Buffett/Berkshire - general news

[CassiusKing1]

Add on top of this the California Wildfire litigation.  

 

A company flush with cash has become a target.  I've trimmed my Brk holding due to this new era.  Sad.

[gfp]

Warren always said there are certain businesses where you aren't well served by having a "rich parent."  He never contemplated being a helmet manufacturer, was one of his examples if I remember correctly.  I think his mindset from the insurance industry has served him well over the years in considering as many risks in his other businesses as he can - which is why he gets a little crabby when he misses some.

[yesman182]

1 hour ago, gfp said:

Warren always said there are certain businesses where you aren't well served by having a "rich parent."  He never contemplated being a helmet manufacturer, was one of his examples if I remember correctly.  I think his mindset from the insurance industry has served him well over the years in considering as many risks in his other businesses as he can - which is why he gets a little crabby when he misses some.

He also said Berkshire shouldn't own the TSA. That comment kept me from investing in Clear Secure.  

[scorpioncapital]

I wasn't aware that someone suing a division of Berkshire can't access the parent. Is this in the sense that it can be allowed to go bankrupt and protect the cash of the parent? If so it seems another bonus of BRK's structure.

[gfp]

28 minutes ago, scorpioncapital said:

I wasn't aware that someone suing a division of Berkshire can't access the parent. Is this in the sense that it can be allowed to go bankrupt and protect the cash of the parent? If so it seems another bonus of BRK's structure.

 

It depends on the subsidiary and how the bulkheads are constructed.  I believe a subsidiary of BHE, like Pacificorp for instance, can be put into bankruptcy without the other assets of BHE being risked, much less the parent company holding company.  But I'm sure there are exceptions for nefarious asset stripping or fraud.  I mean, look at JNJ and the Talc stuff - you don't see all of JNJ at risk.

[John Hjorth]

34 minutes ago, LearningMachine said:

 

Not so fast :-).  It is a complex issue.  

 

You can try to protect all you want with legal structures, but if a subsidiary doesn't have enough assets to satisfy the damages, the party suing would try to convince the court to "pierce the corporate veil" from the subsidiary to the parent.  The party would need to start with showing that the parent effectively exercised control over the subsidiary e.g. by appointing leadership, and show intermingling, etc.  The party being sued would try to delay it by filing for bankruptcy, and then eventually ideally settle because parent with a lot of assets wouldn't want to test the court to decide that whether the veil should be pierced.  ...

 

Yeah, the concept 'company limited liability' is indeed a complicated legal matter.

 

The legal basis is the legal form for the actual legal entity in mention, and what may furthermore be stated in the articles of association and bylaws of the legal entity.

 

Also, some creditors may be capped one way or an other, [i.e. 'non recource' certain pledged asset[s]].

 

If a creditor may want to excercise some kind of economic responsibility for the obligations of the legal entity against the legal entitys owners, the creditor has to establish a causuality between the creditors receivable and the owners responsibity and actual actions. This isen't - in general - trivial by any means.

[Ulti]

https://www.msn.com/en-us/money/savingandinvesting/warren-buffett-or-not-berkshire-hathaway-stock-is-built-to-last/ar-AA1nGYvR

[DooDiligence]

OK, which one of you did this? Because it's friggin' brilliant. Not sure how I feel about the bare bones presentation layer, but the (quasi-AI generated) content is compelling.

 

https://brk-b.com

 

Sample: https://brk-b.com/bloomstran-s-tip-insights-for-berkshire-hathaway-2024_240423.html

Sample: https://brk-b.com/farmland-berkshire-hathaway-to-align-with-buffets-vision_240420.html

Sample: https://brk-b.com/the-hartford-berkshire-s-next-strategic-move_240331.html

 

Disclaimer: Images on this page are largely generated by artificial intelligence. They are not actual fotos and may not be confused with real people, although they might look very familiar.

 

===

 

Also, check out the photonics101.com link at the bottom,

+ links to platform tools.

[DooDiligence]

Sorry for spamming things up here but would this be reasonably accurate (albeit a bit repetitive)?

 

https://brk-b.com/no-room-for-romance-the-unwinding-of-berkshire-hathaway-s-stake-in-markel-the-baby-berkshire_240216.html

Edited April 27 by DooDiligence

[gfp]

1 hour ago, DooDiligence said:

Sorry for spamming things up here but would this be reasonably accurate (albeit a bit repetitive)?

 

https://brk-b.com/no-room-for-romance-the-unwinding-of-berkshire-hathaway-s-stake-in-markel-the-baby-berkshire_240216.html

did that article ever mention that it is unlikely that Warren Buffett was the one who actually bought the MKL stock?  It was a lot of words without saying much so I couldn’t read it all. 

[DooDiligence]

On 4/27/2024 at 2:41 PM, gfp said:

did that article ever mention that it is unlikely that Warren Buffett was the one who actually bought the MKL stock?  It was a lot of words without saying much so I couldn’t read it all. 

 

I did add an "albeit repetitive"   but my point was that it seems like a fair-ish AI generated bit of Berkshire content. Agreed, it could have said the same thing in just a few paragraphs. How do you get these AI's to understand that brevity is the soul of everything?

