 per BHE share, a very big mark-down from $1,174 per share they paid for Abel's shares in 2022. That's a 45% mark-down!!

 

This may very well mean that BHE may be pulling back on utility investments significantly. 

Yeah, Greg’s timing has me a little less concerned about his investing chops.
 

Whatever the case, I hope reinvesting in BHE drops to maintenance capex levels until the industry and the government arrive at a sustainable solution for wildfire liabilities. If that doesn’t happen I think Buffett and Abel need to reconsider this business altogether. 

[Munger_Disciple]

8 minutes ago, KPO said:

Yeah, Greg’s timing has me a little less concerned about his investing chops.
 

Whatever the case, I hope reinvesting in BHE drops to maintenance capex levels until the industry and the government arrive at a sustainable solution for wildfire liabilities. If that doesn’t happen I think Buffett and Abel need to reconsider this business altogether. 

 

For a regulated utility, pretty much all capital expenditures including any maintenance expenses have to be approved by the regulator since they affect the rate base. 

[jbwent63]

The 92% figure is from the BRK 10-K on page K-7. Does the filing state that BRK now owns 100% of BHE? Is it possible that there is another minority shareholder that is still holding a small position?

[Munger_Disciple]

26 minutes ago, jbwent63 said:

The 92% figure is from the BRK 10-K on page K-7. Does the filing state that BRK now owns 100% of BHE? Is it possible that there is another minority shareholder that is still holding a small position?

 

Berkshire now owns 100% of BHE; there are no other minority shareholders. 

[John Hjorth]

10 minutes ago, Munger_Disciple said:

Berkshire now owns 100% of BHE; there are no other minority shareholders. 

 

@Munger_Disciple,

 

Is this about BHE minority interests, or about Bershire Hathaway minority interests in total?

Edited October 1 by John Hjorth

[Munger_Disciple]

12 minutes ago, John Hjorth said:

 

@Munger_Disciple,

 

Is this about BHE minority interests, or about Bershire Hathaway minority interests in total?

 

BHE

[John Hjorth]

8 minutes ago, Munger_Disciple said:

 

BHE

 

Thanks for the elaboration, @Munger_Disciple,

 

In the 2024Q2 Berkshire 10-Q, we have Berkshire minority interests as per June 30^th 2024 of USD 6,274 M. At that date, there must be more than BHE.

 

Off my head I can't come with what the rest by now must be related to.

[Munger_Disciple]

29 minutes ago, John Hjorth said:

 

Thanks for the elaboration, @Munger_Disciple,

 

In the 2024Q2 Berkshire 10-Q, we have Berkshire minority interests as per June 30^th 2024 of USD 6,274 M. At that date, there must be more than BHE.

 

Off my head I can't come with what the rest by now must be related to.

 

Many BRK subs have minority interests. For example, the Blumkin family members who still run NFM (Nebraska Furniture Mart) are minority owners in NFM. 

Edited October 1 by Munger_Disciple

[KPO]

2 hours ago, Munger_Disciple said:

Wow! After reading the filing, BRK paid $650 per BHE share, a very big mark-down from $1,174 per share they paid for Abel's shares in 2022. That's a 45% mark-down!!

 

This may very well mean that BHE may be pulling back on utility investments significantly. 

Yeah, I’m pretty familiar with regulated utilities. What I’m getting at is BHE should be run for cash or divested if they have frequent unpleasant surprises from wildfires and/or other liabilities ambulance chasing attorneys can make stick.