Buffett/Berkshire - general news

[Spekulatius]

Trying to reverse engineer what made them attractive to BRK. ~15% ROIC on average sticks out with lots of FCF.

 

It’s similar to BRK’s TTS in a sense. I strongly believe that Warren is advertising BRK when he talks about this failed deal with Becky Quick. “ Hey we are open for business and can close a deal quickly!”

[ValueMaven]

Thank you WEB for NOT trying to outbid a silly, second-tier (subjective I know) PE shop.  As your loyal investors - we know what principals you stand on and for. 

[scorpioncapital]

He lost it for 200 million. Isn't that like 1.5 or 2 days of annual profit? Seems trivial...just saying. If anything, the argument would be that he would be outbid again. But maybe not. Even if he was he would have pushed the price higher which is at least a secondary goal of competitive bidding.

 

 

[Spekulatius]

He lost it for 200 million. Isn't that like 1.5 or 2 days of annual profit? Seems trivial...just saying. If anything, the argument would be that he would be outbid again. But maybe not. Even if he was he would have pushed the price higher which is at least a secondary goal of competitive bidding.

 

It’s about 4% and 1/2 year with of profit. BRK is known of naming their price and sticking too it. No if and when or renegotiation. Keeping it simple may cost them some deals, but it will also make their offers a simple proposition and prevents them from becoming duped like OXY did. when they thwarted CVX.

[sleepydragon]

If it’s 50bn instead of 5b, it may be a different result.

Maybe Buffett’s next deal will be at that size

[Gregmal]

Just continues to fit the same pattern. Its fine and dandy being patient with what you perceive as high prices. But when thats been the case for an extended period of time, and you're sitting on an outrageous amount of cash that yields nothing...well you're just wrong and costing your shareholders.

 

Id love to see accountability, but many who said the market was overvalued in 2014 continue to say the same things and the fact is, many quality names will likely NEVER again trade at 2014 prices. Nothing worse than someone who is wrong and won't admit it.

 

Buffett and many others just refuse to get with reality. And that is that they need to recalibrate the evaluation of what certain assets are worth. Frankly, I think he should be pressed much harder. If he won't meaningfully repurchase BRK shares, he should be forced to use them for acquisitions. Shit or get off the pot. This whole...wont buyback stock but won't issue it, won't spend cash either and won't take on low interest debt...insanity, bordering on incompetence.

[John Hjorth]

We all hear you, Greg,

 

Please go back to doing your stuff, while I [and other CoBF members] will keep on doing our stuff.

[scorpioncapital]

He lost it for 200 million. Isn't that like 1.5 or 2 days of annual profit? Seems trivial...just saying. If anything, the argument would be that he would be outbid again. But maybe not. Even if he was he would have pushed the price higher which is at least a secondary goal of competitive bidding.

 

It’s about 4% and 1/2 year with of profit. BRK is known of naming their price and sticking too it. No if and when or renegotiation. Keeping it simple may cost them some deals, but it will also make their offers a simple proposition and prevents them from becoming duped like OXY did. when they thwarted CVX.

 

I thought Berkshire makes something like 20-30 billion a year. At the higher end that's 82 million a day. So 200m is about 2-3 days of profits, on top of the cash hoard I guess.

 

 

[sleepydragon]

He lost it for 200 million. Isn't that like 1.5 or 2 days of annual profit? Seems trivial...just saying. If anything, the argument would be that he would be outbid again. But maybe not. Even if he was he would have pushed the price higher which is at least a secondary goal of competitive bidding.

 

It’s about 4% and 1/2 year with of profit. BRK is known of naming their price and sticking too it. No if and when or renegotiation. Keeping it simple may cost them some deals, but it will also make their offers a simple proposition and prevents them from becoming duped like OXY did. when they thwarted CVX.

 

I thought Berkshire makes something like 20-30 billion a year. At the higher end that's 82 million a day. So 200m is about 2-3 days of profits, on top of the cash hoard I guess.

 

Why can’t people think about the first or even second derivative effects? It’s not about over bidding 200 million. It’s about potentially over bidding 2b for the future deal that real matters.

 

[Cardboard]

Well... Buffett said that it would not participate in auctions, sounds to me like he did here.

 

Apollo offered $130/share and he outbid them with $140. Apollo likely thought: "shit, we already spent a ton of money on due diligence, financing, etc. so might as well pay $15 more and get it over with".

 

Not sure if it will be a good deal for Apollo or not but, Buffett certainly look like the annoying bidder at an auction who is just mildly interested and is simply there to make people pay more.

