Author Topic: Berkshire closed down to near book value  (Read 22286 times)

LC

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Re: Berkshire closed down to near book value
« Reply #20 on: March 26, 2020, 03:11:22 PM »
I don't think Buffett is buying back shares when there are reasonably priced targets out there. Repurchases have always been his last resort and he never does it in any real size. So if the market tanks 30-40%, now we are expecting him to suddenly change his tune? I don't think so. If I had to guess, I'd guess there have been minimal repurchases over this time period.
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scorpioncapital

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Re: Berkshire closed down to near book value
« Reply #21 on: March 27, 2020, 04:14:31 AM »
Agree with lc. Everything is linked. When Berkshire is ripe for buybacks tend to coincide with the same time that the world is also ripe for new bargains. In the best case he nibbles a little bit of everything. Not entirely sure how he decides but if he's rational even if berkshire buyback is worth 40 percent return what If everything else is worth 80 percent return? It's all relative. But I think a measured balances approach is best.

wescobrk

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Re: Berkshire closed down to near book value
« Reply #22 on: March 27, 2020, 06:10:43 AM »
Hopefully he can close on a big acquisition like BNSF (although I'm not super impressed with the results from BNSF). Warren being disciplined on price (and buying in 2009 plus buying almost 20% of the stock at very low prices) helped enormously. Apparently, Precision wasn't a great acquisition either. It might not be possible to find another Geico due to all the capital in the world, but I'm confident he can find something by the end of the year.
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gfp

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Re: Berkshire closed down to near book value
« Reply #23 on: March 27, 2020, 06:24:04 AM »
I agree Precision hasn't been a great acquisition so far - but how are you not impressed with BNSF results compared to purchase price?  He's been upstreaming huge amounts of cash out of it every year - tax free - vs a purchase price of a bit over $34 Billion if I am remembering correctly.  Plus I think he borrowed like $8 billion of the cash for purchase.  He's basically taken the entire purchase price out in tax free cash dividends and has a sub worth $80 billion or something like that.  And still takes the cash out every year.

The only part I could criticize is the equity issuance but that was the price to do the deal.  Better to issue the equity and make the deal vs miss out on such an important acquisition.

Hopefully he can close on a big acquisition like BNSF (although I'm not super impressed with the results from BNSF). Warren being disciplined on price (and buying in 2009 plus buying almost 20% of the stock at very low prices) helped enormously. Apparently, Precision wasn't a great acquisition either. It might not be possible to find another Geico due to all the capital in the world, but I'm confident he can find something by the end of the year.
Almost 90 and Charlie is 96 and still going strong!

Gregmal

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Re: Berkshire closed down to near book value
« Reply #24 on: March 28, 2020, 01:29:24 PM »
So, theoretical question, but what exactly would folks here think if, when the next filings occur once this has passed, that WEB did NOTHING here but buyback stock at a similar clip to the previous quarters? By nothing I mean few new equity purchases, no major acquisition, not meaningful buybacks, and continued cash build?

LC

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Re: Berkshire closed down to near book value
« Reply #25 on: March 28, 2020, 01:53:30 PM »
Good question. Assuming I could get a decent price, I would probably trim shares. He’s had many opportunities to deploy capital: internally, repurchases, in private/takeover deals, and now in public markets. We can talk about the perils of activity just for activity’s sake, or how all of humanity’s problems stem from difficulty sitting in a room alone, but at some point you have to take risk to earn a reward.
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Okonomen

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Re: Berkshire closed down to near book value
« Reply #26 on: March 30, 2020, 07:19:15 AM »
So.. just doing some calculations. Seems like the BRK market pf has lost around 30 bn USD value as of late... So my dynamic BV still gets me to around 1,2x bv at 180/share. Any thoughts? However, BRK has lost close to 100 bn USD in market value. Some of it seems fair given that 2020 and maybe 2021 will significantly impact the earning power at subs

Dynamic

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Re: Berkshire closed down to near book value
« Reply #27 on: March 30, 2020, 07:25:37 AM »
I think there will be opportunities and a lot of money will be invested well by Berkshire during the current crisis at decent returns, but it will not necessarily be the case that large purchases will have been made by the close of play tomorrow, which is the end of 2020Q1 that will be reported at the start of May, with the 13F-HR filings to follow on 15th May, 45 days after quarter end.

