Author Topic: Buffett/Berkshire - general news  (Read 524217 times)

ValueMaven

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Re: Buffett/Berkshire - general news
« Reply #720 on: March 24, 2018, 02:16:12 PM »
BTW: I actually bought a little more of the B's right near the close on Friday.  In the low $190s, you are basically paying 1.35x BV....not a bad L.T investment at all IMHO


boilermaker75

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Re: Buffett/Berkshire - general news
« Reply #721 on: March 24, 2018, 03:18:08 PM »
BTW: I actually bought a little more of the B's right near the close on Friday.  In the low $190s, you are basically paying 1.35x BV....not a bad L.T investment at all IMHO

I've written some more 190-strike puts.

ValueMaven

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Re: Buffett/Berkshire - general news
« Reply #722 on: March 25, 2018, 06:47:48 AM »
Yea, that is WAY to risky of a trade for me...I dont care what premiums you are getting upfront.  I havent written puts on BRK in the low $100s awhile ago, but I feel like where we are in the market - you really have no idea what is going to happen.  I think if a big vol induced sell-off occurs, that writing both near-dated, and long-dated puts near 1.1x - 1.x2 BV makes a ton of sense.  Back in Jan of 17 one can sell the January 2019 BRK.B Put at $137.5 strike, and collect a premium of $2.20 (bid price).  So, unless you see BRK.B falling ~37% in the next two years, and are happy to own Berkshire at much lower prices…this could be an interesting way to add synthetically to an already established long position.  Of course if the stock rallies, you collect the premium and nothing more...that trade was obviously a home-run. 

Sincerely,
VM

gfp

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Re: Buffett/Berkshire - general news
« Reply #723 on: March 25, 2018, 08:28:45 AM »
For boilermakers trades, it's much better to sell puts with duration of 2 months or less, over and over again.  It's not riskier than buying shares, assuming you are interested in buying additional shares and size the trade appropriately.  If you get put to, you are happy to own the underlying and if you own a bit more than you intended, you start a covered call selling regimen against the excess shares.

If he's the one that got $1.85 for a 3/29 expiry 190 BRK.B put, he's buying BRK.B shares at $188.15 next week - worst case scenario.  It's only risky if you don't want to buy BRK.B shares for $188.15 in a few days time.

Selling LEAPS puts two years out on a single company ties up a lot of capital for a long time for a comparatively small upfront premium.  Not a great trade.

Yea, that is WAY to risky of a trade for me...I dont care what premiums you are getting upfront.  I havent written puts on BRK in the low $100s awhile ago, but I feel like where we are in the market - you really have no idea what is going to happen.  I think if a big vol induced sell-off occurs, that writing both near-dated, and long-dated puts near 1.1x - 1.x2 BV makes a ton of sense.  Back in Jan of 17 one can sell the January 2019 BRK.B Put at $137.5 strike, and collect a premium of $2.20 (bid price).  So, unless you see BRK.B falling ~37% in the next two years, and are happy to own Berkshire at much lower prices…this could be an interesting way to add synthetically to an already established long position.  Of course if the stock rallies, you collect the premium and nothing more...that trade was obviously a home-run. 

Sincerely,
VM
« Last Edit: March 25, 2018, 08:31:48 AM by globalfinancepartners »

sleepydragon

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Re: Buffett/Berkshire - general news
« Reply #724 on: March 25, 2018, 09:38:59 AM »
For boilermakers trades, it's much better to sell puts with duration of 2 months or less, over and over again.  It's not riskier than buying shares, assuming you are interested in buying additional shares and size the trade appropriately.  If you get put to, you are happy to own the underlying and if you own a bit more than you intended, you start a covered call selling regimen against the excess shares.

If he's the one that got $1.85 for a 3/29 expiry 190 BRK.B put, he's buying BRK.B shares at $188.15 next week - worst case scenario.  It's only risky if you don't want to buy BRK.B shares for $188.15 in a few days time.

Selling LEAPS puts two years out on a single company ties up a lot of capital for a long time for a comparatively small upfront premium.  Not a great trade.

