Berkshire Hathaway: Trading At An Estimated 11.6x Earnings With An Intrinsic Value Of $180/Share
Left Shark Investing • 232 Comments
Left Shark Investing • 232 Comments
Yesterday, 6:56 PM
- The stock market's recent rise has boosted holdings in Berkshire Hathaway’s (BRK.A, BRK.B) portfolio, but the rally in Dow Chemical (NYSE:DOW) has put that company's $255M in annual dividend payments to BRK at risk, Dow Jones reports.
- Since BRK lent Dow $3B in 2009 to help finance an acquisition, Dow has been on the hook for paying an 8.5% annual dividend on 3M preferred shares, but the deal has an escape hatch: If Dow's shares exceed $53.72 for at least 20 trading days in a 30-day period, Dow can convert BRK's preferred shares into common shares, which do not pay out special dividends.
- Dow's failure to stay above the $53.72 for long - despite improved earnings and margins, cost cuts, asset sales, an activist shareholder who shook up the board, and a potential merger with DuPont - has fueled speculation that BRK or Warren Buffett are shorting Dow to pressure the stock and avoid triggering the conversion.
- Although short interest in Dow is down for the year and dropped to $600M at the end of July, short sellers have increased their positions by nearly $100M in August, according to financial analytics firm S3 Partners.
Tue, Aug. 9, 11:59 AM
- Operating earnings may have disappointed a few on the Street, but Berkshire Hathaway (BRK.A, BRK.B) still trades for just 1.36x book value, writes Andrew Bary in Barron's.
- Barclays' Jay Gelb maintains his Overweight rating and $249K per class A share price target (vs. current $220K), as he expects book value will rise to $183K per share by the end of next year while the valuation will remain close to that 1.36x.
- The bull case for those who have been sleeping for a few decades: With no dividend, after-tax operating earnings of about $11K per share per year, or $18B, accrue to book value and replenish Berkshire's cash balance, enabling The Oracle of Omaha to make more accretive acquisitions - a virtuous cycle which doesn't appear to be reflected in BRK's valuation.
- There's also downside protection in Buffett's willingness to be a buyer of Berkshire at 1.2x book value.
- Risks? The obvious one is the possibly impossible shoes to fill of Warren Buffett.
Fri, Aug. 5, 4:24 PM
Fri, Aug. 5, 9:36 AM
- NPD Group reports portable power pack sales were up 101% Y/Y for a two-week period in July following the introduction of Pokémon Go.
- Whether or not the sales pace sustains is still to be determined, but brands like Duracell (BRK.A, BRK.B), Dynex (owned by (NYSE:BBY)), Insignia (also BBY), Zagg (NASDAQ:ZAGG), Mophie (owned by Zagg) and Energizer (NYSE:ENR) are likely to see a boost to July sales.
Thu, Aug. 4, 7:31 AM
- Berkshire's (BRK.A, BRK.B) crossing the 10% ownership threshold in Wells Fargo (NYSE:WFC) triggered a series of regulatory hurdles, including one known as Regulation O that restricts how much credit a bank can extend to a major shareholder.
- Berkshire, of course, is a conglomerate of dozens of companies, many of which do business with Wells Fargo. Of particular concern, according to the report, is American Express (NYSE:AXP), which is a sizable customer of Wells, and in which Berkshire owns a 16% stake.
- Buffett and Co. has asked the Fed or approval to maintain or even boost that 10% stake in Wells. A Fed denial of the request could mean The Oracle would have to sell some of that holding.
Wed, Aug. 3, 11:15 AM
- The $37B January purchase of Precision Castparts was one of Warren Buffett's (BRK.A, BRK.B) biggest deals ever. Its CEO Mark Donegan seems right out of Buffett central casting - low profile, great track record, relentless about staying ahead of the competition. In 13 years with Donegan atop the company, the stock climbed 20-fold and annual revenue quadrupled to $10B.
- According to a Bloomberg profile, however, the reality of Donegan's management style could be at odds with the folksy image The Oracle likes to present. Some current and former employees (including very high-level senior execs) describe Donegan as a bully who is highly effective, but whose behavior at times strains basic decency. Donegan also has a taste for fancy living that may not match the frugal image of his new boss.
- Buffett: "You could talk to hundreds of institutional investors, and you wouldn’t hear one word that’s knocking [Precision] ... They have a pristine reputation. And this is the guy that’s done it.”
- Berkshire reports earnings on Friday in what will be its first full quarterly report including Precision's results.
Thu, Jul. 14, 3:02 PM
- "Buffett has been clear that he likes infrastructure plays in general and he likes utilities," says Bloomberg's Kit Konolige. "They have stable cash flows and they pay dividends. He would appear to believe they are not going away anytime soon.”
- According to Bloomberg, Berkshire Hathaway (BRK.A, BRK.B) has joined NextEra Energy (NYSE:NEE) as a top contender for Energy Future's Oncor Electric Delivery, with valuations in the $18B area.
- The process is fluid, say Bloomberg's sources, and the leading bidders have switched places several times.
Wed, Jul. 13, 10:18 AM
- Southeast Portland neighbors who live near Precision Castparts ((BRK.A +0.2%), (BRK.B +0.2%)) have sued the company over what they say is a "plume" of air pollution.
