Buffett/Berkshire - general news

[Dynamic]

https://www.rationalwalk.com/?p=18732

 

An interesting review of Cunningham and Cuba's new book A Margin Of Trust about Berkshire's culture

[John Hjorth]

Yes, Dynamic, & thanks,

 

Ravi Nagarajan is a Buffett & Munger fan, a Berkaholic & a great thinker. I really enjoy reading his stuff on his blog, and on Twitter his frequent musings and thoughts about what's going here, there & everywhere, including in the FinTwitosphere.

[Dynamic]

Yes, I've enjoyed his writing especially about Berkshire for the best part of 2 decades I think.

 

On Berkshire news, there's a bit of branching out in the London UK property market.

https://uk.finance.yahoo.com/amphtml/news/warren-buffett-berkshire-hathaway-is-boosting-his-london-property-business-mortgages-132918951.html

[LC]

Yes. The points there were very interesting. I will have also an interview with him, where he will give more insights :).

 

Looking forward to it, thanks for sharing your excellent work!

[gfp]

Not particularly important - but Pilot Flying J is adopting a new corporate identity and continues to grow beyond truck stops:

https://www.cspdailynews.com/company-news/pilot-flying-j-changing-its-name

[redskin]

Has anyone heard any updates on this proposal?

 

https://www.barrons.com/articles/berkshire-could-lift-stakes-in-several-big-banks-under-proposed-fed-rule-change-51556217117

[John Hjorth]

Has anyone heard any updates on this proposal?

 

https://www.barrons.com/articles/berkshire-could-lift-stakes-in-several-big-banks-under-proposed-fed-rule-change-51556217117

 

Personally, I'll second redskin's question whole-hearted. I can't remember the sources any longer, and I've got no time to dig them up [perhaps it was actually posted by a fellow CoBF on here], but if I remember correctly, Berkshire has asked for permission not to reduce its position in BAC below 10 percent, while it continues to reduce its position in WFC.

 

Please correct me if I'm wrong, and if I'm not wrong [i may be], what do you get out that? I mean, perhaps, with regard to the forced WFC selling at Berkshire, it may be considered at Berkshire's convenience in the situation. [No kick-a** one-liners from Mr. Buffett nor Mr. Munger for years about WFC being a "good bank" - perhaps for a reason.]

[longtermdave]

I'm not a lawyer, so I can't tell if this would apply to Berkshire the same way it is supposed to apply to entirely passive funds. It is temporary to 2021, and the limit is 15% rather than the 25% limit proposed last year.

 

https://alerts.davispolk.com/10/4767/uploads/2020-01-17-federal-banking-agencies-recognize-the-rise-of-index-funds-and-passive-investing.pdf?sid=b2d35c6d-984b-4c56-8790-ea5676b4bf1c

[Guest eatliftinvestgolf]

This link has a good chart of the proposed rule.

 

https://www.wilmerhale.com/en/insights/client-alerts/20190426-federal-reserve-proposes-revisions-to-the-control-framework-under-the-bank-holding-company-act

[Guest eatliftinvestgolf]

As far as I can tell, the final version of the proposed rule has not yet been released.

 

https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201910&RIN=7100-AF49

 

[woodstove]

Thanks for that link to a summary of the proposed rule.  It seems to me that there is costly risk exposure, due to discretion of regulators in applying rule, interpretation, etc.  Realistic low-risk behaviour will be to not go over 10 percent, I think.  So be it.  Still lots of fish in barrel.

[Sleepwell]

I thought they never sold anything... more flexibility going forward?

 

https://finance.yahoo.com/news/lee-enterprises-buy-berkshire-hathaway-114510889.html

[Sleepwell]

Warren E. Buffett, Berkshire Hathaway’s Chairman and CEO, said, “My partner Charlie Munger and I have known and admired the Lee organization for over 40 years. They have delivered exceptional performance managing BH Media’s newspapers and continue to outpace the industry in digital market share and revenue. We had zero interest in selling the group to anyone else for one simple reason: We believe that Lee is best positioned to manage through the industry’s challenges. No organization is more committed to serving the vital role of high-quality local news, however delivered, as Lee. I am confident that our newspapers will be in the right hands going forward and I also am pleased to be deepening our long-term relationship with Lee through the financing agreement.”

[petec]

I thought they never sold anything... more flexibility going forward?

 

https://finance.yahoo.com/news/lee-enterprises-buy-berkshire-hathaway-114510889.html

 

3x ebitda? Am I reading that right?

[DooDiligence]

Warren E. Buffett, Berkshire Hathaway’s Chairman and CEO, said, “My partner Charlie Munger and I have known and admired the Lee organization for over 40 years. They have delivered exceptional performance managing BH Media’s newspapers and continue to outpace the industry in digital market share and revenue. We had zero interest in selling the group to anyone else for one simple reason: We believe that Lee is best positioned to manage through the industry’s challenges. No organization is more committed to serving the vital role of high-quality local news, however delivered, as Lee. I am confident that our newspapers will be in the right hands going forward and I also am pleased to be deepening our long-term relationship with Lee through the financing agreement.”

 

Apparently Warren & Charlie don't have enough faith in Lee to simply cough up some pocket change to buy them & put the papers in their charge.