The crisis has only brought about attractive prices for around 2-5 weeks out of the 13 weeks or so in Q1 (depending where you draw the line), so that's not enough time for truly enormous activity to show up in their next report. In fact, strategically for a company as closely followed as Berkshire, the ability to avoid disclosing their purchases until 14th August instead of 15th May could be a sufficient advantage to hold off buying a potentially large new position until after Tuesday 31st March given that this market is likely to remain depressed for at least a month or two more and they will probably have an easier time picking up more shares at low prices between 1st April and 14th August if they don't buy any in the week or two leading up to 31st March.

Volumes in most stocks have been high enough during the crisis so far to allow quite substantial stock purchases without moving the market, so Berkshire could well be able to spend substantial sums buying stock from those running for the hills, but only in positions where they aren't required to report it immediately (i.e. those below 10%). They bought a little Delta Airlines until they exceeded 10% ownership then stopped and previously hit 10% in Bank of New York Mellon thanks to buybacks without new purchases and there's little else we've seen disclosed recently.

I'd agree that buybacks of BRK.A and BRK.B probably aren't as enticing as certain other stocks out there. And some stocks even though they're down a lot, aren't exactly at greatly enticing prices, Apple being an example. I can't guess the margin of safety Berkshire would want, but I wouldn't be surprised if they'd like a price in the region of $150-$220 per share for AAPL given that they can't easily go over 10% ownership without onerous reporting requirements, and only briefly Apple dipped close to the top of that range.

Certain stocks are already over 10% and that rules out for example quite a few of the banks where Berkshire is already a large owner, despite their beaten down prices being very attractive.

It seems that Wells Fargo was starting to be offloaded in 2019Q4 at a rate far higher than is necessary to stay below 10%. More likely than not, I would guess that the selling may have continued during January and until February 14th (13F-HR filing) or 24th (crash began). The large price drop after the rate cuts and the position size being well below 10% might actually be sufficient to reverse Berkshire's presumed selling activity, as there aren't many good banks that Berkshire can buy right now without going over 10%, but any such reversal would be hard to tease out of the reports from Q1, as it would be almost indistinguishable from just selling fewer shares (aside from cost basis and realized gains figures).

If there's a major deal in the offing at present with a 50%+ chance of spending many tens of billions or even $100bn+ on an elephant acquisition I could see other rational reasons for Berkshire to have extremely limited buying and buyback activity during Q1.

rb

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Re: Berkshire closed down to near book value
« Reply #28 on: March 30, 2020, 09:25:14 AM »
I'll go ahead and say that he probably didn't do much. The S&P didn't get very cheap. He wasn't doing much buying when the S&P was around these levels previously. I don't think he's shooting his wad at 2600. When he was previously buying around these levels he was buying banks. But was pretty much loaded on those this time around.

What I think we'll see at most, a reversal in the WFC position (lucky break?), possibly some bigger buyback. I think the biggest surprise would probably be a large purchase of PSX.

As for me. I'll probably do nothing. Why would I sell at this price? It's not a good price and I have a massive tax liability on this position.

John Hjorth

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Re: Berkshire closed down to near book value
« Reply #29 on: April 03, 2020, 04:18:01 PM »
So, theoretical question, but what exactly would folks here think if, when the next filings occur once this has passed, that WEB did NOTHING here but buyback stock at a similar clip to the previous quarters? By nothing I mean few new equity purchases, no major acquisition, not meaningful buybacks, and continued cash build?

The question by you certainly qualify, Greg,

Observing [later] what you hypothetically stated, would not cause any reaction from me. Mr. Buffett has earlier stated, that the first priority [with regard to capital allocation] is the needs for capital of the subs already owned [wholly]. We have both read posts here on CoBF about the "Big Four" [also the Berkshire "Black Box" : Precision Castparts Corp., Lubrizol, IMC, Marmon Holdings] and their prospects, which aren't exactly spring green on overall basis.
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