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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.
Lubrizol Q4 2008 Earnings Call TranscriptFeb. 5, 2009
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The Lubrizol Corp. Q2 2008 Earnings CallJul. 31, 2008
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The Lubrizol Corp. Q4 2007 Earnings Call TranscriptFeb. 8, 2008
Lubrizol Q3 2007 Earnings Call TranscriptOct. 26, 2007
Wed, Apr. 23, 9:02 AM
- Since 2009, Berkshire Hathaway (BRK.A, BRK.B) has invited six journalist/analyst questioners to the Woodstock of Capitalism to join shareholders in querying Warren Buffett and Charlie Munger for several hours. Last year, Buffett added a twist by inviting "credentialed bear" (i.e., provably short Berkshire stock) Doug Kass.
- Hunting for a bear for this year's show, Buffett has been unable to find one.
Fri, Apr. 11, 12:02 PM
- About a month ago, Berkshire Hathaway (BRK.A, BRK.B) and Graham Holdings (GHC -0.4%) reached agreement in principal for Berkshire to acquire some cash and a Graham subsidiary which includes WPLG - a Miami-based TV station - in exchange for about 1.6M shares of Graham common stock owned by Berkshire.
- Besides the acquisition of a local media outlet which The Oracle is fond of, the transaction looks like it allows Buffett to cash out of a highly profitable investment in Graham without paying any capital gains tax.
- Press release
Wed, Apr. 9, 6:30 PM
- The U.S. Federal Railroad Administration, sparked by last year's oil train derailment that ignited a fireball and killed 47 people in Canada, says it intends to require at least two crew members for rail shipments of crude oil, a proposal opposed by the railroads.
- The Transportation Department already has ordered energy companies using rail to ship oil to test the chemical composition of all crude before loading it on tank cars, and is studying whether rail cars carrying crude need to be made sturdier to lower the risk of an explosion.
- Railroads potentially affected: CSX, UNP, NSC, GWR, BNSF (BRK.A, BRK.B).
Tue, Apr. 8, 6:46 PM
- Utility stocks are the only group that's been rising regularly in the recent selloff, but another group of stocks that might start to interest buyers: Warren Buffett's top dividend yielding stocks from the Berkshire Hathaway (BRK.A, BRK.B) portfolio.
- Coca-Cola (KO) is a long-time Berkshire holding, fitting with Buffett's buy and hold forever strategy; the dividend yields 3.15%.
- Procter & Gamble (PG) is a long-time holding; it just announced another 7% dividend hike and yields 3.18%.
- Wells Fargo (WFC) is Buffett’s favorite bank and is the largest position in the Berkshire portfolio; while it yields only ~2.4% now, it telegraphed a quarterly dividend raise to $0.35/share for a new yield of 2.87%.
- Wal-Mart (WMT) has grown to a stake of nearly 50M shares, and it raised its quarterly payout to $0.48/share, generating a new yield of 2.45%.
- Buffett owns ~40M shares of GM, where the dividend is relatively new but the drop in the stock price now has its yield just above 3.5%.
- GE was added as a larger stake after Berkshire’s warrant conversions, but the position is still worth only ~$250M; the dividend yields ~3.4%.
- Buffett still owns 11M shares of ConocoPhillips (COP; 3.94% yield) but has moved more cash into rival Exxon Mobil (XOM; 2.7% yield).
Thu, Mar. 27, 2:20 PM
- Berkshire Hathaway (BRK.A, BRK.B) has a larger allocation to financials in its equity portfolio than any other industry and stands to rake in $123M more this year than last thanks to increased dividends at Wells Fargo, American Express, and U.S. Bancorp, among other smaller holdings like Goldman Sachs and BNY Mellon (though Goldman actually hasn't made an announcement yet). Berkshire also has a large preferred stake and warrant holdings in Bank of America, effectively making it one of the bank's largest shareholders.
- The dividends won't make a huge dent in Berkshire's cash pile of over $48B, and Buffett is surely enjoying stock appreciation and the boosted buybacks - which effectively raise his ownership stake - even more.
