Buffett/Berkshire - general news

[maxthetrade]

Here is the complete memo:

http://www.wsj.com//public/resources/documents/GenReCEOsuccession.pdf

[Guest longinvestor]

I think the CEO job goes to Ted or Todd but probably Ted. Managing the investment portfolio and acquiring businesses are tied at the hip as one provides the source of capital for the other.

 

Wouldn't it be awkward if the CEO firmly believes in a certain acquisition but requires the portfolio manager to sell down shares he believes in? Obv the CEO makes the final call but it's clearly a better process if it's one person. In this case perhaps the two of them as a team.

 

Also capital allocation is a broad talent which can be used in both functions. Whereas say, Matt Rose and Greg Abel have very focused skills.

 

Furthermore we've already seen greater involvement from them, esp Ted, in operations/acquisitions. And they're young, and both work in Omaha.

The skill most needed to be successful in the successor job would be to attract, retain, cheerlead and assure that the leadership transition at the subsidiaries goes without too much disruption. Someone who has mastery over designing incentives would be hugelyv valuable. I don't know enough about Todd and Ted to say they fit the above. My sense is they'd be more in line to take on the entire portfolio of $120b from the $9 b

 

[Palantir]

 

Furthermore we've already seen greater involvement from them, esp Ted, in operations/acquisitions. And they're young, and both work in Omaha.

 

I think both are still in their home offices.

[gfp]

Todd Combs moved to Omaha.  Ted Weschler commutes from Virginia.  Both have offices down the hall from Buffett.  I'm sure they have home offices as well

[Mephistopheles]

The skill most needed to be successful in the successor job would be to attract, retain, cheerlead and assure that the leadership transition at the subsidiaries goes without too much disruption. Someone who has mastery over designing incentives would be hugelyv valuable. I don't know enough about Todd and Ted to say they fit the above. My sense is they'd be more in line to take on the entire portfolio of $120b from the $9 b

 

 

For sure they will take over the entire portfolio; that's already been decided.

 

I'd argue that the #1 skill needed is allocating capital across a variety of industries - which they already have a good sense for as they manage investment portfolios. In contrast, Ajit Jain, Matt Rose (or whomever the BNSF CEO is now), and Greg Abel allocate capital in very specific industries. They also spend their time in operations of their specific companies.

 

It would be hard for Jain, for example, to manage the insurance companies and also manage the rest of Berkshire and filter through hundreds of potential acquisitions every year. On the other hand making acquisitions goes right into Ted/Todd's job function, only instead of just public companies they'd also be looking at privately held companies.

[gfp]

Westar Energy had been rumored to be a possiblility for Berkshire Hathaway Energy.  Looks like they either weren't interested - or much more likely - the bidding got too rich to justify.  Great Plains Energy won the "auction" - acquisition premium has been building in the stock for months

 

http://www.wsj.com/articles/great-plains-energy-to-buy-westar-energy-for-8-6-billion-1464691927

[fareastwarriors]

Warren Buffett’s Dicey Power Play

 

MGM and Wynn move to leave Nevada’s Berkshire-owned utility.

 

http://www.bloomberg.com/news/articles/2016-06-10/buffett-s-power-play-pits-las-vegas-casinos-against-energy-unit

[Jurgis]

Warren Buffett’s Dicey Power Play

 

MGM and Wynn move to leave Nevada’s Berkshire-owned utility.

 

http://www.bloomberg.com/news/articles/2016-06-10/buffett-s-power-play-pits-las-vegas-casinos-against-energy-unit

 

Is Berkshire Energy the high cost provider or are other companies loss-selling (or very-low-margin selling)?

[rb]

They're the only provider.

[Jurgis]

They're the only provider.

 

Obviously not if casinos are switching to other providers.

[rb]

From what I understand in the article they'll buy wholesale on the energy market. Tenaska for example doesn't have any generation in Nevada. Not sure whether Exelon does or doesn't.

[gfp]

They are the only transmission provider.  The casinos will still be transmission customers.

 

They're the only provider.

[Jurgis]

Yes, I understand that casinos will still use Berkshire Energy as transmission provider.

 

My question meant specifically the energy provider part.

So to repeat: Is Berkshire Energy the high cost energy provider or are other companies loss-selling (or very-low-margin selling) it (in wholesale market)?

 

I thought Buffett or Abel said that they are low cost energy provider. But perhaps they meant low-cost energy+transmission combined - although that makes little sense, since you can't compare transmission since usually there's only a single transmission provider.

[gfp]

In some markets, Berkshire Hathaway Energy's local companies are the low cost provider - MidAmerican for example.  Obviously in Vegas there is a savings by purchasing power from other generators.  NVE's rates are set by the regulator while a large customer can negotiate market rates directly with a producer.

 

Yes, I understand that casinos will still use Berkshire Energy as transmission provider.

 

My question meant specifically the energy provider part.

