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Tracking Warren Buffett's Berkshire Hathaway Portfolio - Q3 2014 Update
- Warren Buffett's US long stock portfolio increased marginally from $107.58B to $107.79B this quarter.
- Berkshire Hathaway's largest three holdings are at over half the entire portfolio.
- Berkshire Hathaway significantly increased Charter Communications, DIRECTV, and General Motors this quarter.
Paying Under 2 Times EBITDA For An Industry Leader
- News broke on Nov. 13 that Berkshire Hathaway would be acquiring Duracell and some cash in exchange for an equity swap with Procter & Gamble.
- While Procter & Gamble has been focused on growth lately, Duracell likely provides Buffett the strong and stable cash flow he desires.
- To top things off, Buffett's deal to buy the battery maker is a steal once investors consider the cash and tax benefits of the transaction.
Buffett's Brilliant Duracell Deal: A Reprise Of Past Deals, A Comment On The Present Market, A Whisper About The Future
- The Duracell deal reprises Buffett/Berkshire deals with Phillips 66, Washington Post and White Mountains Insurance.
- The cookie cutter for these deals was a cash-rich spinoff yielding a bolt-on acquisition.
- The attractiveness in each case is reinforced greatly by the opportunity to get rid of a no longer wanted publicly-traded asset without paying heavy capital gains tax.
- Duracell may not have a brilliant future, but upon close examination the price is so right it doesn't matter.
- The Duracell over PG deal suggests a Buffett caution on high-priced "defensive" stocks and whispers a possible course of action for his large Coca-Cola position.
- As of this writing, I just sold my entire position in Berkshire Hathaway.
- It was one of the first stocks I owned and I still believe it is a great company.
- However, striving for early retirement, I am investing for the sake of passive income. Since Berkshire does not pay one and maybe never will, I decided to sell it today.
- I reinvested the capital directly into three other companies. Two of them are in Mr. Buffett’s portfolio.
Lasting Lessons From 'Berkshire Beyond Buffett,' With Recent Publication
- Professor Lawrence Cunningham’s Berkshire Beyond Buffett: The Enduring Value of Values was recently published by the Columbia Business School Press.
- The publication details aspects of Berkshire Hathaway, such as acquiring family-owned businesses with broad scope and non-negotiable offers, that could keep the company afloat after Buffett's departure.
- Berkshire Hathaway reported very strong results in August, showing prowess in the face of concern over its founder's health.
- We reiterate our positive stance on the conglomerate, looking to 2015 and beyond.
Analyzing Berkshire Hathaway Using The 4 Filters Test
- Berkshire Hathaway passes all Four Filters.
- Berkshire Hathaway's structure is a major competitive advantage.
- The company will continue to thrive long after current management moves on due to the company's structure.
Should You Consider Adding To An Already Oversize Position In Berkshire?
- Traders advocate doing more of what works and less of what doesn't; does this maxim apply to value investors?
- Berkshire Hathaway has become in recent years an oversize part of my portfolio. Is there a rationale for adding to it?
- Bayes Theorem implies that affirmative new information should increase one's conviction (justifying increasingly large position size in a stock).
- I have owned and followed Berkshire for more than 25 years, in the process not only gathering information but also improving my ability to analyze that information.
- Berkshire's success is not so smooth as to raise doubt (like Madoff or LTCM), but is enough to confirm Berkshire as the real deal - a low-risk compounding machine.
Berkshire Hathaway: The Buy For When You Get An Itchy Trigger Finger
- All investment classes look overpriced.
- By rights, we should be patient.
- But if we can't be patient, buying Berkshire is the thing to do.
- Berkshire's scale and diversity prevent it from acting like a nimble market participant.
- Berkshire keeps tens of billions uninvested to support its liquidity policy.
- Berkshire's productive businesses still beat the S&P.
Is It Time To Wake Up And Smell Burger King's New Coffee?
- Burger King and Tim Hortons' merger is for more than tax purposes.
- Look at Starbucks for a cross-branding example that’s done very well.
- Burger-coke-and-French-fry loving Warren Buffett will help fund a Tim Hortons and Burger King merger.
Berkshire's Outperformance Will Continue To Compress Over Time
- Berkshire Hathaway recently surpassed 200k USD per share, but more importantly this year it also became a ten-thousand bagger (under Warren E. Buffett).
- There are parts of Berkshire that will likely post high returns going forward, and parts of the company that will drag returns significantly.
- It's probably best to think of Berkshire as an index fund without fees, and some free optionality.
