Nov 142018
 

In an SEC 13F filing after the market closed today, Berkshire Hathaway revealed a net increase of $14 billion in its common stock portfolio during the third quarter of 2018.  This is the largest quarterly increase in its common stock investments in many years.

These increases, primarily in the banking sector, were:

(1) Bank of America (BAC)  —     + $6 billion

(2) JP Morgan Chase (JPM)  —  +  $4 billion

(3) Oracle Corp.  (ORCL)   —      +  $2.1 billion

(4) U.S. Bancorp (USB)  —-         +  $1.3 billion

(5) Goldman Sachs (GS) —          +  $1.1 billion

(6) PNC Financial  (PNC) —        +  $830 million

(7) Bank of New York (BK)  —     +  $700 million

(8) Travelers  —                              + $460 million

 

There was one large decrease:

(1) Phillips 66 (PSX)  —-              – $2 billion

 

 Posted by at 5:37 pm
Nov 032018
 

Berkshire Hathaway today released its Form 10-Q for the third quarter of 2018.

Five highlights during the third quarter were:

(1) Berkshire’s operating earnings increased by 100% as compared to the third quarter of 2017.

(2) Berkshire repurchased $928 million of its stock, indicating that both Warren Buffett and Charlie Munger conclude that Berkshire’s current price is below its intrinsic value.  Berkshire bought back its shares at an average price of $312,807 per A share and $207 per B share.

(3) Berkshire purchased approximately $13 billion in equities on a net basis, including approximately $15 billion in equities in “Banks, insurance, and finance”.  Berkshire held $103.6 billion cash as of September 30, down from $111 billion on June 30.

(4) Berkshire added approximately $6 billion, or about 30%, to its stake in Bank of America.

(5) Berkshire’s book value equaled $228,712 per Class A share as of September 30.  At Berkshire’s closing price of $308,411 on November 2, its price to book value ratio equaled 1.35, below its historical average of about 1.58.  This implies that Berkshire is now buying back its shares at prices below 140% of its book value, versus its previous standard of 120%.

 Posted by at 7:43 pm
Nov 022018
 
I am quoted in “Why GE’s Penny Dividend Signals a Sad Turn for Widow and Orphan Stocks”  that is likely to appear in the Business Section of the Washington Post on Sunday, November 4:
“Widow and orphan stocks were designated as such for their safety and income,” said David Kass, a finance professor at the University of Maryland. “In the past, they included utilities and regulated monopolies, such as AT&T, Con Edison, Exxon, Texaco, General Motors, Eastman Kodak and IBM.”  
 

That zaps Buffett’s Berkshire Hathaway. Even though the conglomerate has great finances, it does not pay a dividend. Buffett thinks he can increase the company’s stock price by investing the money instead of giving it to shareholders.

“Buffett likes to invest in companies that pay dividends,” Kass said. “His policy is not to pay dividends, but to own companies that do pay them.”

 Posted by at 2:24 pm
Oct 292018
 

I am quoted in The Wall Street Journal on Berkshire Hathaway investing in Fintech:

“Todd and Ted bring additional expertise to the table,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business and a Berkshire shareholder. “They’re broadening the perspective of Berkshire and broadening the opportunities where they would look to invest.”

 

 Posted by at 7:54 am
Oct 052018
 

I am quoted in a Washington Post article: “Larry Culp’s Long To-Do List To Fix GE“.

“Culp will need to decide whether to fix GE’s power division or scrap it. David Kass, a finance professor at the University of Maryland, thinks he should sell it because of its “substantial” underperformance.

“The remainder of GE can then be turned around,” Kass said. “GE should become a smaller company.”

Ten years ago (October 1, 2008), during the peak of the financial crisis, Warren Buffett announced that Berkshire Hathaway was investing $3 billion in an issue of General Electric preferred stock paying an annual dividend of 10%.  These shares were redeemed by General Electric in 2011 for $3.3 billion plus accrued dividends, resulting in a $1.2 billion profit for Berkshire.

 Posted by at 10:11 pm
Sep 152018
 

In this Jeff Bezos interview (1 hour and 9 minutes) the Amazon CEO quotes from Warren Buffett and explains why he bought the Washington Post which is now profitable and hiring additional staff by becoming a national and global newspaper via the Internet.  Amazon located in Seattle, Washington so they could draw from the talent at Microsoft.  They will announce the location of their second headquarters by the end of 2018.  Amazon Web Services initiated cloud computing and it took seven years before anyone else entered this market resulting in its very large market share.  Bezos was always an A+ student, was his high school’s valedictorian (class of 750 in Miami, Florida), and graduated summa cum laude from Princeton in 1982 where he majored in electrical engineering, physics, and computing.

