Feb 282016
 

On Saturday, February 27, Warren Buffett released his Letter to Shareholders.  Some of the highlights are:

(1) He praised 3G Capital for buying, building, and holding large businesses in contrast to private equity firms that sell the businesses they acquire.

(2) Berkshire’s “appetite for either operating businesses or passive investments doubles our chances of finding sensible uses for Berkshire’s endless gusher of cash.  Beyond that, having a huge portfolio of marketable securities gives us a stockpile of funds that can be tapped when an elephant-sized acquisition is offered to us”.

(3) “For 240 years it’s been a terrible mistake to bet against America…America’s kids will live far better than their parents did.”

(4) “Our definition of interest coverage is the ratio of earnings before interest and taxes to interest, not EBITDA/interest, a commonly used measure we view as seriously flawed.”

(5) With respect to GAAP treatment of stock-based compensation: “If compensation isn’t an expense, what is it? And, if real and recurring expenses don’t belong in the calculation of earnings, where in the world do they belong?”

(6) He provided a vigorous defense against charges of predatory lending at Clayton Homes.  Clayton Homes retains 100% of of its mortgages so its economic interest is aligned with those of its customers.  Clayton Homes is subject to oversight by several Federal agencies and its total fines over the past two years were only $38,200, with refunds to customers of $704,678.  “Furthermore, though we had to foreclose on 2.64% of our manufactured-homes mortgages last year, 95.4% of our borrowers were current on their payments at year-end, as they moved toward owning a debt-free home.”

(7) He provided a discussion of the importance of productivity growth on prosperity, citing examples from farming, railroads, and automobile insurance, and the important role played by 3G Capital.

 

I am quoted in two Omaha World-Herald articles on Buffett’s Letter to Shareholders:

David Kass, a business professor at the University of Maryland and a Berkshire Class B shareholder, said 3G and Berkshire have clearly different business models but share one trait: They buy and plan to hold long term, as opposed to private equity firms, which enact wholesale changes to wring out profits and then sell quickly at top dollar.

“Berkshire does things differently than 3G,” Kass said. “But Buffett is saying that he is proud to be their financing partner.”

http://www.omaha.com/money/buffett/buffett-prepare-yourself-for-the-painful-cost-cutting-across-corporate/article_d3e9512a-ac30-5a96-842f-332b961bde8e.html

“It was an extremely vigorous defense of Clayton Homes,” said David Kass, a business professor at the University of Maryland and owner of Class B shares.

Kass said Buffett took pains to point out that Clayton owns in perpetuity all of the mortgages it writes as opposed to selling them, as other lenders do, ostensibly meaning the company would do its best to keep borrowers from defaulting and getting repossessed.

http://www.omaha.com/money/buffett/buffett-touts-advantages-of-berkshire-s-growth-formula-buy-part/article_bc98daa7-0c18-5da3-9b74-5c3006de20ab.html

 Posted by at 3:46 pm

Berkshire Hathaway’s Investment in Kinder Morgan

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Feb 212016
 

I am quoted in an Omaha World-Herald article (February 21, 2016) on Berkshire Hathaway’s (NYSE: BRK.A) (NYSE: BRK.B) investment in Kinder Morgan (NYSE:KMI).

“Kinder Morgan fits Warren Buffett’s toll bridge model,” said David Kass, a business professor at the University of Maryland and owner of Class B Berkshire shares. “The concept of owning a toll is appealing because generally there is no alternative, which forces people to pay the toll. Or, if there is an alternative, it is less appealing.”

 Posted by at 10:03 am

The Berkshire Hathaway Effect: Market Response to Berkshire’s Major Portfolio Change

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Feb 172016
 

After the market closed on February 16, 2016, Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) reported its equity holdings of U.S. based companies in its SEC 13F filing for the quarter ending December 31, 2015.  This report revealed one major initial investment of about $400 million in oil and gas pipeline company Kinder Morgan (NYSE:KMI).  It is believed that this investment was made by Warren Buffett’s portfolio managers, Ted Weschler and/or Todd Combs.

So how did KMI perform on its first day of trading (February 17, 2016) after release of Berkshire’s 13F filing?

KMI rose by 10.0% ($17.18 + $1.56), substantially outperforming the market averages.  (The S&P 500 rose 1.7% and the Dow Jones Industrial Average rose 1.6%.)

Thus, the “Berkshire Hathaway Effect” of investors closely following Berkshire’s major transactions continues to be observed as it has in previous quarters and years.    

