The Gates Foundation says it will sell 60M shares of Berkshire Hathaway (BRK.A, BRK.B) over about three years to comply with federal income tax rules that limit business ownership by private foundations.
The sale plan extends a similar plan that started in 2014 and expires in June, and the extended plan will continue through at least June 2020.
The Gates Foundation sales will take into account demand for the shares and could be suspended if selling would disrupt the market for the shares.
Hartford Financial (NYSE:HIG) will pay Berkshire Hathaway's (BRK.A, BRK.B) National Indemnity $650M to take on up to $1.5B of losses on asbestos and environmental exposures.
Hartford will book a $423M Q4 after-tax charge, and a $1.10 hit to book value per share ($48.30 at the end of Q3) thanks to the deal. The agreement is also seen as being slightly negative to 2017 P&C net investment income.
The plan for 2017 capital returns - including $1.3B of buybacks - shouldn't be affected.
Shares of Berkshire Hathaway (BRK.A, BRK.B) soared 20% in 2016, helping to boost Warren Buffett's personal fortune by $12.3B - more than any other billionaire in the U.S.
The Oracle of Omaha is now worth $74.2B, enough to make him the 2nd-richest person in the world (behind only Bill Gates, who is worth $84B).
Buffett was a firm supporter of Hillary Clinton during the 2016 presidential campaign, but he scored most of his gains this year, some $7.8B, after she lost the election in November (his fortune rose $3.6B in the two days following the election alone when Berkshire shares jumped 6%).
Dow Chemical (NYSE:DOW) will exercise its right to convert all Series A preferred stock into shares of common stock, and the company expects to complete the conversions over the next week or so, WSJ reports.
A rally in its shares triggered a clause allowing Dow to convert the shares, enabling the company to start keeping $255M it has been sending to Berkshire Hathaway (BRK.A, BRK.B) every year and another $85M owed to Kuwait’s sovereign wealth fund, which owns $1B worth of shares.
Dow would have to pay out ~$180M/year in ordinary dividends on the common stock, but investors have been awaiting the conversion since the move is expected to free up capital for other uses.
A mere two years later, Warren Buffett was looking to exit his (then larger) position for $11.50 each, and thought he had a verbal agreement from Berkshire's owner for just that. When the formal written offer arrived at a few pennies less, a ticked-off Buffett instead began aggressively buying more.
The rest is history, and today the Class A shares of Berkshire (NYSE:BRK.A) topped $250K for the first time ever.
Since the election, BRK is higher by 13%, about doubling the S&P 500's performance. Year-to-date, BRK is up 26.6% vs. the S&P's 11.6% advance.
Berkshire Hathaway (BRK.A, BRK.B) could see $29B added to its book vale under Trump tax cuts, according to Barclays' Jay Gelb.
Gelb notes Berkshire is higher by more than 8% since the election vs. the S&P 500's 3.15% advance. No doubt the prospect of a sustained move higher in interest rates is helping The Oracle's substantial bank holdings, but Gelb suggests the market is also pricing in the benefit of tax cuts.
The SEC is September was curious about how Berkshire Hathaway (BRK.A, BRK.B) justified its decision to assign a value of $26B for "intangible assets" for the recently-acquired Precision Castparts and Duracell.
Production of aerospace and industrial gas turbine parts “requires a sizable investment in inventory, workforce, and property, plant, and equipment, and there are few competitors,” says Berkshire CFO Marc Hamburg, responding to the SEC inquiry.
After famously shunning the airline industry for ever, Warren Buffett has jumped in, with Berkshire Hathaway (BRK.A, BRK.B) showing stakes in American Airlines (NASDAQ:AAL), United Continental (NYSE:UAL), and Delta Airlines (NYSE:DAL) as of Sept. 30.
It's not on the 13F filing, but CNBC reports Berkshire as also having taken a stake in Southwest Airlines (NYSE:LUV).
Buffett's last play in airlines was a $358M preferred stake in U.S. Airways in the late 1980s. He eventually profited, but not before having to ride major losses which soured him on the industry.
