Buffett/Berkshire - general news

[Munger_Disciple]

1 minute ago, stahleyp said:

 

Just because Buffett can do the conglomerate thing better right now it doesn't mean a) someone else can run it better than breaking up b) economies change c) tax situations change

 

I will take the other side of this bet, i.e., Berkshire will endure in its current form for a long, long time. 

[Xerxes]

Reposted here 

 

what is the highest level of a theoretical BRK breakup it can have ?

 

the stock portfolio is mostly held at the insurance as other stated. So of Buffett’s  famous four pillars*, three of them are entangled but that leaves BHE, the fourth pillar, as the easiest (relatively speaking) to spin. 
 

am I correct in stating that ?
 

 

* insurance, BNSF, BHE and Apple

[Spekulatius]

4 hours ago, Xerxes said:

Reposted here 

 

 

what is the highest level of a theoretical BRK breakup it can have ?

 

the stock portfolio is mostly held at the insurance as other stated. So of Buffett’s  famous four pillars*, three of them are entangled but that leaves BHE, the fourth pillar, as the easiest (relatively speaking) to spin. 
 

am I correct in stating that ?
 

 

* insurance, BNSF, BHE and Apple

I am not sure where BHE is held, but suspect it’s at the insurance level as well. However, if it is were possible to spin BHE it would make the least sense because BHE has so much depreciation that they have a negative income tax rate, meaning they reduce taxes for the rest of Berkshire as long as they belong to the conglomerate and would lose those tax credits if they were stand-alone. I think BHE is actually the least likely part to be spun off.

 

I think the easiest so spin off would be the large minors stakes that also present some deadwood like KFC or maybe even KO. They are not controlled by Berkshire, so Berkshire could sell them off, as ai think they are more or less sentimental holdings in WEB coffee can portfolio and unlikely to outperform in the future,

Edited March 7, 2023 by Spekulatius

[Blugolds]

1 hour ago, Spekulatius said:

I am not sure where BHE is held, but suspect it’s at the insurance level as well. However, if it is were possible to spin BHE it would make the least sense because BHE has so much depreciation that they have a negative income tax rate, meaning they reduce taxes for the rest of Berkshire as long as they belong to the conglomerate and would lose those tax credits if they were stand-alone. I think BHE is actually the least likely part to be spun off.

 

I think the easiest so spin off would be the large minors stakes that also present some deadwood like KFC or maybe even KO. They are not controlled by Berkshire, so Berkshire could sell them off, as ai think they are more or less sentimental holdings in WEB coffee can portfolio and unlikely to outperform in the future,

 

Also IMO BHE has the largest potential for deployment of tremendous amounts of future capital for "satisfactory" rates of return. Who knows what the future holds as far as the path the US takes with energy, but BHE has huge advantages in the ability to offer options with little red tape, quick decisions made to go in directions that would otherwise require approval from shareholders, securing of financing etc with competitors that doesnt exist with BHE. Potential for almost unlimited investment if the numbers make sense providing win/win opportunities for customers, states and BRK shareholders. When I look at BRK as a whole, BHE is what gets me most excited for the future as a shareholder. 

[oscarazocar]

1 hour ago, Spekulatius said:

I am not sure where BHE is held, but suspect it’s at the insurance level as well. However, if it is were possible to spin BHE it would make the least sense because BHE has so much depreciation that they have a negative income tax rate, meaning they reduce taxes for the rest of Berkshire as long as they belong to the conglomerate and would lose those tax credits if they were stand-alone. I think BHE is actually the least likely part to be spun off.

 

I think the easiest so spin off would be the large minors stakes that also present some deadwood like KFC or maybe even KO. They are not controlled by Berkshire, so Berkshire could sell them off, as ai think they are more or less sentimental holdings in WEB coffee can portfolio and unlikely to outperform in the future,

It would be very hard to dispose of those equity stakes with paying taxes, which is a big part of the reason they aren't sold.  Berkshire was able to dispose of its Washington Post and Proctor & Gamble stakes through cash-rich splitoffs a little while back, but those are tricky to do and the stars have to line up.

[nwoodman]

1 hour ago, Blugolds11 said:

 

Also IMO BHE has the largest potential for deployment of tremendous amounts of future capital for "satisfactory" rates of return. Who knows what the future holds as far as the path the US takes with energy, but BHE has huge advantages in the ability to offer options with little red tape, quick decisions made to go in directions that would otherwise require approval from shareholders, securing of financing etc with competitors that doesnt exist with BHE. Potential for almost unlimited investment if the numbers make sense providing win/win opportunities for customers, states and BRK shareholders. When I look at BRK as a whole, BHE is what gets me most excited for the future as a shareholder. 

