Buffett/Berkshire - general news

[wachtwoord]

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.

 

Exactly. The same reason FCAU is paying a dividend rather than buying back and Exor is doing buy backs instead (partially funded with the FCAU dividend).

[John Hjorth]

... 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. ...

 

Exactly. The same reason FCAU is paying a dividend rather than buying back and Exor is doing buy backs instead (partially funded with the FCAU dividend).

 

AdjustedEarnings, wachtwoord & alwaysinvert,

 

Your line of thinking has a lot of appeal to me personally. The "problem" [= the likelihood] for me with this is my mental anchoring in what we saw about Berkshire buybacks in 2018Q3, and the reverse engineering outcome of that, indicating a buyback threshold of ~ 209 for the B and 10 percent of the volume for the A and the B. That for 2018Q4 would give us  USD ~4.2 B in buybacks for that quarter.

 

I hope being brutally dragged out of this anchoring to "another reality" [<- your hopes!] next Friday! [ : - ) ]

[SwedishValue]

If he doesn't find a very significant acquisition, doesn't add significantly to new or existing holdings, and only buys back stock sporadically, Berkshire Hathaway will have another 100 Billion in cash in less than 3 years. I just don't see how that can be reasonable, given that he has had the opportunity to buyback stock at a price he likes. So far, Buffett really hasn't done anything to convince me as of which way the cash pile will be going away, but given his comments I find it likely he has a plan. Hopefully we know more next saturday.

[John Hjorth]

Good to see you back posting, SwedishValue,

 

Berkshire AGM 2017 transcript, afternoon session, question 2 :

 

Pressure to deploy  Berkshire's cash grows as it nears $100B

 

... WARREN BUFFETT: Yeah. So, it —you know, we don’t like that. And we shouldn’t use your money that way for a long period of time. And, then, the question is, you know, are we going to be able to deploy it?

 

And I would say that history is on our side, but it’d be more fun if the phone would ring instead of just relying on history books.

 

And, you know, I am sure that sometime in the next 10 years —and it could be next week or it could be nine years from now —there will be markets in which we can do intelligent things on a big scale.

 

But it would be no fun if that happens to be nine years off. And I don’t think it will be, but just based on how humans behave and how governments behave and how the world behaves.

 

But like I say, at a point, the burden of proof really shifts to us, big-time. And there’s no way I can come back here three years from now and tell you that we hold 150 billion or so in cash or more, and we think we’re doing something brilliant. ...

 

So, how do you read that? -To me, it's as close to a promise as about anything said by Mr. Buffett.

 

However, that does not change that Mr. Buffett is killing us [almost, - at least mentally] with this issue, - and we just have to live with it!

 

- - - o 0 o - - -

 

Source: Joel's monster Buffett compilation, p. 4,094.

[Guest longinvestor]

If he doesn't find a very significant acquisition, doesn't add significantly to new or existing holdings, and only buys back stock sporadically, Berkshire Hathaway will have another 100 Billion in cash in less than 3 years. I just don't see how that can be reasonable, given that he has had the opportunity to buyback stock at a price he likes. So far, Buffett really hasn't done anything to convince me as of which way the cash pile will be going away, but given his comments I find it likely he has a plan. Hopefully we know more next saturday.

 

I see some eerie similarities between 1969 and 2019 when it comes to money in management's hands. The partnership was wound down in 1969 because of lack of investment opportunities and more importantly Buffett was sure that he was not going to be able to meet partners' expectations based on past performance.

 

 

Let's play out the possible scenarios today,

 

 

1) They buy back "a little"- market ignores that and BRK prices remain at current levels - (Well below IV)

- Company can keep buying a little along the way. Cash keeps piling up while they wait for the phone to ring.

 

 

2) They buy back aggressively, say, $10 B or more - price gaps up closer to IV.

- Company stops buying back and waits for the phone to ring.

 

 

3) They don't buy anymore that what they did in Sept. Cash really piles up while they wait for the phone to ring. (COBF folks among others go crazier by the day)

 

 

4) They buy a whale. Everyone keeps their mouth shut....until another $100B piles up, as you say...in about 3-5 years. They still like the phone to ring!

 

 

5) They throw in the towel and declare a one time special divvy....on a per A share basis, some $60,000 today.........until another $100B piles up, as you say...in about 3-5 years. They still like the phone to ring. 

 

The phone will ring a few times over the next 5 years.

 

These are all really happy thoughts, not a calamity at all. Love to see every other company have this kind of a problem.

 

Enjoy your weekend.

 

 

 

 

 

 

 

 

 

[nickenumbers]

Longinvestor,

 

I have nothing to add.  Thanks for the clear summarization.  I am interested to see what turns up.

[DooDiligence]

Munger & Buffett

sat on a tuffet

watching their cash pile grow

 

In walked an elephant

all fat & elegant

and then they laid out some dough

 

and the cash continued to flow...