- As The Oregonian reports, the neighbors want the company "to clean up millions of pounds of nickel, chromium, arsenic and other toxic pollutants that they say have settled upon their neighborhoods and increased their chances of cancer and other health problems."
- The neighbors are seeking a class for the case that could add 5,000 residents as co-plaintiffs. They filed the case in Multnomah County Circuit Court.
Tue, Jul. 12, 2:21 AM
- Amazon (NASDAQ:AMZN) surged past Berkshire Hathaway (BRK.A, BRK.B) to a market cap of about $356B on Monday, becoming the fifth largest U.S. company (Berkshire's market value currently sits at $355B).
- The news comes before Amazon's second annual Prime Day. Ahead of the big celebration, the company said it added 19M U.S. Prime members since last year's inaugural event, equating to growth of 43%, for a total 63M members.
Fri, Jul. 1, 4:08 PM
- Berkshire Hathaway (BRK.A -0.3%, BRK.B -0.5%) has applied to the Fed to allow it to raise its holdings in Wells Fargo (WFC -0.6%) above 10%.
- The company doesn't intend to take on more shares of the bank at the moment, it says, or to merge it with others, and “Berkshire does not have any specific transaction or dollar value in mind with respect to any such potential purchases," the company said in its application.
- No other top bank has a single investor with a holding this size. Warren Buffett disclosed in March that Berkshire's stake hit 10% due to bank buybacks.
- The Berkshire investment in Wells Fargo stands at $23B based on yesterday's closing price, and it was attained at average price of $25.46 vs. today's $47.03.
Tue, Jun. 28, 3:58 PM
- A head-on collision of two freight trains in the Texas panhandle this afternoon caused a massive explosion and prompted an evacuation from the area.
- The two BNSF Railway (BRK.A, BRK.B) trains were on the same track when they collided near the town of Panhandle, northeast of Amarillo; each train carried two crew members, and three of the people have not been found.
- Few other details are available as emergency responders continue to assess the damage.
Mon, Jun. 27, 5:38 PM
- NextEra Energy (NYSE:NEE) has offered to buy Energy Future Holdings' Oncor power utility and is closest to reaching a deal among at least seven companies that have expressed interest, Bloomberg reports.
- Berkshire Hathaway (BRK.A, BRK.B) and Edison International (NYSE:EIX) are among the others that have expressed interest in buying Oncor, which could be valued at $17B-$18B, according to the report.
- NEE reportedly has proposed to buy Oncor with a combination of cash and debt, and its offer has exceeded a failed proposal from Hunt Consolidated in which investors would have had to raise more than $12B and cancel billions in debt.
Mon, Jun. 20, 2:41 PM
- Insurance Commissioner Dave Jones finds California Insurance Company - a Berkshire Hathaway (BRK.A, BRK.B) unit - filed one set of rates and insurance policies with the Department of Insurance which it then sold to Shasta Linen, and then followed by having another Berkshire company sell Shasta a second insurance policy with different rates and terms that had never been submitted for review.
- Eventually, Shasta was hit with hundreds of thousands of dollars in unexpected workers comp costs. Jones: "This is a case of if it sounds too good to be true, it probably is."
- As a result of the decision, regulators will have a look to see if the Berkshire unit is selling other unfiled insurance policies.
Fri, Jun. 17, 11:48 AM
- According to a regulatory filing from Berkshire Hathaway's (BRK.A, BRK.B) Geico unit, the company purchased 9.81M shares of Apple (AAPL -1.9%) in the period ending March 14 for about $976M - an average price of $99.49 each.
- The holding was likely initiated by one of The Oracle's investment managers - Todd Combs or Ted Weschler.
- After the buys, the stock price rose as high as $112 by mid-April, but has slid back to $95.71 currently.
- Previously: Buffett buys Apple (May 16)
Tue, Jun. 14, 2:36 AM
- The connection between Quicken Loans founder Dan Gilbert and Warren Buffett became evident last month with news of their surprise bid for Yahoo, but the two men have another business connection that hasn't been previously reported.
- Berkshire (BRK.A, BRK.B) owns a company called Vanderbilt Mortgage and Finance, which buys mortgages for traditional houses exclusively from Quicken.
- "There could well be more business relationships in the future," Buffett told Reuters.
Tue, May 24, 2:10 PM
- Berkshire Hathaway (BRK.A, BRK.B) now owns nearly 15% of Phillips 66 (PSX +2.2%) after buying nearly 643K shares of the company, worth $64M, over the past week.
- Warren Buffett's company now owns ~76.37M PSX shares, a significant jump since the end of 2015 when it owned 61.5M shares.
- Now read Phillips 66: Why Buffett's Berkshire Hathaway continues to fill-up with it
Read more here: http://www.miamiherald.com/news/business/article79506287.html#storylink=cpy
Berkshire Hathaway, Inc. engages in diverse business activities including property and casualty insurance and reinsurance, utilities and energy, freight rail transportation, finance, manufacturing, retailing and services. Its insurance and reinsurance business activities are conducted through... More
Industry: Property & Casualty Insurance
Country: United States