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Buffett Outlining Dividend Plan May Ease Successor’s Path


dcollon
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Guest longinvestor

I think most of Berkshire´s businesses are booming as optimistic as Buffett is in some interviews.  :)

 

Here you can Buffett ask questions (3 hours with Becky this coming Monday):

 

http://www.cnbc.com/id/100502034?__source=yahoo%7Cheadline%7Cquote%7Ctext%7C&par=yahoo

 

Can't wait to read the letter! Yes his businesses must be booming, like the stock is. Can't also wait for the AGM. Something tells me the successor will be named at this year's meeting. First meeting since Warren's health issue was publicly disclosed.

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Just a random thought probably posted in the wrong thread  :P  I wonder how likely a spin off is after the dynamic duo are gone. 

With its size, Berkshire could spin Berkshire Insurance off of Berkshire Holdings................or Hathaway Holdings

 

I would think a spinoff would be against the culture that Warren has tried to set up.  Low low probability.

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Just a random thought probably posted in the wrong thread  :P  I wonder how likely a spin off is after the dynamic duo are gone. 

With its size, Berkshire could spin Berkshire Insurance off of Berkshire Holdings................or Hathaway Holdings

 

I would think a spinoff would be against the culture that Warren has tried to set up.  Low low probability.

 

Basically zero when you read the letter and find that Warren is arguing that Berkshire is *stronger* for the diversity.  I'd wager that anyone who is being considered for that job reads the annual letters.

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Guest longinvestor

from Page 5 of letter

 

<<In summary, Charlie and I hope to build per-share intrinsic value by

(1) improving the earning power of our many subsidiaries;

(2) further increasing their earnings through bolt-on acquisitions;

(3) participating in the growth of our investees;

(4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value;

(5) making an occasional large acquisition.[ftp][/ftp]>>

 

This clearly lays out how capital will be deployed in the future. As you read this, how the fountainhead of cash will be deployed removes the concerns we keep hearing about: 1) Warrren's successor not being Warren & 2) BRK's size making large dealmaking difficult.

 

During 2012, here's how cash was deployed to the five priorities above

1) $10B was reinvested into the operating companies,

2) $2.3 B in tuck-in's

3) More WFC and IBM purchases made

4) $1.3 B in stock repurchases

5) $12 B in the Heinz deal

 

What's most interesting is that 1, 2, 3 & 4 were largely decisions made by someone other than Warren. Even #3 is not a new decision. Of course he had to give a nod to most of these as CEO. His successor will as well.

 

With Combs/Weschler's piece of the investment pie now at $10 B (and growing) and much of the future cash flows already deployed, the market's continued concern over the transition is largely misplaced. Atleast for the foreseeable future. Another elephant aquisition or two will seal this for good. Expect them to buy capital intensive businesses to further pre-deploy future cash flows. And oh btw, just because a PR has not been issued, it does not mean that Warren's successor is not already making/participating in capital decisions!

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from Page 5 of letter

 

<<In summary, Charlie and I hope to build per-share intrinsic value by

(1) improving the earning power of our many subsidiaries;

(2) further increasing their earnings through bolt-on acquisitions;

(3) participating in the growth of our investees;

(4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value;

(5) making an occasional large acquisition.[ftp][/ftp]>>

 

 

 

This clearly lays out how capital will be deployed in the future. As you read this, how the fountainhead of cash will be deployed removes the concerns we keep hearing about: 1) Warrren's successor not being Warren & 2) BRK's size making large dealmaking difficult.

 

During 2012, here's how cash was deployed to the five priorities above

1) $10B was reinvested into the operating companies,

2) $2.3 B in tuck-in's

3) More WFC and IBM purchases made

4) $1.3 B in stock repurchases

5) $12 B in the Heinz deal

 

What's most interesting is that 1, 2, 3 & 4 were largely decisions made by someone other than Warren. Even #3 is not a new decision. Of course he had to give a nod to most of these as CEO. His successor will as well.

 

With Combs/Weschler's piece of the investment pie now at $10 B (and growing) and much of the future cash flows already deployed, the market's continued concern over the transition is largely misplaced. Atleast for the foreseeable future. Another elephant aquisition or two will seal this for good. Expect them to buy capital intensive businesses to further pre-deploy future cash flows. And oh btw, just because a PR has not been issued, it does not mean that Warren's successor is not already making/participating in capital decisions!

 

Very true;

 

Brk is like a BNSF train in motion (with 70 cars and an insurance locomotive) ; it would take a lot of years and screw ups to stop its momentum.  Culture and talent in place will insure it won't derail.  ;)

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Guest longinvestor

from Page 5 of letter

 

<<I

 

Very true;

 

Brk is like a BNSF train in motion (with 70 cars and an insurance locomotive) ; it would take a lot of years and screw ups to stop its momentum.  Culture and talent in place will insure it won't derail.  ;)

 

This does bring about another view of "true" diversification. With the 70 BRK vehicles increasingly hungry for capital, this is true diversification. The chiefs get to invest captive & permanent capital without many strings attached like those that typically come with capital market funding. And they get to invest in essentially what they understand intimately, in their own businesses or to eliminate their competition. Plus, the "culture" of BRK keeps their investing mindsets consistent with one another (Warren clones). Contrast this with the "dart throwing" diversification of mutual funds and worse, individual investors diversifying across asset classes etc.

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