 

And as Gregmal said, if he is not interested in paying more then he will be stuck with a big pile of cash. He is the one who said after all that stocks should trade much higher if interest rates are to stay low.

 

Gets back to good corporate governance or why sitting on $10's of billions in cash that are unneccessary for investment purposes (can't get good returns in his book since unwilling to pay such price) or corporate strength?

 

At current size, Berkshire should definitely shift focus to return capital to shareholders vs timing the market.

 

Cardboard

 

[Gregmal]

Well... Buffett said that it would not participate in auctions, sounds to me like he did here.

 

Apollo offered $130/share and he outbid them with $140. Apollo likely thought: "shit, we already spent a ton of money on due diligence, financing, etc. so might as well pay $15 more and get it over with".

 

Not sure if it will be a good deal for Apollo or not but, Buffett certainly look like the annoying bidder at an auction who is just mildly interested and is simply there to make people pay more.

 

And as Gregmal said, if he is not interested in paying more then he will be stuck with a big pile of cash. He is the one who said after all that stocks should trade much higher if interest rates are to stay low.

 

Gets back to good corporate governance or why sitting on $10's of billions in cash that are unneccessary for investment purposes (can't get good returns in his book since unwilling to pay such price) or corporate strength?

 

At current size, Berkshire should definitely shift focus to return capital to shareholders vs timing the market.

 

Cardboard

 

Thats the thing, and something I dont think many of the Buffetteers appreciate. If nothing else, given what is obvious in the current situation, I fail to see how anyone would be harmed if Berkshire issued/starts issuing a dividend or did a one time special dividend of say $20 per B share or something.

 

What I extrapolate, and what should truly frighten shareholders, is this. Buffett is obviously off on his perception of what companies are worth. Even if he isn't, theres nothing and hasn't been anything, that he s willing to pull the trigger on, and shareholders suffer. But what happens when he does find something? Anything worthwhile is going to have bidders, as we have just seen. He won't "go to auction" and won't "top bids", so one really has to ask themselves, do you want what ever is left over, that no one else wants or chooses to bid on? Which by process of reasoning, is likely going to be the only scenario in which Warren is able to make an acquisition? Ive tried narrowing down what universe an eventual acquisition would come from, and when you eliminate any company that would field competitive bids, move the marker up to a meaningful market cap, and then eliminate "non Buffett" businesses, I'm left thinking he'll end up buying some old economy Dow company like IBM or KO. I mean even GE which he said he would pull the trigger on in the mid teens, "at the right price", he whiffed on at like $7-8. Personally I think he should get with the times, bite the bullet, and pay up for something like VMware.

 

 

[Cigarbutt]

^To the question, what's wrong, Warren? I don't know the answer and wonder if he has lost it or if the market has lost it. I guess it all comes down to an individual decision with personal investment implications but here's an historical input that is potential food for thought. The link is an indirect reference to a WSJ article and was supplied by, I think, a COBF member:

https://brianlangis.wordpress.com/2018/09/26/whats-wrong-warren/

 

The question here is not to compare both periods but simply to mention that, for some, in 1999, the obvious choice was to bet on Yahoo.

The verdict 20 years later:

 

                                              1999              2019

MKT CAP Yahoo (B)                    120                48*

MKT CAP BRK (B)                      83                  540

 

*I'm no Yahoo or related specialist and the number represents what I come to as an estimate of liquidation value resulting from relatively recent transactions.

 

A potential message: The environment keeps on changing but some principles endure and the retained earnings aspect may only play out over time.

[Cardboard]

I think that Buffett best strategy going forward due to size and lack of large mom and pop shop running to him to get bought out, would be to dollar cost average monthly incoming cash flow and a fraction of cash pile into an S&P 500 ETF and do opportunistic share buybacks.

 

This would pretty much eliminate any succession risk and help BRK continue to beat the S&P via embedded leverage or float.

 

 

[alpha]

I think that Buffett best strategy going forward due to size and lack of large mom and pop shop running to him to get bought out, would be to dollar cost average monthly incoming cash flow and a fraction of cash pile into an S&P 500 ETF and do opportunistic share buybacks.

 

This would pretty much eliminate any succession risk and help BRK continue to beat the S&P via embedded leverage or float.

 

I think you should go review Berkshires history, specifically the flood of large high-quality companies they purchased in quick succession when the junk bond market dried up at the end of the dot com bubble.

[RuleNumberOne]

Buffett cannot get in and get out without moving the price drastically. In other words, he has a wide bid-ask spread. Mike Burry was right about the lack of liquidity in many stocks.

