Buffett/Berkshire - general news

[Dynamic]

On thinking about your suspicion that Berkshire has stopped buying Apple, I think you're right and that they may potentially have even decided to trim their position by a small amount to stay below the reporting threshold.

 

Regarding Apple and the 13D requirements, I wasn't aware that 13D reporting came at 5% as I'm fairly new to trawling through all the EDGAR filings, especially since I've started receiving them on email via rocketfinancial and since I start looking at historic 13D filings to calculate the holdings by pensions funds for various Berkshire subsidiary employees to account for these in the Look Through spreadsheet, but here's a decent summary I found in response to gfp's post:

 

Schedule 13D

From Wikipedia, the free encyclopedia

 

Schedule 13D is an SEC filing that must be submitted to the US Securities and Exchange Commission within 10 days by anyone who acquires beneficial ownership of more than 5% of any class of publicly traded securities in a public company. A filer must promptly update the Schedule 13D filing to reflect any material change in the facts disclosed, including, among other things, the acquisition or disposition of 1% or more of the class of securities that are the subject of the filing.

 

I have recently had suspicions that a few more AAPL may have been purchased by Berkshire in the $162-$165 range at the end of April, but the run-up to $183-$194 ballpark since then may have curtailed their buying. Roughly 200 milion shares of AAPL traded in that April low period, so I would not have been shocked to find they've added another 50-60 million shares.

 

On the latest Apple 10-Q we have the figure:

4,915,138,000 shares of common stock, par value $0.00001 per share, issued and outstanding as of April 20, 2018

, which remains the latest published figure for outstanding shares.

 

Now it appears that 5% reporting threshold would currently be 245,756,900 shares.

 

Berkshire's 13-F holdings (Berkshire and New England Asset Management combined) as of 31st March including pension fund holdings are:

245,278,633 (4.990% of last known shares outstanding).

 

This is remarkably close to a threshold that wouldn't have been precisely known to Berkshire prior to 20th April. Can that be coincidence?

 

We believe that 2,837,753 shares are owned by pension schemes within Berkshire (per 10-K annual report). (0.058% of AAPL)

 

From the financial-benefit definition of beneficially owned, Berkshire has 242,440,880 (4.933% of AAPL), excluding the pension scheme holdings that are not for the financial benefit of Berkshire's owners.

But from the voting power definition of beneficially owned, it's the 4.990% known directly from the two 13-F filings that counts.

 

I assume from the 4.990% being just below 5.000% that it may be the latter that would trigger the 13D and that this threshold is what curtailed Berkshire's buying in the first quarter to avoid reporting responsibilities.

 

It is even possible, perhaps likely, that Berkshire may engage in slight trimming this quarter at the $180+ range to avoid 13D filing responsibilities that might arise the moment that Apple next makes a filing that discloses a reduced number of shares outstanding.

 

In this way, Apple, like Wells Fargo, may well then remain at about this size, with Berkshire estimating the extent of Apple buybacks and trimming slightly from quarter to quarter, unless the SEC is willing to grant them an exemption from public filing within 10 days until they hit a higher limit such as 10%. I imagine such an exemption is possible, because I don't recall 13D filings about the 0.4% Wells Fargo position trimming appearing prior to the release of the 13-F this quarter, and this trimming ws to keep Berkshire just below the 10% level to avoid being considered a Bank Holding Company, which is, of course, well above the 5% 13D threshold. If they are allowed exemption from public filing of 13D while they build their position.

 

From the Berkshire 2018Q2 quarterly report, they beneficially hold $47.2bn as of 30th June 2018. The pension scheme holdings wouldn't be included there but will appear in the 13-F later this month.

The lowest number that would round up to that figure is $47.15bn.

The Apple share price at the close on 29th June - the last trading day - was $185.11

So the smallest share count that fits would be 254,713,414 shares of Apple held by Berkshire, an increase of at minimum 9,434,781 shares over 31/03/2018.

 

As a percentage of Apple's then published 4,915,138,000 shares outstanding (as of their May 10Q), this is 5.18% at a minimum based on the known share count at the time (which has since decreased, increasing Berkshire's percentage ownership of Apple).

 

So this exceeds the 5% threshold where Berkshire must file a Schedule 13D filing with the SEC.