Fri, Mar. 14, 5:51 PM
- A major snarl in railroad traffic is rippling through the supply chains of businesses across the U.S., much of it caused by pileups at BNSF Railway (BRK.A, BRK.B) in a critical area where it is shipping crude oil from North Dakota’s Bakken Shale region, WSJ reports.
- BNSF already was stretched by the heavy demand for oil transport, but the problem grew when the oil boom led to shortages in locomotives and crew, and a bitter winter forced it to use smaller trains, all of which has caused a ripple effect across the U.S. as shipments have been delayed.
- While BNSF isn’t the only railroad with capacity problems, its troubles have been aggravated by a big grain harvest and its surging crude business; the backlogs could wind up costing shippers hundreds of millions of dollars.
Fri, Mar. 14, 12:52 PM
- Unsurprisingly, the Berkshire Hathaway (BRK.A, BRK.B) board is recommending shareholders vote against a proposal requesting the institution of a substantial dividend. "Whereas the corporation has more money than it needs, and since the owners unlike Warren Buffett are not multibillionaires, the board shall consider paying a meaningful annual dividend on the shares."
- "Our shareholders are far wealthier today than they would be if the funds we used for acquisitions had instead been devoted to share repurchases or dividends," responds the board.
- Warren Buffett has previously said he would consider a payout only when he runs of places to invest, which, according to his annual letter, he's not close to.
- In other news, Warren Buffett's compensation rose 15% to $485,606 in 2013, though his salary remained at $100K. More importantly, what was The Oracle's tax rate?
Wed, Mar. 12, 8:53 AM
- Berkshire Hathaway (BRK.A, BRK.B) and Graham Holdings (GHC) reach agreement in principle for Berkshire to acquire a subsidiary of Graham which includes a Miami TV station, a number of Berkshire shares, and cash in exchange for about 1.6M shares of Graham Class B stock currently owned by Berkshire.
- The deal sounds like it's the result of a phone call between Buffett and Donald Graham, with the final numbers still to be worked out and nothing yet on paper.
- "I am sure this is a mutually beneficial transaction for both companies,” says Buffett. “While this transaction will greatly reduce our position in Graham Holdings, our admiration for the company and its management is undiminished.”
- Press release
Thu, Mar. 6, 3:08 PM
- Typically making up 20-25% of Berkshire Hathaway's (BRK.A, BRK.B) insurance units' investment holdings ($186.8B AUM), fixed-income assets dropped to just 14% as of the end of the year. Stocks account for $114.8B of the holdings. Cash of $48.2B is up from $47B a year ago and $30.6B at the end of 2009, and of the fixed-income the units do hold, there's a decided tilt away from duration.
- Investment income in the insurance units was $3.7B in 2013, but this could drop as nice-yielding deals with Mars, Inc, Swiss Re, Goldman, and GE wound down and Buffett has only been able to replace a portion of that money with equally lucrative plays (i.e., Heinz). “Investment opportunities currently available will likely generate considerably lower yields ... We continue to hold significant cash and cash equivalents earning very low yields.”
- Broad fixed-income ETFs: AGG, BOND, BND, BSV, BIV, BLV, SCHZ, LAG, SAGG, ILTB, GVI, ISTB, GBF, DI, LDUR, MINC, FWDB, GIY, AGND, AGZD
Thu, Mar. 6, 12:33 PM
- Grain elevator and short-line railway operator Ceres Global (CERGF) says it received approval from U.S. and Canadian federal border agencies to link its Saskatchewan terminal to a rail line operated by Burlington Northern (BRK.A, BRK.B).
- The move will allow Ceres to begin construction on the terminal, which will be able to ship 25K bbl/day of light crude and up to 40M bushels/year of grain once it is fully operational.
- Ceres plans to ramp up shipments of light crude at the terminal to as much as 70K bbl/day within three years and install a liquefied natural gas pipeline from Saskatchewan refineries.