Edited April 29 by DooDiligence

[Spooky]

On 4/26/2024 at 8:47 PM, gfp said:

 

It depends on the subsidiary and how the bulkheads are constructed.  I believe a subsidiary of BHE, like Pacificorp for instance, can be put into bankruptcy without the other assets of BHE being risked, much less the parent company holding company.  But I'm sure there are exceptions for nefarious asset stripping or fraud.  I mean, look at JNJ and the Talc stuff - you don't see all of JNJ at risk.

 

If Berkshire's legal structure is set up properly it can insulate the parent from risks at the subsidiary / operating level. Generally the maximum you can lose in a corporation is the capital that you have put into it, there is no default right to go after the assets of a parent corporation or shareholders. There are a few exceptions: 1) parent company guarantees of debts / contracts at the subsidiary level; 2) piercing the corporate veil - a judge can look through the corporate form if a corporation is not run as a distinct entity of the shareholder (I doubt this is a risk for BRK, more common with small corporations with one or two shareholders); 3) certain regulatory regimes like GDPR can give you a penalty equal to a percentage of the global revenue of a company which is terrifying but I think this penalty would be levelled at the subsidiary which violated the rules.

 

 

[John Hjorth]

On 4/26/2024 at 10:47 PM, gfp said:

It depends on the subsidiary and how the bulkheads are constructed.  I believe a subsidiary of BHE, like Pacificorp for instance, can be put into bankruptcy without the other assets of BHE being risked, much less the parent company holding company.  But I'm sure there are exceptions for nefarious asset stripping or fraud.  ...

 

Agreed. +1

[Charlie]

Barron´s cover story:

 

Warren Buffett or Not, Berkshire Hathaway Stock Is Built to Last

 

https://www.barrons.com/articles/berkshire-hathaway-stock-price-warren-buffett-succession-4ab47394

 

Nothing new, but a good warm-up for the annual meeting.

[Munger_Disciple]

Another day & another $30 Billion lawsuit aimed at BHE. BHE is looking more like a tobacco company these days:

 

https://finance.yahoo.com/news/warren-buffett-pacificorp-now-faces-215442680.html

Edited April 29 by Munger_Disciple

[charlieruane]

"I did not anticipate or even consider the adverse developments in regulatory returns and, along with Berkshire’s two partners at BHE, I made a costly mistake in not doing so." -WB, 2023 Berkshire AR

Edited April 29 by charlieruane

[Munger_Disciple]

Another WSJ article in the lead-up to the annual meeting:

 

https://www.wsj.com/finance/investing/charlie-munger-berkshire-hathaway-annual-meeting-missed-7a5d2ee5?mod=lead_feature_below_a_pos1

[ValueArb]

https://www.ft.com/berkshire

 

Quote

Berkshire after Buffett: can any stockpicker follow the Oracle?

 

Ted Weschler and Todd Combs stand to take over a $354bn portfolio from the world’s best-known investor

 

Warren Buffett’s deputies are trailing both their mentor and the market, according to a Financial Times analysis that examined the performance of the two men set to take over Berkshire Hathaway’s $354bn stock portfolio.

 

According to the FT analysis the last decade hasn't been kind to Warren's public company investments (trailing the S&P 500), but both Ted and Todd have done much worse. Their methodology is pretty ad hoc, so can't attest to the reasonableness of their conclusions.

 

Quote

The FT reconstructed the company’s US stock portfolio starting in 2010, just before Combs and Weschler joined Berkshire, based on quarterly filings with the Securities and Exchange Commission.

 

The FT then used Buffett’s comments in dozens of interviews, speeches at annual meetings and media reports to determine which trades were his and which belonged to one of his deputies...

 

At times, Buffett has been explicit about who invested in what stock but in other cases we had to make an educated guess. Smaller trades have generally been attributed to Combs or Weschler. But as their portfolios have grown, the size of an individual investment has become less informative as to whether it was made by Combs and Weschler or Buffett.

 

They make one good point about Berkshire's "permanent capital" giving them an edge that few managers have. But I think overall running a $350B actively managed portfolio is probably the most challenging situation an investment manager ever had. So it's not surprising that even Buffett is trailing the S&P for long periods now.  

 

I'm not sure what the solution can be after Buffett, I doubt the shareholder base has the stomach for an enormous one time dividend or whether it would be enough to lighten those chains to return the portfolio to consistent market beating returns. Even a $250B distribution would leave them with over $100B to allocate, and even if they produce stellar returns that's from barely 10% of Berkshire assets so how much could it move the needle?

[John Hjorth]

@ValueArb,

 

You appear to disregard or forget, that large parts of the stock portfolio is owned inside the insurance part of Berkshre, that the insurance group is subject to regulation on it's capital levels, thereby introcing dividend restrictions. I'm not even sure a dividend of USD 250 B or USD 100 B is possible / feasible.

