Buffett/Berkshire - general news

[gfp]

One thing I noticed in this report is that towards the bottom of page 7 they mention that a new accounting pronouncement that will go into effect at the beginning of 2023 is currently projected to reduce shareholders' equity by $6-7 Billion (ultimate amount to be based on interest rates at that time).  ASU 2018-12

 

They mentioned it last quarter but this quarter they included an estimated ballpark figure if rates stay about the same.

 

 

Quote:

We will adopt ASU 2018-12 as of January 1, 2023 using the modified retrospective method, whereby revised cash flow and discount rate assumptions as of January 1, 2021 (the transition date) are applied to contracts then in-force, with liabilities then remeasured as provided under the standard. The cumulative effects from discount rate assumption changes as of the transition date will be recorded in accumulated other comprehensive income and the cumulative effect from cash flow assumption changes will be recorded in retained earnings. While we have not finalized our assessment of the impact of the adoption as of the transition date, we currently believe that the changes in discount rate assumptions will have a greater effect on our recorded liabilities than changes in cash flow assumptions. We currently estimate that as of January 1, 2021, the adoption of ASU 2018-12 will reduce our consolidated shareholders’ equity between $6 billion and $7 billion from the amount previously reported, primarily due to the low interest rate environment at that time. However, the ultimate impact of adopting ASU 2018-12 will be based on the discount rate and cash flow assumptions determined as of the January 1, 2023 adoption date. We, therefore, continue to evaluate the effect this standard will have on our Consolidated Financial Statements.

[aws]

Are we at all concerned that maybe something has changed and Greg Abel is no longer the successor? It is a rather surprising transaction that leaves Abel with no skin in the game.

[ValueMaven]

I thought he had a modest size stake in the b-shares?? with his large stake in BHE as well...which we now know what happened too...I would have liked if he swapped his BHE position into BRK stock...what gives?

Edited August 6, 2022 by ValueMaven

[aws]

Modest would be a very accurate description of his Berkshire holdings. He owns 5 A shares in his living trust and a couple thousand B shares in his kid's names. 

 

https://www.sec.gov/Archives/edgar/data/0001646348/000108131618000011/xslF345X02/wf-form3_151640024127980.xml

[ValueMaven]

I agree - however I wouldnt jump to any conclusions just yet regarding Mr. Abel.  Thus far his actions have been A+ from a corporate governance and operating perspective.  

[ValueMaven]

Berkshire paid $870M for Mr. Abel's 1% stake in BHE.  Does that mean that BHE is worth $87B?

[Xerxes]

From Barron’s, on the monthly data within Q2, for lazy folks like me:

 

 

 

[ValueMaven]

Looks like $1B of buybacks in the Q at an avg price of ~$280.  Looks like another $1.4B was bought back in July ... 

[aws]

7 minutes ago, ValueMaven said:

Looks like $1B of buybacks in the Q at an avg price of ~$280.  Looks like another $1.4B was bought back in July ... 

 

July purchases were 1,119 A share equivalent, so around $470 million worth.

[Munger_Disciple]

17 minutes ago, ValueMaven said:

Looks like $1B of buybacks in the Q at an avg price of ~$280.  Looks like another $1.4B was bought back in July ... 

 

Paid closer to $284 per B share for the June repos, and my math agrees with @aws regarding July repos; closer to $470mm in repos in the July 1-July 26 time period at an average cost of $420K per A share or $280 per B share. 

Edited August 6, 2022 by Munger_Disciple

[ValueMaven]

From the Q: 

# of o/s as of 7/26: A-share: 599,924 

# of o/s as of 7/26: B-share: 1,301,126,370 

[aws]

On 6/30 it was 601,167 A + 1,300,940,370 B = 1,468,461 A Share Equivalent

On 7/26 599,924 A + 1,301,126,370 B = 1,467,342 A Share Equivalent

Net reduction was 1,119 A Shares

[ValueMaven]

Bloomstran on the Q

 

[Dynamic]

1 hour ago, ValueMaven said:

[Christopher Bloomstran 's thread]

 

I really found a lot of good content in his whole thread about the Q2 report which starts from this post on Twitter.

Edited August 7, 2022 by Dynamic
Corrected link

[LearningMachine]

@Dynamic and @ValueMaven, thanks for sharing. 

 

Interesting observation:

"Auto insurers are struggling with inflation in used car prices, parts, labor costs and medical costs. GEICO underwrote at a 105% combined, with losses at 92.8%. Policies in force declined so loss in market share relative to PGR continues."