So to repeat: Is Berkshire Energy the high cost energy provider or are other companies loss-selling (or very-low-margin selling) it (in wholesale market)?

 

I thought Buffett or Abel said that they are low cost energy provider. But perhaps they meant low-cost energy+transmission combined - although that makes little sense, since you can't compare transmission since usually there's only a single transmission provider.

[Jurgis]

OK, thanks.

[fareastwarriors]

See’s Candies to open first New York retail shop this summer

 

http://www.nytimes.com/2016/06/15/realestate/commercial/recent-commercial-real-estate-transactions.html?_r=2

 

60 West Eighth Street (between Avenue of the Americas and MacDougal Street) Manhattan

 

See’s Candies, based in San Francisco, is to open its first New York shop toward the end of the summer in a 625-square-foot retail space, with a 325-square-foot basement, in this five-story walk-up, which was built around 1900, in the Greenwich Village Historic District.

 

 

Tenant: See’s Candies

 

[valueinvesting101]

See's candy was available at Macy's during Christmas season. With their own store, they will be able to sell more product variety. But location choice seems odd to me. I think it would have better fit in midtown but then rents would be higher in Midtown.

[John Hjorth]

Buffett Applies to Fed to Build Wells Fargo Stake Beyond 10%

 

http://www.bloomberg.com/news/articles/2016-07-01/buffett-applies-to-fed-to-expand-wells-fargo-holding-beyond-10

[Guest longinvestor]

AMZN just left BRK behind on mkt cap.

 

FB at 331 is within shouting distance.

 

That leaves NFLX @42 B and that'd completely bring on the new FANG 4x world order.

[gfp]

I shared this elsewhere, but some here might be interested in this A.M. Best magazine article on Ajit Jain with comments from Warren - this links to the article in PDF format, might not be available forever at this link but working now:

 

http://www3.ambest.com/review/article/July2016/32_KeyInfluencers_AjitJain.pdf

[Guest longinvestor]

I shared this elsewhere, but some here might be interested in this A.M. Best magazine article on Ajit Jain with comments from Warren - this links to the article in PDF format, might not be available forever at this link but working now:

 

http://www3.ambest.com/review/article/July2016/32_KeyInfluencers_AjitJain.pdf

 

Interesting piece on Ajit but there's not much by way of new information, Buffett has said these things about Jain all along. Just fueling the succession story, it appears. As a shareholder, it would be great for everyone at Berkshire to come to Jesus for vetting their ideas. At least the very big ones. Keep us all out of trouble.

[fareastwarriors]

Berkshire Hathaway Said to Be Among Leading Oncor Bidders

 

http://www.bloomberg.com/news/articles/2016-07-14/berkshire-hathaway-said-to-be-among-leading-bidders-for-oncor

[alpha asset strategies]

Berkshire Hathaway Said to Be Among Leading Oncor Bidders

 

http://www.bloomberg.com/news/articles/2016-07-14/berkshire-hathaway-said-to-be-among-leading-bidders-for-oncor

 

Hasn't Buffett stated in the past that he doesn't participate in auctions?  Is this a new practice for him, or has he bought companies via auction in the past?  I personally can't recall any off the top of my head.

[John Hjorth]

Berkshire Hathaway Said to Be Among Leading Oncor Bidders

 

http://www.bloomberg.com/news/articles/2016-07-14/berkshire-hathaway-said-to-be-among-leading-bidders-for-oncor

 

Hasn't Buffett stated in the past that he doesn't participate in auctions?  Is this a new practice for him, or has he bought companies via auction in the past?  I personally can't recall any off the top of my head.

 

Yes it's mentioned in the aqusition criteria section of the shareholder letter every year.  Wasen't there a similar situation a few years back, where Ajit Jain on behalf of Berkshire Re placed a bid [one final bid] on a listed reinsurance company [Transocean Re or something like that was the name of the company, if I remember correctly].

[gfp]

Jain bid on Transatlantic Re, but there may have been more to it than a simple auction bid.  He may have been doing a friend a favor to get another bidder to come up or block someone - I can't remember the specifics but Berkshire didn't buy the company.  Despite Berkshire's long stated "rule" that they don't participate in auctions, they absolutely do and this isn't new.  Most of the companies they purchased out of Bankruptcy and several negotiated takeovers that had other interested parties over the years.  Warren can define "auction" loosely and keep it in the "rules".  It primarily serves to remind sellers that Berkshire doesn't like to duke it out with others so don't try it or you risk us pulling our offer, as well as the standard "we don't want to bring in managers/founders who care so little about their baby that they would sell it to the highest bidder vs the best permanent home"

 

edit - Alleghany ended up winning TransRe, which Gen Re - now under Ajit's management - just signed a broker market cooperation deal with.  I do believe Ajit is close with TransRe management and Berk's bid was a sort of favor for a friend.  TransRe didn't want Validus to get the company for whatever reason.