Dec 182014
 

After outperforming the S&P 500 and Warren Buffett in both 2012 and 2013, Todd Combs and Ted Weschler may have underperformed  the S&P 500 in 2014.

Combs and Weschler are each managing about $7.5 billion of the $120 billion equity portfolio of Berkshire Hathaway (BRK.A) (BRK.B).  Their largest investments, DirecTV (DTV) and DaVita (DVA), performed very well, with each outperforming the S&P 500 by about 10 percentage points.  DTV (Combs and Weschler) and DVA  (Weschler) are each currently valued at more than $2.5 billion.

However, their investments in General Motors ($1.3 billion) (Weschler) is down 20% this year, and Chicago Bridge & Iron ($500 million) (Combs) has lost about 50% of its value.  By contrast, the S&P 500 has risen over 10% in 2014.  Other declines in the Combs and Weschler portfolios include National Oilwell Varco (NOV), Suncor Energy (SU), Viacom (VIAB), and Liberty Media (LMCA).  However, the following Combs/Weschler investments rose in 2014: Charter Communications (CHTR), Liberty Global (LBTYA), Mastercard (MA), Visa (V), Precision Castparts (PCP), and Wabco (WBC).

Calculating the returns to the Combs and Weschler portfolios from outside the company is a combination of art and science since Berkshire does not reveal who is responsible for each pick in its Form 13F filings to the U.S. Securities and Exchange Commission. Nor does it list when shares were acquired or when they were sold and at what prices. 

With respect to Warren Buffett’s performance in 2014, his largest equity investment, Wells Fargo (WFC), rose about 25% in 2014 and is currently valued at about $27 billion.  His next three largest investments are Coca-Cola (KO) ($17 billion) (+5%), American Express ($14 billion) (+8%), and IBM (IBM) ($11 billion) (- 13%).

I am quoted in a Bloomberg article on this topic:

“It appears, on first glance, that Todd and Ted have underperformed the S&P 500 this year,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business who has studied Berkshire’s portfolio.

The entire article is available at:

http://www.bloomberg.com/news/2014-12-18/buffett-s-backup-stock-pickers-stumble-as-gm-declines.html?cmpid=yhoo

 

 Posted by at 11:07 pm

Berkshire Hathaway Owns 4.18% of Restaurant Brands International and Controls 14.37% of its Voting Shares

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Dec 142014
 

In a Berkshire Hathaway (BRK.A, BRK.B) news release dated December 12, 2014, “Berkshire Hathaway Completes Investment in Restaurant Brands International Inc.”, Berkshire revealed that it currently owns 4.18% of the common shares of Restaurant Brands International (QSR), and it controls 14.37% of the total number of votes attached to all outstanding voting shares of the Corporation.

Upon the closing of the Burger King (BKW) acquisition of Tim Horton’s (THI) on December 12, 2014, Berkshire purchased, for a total of $3 billion, a 9% perpetual voting preferred stock and exercised a warrant to purchase 8,438,225 common shares at the exercise price of $0.01 per share (at a cost of $84,382.25).  The exercise of this warrant represented 1.75% of the common shares of the merged firm.

This is discussed in a Bloomberg article on this topic:

http://www.bloomberg.com/news/2014-12-15/berkshire-to-hold-larger-stake-in-burger-king-tim-hortons-parent.html?cmpid=yhoo

 

 Posted by at 1:52 pm

Berkshire To Convert Burger King/Tim Horton’s Warrants on December 12

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Dec 102014
 

When Burger King’s (BKW)  acquisition of Tim Horton’s (THI) closes on December 12, Berkshire Hathaway (BRK.A, BRK.B) will purchase $3 billion of 9% preferred shares and receive a warrant to purchase 1.75% of the common shares of the combined company at an exercise price of $0.01 per common share.  Berkshire has informed Burger King that it intends to exercise the warrant promptly following the closing of the transaction.  Berkshire will then own 8.4 million shares with a current market value of about $275 million.

Although the preferred shares will result in Berkshire receiving annual dividends of $270 million, approximating the current value of its common shares of the merged company, Berkshire’s “penny” warrants are atypical compared to its financing in recent years of Goldman Sachs (GS), General Electric (GE), Dow Chemical (DOW), and Bank of America (BAC).  In each of the latter deals, Berkshire either waited several years (GS and GE) to convert its warrants or has not yet converted (DOW and BAC).  The conversion of Berkshire’s penny warrants requires a relatively small investment of only $84,000 for the 8.4 million shares of the merged company’s common shares.  The new company will be named Restaurant Brands International, have a ticker symbol of QSR, and trade on the New York Stock Exchange.

