Buffett/Berkshire - general news

[gfp]

Any bets that it's not a crypto guy this time around?

 

by the way, apparently you can track Justin Sun's (2019 lunch winner) crypto wallet assets in real time?

https://debank.com/profile/0x3ddfa8ec3052539b6c9549f12cea2c295cff5296

Edited June 17, 2022 by gfp

[yesman182]

3 hours ago, sleepydragon said:

Hopefully its Elon. 

[sleepydragon]

3 hours ago, gfp said:

Any bets that it's not a crypto guy this time around?

 

by the way, apparently you can track Justin Sun's (2019 lunch winner) crypto wallet assets in real time?

https://debank.com/profile/0x3ddfa8ec3052539b6c9549f12cea2c295cff5296

current bid is 13141314.00

1314= “one life, one generation “ in chinese

 

[gfp]

Interesting article on what will become of the "rest" of Buffett's estate when he passes.  Probably sheds some light on why Susie was added to the board of directors.

 

https://www.wsj.com/articles/warren-buffetts-estate-planning-bill-and-melinda-gates-foundation-sends-charities-scrambling-11655811074?mod=hp_lead_pos5

[greenwave]

On 6/21/2022 at 11:25 AM, gfp said:

Interesting article on what will become of the "rest" of Buffett's estate when he passes.  Probably sheds some light on why Susie was added to the board of directors.

 

https://www.wsj.com/articles/warren-buffetts-estate-planning-bill-and-melinda-gates-foundation-sends-charities-scrambling-11655811074?mod=hp_lead_pos5

--

Any one else wondering how long the Gates Foundation gifting season this year may continue to have an impact on the trading price of Brk shares. 

 

As I understand it , the additional number of shares gifted this year to the Gates Foundation was significantly more than in the past.

greenwave

[John Hjorth]

1 minute ago, greenwave said:

... As I understand it , the additional number of shares gifted this year to the Gates Foundation was significantly more than in the past.

greenwave

 

It's not so. 5% of the last years position after giving is donated each year.

[gfp]

1 hour ago, greenwave said:

--

Any one else wondering how long the Gates Foundation gifting season this year may continue to have an impact on the trading price of Brk shares. 

 

As I understand it , the additional number of shares gifted this year to the Gates Foundation was significantly more than in the past.

greenwave

 

Yes, as John mentioned the number of shares gifted declines every year.  The Gates foundation (and the 4 other foundations) are constantly selling b-shares at practically all times of the year.  Any recent pressure would be primarily due to index and fund sales.  BRK is a big component of financial indices and a big component of the S&P indices compared to the average daily volume traded.  

 

Off topic, any chance you chose 'greenwave' because you went to Tulane?

[greenwave]

1 hour ago, John Hjorth said:

 

It's not so. 5% of the last years position after giving is donated each year.

Thank you John for the clarification .

greenwave. 

[greenwave]

1 hour ago, gfp said:

 

Yes, as John mentioned the number of shares gifted declines every year.  The Gates foundation (and the 4 other foundations) are constantly selling b-shares at practically all times of the year.  Any recent pressure would be primarily due to index and fund sales.  BRK is a big component of financial indices and a big component of the S&P indices compared to the average daily volume traded.  

 

Off topic, any chance you chose 'greenwave' because you went to Tulane?

--

Thank you gfp for shedding more light on the foundations' methodology .

 

Re: greenwave  

 

Summerville , South Carolina was my hometown .

 

I played High School football with the Summerville Green Wave  football team .

Our High school football coach was noted as the winningest football program in the history of football--at all levels.

 

My coach - John McKissick coached as head coach of the Green Wave there from 1952 through 2014.

 

He held the record for the most football wins at any level with 621 wins .

 

( He was also a Buffett fan  ) 

[CassiusKing1]

I'm more concerned with the ownership void once all of WEB's shares our donated/sold.  That's a majority shareholder that is liquidating.  Putting both pressure on the stock and increasing the need to do very aggressive buybacks.

Not sure what the rules are, but like I've been saying, it would be great to have the shares donated to the Foundations, then bought back in large blocks and retired.  Thoughts?