Yea, that is WAY to risky of a trade for me...I dont care what premiums you are getting upfront.  I havent written puts on BRK in the low $100s awhile ago, but I feel like where we are in the market - you really have no idea what is going to happen.  I think if a big vol induced sell-off occurs, that writing both near-dated, and long-dated puts near 1.1x - 1.x2 BV makes a ton of sense.  Back in Jan of 17 one can sell the January 2019 BRK.B Put at $137.5 strike, and collect a premium of $2.20 (bid price).  So, unless you see BRK.B falling ~37% in the next two years, and are happy to own Berkshire at much lower prices…this could be an interesting way to add synthetically to an already established long position.  Of course if the stock rallies, you collect the premium and nothing more...that trade was obviously a home-run. 

Sincerely,
VM

It’s a good idea, but given u would have to pay short term capital gain taxes in theses trades (IRA doesn’t allow this), probably not worth it.

gfp

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Re: Buffett/Berkshire - general news
« Reply #725 on: March 25, 2018, 03:12:38 PM »
You can sell cash secured puts in an IRA at interactive brokers and others that offer that trading approval. You cannot borrow in an IRA, so you need the cash unencumbered in the account. Which is one reason shorter duration is better. Also the last month or two is when you get the most premium decay or whatever they call it

sleepydragon

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Re: Buffett/Berkshire - general news
« Reply #726 on: March 25, 2018, 03:19:19 PM »
You can sell cash secured puts in an IRA at interactive brokers and others that offer that trading approval. You cannot borrow in an IRA, so you need the cash unencumbered in the account. Which is one reason shorter duration is better. Also the last month or two is when you get the most premium decay or whatever they call it

I didn’t know this. Will ask my broker. Thanks!

boilermaker75

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Re: Buffett/Berkshire - general news
« Reply #727 on: March 26, 2018, 04:48:07 AM »
You can sell cash secured puts in an IRA at interactive brokers and others that offer that trading approval. You cannot borrow in an IRA, so you need the cash unencumbered in the account. Which is one reason shorter duration is better. Also the last month or two is when you get the most premium decay or whatever they call it

I suspect most, probably all, brokers would allow cash secured put trades in an IRA since it is an equivalent strategy to selling covered calls.

Although I have an IB account, my IRA is with Schwab and I do cash secured put trades in this IRA.

Dynamic

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Re: Buffett/Berkshire - general news
« Reply #728 on: March 26, 2018, 04:48:51 AM »
Berkshire Hathaway Says Knauf Made Offer for USG at $42 a Share

Quote
Berkshire Hathaway Inc. said Knauf entities earlier this month made a non-binding offer for USG Corp. at $42 a share, and the two held discussions on the proposed transaction.

Berkshire has so far not agreed to support any plan or proposal by Knauf, and there are no agreements between the two parties, according to a filing on Monday. Knauf has not responded to Berkshire’s proposed options on the purchase.

That represents a 25.3% premium to Friday's closing price in a down market. Berkshire's stake at $42 per share would be valued at $1,822,295,160 (versus $1,453,931,209.80 at Friday's closing price).

Berkshire just filed a 13D/A (hat tip to rocketfinancial.com) which seemingly reiterates that it controls 43,387,980 shares of USG common stock (30.8% of class).

This number of shares exactly matches what I got from combining the BRK and New England Asset Management 13-Fs dated 31 Dec 2017 in my BRK Look Through Google Sheet, so does not represent a change. NICO seems to control the BRK 13-F portion of 39,002,016 shares (and parts of it are held via their subsidiaries), while GenRe controls the remaining NEAM portion of 4,385,964 shares. Warren Buffett is deemed to control the whole holding as he has control over NICO and GenRe.

This made me look up USG on Google Finance/News, and I found the above Bloomberg article, which presumably explains the 13D/A filing.

