Berkshire 13F

[Yours Truly]

Increases:

WFC - 4%

IBM - 0.01%

WMT - 4%

DTV - 10%

USB - 0.3%

DVA - 10%

NOV - 41%

VRSN - 122%

WBC - 0.11%

 

Reducuctions:

BK - 4%

MDLZ - 45%

KFT - 4%

 

New positions:

CBI - 0.48% of portfolio

STRZA - 0.15% of portfolio

[Palantir]

Somebody really likes NOV.....time to dig.

[LC]

my thoughts as well...though i'm not sure it's one of warren's.

 

[boilermaker75]

From my one minute of due diligence I do not understand CBI, but STARZ looks interesting.

[AchilliesValue]

From my one minute of due diligence I do not understand CBI, but STARZ looks interesting.

 

Meryl Witmer who was recently named to the Board of Directors recommended it at the most recent Barron's Roundtable.

 

CB&I, or Chicago Bridge & Iron [CBI], trades around $47. It is an engineering and construction company that builds some of the largest energy and petrochemical-infrastructure projects globally. It also licenses process technology in the petrochemical, gas-processing, and refining fields. There will be significant infrastructure and manufacturing capacity built to take advantage of oil and gas shale production in the U.S. and natural-gas finds elsewhere. CB&I and Shaw Group [sHAW], which it plans to acquire, could be huge beneficiaries. After the deal is completed, there will be 110 million shares outstanding and $1.2 billion of net debt.

 

The crown jewel of CB&I is its Lummus Technology division, which licenses proprietary technology and garners an annuity-type stream of earnings. Lummus licenses the most widely used ethylene technology, and has about a 40% market share. It also licenses technology for other petrochemicals. CB&I's ability to provide both engineering and construction expertise and process technology is a competitive advantage.

 

Who are some of its customers?

 

Witmer: Westlake Chemical [WLK] and Williams Partners [WPZ] have announced plans to expand, and both have chosen Lummus. Dow Chemical [DOW], ConocoPhillips [COP], and ExxonMobil [XOM] are all planning major greenfield expansions later in the decade. Lummus is enjoying terrific growth. CB&I has guided analysts to expect operating income from Lummus of $225 million in 2013, up from $120 million last year and $96 million in 2011. This division alone may be worth $2.5 billion, or about half the equity capitalization of the entire company. In addition to petrochemical expansions, LNG [liquefied natural gas] export terminals and large-scale natural-gas processing plants are fertile ground for CB&I. The company is working on major LNG projects in Australia and western Africa.

 

With the tremendous amount of business coming up for bid, contract terms are improving across the industry. A dearth of fixed-price bids and an increase in less risky cost-plus contracts is a great development for companies such as CB&I, Bechtel, and Fluor [FLR]. To determine a run rate of near-term earnings potential, we calculated the pro-forma trailing 12-month earnings of CB&I and Shaw combined, and added some savings from synergies and the increase in Lummus earnings. That leads to $4.60 a share in after-tax free cash flow, supporting a price for CB&I at least 25% higher than the current one. If the stock were to trade at 13 times our earnings estimate, it would be about $60 a share. If you add CB&I's earnings projections, and Shaw's, all listed in the merger proxy filing, you get $8 a share of forecast earnings in 2016. We see the stock trading at about $100 at the end of 2015.

 

Hickey: How big a piece of CB&I will Shaw be? Shaw is struggling with two major nuclear power plants, which are experiencing delays.

 

Witmer: Shaw has an issue in Georgia. If it lost on every issue involving that plant, we estimate it would have a negative effect of $3 a share, versus what it would otherwise earn on the project. But it has a cost-sharing arrangement with Westinghouse on that plant, so things look OK. Shaw has already disclosed some information on its liability. Shaw is well regarded as a servicer of nuclear-power plants, and has a 40% market share, which has grown dramatically. Also, there is a labor shortage among sophisticated engineers.

[educatedidiot]

Berkshire's Q3 13-F is out: http://www.rocketfinancial.com/Holdings.aspx?id=1058&fC=1

 

We already knew they exercised those BAC warrants.  I thought it was interesting that it was the 3rd consecutive quarter with over 10 million shares of IBM sold.  Looks like they're completely liquidating the position -- it just takes time, even for a stock as liquid as IBM!

[Jurgis]

It's interesting to see very little activity from T&T. They are usually more active.

[educatedidiot]

Jurgis,

 

I was thinking the same thing.  I think it's a sign of the times.  The market is frothy, and under Berkshire T&T have the luxury of being able to sit on their hands.

[John Hjorth]

Jurgis & educatedidiot,

 

yes, agreed - very striking.

 

- - - o 0 o - - -

 

Personally, I'm a bit puzzled about the share count for the BAC position. 700 hundred million BAC shares aquired in the warrant swap, in the 13/F 21 million shares less reported. What's the explanation for this?

