May. 27, 2014, 11:27 AM
- Noting that Berkshire Hathaway's (BRK.A, BRK.B) Warren Buffett has suggested he will hunt for his next big acquisition among energy companies, Reuters speculates that strong candidates that fit Buffett's style could include Baker Hughes (BHI), Williams Partners (WPZ) and Pinnacle West Capital (PNW).
- BHI has a fat ~$30B market cap but is trading at a discount to peers on several key metrics, WPZ sports the competitive advantage of its ownership of the Transco gas mainline which runs from Texas to New York, while PNW may be on the smallish side but offers strong cash flow from operations and reasonable debt.
May. 22, 2014, 8:34 AM
- The move by Susep - Brazil's insurance regulator - allows Berkshire Hathaway (BRK.A, BRK.B) to operate in the country as an "eventual reinsurer," i.e. to do business there without having a representative office.
- In Brazil, there are three classes of reinsurers - local, admitted, and eventual. Eventual reinsurers must have global net assets of at least $150M and be rated a notch above the minimum investment-grade rating.
May. 9, 2014, 8:58 AM
- BNSF Railway (BRK.A, BRK.B), the main railroad moving crude oil out of the Bakken formation in North Dakota, says a new federal emergency order on rail shipments will not affect its shipments.
- The U.S. Department of Transportation will require railroads to inform state emergency management officials about the movement of large shipments of crude oil, and will ask companies shipping oil from the Bakken to stop using older generation tank cars that have been involved in several fiery derailments.
- BNSF says it will comply with the new reporting requirements but does not foresee any impact of service.
- Related rail/oil stocks: CSX, UNP, NSC, KSU, CP, GWR, OAS, NOG, KOG, CLR, WLL, EOX.
May. 3, 2014, 7:51 PM
- He didn't want to "go to war" with management, says Warren Buffett, responding to the first question asked of him at the Berkshire Hathaway (BRK.A, BRK.B) annual meeting: Why did he abstain from voting on the controversial equity compensation plan for Coca-Cola (KO) executives?
- "You keep belching at the dinner table, you'll be eating in the kitchen," says Buffett, describing the clubby culture of corporate boards where being agreeable keeps you on the inside and being confrontational gets you blackballed. "I've voted for compensation plans in various places that are far from what I would have designed myself ... That is the way boards work."
- A shareholder proposal requesting Berkshire board consideration of a dividend received less than 2% of the vote, pleasing to Buffett who believes he and Charlie Munger can do a better job of allocating company capital than returning it to shareholders. Still, with $40B and rising in Berkshire's coffers, even Buffett concedes the day is coming when the company has "more cash than we can intelligently invest."
- "That error that they made doesn't bother me," says Buffett of Bank of America (BAC), which had to suspend its capital return plan after miscalculating capital levels. "It doesn't change my feeling about Bank of America's risk management one iota."
- Mungerisms: Comparing Berkshire book value to the S&P 500 is "insane" and makes it harder for Buffett to look good. "Warren sets a ridiculously high standard. The last couple of years added $60B in value ... If that's failure, then I want more of it."
May. 2, 2014, 5:25 PM| 7 Comments
May. 1, 2014, 7:07 PM
- Berkshire Hathaway (BRK.A, BRK.B) agrees to acquire SNC-Lavalin's (SNCAF) AltaLink, the operator of electric transmission lines in Canada, for $3.24B, as Warren Buffett’s company expands its investment in energy.
- Buffett’s power unit, renamed just this week as Berkshire Hathaway Energy, has been expanding through acquisitions under CEO Greg Abel; SNC is moving away from infrastructure investments to put resources into engineering and construction.
Apr. 28, 2014, 2:01 PM
- "Berkshire's (BRK.A, BRK.B) insurance business generates substantial no-cost float ($77B at year-end 2013) available for investing and will benefit from the Heinz acquisition," says Barclays' Jay Gelb, calling now a good time to buy the stock. "Importantly, Berkshire has significant cash available for additional acquisitions (we estimate about $25B) to supplement organic growth."
- Gelb also notes Berkshire has substantial leverage to an improving economy and housing market, with non-insurance operations now accounting for two-thirds of operating earnings. The stock trades at 1.41x book, just above the 1.2x at which Buffett says he's buying back stock.
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
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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