Tue, Mar. 4, 12:32 PM
- Icahn Enterprises (IEP) is currently trading at a 40% premium to what it calls "indicative net asset value," writes Andrew Bary in Barron's, which seems excessive given performance hinges so much on the success of Icahn's investments. Yes, the company has a small group of wholly-owned businesses, but they produce little profit,
- Berkshire Hathaway (BRK.A, BRK.B) - on the other hand - trades at a more modest 1.3x book and has a group of wholly-owned businesses which threw off about $15B in income last year. With some earnings growth this year, it's reasonable to say the stock's trading at 1.2x end-of-2014 book - the level at which Buffett and Munger have said they're buyers (with $42B in cash on the balance sheet, they have the means to do so).
Tue, Mar. 4, 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.
Tue, Mar. 4, 8:37 AM
- "I don't know of any good examples of an iconic CEO like Buffett ever being successfully followed," says KBW's Meyer Shields. Examples over the past 15 years: Immelt following Welch at GE, Ballmer/Gates at Microsfot, and Cook/Jobs at Apple.
- One issue for any successor: By dint of his insane track record, Buffett has the freedom to make mistakes or underperform the stock market for long periods - moves that might get another CEO fired. "I feel sorry for the person who follows in his shoes," says Berkshire (BRK.A, BRK.B) investor Dave Sather. "Buffett's in a very unique position... to where he can just think 100 percent independently. I worry that the next person will not have quite the same flexibility to be a dealmaker."
- Berkshire eventually plans to split Buffett's three jobs - CEO, CIO, and Chairman - but has not yet flagged who will be taking on the key roles.
Mon, Mar. 3, 7:47 AM
- Under the new terms - which require shareholder approval - Bank of America (BAC) is prohibited from redeeming the $2.9B in preferred stock issued to Berkshire (BRK.A, BRK.B) for five years and the stock will continue to pay a 6% dividend. The dividends, however, will no longer be cumulative, meaning the bank won't be penalized if forced to skip a payment.
- In exchange, BofA will be able to count the $2.9B as Tier 1 capital - a good deal for the bank which faces ever-more-stringent capital requirements.
- Buffett originally invested $5B in BofA in 2011, acquiring the preferred stock along with warrants struck at $7.14 and expiring in 2021 allowing the purchase of 700M shares - thus far a home run.
- Regulatory filing
Mon, Mar. 3, 7:37 AM
- Appearing on CNBC following this weekend's release of Berkshire Hathaway (BRK.A, BRK.B) earnings and his annual letter, Warren Buffett tells the gang the U.S. economy continues to grow steadily and he prefers to hold stocks forever, but would sell shares in order to buy big businesses that could remain a permanent part of Berkshire.
- In other tidbits, the Oracle says the Keystone pipeline is a good idea for the country and he repeats his warning of a decade-long pension crisis in the country.
- And where will his wife's money be invested should Buffett meet his demise before her: "My advice to the trustee could not be more simple: Put 10 percent of the cash in short-term government bonds and 90 percent in very low-cost S&P 500 index fund.” Average investors, he says, will see higher returns in a low-cost index fund than those achieved by most others - be they pension funds, institutions, or individuals - who pay for high-fee managers.
- A simplified reason for bubble worry, says the FT's James Mackintosh: Buffett underperformed the S&P 500 last year by the most since 1999.
Sun, Mar. 2, 2:06 AM
- Berkshire Hathaway's (BRK.A) Q4 net profit rose almost 10% to $4.99B, or $3,035 per class A share, helped by gains at the company's insurance units.
- Operating profit +34% to $3.78B, or $2,297 a share.
- Full-year net profit +31% to $19.48B, or $11,850 a share; operating profit +20% to $15.14B, or $9,211 a share.
- Berkshire's 2013 book value per share, Warren Buffett's preferred measure of net worth, grew18.2% after taxes to $134,973.
- From 2009-2013, book value increased 91%, while that of the S&P 28%; that's the first time that Buffett has failed in his goal of growing Berkshire's value faster than the S&P's over a five-year period.
- Berkshire ended 2013 with $48.19B in of cash and equivalents, which gives the company plenty of money to make more big deals.
- Berkshire's full annual report.
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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