Buffett/Berkshire - general news

[Spooky]

16 hours ago, DooDiligence said:

I'd be interested in how others manage to think more moves ahead

 

I always try and keep asking "and then what ... and then what..." or "what are the consequences of the consequences?"

 

 

[DooDiligence]

Yep. It's a matter of discipline and behavior. You know what to do, but do you do it?

[Charlie]

Interesting story:

 

My biggest mistake was that I always sold stocks way too early. In fact, I got a call from Warren Buffett in 1989. My daughter picks up the phone and says, "It's Mr. Buffett on the line." And I pick up the phone and I hear, "This is Warren Buffett from Omaha, Nebraska." You know, he talks so fast. "And I love your book, One Up On Wall Street, and I want to use a line from it in my year-end report. I have to have it. Can I please use it? I said, "Sure. What's the line?"

He says, " Selling your winners and holding your losers is like cutting the flowers and watering the weeds. "

 

That one line he picked up in my whole book has been my greatest mistake.

 

Peter Lynch
Forbes India, Collectors Edition - November 2017

[DooDiligence]

Same mistake here. That coupled with the weed vs flower analogy is pretty much why I'm so concentrated now. I see new ideas and look at them with a jaundiced eye. I can feel the desire to buy and see that it rises for the wrong reasons.

[villainx]

On 9/23/2025 at 4:42 PM, DooDiligence said:

I can feel the desire to buy and see that it rises for the wrong reasons.

 

And here I go creating a new 1% position in something. 

[Intelligent_Investor]

My biggest mistakes by far have been not buying enough of a stock when its dirt cheap. If I made a lot more of my 5% positions 10% positions when I had the chance I'd be so much richer right now

[KPO]

An equity swap for 90% of the common position in OXY would be a tax efficient way to spin this, but unfortunately it’s looking more like a garage sale to reduce debt like other poorly run companies (e.g. LUMN). 
 

https://www.ft.com/content/800fc153-1f61-4570-a5e0-dc784bf99b63

[Munger_Disciple]

Sale of 15,000 B shares by (Ajit) Jain Foundation:

 

https://www.sec.gov/Archives/edgar/data/1067983/000172845125000008/xslF345X05/primary_doc.xml

[gfp]

https://www.wsj.com/business/deals/berkshire-hathaway-occidental-petroleum-deal-80a78f2e?gaa_at=eafs&gaa_n=ASWzDAhtvvVuFF3Bgzj4DK7djfvl48_5T5MRYnkv5Pl0sRxOu5w_AucgofF4MZbjYmQ%3D&gaa_ts=68dc3864&gaa_sig=lRVkBlaG7BWj4MCQ-gUr42d2xueGNo1v2Mx0r31NYsMpURTR4_izReYBsy5pTNIAkUgb2FMr_fAxIX2ndMR3Ew%3D%3D

[Pellom]

I imagine they will exit Oxy altogether once this is finalized? 

[gfp]

Just now, Pellom said:

I imagine they will exit Oxy altogether once this is finalized? 

 

How on earth would they exit OXY altogether?  By selling stock in the open market?  The only way out of OXY for BRK is to have the company sell itself to Chevron or someone like that.

 

This sounds like a cash deal that would leave BRK's ownership level in OXY unchanged.

[Pellom]

11 minutes ago, gfp said:

 

How on earth would they exit OXY altogether?  By selling stock in the open market?  The only way out of OXY for BRK is to have the company sell itself to Chevron or someone like that.

 

This sounds like a cash deal that would leave BRK's ownership level in OXY unchanged.

 

You're right, let me be more clear. The assumption has been Berkshire has been unhappy about this investment -- specifically the CEO's decisions. By buying a piece of the business they clearly like, I wonder if this begins a gradual exiting of the ownership stake of Oxy. 

[Munger_Disciple]

Perhaps Buffett can exchange $10B of equity for Oxychem if he wants to reduce Berkshire's exposure OXY (ex-Oxychem). But that doesn't work for OXY because Vicki needs to lower the debt.

 

So it will be a cash deal I think. 

Edited September 30, 2025 by Munger_Disciple

[jbwent63]

Does anyone think this could be a swap, the outstanding preferreds held by BH for the chemicals business? Might be very tax efficient.... Like the Gillette/P&G deal or the GHC deal?

[gfp]

1 minute ago, jbwent63 said:

Does anyone think this could be a swap, the outstanding preferreds held by BH for the chemicals business? Might be very tax efficient.... Like the Gillette/P&G deal or the GHC deal?

 

It could be, but if I'm Buffett and Abel I want to pay with cash and keep my preferred shares (and the associated warrant duration) as long as possible.

[yesman182]

3-4 years ago this was called the crown jewel of oxy. I am happy for BRK to get it. Sure the sales are lumpy, but its hard to imagine a world with out PVC and other products they produce. Seems like this will be producing chemicals after oxy's wells run dry. 

[Munger_Disciple]

58 minutes ago, gfp said:

 

It could be, but if I'm Buffett and Abel I want to pay with cash and keep my preferred shares (and the associated warrant duration) as long as possible.

 

I agree. Buffett & Abel want to keep earning that 8% dividend on preferreds as long as possible. By paying for Oxychem in cash, they make the preferred investment bullet proof because it reduces the total debt at OXY.