[Hektor]

https://www.wsj.com/finance/berkshire-hathaway-annual-meeting-romance-25eb77fc

 

How Berkshire Hathaway’s Annual Meeting Became a Hotspot for Romantic Mergers

Warren Buffett himself has jumped in to serve as a wingman at the famous Omaha gathering

 

Buffett has been the wingman on proposals, including once for his grandnephew Alex Rozek, who wanted to propose to his girlfriend, Mimi Krueger, at the 2009 shareholder meeting.

 

“Just ask how we’re going to get the economy back on track,” Rozek recalls Buffett advising him.

 

When the day arrived, Rozek and Krueger were in the audience when Buffett said there was time for one more question. Rozek delivered his line. 

 

“I was sitting there with my head in my hands trying to disappear,” she recalls. “I was like, oh my God…what is he doing?”

Buffett replied that “household formations” would help—and asked if that gave Rozek any ideas.

 

“I think so,” Rozek said. “Mimi, you’re my best friend. Would you be my wife?”

The crowd applauded as she took in what had happened, and gave a resounding, “Yes.”

[gfp]

1 hour ago, ValueArb said:

https://www.ft.com/berkshire

 

 

According to the FT analysis the last decade hasn't been kind to Warren's public company investments (trailing the S&P 500), but both Ted and Todd have done much worse. Their methodology is pretty ad hoc, so can't attest to the reasonableness of their conclusions.

 

 

They make one good point about Berkshire's "permanent capital" giving them an edge that few managers have. But I think overall running a $350B actively managed portfolio is probably the most challenging situation an investment manager ever had. So it's not surprising that even Buffett is trailing the S&P for long periods now.  

 

I'm not sure what the solution can be after Buffett, I doubt the shareholder base has the stomach for an enormous one time dividend or whether it would be enough to lighten those chains to return the portfolio to consistent market beating returns. Even a $250B distribution would leave them with over $100B to allocate, and even if they produce stellar returns that's from barely 10% of Berkshire assets so how much could it move the needle?

 

So it's kind of a bullshit article because they don't know which investors bought which stocks.  Several of their guesses appear to be incorrect.

 

These are likely wrong:

Aon: Buffett

Capital One: Buffett

Celanese: Combs/Weschler (not sure)

General Motors: Combs/Weschler (not sure)

Lee Enerprises: Combs/Weschler

PNC Financial: Buffett

S&P 500 ETF: Buffett

VeriSign: Combs/Weschler

Verisk Analytics: Combs/Weschler

 

(they also don't do enough research to figure out the actual buy and sell prices to calculate the returns, using 13F quarter-end data instead)

 

Edited Wednesday at 08:25 PM by gfp

[Xerxes]

1 hour ago, ValueArb said:

https://www.ft.com/berkshire

 

 

According to the FT analysis the last decade hasn't been kind to Warren's public company investments (trailing the S&P 500), but both Ted and Todd have done much worse. Their methodology is pretty ad hoc, so can't attest to the reasonableness of their conclusions.

 

 

They make one good point about Berkshire's "permanent capital" giving them an edge that few managers have. But I think overall running a $350B actively managed portfolio is probably the most challenging situation an investment manager ever had. So it's not surprising that even Buffett is trailing the S&P for long periods now.  

 

I'm not sure what the solution can be after Buffett, I doubt the shareholder base has the stomach for an enormous one time dividend or whether it would be enough to lighten those chains to return the portfolio to consistent market beating returns. Even a $250B distribution would leave them with over $100B to allocate, and even if they produce stellar returns that's from barely 10% of Berkshire assets so how much could it move the needle?

If Buffett ever uses a special dividend at some point it will be IMHO for “signalling” reason telling the regulators to chill-out vis a vis BHE. Better to give back it to the shareholders than “throwing more money at bad money”.
 

I don’t think he will ever issue special dividends for the sake of creating a lower base, to grow from. 

[charlieruane]

It's also clear that Combs and Weschler are doing way more than public-market stockpicking. Combs is spending the vast majority of his time fixing up Geico, which is a huge value-add for Berkshire. Ted also does meaningful work on private deals, the results of which are not reflected in his portion of the public equity portfolio. 

 

 

[ValueArb]

2 hours ago, John Hjorth said:

@ValueArb,

 

You appear to disregard or forget, that large parts of the stock portfolio is owned inside the insurance part of Berkshre, that the insurance group is subject to regulation on it's capital levels, thereby introcing dividend restrictions. I'm not even sure a dividend of USD 250 B or USD 100 B is possible / feasible.

 

That just makes it worse, no? It would mean Combs and Weschler are going to be stuck managing such an enormous portfolio that it's going to be very difficult to beat the market over time.

[ValueArb]

59 minutes ago, Xerxes said:

If Buffett ever uses a special dividend at some point it will be IMHO for “signalling” reason telling the regulators to chill-out vis a vis BHE. Better to give back it to the shareholders than “throwing more money at bad money”.
 

I don’t think he will ever issue special dividends for the sake of creating a lower base, to grow from. 

 

I wasn't referring to Buffett, I was referring to what happens after he's gone. Clearly it's unlikely he'll ever issue any dividends because it's antithetical to his life long goal of making his "painting" as large as possible. He didn't even start buybacks until his 6th decade as CEO, but at least in that case it directly increases per share value.