The juicy part was in the SEC 13D/A filing Notes which include:
Quote
Item 4 is hereby amended to add the following:

From time to time, beginning many years ago, executives of Gebr. Knauf Verwaltungsgesellschaft KG (“Gebr. Knauf”) and/or C & G Verwaltungs GmbH (“C & G Verwaltungs” and, together with Gebr. Knauf, the “Knauf Entities”) have contacted Berkshire’s Chief Executive Officer (“CEO”) to describe the Knauf Entities’ potential and conditional interest in a transaction with USG. Most recently, the Knauf Entities furnished Berkshire a copy of a letter from Gebr. Knauf to USG dated March 15, 2018 in which Gebr. Knauf submitted an indicative and non-binding proposal for the acquisition of 100% of the outstanding shares of Common Stock of USG at $42.00 per share.

On March 23, 2018 Berkshire’s CEO and another Berkshire executive held a telephonic discussion with two executives of the Knauf Entities and three representatives of one of the advisors of the Knauf Entities, during which Berkshire proposed to grant to the Knauf Entities an option to purchase all of the Berkshire Entities’ shares of Common Stock of USG, subject to legal review. Such option would be exercisable only in connection with the consummation of a purchase by the Knauf Entities of all of the outstanding shares of Common Stock of USG that the Knauf Entities did not already own, at a price of not less than $42.00 per share, subject to and in accordance with applicable law and contractual restrictions. The option exercise price per share was proposed by Berkshire to be the price per share paid to such other holders of Common Stock of USG by the Knauf Entities, less the option purchase price of $2.00 per share to be paid to the Berkshire Entities upon entering into a definitive option agreement. The option would have a term of approximately 6 months.

The Knauf Entities have not responded to this proposal, and the Reporting Persons do not know whether the Knauf Entities will pursue further discussion with Berkshire of the proposed option or will make an offer to purchase shares of Common Stock of USG. Berkshire has not agreed to support any plan or proposal by the Knauf Entities with respect to the Common Stock of USG, and there are no agreements, written or otherwise, between the Reporting Persons and the Knauf Entities.

Depending upon price, market conditions, availability of funds, evaluation of other investment opportunities, and other factors, the Reporting Persons may at any time and from time to time sell or otherwise dispose of some or all of the shares of Common Stock of USG held by them, either as contemplated by the Registration Rights Agreement or in another manner permitted by applicable law.

Item 5 is hereby amended as follows:

The percentages of outstanding shares reported in this Amendment No. 9 are based on the number of shares of Common Stock disclosed as outstanding on USG’s Form 10-K filed with the Commission on February 14, 2018.

boilermaker75

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Re: Buffett/Berkshire - general news
« Reply #729 on: March 26, 2018, 04:49:56 AM »
For boilermakers trades, it's much better to sell puts with duration of 2 months or less, over and over again.  It's not riskier than buying shares, assuming you are interested in buying additional shares and size the trade appropriately.  If you get put to, you are happy to own the underlying and if you own a bit more than you intended, you start a covered call selling regimen against the excess shares.

If he's the one that got $1.85 for a 3/29 expiry 190 BRK.B put, he's buying BRK.B shares at $188.15 next week - worst case scenario.  It's only risky if you don't want to buy BRK.B shares for $188.15 in a few days time.

Selling LEAPS puts two years out on a single company ties up a lot of capital for a long time for a comparatively small upfront premium.  Not a great trade.

Yea, that is WAY to risky of a trade for me...I dont care what premiums you are getting upfront.  I havent written puts on BRK in the low $100s awhile ago, but I feel like where we are in the market - you really have no idea what is going to happen.  I think if a big vol induced sell-off occurs, that writing both near-dated, and long-dated puts near 1.1x - 1.x2 BV makes a ton of sense.  Back in Jan of 17 one can sell the January 2019 BRK.B Put at $137.5 strike, and collect a premium of $2.20 (bid price).  So, unless you see BRK.B falling ~37% in the next two years, and are happy to own Berkshire at much lower prices…this could be an interesting way to add synthetically to an already established long position.  Of course if the stock rallies, you collect the premium and nothing more...that trade was obviously a home-run. 

Sincerely,
VM

It’s a good idea, but given u would have to pay short term capital gain taxes in theses trades (IRA doesn’t allow this), probably not worth it.


I will happily pay taxes if I am getting a 1% gain on such a short time frame.

If I am put to I pay no taxes till I sell the position because the put premium comes off the basis.