 

Looks like some other insurers with longer tail will get impacted in upcoming years.

Edited August 7, 2022 by LearningMachine

[widenthemoat]

Question for the board on the BRK 10-Q: Does anyone know where the interest/dividend/other income for the non-insurance related investments gets picked up in the "Business segment data (Note 23)"? For example, interest/dividend/other income per Note 23 is $2,284 on insurance investments of $395,260. Compare this to interest/dividend/other income of $2,861 from the income statement on balance sheet investments of $450,135 (Cash: $26,534, T-Bills:  $74,803, Fixed maturity securities: $21,136, Equity securities: $327,662).

 

Thanks in advance. 

[jbwent63]

17 hours ago, widenthemoat said:

Question for the board on the BRK 10-Q: Does anyone know where the interest/dividend/other income for the non-insurance related investments gets picked up in the "Business segment data (Note 23)"? For example, interest/dividend/other income per Note 23 is $2,284 on insurance investments of $395,260. Compare this to interest/dividend/other income of $2,861 from the income statement on balance sheet investments of $450,135 (Cash: $26,534, T-Bills:  $74,803, Fixed maturity securities: $21,136, Equity securities: $327,662).

 

Thanks in advance. 

My guess, and its only a guess, is that the $2,861 includes the $2,284 plus the equity income from KraftHeinz, Pilot, Berkadia etc, but also note that the amount is Insurance and Other. There may be some investment income earned in the Other units (MSR for example), which are immaterial and therefore not disclosed. It would be helpful if there was a reconciliation somewhere in the report for sure.

[gfp]

I believe it is discussed on page 40,

 

"

Other earnings/loss consist primarily of Berkshire parent company investment income and corporate expenses, other intercompany interest income where the interest expense is included in earnings of the operating businesses and unallocated income taxes."

 

So the answer to your question would be that while almost all of the investments are held inside insurance companies (or BYD in the Energy company), Berkshire parent company owns some investments and those investments generate income.

[gfp]

Berkshire's 13F is out showing unsurprising moves that we mostly already knew about.  Added a bit to AAPL, CVX, ALLY, OXY, etc..  Finished selling off VZ, sold half the STOR.

 

Also, New England Asset Management 13F isn't out yet but it looks like they added $583.5 million worth of HPQ at $35.71/share over at General Re on 4/6/2022 so that should show up over at NEAM.

(These were disclosed on this Form 4 which caused HPQ shares to jump the next day: https://www.sec.gov/Archives/edgar/data/0001067983/000089924322014160/xslF345X03/doc4.xml)

 

The ATVI stake increased a little bit - I don't think he wants to go over 10% here for the short swing profit rule or just the Form 4 requirements.  Under the surface he is trading this position a bit.

 

At National Indemnity, he bought 8.6m ATVI shares at 77.69/sh on 4/29 and sold 6.99m ATVI shares at 78.57/sh on 5/6.

 

Also at National Indemnity he added $97m of BASF.  

Edited August 15, 2022 by gfp

[gfp]

Warren paid $138.37 / share for 3.879m shares of AAPL on 5/20/2022, for a total cost of $536,724,551

 

So the quarter-end Apple position is something like 915,226,526 shares ($158.3 Billion at today's close)

Edited August 15, 2022 by gfp

[aws]

They own about 9% of Ally now, that's a pretty large purchase. I wonder why they didn't have to report it earlier when they crossed the 5% threshold.

[gfp]

1 minute ago, aws said:

They own about 9% of Ally now, that's a pretty large purchase. I wonder why they didn't have to report it earlier when they crossed the 5% threshold.

 

You don't have to report 5% in a hurry like you do with 10%.  Maybe once a year or something like that.

[ValueMaven]

He basically bottom ticked the Apple buy ... not bad timing !

[yesman182]

3 hours ago, aws said:

They own about 9% of Ally now, that's a pretty large purchase. I wonder why they didn't have to report it earlier when they crossed the 5% threshold.

 I have a feeling one reason they didn't buy more is because they didn't want to get over the 10% ownership mark. I suspect the ownership in ALLY will be like USB were they stay above 9%, but routinely sell off some shares to stay under 10%. 

[Xerxes]

Does the fact that he is adding to Apple, an already large position, is an indication that he is implicitly thinking that the 10-year T-bonds have peaked.