Buffett/Berkshire - general news

[gfp]

Good summary Dynamic.  Yes, Berkshire still holds over 5% of each of Marubeni, Mitsui, Mitsubishi, Itochu and Sumitomo.  But it is important to remember that Berkshire has paired that Yen currency risk by issuing Yen denominated bonds to fully fund the investments in these high dividend paying, international commodity-exposed investments.  It was one of those clever float-like things that Warren does from time to time that won't move the needle but keep his brain active.  Hopefully this one goes better than the SQUARZ lol.   So far it has gone very well for Berkshire.

 

Berkshire is at 92% ownership of BHE because Berkshire didn't buy out Greg Abel, BHE did (as a share repurchase that also benefits the Scott family shareholders).

 

I don't think Berkshire has to disclose the Japanese investments in official holding reports unless it goes to 10% under a blanket disclosure exemption for 'foreign investment firms' as long as it doesn't go on the board of directors or get too involved.  They did write letters to each of the 5 companies offering cooperation on energy JVs and such.  I wonder if Abel has anything in the works on that kind of stuff.

[Dynamic]

2 hours ago, gfp said:

Berkshire is at 92% ownership of BHE because Berkshire didn't buy out Greg Abel, BHE did (as a share repurchase that also benefits the Scott family shareholders).

Thanks gfp, that's a nuance I hadn't picked up on.

[MCR]

Yesterday, while driving on I-85 in South Carolina near Spartanburg I came across a previously unknown (to me) small BRK bolt-on acquisition from 2014--SmileMakers. It was a nondescript building with its logo on the front and the words "A Berkshire Hathaway Company" printed underneath it. (Don't ask me how I read it that fast driving at 75 MPH.) I mentioned the company to my wife over lunch and it turns out she was very familiar with it. They produce gifts that dentists, doctors, etc. give away to kids. My kids have gotten their stuff for years; she told me my daughter got one when her wisdom teeth were pulled earlier this year.

 

A little digging this morning found a news story from 2014 that the company was purchased by Oriental Trading Company from Staples. Not something we'd likely ever see mentioned in the Chairman's report and too small to move the needle for the parent company, but pretty neat to learn about another way BRK positively impacts people's lives (including my own). 

[ValueMaven]

The idea is/was that Marmon, Precision Castparts, Alleghany, and Oriental Trading could do a lot of these under the radar bolt on acquisitions away from the parent HQ.

[gfp]

Barron's ran a piece about GEICO falling behind on Telematics - nothing new that I saw, but here it is:

https://www.barrons.com/articles/berkshire-hathaway-warren-buffett-geico-51663013589

[DooDiligence]

6 minutes ago, gfp said:

Barron's ran a piece about GEICO falling behind on Telematics - nothing new that I saw, but here it is:

https://www.barrons.com/articles/berkshire-hathaway-warren-buffett-geico-51663013589

 

I can't read the article but from personal experience, I get $142 discount on my policy (enrolled a few years ago), by enabling "Drive Easy" which allows the GEICO app to always access data.

 

See screenshot below for virtue signaling. Zero hard braking or sharp cornering, but I keep my phone in my lap which counts as "in hand", and lowers my score. I'll start dropping it in the console and see if my score improves.

 

[gfp]

Who says there are no synergies between Berkshire subs - Greg Abel will probably be better at keeping his ears open to opportunities to collaborate -

 

https://wvmetronews.com/2022/09/13/berkshire-hathaway-company-to-produce-titanium-aerospace-products-in-jackson-county/

[fareastwarriors]

1 hour ago, DooDiligence said:

I can't read the article

here you go, a free link:

 

https://archive.ph/Bpxr8

[DooDiligence]

6 hours ago, fareastwarriors said:

here you go, a free link:

 

https://archive.ph/Bpxr8

 

Thanks

[MarioP]

Kind of funny and a sign of a new area. Buffett always said  to  avoid investments in sector that can be disturb by technology. Now technology is messing up one of his investment made 50 years ago…

[scorpioncapital]

Every old world business has no excuse not to use technology to enable their core business model to be more efficient and do better. I don't see this is an issue of being tech adverse but just a bad mistake unfortunately. 

Also it is probably normal for insurers to have claims cost inflation and that to impact performance. Insurers don't do very well when there is unexpected inflation. Even moreso if you didn't use available technology to do better underwriting.

 

Edited September 14, 2022 by scorpioncapital

[yesman182]

I think Geico is doing exactly what they said they would do. They said they feel they can have a leading underwriting profits just by asking questions at the time of application. They also said they would pay close attention to telematics and integrate them into their business if they prove to be better over time. I don't think its a big deal if they are a few years late to the party. Its the same story with precision railroading. 

[gfp]

1 hour ago, yesman182 said:

I think Geico is doing exactly what they said they would do. They said they feel they can have a leading underwriting profits just by asking questions at the time of application. They also said they would pay close attention to telematics and integrate them into their business if they prove to be better over time. I don't think its a big deal if they are a few years late to the party. Its the same story with precision railroading. 

 

Yeah, I think you are right broadly speaking.  I do think they started to notice some adverse selection by letting the competition run with telematics for as long as they did.  Safe drivers want telematics to save money, crazy drivers avoid telematics.  Also, a lot of the items they liked to base their rates on - like credit score - are somewhat frowned upon as a rate-setting tool lately.  Despite being just fine as a predictor of claims.

