Buffett/Berkshire - general news

[Dynamic]

Isen't the sustainability link on the Berkshire main webpage to the Berkshire sustainability sub page new?

 

Yes, it's new. It wasn't there on Jan 30, 2019 but was there from Feb 1st, 2019. Good spot, John.

 

Maybe they'll notice the typo in the link to Berkshire Hathaway En[glow=red,2,300]g[/glow]ergy Company soon.

 

Clicking on that link, I notice that the Property Plant and Equipment is show in Coal, Natural Gas and "Renewables and Other". Something in me makes me treat such categories with suspicion. It makes it sound like it isn't just energy generation and storage assets, but also distribution assets, offices and so on, which seems a little disingenuous if true. Also, the assets for solar and wind may cost more up front but with no ongoing fuel costs, and now even with grid scale storage, they work out cheaper per kWh in the long run, so I think it may be a little misleading superficially.

[John Hjorth]

Thanks Dynamic,

 

I think I spotted it, because of the lack of dynamics on the main page. [ ; - ) ] I have noted, that there is a delay in the "Updated" date on the main page at just about every News Release ... - sometimes a few hours, sometimes a few days. - No need to go fancy with a coded automatic "Updated" date. [it may be my own browser cache though.]

 

So I suppose the typo on the sub page will be fixed sometime soon, too.

[Dynamic]

Yeah, I do like the simplicity of Berkshire's website. Simple but effective and probably edited rarely as a minor part of the work of one person's job at HQ. Leave the flashy sites to the subsidiaries.

[John Hjorth]

... Clicking on that link, I notice that the Property Plant and Equipment is show in Coal, Natural Gas and "Renewables and Other". Something in me makes me treat such categories with suspicion. It makes it sound like it isn't just energy generation and storage assets, but also distribution assets, offices and so on, which seems a little disingenuous if true. Also, the assets for solar and wind may cost more up front but with no ongoing fuel costs, and now even with grid scale storage, they work out cheaper per kWh in the long run, so I think it may be a little misleading superficially.

 

I just noted your edit to your post #1030, quoted above, Dynamic,

 

It's to me certainly worth a separate discussion about Berkshire, and I hope you'll take the initiative to start a new topic about it.

[Dynamic]

I'm not sure it is worth another topic, and I'm generally happy with BHE's sizeable investments into renewable energy, which are quite rapidly supplanting fossil fuels and interest in grid scale storage along with their focus on efficiency as well as meeting the expectations of their regulators and customers. I'm just pointing out that those sort of things tug at my skeptical alarm bells and make me wonder if all is as it seems.

[gfp]

Berkshire continues to go after the primary insurance business with the launch of a new product called "THREE" that features a "three page policy" for small businesses covering workers comp, multiple liability coverages, property & auto.

 

https://www.businesswire.com/news/home/20190211005143/en/Big-News-Small-Business-Berkshire-Hathaway

 

https://www.reinsurancene.ws/berkshire-hathaway-to-launch-three-page-insurance-product-for-small-businesses/

 

www.threeinsure.com

 

- most interesting to me is that this is being launched under the Berkshire Hathaway name, not any of the existing primary companies in this space, like GUARD, BHSI, the various 'home state' companies, etc.  This one is all Ajit!

 

(this is the current offering direct offering - the new one will be a big marketing push to take share in this space)

https://www.biberk.com

https://www.reuters.com/article/us-berkshire-biberk-idUSKBN18528N

https://www.omaha.com/money/buffett/companies-like-biberk-aim-to-make-buying-insurance-paying-claims/article_815acffe-3188-5f79-a23d-c876d6580527.html

[Dynamic]

It certainly sounds compelling. It sounds like it will be simple, involve low administrative overhead and appeal to small business owners for whom insurance is necessary but not worthy of too much attention, and will be backed by Berkshire's financial strength, and from Berkshire's point of view it will capture 3 premiums in one hit, with one set of administrative overhead and no brokers' expenses thanks to the direct sales model. They suggest a 20% typical saving over bundled policies.