 

From this I think we can assume that Berkshire has been granted confidential filing status for Schedule 13D at this point while they continue to add to their position, so their public holdings will only be released in their 13-F filing later this month and there will be less indication of the price range they've bought at than during a 10-day period. Otherwise, had the 13D filing been made public we'd have known within 10 days of any increase above 5% during the quarter, meaning at latest 10th July if they'd bought off market on 30th June. This confidential status seems entirely fair given Berkshire's proprietary view of Apple's valuation which is a competitive advantage. Berkshire clearly doesn't wish to conduct a takeover of Apple or exercise control over it, and the SEC's requirement relates to monitoring of voting power, not publicly disclosing the prices and quantities traded by those they regulate and giving away such proprietary judgement clues to the investment community at large.

 

Perhaps we can then envisage that Berkshire could continue to buy beyond 5% when Apple is priced attractively, and could probably get close to 10% before hitting the requirements that caused them to trim their Phillips 66 (PSX) stake, even though, like Apple it's not a bank, so wouldn't cause Berkshire to be considered a bank holding company as a 10% holding in Wells Fargo would. Possibly even over 10%, it might be worth whatever those requirements are, given that Apple is one of the few investees that can really move the needle given Berkshire's size.

 

That potentially could mean that in future, rather than the Apple stake representing about 9-10% of Berkshire's market cap, it could rise a lot further.

 

I haven't yet updated my public Look Through Google Sheet, as we only have an estimated Apple holding and the share count has only risen by 2% last quarter. It won't be too long until the 13-F is released and I will update it more fully.

[SwedishValue]

On thinking about your suspicion that Berkshire has stopped buying Apple, I think you're right and that they may potentially have even decided to trim their position by a small amount to stay below the reporting threshold.

 

Regarding Apple and the 13D requirements, I wasn't aware that 13D reporting came at 5% as I'm fairly new to trawling through all the EDGAR filings, especially since I've started receiving them on email via rocketfinancial and since I start looking at historic 13D filings to calculate the holdings by pensions funds for various Berkshire subsidiary employees to account for these in the Look Through spreadsheet, but here's a decent summary I found in response to gfp's post:

 

Schedule 13D

From Wikipedia, the free encyclopedia

 

Schedule 13D is an SEC filing that must be submitted to the US Securities and Exchange Commission within 10 days by anyone who acquires beneficial ownership of more than 5% of any class of publicly traded securities in a public company. A filer must promptly update the Schedule 13D filing to reflect any material change in the facts disclosed, including, among other things, the acquisition or disposition of 1% or more of the class of securities that are the subject of the filing.

 

I have recently had suspicions that a few more AAPL may have been purchased by Berkshire in the $162-$165 range at the end of April, but the run-up to $183-$194 ballpark since then may have curtailed their buying. Roughly 200 milion shares of AAPL traded in that April low period, so I would not have been shocked to find they've added another 50-60 million shares.

 

On the latest Apple 10-Q we have the figure:

4,915,138,000 shares of common stock, par value $0.00001 per share, issued and outstanding as of April 20, 2018

, which remains the latest published figure for outstanding shares.

 

Now it appears that 5% reporting threshold would currently be 245,756,900 shares.

 

Berkshire's 13-F holdings (Berkshire and New England Asset Management combined) as of 31st March including pension fund holdings are:

245,278,633 (4.990% of last known shares outstanding).

 

This is remarkably close to a threshold that wouldn't have been precisely known to Berkshire prior to 20th April. Can that be coincidence?

 

We believe that 2,837,753 shares are owned by pension schemes within Berkshire (per 10-K annual report). (0.058% of AAPL)

 

From the financial-benefit definition of beneficially owned, Berkshire has 242,440,880 (4.933% of AAPL), excluding the pension scheme holdings that are not for the financial benefit of Berkshire's owners.

But from the voting power definition of beneficially owned, it's the 4.990% known directly from the two 13-F filings that counts.

 

I assume from the 4.990% being just below 5.000% that it may be the latter that would trigger the 13D and that this threshold is what curtailed Berkshire's buying in the first quarter to avoid reporting responsibilities.