 
 Posted by at 11:46 pm
Feb 162016
 

Berkshire Hathaway (BRK.A, BRK.B) released its SEC 13F filing for the fourth quarter ending December 31, 2015 after the market closed today.  There were several major changes from the third quarter.

One new stake was established:

(1) $400 million in Kinder Morgan (KMI) (Ted Weschler or Todd Combs)

 

There was an increase in the following:

(1) $450 million in Deere (DE)  (Total Stake = $1.7 billion) (Warren Buffett or Ted Weschler or Todd Combs)

(2) $450 million in Wells Fargo (WFC) (Total Stake = $26.1 billion) (Warren Buffett)

 

There was a decrease in the following:

(1) $450 million in AT&T (T) (Total Stake = $1.6 billion) (Todd Combs or Ted Weschler)

 

There were also smaller increases in Axalta (AXTA) (Total Stake = $600 million) and Liberty Global (LBTYA) (Total Stake = $500 million), and a small decrease in Wabco (WBC) (Total Stake = $350 million).  A small position in Chicago Bridge & Iron (CBI) ($80 million) was eliminated.

 

 

 

 

 

 

 

 Posted by at 7:19 pm

Berkshire Hathaway Increases Stake in Phillips 66 by $1.1 Billion in 2016

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Feb 122016
 

In SEC Form 4 filings, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has disclosed that in January and early February 2016, it has added to its stake in Phillips 66 (NYSE: PSX) at prices between $72 and $80 per share.   This additional investment of approximately $1.1 billion ($634 million in early January and $446 million in late January and early February) has resulted in Berkshire owning 75.6 million shares of Phillips 66, or 14.3 percent of its outstanding shares.  Berkshire purchased shares in Phillips 66 in 9 of the first 10 trading days in February. Berkshire’s stake in Phillips 66, at its closing price of $75.20 on February 12, is valued at $5.7 billion and is its sixth largest stock holding.

Since it holds over 10 percent of the shares of Phillips 66, Berkshire is required to report changes to its position on SEC Form 4.  Berkshire first revealed owning over 10 percent of Phillips 66 stock in August, 2015.  This year’s purchases are the first Berkshire has made since September.  It is likely that this additional investment in Phillips 66 was made by Warren Buffett.

 Posted by at 8:50 pm

Berkshire Hathaway Increases Stake in Phillips 66 by $1 Billion in 2016

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Feb 092016
 

In SEC Form 4 filings, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has disclosed that in January and early February 2016, it has added to its stake in Phillips 66 (NYSE: PSX) at prices of $74 – $80 per share.   This additional investment of approximately $1.0 billion ($634 million in early January and $367 million in late January and early February) has resulted in Berkshire owning 74.5 million shares of Phillips 66, or 14.1 percent of its outstanding shares.  Berkshire’s stake in Phillips 66, at its closing price of $75.44 on February 9, is valued at $5.6 billion and is its sixth largest stock holding.

Since it holds over 10 percent of the shares of Phillips 66, Berkshire is required to report changes to its position on SEC Form 4.  Berkshire first revealed owning over 10 percent of Phillips 66 stock in August, 2015.  This year’s purchases are the first Berkshire has made since September.  It is likely that this additional investment in Phillips 66 was made by Warren Buffett’s portfolio managers, Todd Combs and/or Ted Weschler.

ValueWalk and Investing.com published this blog post.

 

 Posted by at 8:49 pm

Berkshire Hathaway Increases Stake in Phillips 66 by $964 Million in 2016

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Feb 032016
 

In SEC Form 4 filings, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has disclosed that on each of the first nine trading days of 2016, on each of the last three trading days of January, and on each of the first three trading days of February, it has added to its stake in Phillips 66 (NYSE: PSX) at prices of $75 – $80 per share.  Berkshire has accounted for an average of 25 percent of the volume of PSX shares on four of those days.  This additional investment of approximately $964 million ($634 million in early January and $330 million in late January and early February) has resulted in Berkshire owning 74.0 million shares of Phillips 66, or 14.0 percent of its outstanding shares.  Berkshire’s stake in Phillips 66, at its closing price of $79.10 on February 3, is valued at $5.9 billion and is its sixth largest stock holding.

Since it holds over 10 percent of the shares of Phillips 66, Berkshire is required to report changes to its position on SEC Form 4.  Berkshire first revealed owning over 10 percent of Phillips 66 stock in August, 2015.  This year’s purchases are the first Berkshire has made since September.  It is likely that this additional investment in Phillips 66 was made by Warren Buffett’s portfolio managers, Todd Combs and/or Ted Weschler.

Investing.com and ValueWalk have published this blog post.

 Posted by at 8:47 pm