CanadianMunger

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Berkshire, Constellation Software & Alphabet

Disagree with all of this. Nothing further to add. -CM

“The plan to create a publicly listed operating group made up of Topicus and TSS was a key part of our discussions with the Topicus founders. They didn’t want their legacy disappearing into the craw of an omnivorous conglomerate. While they knew that Topicus would have autonomy within Constellation, they also wanted identity. The public listing is expected to afford our Netherlands-based businesses a platform from which to celebrate their culture and achievements.” Why shouldn't Berkshire follow Constellation Software's lead by partially spinning off stakes in their major businesses? I re-read the 2019 annual this week (nearly all of it) in preparation for the release this weekend of the 2020 report. Nearly all of their non-insurance businesses with the exception of BHE have been pretty stagnant for a long time. What is their motivation to improve? A pat on the back from Buffett and Abel? What happens post WEB? At least when you have a public quotation their is some real feedback on how you are performing (or perceived to be performing), rather than being buried in some huge conglomerate. Look at PCC, their last major acquisition - it was a poor performer pre-covid and looks to be a train wreck. If it was publicly quoted, there would be some real time feedback on how they are performing. Conversely if a portion of GEICO was public over the past few decades it would have reinforced how well they have done. Humans respond to information (market quotes). Berkshire could still own a majority stake and of course consolidate results. I'm surprised that with all their expertise on incentives and psychology that WEB & CM have not tried this. I suppose on one level it would be an admission that the conglomerate structure is not always optimal. Mark Leonard has spoken on identity being lost the more an organization grows. "I'm an old dog, but I'm certain that they have new tricks to teach me" - Mark Leonard Will Berkshire eventually learn some new tricks? -CM

They structured this so the dividend is ~zero and cost basis is ~$0. At least for Canadians. My broker is showing my cost basis as $0.0002 per share. My wife's broker is showing $0.01 for all her shares. So I think it is safe to use $0 as your cost basis. Explanation: TOI gave CSU preferred shares that exactly match the FMV of the spin-out. So the net value of the spin-out is $0. How these shares worth $0 are now trading at $60, I don't know. NOTE: Not tax advice. This is how I interpreted the prospectus and matches what I am seeing at the broker. But I don't understand it. Most spin-offs I've owned have been tax-free, but usually the company posts a FAQ detailing (their interpretation) of the taxable dividend and cost basis. I am not seeing that for TOI. Thanks very much KCLarkin! Some magical accounting at work here haha. Hopefully there is something official on the CSU website soon.. but its about as fancy as Berkshire's! Cheers, CM

I've never had a company I've owned before do a spinoff, looking for a little help here please. The Spin-Out Shares will constitute a dividend for Canadian federal income tax purposes equal to the fair market value at the time of the Spin-Out of the Spin-Out Shares so distributed. The above is from the final prospectus. Speaking as a taxable CDN investor: 1) What is the total $ value of dividend received per TOI share? 2) What is my cost basis for TOI? Appreciate any insights, -CM

What are the tax implications for Canadian holders in non-registered accounts?

Baskin wealth had some intelligent thoughts on the subject: https://baskinwealth.com/blog/fun-with-numbers-should-you-realize-capital-gains-and-pay-taxes-early/

Looks like the washed up old dog still has a few tricks up his sleeve ;)

The following is from Buffett's 2015 special letter "Berkshire - Past, Present & Future": "Purchases of Berkshire that investors make at a price modestly above the level at which the company would repurchase its shares, however, should produce gains within a reasonable period of time. Berkshire’s directors will only authorize repurchases at a price they believe to be well below intrinsic value. (In our view, that is an essential criterion for repurchases that is often ignored by other managements.) For those investors who plan to sell within a year or two after their purchase, I can offer no assurances, whatever the entry price. Movements of the general stock market during such abbreviated periods will likely be far more important in determining your results than the concomitant change in the intrinsic value of your Berkshire shares. As Ben Graham said many decades ago: “In the short-term the market is a voting machine; in the long-run it acts as a weighing machine.” Occasionally, the voting decisions of investors – amateurs and professionals alike – border on lunacy." Given Buffett's modesty, are we to infer that purchases made around these levels (~1.2 book) will outperform the S&P?

All three look pretty cheap, as discussed in the various threads. Currently Berkshire.B trades at $202.33US, Brookfield $39.59CAD, and Fairfax at $350.24CAD. Who performs the best over the next decade?

snowball - apologies, can you clarify what you mean here?

Thanks for posting. fyi this took place on January 29, 2020.

I took a look at this one a while ago (LMB). Did not pull the trigger b/c: a) CEO seemed overly promotional b) I'm unsure how deep we are in the construction cycle - management has been trying to increase service revenues, however the business is to a large degree cyclical -CM

gfp, I thought the same. I'm speculating that this speaks to WEB's discipline in not accepting a return below whatever his hurdle rate is, even with 100B in his wallet ;) -CM