 

Momentum hedge funds want their 2 and 20. They don't care if the stock price crashes on the way out - they just want a few quarters/years of 2-and-20 and they are satisfied. Buffett is investing his own money.

 

[John Hjorth]

Mr. Buffett doesn't give a heck about bid-ask spreads. Nor does he care about momentum hedge funds.

[bizaro86]

Mr. Buffett doesn't give a heck about bid-ask spreads. Nor does he care about momentum hedge funds.

 

While this isn't directed to me, I doubt the previous poster meant bid 49.98/ask 49.99 for bid-ask spreads.

 

If Buffett wants to buy a full company away from the stock market, he probably needs to pay a premium, maybe in the 30% range. The ask for the whole firm being greater than the ask for a single share. Similarly, if he takes a big position in something, once disclosed (either quarterly or at 5% of target) that has the potential to increase the price making the remainder of the position more expensive.

[John Hjorth]

Mr. Buffett doesn't give a heck about bid-ask spreads. Nor does he care about momentum hedge funds.

 

While this isn't directed to me, I doubt the previous poster meant bid 49.98/ask 49.99 for bid-ask spreads.

 

If Buffett wants to buy a full company away from the stock market, he probably needs to pay a premium, maybe in the 30% range. The ask for the whole firm being greater than the ask for a single share. Similarly, if he takes a big position in something, once disclosed (either quarterly or at 5% of target) that has the potential to increase the price making the remainder of the position more expensive.

 

Oh, spare me.

[bizaro86]

Mr. Buffett doesn't give a heck about bid-ask spreads. Nor does he care about momentum hedge funds.

 

While this isn't directed to me, I doubt the previous poster meant bid 49.98/ask 49.99 for bid-ask spreads.

 

If Buffett wants to buy a full company away from the stock market, he probably needs to pay a premium, maybe in the 30% range. The ask for the whole firm being greater than the ask for a single share. Similarly, if he takes a big position in something, once disclosed (either quarterly or at 5% of target) that has the potential to increase the price making the remainder of the position more expensive.

 

Oh, spare me.

 

I apologize if my post offended you.

[james22]

Any of you who believe Buffett has "lost it" believe the share price will jump when he passes or steps down?

 

Why not?

[Gregmal]

Any of you who believe Buffett has "lost it" believe the share price will jump when he passes or steps down?

 

Why not?

 

No, but that is only because there is still a consensus that consists of cult followers who believe Buffett still has magical power. I think the opportunity would present itself a wee bit after, once all the super talented people currently underneath him get bigger pieces of the pie and can get back to doing what they do best without the fear of Grampa looking over their shoulder.

[scorpioncapital]

I already see Buffett being quieter, maybe there is truth to his line that he wants to be like the Wizard of Oz and give commands from beyond the grave) Might even be a non-event this way of 'bowing out'. Look at the founders of Google who just bowed out at even an early age.

 

 

[Dynamic]

Not exactly news but Berkshire and its main portfolio constituents are up sharply today and Berkshire Class B has broken above $225 for the first time yet it doesn't seem priced for too much optimism unlike perhaps 9th October 2018 when it peaked at $223.64 or so.

[gfp]

For those curious about Tracy Britt Cool's next gig (with a TDG connection thrown in), here is the news on that -

https://www.standard.co.uk/business/warren-buffett-prot-g-e-strikes-out-with-london-stock-market-listing-a4312141.html

[gfp]

A bit of the background on the Tech Data attempt - Berkshire had made a few changes to Apollo's merger agreement that would be more favorable to Tech Data and basically copied the rest of Apollo's lawyers' work.  These were the sweeteners, along with the extra $10 per share.  Apollo still topped them, of course, newly emboldened that Berkshire was willing to pay $140..

 

"On November 22, 2019, representatives of Berkshire met with Mr. Hume and a representative of BofA Securities. On November 23, 2019, Berkshire submitted a binding written proposal to acquire all of the outstanding shares of Tech Data common stock for $140.00 per share. Berkshire also provided a proposed form of merger agreement, based on the Original Agreement entered into between Tech Data, Parent and Merger Sub, but containing certain terms more favorable to Tech Data, including (1) fully funding the transaction using cash-on-hand at Berkshire, (2) elimination of certain representations and warranties to be made by Tech Data and (3) elimination of a “no material adverse effect” condition to buyer’s obligation to close the merger."

 

From page 43, "Background of the Merger"

https://www.sec.gov/Archives/edgar/data/790703/000119312519311852/d841970dprem14a.htm#rom841970_32