[rolling]

Berkshire's Q3 13-F is out: http://www.rocketfinancial.com/Holdings.aspx?id=1058&fC=1

 

We already knew they exercised those BAC warrants.  I thought it was interesting that it was the 3rd consecutive quarter with over 10 million shares of IBM sold.  Looks like they're completely liquidating the position -- it just takes time, even for a stock as liquid as IBM!

There might be some tax loss harvesting in IBM. Buffett said it would be stupid to sell now if they could pay less taxes later. The inverse works with the latest blocks of IBM, which are now certainly at a loss. However, it takes time to sell, especially since they are likely to be selling only when it comes closer to 160 and to stop when it is cheaper...

 

In addittion, they essentially switched IBM into Apple, thus maintaining their tech position (even if buffett considers Apple a consumer products business)

[educatedidiot]

Personally, I'm a bit puzzled about the share count for the BAC position. 700 hundred million BAC shares aquired in the warrant swap, in the 13/F 21 million shares less reported. What's the explanation for this?

 

I was going to comment on this too.  It looks like they sold 21 million shares after the exercise.  It will be interesting to see if they continued selling in Q4 when that comes out three months from now.

[gfp]

They didn't sell any BAC shares.  For some reason 21 million shares held at General Reinsurance don't show up on Berkshire's filing. 

 

https://www.sec.gov/Archives/edgar/data/70858/000119312517280738/d411721dsc13ga.htm

 

 

They show up under "New England Asset Management" ->

https://www.sec.gov/Archives/edgar/data/1004244/000108514617002458/0001085146-17-002458-index.htm

 

 

Other Berkshire holdings in that filing (which are in addition to the reporting holdings on sites like dataroma) are -

 

4.217 million shares of Apple

21 million shares of BAC

227,750 shares of Diageo

431,063 shares of GS

4.386 million shares of USG

2.954 million shares of Verisk

24.3 million shares of Wells Fargo

[John Hjorth]

It's interesting to see very little activity from T&T. They are usually more active.

 

Somehow it appears to me to be appalling. Somewhere, deep down in the accounts, in 2nd quarter 2017 report for Berkshire is "drowned": The expenses for two comfortable sofas [most likely bought at NFM], two alarm clocks [to buzz at start of lunch time, and when to go home from work], two good & warm sleep carpets, and two nice pillows.

 

Not sure Mr. Buffett got the agreements with Mr. Combs and Mr. Weschler right here. - It's our job as shareholders to do so!

[Guest longinvestor]

It's interesting to see very little activity from T&T. They are usually more active.

 

Somehow it appears to me to be appalling. Somewhere, deep down in the accounts, in 2nd quarter 2017 report for Berkshire is "drowned": The expenses for two comfortable sofas [most likely bought at NFM], two alarm clocks [to buzz at start of lunch time, and when to go home from work], two good & warm sleep carpets, and two nice pillows.

 

Not sure Mr. Buffett got the agreements with Mr. Combs and Mr. Weschler right here. - It's our job as shareholders to do so!

Hopefully they read 500 more pages per day ;) There will be a quarter when we may find out that they are managing 2x what they're now.

[cubsfan]

Don't be too hard on T & T - if Todd brings Berk another deal like Precision Cast Parts (which Warren said he never heard of), then

the boys will earn their keep.

[SlowAppreciation]

Here's the portfolio if you want to take a look:

 

http://minesafetydisclosures.com/individual-investor-portfolio

[Jurgis]

Here's the portfolio if you want to take a look:

 

http://minesafetydisclosures.com/individual-investor-portfolio

 

Bottom graph is pretty neat. Two comments: it might be nice if it was zoomable/resizeable; I think you should draw new positions differently. The most obvious is the AXP/KHC transition. IMO, you should go from 0% KHC in 2015Q2 to 18% KHC in 2015Q3 as a blue triangle. Right now you are drawing this as green AXP area which looks quite misleading and incorrect. The mouseovers show correct intervals, but the overall visual is quite broken.

Anyway, just a comment.  8)

 

Good luck.

[SlowAppreciation]

Here's the portfolio if you want to take a look:

 

http://minesafetydisclosures.com/individual-investor-portfolio

 

Bottom graph is pretty neat. Two comments: it might be nice if it was zoomable/resizeable; I think you should draw new positions differently. The most obvious is the AXP/KHC transition. IMO, you should go from 0% KHC in 2015Q2 to 18% KHC in 2015Q3 as a blue triangle. Right now you are drawing this as green AXP area which looks quite misleading and incorrect. The mouseovers show correct intervals, but the overall visual is quite broken.

Anyway, just a comment.  8)

 

Good luck.