Berkshire Hathaway Expands In Asia: New Frontier Offers Further Growth For Shareholders
- Berkshire Hathaway has announced expansion into several Asian general insurance markets, many of which are underserved, with rapidly growing middle classes and strong economic momentum.
- According to a recent study by Ernst and Young, China represents the greatest opportunity within the Asian markets (defined as China, Hong Kong, India, Indonesia, Malaysia, Thailand and Vietnam).
- Q2 results show revenue increase of 11% and $55.5 billion in cash—enough to maneuver into new markets—and always with room to move up.
- We are continually optimistic on Berkshire Hathaway, moving forward in 2014, and suggest other investors be so, as well.
- Berkshire Hathaway is 13% undervalued relative to its fair intrinsic value.
- Berkshire continues to identify new investment opportunities to acquire.
- Whitney Tilson continues to see value in Berkshire.
- Berkshire continues to generate solid organic profit growth from its diverse mix of industrial business units.
- Berkshire Hathaway released its 13F last week.
- The filing reports that Berkshire added no new equities and sold out of no new equities, but it did increase and reduce multiple already existing positions.
- This is a review of the position increases and decreases listed on the 13F, for use in determining Berkshire's future actions.
Berkshire Beyond Buffett: A Lasting Bet- Book Review
- Lawrence A. Cunningham’s latest book, Berkshire Beyond Buffett: The Enduring Value of Values (Columbia Business School Publishing), is a close examination of Buffett’s “hidden method” of success.
- Cunningham highlights themes among many Berkshire acquisitions, such as straightforward, family owned businesses, with American can-do work ethic, savvy cost controls, and foresight.
- Berkshire Hathaway released Q2 earnings, with a stunning 41% jump in profit; YTD total shareholders’ equity has increased $12.1 billion.
- With consideration of the company values that Buffet will very likely keep intact post-retirement, Cunningham's book is another testament to Berkshire Hathaway's being a lasting bet in 2014 and beyond.
Tracking Warren Buffett's Berkshire Hathaway Portfolio - Q2 2014 Update
- Warren Buffett's US long stock portfolio increased marginally from $105.77B to $107.58B this quarter.
- Berkshire Hathaway's largest three holdings are at over half the entire portfolio.
- Berkshire Hathaway almost eliminated ConocoPhillips and Graham Holdings this quarter.
How Buffett Is Changing The Future Of Berkshire's Float - From Insurance To Uncle Sam
- Warren Buffett is generating new sources of float in capital intensive businesses using depreciation.
- Thanks to 'Uncle Sam', deferred taxes will soon surpass insurance as the primary float generator.
- Understanding how deferred taxes work for fixed assets will be crucial to valuation going forward.
- Why Buffett is spending large amounts of capex on BNSF and MidAmerican to grow tax float.
- What is the intrinsic value of deferred tax float, and valuation implications for Berkshire Hathaway.
Berkshire Hathaway Inc. Class A Shares Set New Milestone
Warren Buffett's Buyback Math: Why 120% Of Book Value Is The Magic Number For Berkshire
- Warren Buffett has indicated he will buy back Berkshire Hathaway stock at 120% of book value.
- We discuss a simple calculation which suggests why 1.2x book is of significance.
- Understanding insurance float plays a key role in sizing the buyback premium to book value.
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Tue, Sep. 23, 1:04 PM
- Its share price already struggling over the past year, Tesco (OTCPK:TSCDY) - the U.K.'s largest supermarket operator - is off another 15% this week after an accounting bungle in which it overstated its profit forecast by £250M. The stock is now lower by about 50% Y/Y.
- Berkshire Hathaway (BRK.A, BRK.B) - Tesco's 3rd largest shareholder with a 4% stake - is sporting losses of about $750M on its original $1.7B purchase.
Fri, Sep. 12, 4:37 AM
- Burger King (NYSE:BKW) will meet with leaders next week to discuss a $7.25B loan package, including a $6.75B seven-year term loan and a $500M five-year revolver, to back its $11.5B purchase of Tim Hortons (NYSE:THI).
- The loan, being arranged by JPMorgan Chase, would be the single biggest term loan for an acquisition by a speculative-grade borrower since 2007.
- Berkshire Hathaway (BRK.A, BRK.B) is also providing $3B of preferred equity financing for the transaction.
Thu, Sep. 11, 8:31 AM
- "I think Einstein needed somebody to talk to," says Charlie Munger, responding to a question about how he and Warren Buffett hooked up in a partnership. "He wouldn't have been as good as he was if he didn't have a talking foil who knew something, and I think I've been very useful in that regard."
