Author Topic: Buffett/Berkshire - general news  (Read 466855 times)

KFS

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Re: Buffett/Berkshire - general news
« Reply #850 on: August 08, 2018, 01:45:20 PM »
https://www.valuewalk.com/2018/08/berkshires-intrinsic-value-results-beat/

Value Walk article..... interesting sum-of-the-parts valuation.....



John Hjorth

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Re: Buffett/Berkshire - general news
« Reply #851 on: August 08, 2018, 01:56:39 PM »
Welcome to you here on CoBF, KFS! [ : - ) ]

Just for your information, there is also the last three client letters from Semper Augustus, which can be accessed here, just in case you don't already know them.
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

KFS

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Re: Buffett/Berkshire - general news
« Reply #852 on: August 08, 2018, 02:35:01 PM »
Welcome to you here on CoBF, KFS! [ : - ) ]

Just for your information, there is also the last three client letters from Semper Augustus, which can be accessed here, just in case you don't already know them.

Thank you.... very good material..... I've been a quiet reader of this forum for some time now, just now emerging from the shadows

Dynamic

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Re: Buffett/Berkshire - general news
« Reply #853 on: August 09, 2018, 12:29:00 AM »
On thinking about your suspicion that Berkshire has stopped buying Apple, I think you're right and that they may potentially have even decided to trim their position by a small amount to stay below the reporting threshold.

Regarding Apple and the 13D requirements, I wasn't aware that 13D reporting came at 5% as I'm fairly new to trawling through all the EDGAR filings, especially since I've started receiving them on email via rocketfinancial and since I start looking at historic 13D filings to calculate the holdings by pensions funds for various Berkshire subsidiary employees to account for these in the Look Through spreadsheet, but here's a decent summary I found in response to gfp's post:

Quote
Schedule 13D
From Wikipedia, the free encyclopedia

Schedule 13D is an SEC filing that must be submitted to the US Securities and Exchange Commission within 10 days by anyone who acquires beneficial ownership of more than 5% of any class of publicly traded securities in a public company. A filer must promptly update the Schedule 13D filing to reflect any material change in the facts disclosed, including, among other things, the acquisition or disposition of 1% or more of the class of securities that are the subject of the filing.

I have recently had suspicions that a few more AAPL may have been purchased by Berkshire in the $162-$165 range at the end of April, but the run-up to $183-$194 ballpark since then may have curtailed their buying. Roughly 200 milion shares of AAPL traded in that April low period, so I would not have been shocked to find they've added another 50-60 million shares.

On the latest Apple 10-Q we have the figure:
Quote
4,915,138,000 shares of common stock, par value $0.00001 per share, issued and outstanding as of April 20, 2018
, which remains the latest published figure for outstanding shares.

Now it appears that 5% reporting threshold would currently be 245,756,900 shares.

Berkshire's 13-F holdings (Berkshire and New England Asset Management combined) as of 31st March including pension fund holdings are:
245,278,633 (4.990% of last known shares outstanding).

This is remarkably close to a threshold that wouldn't have been precisely known to Berkshire prior to 20th April. Can that be coincidence?

We believe that 2,837,753 shares are owned by pension schemes within Berkshire (per 10-K annual report). (0.058% of AAPL)

From the financial-benefit definition of beneficially owned, Berkshire has 242,440,880 (4.933% of AAPL), excluding the pension scheme holdings that are not for the financial benefit of Berkshire's owners.
But from the voting power definition of beneficially owned, it's the 4.990% known directly from the two 13-F filings that counts.

I assume from the 4.990% being just below 5.000% that it may be the latter that would trigger the 13D and that this threshold is what curtailed Berkshire's buying in the first quarter to avoid reporting responsibilities.

It is even possible, perhaps likely, that Berkshire may engage in slight trimming this quarter at the $180+ range to avoid 13D filing responsibilities that might arise the moment that Apple next makes a filing that discloses a reduced number of shares outstanding.