[thepupil]

21 minutes ago, CassiusKing1 said:

I'm more concerned with the ownership void once all of WEB's shares our donated/sold.  That's a majority shareholder that is liquidating.  Putting both pressure on the stock and increasing the need to do very aggressive buybacks.

Not sure what the rules are, but like I've been saying, it would be great to have the shares donated to the Foundations, then bought back in large blocks and retired.  Thoughts?

WEB owns $92 billion of stock

The Gates foundation owns about $7.5B (28mm B shares)

 

Collectively they own about $100 billion. 

 

Berkshire's market cap is $590 billion. 

 

Buffett and the Gates foundation collectively are a 17% owner, not a majority shareholder. My understanding is that Buffett donates about $3-$6B /year in total about 85% of which goes to the Gates Foundation. They buyback has been $24B in 2020 and $27B in 2021 and Berkshire is and has been reducing shares outstanding. 

 

I don't think you should be necessarily concerned about this given the shares are not all donated/sold at once and Berkshire is indeed buying back the donated shares (and then some). 

 

I think a more relevant concern is the governance implications as Buffett's A shares go away, the non-Buffett A shares become very powerful. 

 

https://twitter.com/thepupil11/status/1394304208313098248?s=20&t=kOspZ81fvpypQOVm-yYwAA

 

Edited June 24, 2022 by thepupil

[gfp]

17 minutes ago, CassiusKing1 said:

I'm more concerned with the ownership void once all of WEB's shares our donated/sold.  That's a majority shareholder that is liquidating.  Putting both pressure on the stock and increasing the need to do very aggressive buybacks.

Not sure what the rules are, but like I've been saying, it would be great to have the shares donated to the Foundations, then bought back in large blocks and retired.  Thoughts?

 

Well one big offsetting factor is that as the free float of shares increases, Berkshire's weighting in large indices will increase toward what you would expect for their market cap.  Currently, Berkshire's weighting is 'float adjusted' lower because of the large block of stock tied up by Buffett.  So index funds, S&P500 particularly, will soak up some of that stock.

 

I doubt Berkshire will buy large blocks directly from the foundations, even though that would be most efficient.  Instead, they will probably continue as they are now - buying what they can on the open market (including foundation shares sold into that market each day) and occasional blocks that become available.

[ValueMaven]

Within the next quarter or two, Berkshire will have 20% stakes in both OXY and AXP.  This will require the company to account for both positions using the equity method of accounting...Berkshire will report their % ownership of OXY and AXP's earnings as their own Operating Income going forward.  This could likely added $300-400M in OI over the coming quarters.  

 

Thoughts?  

Edited June 24, 2022 by ValueMaven

[gfp]

I would be surprised if Berkshire is forced to use the equity method for American Express specifically.  The 20% rule is not absolute and the presumption of influence/control can be overcome when specific agreements are in place that limit the shareholder's power.  I believe Berkshire has agreements in place with AXP that would qualify.  We'll find out soon enough.

 

Berkshire used the equity method with Moody's and Burlington Northern back in the day.  They don't use it with DaVita because around half of the DaVita stock is owned by the pension funds and not Berkshire itself.  They are part of a control group and have multiple board seats at Kraft Heinz so that one doesn't have any leeway.

 

Pilot Corporation will stop being an equity method investment at the end of the year and will be consolidated.  Pilot has a very high revenue so that will bump up Berkshire's reported revenue.  Kind of like when they bought McLane - lots of revenue but small margins.

 

 

[ValueMaven]

Very interesting.  Thank you @gfp

[John Hjorth]

Thank you, @gfp & @ValueMaven, for the above exchange.

 

If one think about it a bit more and a bit deeper, the issue at hand is simply mind provoking, because Berkshire is actually gradually and over time catching and gobbling up its "surroundings" - like a black hole or like the span of the tentacles of a hungry octypus.

 

Absolutely incredible what the mathematical laws for exponential functions and uninterrupted compounding - plus buy more or sharebuybacks, or both in combination - can produce of longer term economic outcomes.

