gfp927z
1 day ago
Bar, Those allegations against Globe Life do sound serious. The stock is staging a nice recovery, but still down by 1/3 or so. I guess the moral of the story is that when Buffett exits a stock completely, it's probably best to follow his lead. But there are a bunch of stocks that Buffett sold out of last year that I decided to keep for the longer term --> DHI, GL, MKL, MMC, JNJ, MDLZ, PG. So far only GL has blown up, but luckily only a small position. Still unnerving to watch though.
>>> Globe Life profit surges on strong underwriting, investment returns
Reuters
Apr 22, 2024
https://finance.yahoo.com/news/globe-life-profit-surges-strong-210636532.html
April 22 (Reuters) - Globe Life posted a rise in first-quarter profit on Monday as the insurer benefited from strong investment returns and underwriting activities.
The insurance industry, known for its resilience to economic downturns, sustains a stable demand for policies, with both corporate and government spending on insurance remaining steady.
Total premiums at Globe Life rose to $1.15 billion in the first quarter from $1.10 billion a year ago.
The surge in the broader equity capital markets on the other hand has enhanced investment income for insurers, who diversify a portion of their cash across various asset classes.
Globe Life's net investment income for the quarter increased about 10% to $282.6 million.
The company's net operating income for the three months ended March 31 came in at $2.78 per share, compared with $2.53 per share in the prior-year quarter.
Globe Life expects its operating income for the year to be between $11.50 to $12.00 per share. The insurer further expects to resume share buybacks once the blackout period related to a potential acquisition ends for the first quarter.
Earlier this month, Fuzzy Panda Research disclosed a short position in the company, citing numerous cases of insurance fraud, leading Globe Life's shares to drop to their lowest in over a decade.
Globe Life denied the allegations, saying "the short seller analysis by Fuzzy Panda Research mischaracterizes facts and uses unsubstantiated claims and conjecture to present an overall picture of Globe Life that is deliberately false."
<<<
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gfp927z
1 week ago
>>> Billionaire Warren Buffett Recently Cut This Stock From Berkshire Hathaway's Portfolio. It Just Dropped 53% In 1 Day. Here's What Investors Need to Know.
by Courtney Carlsen
Motley Fool
Apr 17, 2024
https://finance.yahoo.com/news/billionaire-warren-buffett-recently-cut-101500983.html
Globe Life (NYSE: GL) stock plummeted by more than 53% in a single day last week after short-seller Fuzzy Panda Research accused the life insurance company of fraud. The claims piled onto the already struggling stock, which had previously been a longtime holding of Warren Buffett's conglomerate, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B).
If you're thinking about buying the dip in the stock, there are some things you'll want to know.
Globe Life's troubles began last year
Globe Life was one of Berkshire Hathaway's longest-held investments, having been part of the conglomerate's portfolio for more than two decades. Berkshire held Globe Life through several difficult economic periods, including the COVID-19 pandemic, which put tremendous pressure on life insurers by elevating claims costs.
Buffett examines a management team's character and trustworthiness when investing. Buffett and his team have an excellent track record of evaluating management, which is a big reason for the conglomerate's long-term success. When Globe Life became the subject of several lawsuits accusing it of misconduct, Berkshire pulled the plug on its investment.
Last year, two Globe Life subsidiaries, American Income Life Insurance Co. and Arias Agencies, faced a lawsuit accusing them of inappropriate workplace conduct; this included rampant drug use, sexual abuse, and degradation of agents who didn't hit sales targets.
Globe Life's struggles continued when a former executive claimed he was fired for blowing the whistle on "potentially illegal" sales practices at the subsidiary. It appears that the accusations were why Berkshire sold its stake in the insurer last year.
Here's what short seller Fuzzy Panda had to say about the insurer
Fast-forward to this year, and Globe Life's troubles have gone from bad to worse. On March 6, the U.S. Department of Justice issued subpoenas to Globe Life and American Income Life. The subpoena is part of an investigation into allegations of fraud and misconduct at the (renamed) Arias Organization, now one of American Income Life's agencies.
Last week, the dam broke after short-seller Fuzzy Panda Research accused Globe Life of "extensive" insurance fraud that was ignored by management. According to Breakout Point and reported by Bloomberg, Fuzzy Panda Research was the best-performing active short-seller in 2023. Although short-sellers -- investors who try to profit from falling share prices -- suffered deep losses during the long bull market of the 2010s, they can help expose harmful or downright fraudulent business practices.
Fuzzy Panda reviewed hundreds of court documents and interviewed former executives and agents "who showed us where the fraud was hidden." According to the short-seller, the fraud was ignored by management despite being "obvious and reported hundreds of times." After the short report was released, Globe Life's stock plummeted 53% in a single day.
