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BRK 2016Q3 reporting


John Hjorth
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We get to see how much the $2.1 B face of Wrigley preferred was redeemed for ->

 

"During 2008, we purchased $2.1 billion of Wrigley preferred stock that was acquired pursuant to a shareholder agreement in

conjunction with Mars Incorporated’s acquisition of Wrigley. Pursuant to certain put and call provisions in the shareholder

agreement, up to 50% of our original investment was redeemable over a 90-day period that was scheduled to begin on October 6,

2016. On August 8, 2016, we entered into a stock purchase agreement with Mars, under which Mars agreed to acquire all of the

Wrigley preferred stock for approximately $4.56 billion, which included a prorated dividend that would have otherwise been payable

on October 6, 2016. The transaction was completed on September 27, 2016. "

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84.8B cash - 24% of the market cap.

 

The pleasure of working with permanent capital - from very patient, long term investors. You meet in at the office, every day,  stating to your secretary: "No calls to me today about WFC, please - thanks!".

 

In the middle of the day you take a nap on the couch in office, thinking about things in general. Then you get up in the middle of your rest, calling Mr. Munger: "Any ideas?" Answer: "No". Then you go to, or call T&T with the same question. Same answer.

 

Then you you go back to the couch, trying to get some rest, but to no avail, because the couch is standing in a high bow, because of the cash pile below it.

 

Problems [to the contrary of conditions] are issues, to which you are able make a difference.

 

I'm [still] waiting.

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84.8B cash - 24% of the market cap.

 

The pleasure of working with permanent capital - from very patient, long term investors. You meet in at the office, every day,  stating to your secretary: "No calls to me today about WFC, please - thanks!".

 

In the middle of the day you take a nap on the couch in office, thinking about things in general. Then you get up in the middle of your rest, calling Mr. Munger: "Any ideas?" Answer: "No". Then you go to, or call T&T with the same question. Same answer.

 

Then you you go back to the couch, trying to get some rest, but to no avail, because the couch is standing in a high bow, because of the cash pile below it.

 

Problems [to the contrary of conditions] are issues, to which you are able make a difference.

 

I'm [still] waiting.

 

+1!  That's about right for what happens at Berkshire.  Cheers!

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Guest longinvestor

84.8B cash - 24% of the market cap.

 

If you are a shareholder, your cash holding can be just this much. I'm near certain that I would pee away more of it than the Omaha boys.

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84.8B cash - 24% of the market cap.

 

If you are a shareholder, your cash holding can be just this much. I'm near certain that I would pee away more of it than the Omaha boys.

 

+1. Tough to get that kind of discipline.

 

Agree. Just need to keep it black and white in regards to valuation. Surely no crisis now. Perfect time to just keep building cash but tough as value can be so easily self perceived.

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Book Value per B Share sitting at $109.19.

 

As of close today, B Shares trading at 1.31 Book Value.

 

Perhaps we will see shares dip into the ~1.2 (or below) range with more volatility.

Actually, if you mark the khc investment what you get P/B=1.26 on sept 30. Taking Sep 30 BV/current cap => P/B=1.24. However currently P/B is probably higher due to losses in the stock portfolio.

 

One of a few things is going to happen:

 

1. Stock will move up

2. Buybacks kick in

3. It's elephant time!

 

Edit: It's so amazing, after doing an elephant last year they're ready for another one. Only at Berkshire. The should change the ticker to BHL for Blackhole.

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Book Value per B Share sitting at $109.19.

 

As of close today, B Shares trading at 1.31 Book Value.

 

Perhaps we will see shares dip into the ~1.2 (or below) range with more volatility.

Actually, if you mark the khc investment what you get P/B=1.26 on sept 30. Taking Sep 30 BV/current cap => P/B=1.24. However currently P/B is probably higher due to losses in the stock portfolio.

 

One of a few things is going to happen:

 

1. Stock will move up

2. Buybacks kick in

3. It's elephant time!

 

Edit: It's so amazing, after doing an elephant last year they're ready for another one. Only at Berkshire. The should change the ticker to BHL for Blackhole.

 

Interesting - thanks for pointing that out! I was going strictly by reported book value.

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84.8B cash - 24% of the market cap.

 

The pleasure of working with permanent capital - from very patient, long term investors. You meet in at the office, every day,  stating to your secretary: "No calls to me today about WFC, please - thanks!".

 

WEB has plausible deniability when things go bad (disclaimer: I don't believe this was by design.)

 

From a May 2014 New York Times article:

 

"By the standards of the rest of the world, we overtrust. So far it has worked very well for us. Some would see it as weakness.”