In this way, Apple, like Wells Fargo, may well then remain at about this size, with Berkshire estimating the extent of Apple buybacks and trimming slightly from quarter to quarter, unless the SEC is willing to grant them an exemption from public filing within 10 days until they hit a higher limit such as 10%. I imagine such an exemption is possible, because I don't recall 13D filings about the 0.4% Wells Fargo position trimming appearing prior to the release of the 13-F this quarter, and this trimming ws to keep Berkshire just below the 10% level to avoid being considered a Bank Holding Company, which is, of course, well above the 5% 13D threshold. If they are allowed exemption from public filing of 13D while they build their position.

From the Berkshire 2018Q2 quarterly report, they beneficially hold $47.2bn as of 30th June 2018. The pension scheme holdings wouldn't be included there but will appear in the 13-F later this month.
The lowest number that would round up to that figure is $47.15bn.
The Apple share price at the close on 29th June - the last trading day - was $185.11
So the smallest share count that fits would be 254,713,414 shares of Apple held by Berkshire, an increase of at minimum 9,434,781 shares over 31/03/2018.

As a percentage of Apple's then published 4,915,138,000 shares outstanding (as of their May 10Q), this is 5.18% at a minimum based on the known share count at the time (which has since decreased, increasing Berkshire's percentage ownership of Apple).

So this exceeds the 5% threshold where Berkshire must file a Schedule 13D filing with the SEC.

From this I think we can assume that Berkshire has been granted confidential filing status for Schedule 13D at this point while they continue to add to their position, so their public holdings will only be released in their 13-F filing later this month and there will be less indication of the price range they've bought at than during a 10-day period. Otherwise, had the 13D filing been made public we'd have known within 10 days of any increase above 5% during the quarter, meaning at latest 10th July if they'd bought off market on 30th June. This confidential status seems entirely fair given Berkshire's proprietary view of Apple's valuation which is a competitive advantage. Berkshire clearly doesn't wish to conduct a takeover of Apple or exercise control over it, and the SEC's requirement relates to monitoring of voting power, not publicly disclosing the prices and quantities traded by those they regulate and giving away such proprietary judgement clues to the investment community at large.

Perhaps we can then envisage that Berkshire could continue to buy beyond 5% when Apple is priced attractively, and could probably get close to 10% before hitting the requirements that caused them to trim their Phillips 66 (PSX) stake, even though, like Apple it's not a bank, so wouldn't cause Berkshire to be considered a bank holding company as a 10% holding in Wells Fargo would. Possibly even over 10%, it might be worth whatever those requirements are, given that Apple is one of the few investees that can really move the needle given Berkshire's size.

That potentially could mean that in future, rather than the Apple stake representing about 9-10% of Berkshire's market cap, it could rise a lot further.

I haven't yet updated my public Look Through Google Sheet, as we only have an estimated Apple holding and the share count has only risen by 2% last quarter. It won't be too long until the 13-F is released and I will update it more fully.

SwedishValue

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Re: Buffett/Berkshire - general news
« Reply #854 on: August 09, 2018, 12:43:15 AM »
On thinking about your suspicion that Berkshire has stopped buying Apple, I think you're right and that they may potentially have even decided to trim their position by a small amount to stay below the reporting threshold.

Regarding Apple and the 13D requirements, I wasn't aware that 13D reporting came at 5% as I'm fairly new to trawling through all the EDGAR filings, especially since I've started receiving them on email via rocketfinancial and since I start looking at historic 13D filings to calculate the holdings by pensions funds for various Berkshire subsidiary employees to account for these in the Look Through spreadsheet, but here's a decent summary I found in response to gfp's post:

Quote
Schedule 13D
From Wikipedia, the free encyclopedia

Schedule 13D is an SEC filing that must be submitted to the US Securities and Exchange Commission within 10 days by anyone who acquires beneficial ownership of more than 5% of any class of publicly traded securities in a public company. A filer must promptly update the Schedule 13D filing to reflect any material change in the facts disclosed, including, among other things, the acquisition or disposition of 1% or more of the class of securities that are the subject of the filing.