 

It is even possible, perhaps likely, that Berkshire may engage in slight trimming this quarter at the $180+ range to avoid 13D filing responsibilities that might arise the moment that Apple next makes a filing that discloses a reduced number of shares outstanding.

 

In this way, Apple, like Wells Fargo, may well then remain at about this size, with Berkshire estimating the extent of Apple buybacks and trimming slightly from quarter to quarter, unless the SEC is willing to grant them an exemption from public filing within 10 days until they hit a higher limit such as 10%. I imagine such an exemption is possible, because I don't recall 13D filings about the 0.4% Wells Fargo position trimming appearing prior to the release of the 13-F this quarter, and this trimming ws to keep Berkshire just below the 10% level to avoid being considered a Bank Holding Company, which is, of course, well above the 5% 13D threshold. If they are allowed exemption from public filing of 13D while they build their position.

 

From the Berkshire 2018Q2 quarterly report, they beneficially hold $47.2bn as of 30th June 2018. The pension scheme holdings wouldn't be included there but will appear in the 13-F later this month.

The lowest number that would round up to that figure is $47.15bn.

The Apple share price at the close on 29th June - the last trading day - was $185.11

So the smallest share count that fits would be 254,713,414 shares of Apple held by Berkshire, an increase of at minimum 9,434,781 shares over 31/03/2018.

 

As a percentage of Apple's then published 4,915,138,000 shares outstanding (as of their May 10Q), this is 5.18% at a minimum based on the known share count at the time (which has since decreased, increasing Berkshire's percentage ownership of Apple).

 

So this exceeds the 5% threshold where Berkshire must file a Schedule 13D filing with the SEC.

 

From this I think we can assume that Berkshire has been granted confidential filing status for Schedule 13D at this point while they continue to add to their position, so their public holdings will only be released in their 13-F filing later this month and there will be less indication of the price range they've bought at than during a 10-day period. Otherwise, had the 13D filing been made public we'd have known within 10 days of any increase above 5% during the quarter, meaning at latest 10th July if they'd bought off market on 30th June. This confidential status seems entirely fair given Berkshire's proprietary view of Apple's valuation which is a competitive advantage. Berkshire clearly doesn't wish to conduct a takeover of Apple or exercise control over it, and the SEC's requirement relates to monitoring of voting power, not publicly disclosing the prices and quantities traded by those they regulate and giving away such proprietary judgement clues to the investment community at large.

 

Perhaps we can then envisage that Berkshire could continue to buy beyond 5% when Apple is priced attractively, and could probably get close to 10% before hitting the requirements that caused them to trim their Phillips 66 (PSX) stake, even though, like Apple it's not a bank, so wouldn't cause Berkshire to be considered a bank holding company as a 10% holding in Wells Fargo would. Possibly even over 10%, it might be worth whatever those requirements are, given that Apple is one of the few investees that can really move the needle given Berkshire's size.

 

That potentially could mean that in future, rather than the Apple stake representing about 9-10% of Berkshire's market cap, it could rise a lot further.

 

I haven't yet updated my public Look Through Google Sheet, as we only have an estimated Apple holding and the share count has only risen by 2% last quarter. It won't be too long until the 13-F is released and I will update it more fully.

 

This is extremely interesting to me. Living a couple of thousand miles away and with approximately zero knowledge on US reporting requirements and exceptions, your argument seems to make a lot of sense. Any other takers?

[Dynamic]

Thanks @SwedishValue. User @globalfinancepartners has been the member who had explained most of this to me, for which I'm very grateful and give huge credit (and surely owe them a beer or two if we should ever meet!), so I posted this with the thought that any nuance I've misunderstood will be corrected by peer-review and we'll all learn something.

[gfp]

Thats a lot to read on a phone, but I think you guys got the gist of it.  The most recent published share count of Apple (found at the very top of every 10Q) is the number they have to use, not quarter-end or average share counts.  Apple published this:

 

"4,829,926,000 shares of common stock, par value $0.00001 per share, issued and outstanding as of July 20, 2018"

 

less than 10 business days ago, which I believe is the Berkshire deadline for publishing a "13G" with the SEC.  If Berkshire doesn't file within 10 business days of Apple's updated share count, they either made a mistake and will update later with a 'sorry, we should have done this earlier' or they have elected to sell down their stake to stay just under what they project to be the 5% share count - for the sake of privacy one would assume.  It's not very important in valuing Berkshire obviously.  Hell, Berkshire could even enter into one of those deals like Advance/Newhouse did with Charter where they sell blocks back to the company to maintain their exact same % ownership level over time.  Would probably save both parties a little bit on trading costs.  But I don't expect that

 

I will ask Marc Hamburg, but I seriously doubt he will answer me about this question since it involved an individual security Warren might be buying or selling. 

