Berkshire Hathaway: Trading At An Estimated 11.6x Earnings With An Intrinsic Value Of $180/Share
Left Shark Investing • 229 Comments
Left Shark Investing • 229 Comments
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
Mon, May 16, 7:40 AM
Tue, Mar. 1, 12:01 PM
- After a 2% post-earnings gain yesterday, Berkshire Hathaway (BRK.A, BRK.B) sells for about 1.3x year-end book value of $155,501, writes Andrew Bary. That's only modestly above the 1.2x book or $186K per share at which The Oracle would be happy to repurchase stock, and - given the company's ample cash (around $40B after the Precision Castparts purchase) - $186K likely represents a floor for the shares.
- Plus, notes Bary, book value tends to rise by about $3K per share per quarter, given Berkshire's earnings run-rate.
- As Buffett has noted, he's delighted to buy at 1.2x book because Berkshire's intrinsic value "far exceeds" book value. One example: Accounting rules require the Kraft Heinz stake be carried at about $16.6B when its value is more like $25B. That's another $3K that could be added to book.
- A bull on the stock, Nomura's Cliff Gallant says book value could rise to $167K by year-end, pushing that 1.2x threshold to $200K, or only marginally less than the current price level.
- Succession risk? With the stock's cheap valuation, it's likely already priced in, says Bary, who picks Berkshire Hathaway Energy Chairman Greg Abel as the next chief.
Wed, Feb. 17, 12:34 PM
- The Warren Buffett effect is sending Kinder Morgan (KMI +10.9%) soaring after Berkshire Hathaway (BRK.A, BRK.B) disclosed a new 26.5M-share purchase during Q4, even though that's not a major investment for Buffett - and the Oracle may not have made the purchase at all.
- Barron's Andrew Bary believes the purchase probably was taken by either Todd Combs or Ted Weschler rather than Buffett himself; Berkshire does not disclose which manager buys which stocks, but smaller holdings generally are initiated by Combs or Weschler, who each run ~$7B of the equity portfolio, while Buffett oversees more than $100B.
- Bary also notes that KMI emphasizes distributable cash flow, while Buffett prefers to focus on free cash flow - "something Kinder Morgan doesn’t have a lot of... [KMI] has sizable capital expenditures beyond just the 'sustaining' capital expenditures included in its DCF calculation. As a result, it is not left with much free cash flow."
- Even if Buffett did take the position, Bary says he has not had a good investment record in recent years, and Berkshire may have a loss in KMI if it bought its entire position in Q4, as it fell sharply when the company cut its dividend by 75% in December.
Tue, Feb. 16, 4:27 PM
Fri, Jan. 29, 4:58 PM
- For the first time, Berkshire Hathaway (BRK.A +3.2%, BRK.B +2.8%) plans to webcast its annual meeting -- a k a "Capitalist Woodstock" -- meaning that investors who can't make the pilgrimage to Omaha, Neb., may take part.
- The move should give the meeting a broader reach than the tens of thousands who descend on Nebraska each April to hear from Warren Buffett and Charlie Munger.
- No word yet on how to access the webcast, or whether the stream will be filled with Geico ads.
Nov. 16, 2015, 7:46 AM
- The latest 13F from Berkshire Hathaway (BRK.A, BRK.B) shows a new 59.3M share stake in AT&T (NYSE:T), and the GM stake taken up to 50M shares from 41M. At least part, if not all of the T stake is the result of shares received in the DirecTV merger.
- Phillips 66 (NYSE:PSX) is up to 61.5M shares from about 30M; Kraft Heinz (NASDAQ:KHC) 325.6M shares from zero; Suncor (NYSE:SU) 30M shares from 23.3M, John Malone (LMCK, LMCA) a total of about 24M shares from about 13M.
- Buffett trimmed his Wal-Mart (NYSE:WMT) position to 56.2M shares from 58.3M.
- AT&T +1.4% premarket
Aug. 24, 2015, 7:47 PM
- Geico (BRK.A -3.2%, BRK.B -3.4%) will pay $6M to settle insurance discrimination charges first brought up by the Consumer Federation of California against the company.
- Geico was charged with quoting inflated rates to women, low-income and non-professional-level applicants. The company agrees not to consider education and occupation in sorting coverage limits via a three-year settlement.
- The payout could double to $12M if Geico's found to be not in substantial compliance.
Aug. 10, 2015, 11:28 AM
- Berkshire Hathaway's (BRK.A -0.7%; BRK.B -0.6%) $37B purchase of Precision Castparts (PCP +19.1%), combined with Berkshire's FQ2 earnings report that showed profit fell 37% due to higher costs at its insurance units, appear to be striking an off note with the company's investors, sending shares lower.
- It's the biggest deal of Warren Buffett's career: BRK is paying $235/share for PCP, a 21.2% premium over Friday's closing price and 18x projected profit over a 12-month period.
