Author Topic: Annual Letter 2018  (Read 12358 times)

DooDiligence

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Re: Annual Letter 2018
« Reply #10 on: February 22, 2019, 07:01:45 AM »
So nobody answered me on the KHC thread, but it looks like Berkshire's reported earnings in Q4 will be a real shit show.  Berkshire's 26.7% interest in KraftHeinz's $12.608 Billion net loss for the quarter will pass through BRK's books under the equity method.  That's another $3.366 Billion taken out of BRK's Q4 operating earnings.  Then we also have the uncertain results from catastrophe losses.  The headline numbers will also be swamped by the large unrealized hit to the equity portfolio. 

Here's hoping we get an opportunity to buy some BRK next week.  Looking forward to the annual letter as always.  Enjoy your weekend

Fingers crossed.

I sold ABC & SFTBY & have written "Warren, Chuck, Ted, Todd, Ajit & Greg" on the cash.
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compoundsnowly83

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Re: Annual Letter 2018
« Reply #11 on: February 22, 2019, 07:31:59 AM »
Excellent point on how the KHC numbers will impact Berkshire's numbers in Q4.  It is one of those scenarios that the accounting results don't reflect the true earnings power and could be a topic of discussion in the report. KHC took a non-cash impairment charge off $12.6bn (amount to commons shareholders) or $3.4bn (Bekshire's share) in Q4.  The implied loss of $3.4bn which will show up in operating earnings does not reflect KHC's earnings power. 

John Hjorth

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Re: Annual Letter 2018
« Reply #12 on: February 22, 2019, 08:05:11 AM »
It for sure won't be pretty as almost usual tomorrow - I basically agree on that. 1

But we have to remember the reporting context, tomorrow is 10-K reporting, not 10-Q reporting. So we won't see the result for 2018Q4 - so to say - directly. [We'll have to diff with 2018Q3 income statement according to the 10-Q for that particular quarter to get the 2018Q4 result.]

In short, there is USD 29.4 B after tax earnings for the first nine months, that we definitely have to remember in the whole picture for tomorrow's reporting.

- - - o 0 o - - -

1.  Berkshire has only had negative progress in book value per share in the years 2001 and 2008 since 1965 [minus 6.2 percent and minus 9.6 percent respectively] - and we all know why for those two years.
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aws

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Re: Annual Letter 2018
« Reply #13 on: February 22, 2019, 08:07:37 AM »
The loss from the writedown was not that much different from the market value decline during the period, so it would be more or less the same if they were not reporting it on the equity method.  KHC was 55.11 on 9/30 and 43.04 on 12/31. 325mm sh x 12.07 loss per share = 3.92b. 

And since the market value is a further 20% lower QTD it will actually be carried well above fair value, as compared with most of their equity portfolio which has rallied strongly since yearend.

scorpioncapital

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Re: Annual Letter 2018
« Reply #14 on: February 22, 2019, 09:07:17 AM »
So Buffett blundered, perhaps investing with his dietary preferences in a food stock that no longer has the moat it once had and not very internationally portable, but we see the strength of Berkshire being so diversified it can easily take a hit like this and brush it off.


compoundsnowly83

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Re: Annual Letter 2018
« Reply #15 on: February 22, 2019, 01:08:18 PM »
I did this quickly so my math is likely wrong but KHC still appears to be a decent deal for us as shareholders. Quick summary:

- Berkshire acquired 50% of Heinz in 2013 for $4.25bn but later increased cost basis to $9.8bn when Kraft merged with Heinz.
- Berkshire also invested $8bn in 9% preferred equity that was redeemed in 2016 for $8.3bn and paid $1.7bn of dividends before it was redeemed for a little over $2bn of profit.
- The $9.8bn of cost basis is currently worth $11.2bn based on a share price of $34.53. 
- Total invested dollars of $17.8bn that has already returned $10bn and still still owns $11.2bn of the equity.


gfp

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Re: Annual Letter 2018
« Reply #16 on: February 22, 2019, 01:13:22 PM »
Hey John - they do release 4th quarter numbers as well, just as a press release.  Here are last years numbers:
http://www.berkshirehathaway.com/news/feb2418.pdf

It for sure won't be pretty as almost usual tomorrow - I basically agree on that. 1

But we have to remember the reporting context, tomorrow is 10-K reporting, not 10-Q reporting. So we won't see the result for 2018Q4 - so to say - directly. [We'll have to diff with 2018Q3 income statement according to the 10-Q for that particular quarter to get the 2018Q4 result.]

In short, there is USD 29.4 B after tax earnings for the first nine months, that we definitely have to remember in the whole picture for tomorrow's reporting.

- - - o 0 o - - -

1.  Berkshire has only had negative progress in book value per share in the years 2001 and 2008 since 1965 [minus 6.2 percent and minus 9.6 percent respectively] - and we all know why for those two years.

John Hjorth

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Re: Annual Letter 2018
« Reply #17 on: February 22, 2019, 01:53:05 PM »
Hi gfp,

You're right, actually! -Those numbers will be exactly there, in the press release tomorrow! -And then Reuters grabs them, journalists start typing, everybody copycat'ing [without reading or understanding anything else at all!], and the whole thing "explodes"! "Berkshire has burned a hole in the carpet of USD X B in fourth quarter!" Berkshire bashing and anti-hype on Bloomberg, Seeking Alpha, Twitter, in short, all over - and on CoBF likely too!

I'm already getting flooded with it in my e-mail inbox, my Twitter feed and so on! -As you already said, it has buying opportunity next week for Berkshire written all over it!     [ ; - ) ]
”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

Munger_Disciple

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meiroy

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Re: Annual Letter 2018
« Reply #19 on: February 22, 2019, 04:20:53 PM »
So nobody answered me on the KHC thread, but it looks like Berkshire's reported earnings in Q4 will be a real shit show.  Berkshire's 26.7% interest in KraftHeinz's $12.608 Billion net loss for the quarter will pass through BRK's books under the equity method.  That's another $3.366 Billion taken out of BRK's Q4 operating earnings.  Then we also have the uncertain results from catastrophe losses.  The headline numbers will also be swamped by the large unrealized hit to the equity portfolio. 

Here's hoping we get an opportunity to buy some BRK next week.  Looking forward to the annual letter as always.  Enjoy your weekend

That would be awsome, if it crashes it would hit the buyback floor which means we get to buy calls.