[ValueMaven]

This is a great asset.  I really hope BRK acquires it! A lot of us speculated about this in the past.  After the failed deal with ONCOR a few years back ... if this one also falls through, or BRK is outbid by some PE investor - you really have to question Berkshire's approach.  I'd be OK if BRK swapped the 8% preferred for this.  It's that attractive of an asset.  Also an asset-swap might also avoid a shareholder vote for OXY.  They could really sell it to their investors regarding interest expense alone.  

Edited September 30, 2025 by ValueMaven

[KPO]

3 hours ago, Munger_Disciple said:

Perhaps Buffett can exchange $10B of equity for Oxychem if he wants to reduce Berkshire's exposure OXY (ex-Oxychem). But that doesn't work for OXY because Vicki needs to lower the debt.

 

So it will be a cash deal I think. 

I’m betting it’s an exchange of some sort as I’ve mentioned a few times in recent years. If it plays out this way, I love it. Tax efficient transaction at a good valuation for an asset with lumpy returns. If they involve some or all of the preferred this is a win win as it allows OXY to start up the buyback engine, which will further bump what remains of Berkshire’s OXY equity. Seems brilliant.

 

 

[jbwent63]

14 hours ago, Munger_Disciple said:

 

I agree. Buffett & Abel want to keep earning that 8% dividend on preferreds as long as possible. By paying for Oxychem in cash, they make the preferred investment bullet proof because it reduces the total debt at OXY.

I should have elaborated. By agreeing to exchange the preferreds for Oxychem, I am assuming that the valuation of the preferreds would be maximized (and the potential for appreciation in the commons and the warrants) and the valuation of the chemicals business minimized such that both parties are feeling a win after future dividends and current taxes are taken into account. BRK can replace some of the current preferred dividend with a dividend from the newly acquired entity. Let's see what happens. My bet is it's a non-cash transaction.

[gfp]

BNSF on the NS-UNP deal

 

https://www.bnsf.com/bnsf-resources/news-media/customer-notifications/pdf/2025-09-29 BNSF Merger Position.pdf

[xboojum]

The advantage of the Duracell swap (or the Florida television station with Graham Holdings) was that he didn't have to pay capital gains taxes on the stock he exchanged, whereas he's underwater with the OXY position as a whole and flush with cash. The 8% coupon from the preferred is better than he can get clipping T-bills. Further, from OXY's point of view, the preferred equity, not debt, and they're trying to shed debt. I can't see why a non-cash transaction makes sense for either side.

[gfp]

8 minutes ago, xboojum said:

The advantage of the Duracell swap (or the Florida television station with Graham Holdings) was that he didn't have to pay capital gains taxes on the stock he exchanged, whereas he's underwater with the OXY position as a whole and flush with cash. The 8% coupon from the preferred is better than he can get clipping T-bills. Further, from OXY's point of view, the preferred equity, not debt, and they're trying to shed debt. I can't see why a non-cash transaction makes sense for either side.

 

Despite OXY's stated goal of deleveraging the debt side, it still makes sense from their end to try to knock out Warren's preferred stock as part of the deal.  It costs them far more than their debt does, and the interest on their debt is tax deductible.

 

Part of the reason they are so focused on deleveraging is to be in a position to get back to shareholder returns that could force partial redemptions of Warren's expensive preferred.  Otherwise they will just wait until 2029 and pay him off at 105% of par.

 

Warren does have a capital gain on the preferred - there is no such thing as "free warrants" in accounting, so Berkshire's cost basis in the OXY preferred is not "100."

[KPO]

4 hours ago, jbwent63 said:

I should have elaborated. By agreeing to exchange the preferreds for Oxychem, I am assuming that the valuation of the preferreds would be maximized (and the potential for appreciation in the commons and the warrants) and the valuation of the chemicals business minimized such that both parties are feeling a win after future dividends and current taxes are taken into account. BRK can replace some of the current preferred dividend with a dividend from the newly acquired entity. Let's see what happens. My bet is it's a non-cash transaction.

Well said. I think Berkshire is uniquely positioned to buy this at a reasonable price by giving on the preferreds.  If it’s an all cash deal without an auction, that’s a bad look for the OXY BOD. 

[jbwent63]

6 hours ago, gfp said:

 

Despite OXY's stated goal of deleveraging the debt side, it still makes sense from their end to try to knock out Warren's preferred stock as part of the deal.  It costs them far more than their debt does, and the interest on their debt is tax deductible.

 

Part of the reason they are so focused on deleveraging is to be in a position to get back to shareholder returns that could force partial redemptions of Warren's expensive preferred.  Otherwise they will just wait until 2029 and pay him off at 105% of par.

 

Warren does have a capital gain on the preferred - there is no such thing as "free warrants" in accounting, so Berkshire's cost basis in the OXY preferred is not "100."

All correct. In addition the preferreds are like debt. They have a high, non-deductible coupon, fixed repayment/redemption date (2029), they are just in a different bucket on the balance sheet according to GAAP. Not having to pay cash to redeem solves a problem for OXY allowing them to use those resources to pay back more of the Anandarko debt faster....another win for both parties.