I have recently had suspicions that a few more AAPL may have been purchased by Berkshire in the $162-$165 range at the end of April, but the run-up to $183-$194 ballpark since then may have curtailed their buying. Roughly 200 milion shares of AAPL traded in that April low period, so I would not have been shocked to find they've added another 50-60 million shares.

On the latest Apple 10-Q we have the figure:
Quote
4,915,138,000 shares of common stock, par value $0.00001 per share, issued and outstanding as of April 20, 2018
, which remains the latest published figure for outstanding shares.

Now it appears that 5% reporting threshold would currently be 245,756,900 shares.

Berkshire's 13-F holdings (Berkshire and New England Asset Management combined) as of 31st March including pension fund holdings are:
245,278,633 (4.990% of last known shares outstanding).

This is remarkably close to a threshold that wouldn't have been precisely known to Berkshire prior to 20th April. Can that be coincidence?

We believe that 2,837,753 shares are owned by pension schemes within Berkshire (per 10-K annual report). (0.058% of AAPL)

From the financial-benefit definition of beneficially owned, Berkshire has 242,440,880 (4.933% of AAPL), excluding the pension scheme holdings that are not for the financial benefit of Berkshire's owners.
But from the voting power definition of beneficially owned, it's the 4.990% known directly from the two 13-F filings that counts.

I assume from the 4.990% being just below 5.000% that it may be the latter that would trigger the 13D and that this threshold is what curtailed Berkshire's buying in the first quarter to avoid reporting responsibilities.

It is even possible, perhaps likely, that Berkshire may engage in slight trimming this quarter at the $180+ range to avoid 13D filing responsibilities that might arise the moment that Apple next makes a filing that discloses a reduced number of shares outstanding.

In this way, Apple, like Wells Fargo, may well then remain at about this size, with Berkshire estimating the extent of Apple buybacks and trimming slightly from quarter to quarter, unless the SEC is willing to grant them an exemption from public filing within 10 days until they hit a higher limit such as 10%. I imagine such an exemption is possible, because I don't recall 13D filings about the 0.4% Wells Fargo position trimming appearing prior to the release of the 13-F this quarter, and this trimming ws to keep Berkshire just below the 10% level to avoid being considered a Bank Holding Company, which is, of course, well above the 5% 13D threshold. If they are allowed exemption from public filing of 13D while they build their position.

From the Berkshire 2018Q2 quarterly report, they beneficially hold $47.2bn as of 30th June 2018. The pension scheme holdings wouldn't be included there but will appear in the 13-F later this month.
The lowest number that would round up to that figure is $47.15bn.
The Apple share price at the close on 29th June - the last trading day - was $185.11
So the smallest share count that fits would be 254,713,414 shares of Apple held by Berkshire, an increase of at minimum 9,434,781 shares over 31/03/2018.

As a percentage of Apple's then published 4,915,138,000 shares outstanding (as of their May 10Q), this is 5.18% at a minimum based on the known share count at the time (which has since decreased, increasing Berkshire's percentage ownership of Apple).

So this exceeds the 5% threshold where Berkshire must file a Schedule 13D filing with the SEC.

From this I think we can assume that Berkshire has been granted confidential filing status for Schedule 13D at this point while they continue to add to their position, so their public holdings will only be released in their 13-F filing later this month and there will be less indication of the price range they've bought at than during a 10-day period. Otherwise, had the 13D filing been made public we'd have known within 10 days of any increase above 5% during the quarter, meaning at latest 10th July if they'd bought off market on 30th June. This confidential status seems entirely fair given Berkshire's proprietary view of Apple's valuation which is a competitive advantage. Berkshire clearly doesn't wish to conduct a takeover of Apple or exercise control over it, and the SEC's requirement relates to monitoring of voting power, not publicly disclosing the prices and quantities traded by those they regulate and giving away such proprietary judgement clues to the investment community at large.

Perhaps we can then envisage that Berkshire could continue to buy beyond 5% when Apple is priced attractively, and could probably get close to 10% before hitting the requirements that caused them to trim their Phillips 66 (PSX) stake, even though, like Apple it's not a bank, so wouldn't cause Berkshire to be considered a bank holding company as a 10% holding in Wells Fargo would. Possibly even over 10%, it might be worth whatever those requirements are, given that Apple is one of the few investees that can really move the needle given Berkshire's size.