Great post and totally agree. I was just reflecting on this today and thinking what an incredible swag of assets to hold at this point in time.  Buffett said for many years that the energy business was always about wealth protection, understated to the last

[Xerxes]

3 hours ago, Spekulatius said:

I am not sure where BHE is held, but suspect it’s at the insurance level as well. However, if it is were possible to spin BHE it would make the least sense because BHE has so much depreciation that they have a negative income tax rate, meaning they reduce taxes for the rest of Berkshire as long as they belong to the conglomerate and would lose those tax credits if they were stand-alone. I think BHE is actually the least likely part to be spun off.

 

I think the easiest so spin off would be the large minors stakes that also present some deadwood like KFC or maybe even KO. They are not controlled by Berkshire, so Berkshire could sell them off, as ai think they are more or less sentimental holdings in WEB coffee can portfolio and unlikely to outperform in the future,

 

Thanks.

Though wouldn't KO be also be one of those owned through the float and not directly through the group's balance sheet.

 

 

[Munger_Disciple]

2 hours ago, Blugolds11 said:

 

Also IMO BHE has the largest potential for deployment of tremendous amounts of future capital for "satisfactory" rates of return. Who knows what the future holds as far as the path the US takes with energy, but BHE has huge advantages in the ability to offer options with little red tape, quick decisions made to go in directions that would otherwise require approval from shareholders, securing of financing etc with competitors that doesnt exist with BHE. Potential for almost unlimited investment if the numbers make sense providing win/win opportunities for customers, states and BRK shareholders. When I look at BRK as a whole, BHE is what gets me most excited for the future as a shareholder. 

 

+1

 

In addition, I think there is an excellent symbiotic relationship between insurance & BHE where insurance generates the capital via float and can be invested in BHE at decent rates of return. That's why I think it would be stupid to try to break up Berkshire. As a whole, Berkshire's intrinsic value is greater than the pieces. 

[Spooky]

7 hours ago, Munger_Disciple said:

 

+1

 

In addition, I think there is an excellent symbiotic relationship between insurance & BHE where insurance generates the capital via float and can be invested in BHE at decent rates of return. That's why I think it would be stupid to try to break up Berkshire. As a whole, Berkshire's intrinsic value is greater than the pieces. 

 

Exactly. In my opinion the large amount of float BRK has available reduces its cost of capital which gives it an advantage in capital intensive industries which is why BRK is the largest owner of PP&E in America. It is the best owner of these types of assets.

[CassiusKing1]

Agreed 100%.  Berk is more valuable as it is, not broken up.

 

I'm still wishing that WEB takes out Costco.  I think it fits perfectly and compliments so many of our businesses.

Recurring revenue from membership dues.  Costco offers auto/home insurance that can be combined with BRK's already existing businesses.  Costco could be a little like the BRK annual meeting where Costco would carry See's Candies, Benjamin Moore Paint, etc.  BRK is pretty much a Costco now without the singular store front and everything under one roof.

[Blugolds]

14 minutes ago, CassiusKing1 said:

Agreed 100%.  Berk is more valuable as it is, not broken up.

 

I'm still wishing that WEB takes out Costco.  I think it fits perfectly and compliments so many of our businesses.

Recurring revenue from membership dues.  Costco offers auto/home insurance that can be combined with BRK's already existing businesses.  Costco could be a little like the BRK annual meeting where Costco would carry See's Candies, Benjamin Moore Paint, etc.  BRK is pretty much a Costco now without the singular store front and everything under one roof.

 

 

 

 

 

 

[Guest]

20 hours ago, Munger_Disciple said:

 

I will take the other side of this bet, i.e., Berkshire will endure in its current form for a long, long time. 

 

I would take the other side of that bet. I would be very, very surprised if this is not too big of a beast for someone less capable than Buffett to manage. I wouldn't be surprised at all to see a bunch of spin offs down the road.

[John Hjorth]

16 hours ago, Spekulatius said:

I am not sure where BHE is held, but suspect it’s at the insurance level as well. ....

 

I did check up on the BHE ownership. It's actually owned by Berkshire Hathaway, the parent, and has been since control was obtained over it in 1999. The documentation for it is in the the attachments to the BHE 2022 10-K on SEC website.