AAL +3.4%, UAL +1.7%, DAL +2.3%, LUV +3.1% after hours
Buffett on the airlines circa 2002: “If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright ... The airline business has been extraordinary. It has eaten up capital over the past century like almost no other business."
It's an ironic twist, given that this week's stock market rally was fueled by the election of Donald Trump, whom Buffett vigorously opposed.
U.S. stocks rallied over the past three days on expectations of greater government spending, higher interest rates and fewer regulations under Trump, which could highly benefit many of BRK's businesses and investments.
BRK's BNSF railroad, for example, has seen profit fall 19% in 2016, hurt by declining shipments of coal, but the coal industry could be strengthened if Trump fulfills his promise to boost mining and perhaps ease limits on carbon emissions.
Also, some of BRK’s biggest stock holdings are financial services companies, including Wells Fargo, which skyrocketed 16% this week.
Buffett reiterated his confidence in equities earlier today, saying "The stock market will be higher 10, 20, 30 years from now. It would have been with Hillary, and it... will be with Trump."
The idea put forth by some market pundits that stocks would plunge after a Trump victory were "silly," says Warren Buffett (BRK.A, BRK.B) in a CNN interview. Stocks will be higher 10, 20, and 30 years from now, and it would be so no matter who won the election.
Trumps threats of import tariffs on goods from China and Mexico are a very bad idea, says Buffett, but not necessarily enough to cause a recession. He notes that rewriting trade agreements is something he's going to need Congress' support on, and this isn't a given even though Republicans are in control of both chambers.
Berkshire Hathaway (BRK.A, BRK.B) reported a record cash hoard of $85B at the end of Q3. Warren Buffett likes to hold $20B as a cushion, says Barclays' Jay Gelb, leaving him more than $60B to put to work. Barron's Andrew Bary says the practical number is smaller - closer to $45B - but that still leaves enough for an "elephant-sized acquisition."
That's only if he can find the right price, and a stock market at record highs could make that difficult. Last year's Precision Castparts purchase for $37.2B was Berkshire's largest acquisition to date. One speculated target is Phillips 66 (NYSE:PSX). Its current market cap is just over $42B.
Q3 operating profit of BRK's insurance underwriting business, which includes Geico, fell 34% Y/Y to $272M; insurance investment income’s operating profit rose to $850M: operating profit at the railroad, utilities and energy segments was roughly flat at $1.95B; operating profit from other businesses gained 38% to $2.04B; insurance float rose to $91B during the quarter.
Burlington Northern Santa Fe's Q3 operating profit fell 12% Y/Y, as the weak energy market continued to weigh on freight volume and prices.
BRK also reports a $22.1B stake in Wells Fargo (NYSE:WFC), suggesting it held onto its 10% position even amid the start of the scandal over the bank's creation of unauthorized customer accounts; BRK is WFC's largest shareholder.
With $85B in cash at the end of the quarter, Warren Buffett still has plenty of cash on hand for future acquisitions if he so desires.
Reinsurers sell coverage to other insurance companies for natural disasters and such. While they wait for loss-triggering events to happen, the reinsurers collect premiums which they can then invest. Warren Buffett (BRK.A, BRK.B) credits this "float" as a big factor behind his great fortune.
But business isn't what it used to be, write Sonali Basak and Noah Buhayar in Bloomberg, and Buffett sold stakes in Swiss Re and Munich Re last year, saying prospects over the next decade don't look great. He also put new leadership in charge of Berkshire's General Re to try and reverse more than a decade of shrinking float.
Among the issues are what's turned into years of barely visible interest rates. “It is no fun,” says The Oracle, to “find out that a great many of the things that you were buying a few years ago now have negative yields.” It's also become a more crowded field with the entrants first of David Einhorn (NASDAQ:GLRE) and more recently Dan Loeb (NYSE:TPRE) helping to create a price war, with premiums down 40% over the past decade.
Insurers can also now turn to investment banks to lay off risk by issuing catastrophe bonds - a market that's grown from $9.2B to $25B over the last ten years.
A shakeout is already underway as there have been a number of sector mergers. What might further shake things up would be a catastrophe big enough to cause significant industry losses.