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Mystery Berkshire Investment


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The last 10-Q showed $245bb in equity investments. The most recent 13-F filing showed 228.9bb in equity portfolio and noted that they have a confidential position that hasn't been disclosed publicly yet.

 

Ideas on what this mystery 16.5bb investment could be (and I assume he was still adding this quarter)? Given the Apple stake, the relative size of the investment (which I assume wouldn't be more than 15-20% of the total CSO), and the more reasonable recent valuations, perhaps Facebook?

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The last 10-Q showed $245bb in equity investments. The most recent 13-F filing showed 228.9bb in equity portfolio and noted that they have a confidential position that hasn't been disclosed publicly yet.

 

Ideas on what this mystery 16.5bb investment could be (and I assume he was still adding this quarter)? Given the Apple stake, the relative size of the investment (which I assume wouldn't be more than 15-20% of the total CSO), and the more reasonable recent valuations, perhaps Facebook?

 

I don't think its as cut and dry as that to guess the size of the undisclosed purchase because a.) Berkshire owns foreign securities that are included in the 10-Q equities but not listed in a 13-F; and b.) Berkshire files two 13-F filings, the one you reference and certain portions of the 13-F for General Re New England Asset Management. 

 

Long story short - I don't think the undisclosed equity investment was as large as you think it was at quarter end.

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Thanks, a lot of back of the envelope math and I definitely overlooked the foreign holdings not being reported in the 13-F, but carried on the balance sheet under the equity investments. Given BYD and the recent trading company investments, it's clear it's not $16bb, and may not even be half that. On the other hand, it's clearly something he is building a position in, or he wouldn't be making use of the SEC exemption.

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Thanks, a lot of back of the envelope math and I definitely overlooked the foreign holdings not being reported in the 13-F, but carried on the balance sheet under the equity investments. Given BYD and the recent trading company investments, it's clear it's not $16bb, and may not even be half that. On the other hand, it's clearly something he is building a position in, or he wouldn't be making use of the SEC exemption.

 

I remember thinking it was probably a $4-5 Billion position in the quarter at cost basis but even that reasoning ignored the possibility of part of that number being separate additional purchases of foreign securities (like the Japanese trading company basket, potential European Pharma for his basket, etc)

 

People were comparing the new purchases of equities figure for the quarter with the disclosed new purchases in the 13-F.

 

Of the $16.5 Billion difference you note, approx. $3.6 Billion is accounted for at General Re NEAM, $3 Billion for the BYD value at quarter end, and then whatever other foreign securities they hold, japan, europe, etc..

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my guess is Google

+1 That’s my feeling too.  A self proclaimed mistake of omission.  If this is the one hopefully weighted more towards $1000 than $2000 per share. 

 

Buffett's longtime partner, Charlie Munger, also lamented not investing in Google.

 

"We could see in our own operations how well that Google advertising was working," Munger told the crowd at Berkshire's annual shareholder meeting (2019) "And we just sat there sucking our thumbs."

 

"I feel like a horse's ass for not identifying Google," he added. "I think Warren feels the same way. We screwed up."

 

"He's saying, 'We blew it,'" Buffett added.

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I agree. I think it would be much more likely to be Facebook, than Google at today's prices. I thought Alphabet was a huge value relative to the rest of the FANG a few years ago when it was trading around $850 and started displaying some value characteristics. To me, it fit into Bufett and Munger's "wonderful company at a reasonable price" mantra given its cash flows, growth profile, and strong moat (although I'm sure Charlie and Warren hate its SBC practices).  I was fortunate to pull the trigger, and was able to add to it at $1100-1200s back, and then again in the $1400-1500s in Aug (making it my largest position and a long term punch card hold).  But at $2100, it's had a really nice run and I frankly hope BRK isn't buying it at these prices. I think Facebook is now looking like Google did a couple years ago (minus the significant moat), and is displaying some value characteristics relative to its growth profile, cash hoard, and free cash flows. I took a position after recent earnings when the stock didn't move. To me, FB is the more reasonable buy at today's prices.

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I would also love to see Buffett snap up Markel (trading at 1.2x book right now). That would be a great cannon shot (but doubt it would a minority stake through open mkt purchases).

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i would be shocked if it was Boeing.

 

Of all the assets in aerospace that entity is the one you don't want to own. It has the brand, but shareholders will be taking the backseat on that asset for a longggggg while, after being showered by tens billions in the past decade.

 

Total of $43 billions returned via buyback since 2010.

Total of $25 billions returned as dividend since 2010.

 

On a cumulative free cash flow of $59 billion since 2010.

Long term debt is up from $9 billion (pre-MAX) to +$60 billion today (yes a whole bunch of its cash on B/S).

 

Far better, to own tier 1 assets that get their revenues in MRO and Aftermarket, than Boeing which is dependent on production delivery. Aftermarket will recover when the flight returns en masse, production deliveries will still trickle.

 

Lastly, in this multi-decade zero sum game that is being played between Boeing and Airbus, the former has lost this round big time. I believe the ramification will be multi-decade. As a trade, BA is probably ok, but as a long term pillar of Berkshire, i am not so certain.

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i would be shocked if it was Boeing.

 

Of all the assets in aerospace that entity is the one you don't want to own. It has the brand, but shareholders will be taking the backseat on that asset for a longggggg while, after being showered by tens billions in the past decade.

 

Total of $43 billions returned via buyback since 2010.

Total of $25 billions returned as dividend since 2010.

 

On a cumulative free cash flow of $59 billion since 2010.

Long term debt is up from $9 billion (pre-MAX) to +$60 billion today (yes a whole bunch of its cash on B/S).

