Guest Schwab711 Posted March 12, 2016 Share Posted March 12, 2016 I understand that the build-up of a diversified and controlled non-insurance earnings stream creates a competitive advantage for the reinsurance arm (and GEICO/industrial subs, to a lesser degree), but I think BRK shareholders would currently be better served if BRK paid a small, once-a-year, and variable dividend (could target a roughly bi-annual special dividend instead of something predictably frequent). I'm not a big fan of the PCP acquisition and I think a return of capital or nothing would have been better. It would also lower the minimum size necessary to "move the needle". Even with the $9b bond sale, shareholders will earn roughly 10-11% pre-tax ROIC on the PCP purchase, assuming margins don't fall again in 2016. I don't think a spin-off of any major unit makes sense anymore. However, I think a Yahoo-like strategy where they create a "Berkshire Investment Advisor" sub would be an excellent, capital-light, move to take advantage of "Berkshire" name while providing BRK an option to spin-off their large, non-controlling equity stakes on a tax-free basis, if they ever wanted to. WEB loves financial flexibility and stable, high-ROIC cash flows (but who doesn't). If it could be used to monetize their deferred tax assets then it would seem worthwhile. Depending on the structure, it seems like they could reduce their expected tax burden on future financing transactions (think BAC, DOW, and GS warrants) I'm guessing this isn't as simple as I think. If they ever did spin-off the IA they would surely want to drop the Berkshire name, which probably dings the value and potentially hurts their reputation. I assumed NE or CA would be the natural regions to launch in. WFC has >10% deposit share in NE (AUM share appears to be higher) and BAC/WFC's ~43% deposit share in CA (wow!). I guess he could start on the east coast? On second thought, this proposal may be as ridiculous as suggesting BRK buyout MCO or something. Either way, I prefer the Berkshire IA in the US or a regular special dividend vs. Berkshire re-insurance in Australia and heavy invests in AU banks while their housing market looks like 2005 Florida. Anyone have any thoughts on why this is genius or poorly thought out? http://www.nebankers.org/images/files/pdf-public/communications/press-room/bank-statistics/marketshare-rpt-by-marketshare.pdf https://www.snl.com/irweblinkx/depositmarketshare.aspx?iid=4074352 Link to comment Share on other sites More sharing options...
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