Berkshire Q2 2023

[cubsfan]

^^^ oh yeah. Those kind of assets that Munger used to talk about….

 

You reach for them, and they just disappear.

[KPO]

52 minutes ago, gfp said:

 

So I believe that technically, AIG said they had a trillion dollars of assets in 2007 before the crash.  Obviously we could put an asterisk on that one.

 

 

Nice sleuthing here. It’s pretty remarkable how large this company has become since I started following it in ‘94. 

[adesigar]

4 hours ago, Maxwave28 said:

Below is my look thru earnings calculation, I am at a similar earnings yield of 4.8% on $353bn (i get to the portfolio yield by grossing up the top 5 holdings as indicative of the portfolio at large) or ~$16.9bn but think we have subtract dividends paid to BRK of about ~$4.7bn as those are already in operating earnings. Therefore I get to an incremental pre tax look thru earnings of $12.1bn apply a 10% discount for some taxes and I get to $10.9 of incremental look thru earnings to BRK. If we annualize the $10bn of operating earnings to $40bn and add the $10.9bn then perhaps run rate total look thru earnings maybe ~$50.9bn on a market cap ~$760bn equates to a look thru earnings yield ~6.7%.

 

See my calculation below. Please rip it apart as I am guessing I missed something.  

 

 

 

This whole look thru earnings and apply some generic PE is dumb. It makes absolutely zero sense. 
 

eg

Take 180 billion in Apple stock, which is at a PE of 30. Look through earnings are 6 billion on that. So using look through earnings and a PE of 15 we are supposed to value the 180 Billion of AAPL at 90 Billion.

 

Yea no thanks.

 

 

 

 

[Luca]

41 minutes ago, adesigar said:

 

This whole look thru earnings and apply some generic PE is dumb. It makes absolutely zero sense. 
 

eg

Take 180 billion in Apple stock, which is at a PE of 30. Look through earnings are 6 billion on that. So using look through earnings and a PE of 15 we are supposed to value the 180 Billion of AAPL at 90 Billion.

 

Yea no thanks.

 

 

That's absolutely not how we did it, we did not apply some generic PE. We looked at the current earnings for each partially owned business to calculate the earnings for the stock portfolio. Then we looked at the approximate earnings yield of Berkshire with adding those earnings to it. Your statement makes no sense!

 

5 hours ago, Maxwave28 said:

Below is my look thru earnings calculation, I am at a similar earnings yield of 4.8% on $353bn (i get to the portfolio yield by grossing up the top 5 holdings as indicative of the portfolio at large) or ~$16.9bn but think we have subtract dividends paid to BRK of about ~$4.7bn as those are already in operating earnings. Therefore I get to an incremental pre tax look thru earnings of $12.1bn apply a 10% discount for some taxes and I get to $10.9 of incremental look thru earnings to BRK. If we annualize the $10bn of operating earnings to $40bn and add the $10.9bn then perhaps run rate total look thru earnings maybe ~$50.9bn on a market cap ~$760bn equates to a look thru earnings yield ~6.7%.

 

See my calculation below. Please rip it apart as I am guessing I missed something.  

 

 

 

 

 

Yes, makes sense, around that number and i believe you are right with the dividends and taxes!

 

 

Edited August 5, 2023 by Luca

[Parsad]

8 hours ago, KPO said:

Not that it really matters, but is Berkshire the first non-bank to $1 trillion in assets?

 

Yes.  AIG was leveraged 10-1 asset to equity...essentially a bank!  I believe BRK has the most equity of any company to have ever existed at over half a trillion.  Cheers!

[UK]

 

 

[Thelilyinvestor]

I find interesting that he bought back more Berkshire shares in June and early July than April and May at higher prices. Maybe he is seeing a re acceleration in the US economy?

