Author Topic: Annual Letter 2018  (Read 12138 times)

skanjete

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Re: Annual Letter 2018
« Reply #40 on: February 24, 2019, 10:50:19 AM »
Berkshire files two 13Fs, and then there are some pension fund holdings that are eliminated in the Annual Report presentation but may creep in to other SEC filings.  Most people just forget about General Re New England Asset Management holdings that are tagged as belonging to Berkshire.  Dataroma and CNBC have always had that part wrong.

Does anyone know why the amounts of stocks Berkshire holds and lists on page 12 don't seem to match (in most cases) the amounts as listed in their 13F on Q42018?

OK, thanks a lot!!!


longinvestor

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Re: Annual Letter 2018
« Reply #41 on: February 24, 2019, 04:22:49 PM »
During the era of the just abandoned BV multiple method, some headlines suggested that the company could buy back at BV multiples not yet reported (between quarterly statements). Greg Warren asked a question about this at one of the annual meetings and later reported in his Morningstar report that Buffett confirmed that that could happen. I called BS on that because Buffett said no such thing. Warren kept repeating that anyway, such is journalism. And folks like Greg W fit the description of the precisely wrong type perfectly.


Berkshire, in fact, may be the only company in the Fortune 500 that does not prepare monthly earnings reports or balance sheets. I, of course, regularly view the monthly financial reports of most subsidiaries. But Charlie and I learn of Berkshire’s overall earnings and financial position only on a quarterly basis.
Furthermore, Berkshire has no company-wide budget (though many of our subsidiaries find one useful). Our lack of such an instrument means that the parent company has never had a quarterly “number” to hit. Shunning the use of this bogey sends an important message to our many managers, reinforcing the culture we prize.
« Last Edit: February 24, 2019, 04:26:35 PM by longinvestor »

shalab

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Re: Annual Letter 2018
« Reply #42 on: February 24, 2019, 04:57:04 PM »
Not impressed with Greg Warren or morningstar analysts. Someone posted that their "no moat" stocks outperformed the "narrow moat" stocks which outperformed "widemoat" stocks.

One of its new empirical findings focuses on Morningstar’s moat ratings as a proxy for popularity. The notion being that companies with wide moats are more popular with investors than those that lack moats.

As a test, the rated stocks were sorted into three portfolios each month based on the strength of their moats. The portfolios were equally weighted and their returns tracked from July, 2002 to August, 2017.

The wide-moat portfolio generated a compound annual growth rate of 11.15 per cent over the period. Not bad. But the narrow-moat portfolio climbed 12.08 per cent annually and the no-moat portfolio gained 15.40 per cent per year.

The no-moat firms beat the wide-moat firms by an average of 4.25 percentage points annually. They had outstanding returns despite their undesirable characteristics.


During the era of the just abandoned BV multiple method, some headlines suggested that the company could buy back at BV multiples not yet reported (between quarterly statements). Greg Warren asked a question about this at one of the annual meetings and later reported in his Morningstar report that Buffett confirmed that that could happen. I called BS on that because Buffett said no such thing. Warren kept repeating that anyway, such is journalism. And folks like Greg W fit the description of the precisely wrong type perfectly.


Berkshire, in fact, may be the only company in the Fortune 500 that does not prepare monthly earnings reports or balance sheets. I, of course, regularly view the monthly financial reports of most subsidiaries. But Charlie and I learn of Berkshire’s overall earnings and financial position only on a quarterly basis.
Furthermore, Berkshire has no company-wide budget (though many of our subsidiaries find one useful). Our lack of such an instrument means that the parent company has never had a quarterly “number” to hit. Shunning the use of this bogey sends an important message to our many managers, reinforcing the culture we prize.


longinvestor

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Re: Annual Letter 2018
« Reply #43 on: February 24, 2019, 05:30:55 PM »
Somehow I missed the PR about Tony Nicely retiring as CEO and passing the reins on to Bill Roberts. And of course, he is now Chairman for life, one of many across Berkshire. All of this moving and shaking perhaps a result of Jain and Abel's promotions.

Based on Buffett's comments over the years, Tony is the master low cost producer and great at crafting incentive compensation. Both extremely valuable to Berkshire as it grows it's stable of operating companies. What is happening at KHZ (brand co versus monster retailers) is playing out across the economy and IMO, being the low cost producer is often the same as last man standing. Berkshire's bench is deep with folks like Tony around.

 

gfp

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Re: Annual Letter 2018
« Reply #44 on: February 26, 2019, 05:25:15 AM »
Here is the BNSF 10-K for those interested

https://www.sec.gov/Archives/edgar/data/934612/000093461219000005/llc12311810k.htm

$5.45 Billion in cash distributions to the parent in 2018 (not counting cash for their share of consolidated taxes).  And yes, they did issue $1.5 Billion in new debt and only $750m was redeemed.

Pretax income for BNSF (shows the underlying biz without TCJA distortion)
2018:  6,863
2017:  6,328
2016:  5,693

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On the GEICO post above, it was certainly a helpful data point to have Warren essentially assign a lower bound to what he values GEICO at.  When you pay a couple billion for something and say Tony added over $50 Billion in value for Berkshire shareholders...  You have to assume he has a higher figure in his head.  Unfortunately, it's too complicated to separate companies like GEICO and NICO from the other operating companies BRK owns, since they own each other with the regulatory capital / float.  Progressive has a $43 Billion market cap at the moment, btw.

I believe that is why he didn't assign value to his "5th grove," insurance.  It was his way of also not counting a single dollar of liability for that grove either. 

longinvestor

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Re: Annual Letter 2018
« Reply #45 on: February 26, 2019, 03:08:38 PM »
I’ll bet that Buffett thinks of the fifth pillar as the margin of safety for the other four. The ultimate safety blanket.

gfp

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Re: Annual Letter 2018
« Reply #46 on: February 27, 2019, 05:26:45 AM »
Here is a good article on BHE and a good estimate of its value based on share repurchases that BHE does directly with Walter Scott's family.  Greg Abel's BHE shares, which used to be Sokol's shares before Berkshire facilitated the transfer, are convertible into Berkshire Hathaway common stock.  So ultimately Greg will be a large owner of BRK common shares.  The Scott family is the only other owner of BHE shares.

https://www.fool.com/investing/2019/02/27/the-big-berkshire-hathaway-buyback-no-one-is-talki.aspx

ander

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Re: Annual Letter 2018
« Reply #47 on: March 12, 2019, 11:02:20 AM »
Re: the public equities portfolio on page 12, Buffett writes "are earning about 20% on the net tangible equity capital required to run their businesses." Has anyone seen how Buffett calculates net tangible equity capital? Also am curious what he refers to as earnings (operating earnings or net income), but first wanted to confirm the net tangible equity capital calculation.