 

Yeah I agree. Unfortunately I'm somewhat beholden to how the tool I'm using formats it as there isn't a ton more I can do to adjust it—they only give you so much control.

 

But there's definitely more that I can do to the graph to make it more easily readable, and I'll continue tinkering and improving it.

 

Appreciate the feedback. Please keep it coming

[Jurgis]

Here's the portfolio if you want to take a look:

 

http://minesafetydisclosures.com/individual-investor-portfolio

 

Bottom graph is pretty neat. Two comments: it might be nice if it was zoomable/resizeable; I think you should draw new positions differently. The most obvious is the AXP/KHC transition. IMO, you should go from 0% KHC in 2015Q2 to 18% KHC in 2015Q3 as a blue triangle. Right now you are drawing this as green AXP area which looks quite misleading and incorrect. The mouseovers show correct intervals, but the overall visual is quite broken.

Anyway, just a comment.  8)

 

Good luck.

 

Yeah I agree. Unfortunately I'm somewhat beholden to how the tool I'm using formats it as there isn't a ton more I can do to adjust it—they only give you so much control.

 

But there's definitely more that I can do to the graph to make it more easily readable, and I'll continue tinkering and improving it.

 

Appreciate the feedback. Please keep it coming

 

Would the tool work the way we want it if you put in 0% KHC in 2015Q2 into the data? I.e. explicit value of KHC 0 for that date?

If exact 0 does not work, it might be possible to put in 0.0001% KHC in 2015Q2 (though exact 0 would be better/nicer). Yeah, both of these might require massaging a data a bit before passing to the tool.

 

Anyway, just some thoughts how to get around the tool limitations. ;)

 

[SlowAppreciation]

Here's the portfolio if you want to take a look:

 

http://minesafetydisclosures.com/individual-investor-portfolio

 

Bottom graph is pretty neat. Two comments: it might be nice if it was zoomable/resizeable; I think you should draw new positions differently. The most obvious is the AXP/KHC transition. IMO, you should go from 0% KHC in 2015Q2 to 18% KHC in 2015Q3 as a blue triangle. Right now you are drawing this as green AXP area which looks quite misleading and incorrect. The mouseovers show correct intervals, but the overall visual is quite broken.

Anyway, just a comment.  8)

 

Good luck.

 

Yeah I agree. Unfortunately I'm somewhat beholden to how the tool I'm using formats it as there isn't a ton more I can do to adjust it—they only give you so much control.

 

But there's definitely more that I can do to the graph to make it more easily readable, and I'll continue tinkering and improving it.

 

Appreciate the feedback. Please keep it coming

 

Would the tool work the way we want it if you put in 0% KHC in 2015Q2 into the data? I.e. explicit value of KHC 0 for that date?

If exact 0 does not work, it might be possible to put in 0.0001% KHC in 2015Q2 (though exact 0 would be better/nicer). Yeah, both of these might require massaging a data a bit before passing to the tool.

 

Anyway, just some thoughts how to get around the tool limitations. ;)

 

Problem with that is then it throws off when a position is New or has been exited. Additionally, it'd be a pain in the ass to implement but I'll see if there are some other workarounds I can come up with.

[Jurgis]

Yeah, I understand. Good luck.  8)

[Jurgis]

I'm thinking: was Buffett whipsawed out of WMT? is he whipsawing out of IBM?

[rb]

Here's a crazy idea. Berkshire buying GE. How's that for an elephant?

[rolling]

Here's a crazy idea. Berkshire buying GE. How's that for an elephant?

I thought the same a few days ago, but...

 

Cons:

- lots of debt would need to be issued and big rating downgrade for Bekshire

- buying GE financial arm would make Berkshire too big to fail

- cultural issues at GE could pass to Berkshire: since GE is so big it would be uncertain whether Berkshire culture would ultimately win

- competition issues with Precision Castparts/BNSF could block the deal (very doubtful?)

- problems to fix: berkshire doesn't like fixing problems. They like to keep management teams and that couldn't happen with GE (in addition management would be unlikely to agree to a deal that would send them to unemployment)

 

So, a buyout is not happening. What could happen would be Berkshire buying parts of the business, which would mostly avoid all cons I previously presented but there would be an additional one: GE is likely trying to get and auction for those businesses and Berkshire avoids auctions.

 

Anyway: any ideas on potentially interesting GE businesses for Berkshire? Any GE business that could be tucked in with a Berkshire manager?

[rb]

Yea it was more of a day dream as GE would be one hell of an elephant. I don't think they'll do GE whole because of the whole bureaucratic mess - Buffett hates that. If there was a deal for GE he'd most likely do it with 3G where he sends in the 3G guys to clean the place up.

 

I do however think that they may be looking at picking up some GE businesses or at least they should be. Transportation and Lighting especially look like BRK businesses. These could be either stand alone or tucked into Marmon.