[Sleepwell]

I thought they never sold anything... more flexibility going forward?

 

https://finance.yahoo.com/news/lee-enterprises-buy-berkshire-hathaway-114510889.html

 

3x ebitda? Am I reading that right?

 

That also jumped out to me... I think what they saw attractive was the financing they got in return. 576mm @9% 52MM in interest which is higher than the 47MM. I'm guessing there's some tax planning behind this too

[5xEBITDA]

I thought they never sold anything... more flexibility going forward?

 

https://finance.yahoo.com/news/lee-enterprises-buy-berkshire-hathaway-114510889.html

 

3x ebitda? Am I reading that right?

 

More like 3x EBITDA heading to 4-5x, etc.

[gfp]

I don't blame warren for preferring $576 million of long term financing at 9%.  Lee was already running the papers

[petec]

I thought they never sold anything... more flexibility going forward?

 

https://finance.yahoo.com/news/lee-enterprises-buy-berkshire-hathaway-114510889.html

 

3x ebitda? Am I reading that right?

 

More like 3x EBITDA heading to 4-5x, etc.

 

In which case more than tripling your capital commitment is an odd thing to do even if it does move you higher up the structure.

[5xEBITDA]

I thought they never sold anything... more flexibility going forward?

 

https://finance.yahoo.com/news/lee-enterprises-buy-berkshire-hathaway-114510889.html

 

3x ebitda? Am I reading that right?

 

More like 3x EBITDA heading to 4-5x, etc.

 

In which case more than tripling your capital commitment is an odd thing to do even if it does move you higher up the structure.

 

Edit: nvm

[redskin]

Has anyone heard any updates on this proposal?

 

https://www.barrons.com/articles/berkshire-could-lift-stakes-in-several-big-banks-under-proposed-fed-rule-change-51556217117

 

Personally, I'll second redskin's question whole-hearted. I can't remember the sources any longer, and I've got no time to dig them up [perhaps it was actually posted by a fellow CoBF on here], but if I remember correctly, Berkshire has asked for permission not to reduce its position in BAC below 10 percent, while it continues to reduce its position in WFC.

 

Please correct me if I'm wrong, and if I'm not wrong [i may be], what do you get out that? I mean, perhaps, with regard to the forced WFC selling at Berkshire, it may be considered at Berkshire's convenience in the situation. [No kick-a** one-liners from Mr. Buffett nor Mr. Munger for years about WFC being a "good bank" - perhaps for a reason.]

 

Looks like they finalized the rule change.  It is effective April 30th.

https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200130a.htm

[Dynamic]

So in summary it appears that 25% ownership is to become permissible without becoming a bank holding company unless you seek to exercise any control or influence beyond your normal voting rights. Potentially non voting shares might permit more ownership still.

 

For Berkshire the accelerated disclosure rules for owning over 10% of any US traded company enforced by SEC still apply so Berkshire would have to disclose new purchases within 5 days once they exceed 10%. Large additional stakes bought in the open market are unlikely but negotiated block purchases might be conceivable.

 

I'd imagine that Bank of America and Wells Fargo stakes will remain roughly constant from now on in share count but will gradually grow as a percentage through the investee buybacks. Berkshire will still need to monitor the investee filings to ensure they file form 13D or 13G within 3-5 days when a new outstanding share count is published.

[Guest longinvestor]

Over at the TMFools forum, one post caught my eye; Given that investment gains are to be reported as income, we’re likely to see a monster headline number when earnings come out from Omaha. Buffett has been warning against this very headline focus but it would still be nice to see. I went back to see what other companies reported big earnings and AAPL figures 3 or 4 times in the past decade. And FNM! Berkshire has been in the top 3 a couple of times. Based on the new reporting requirements and the large Apple holdings, we’re rather likely to keep the pole position for the next decade!

[CorpRaider]

So in summary it appears that 25% ownership is to become permissible without becoming a bank holding company unless you seek to exercise any control or influence beyond your normal voting rights. Potentially non voting shares might permit more ownership still.

 

For Berkshire the accelerated disclosure rules for owning over 10% of any US traded company enforced by SEC still apply so Berkshire would have to disclose new purchases within 5 days once they exceed 10%. Large additional stakes bought in the open market are unlikely but negotiated block purchases might be conceivable.

 

I'd imagine that Bank of America and Wells Fargo stakes will remain roughly constant from now on in share count but will gradually grow as a percentage through the investee buybacks. Berkshire will still need to monitor the investee filings to ensure they file form 13D or 13G within 3-5 days when a new outstanding share count is published.

 

That was my conclusion.  WRT Wells it seems unlikely they let it tick across the line because of the banking relationship.

[villainx]

I'd imagine that Bank of America and Wells Fargo stakes will remain roughly constant from now on in share count but will gradually grow as a percentage through the investee buybacks. Berkshire will still need to monitor the investee filings to ensure they file form 13D or 13G within 3-5 days when a new outstanding share count is published.

 

Isn't it very likely that they'll be adding a bunch of banking stock in the near future?  They have the cash on hand and it seems like the regulations were the main thing holding them back.  Or prices are too high, and BRK will pounce when a reasonable entry presents itself?

 

Likewise, the reg hurdle might have limited some of T&T's purchases?  So they certainly can do something too?