Apr. 24, 2014, 8:17 AM
- "Any time a large financial institution starts promising regular earnings increases, you're going to have trouble," Warren Buffett famously said in 2010, explaining why he dumped stakes in Freddie Mac (FMCC) and Fannie Mae (FNMA) many years before the housing bust.
- As for whether Berkshire Hathaway (BRK.A, BRK.B) has any interest in the GSEs at this point, the answer is "no," says Buffett in a Bloomberg interview. Buffett does though, see a role for government in housing finance. "The 30-year fixed-rate mortgage is very good for the American public and I think that you will need government participation in some way to bring the costs down.”
Apr. 23, 2014, 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.
Apr. 11, 2014, 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
Apr. 9, 2014, 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).
Apr. 8, 2014, 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).
Mar. 27, 2014, 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.
Mar. 14, 2014, 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.
Mar. 14, 2014, 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?
Mar. 12, 2014, 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
Mar. 6, 2014, 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
Mar. 6, 2014, 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.
Mar. 4, 2014, 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).
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.
Mar. 4, 2014, 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.
Mar. 3, 2014, 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
Mar. 3, 2014, 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.
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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