Author Topic: Buffett/Berkshire - general news  (Read 466937 times)

longinvestor

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Re: Buffett/Berkshire - general news
« Reply #340 on: November 11, 2016, 11:19:46 AM »


netnet

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Re: Buffett/Berkshire - general news
« Reply #341 on: November 11, 2016, 01:03:09 PM »

rb

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Re: Buffett/Berkshire - general news
« Reply #342 on: November 11, 2016, 01:05:41 PM »
Yeah.... That was what? The 50th time that we heard that the old man went senile and lost it?

dcollon

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Re: Buffett/Berkshire - general news
« Reply #343 on: November 11, 2016, 01:20:41 PM »
From none other than Bruce Greenwald:


"Itís a crazy deal.  Itís an insane deal.  We looked at Burlington Northern at $75 and Iíll give you the exact calculation we did.  You donít have a high earnings return.  They are paying 18 times earnings, but itís really much worse than that.  They report maintenance cap-ex very carefully.  They report depreciation and amortization, and they report only about 70% of the maintenance cap-ex.  So they are under-depreciating, and their profit numbers are lower than the true profit numbers Ė and in a bad way, because the tax shield for the depreciation is undergone too.  Their profitability is much lower than it looks.

Buffettís paying 18-times [at $100/share] and at $75 he was paying 16-times.  Our calculation is he was paying 21-times.

Secondly, there are two kinds of assets.  There are the rights-of-way, which you canít get rid of.  So thereís no issue about having to earn a return on them because you have to keep it in the business, and because thereís nothing they can do with those rights-of-way.  If you look at the asset value of the non-right-of-way equipment, and you write it up because itís more expensive than it was originally, you get an asset value thatís very close to the earnings power value.  We didnít see a lot franchise value or hidden asset value.

The other thing is that if you try to calculate sustainable earnings, you have to cope with the fact that earnings are up enormously since 2003, when oil went up.  There is a simple calculation you can do, which compares the cost-per-ton-mile for freight for a truck versus a railroad.  If you build the increase in the price of diesel fuel into the post-2003 experience, when revenues suddenly start to grow, what you see is that the entire growth of the revenue is accounted for by the energy advantage that the railroads have and therefore how much business they can capture from the truckers, and how much pricing they can get because the competition is now more expensive.

There is nothing special about the railroads.  Itís entirely an energy play.

If you look at what their margins should have gone up by, given the energy efficiency, the margins go up by only about half of that.  So you donít have a good aggressive management over these five years producing outsized returns.

We looked back at when they did the merger with Santa Fe, because then they did increase margins.  But they got bored with it, and margins started to come down.  The same thing happened recently.  We donít see a lot of hidden profitability in the culture of the company.

It looked to us like an oil play.  He has a history of making bad oil play decisions.  And that was at $75/share, we thought there were better oil plays.  At $100/share we think he has lost his mind."

rb

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Re: Buffett/Berkshire - general news
« Reply #344 on: November 11, 2016, 01:42:04 PM »
Well if I can be a bit of a dick, there's a reason why Bruce Greenwald is Bruce Greenwald and Warren Buffett is Warren Buffett.

shalab

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Re: Buffett/Berkshire - general news
« Reply #345 on: November 11, 2016, 08:21:49 PM »
Well said...

Well if I can be a bit of a dick, there's a reason why Bruce Greenwald is Bruce Greenwald and Warren Buffett is Warren Buffett.

VersaillesinNY

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Re: Buffett/Berkshire - general news
« Reply #346 on: November 21, 2016, 10:55:12 AM »
Warren Buffettís Meeting with University of Maryland MBA/MS Students Ė November 18, 2016

https://blogs.rhsmith.umd.edu/davidkass/

Liberty

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Re: Buffett/Berkshire - general news
« Reply #347 on: November 21, 2016, 12:27:35 PM »
Warren Buffettís Meeting with University of Maryland MBA/MS Students Ė November 18, 2016

https://blogs.rhsmith.umd.edu/davidkass/

Thank you. Some of the same things he's always said, but a few new tidbits that I enjoyed.
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gfp

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Re: Buffett/Berkshire - general news
« Reply #348 on: November 21, 2016, 02:39:24 PM »
Berkshire filed a standard correspondence note back and forth with the SEC today - no big deal, but some might find management's summary of Precision Castparts' business and the oligopoly markets it sells into interesting.  I did.  Starts on page five on this section of correspondence "As background, PCC..."  ->

https://www.sec.gov/Archives/edgar/data/1067983/000119312516732679/filename1.htm

edit :  Bloomberg wrote a piece about the exchange ->
https://www.bloomberg.com/gadfly/articles/2016-11-22/warren-buffett-and-berkshire-a-matter-of-trust
« Last Edit: November 22, 2016, 12:01:28 PM by globalfinancepartners »

longinvestor

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Re: Buffett/Berkshire - general news
« Reply #349 on: November 21, 2016, 03:23:00 PM »
Berkshire filed a standard correspondence note back and forth with the SEC today - no big deal, but some might find management's summary of Precision Castparts' business and the oligopoly markets it sells into interesting.  I did.  Starts on page five on this section of correspondence "As background, PCC..."  ->

https://www.sec.gov/Archives/edgar/data/1067983/000119312516732679/filename1.htm

Interesting.

There is a thing called "back-to-birth-traceability" that aerospace parts come under. That in effect means switching out suppliers is darn near impossible. In my work, I've worked with a small aerospace parts supplier that was poorly run and went into bankruptcy. Their main customer (one of the eight oligopolies named in the above filing) played a pivotal part in nursing this co back to health. That's how sticky aerospace business can be.
« Last Edit: November 21, 2016, 03:24:41 PM by longinvestor »