 

I think it is worth a thought, we all know that Buffett is very price sensitive and only buys back shares of Berkshire if they are "significantly undervalued conservatively estimated by Charlie and me"

 

Lily

[Libs]

18 hours ago, Maxwave28 said:

Below is my look thru earnings calculation, I am at a similar earnings yield of 4.8% on $353bn (i get to the portfolio yield by grossing up the top 5 holdings as indicative of the portfolio at large) or ~$16.9bn but think we have subtract dividends paid to BRK of about ~$4.7bn as those are already in operating earnings. Therefore I get to an incremental pre tax look thru earnings of $12.1bn apply a 10% discount for some taxes and I get to $10.9 of incremental look thru earnings to BRK. If we annualize the $10bn of operating earnings to $40bn and add the $10.9bn then perhaps run rate total look thru earnings maybe ~$50.9bn on a market cap ~$760bn equates to a look thru earnings yield ~6.7%.

 

See my calculation below. Please rip it apart as I am guessing I missed something.  

 

 

Thank you. Very helpful.

[menlo]

With regard to the amount of cash, i wonder if it might be in "anticipation" of Buffett's (and/or Munger's) passing or resigning.  While stepping down might allow Buffett to control the narrative, i assume that his death would result in quite the sell off.  Hence, the cash hoard would be available for a buyback in size.  The opportunity cost with 5% T-Bill rates is minimal as well.  Just thinking out loud....

[throw123]

8 minutes ago, menlo said:

With regard to the amount of cash, i wonder if it might be in "anticipation" of Buffett's (and/or Munger's) passing or resigning.  While stepping down might allow Buffett to control the narrative, i assume that his death would result in quite the sell off.  Hence, the cash hoard would be available for a buyback in size.  The opportunity cost with 5% T-Bill rates is minimal as well.  Just thinking out loud....

I have a similar train of thought. if the share price tanks it would be a blessing for new management

[BiggieCheese]

Disagree - believe the cash balance is a result of the current opportunity set. I don't think he would avoid attractively priced investments for the possibility of deploying capital in future buybacks. Additionally, the speed at which Berkshire can deploy capital in buybacks seems limiting. In Q3 2020 there was ~$9b of buybacks at 1.2x book value. If this is somewhat representative of what the maximum pace of buybacks would be and the price it seems way too small to plan on

[Malmqky]

Just now, BiggieCheese said:

Disagree - believe the cash balance is a result of the current opportunity set. I don't think he would avoid attractively priced investments for the possibility of deploying capital in future buybacks. Additionally, the speed at which Berkshire can deploy capital in buybacks seems limiting. In Q3 2020 there was ~$9b of buybacks at 1.2x book value. If this is somewhat representative of what the maximum pace of buybacks would be and the price it seems way too small to plan on

 

This is what I think too.

 

Looking at the companies Berk can invest in and most likely would invest in...well they're all at a pretty lofty valuation right now.

Better to keep rolling 4 week tbills I reckon

[Xerxes]

Some Berkshire old timers might sell in the months/years after Buffett … or might de-risk months/years before in anticipation of. 
 

But I sincerely doubt that the day after tomorrow, there would be a massive sell off by the long time holders. Like they are surprised and didn’t see it coming. 
 

This is not the Berkshire of 20 years ago, where there would have been a change in trajectory, because there is a change at the helm. 
 

I have a friends who are “supposedly” going to make their first BRK in size the day after.  Thus expecting some major sell off. They have been waiting for a long time. In the meantime, Berkshire climbs the wall of worry. 
 

 

[Charlie]

Some years ago Munger told his relatives at an annual meeting that they shouldn´t be so dumb to sell their Berkshire shares.

I think that is the mantra of a lot of Berkshire billionaires and millionaires.

[adesigar]

Berkshire HODL

[Kuhndan]

Buffett has said in the past that he anticipates Berkshire Hathaway stock going up once he passes as investor speculate on the break up value of the company. Given the Board in place and Buffett’s wishes, I don’t see a break up happening.