I am quoted in this CNBC article on Warren Buffett’s 87th birthday.
Warren Buffett was interviewed on Fox Business and asked about Berkshire Hathaway’s current cash position of about $100 billion. He responded:
(1) “There will be periods when stocks go down a lot and we will be buying.”
(2) He also mentioned that there are one million shareholders of Berkshire Hathaway.
(3) Warren Buffett also predicted that there would likely be a tax cut in 2017.
Warren Buffett was interviewed on CNBC today. He discussed several specific Berkshire Hathaway investments:
(1) Apple: Berkshire owns 2 1/2% of Apple’s shares. Initially one of Buffett’s portfolio managers (Todd Combs or Ted Weschler) bought 10 million shares of Apple (during the first quarter of 2016). Warren Buffett subsequently purchased many more shares (during the first quarter of 2017). During the second quarter of 2017, Combs or Weschler sold 2/3 of his stake in Apple to free up funds for other investments. (They each manage $11 billion). At the same time, Buffett bought more shares of Apple than Combs or Weschler sold.
(2) IBM: Buffett has more confidence in Apple than in IBM.
(3) Bank of America: Berkshire just converted its warrants into 700 million shares of Bank of America common stock and plans to hold those shares for a long time.
(4) Wells Fargo: This is still a good long-term investment. Its problems will be corrected.
(5) Kraft Heinz: Retailers such as Amazon/Whole Foods are becoming stronger relative to the food companies. Specific brands will succeed through advertising (such as Berkshire owned Duracell batteries). Kraft Heinz will not be acquiring Mondelez nor Unilever. Berkshire/3G Capital will not engage in hostile takeovers. It is hard to fight retailers with mergers. What matters is the strength of individual brands.
Today is Warren Buffett’s 87th birthday. Happy Birthday, Mr. Buffett!
This blog was launched 7 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 at 11:00 a.m. EST today.)
Berkshire Hathaway exercised its Bank of America warrants to purchase 700 million shares at $7.14 per share. These shares have a current market value of about $16.5 billion. Berkshire’s initial cost in August 2011 was $5 billion (6% preferred stock plus warrants to purchase 700 million shares at $7.14). Berkshire’s $5 billion investment has resulted in a profit of about $13 billion ($11.5 billion capital gains in Bank of America common stock, plus $1.8 billion in Bank of America preferred stock dividends). Its return of 28% per annum includes its compounded annual rate of return of 22% on Bank of America common stock plus its 6% annual dividend on Bank of America preferred stock.
I an quoted in the Washington Post on Uber’s new CEO Dara Khosrowshahi.
2. He’s (relatively) young and experienced
At 48, Khosrowshahi isn’t as young as the hoodie-wearing Mark Zuckerberg, who created Facebook when he was 19. But he’s still young as far as U.S. CEOs go. “He has substantial CEO experience at a relatively young age,” said David Kass, a professor of finance at the University of Maryland. “Youth and experience are very important qualities in Silicon Valley.”
As Uber continues to reshape how people get around cities, that youthful vitality will come in handy to improve its services, which are frequently used by customers in their 20s and 30s, Kass said.
5. He’s no Travis Kalanick. But he’s still another male CEO.
Unlike Kalanick, the former chief executive who was seen as brash and armed with a short fuse, Khosrowshahi’s demeanor is viewed as “even keeled and low-key,” Kass said. “He is not as volatile or unpredictable as the previous CEO.”
“It’s a large cost certainly to Berkshire, in the time and effort put in which is not resulting in any return,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business and a Berkshire shareholder. “But [Mr. Buffett’s] main concern would have been his expected rate of return over time from his $9 billion price, and he wasn’t willing, of course, to go any higher from that.”
I am quoted in the Washington Post: “Can GE’s Former Chief Executive Turn Uber Around?”
At GE, Immelt oversaw a vast overhaul of the conglomerate’s portfolio. And as a highly regarded executive of a Fortune 500 company, he could bring a calming influence to a company in crisis. “He may be perceived as someone with broad managerial experience to turn Uber around,” said David Kass, a professor of finance at the University of Maryland.
Immelt could also prove to be an enormous asset as the company considers going public. To investors on Wall Street, skeptical of a company often tied with mismanagement and misbehavior, Immelt is a household name. His lengthy stint at GE might translate into a clearer strategy for Uber and a newly expanded executive team primed for an IPO. “His presence would convey a quality image and help improve its perception by the investment community when they go to the public markets in an IPO,” Kass said.
I am quoted in the Washington Post on Amazon (Nasdaq:AMZN) borrowing $16 billion to finance the purchase of Whole Foods (Nasdaq:WFM).
“Amazon doesn’t want to issue stock to make the purchase because that would introduce dilution,” said David Kass, finance professor at the University of Maryland. Besides, Kass added, “now is a sweet spot for debt. Interest rates are likely to rise.”
In its SEC Form 13-F filing after the market closed today, Berkshire Hathaway reported several large changes to its portfolio during the quarter ending June 30, 2017 that had not previously been disclosed.
Its largest additions were:
(1) $500 million initial investment in Synchrony Financial (credit card company that was spun off from General Electric in 2015) (NYSE:SYF).
(2) $500 million additional investment in Bank of New York Mellon (NYSE:BK).
(3) $500 million additional investment in Liberty Media SiriusXM (Nasdaq:LSXMA) (Nasdaq:LSXMK).
(4) $350 million additional investment in General Motors (NYSE:GM).
The largest reductions were:
(1) $300 million sale of its entire position in General Electric (NYSE:GE).
(2) $300 million sale of almost its entire position in Wabco (NYSE:WBC).
I am quoted in a Bloomberg article on these portfolio changes:
“The outlook for GE has certainly soured,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, citing the recent departure of Jeff Immelt as chief executive officer. “The CEO essentially was forced to resign.”
Kass said Berkshire’s decision to sell GE and buy Synchrony in the same period was probably a coincidence. Buffett oversaw the GE holding, and one of his deputies — Todd Combs or Ted Weschler — was likely responsible for the new investment, given its smaller size in the Berkshire portfolio, Kass said. The filing doesn’t say which money manager is responsible for each pick.