- The Chairman of Daily Journal Corp. (NASDAQ:DJCO), Munger was speaking at the annual meeting.
- "Anyone who thinks this is a great tragedy is stark raving mad," says Munger over the hubbub about Berkshire Hathaway's (BRK.A, BRK.B) financing of Burger King's takeover of Tim Hortons, and the subsequent relocation to Canada. He notes Berkshire's tax bill will go up as a result of its involvement.
- Elon Musk? He's a genius, says Munger, "and I don't use that word lightly ... He’s also one of the boldest men who ever came down the pike. So put me down as saying I’ve always been afraid of the guy whose IQ is 190 and he thinks it’s 250.”
Thu, Sep. 4, 5:58 PM
- Senior execs from rail operators BNSF (BRK.A, BRK.B) and Canadian Pacific (NYSE:CP) pleaded with regulators today not to force them to take other operators’ trains on their networks in areas of the northern plains plagued by severe freight delays.
- Today's hearing discussed how farmers faced severe delays moving last year’s bumper harvest because of rail congestion, and there is growing concern over the potential for similar delays for this year’s harvest, which already is starting for some crops and also is expected to be large.
- "Any decision that forces more railcars on to our already congested system will not create more capacity,” BNSF chief marketing officer Stevan Bobb warned. “It will reduce capacity to some BNSF customers.”
Tue, Aug. 26, 2:00 AM
- In a surprise twist which lands Warren Buffett in the middle of the Burger King (NYSE:BKW)-Tim Hortons (NYSE:THI) deal, Berkshire Hathaway (BRK.A, BRK.B) is now expected to provide about 25% of the financing for the merger, WSJ reports.
- The exact structure of Buffett's participation remains unclear, but sources say he will invest in the form of preferred shares.
- Due to deal being structured as a tax-inversion, the new move also shoves the billionaire into a heated debate over U.S. taxes.
- THI +1.7% AH
Mon, Aug. 25, 9:58 AM
- "I am perfectly willing to spend whatever it takes to get everyone in the country to check our price," says Warren Buffett. Berkshire Hathaway's (BRK.A, BRK.B) Geico's ubiquitous ads - the company spent $1.2B last year (and Buffett says it will be more in 2014) - account for nearly 25% of all U.S. insurance companies' advertising spending. And it made Berkshire Hathaway the 7th largest advertiser in the country in 2013.
- Since shortly after current CEO Tony Nicely took the top job at Geico in 1993, the insurer's market share in personal auto insurance has about quadrupled to 10%, and last year the company became the 2nd largest U.S. auto insurer - behind State Farm, but ahead of Allstate and Progressive. Pretax underwriting profit of $393M in 2013 was up 17% from a year earlier.
- One reason for the need for the lavish ad spending for this otherwise thrifty company: Geico doesn't use agents, but instead sells policies directly to consumers via the Web or the phone.
- Geico execs are "cost-conscious connoisseurs," says the author of an upcoming book on Berkshire. "At headquarters, they're as thrifty as can be….Geico is the quintessential Berkshire company."
Thu, Aug. 21, 11:43 AM
- Hedge funds are having a difficult time of it again this year, up 1% vs. a 7.5% gain for the S&P 500, according to Goldman Sachs, which crunched the numbers on 775 funds with $1.9T in AUM.
- Nevertheless, Goldman's list of 50 stocks which "matter most" to hedge funds has outperformed the S&P 500 on a quarterly basis 66% of the time since 2001. The stocks this quarter (posted in order of the number of funds in which a name is a top-10 holding):
- ACT, AAPL, FB, AGN, AAL, GM, TWC, AIG, MSFT, HTZ, CHTR, MU, WMB, LNG, C, DAL, HCA, APC, CBS, ALLY, GOOGL, APD, NRF, BAC, EBAY, LBTYK, PCLN, VRX, BIDU, DTV, DISH, DG, EQIX, MA, WAG, ARCP, GILD, LINTA, MON, FOXA, VC, AMZN, BRK.A, BRK.B, SUNE, CMCSA, JPM, MIC, CCI, HES, LAMR.
- A special call-out to Northstar Realty (NYSE:NRF), Visteon (NYSE:VC), SunEdison (NYSE:SUNE), Macquarie Infrastructure (NYSE:MIC), and Lamar Advertising (NASDAQ:LAMR) for making the list of hedge fund hotels despite their relatively tiny market caps.