[Spekulatius]

Munger & Buffett

sat on a tuffet

watching their cash pile grow

 

In walked an elephant

all fat & elegant

and then they laid out some dough

 

and the cash continued to flow...

 

My own opinion is that they did very little regarding buybacks, as they were napping the entire time. We will find out soon enough.

[John Hjorth]

Hilarious! - Made my day! [ : - ) ]

[Mephistopheles]

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

 

It’s concerning to me that Buffett replied to a request for comment, when does he ever do that, especially regarding the stock portfolio?? Is he planning on selling Apple shares and wants to hold the price up? Why wouldn’t he want people to think that he himself is reducing shares? Presumably he’d only benefit if the stock drops due to repurchases or him buying more.

[gfp]

I agree to some extent that it is unusual and unnecessary.  If I had to guess I would guess that: a.)  He doesn't like the press running with false headlines about him that other, less sophisticated, investors might make investment decisions based on - and b.) He feels some desire to show he supports Tim Cook at Apple, and is not 'pulling a Ginni Ronmety' on him...

 

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

 

It’s concerning to me that Buffett replied to a request for comment, when does he ever do that, especially regarding the stock portfolio?? Is he planning on selling Apple shares and wants to hold the price up? Why wouldn’t he want people to think that he himself is reducing shares? Presumably he’d only benefit if the stock drops due to repurchases or him buying more.

[woodstove]

And perhaps c) Reminder that not all decisions/actions of Berkshire are made at Omaha office, now including capital allocation decisions.

[gfp]

And perhaps c) Reminder that not all decisions/actions of Berkshire are made at Omaha office, now including capital allocation decisions.

 

Yeah - “Warren Buffett daytrades in and out of Oracle!”  “The Oracle of Omaha abandons Oracle!”

[bennycx]

Berkshire should convert into a bank holding company and increase its stake or buy over a bank.

[John Hjorth]

Berkshire should convert into a bank holding company and increase its stake or buy over a bank.

 

Personally I think that'll never happen, benny,

 

It's not only about status of Berkshire as a bank holding company with the required regulatory reporting, but also about reporting about Berkshire subs doing business with a particular bank on arms length basis. Please try to think about the business volume of all the Berkshire subs with BAC, WFC & JPM. I don't know anything specific about it, and have no data to support my line of thinking, just here assuming it must be: "a lot".

[John Hjorth]

Here, I'm sorry for double posting.

 

To me, [and thereby to you, as a CoBF member], this may be a non-event, based on Dynamic's reporting about the Berkshire portfolio EOP 2018Q4. Dynamic has documented, that this is about a reduction of about 50k shares AAPL, while "The Press" talks about - and covers - something else.

 

-In short, & frankly, it's actually not worth our time and attention. -Simply, because it does not matter for our individual investment in Berkshire in any material way.

 

- - - o 0 o - - -

 

The e-mail from Ms. Bosanek to Reuters has some interesting angles - by principle - however, if one thinks about it. To me, it's a tiny supplementary information, based on a situation not seen before, caused by the two of the four don't knowing exactly what the other "two"s are up two to. In short, this may likely happen again.

[CharlesMunger]

Buffett on Monday on CNBC

https://www.cnbc.com/2019/02/20/legendary-investor-warren-buffett-to-join-cnbcs-becky-quick-for-a-special-edition-of-squawk-box-on-monday-february-25-6am-9am-et.html

[gfp]

Wow - classic case of "lose reputation for the firm and I will be ruthless" ??

https://finance.yahoo.com/news/buffetts-berkshire-hathaway-talks-sell-201610562.html

 

You don't see these headlines everyday...

[Dynamic]

The "bait and switch" marketing sounds rather concerning, regardless of whether it's standard practice in the industry or not, and I could see that as a potential reason to either:

(i) divest (if it's common industry practice that's essential to compete, along the lines of blood doping in professional cycling - Berkshire wouldn't want to remain in that business) or

(ii) take ruthless steps to deal with those involved and take a close look at incentives to firmly discourage such reputation-harming practice.

Having said that, from surface reading, alarm bells were going off while I read the article that this sounds like a bit of a non-story backed up by hearsay at the moment.

 

Also a case of Berkshire neither confirming nor denying reports in case denial at times causes 'refusal to comment' to be considered confirmation at others. The news cycle is now so fast, that I note that "Berkshire Hathway [sic] did not immediately respond to a request for comment" is becoming a regular refrain in many articles.

 

I was actually mildly surprised that Debbie Bosanek told reporters on 15th Feb that the tiny Apple sale last quarter was not Warren Buffett's doing.

[Cigarbutt]

The "bait and switch" marketing sounds rather concerning, regardless of whether it's standard practice in the industry or not, and I could see that as a potential reason to either:

(i) divest (if it's common industry practice that's essential to compete, along the lines of blood doping in professional cycling - Berkshire wouldn't want to remain in that business) or

(ii) take ruthless steps to deal with those involved and take a close look at incentives to firmly discourage such reputation-harming practice.