[John Hjorth]

Do you remember this? I'll bet this will never happen again with Mr. Hamburg as CFO. I haven't studied his 2014 bonus in the AGM 2015 proxy, though! [ : - ) ]

[Dynamic]

"4,829,926,000 shares of common stock, par value $0.00001 per share, issued and outstanding as of July 20, 2018"

 

My point was that they already exceeded 5% by 30th June 2018 even using the April share count published by Apple in early May, so they would have had to publish by 10th July 2018, which has been and gone.

 

Thus I'm pretty sure they have a confidentiality waiver on the 13D filings, meaning they tell the SEC within 10 days but the SEC doesn't make it public so we can't narrow down too closely what prices they consider cheap.

 

That's unless they somehow get to use a different Apple mark-to-market price from the closing price I found through Google Finance and Yahoo Finance for 29th June 2018. That would throw out my calculation of the minimum number of shares that would round to 47.2 billion dollars, but I've never noticed such a discrepancy before.

[gfp]

Ah yes I see your point.  If I had to guess I would say they are selling a small number of shares to keep it under the reporting requirements.  I don't believe they have any confidential treatment for the 13G and they didn't seek confidential treatment on the 13F.  We'll see if Marc gets back to me but I doubt he will be able to answer if they are indeed selling shares.

[Dynamic]

Well, the 13F is not long to wait for, then we'll have an actual share count as of 30th June 2018, filed with the SEC, instead of having to back-calculate from dividing the reported Q2 valuation of their Apple stake to the nearest $0.1bn by the presumed closing price they would have used to derive it, which is usually pretty reliable.

 

Buffett also muttered some comments to Becky Quick in a CNBC interview prior to the Annual Meeting and Q1 financials which seemed in accordance with the current holdings according to what someone mentioned in another thread - though I haven't checked it - and thinking about it, Warren's command of the figures and instant recall is legendary, so an off-the-cuff mumbled remark is probably going to be correct in his case.

 

I'm thinking they did and still do hold more than 5.0% and would have to tell the SEC every time their holding increases by 1% more, if I understand the rules

[Jurgis]

I wonder what you guys think about BRK taking (very close to) 5% position in companies and having to sell down to 5% due to share buybacks. Isn't this very short term investing? I.e. they pretty much know the company will be buying back shares and they know that they will have to sell down within a quarter, so their holding time is a quarter or two for that slice of position. Is it a good investment? (Yeah, if there's bull market in that stock, it is, but Buffett would not buy expecting single quarter bull market, would he?). Why not buy 4.8% or some other number where they would not be forced to sell within short time frame?

 

Not that this matters a lot, but I just wonder...

[Dynamic]

Yeah, that's another reason I think they're over 5%. It's much more speculative if you're a forced seller. The odds may be tilted in your favour if you buy well below IV, but it's still pretty speculative.

[LC]

End quarterly guidance! Indeed. Let’s see how this plays out.

 

Not sure I agree. I don't view quarterly guidance as a measure to price the stock - but rather to "price" management. How accurate are management's estimates? If they're regularly inaccurate, why is that? Is the business very volatile and even management cannot get much clarity? Is management just dumb, or at worse, dishonest?

 

I think the more communication between management and shareholders, the better - even if it just management's estimate. It's the shareholder's job to manage that information.

[alwaysinvert]

https://www.businesswire.com/news/home/20180813005684/en/

 

Airlines and banks... no mention of Apple there

[Dynamic]

I suspect they're specifically mentioning the banking and airline industries because it's those industries where some positions are close to 10% and they're simultaneously adding to some of the similar banks that are well below 10%.