Bezos is starting charities focusing on pre-school education in poor neighborhoods to minimize the probabilities of children being left behind, and is also donating $2 billion to fight homelessness.

Jeff Bezos owns 16 percent of Amazon which is approximately a $1 trillion company.  He is the richest person in the world, worth $160 billion and “has created $840 billion in wealth for everyone else”.  He gets eight hours of sleep every night, exercises regularly, and has his first meetings everyday with staff at 10:00 a.m.  He is too tired at 5:00 p.m. to make major decisions.  He “putters around” in the morning by reading newspapers and has breakfast with his children before they go to school.  He previously worked for D.E. Shaw (investment management firm) in New York City where he met his wife Mackenzie Bezos who also graduated summa cum laude from Princeton.

Even though he had an excellent job with D.E. Shaw, he wanted to start a business selling books on the Internet.  What people think about late in life are “errors of omission”, what people could have done but did not.  He did not want this to be one opportunity that he did not pursue.

Warren Buffett has previously described Jeff Bezos as the best business person he has ever met.

Jeff Bezos was interviewed by David Rubenstein, co-founder and co-chief executive officer of the Carlyle Group.

 

 Posted by at 7:35 am
Sep 032018
 

In a Berkshire Hathaway news release on July 17, 2018, Berkshire’s Board of Directors announced an amendment to its share repurchase program.  The earlier share repurchase program provided that the price paid for repurchases would not exceed a 20% premium over the then-current book value of such shares.  Under the amended plan, share repurchases can be made at any time that both Warren Buffett and Charlie Munger believe that the repurchase price is below Berkshire’s intrinsic value, “conservatively determined”.

“The current policy whereby share repurchases will not be made if they would reduce the value of Berkshire’s consolidated cash, cash equivalents and U.S. treasury Bills holdings below $20 billion will continue.  Berkshire will not initiate any share share repurchases under the amended program until it publicly releases its second quarter earnings, currently scheduled after the close of the markets on Friday, August 3, 2018.”

On August 30, during an interview on CNBC, Warren Buffett stated that “we’ve bought back a little” (shares of Berkshire Hathaway).  Therefore, these shares were purchased between Monday, August 6 and Thursday, August 30 (Buffett: “We’re buying stocks this morning.”)  Between August 6 and August 30, Berkshire Hathaway traded approximately between $310,000 and $315,000 per share (approximately a 45% premium to its June 30 book value of $217,677).  A purchase price in this range implies that Buffett and Munger probably estimate that Berkshire’s intrinsic value is at least a 55% premium to its book value, or at least $335,000 per share, allowing for a “margin of safety”.  On Friday, August 31, Berkshire closed at $315,800.

 

 Posted by at 8:12 pm
Aug 302018
 

Warren Buffett was interviewed on CNBC on August 30, 2018, his 88th birthday.

The 5 highlights were:

(1) Stocks are currently more attractive than fixed income or real estate.   Berkshire Hathaway is buying stocks every day including today.

(2) Buffett recently purchased additional shares of Apple.  The value of an iPhone to the user far exceeds its cost of $1,000.

(3) Berkshire has recently bought back some of its shares since they were priced below their intrinsic value.  (Note: This implies that Berkshire bought back its shares at about 1.4 times book value ($310,000).  Therefore, Buffett and Munger estimate Berkshire’s intrinsic value to be at least 1.5 times book value ($330,000 —“margin of safety”).  Berkshire closed at $315,800 on August 31.)

(4) Berkshire owns about 9 1/2% of each of the four major airlines and wishes to keep its stakes below 10% to avoid additional regulations.  Otherwise, they would like to own 20% of each airline.

(5) Packaged food companies are not as attractive as they used to be.  But they still earn high returns on tangible assets.

 

 Posted by at 9:38 pm
Aug 302018
 

Today is Warren Buffett’s 88th birthday.  Happy Birthday, Mr. Buffett!

This blog was launched 8 years ago today on the occasion of Warren Buffett’s 80th birthday.  I hope it has been helpful to all who have visited this site.

(Note: Warren Buffett will be interviewed on CNBC from 11:00 – 11:15 a.m. EST today.)

 

 Posted by at 7:22 am