 

Far better, to own tier 1 assets that get their revenues in MRO and Aftermarket, than Boeing which is dependent on production delivery. Aftermarket will recover when the flight returns en masse, production deliveries will still trickle.

 

Lastly, in this multi-decade zero sum game that is being played between Boeing and Airbus, the former has lost this round big time. I believe the ramification will be multi-decade. As a trade, BA is probably ok, but as a long term pillar of Berkshire, i am not so certain.

 

BA made a mistake, but that doesn't mean its future isn't bright, someone is going to have to build large structures in space some day. Plus, the odds I'm right are basically 1 in 3000.

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General Electric is far more possible than Boeing, IMHO.

 

Larry Culp cut his teeth at Danaher and he is well known name.

 

Its aviation exposure is an actual positive with the recovery in Aftermarket and 737 MAX pulling its weight on production side. Think about it. The bulk of commercial aircraft flying out there either have engines from GE, Pratt & Whitney, Rolls-Royce or Safran. With the first two + Safran dominating the narrow-body market.

 

Its health care is a positive as well. The big question mark were on its Power division (they wrote off the bad part of Alstom) and GE Capital, the latter is being dismantled completely except for financing that is needed to supports its industrial operations. Its renewables (which i dont know much about) can only be a positive.

 

In 2012, GE Capital was 31% of revenues now it is less than 10%.

Aviation was 13% of sales in 2012 and now it is 34%. Long term debt has gone down from $220 billion to ~$60 billion.

 

I think General Electric will rip and will ride the opening economy and rotation to value trade.

 

 

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BA made a mistake, but that doesn't mean its future isn't bright, someone is going to have to build large structures in space some day. Plus, the odds I'm right are basically 1 in 3000.

 

Agreed.

Don't get be wrong, I believe Boeing is great American icon and will survive and do great things.

 

It is just that i don't see Buffet being interested in a company where shareholders have to take the back seat to bondholders for time being (counted in years).

 

 

 

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General Electric is far more possible than Boeing, IMHO.

 

Larry Culp cut his teeth at Danaher and he is well known name.

 

Its aviation exposure is an actual positive with the recovery in Aftermarket and 737 MAX pulling its weight on production side. Think about it. The bulk of commercial aircraft flying out there either have engines from GE, Pratt & Whitney, Rolls-Royce or Safran. With the first two + Safran dominating the narrow-body market.

 

Its health care is a positive as well. The big question mark were on its Power division (they wrote off the bad part of Alstom) and GE Capital, the latter is being dismantled completely except for financing that is needed to supports its industrial operations. Its renewables (which i dont know much about) can only be a positive.

 

In 2012, GE Capital was 31% of revenues now it is less than 10%.

Aviation was 13% of sales in 2012 and now it is 34%. Long term debt has gone down from $220 billion to ~$60 billion.

 

I think General Electric will rip and will ride the opening economy and rotation to value trade.

 

Interesting thesis. I haven't been paying much attention to GE because I thought its management was crap, but you've got me interested in taking another look.

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BTC? 

 

OK, JK,  I'd guess Google as well.

 

BTC quite  possible. As 6 hour download of a BTC node replaces each banking function through out world. It may not be longer before Oracle of Omaha and venerated Charlie Munger change their mind on it.  PS: Interesting one from today is BNY Mellon news. All old players on street  joins; ultimately Oracle joins. This may be only start up investment where general public had open market ledger and cap table (fully visible) access for 12 years or so before Traditional finance make their mind about it. As WEB says: "If history is guide to riches ; librarians would be richest in the world." Digital Scarcity is the trail on which World embarks. World abundant with Central bank currencies;  a new trail leading to Digital Scarcity has begun.

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GE makes a lot of sense, if he is comfortable that there are no hidden nukes. Energy, healthcare, aviation are good to great businesses with a lot of staying power. It would also be a win-win since the backing of Berkshire would be a big vote of confidence and lower GE's cost of capital. The possible dealbreaker is a rotten culture ala WFC and getting comfortable Culp can change that which might be too big a leap of faith. But between BHE and Castparts he should be able to get som insights.

 

I don't see him entering the military complex through Boeing, has he ever invested in something with a defence component?

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BTC? 

 

OK, JK,  I'd guess Google as well.

 

BTC quite  possible. As 6 hour download of a BTC node replaces each banking function through out world. It may not be longer before Oracle of Omaha and venerated Charlie Munger change their mind on it.  PS: Interesting one from today is BNY Mellon news. All old players on street  joins; ultimately Oracle joins. This may be only start up investment where general public had open market ledger and cap table (fully visible) access for 12 years or so before Traditional finance make their mind about it. As WEB says: "If history is guide to riches ; librarians would be richest in the world." Digital Scarcity is the trail on which World embarks. World abundant with Central bank currencies;  a new trail leading to Digital Scarcity has begun.

 

Every banking function?

 

How does BTC assess credit risk, market risk, IRR, etc? How does BTC perform collections and fraud functions? How does BTC perform hedging? Risk appetite assessments? I am not well versed in Bitcoin or block chains but I have not seen anything related to these functions discussed in conjunction with Bitcoin.

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GE makes a lot of sense, if he is comfortable that there are no hidden nukes. Energy, healthcare, aviation are good to great businesses with a lot of staying power. It would also be a win-win since the backing of Berkshire would be a big vote of confidence and lower GE's cost of capital. The possible dealbreaker is a rotten culture ala WFC and getting comfortable Culp can change that which might be too big a leap of faith. But between BHE and Castparts he should be able to get som insights.

 

I don't see him entering the military complex through Boeing, has he ever invested in something with a defence component?

 

In the ‘90 he invested in General Dynamics

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