That potentially could mean that in future, rather than the Apple stake representing about 9-10% of Berkshire's market cap, it could rise a lot further.

I haven't yet updated my public Look Through Google Sheet, as we only have an estimated Apple holding and the share count has only risen by 2% last quarter. It won't be too long until the 13-F is released and I will update it more fully.

This is extremely interesting to me. Living a couple of thousand miles away and with approximately zero knowledge on US reporting requirements and exceptions, your argument seems to make a lot of sense. Any other takers?

Dynamic

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Re: Buffett/Berkshire - general news
« Reply #855 on: August 09, 2018, 12:59:25 AM »
Thanks @SwedishValue. User @globalfinancepartners has been the member who had explained most of this to me, for which I'm very grateful and give huge credit (and surely owe them a beer or two if we should ever meet!), so I posted this with the thought that any nuance I've misunderstood will be corrected by peer-review and we'll all learn something.

gfp

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Re: Buffett/Berkshire - general news
« Reply #856 on: August 09, 2018, 04:59:10 AM »
Thats a lot to read on a phone, but I think you guys got the gist of it.  The most recent published share count of Apple (found at the very top of every 10Q) is the number they have to use, not quarter-end or average share counts.  Apple published this:

"4,829,926,000 shares of common stock, par value $0.00001 per share, issued and outstanding as of July 20, 2018"

less than 10 business days ago, which I believe is the Berkshire deadline for publishing a "13G" with the SEC.  If Berkshire doesn't file within 10 business days of Apple's updated share count, they either made a mistake and will update later with a 'sorry, we should have done this earlier' or they have elected to sell down their stake to stay just under what they project to be the 5% share count - for the sake of privacy one would assume.  It's not very important in valuing Berkshire obviously.  Hell, Berkshire could even enter into one of those deals like Advance/Newhouse did with Charter where they sell blocks back to the company to maintain their exact same % ownership level over time.  Would probably save both parties a little bit on trading costs.  But I don't expect that

I will ask Marc Hamburg, but I seriously doubt he will answer me about this question since it involved an individual security Warren might be buying or selling.   

John Hjorth

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Re: Buffett/Berkshire - general news
« Reply #857 on: August 09, 2018, 05:24:00 AM »
Do you remember this? I'll bet this will never happen again with Mr. Hamburg as CFO. I haven't studied his 2014 bonus in the AGM 2015 proxy, though! [ : - ) ]
”In the race of excellence … there is no finish line.”
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Dynamic

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Re: Buffett/Berkshire - general news
« Reply #858 on: August 09, 2018, 05:45:27 AM »
"4,829,926,000 shares of common stock, par value $0.00001 per share, issued and outstanding as of July 20, 2018"

My point was that they already exceeded 5% by 30th June 2018 even using the April share count published by Apple in early May, so they would have had to publish by 10th July 2018, which has been and gone.

Thus I'm pretty sure they have a confidentiality waiver on the 13D filings, meaning they tell the SEC within 10 days but the SEC doesn't make it public so we can't narrow down too closely what prices they consider cheap.

That's unless they somehow get to use a different Apple mark-to-market price from the closing price I found through Google Finance and Yahoo Finance for 29th June 2018. That would throw out my calculation of the minimum number of shares that would round to 47.2 billion dollars, but I've never noticed such a discrepancy before.
« Last Edit: August 09, 2018, 05:48:53 AM by Dynamic »

gfp

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Re: Buffett/Berkshire - general news
« Reply #859 on: August 09, 2018, 06:48:06 AM »
Ah yes I see your point.  If I had to guess I would say they are selling a small number of shares to keep it under the reporting requirements.  I don't believe they have any confidential treatment for the 13G and they didn't seek confidential treatment on the 13F.  We'll see if Marc gets back to me but I doubt he will be able to answer if they are indeed selling shares.