Having said that, from surface reading, alarm bells were going off while I read the article that this sounds like a bit of a non-story backed up by hearsay at the moment.

 

Also a case of Berkshire neither confirming nor denying reports in case denial at times causes 'refusal to comment' to be considered confirmation at others. The news cycle is now so fast, that I note that "Berkshire Hathway [sic] did not immediately respond to a request for comment" is becoming a regular refrain in many articles.

 

I was actually mildly surprised that Debbie Bosanek told reporters on 15th Feb that the tiny Apple sale last quarter was not Warren Buffett's doing.

Applied Underwriters is actually quite an interesting business. Before coming under BH's umbrella, it seems that they were noticed by Mr. Jain when completing a reinsurance deal. My take on the company is that they are very efficient in closing claims, have high retention ratios, are very good at offering innovative products in neglected segments of their workers comp market, including profit-sharing instruments that may confuse some clients, brokers and regulators. There may be something more to them but I don't see it.

 

Insurance is very much about reputation and, perhaps, head office has had enough of the noise and decided to sell because it was no longer a "core" asset and was effectively competing against other BH subs in the WC market (BH's business has grown quite a bit in that segment).

 

Another aspect is that alternative capital providers and private equity have had a large appetite for this type of operator in that kind of market.

 

FWIW, Applied Underwriters recently won a battle but it's not over until it's over.

https://www.natlawreview.com/article/applied-underwriters-defeats-class-certification-long-running-worker-s-compensation

 

 

[gfp]

It is certainly possible that the decision to sell is, as they claim, unrelated to the EquityComp issues.  Berkshire is pushing bigger and bigger into primary and they will be competing.  But they've been competing between their various insurance and reinsurance subs for a long time.  Now all of a sudden it's a problem.

 

It could be that since the founders control something like 19% of Applied Underwriters, they were unhappy with the increased future competition (BRK Specialty, BRK GUARD, THREE, etc) and instigated the process.

 

Applied has around a Billion in premiums and still features the Berkshire halo, so it aught to fetch a fancy price (not that it will be material to a half trillion dollar market value parent company)

 

In other news...  (hope springs eternal) - Southwest shares caught a bid earlier today when Bloomberg or someone started circulating a rumor that Berkshire wanted to buy the whole enchilada at $75 a share.

 

https://www.fool.com/investing/2019/02/28/why-southwest-airlines-stock-just-popped.aspx

 

I do love Southwest as a customer (although the flights are always free with points, I do pay for early bird check-in)

[Spekulatius]

It is certainly possible that the decision to sell is, as they claim, unrelated to the EquityComp issues.  Berkshire is pushing bigger and bigger into primary and they will be competing.  But they've been competing between their various insurance and reinsurance subs for a long time.  Now all of a sudden it's a problem.

 

It could be that since the founders control something like 19% of Applied Underwriters, they were unhappy with the increased future competition (BRK Specialty, BRK GUARD, THREE, etc) and instigated the process.

 

Applied has around a Billion in premiums and still features the Berkshire halo, so it aught to fetch a fancy price (not that it will be material to a half trillion dollar market value parent company)

 

In other news...  (hope springs eternal) - Southwest shares caught a bid earlier today when Bloomberg or someone started circulating a rumor that Berkshire wanted to buy the whole enchilada at $75 a share.

 

https://www.fool.com/investing/2019/02/28/why-southwest-airlines-stock-just-popped.aspx

 

I do love Southwest as a customer (although the flights are always free with points, I do pay for early bird check-in)

 

My guess is the fact that this deal is in the news means is that the rumour likely is false. BRK has been very good at keep on their plans secret in the past.

[boilermaker75]

I also love Southwest, but I don't pay for early bird check-in.

 

When I fly with my wife, she always gets the early bird and I don't. I love when I end up only a few spaces behind her in line and can gloat about saving $20!

 

 

I do love Southwest as a customer (although the flights are always free with points, I do pay for early bird check-in)

[wachtwoord]

I also love Southwest, but I don't pay for early bird check-in.

 

When I fly with my wife, she always gets the early bird and I don't. I love when I end up only a few spaces behind her in line and can gloat about saving $20!

 

 

I do love Southwest as a customer (although the flights are always free with points, I do pay for early bird check-in)

 

Why would you want to be first in the plane? I always prefer to enter as late as possible (except when hand luggage is not guaranteed as I prefer it not to go to the hold).

[boilermaker75]

I also love Southwest, but I don't pay for early bird check-in.

 

When I fly with my wife, she always gets the early bird and I don't. I love when I end up only a few spaces behind her in line and can gloat about saving $20!

 

 

I do love Southwest as a customer (although the flights are always free with points, I do pay for early bird check-in)

 

Why would you want to be first in the plane? I always prefer to enter as late as possible (except when hand luggage is not guaranteed as I prefer it not to go to the hold).

 

Yes to store a bag in the overhead and to get an aisle seat. It is open seating on LUV.