Buffett/Berkshire - general news

[UK]

"The question comes more loudly now than at any time since Berkshire missed out on the dotcom boom: has Mr Buffett lost his touch?"

 

Another article (this time from FT) to be added to the repository of has-buffet-lost-his-touch articles.

https://business.financialpost.com/investing/warren-buffett-lost-his-touch

 

“If Berkshire is to have the prospects of generating the value it has in the past, it has to adapt by buying these companies that will generate significant value over the next 25 years,” said Christopher Rossbach, chief investment officer of J Stern & Co. J Stern manages money for the Stern family, which has held Berkshire shares for decades, as well as other investors.

 

“Both Warren and Charlie (Munger, Berkshire’s vice-chairman) have acknowledged that they have missed Amazon and that they should be looking at these companies but they have also said they don’t understand them,” Rossbach said. “They have kept them in the box that Warren has on his desk that says ‘Too hard’. What will it take for them to take these stocks out of the box?”

 

“Berkshire Hathaway remains designed to reward investors over time but not on time,” said Thomas Russo, a managing member of Gardner Russo & Gardner, which owns Berkshire stock.

“It is one of the reasons we say to people, ‘Don’t be in a hurry to spend that money’,” referring to Buffett’s US$137-billion cash pile. “If you rush it, he could make a mistake.”

 

“I am nervous that he may have missed this whole rally,” said James Shanahan, an analyst with Edward Jones. “If the rally started in late March and he was a net seller in April, it seems like . . . he missed it all. That’s frustrating. A lot of retail investors were ploughing money into the market and doing better than professional investors. I think you can include Buffett in that.”

 

“Those two things, I believe, have really tarnished Berkshire’s reputation for dealmaking,” Seifert said of the two investments. The Occidental deal “was an unmitigated disaster.”

[mountboney]

I don't get the BI insurance fear with regards to BRK.  Straight out of his mouth at this years annual meeting:

 

"We are not big in the commercial, multiple peril business.

Warren Buffett: (02:49:47)

So I mean, this is not like our auto business or anything of that sort, but we will have claims. We’ll have litigation costs, but proportionally it’s not the same with us as with some other companies, which have been much more…

Warren Buffett: (02:50:03)

…those with some other companies which have been much heavier in writing business interruption as part of a commercial, multiple peril."

 

How much clearer could he be?

[longterminvestor]

So lets say BRK purchased some Markel shares.  Knowing Markel owns some BRK shares, is there some kind of tax-free exchange the two corporations could make if they gave each other an equal amount of the others shares?  Weird question but just curious. 

[sleepydragon]

So lets say BRK purchased some Markel shares.  Knowing Markel owns some BRK shares, is there some kind of tax-free exchange the two corporations could make if they gave each other an equal amount of the others shares?  Weird question but just curious.

 

I think BRK did this from Graham

[wabuffo]

Also did this with  PG - got Duracell business in tax-free return for BRK’s PG common shares.  Buffett has done this a few times.  In the WaPo tax-free exchange, BRK also received a Miami TV station.

 

wabuffo

[gfp]

Berkshire released a bit more commentary on this year's annual gift by Warren to the various foundations.  Must be an election year

 

https://berkshirehathaway.com/news/jul0820.pdf

[aws]

So lets say BRK purchased some Markel shares.  Knowing Markel owns some BRK shares, is there some kind of tax-free exchange the two corporations could make if they gave each other an equal amount of the others shares?  Weird question but just curious.

 

It only works when there is a business involved, and the business has to be a substantial part of the total deal (I think at least one third of the total deal value).  In the Graham deal Berkshire bought a TV station and obviously they bought Duracell in the P&G deal.  It's probably only worth bothering when you have one side with a very low cost basis in the shares so the tax savings are material to the overall deal size.

[rolling]

So lets say BRK purchased some Markel shares.  Knowing Markel owns some BRK shares, is there some kind of tax-free exchange the two corporations could make if they gave each other an equal amount of the others shares?  Weird question but just curious.

 

It only works when there is a business involved, and the business has to be a substantial part of the total deal (I think at least one third of the total deal value).  In the Graham deal Berkshire bought a TV station and obviously they bought Duracell in the P&G deal.  It's probably only worth bothering when you have one side with a very low cost basis in the shares so the tax savings are material to the overall deal size.

https://corporatefinanceinstitute.com/resources/knowledge/deals/cash-rich-split-off/

[jwelborn93]

The shutdown of the DAPL pipeline in the Bakken should be very positive for BNSF going forward.  They have most of the capacity in the region and crude rail capacity will likely double if the shutdown remains in place to transport the marginal barrel.  Railing crude has historically been the most profitable end market for the rails from a margin perspective. 