- "I'm not crazy about paying $30B for a $1.5B earnings stream of a cyclical company supplying airplane makers," says Jeff Matthews, a principal at hedge fund Ram Partners and author of a book about Buffett.
- Buffett tells CNBC that Berkshire will use $23B of its own cash and borrow ~$10B to fund the deal, which he says will be the last one his firm undertakes for roughly a year as it rebuilds its cash pile.
Jul. 1, 2015, 12:30 PM
- "This changes almost everything" in P&C, says KBW's Meyer Shields. "Ace (ACE +2%) is a very experienced and successful acquirer." The deal should help Ace better compete with rivals like AIG (AIG +1%) and Berkshire Hathaway (BRK.A, BRK.B).
- Merger presentation slides
- Unlike some other insurers focused on buybacks - including the acquired Chubb (CB +29%) - Ace and its CEO Hank Greenberg have been using capital for purchases, building scale and diversifying risk.
- Chubb CEO John Finnegan - previously set to retire at the end of 2016 - could be in for a nine-digit golden parachute should he be let go prior to that or resigns for reasons such as a reduction in responsibility or pay. Greenberg is set to lead the combined company.
- Previously: P&C stocks on the move after Chubb sale (July 1)
- Previously: ACE buying Chubb in cash and stock deal for $28.3B (July 1)
Aug. 4, 2014, 10:05 AM
- Cash residing in Berkshire Hathaway's (BRK.B +1.3%), (BRK.A +1.1%) coffers rose to $55.5B as of June 30, more than double the amount Warren Buffett has said he likes to keep on hand should the company's insurance units face unusually large claims.
- Berkshire's size is not just a hindrance to finding a needle-moving deal, but so is the perky stock market. Also, Berkshire isn't the only one out there looking for deals. "The amount of dry power is unprecedented," says a private-equity advisor, and the pile of money (estimated at $1.16T) has led to warnings from Blackstone's Tony James and Apollo Global's Josh Harris about paying too much for acquisitions.
- Previously: Berkshire Hathaway reports Q2 results
Mar. 4, 2014, 10:43 AM
- Utilities that meet takeover criteria outlined by Warren Buffett this weekend for another “major” acquisition after paying more than $5B last year for electricity provider NV Energy include Wisconsin Energy (WEC +1.8%) and Alliant Energy (LNT +1.1%), Bloomberg speculates.
- WEC and LNT operate in states with favorable regulatory environments, and LNT is expanding into renewable energy, which Buffett has signaled could be a focus for large investments, according to Morningstar; pipeline MLPs such as Plains All American (PAA) and MarkWest Energy (MWE) also could appeal to Buffett, a Baird analyst says.
- Berkshire Hathaway (BRK.A, BRK.B) “is likely looking at a lot of small, regulated utilities that have a lot of growth on the table where his low cost of capital is an incredible advantage,” Morningstar's Mark Barnett says.
Feb. 20, 2014, 10:44 AM
- Berkshire Hathaway's (BRK.A, BRK.B) BNSF Railway says it plans to buy its own fleet of up to 5,000 new crude oil tank cars with safety features that exceed the latest standards adopted by the industry more than two years ago.
- BNSF's plan, unusual for a railroad which generally owns only the tracks and locomotives that pull trains, is intended to further the industry's push for safer movement of crude by rail in light of several recent derailments and crashes, including one involving a BNSF train in North Dakota last December.
- BNSF isn't identifying railcar makers from which it will seek bids, but U.S. manufacturers include Trinity Industries (TRN +9.5%), American Railcar Industries (ARII +10.3%) and Greenbrier (GBX +5.4%).
Jan. 2, 2014, 8:34 AM
Dec. 31, 2013, 12:33 PM
- For Berkshire Hathaway (BRK.A, BRK.B), the purchase of Phillips 66's (PSX +2.9%) specialty products unit has a lot to do with the tax treatment; the financial terms of the deal look like the cash-rich spinoffs used by Liberty Media when it acquired interests in businesses such as the Atlanta Braves and DirecTV.
- The cash-rich split is a way for a holder of appreciated stock - PSX has gained 45% YTD - to dispose of it in a very tax efficient way, tax expert Robert Willens says, calling the acquisition a "great transaction" for Berkshire.
- But Barron's Ben Levisohn wonders what the purchase might say about PSX: BRK chose to pay with ~19M PSX shares it already owns and not with cash - is it a sign Warren Buffett thinks PSX has run too far?
Dec. 16, 2013, 9:09 AM
- Siemens (SI) +2.9% premarket after agreeing to sell 448 wind turbines and provide service for several years to MidAmerican Energy, Berkshire Hathaway's (BRK.A, BRK.B) power business, in SI’s biggest-ever order for land-based wind equipment.
- Wind turbines typically cost ~$1M for each MW of capacity, making the deal worth more than $1B, the head of Siemens Energy’s wind power division says, without providing an exact price.
- MidAmerican will equip five wind power projects in Iowa with the wind turbines and provide energy for nearly 320K homes.
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
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