 

They know that their 13-F is widely scrutinised to garner insights into the thinking of one of the greatest investors (and two other great investors picked by him), so they're indicating that in the case of banks and airlines, they'll have sold some Wells Fargo, almost certainly, to stay below 10% as they repurchase, but may have added to Bank of America, say, or Bank of New York Mellon or an investment bank. They wish to ensure that investors and reporters do not erroneously attribute such sales to having a preference of giving any endorsement to one bank over another or one airline over another, or cause a panic sell-off in a troubled bank like Wells Fargo based on a misinterpretation, or cause a run-up in a bank being added to, which might even constitute inadvertent market manipulation and work against their self-interest as a current seller/buyer respectively.

 

In the case of Apple, they're not near the 10% threshold and they're not investing in other similar companies, so no such buying/selling differential will be evident.

 

I'm not sure I'll do so tomorrow 'afternoon' which is some time in the evening or night here in the UK, but I'll aim to update my public Look Through Google Sheets with both the Berkshire 13-F and the New England Asset Management 13-F, plus some other recent filings such as the 13G/A on Axalta. Until now, as we only had to wait a week or two since the Q2 financials, I decided not to update the COMBINED HOLDINGS worksheet tab with the information gleaned regarding small changes. As always, my spreadsheet will differ from those published in most places on the internet because I include New England Asset Management (thanks @globalfinancepartners) and make adjustments for some known or assumed foreign holdings that don't get reported on 13-F and also for known holdings within Berkshire's pensions funds that aren't for the benefit of shareholders.

[Jurgis]

https://www.businesswire.com/news/home/20180813005684/en/

 

This reraises the question I had above in the thread. Why not pre-plan and not bump into 5%/10% limits and have to sell? Seems like these guys need some investment planning people or something...

 

(And as above, yeah, in bull market maybe you leave money on the table by taking position that does not bump into 5/10 limits. But you won't always have gains when selling is forced).

[gfp]

https://www.dataroma.com/m/holdings.php?m=BRK

[Zorrofan]

Any idea why BRK sold out of Verisk?

[rb]

Valuation?

[Zorrofan]

BRK has held a stake since before it went public. Was wondering whats changed, thought about valuation but WEB didn't sell KO when it was wildly overpriced so......

[Dynamic]

Any idea why BRK sold out of Verisk?

 

There are still 2,780,136 shares of Verisk held by Berkshire care of New England Asset Management 13-F filing owner code 01 02.

 

Including both 13-F filings, it appears to have declined by -458,692 shares, or -14.2% of the previous quarter's holding, and it just happens that all of Berkshire's direct holdings were eliminated.

 

More to come via my Look Through Portfolio thread.

[Zorrofan]

Any idea why BRK sold out of Verisk?

 

There are still 2,780,136 shares of Verisk held by Berkshire care of New England Asset Management 13-F filing owner code 01 02.

 

Including both 13-F filings, it appears to have declined by -458,692 shares, or -14.2% of the previous quarter's holding, and it just happens that all of Berkshire's direct holdings were eliminated.

 

More to come via my Look Through Portfolio thread.

 

thanks!!

[gfp]

The only real surprise for me was that he continued to sell down PSX following last quarter's big sale back to the company.  PSX shares continued to rise, in part because of the share retirement Buffett contributed to.  He had said in the press release for the big sale back to the company that he intended to remain a large shareholder.

 

Maybe he just wanted to give them some room to do more big repurchases before he hits 10% again.

 

The airline and bank moves were telegraphed a couple days ago.  I guess the Goldman addition is a bit of a surprise since he hasn't added to the position from net-settling the warrants until now as far as I can remember.

[John Hjorth]

Perhaps Mr. Buffet needed some cash to hand over more capital to manage by Mr. Combs & Mr. Weshler [and woulden't reduce overall level of cash & T-Bills]? - I'm just speculating here. This "Here are USD X B to manage your own way, but don't buy "my" stocks" can create some odd situations.

[CorpRaider]

Man, I think they are off base on the airlines (again).

[John Hjorth]

Conglomerate investing is like starting mingling and merging toes with another person relatively late in life. You have to take the whole package, or pass.

[longtermdave]

Another step back from his many activities. He'd been meeting with students from 40 different universities.

 

https://www.usnews.com/news/best-states/nebraska/articles/2018-08-14/warren-buffett-is-ending-his-meetings-with-college-students