Following the serious accusations from Fuzzy Panda, Globe Life responded by saying:
We reviewed the report and found it to be wildly misleading, mixing anonymous allegations with recycled points pushed by plaintiff law firms to coerce Globe Life into settlements ... The short seller analysis by Fuzzy Panda Research mischaracterizes facts and uses unsubstantiated claims and conjecture to present an overall picture of Globe Life that is deliberately false, misleading and defamatory.
Buy the dip?
According to The Fly, analysts believe the stock sell-off is overdone, but big question marks remain. Investment bank and investment firm Piper Sandler said that Globe Life's response "serves to assuage concerns but does not completely remove the vacuum that remains absent a broader communication about this matter with the investment community."
Another investment firm, Evercore, meanwhile, sees limited downside from here but says there is still "significant uncertainty for the shares."
Globe Life faces serious allegations, and the stock price reflects this. After its significant sell-off, aggressive investors may find the stock ripe for the picking. If you're willing to tolerate this risk, though, don't bet more than you're willing to lose.
However, given the uncertainty around the situation and the Department of Justice's investigation, most investors are better off waiting to see how things shake out; they should avoid the stock for now.
<<<
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DiscoverGold
1 week ago
Berkshire Hathaway Currently Down Seven Consecutive Days, on Pace for Longest Losing Streak Since December 2018
By: Dow Jones Market Data | April 16, 2024
• Berkshire Hathaway Inc. Class B (BRKB) is currently at $399.11, down $1.15 or 0.29%
- Would be lowest close since Feb. 14, 2024, when it closed at $398.68
- Currently down eight of the past nine days
- Currently down seven consecutive days; down 4.66% over this period
- Longest losing streak since Dec. 24, 2018, when it fell for eight straight trading days
- Worst seven day stretch since the seven days ending Oct. 4, 2023, when it fell 4.98%
- Down 5.09% month-to-date
- Up 11.9% year-to-date
- Down 5.09% from its all-time closing high of $420.52 on March 28, 2024
- Up 22.94% from 52 weeks ago (April 18, 2023), when it closed at $324.63
- Down 5.09% from its 52-week closing high of $420.52 on March 28, 2024
- Up 25.11% from its 52-week closing low of $319.02 on May 25, 2023
- Traded as low as $397.23; lowest intraday level since Feb. 14, 2024, when it hit $393.55
- Down 0.76% at today's intraday low
All data as of 10:58:56 AM ET
Read Full Story »»»
DiscoverGold
gfp927z
4 weeks ago
>>> Apple’s first quarter has felt more like an entire (bad) year
Yahoo Finance
Daniel Howley
Mar 27, 2024
https://finance.yahoo.com/news/apples-first-quarter-has-felt-more-like-an-entire-bad-year-201715880.html?.tsrc=fin-notif
Apple (AAPL) is in the midst of what you could generously call a “difficult” period. The company is contending with a high-profile antitrust battle with the Department of Justice, falling iPhone sales in China, and a regulatory investigation in the European Union. And those are just the headlines from the past week.
The company is also still facing a shortfall when it comes to generative AI capabilities. And while it’s widely expected to debut some kind of generative AI offering during its WWDC developer event on June 10, it’ll need to have quite an impressive showing if it’s going to catch up to its Big Tech rivals including Microsoft (MSFT) and Google (GOOG, GOOGL).
All of that is hurting Apple’s stock price. Shares of the iPhone maker have fallen more than 7% since the start of the year and are up just 6.25% over the last 12 months. Shares of Microsoft, meanwhile, are up 14% year to date and 49% over the last 12 months. Google? Shares of the search giant are up 9% year to date and 43% in the last 12 months.
Suffice it to say, Apple’s 2024 is not going well.
Apple’s China problem
Apple’s latest headache came Tuesday, when Bloomberg, citing Chinese government data, reported that iPhone shipments fell 33% year over year in the country in February.
China is Apple’s third-largest market behind North America and Europe. In 2023, the region accounted for $72.6 billion of Apple’s $383.3 billion in total revenue. That’s roughly 19% of the company’s sales.
And this isn’t exactly out of the blue. Earlier this month, Counterpoint Research reported that iPhone sales fell 24% year over year through the first six weeks of 2024 in the country. Overall smartphone unit sales in China declined 7% during the same period.
Apple has been aggressively expanding in China for years, but a resurgent Huawei and difficult economic conditions in the country are squeezing device sales. The company isn’t just sitting idly by, though. Last week, CEO Tim Cook flew to China for the opening of the company’s latest flagship store in Shanghai. He also attended the China Development Forum in Beijing and was expected to meet with Chinese President Xi Jinping.
According to the South China Morning Post, Apple-authorized retailers are also trying to goose sales, cutting the price of the company’s latest iPhones in the hopes that it will get consumers to start buying again. However, it might take more than lower prices to make that happen.
A battle with the DOJ
Outside of Apple’s China sales drama, the company is also facing its long-anticipated antitrust fight with the Department of Justice. The lawsuit, which the DOJ filed last Thursday, accuses Apple of illegally maintaining dominance over the premium smartphone market by pushing aside competing apps and devices.