I am quoted in an Omaha World-Herald article (December 10) on this topic:

“The common shares will be highly marketable securities, but I don’t see Buffett selling them anytime soon,” said David Kass, a University of Maryland business professor and Berkshire shareholder. “Some people may say the shares are topped out, but next time Berkshire reports its holdings, I think we will see that Buffett does not think that.”

The entire article is available at:

http://www.omaha.com/money/burger-king-deal-to-bring-berkshire-quick-gain/article_10693b8a-d0c6-5d00-8277-89026a8570ec.html

 Posted by at 8:32 am

Berkshire Hathaway Insurance Entering Singapore

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Dec 092014
 

I am quoted in an Omaha World-Herald article on Berkshire Hathaway Insurance entering Singapore (December 9, 2014):

“It is one of the best economies in the world, certainly in Southeast Asia,” said David Kass, a business professor at the University of Maryland and a Berkshire shareholder. “It is a great financial and economic environment and it makes great sense to expand there.”

Insurance is the lifeblood of Berkshire, whose businesses run from boxed confections at See’s Candies to industrial chemicals at Lubrizol. Insurance businesses provided Buffett with $77 billion as of December 2013, money that had been paid in by customers as premiums but not yet paid out to settle claims. That money, called float in the insurance industry, can be used to invest in other ventures.

“It is the fuel for Warren Buffett’s investments,” Kass said.

The entire article is available at:

 

 Posted by at 7:51 am

Berkshire Hathaway to Own 1.75% of Burger King/Tim Horton’s on December 12

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Dec 052014
 

When Burger King’s (BKW)  acquisition of Tim Horton’s (THI) closes on December 12, Berkshire Hathaway (BRK.A, BRK.B) will purchase $3 billion of 9% preferred shares and receive a warrant to purchase 1.75% of the common shares of the combined company at an exercise price of $0.01 per common share.  Berkshire has informed Burger King that it intends to exercise the warrant promptly following the closing of the transaction.  Berkshire will then own 8.4 million shares with a current market value of about $300 million.

 

From the Burger King/Tim Horton’s prospectus:

“In connection with the transactions,
Berkshire Hathaway Inc. (“Berkshire”) will purchase for an aggregate purchase price of $3,000,000,000 (USD),
(a) Class A 9% cumulative compounding perpetual voting preferred shares of Holdings (the “preferred shares”) and
(b) a warrant to purchase Holdings common shares (the “warrant”), which shares issuable pursuant to the warrant
will represent 1.75% of the fully diluted common shares of Holdings as of the completion of the transactions, at an
exercise price per Holdings common share of $0.01. The warrant may be exercised until the fifth anniversary of the
closing of the transactions. Berkshire has informed Holdings that it intends to exercise the warrant promptly
following the closing of the transactions.”

 

http://www.omaha.com/money/berkshire-hathaway-gets-percent-interest-stock-in-burger-king-tim/article_410c071e-3db5-11e4-93f8-0017a43b2370.html

http://online.wsj.com/articles/burger-king-nears-closing-tim-hortons-acquisition-1417785495?

 Posted by at 11:43 pm

Berkshire Hathaway and Clean Energy

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Dec 012014
 
I am quoted in a Omaha World-Herald article (November 30, 2014) on Berkshire Hathaway and clean energy:

“Omaha’s Berkshire Hathaway appears set to gain from the energy changes. The company owns two major U.S. pipelines, including Omaha-based Northern Natural Gas, the nation’s largest. Berkshire’s MidAmerican Energy, based in Iowa, is the utility industry’s biggest generator of wind energy.

The company also has invested billions in solar projects, including one in California described as the largest solar farm in the world. It’s under construction, scheduled for completion next year.”

“Berkshire’s energy investments show a certain amount of foresight in reading the tea leaves,” said David Kass, a University of Maryland business professor who follows Berkshire and is a shareholder. “Seeing what direction the country is going with green technology has allowed Berkshire to get there faster than others.”
 
The entire article is available at:
 Posted by at 7:35 am