 

I didn't see anything in the FAQ about what happens if renewal dates are different for different cover under a business's existing arrangements. I could well imagine that auto insurance or premises insurance might vary, though I'm not all that familiar with how these things are done in the USA. In the highly competitive UK personal market, products like Admiral Multicover allow you to cover home and car according to their respective renewal dates and obtain a discount (though you can usually do better by shopping around for separate policies from different insurers, typically via comparison website that earn referral fees) but the two policies remain separate, just with the same provider.

 

I'd imagine that if the renewal dates do differ, THREE could quote an effective annual premium (so they know what to expect for the whole year) then take on cover from the renewal date pro-rata for the remainder of the year to bring them all into line, and send email reminders to the insured to make sure they lapse their other policies when they expire.

 

I can imagine there's also a little scope in a similar fashion to simplify the lives of residential building managers like apartment/condominium companies, or what in the UK we call Resident Management Companies (a Landlord usually owned by the apartment owners) or Right To Manage Companies. Typically, in the UK, these companies require Buildings Insurance (with optional Terrorism cover) which usually includes Employee Liability (workers' comp, covering contractors such as cleaners, handymen and gardeners if they get injured at work). Plus, if they have elevators, they'd require Engineering Insurance (which mainly covers 6-monthly inspections to ensure safe operation and has only a few competing insurers) and they'd normally want Directors and Officers Liability insurance to cover the company officers such as Directors and Company Secretary (who are frequently flat-owners too). However, the costs of buildings insurance are usually around 10x higher than the other two, so I'm not sure how much additional float and underwriting profit could be gained, though the administrative overhead reduction and direct sales approach should still enable decent savings, and the simplicity of a single policy at a competitive price may make the product sticky and encourage regular renewal, especially when the Directors run the building for free in their spare time.

[gfp]

I don't see renewal dates being an issue.  It is not uncommon to cancel insurance policies and receive the pro-rated premiums back as a refund.  It happens all the time when an asset is sold or you decide to switch providers.

 

I should also note that 'three page policy' is a marketing / branding thing and the actual legal contract for several types of specific business insurance that passes muster with each state regulator will be pretty standard (and long).

 

But what they say and market in those three pages can say a lot about the company and how plainly they wish to spell out 'the deal'.  Hopefully this marketing message is a hit, as Berkshire has been trying this GEICO-for-small-biz-insurance for a while now and it has remained tiny.  First it was "coveryourbusiness.com" - then "biberk.com" - bi for 'business insurance - and now "threeinsure.com" with a cool new Nebraska logo and the prominent Berkshire Hathaway brand.

[alpha]

 

Munger answering a range of questions at Daily Journal Corp annual meeting:

 

https://www.reuters.com/article/us-dailyjournal-munger/charlie-munger-targets-active-managers-elon-musk-praises-china-idUSKCN1Q32V7

[alwaysinvert]

https://whalewisdom.com/filer/berkshire-hathaway-inc#tabholdings_tab_link

 

Net seller of AAPL (!). Continued bank share purchases, although no huge moves considering the big market drawdown.

 

Oracle is gone too.

[John Hjorth]

Well, I think I got my guessing roughly right with AAPL. I'm surprised to see that so little has been added to other positions - only really meaningful addition is to JPM, but certainly a lot less than I expected. And then this further addition to BAC, where Berkshire already is fairly close to the self-imposed maximum 10 percent? Perhaps JPM is just some kind of "substitute" for forced selling of WFC, and later, but soon, also BAC.

 

Perhaps Berkshire feels maxed out on total level with US financials? [We have to remember AXP here.]

[alpha]

https://whalewisdom.com/filer/berkshire-hathaway-inc#tabholdings_tab_link

 

Net seller of AAPL (!). Continued bank share purchases, although no huge moves considering the big market drawdown.

 

Oracle is gone too.

 

Also started position in Suncor and Redhat. Almost out of PSX.