Edited March 7, 2023 by John Hjorth

[cubsfan]

2 hours ago, stahleyp said:

 

I would take the other side of that bet. I would be very, very surprised if this is not too big of a beast for someone less capable than Buffett to manage. I wouldn't be surprised at all to see a bunch of spin offs down the road.

 

How does Warren do this when he's made clear to many sellers that their companies will not be sold once acquired for Berkshire?   I believe his only condition was that unless the business was struggling and forecasting unending losses - he would not sell the founder's business for a few extra points of return to Berkshire.

 

He's not going to violate that promise, given his reputation.

[gfp]

11 minutes ago, John Hjorth said:

 

I did check up on the BHE ownership. It's actually owned by Berkshire Hathaway, the parent, and has been since control was obtained over it in 1999. The documentation for it is in the the attachments to the BHE 2022 10-K on SEC website.

That is correct.  The only BHE shares owned by the Insurance Companies are the preferred shares issued to fund the recent pipeline deal.  Much of that has already been paid back / redeemed.  The insurance companies also buy publicly trading bonds of Berkshire subsidiaries from time to time in the market as an investment and I have seen some BHE bonds in National Indemnity's portfolio.

[John Hjorth]

Thank you for bringing all shades and details on the matter to the table here, @gfp. It's appreciated much, as always.

[Munger_Disciple]

3 hours ago, stahleyp said:

 

I would take the other side of that bet. I would be very, very surprised if this is not too big of a beast for someone less capable than Buffett to manage. I wouldn't be surprised at all to see a bunch of spin offs down the road.

 

To each his own. We are all free to bet the way we want & that's what makes it a market. 

[bizaro86]

1 hour ago, cubsfan said:

 

How does Warren do this when he's made clear to many sellers that their companies will not be sold once acquired for Berkshire?   I believe his only condition was that unless the business was struggling and forecasting unending losses - he would not sell the founder's business for a few extra points of return to Berkshire.

 

He's not going to violate that promise, given his reputation.

 

True. He's also unlikely to be around making or keeping promises for many more decades.

 

Nobody thinks it will be broken up in his lifetime. 10-15 years down the road after his A shares have been converted to Bs it's more possible.

[cubsfan]

24 minutes ago, bizaro86 said:

 

True. He's also unlikely to be around making or keeping promises for many more decades.

 

Nobody thinks it will be broken up in his lifetime. 10-15 years down the road after his A shares have been converted to Bs it's more possible.

 

I likely didn't say this correctly. My assumption was that his promise is for Berkshire to keep forever. 

Maybe that's not true?  

 

If the company could be taken over - that's different. 

 

But I expected as long as the acquisition was not a sustained money loser OR it damaged Berkshire's reputation - subs would not be sold to make a few bucks. Doesn't seem like the board would bend on this. And as stated, the corporate structure seems deliberate to make it difficult.

 

Anybody know if Warren's promise to selling founders extends beyond his passing?

[nwoodman]

More OXY

 

https://www.sec.gov/Archives/edgar/data/1067983/000089924323007400/xslF345X03/doc4.xml

[Ulti]

https://neckar.substack.com/p/enough-the-forgotten-lesson-of-ben

[Guest]

23 hours ago, cubsfan said:

 

How does Warren do this when he's made clear to many sellers that their companies will not be sold once acquired for Berkshire?   I believe his only condition was that unless the business was struggling and forecasting unending losses - he would not sell the founder's business for a few extra points of return to Berkshire.

 

He's not going to violate that promise, given his reputation.

 

He won't, I agree. That doesn't mean someone else won't. Unless there is some legal binding thing I'm not aware of, seems like it's doable and dare I say, likely, when he's no longer running the show.

[Spekulatius]

LOL, it's like playing Jumanji when you get your renewal letter:

 

[MCR]

Just saw Adam Mead Tweet about ROIC.AI: "It's like ValueLine for free."

What do you think? https://roic.ai/company/BRK-A

[Blugolds]

5 hours ago, MCR said:

Just saw Adam Mead Tweet about ROIC.AI: "It's like ValueLine for free."

What do you think? https://roic.ai/company/BRK-A

 

I like the layout but wonder why you cant create a portfolio of stocks you want to keep tabs on rather than always having to search each individually. Seems like a pretty basic offering that all the other info providers have ie. Finviz, yahoo, google.