Wed, Aug. 20, 3:25 PM
- "Berkshire had owned convertible notes of USG since 2008 and was effectively forced to convert the notes when they were called for redemption by USG in December 2013," says Warren Buffett in a statement. "This event triggered a filing requirement for Berkshire (BRK.A, BRK.B) and we were late in realizing that fact.”
- Previously: Berkshire Hathaway to pay fine over reporting violation
Wed, Aug. 20, 11:42 AM| 14 Comments
Tue, Aug. 19, 7:17 PM
- Among Warren Buffett's (BRK.A, BRK.B) Q2 moves was a pullback in oil company investments, selling off the vast majority of his stake in ConocoPhillips (NYSE:COP) and dumping some of his holdings in Phillips 66 (NYSE:PSX) and National Oilwell Varco (NYSE:NOV).
- The move looks prescient, as U.S. crude prices have dropped from ~$107/bll in mid-June to less than $95 today, and energy stocks went from being among the best performers on Wall Street to the middle of the pack.
- West Texas crude for September delivery fell $1.93 to $94.48/bbl, the lowest settlement for a front-month contract since Jan. 17, and Brent crude traded near 14-month lows.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, CRUD, USL, UWTI, DWTI, DNO, SZO, OLO, OLEM
Fri, Aug. 15, 3:38 AM
- Berkshire Hathaway (BRK.B), (BRK.A) disclosed a $366M stake in cable TV operator Charter Communications (NASDAQ:CHTR) in the second quarter, according to a new regulatory filing. Shares of Charter have now rose more +2% in after-hours trading.
- The filing also detailed other new investments including a 1.3% raised stake in Wal-Mart (NYSE:WMT), and other increased holdings including IBM (NYSE:IBM) and Suncor Energy (NYSE:SU).
- However, Berkshire Hathaway reduced its stake in several companies, among them DirecTV (NASDAQ:DTV).
Wed, Aug. 13, 3:44 AM
- Berkshire Hathaway (BRK.B), (BRK.A) has hired two senior executives from AIG's (NYSE:AIG) Asia operations to boost its insurance business in the region.
- The company has recently put a large effort on expanding its businesses by moving beyond its core reinsurance operations. In July, it entered the fiduciary insurance business and hired AIG's VP of fiduciary liability.
- Additionally, Berkshire Hathaway Specialty Insurance, the company's commercial insurance business, is applying for licenses from regulators in Sydney, Hong Kong, Singapore and Europe.
Mon, Aug. 4, 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
Fri, Aug. 1, 6:28 PM
- Berkshire Hathaway (BRK.A, BRK.B): Q2 operating earnings per Class A equivalent share of $2,634 (+10% Y/Y) beats by $149.
- Net earnings per Class A equivalent share of $3,889 (+41% Y/Y).
- Revenue of $49.76B (+11% Y/Y).
- Book value per Class A equivalent share of $142,483 (+3% Q/Q).
- Press Release, 10-Q Filing
Fri, Jul. 25, 6:36 PM
- Berkshire Hathaway Energy's (BRK.A, BRK.B) application to buy SNC-Lavalin's (OTCPK:SNCAF) AltaLink power transmission unit wins preliminary approval from Canada's government.
- As part of the approval, Berkshire agrees not to cut jobs and that AltaLink - Alberta's largest regulated electricity transmission company - will remain locally managed with headquarters, senior management and operations remaining in the province.
- The C$3.2B purchase still needs approval from Alberta's utilities commission.
Wed, Jul. 23, 1:01 PM
- One of The Oracle's crisis-era high-yield investments could soon end as a post-earnings rally for Dow Chemical (DOW +3.4%) brings the stock above $53.72 for the first time in nine years. Should the shares close above that price for 20 trading days in a 30-day window, Berkshire's (BRK.A, BRK.B) $3B preferred stake in Dow could be converted into common stock.
- The preferred stock is expensive for Dow as it carries an 8.5% yield, meaning $255M in dividends annually paid to Berkshire. Of course a conversion would mean dilution, but "people have come to view the dilution from the preferreds as a manageable issue," says UBS's John Roberts, thanks to strong earnings and share repurchases.
- Previously: Dow Chemical beats estimates amid sales gains across businesses
BRK.A vs. ETF Alternatives
Berkshire Hathaway Inc is a conglomerate holding company owning subsidiaries engaged in a number of business activities, including property and casualty insurance and reinsurance, utilities and energy, finance, manufacturing, service and retailing.
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