 

- - - o 0 o - - - 

 

Today, I went back the memory lane, to the end of Berkshires quarter when I bought the first few Berkshire shares,  almost a decade ago:

 

Total cash and cash equivivalents at hand : USD 47,776 B [, now USD 39,113, 2022Q1]],

Equity securities : USD 87,088 [, now USD 390,538], &

Equity accounted investments : USD 0 B [, now USD 17,596].

 

Add to that the reduced Berkshire share count because of share buybacks.

 

 

 

Edited June 25, 2022 by John Hjorth

[John Hjorth]

The exchange between @CassiusKing1, @thepupil and @gfp above is extremely important longer term for the future development of Berkshire.

 

I hope one you gents will take the initiative to a topic split from here - to a separate topic - for further discussion.

[ValueMaven]

@John Hjorth You are missing a 1 in total cash section ... whats a $100B typo, lol

[gfp]

2 hours ago, ValueMaven said:

@John Hjorth You are missing a 1 in total cash section ... whats a $100B typo, lol

Well, cash and cash equivalents was not $139 Billion in the Q1 2022 report either.

[CorpRaider]

It sounds to me like changes are afoot with respect to the bequest of his shares upon death.  He imposed a requirement on the gates foundation as I recall to promptly spend the money (maybe over 10 years after death).  I wonder if similar requirements will be imposed on the Susan Buffett foundation.  

[gfp]

I don't think anything has changed per se - I think someone just wrote an article speculating that things have changed and Buffett didn't cooperate with the article except to say the reporting contained numerous inaccuracies. 

 

The plan all along has been that all of his Berkshire shares be distributed and sold within 10 years of his death and the Susan Thompson Buffett foundation be shut down after that 10 year mark.

[yesman182]

Yeah, I don't think anything has changed either. And if something does change, he will tell us. He has always been open about his intentions and at one annual meeting he went into great detail how you should involve your kids in the Will writing process so that if anyone is un happy they can talk to you before you die. 

[CorpRaider]

On 6/27/2022 at 8:36 AM, gfp said:

I don't think anything has changed per se - I think someone just wrote an article speculating that things have changed and Buffett didn't cooperate with the article except to say the reporting contained numerous inaccuracies. 

 

The plan all along has been that all of his Berkshire shares be distributed and sold within 10 years of his death and the Susan Thompson Buffett foundation be shut down after that 10 year mark.

Yeah I think you're right.  Will be interesting dynamics of the founder leaving and a big overhang of selling his stock over the decade thereafter, but that's nothing new.

Edited June 28, 2022 by CorpRaider

[Blugolds11]

Anybody have any thoughts on the the potential advantages of owning A shares vs B shares further down the line. 

 

A is convertible to B...lower volume with A...1500:1..we all know the differences...but down the line with Warrens stake converting to B and being sold is there a potential for A to hold up better, obviously anybody who has watched both for any amount of time knows that they dont always move in lockstep...but just wondering if there is anything to consider with that regard. Obviously voting rights are more beneficial for A shares...but immaterial for the avg investor with a couple at most. OR will it really not make that much of a difference since there is the 1500:1 conversion option...

 

With the large amount of A shares from Warren converting to B and being sold, will that reduce the A share count to make the voting rights of remaining A shares more valuable, protection against larger players trying to get more control etc. 

 

I guess I havent really taken the time to think through it fully, just thought Id throw the question out there incase anyone else had already done the thinking for me. 

[aws]

A shares are obviously tougher to buy and sell at low cost (especially taxes), so it's not something you want to do lightly. If you have tax free accounts in sufficient size and are sure you are going to hold Berkshire for years, then I would definitely hold A shares over B when the premiums are like they are presently (roughly $500/sh, or .33/B share). That's a negligible downside for something that could in theory have a much higher premium in the future.

 

Share class price differentials aren't something I really track, but occasionally wild things can happen. I remember last year the super voting Discovery shares traded at something like 5x the non-voting shares. Berkshire is too big for anything that wild to happen, but at 12 basis points or so you really don't need much. Even Google has more like 50 bps between their two share classes.