[gfp]

On 9/13/2022 at 9:34 AM, gfp said:

Who says there are no synergies between Berkshire subs - Greg Abel will probably be better at keeping his ears open to opportunities to collaborate -

 

https://wvmetronews.com/2022/09/13/berkshire-hathaway-company-to-produce-titanium-aerospace-products-in-jackson-county/

 

 

This announcement is pretty interesting because it is something totally new for BHE.  BHE Renewables will be the owner/developer of this 2000 acre industrial park and Precision Castparts / Timet will be the first tenant to locate there.  But PCP doesn't need 2000 acres.  So this is actually a bigger development than just BHE buying PCP's factory site.  The park will apparently be marketed to additional tenants - kind of like the parks that the Iscar founder Steph Wertheimer developed after selling his company to BRK.

 

Also odd / interesting because it isn't very sunny in West Virginia.  I think it's like 48th in the states for sun so it's an odd choice for a solar powered industrial park.  Maybe the solar won't actually be generated on site?  Or maybe that's why they need so much land LOL

 

One thing is for sure, there must be some hefty tax incentives on the table.

[yesman182]

3 hours ago, gfp said:

This announcement is pretty interesting because it is something totally new for BHE.  BHE Renewables will be the owner/developer of this 2000 acre industrial park and Precision Castparts / Timet will be the first tenant to locate there.  But PCP doesn't need 2000 acres.  So this is actually a bigger development than just BHE buying PCP's factory site.  The park will apparently be marketed to additional tenants - kind of like the parks that the Iscar founder Steph Wertheimer developed after selling his company to BRK.

 

Also odd / interesting because it isn't very sunny in West Virginia.  I think it's like 48th in the states for sun so it's an odd choice for a solar powered industrial park.  Maybe the solar won't actually be generated on site?  Or maybe that's why they need so much land LOL

 

One thing is for sure, there must be some hefty tax incentives on the table.

I wasn't aware they are going to be the Owner/Developer of the land. Buffet has mentioned at the annual meetings how server farms have flocked to Iowa for the low cost power. Maybe BHE wants to offer low cost electricity to long term tenants and collect leasing/rental income? 

[ValueMaven]

Stock is cheap here - hope Warren is buying back aggressively !!

[yesman182]

6 minutes ago, ValueMaven said:

Stock is cheap here - hope Warren is buying back aggressively !!

I do too, but I also hope he is finding other securities he likes more. 

[gfp]

This article goes a little bit into the history of the West Virginia BHE/PCP deal.  Letter to Buffett, Buffett forwards it to BHE. Bill Furman goes out to West Virginia to tour sites.  Sounds like the other tenants of the microgid industrial park will be feeding into or taking off from the Timet plant.

 

https://www.sfgate.com/news/article/A-letter-to-a-billionaire-sparked-a-W-Va-17464001.php

[CassiusKing1]

On 9/23/2022 at 8:32 PM, ValueMaven said:

Stock is cheap here - hope Warren is buying back aggressively !!

Agreed!  Started some nibbling on Friday.

[UK]

https://www.wsj.com/articles/amazon-berkshire-hathaway-could-be-among-top-payers-of-new-minimum-tax-11664098382

 

The UNC analysis comes with caveats. Lacking confidential tax returns that would allow precise calculations, the authors used publicly available financial data. Companies might change behavior to minimize taxes. A one-year snapshot includes unusual situations that cause companies to pay the minimum tax once, generating tax credits that can be used in future years.

 

Under the new law, companies averaging more than $1 billion in publicly reported annual profits calculate their taxes twice: once under the regular system with a 21% rate and again with a 15% rate and different rules for deductions and credits. They pay whichever is higher. The new system, known as the book minimum tax, starts with income reported on the financial statement, not traditional taxable income. Differences between the two—the treatment of stock-based compensation, for example—could drive a company into paying the new tax. According to the UNC estimates, Berkshire Hathaway would have paid the most in 2021, at $8.3 billion—or about a quarter of the estimated total—followed by Amazon at $2.8 billion and Ford Motor Co. at $1.9 billion.

Edited September 27, 2022 by UK

[gfp]

These articles ignore the fact that the implementation of the minimum tax law hasn't been written yet.  There is no indication they intend to negate renewable energy tax credits, accelerated depreciation for investments in US PPE, or introduce a new tax on unrealized gains on securities inside insurance company investment portfolios.  

 

I wouldn't expect Berkshire to have a huge change to their cash tax rates when this thing is finally implemented.

[Munger_Disciple]

5 hours ago, gfp said:

These articles ignore the fact that the implementation of the minimum tax law hasn't been written yet.  There is no indication they intend to negate renewable energy tax credits, accelerated depreciation for investments in US PPE, or introduce a new tax on unrealized gains on securities inside insurance company investment portfolios.  

 

I wouldn't expect Berkshire to have a huge change to their cash tax rates when this thing is finally implemented.

 

+1

 

Articles like this from Barron's & WSJ are click bait I'm afraid. I like this rebuttal : An AT&T spokesman said the company doesn’t expect the minimum tax to affect its 2023 tax bill. “Academics don’t prepare our taxes; trained and expert tax professionals do that work,” the spokesman said.

Edited September 27, 2022 by Munger_Disciple

[hardcorevalue]

even though it's losing relevance does anyone care to guess what p/b $BRK.b is trading at today? 

[Thrifty3000]

On 9/23/2022 at 7:39 PM, yesman182 said:

I do too, but I also hope he is finding other securities he likes more. 

 

Last time the shares were in this price range he was scooping up $5 to $6 billion per quarter. I assume he's buying back that amount again now.

[yesman182]

I was wondering if WEB would sell his ATVI shares and buy back more BRK shares. At most he stands to make ~25% before taxes with ATVI. But since the ATVI deal isn't certain to close, why "risk it" when you have the buyback as an option.  When they were buying ATVI in Q1 is seems like the BRK shares were near the all time high. It seems to me that the BRK shares are around 20% below intrinsic value and it seems like they are a better buy than ATVI.