Author Topic: Berkshire 2030  (Read 12489 times)

John Hjorth

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Re: Berkshire 2030
« Reply #10 on: October 14, 2020, 11:35:27 AM »
John
I think of Buffet comment about $100 billion return in the same vein as I do of Watsa being able to pull something close Teledyne’ buyback program. More or less as aspirational goals.


I don't view it that way. 

FFH has had no shortage of places to allocate its capital (some have been good, some have been disappointing), but it has been chronically in need of more to fund its acquisitions, pay that annual divvy and to (not) repay debt.  Prem's assertions about buybacks require a fundamental shift in corporate strategy, which is not an impossible outcome but as they say, I'm from Missouri. 

In contrast, BRK generates about $40b of cash from operations per year, and the investment portion of its SCFP and the cash balance sadly demonstrates a lack of opportunities to deploy that capital.

So, FFH might be willing to initiate a long-term significant return of capital, but it is largely unable to do so without a drastic change in corporate strategy.  BRK is *fully able* to return $20B per year, but is seemingly unwilling to do so.  The outcome has been similar, but the underlying problem is quite different.  I would not describe Prem's or Warren's statements as "aspirational" but rather as "disingenuous" in both cases.


SJ

Thank you to you both for replies, Xerxes & StubbleJumper,

Somehow, the whole thing boils down to "hunger" [for returns] vs. risk awareness. [ ; - ) ] - If & when I start selling out of the [monster] Berkshire position owned by my family and I, I'll post about it here on CoBF - You'll likely get no better buying signal! [ ; - ) ]
”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


Xerxes

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Re: Berkshire 2030
« Reply #11 on: November 23, 2020, 03:40:59 PM »
Based on Barron's
"Repurchases totaled $15.7 billion in the first three quarters of 2020, against $4.9 billion for all of 2019."

That is ~$20 billion done; so, $80 billion more to go to meet the $100 billion lofty target and some 10 years to do it.


ValueMaven

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Re: Berkshire 2030
« Reply #12 on: November 27, 2020, 11:12:44 AM »
Assuming 8% operating growth, w/a fairly recession proof business model, and a decrease in the share-count - you get some really interesting terminal value prices in 2030...BERK could retire $20B of shares per year and still be in a net-cash position each year - assuming operating income of ~$25B - ~$30B...and you still have the base $100B of cash on the b/s as well.  Basically, I think this has become a huge cash generator/capital return story with a slightly below market-ish growth over the next decade. 
« Last Edit: November 27, 2020, 11:41:05 AM by ValueMaven »

Swedish_Compounder

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Re: Berkshire 2030
« Reply #13 on: November 28, 2020, 11:36:57 AM »
I would not be totally surprised if they buy back 4-5 percent of their stock per year the coming ten years.

Stock portfolio could be worth 600-700 billion.

Cash flow from operations 80 billion.

Not an unlikely scenario in my view...

ValueMaven

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Re: Berkshire 2030
« Reply #14 on: November 28, 2020, 12:48:48 PM »
I would not be totally surprised if they buy back 4-5 percent of their stock per year the coming ten years.

Stock portfolio could be worth 600-700 billion.

Cash flow from operations 80 billion.

Not an unlikely scenario in my view...

How are you getting $80B 10 years out??  Assuming another large deal?  Growth in operating businesses would have to be in the mid-teens (using 2019 as a base assumption) to even have a shot...what am I missing?

StubbleJumper

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Re: Berkshire 2030
« Reply #15 on: November 28, 2020, 01:58:46 PM »
I would not be totally surprised if they buy back 4-5 percent of their stock per year the coming ten years.

Stock portfolio could be worth 600-700 billion.

Cash flow from operations 80 billion.

Not an unlikely scenario in my view...

How are you getting $80B 10 years out??  Assuming another large deal?  Growth in operating businesses would have to be in the mid-teens (using 2019 as a base assumption) to even have a shot...what am I missing?

Cash from Ops has been $46B, $37B and $39B from 2017 to 2019.  Hitting $80B would basically be a double over 10 years, which is about 7% annually, compounded.  Without undertaking a nuts-and-bolts analysis of how a 7% growth actually would occur, the notion doesn't seem outrageous at first glance.


SJ

Swedish_Compounder

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Re: Berkshire 2030
« Reply #16 on: November 29, 2020, 12:59:59 AM »
Right. Cash flow from ops will probably have more than doubled from 2010 to 2020. Only really large acquisition during those ten years was PCP I believe (BNSF consolidated from Feb 2010). So 7% CAGR the coming ten years seems achievable I think.

Now, they have much more cash to begin with, which they could together with the incoming cash flows use for share repurchases if they decide to do so. If the excess cash stands still or goes down the coming ten years, that could mean they can both afford large repurchases and some acquisition activity.

Note that this is not a forecast, but more a view of how it could look ten years from now. Forecasts are always difficult to make... I really hope they step up their share repurchases even if the price goes up some. BRK is still very cheap compared to the market and compared to what they need to pay for acquisitions and other stocks, especially when taking quality into account.
« Last Edit: November 29, 2020, 01:02:06 AM by Swedish_Compounder »

longinvestor

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Re: Berkshire 2030
« Reply #17 on: November 29, 2020, 09:51:27 AM »
Right. Cash flow from ops will probably have more than doubled from 2010 to 2020. Only really large acquisition during those ten years was PCP I believe (BNSF consolidated from Feb 2010). So 7% CAGR the coming ten years seems achievable I think.

Now, they have much more cash to begin with, which they could together with the incoming cash flows use for share repurchases if they decide to do so. If the excess cash stands still or goes down the coming ten years, that could mean they can both afford large repurchases and some acquisition activity.

Note that this is not a forecast, but more a view of how it could look ten years from now. Forecasts are always difficult to make... I really hope they step up their share repurchases even if the price goes up some. BRK is still very cheap compared to the market and compared to what they need to pay for acquisitions and other stocks, especially when taking quality into account.

Well stated! Berkshire stands almost alone in today’s world by way of “Safe&Cheap”.

This from another board, there’re fools on both ends in the market right now; those foolish ones to be selling back to Berkshire and those buying shares from (nameless) serial share issuers. There’s lament about how Berkshire is going to intelligently spend their cash while the nameless need to issue shares for cash needs.

The tide will go out one day!

mattee2264

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Re: Berkshire 2030
« Reply #18 on: January 22, 2021, 02:37:30 PM »

 What do you guys think about the key man risk? Most conglomerates tend to sell below book value. So there is still something of a Buffett/Munger premium. If you think book value can compound at 7-10% a year but book value falls from 1.3x book value to 1x book value (or lower) the returns become a lot less attractive. Obviously buybacks will help to some extent and most conglomerates do not really bother with this as a way of eliminating any discounts.

Every Banana Counts

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Re: Berkshire 2030
« Reply #19 on: January 22, 2021, 02:53:18 PM »

 What do you guys think about the key man risk? Most conglomerates tend to sell below book value. So there is still something of a Buffett/Munger premium. If you think book value can compound at 7-10% a year but book value falls from 1.3x book value to 1x book value (or lower) the returns become a lot less attractive. Obviously buybacks will help to some extent and most conglomerates do not really bother with this as a way of eliminating any discounts.
If Berkshire’s price to book hovered around one for an extended period of time (years), then I think the long-term shareholder would greatly benefit. I cannot imagine a tremendous amount of shares would not be re-purchased. If large amounts of shares are not re-purchased at that level, then they would likely be getting opportunities to make much higher returned elsewhere. This would also be a great scenario for Berkshire. It is a good point you make, but that is why it is important to entrust your money to great capital allocators.