 

I doubt Buffet is an Ayn Rand fan like Greenspan was (he overtrusted management too) although in WEB's case I tend to believe that it's because he's basically an honest guy whereas Greenspan was just deluded...

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Comparison with some other (more popular) stocks:

 

 

MSFT Quarterly earnings:

Income before income taxes: 5,325 million

Market cap: 457 billion

 

Google Quarterly earnings

Income before income taxes: 6,045 million

Market cap: 531 billion

 

Facebook quarterly earnings

 

Income before income taxes: 3,169 million

Market cap: 347 billion

 

Amazon quarterly earnings

 

Income before income taxes: 491 million

Market cap: 357 billion

 

Netflix quarterly earnings

 

Income before income taxes: 51 million

Market cap: 52 billion

 

Berkshire Hathaway quarterly earnings

 

Income before income taxes: 10,525 million

Market cap: 353 billion

 

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Guest longinvestor

Comparison with some other (more popular) stocks:

 

 

MSFT Quarterly earnings:

Income before income taxes: 5,325 million

Market cap: 457 billion

 

Google Quarterly earnings

Income before income taxes: 6,045 million

Market cap: 531 billion

 

Facebook quarterly earnings

 

Income before income taxes: 3,169 million

Market cap: 347 billion

 

Amazon quarterly earnings

 

Income before income taxes: 491 million

Market cap: 357 billion

 

Netflix quarterly earnings

 

Income before income taxes: 51 million

Market cap: 52 billion

 

Berkshire Hathaway quarterly earnings

 

Income before income taxes: 10,525 million

Market cap: 353 billion

 

:-)

 

Let's not allow the facts to spoil a good tale.

 

Too old, too big and too boring. That's a good summary.

 

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Comparison with some other (more popular) stocks:

 

 

MSFT Quarterly earnings:

Income before income taxes: 5,325 million

Market cap: 457 billion

 

Google Quarterly earnings

Income before income taxes: 6,045 million

Market cap: 531 billion

 

Facebook quarterly earnings

 

Income before income taxes: 3,169 million

Market cap: 347 billion

 

Amazon quarterly earnings

 

Income before income taxes: 491 million

Market cap: 357 billion

 

Netflix quarterly earnings

 

Income before income taxes: 51 million

Market cap: 52 billion

 

Berkshire Hathaway quarterly earnings

 

Income before income taxes: 10,525 million

Market cap: 353 billion

 

:-)

 

Let's not allow the facts to spoil a good tale.

 

Too old, too big and too boring. That's a good summary.

 

Also Facebook looks very attractive relatively. :-)

 

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... Too old, too big and too boring. ...

 

Well, that could actually be me! [<- place smiley here].

 

This is an oversize Rock of Gibraltar, a former failing textile business, earlier gone into run-off mode [-What a run-off mode!]. Is rock productive? The market price per share now is about the same as two years ago. Please lookup 2014Q3 reporting and compare to 2016Q3 reporting, and take a look at what has happened in those two years.

 

Perhaps I should consider stop expressing my impatience and buy more.

 

I get more and more dizzy reading the financials quarter by quarter for this thing. Now we have:

  • Net cash flow from operations at USD 25B for 9 months,
  • Insurance float at USD 91B,
  • Deferred taxes at approx. USD 74B,
  • Cash and cash equivalents at USD 85B,
  • Equity securities at USD 101B.

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Given where the market is priced at, berkshire looks very tempting.  Tempting to do something foolish and put half my portfolio into it.  The thing that concerns me is the single company risk.  It seems there is always that small chance that some mega catastrophe hits their insurance operations so hard it takes the whole thing down.  Does anyone have any suggestions on how to hedge BRK?  They don't appear to have an options market.

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Firstly, actually BRK does have an options market. Please don't hog it cause i like to swim in that pond from time to time :). Look at the B class not the A class. It's not as big as for other companies in it's class but it should be big enough unless ur a giant investor. But the if your a giant investor you have access to bespoke options.

 

Secondly, BRK doesn't really do CAT reinsurance anymore so that risk isn't as big as it once was. I think they estimate that if the worst global catastrophe they can possibly imagine comes to pass it would cost them one year's operating earnings. Ironically if that happened it would probably end up benefiting BRK because it would result in such a tight market that they would make a killing on future underwriting.

 

Thirdly, while i wouldn't recommend that anyone go 50% in one stock, BRK is probably the only one you could do that with and not loose sleep at night. I don't think that you can think of BRK as carrying single company risk given the breadth and depth of their operations and the quality of management.

 

Fourthly, I agree BRK's valuation looks kinda appealing. Especially in this crazy market. Sometimes the right thing to do is also the easiest :).

 

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