[gfp]

WSJ has an article about the OXY warrants that Icahn hatched up.  I'm not sure they have it 100% correct as it relates to the Berkshire security's protections against dilution.  They also seem to miss that OXY has to pay Berkshire 9%, not 8%, when paying the dividend in stock.  Will have to take a peek at the filings for the OXY Berkshire preferred after I walk the dog

 

https://www.wsj.com/articles/oxys-sweetener-a-bitter-pill-for-warren-buffett-11594378801

[CorpRaider]

I agree.  My impression reading the article was, "yeah BRK is really hurt by raising capital that is subordinated to the preferred in this environment." ::)

 

 

[physdude]

My impression, "yeah BRK is really hurt by raising capital that is subordinated to the preferred in this environment."

 

That is sarcasm, right? (I think it almost definitely is, but just wanted to make sure)

[LearningMachine]

My impression, "yeah BRK is really hurt by raising capital that is subordinated to the preferred in this environment."

 

That is sarcasm, right? (I think it almost definitely is, but just wanted to make sure)

 

I'm thinking it actually increases the value of Buffett's investment in senior securities in OXY with (1) no negative impact from dilution of subordinated securities and (2) positive impact from lowering the likelihood of OXY filing for bankruptcy with the new money.

[bizaro86]

I agree.  My impression reading the article was, "yeah BRK is really hurt by raising capital that is subordinated to the preferred in this environment." ::)

 

Aren't they just distributing 7 year warrants to shareholders? I doubt that results in any new equity capital on their balance sheet until the 7 years are up. And not at all if they end up distressed before that. But it would dilute some of the conversion upside. If this was a rights offering where they sold new shares for cash I'd agree it was great for the prefs, but that isnt my read of what's happening.

[nickenumbers]

Why do we think Ajit Jain sold some BRK shares for just under $1MM?  [info reported on Dataroma as insider transaction.]

 

 

≡

08 Jul 09:42

BRK.A

BERKSHIRE HATHAWAY INC

JAIN AJIT

Vice Chairman 01 Jul 2020 Sale 5,600 177.735 995,316 I

 

* D/I = Direct / Indirect

* 10% = Entity with 10% or higher ownership stake

* A = Amendment Filing (SEC Form 4/A)

[rb]

Maybe he wanted to buy a boat??

[gfp]

He did not.  His foundation, the Jain Foundation, sold the shares.  Presumably to make donations, fund research, be charitable, meet minimum requirements to remain a tax exempt foundation, etc...

 

https://www.sec.gov/Archives/edgar/data/1067983/000172845120000003/xslF345X03/primary_doc.xml

 

Why do we think Ajit Jain sold some BRK shares for just under $1MM?  [info reported on Dataroma as insider transaction.]

 

 

≡

08 Jul 09:42

BRK.A

BERKSHIRE HATHAWAY INC

JAIN AJIT

Vice Chairman 01 Jul 2020 Sale 5,600 177.735 995,316 I

 

* D/I = Direct / Indirect

* 10% = Entity with 10% or higher ownership stake

* A = Amendment Filing (SEC Form 4/A)

[nickenumbers]

Maybe he wanted to buy a boat??

 

Okay, I chuckled at that!  You never know.. 

[John Hjorth]

Maybe he wanted to buy a boat??

 

Okay, I chuckled at that!  You never know..

 

#metoo! [ : - D] -Well, with a salary of USD 19 M for 2019 [including a bonus of USD 3 M or something like that], I suppose you "just" swipe some plastic if you want to buy "a boat" [not a yacht].

[rb]

John, my friend, that only happens in the movies. In reality they don't let you swipe plastic. I bought a car a couple of years ago and they only let me swipe plastic for $5,000. I had to bring paper for the rest. This wasn't a corner store place either, it was a BMW dealership.

 

Full disclosure: I gave them a certified cheque. I didn't ask if also took Berkshire stock certificates.

[John Hjorth]

rb,

 

You're right. The last time I bought something tangible & expensive [for my part: a car] I paid with a certified cheque, too. Later, I have at my broker bought Berkshire shares in one transaction above that figure in the car transaction - the difference is the broker already knows the cash is present and available.

[nickenumbers]

Every time I have bought a yacht they have accepted a credit card for the full purchase price!!  ::)

[John Hjorth]

Value investors don't buy yachts - period. They are cheap-skates [, perhaps with some kind of weird obsession to cars or whatever - not yachts!][ ; - D ]

 

- - - o 0 o - - -

 

Now back to Buffett/Berkshire - General news.

[Jurgis]

Every time I have bought a yacht they have accepted a credit card for the full purchase price!!  ::)

 

Same for me. I think the other guys are just using crappy value investor CCs.  ::)

[Guest longinvestor]

https://finance.yahoo.com/news/navistar-develop-self-driving-trucks-120000766.html

 

McLane is co-investing in the development of self-driving truck network/ technology. Imagine that, a lowly Berkshire subsidiary investing in technology? Not supposed to be that way, who’d have thunk?