 

...  AAPL position only moved by 1% 

[alwaysinvert]

Well, I think I got my guessing roughly right with AAPL. I'm surprised to see that so little has been added to other positions - only really meaningful addition is to JPM, but certainly a lot less than I expected. And then this further addition to BAC, where Berkshire already is fairly close to the self-imposed maximum 10 percent? Perhaps JPM is just some kind of "substitute" for forced selling of WFC, and later, but soon, also BAC.

 

Perhaps Berkshire feels maxed out on total level with US financials? [We have to remember AXP here.]

 

Something that I don't understand is certainly going on with the JPM stake. I was expecting at least as large a buy as in Q3, but that turned out wrong. He really is very hard to predict. Maybe this bodes well for buyback volumes, but I wouldn't be too sure about that either. Really is peculiar.

[John Hjorth]

... Maybe this bodes well for buyback volumes, but I wouldn't be too sure about that either. Really is peculiar.

 

Yes, fingers crossed for buybacks, but I have no high hopes. We'll see next Friday.

[aws]

Net buys were only about 1b for the quarter, and unless they got lucky and bought RHT before the IBM news then most of that is probably just a merger arb.  Not exactly swinging for the fences on one of the worst quarters in recent memory.  I wonder if he was expecting it to get a lot worse, or if he was spending all his funds on Berkshire stock.  Berkshire did do relatively well compared to the market up until the start of the year, so maybe he was buying a lot then but has been locked out lately.

[Spekulatius]

Well, I think I got my guessing roughly right with AAPL. I'm surprised to see that so little has been added to other positions - only really meaningful addition is to JPM, but certainly a lot less than I expected. And then this further addition to BAC, where Berkshire already is fairly close to the self-imposed maximum 10 percent? Perhaps JPM is just some kind of "substitute" for forced selling of WFC, and later, but soon, also BAC.

 

Perhaps Berkshire feels maxed out on total level with US financials? [We have to remember AXP here.]

 

Interesting, they he now owns almost exactly 8.75% of both WFC and BAC. He is not really limited with WFC any more - has sold quite a few shares and is quite far below the 10% limit.

[aws]

The linked percentage ownership are off.  It's more like 9.3% of each WFC and BAC.  Like one year away from being at 10% at current buyback rates.  They are probably using old or average shares outstanding figures.

[John Hjorth]

Furthermore, the 2018Q4 13-F/HR for New England Asset Management has to be taken into consideration. We'll just need to give Dynamic sufficient time to get precise and clear cut share numbers.

[Dynamic]

There were a ton of 13G filings too all as at 31 December 2018 which I've just been through. Very helpful in backing out pension fund holdings and checking my totals before I publish my look through sheet update  Also they express the control stake as a percentage of known outstanding stock for each holding that has a 13G

 

The Apple holding on the 13G is higher than the total of NEAM and Berkshire 13-F filings, whereas for most holdings it is exactly the total. Previously I had assumed a bunch of the holding was pensions as it didn't show up in the annual report total. Now I'm not sure if it's only barely down far less than 1% or whether the holding attributable to shareholders shown in the annual report next week will differ. For now as the Apple 13G at the top of the list of SEC filings doesn't include any pensions I'm assuming it needs an upward adjustment from the 13F totals, keeping the total Berkshire holding almost constant.

 

I guess with Apple reaching such high valuations in October, its possible a pension scheme decided to sell it and use the proceeds elsewhere, but it's also possible it wasn't sold after all and there's something different about the 13-F filings now.

[gfp]

Hey Dynamic - Seems like the totals add up to me.  The Berkshire 13F reports 249,589,329 shares and the 13G reports 255,300,329 shares (Berkshire's actual total economic interest).  The difference is the same 5.711 million shares in New England Asset Management that Berkshire is the ultimate owner of.

 

Berkshire's 9.30 quarterly filing shows $57.6 Billion AAPL at a closing price of 225.74, which pencils out to just about the same: 255.16 million shares - discrepancies which could be due to "57.6 Billion" not being an exact number.

 

No big change in Apple shares that I can see.  Could be one of the original T's trimmed their position at near all time highs, or it could be something else.

 

 

(No big changes inside General Re NEAM this quarter - a few shares of WFC sold and continued selling off of Verisk, which Buffett never actually "bought" per se)

 

There were a ton of 13G filings too all as at 31 December 2018 which I've just been through. Very helpful in backing out pension fund holdings and checking my totals before I publish my look through sheet update  Also they express the control stake as a percentage of known outstanding stock for each holding that has a 13G

 

The Apple holding on the 13G is higher than the total of NEAM and Berkshire 13-F filings, whereas for most holdings it is exactly the total. Previously I had assumed a bunch of the holding was pensions as it didn't show up in the annual report total. Now I'm not sure if it's only barely down far less than 1% or whether the holding attributable to shareholders shown in the annual report next week will differ. For now as the Apple 13G at the top of the list of SEC filings doesn't include any pensions I'm assuming it needs an upward adjustment from the 13F totals, keeping the total Berkshire holding almost constant.

 

I guess with Apple reaching such high valuations in October, its possible a pension scheme decided to sell it and use the proceeds elsewhere, but it's also possible it wasn't sold after all and there's something different about the 13-F filings now.

[Dynamic]

I had the AAPL position as:

 

BRK 13-F: 247,047,762

 

It turns out I had it correct on the BRK 13-F sheet, but on my COMBINED HOLDING sheet I'd made some adjustments to it previously that I hadn't deleted, so I was in error. I've now copied the normal correct formula and...

 

It now correctly says:

 

BRK 13-F: 249,589,329

NEAM 13-F: 5,711,000

Total: 255,300,329

 

The 13G reports: 255,300,329 shares of Common Stock, so we have a match.

 

Sorry for the false alarm!

[gfp]

Debbie Bosanek confirmed to CNBC that the small amount of AAPL stock that was sold was attributable to Ted or Todd.  Could have been pension shares, since that is a big part of what they manage.

 

https://www.cnbc.com/2019/02/15/berkshire-trimmed-its-apple-stake-but-it-wasnt-buffett.html

[Dynamic]

BTW, prior to updating my Look Through spreadsheet, here is a link to the summary of position changes with percentage change and absolute change in number of shares (total number of shares is not shown).

 

Actually, I had previously included some shares assumed to be pension shares based on difference between last year's 10-K and 13-F. The 13G confirms there are now no pension shares.

[AdjustedEarnings]

My view is that it absolutely bodes well for the buyback. I was as surprised as anyone that the level of purchases was not higher. But, if I put myself in WEB's shoes, my two options to spend funds are:

 

1. Buy more of all the securities I like at better prices. Should they gain, I've got to pay a corp-level capital gains tax (which is higher than individuals for the LT rate) and have to worry about running up against 10% ownership in many of the holdings.

 

2. Increase the per-share ownership of that same exact portfolio, but with a further discount, AND on a leveraged basis (through insurance). This option is the buyback.

 

From the continuing shareholders standpoint, they end up much better with option 2 and their economic exposure to the equity portfolio does increase. On a per-share basis, they DO own more of all of the securities, even if BRK didn't explicitly purchase them. Philosophically, this would not be dissimilar from repurchases at LSXMA v/s SIRI. LSXMA owns SIRI on leverage. Let me know what you all think.

 

 

Well, I think I got my guessing roughly right with AAPL. I'm surprised to see that so little has been added to other positions - only really meaningful addition is to JPM, but certainly a lot less than I expected. And then this further addition to BAC, where Berkshire already is fairly close to the self-imposed maximum 10 percent? Perhaps JPM is just some kind of "substitute" for forced selling of WFC, and later, but soon, also BAC.

 

Perhaps Berkshire feels maxed out on total level with US financials? [We have to remember AXP here.]

 

Something that I don't understand is certainly going on with the JPM stake. I was expecting at least as large a buy as in Q3, but that turned out wrong. He really is very hard to predict. Maybe this bodes well for buyback volumes, but I wouldn't be too sure about that either. Really is peculiar.

[alwaysinvert]

It's just so hard to see that there is much of a tradeoff between buying more publicly traded stocks and doing buybacks as of right now.