The Justice Department claims that Apple imposes restrictions on app developers, makes it difficult for users to switch to competing platforms, and hinders cloud gaming and so-called super apps that allow users to access multiple smaller apps from one larger platform.
Apple, however, is fighting back, saying in a statement that the suit "threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to create the kind of technology people expect from Apple."
The DOJ is seeking to force Apple to change its business practices, which could mean giving third-party apps greater access to the company’s platforms and requiring Apple to expand compatibility with third-party device makers.
The lawsuit could also prove to be a dangerous distraction for Apple similar to how Microsoft’s antitrust battle in the 90’s stole executives’ attention away from emerging technologies like smartphones. If Microsoft hadn’t been so invested in its antitrust fight at the time, there’s a good chance it would have seen the smartphone age coming as did Apple and Google, and launched its own line of handsets.
European Commission calling
In addition to slowing iPhone sales in China and the DOJ’s antitrust suit, the European Union’s competition watchdog, the European Commission on Monday, announced that it is looking into whether Apple is in compliance with the bloc’s Digital Markets Act.
In a statement released Monday, the Commission said it is investigating Apple’s new app fee structure in the EU as well as whether it meets user choice obligations related to default apps and the ability to delete preinstalled apps.
The Digital Markets Act requires Apple to open up the iPhone to third-party app stores, enabling developers to get around the 30% and 15% fees the company charges for sales through its own App Store. While Apple said it will allow those third-party stores, the company said it will also charge developers a 50 euro cent Core Technology Fee per install per year on apps that have been installed more than 1 million times in the last 12 months.
In a statement, the EC said it is looking into whether Apple’s new fees defeat the purpose of the obligations of the Digital Markets Act.
While Apple is certainly facing a slew of challenges, it’s far from down and out. It’s still the second-richest company in the world by market capitalization — behind Microsoft — and it’s sure to continue to sell millions of devices and services subscriptions throughout the year ahead.
Still, for the foreseeable future, Apple could be in for a bumpy ride.
<<<
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gfp927z
4 weeks ago
Bar, >> BRK near record high <<
Yes, and that's with APPL down almost 15% from its Dec high. So having so much in AAPL hasn't been a problem for Berkshire so far. While Apple is getting hit with anti-trust problems, so are the other big Techs like GOOG, META, but they remain resilient.
Also, looks like the bull market is broadening out to the mid and small caps, so a good sign. I sill worry about the geopolitical / war related risks, plus the US election, but with the Fed planning 3 rate cuts this year, that should be a nice tailwind for the markets. Lots of potential landmines, but as the old saying goes - 'bull markets climb a wall of worry'.
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gfp927z
1 month ago
>>> Berkshire Hathaway Energy
https://en.wikipedia.org/wiki/Berkshire_Hathaway_Energy
Company type Subsidiary
Predecessor MidAmerican Energy Holdings Company
Headquarters Des Moines, Iowa
Key people
Greg Abel (Chairman)
William J. Fehrman (CEO & President)
Revenue Increase $25.15 billion (2021)[1]
Operating income Increase $4.25 billion (2012)[2]
Net income Increase $2.57 billion (2012)[2]
Owner Berkshire Hathaway (92%)
Walter Scott Jr. family (8%)
Parent Berkshire Hathaway
Website www.brkenergy.com
Berkshire Hathaway Energy (previously known as MidAmerican Energy Holdings Company until 2014) is a holding company and subsidiary of Berkshire Hathaway, which owns 92% of the company. Berkshire has owned a controlling stake since 1999.[3] The company also controls power distribution companies in the United Kingdom and Canada.[4] The remaining 8% is owned by the family of Walter Scott Jr.[5]
Greg Abel serves as chairman. Scott W. Thon is president and CEO. David L. Sokol was CEO until 2008.
Until 2014, it was known as MidAmerican Energy Holdings Company from its root as MidAmerican Energy Company; it took on the name of its parent to reflect the diversity of its portfolio.[6]
As of 2019, BHE "serves 4.9 million retail customers, generates 29 gigawatts of power and transports 8.2 billion cubic feet of natural gas per day over 16,400 miles of regulated pipeline."[4]
In 2023, a jury ordered BHE subsidiary PacifiCorp to pay $70 million in punitive damages to 17 homeowners negatively impacted by wildfires that afflicted Oregon in 2020.[7]
Subsidiaries & investments
Berkshire Hathaway Energy owns the following companies:
- MidAmerican Energy Company
- MidAmerican Renewables[8] (Renewable Energy/Wind Energy)
- PacifiCorp, purchased for $9.4 billion in 2005[9]
- Northern Powergrid (formerly CE Electric UK)
- Integrated Utility Services UK
- CalEnergy Generation
- Imperial Valley Geothermal Project
- Kern River Gas Transmission Company[10]
- Kern River Pipeline
- Northern Natural Gas Company (Omaha)[11]
- BYD Company (19.92% of outstanding shares)[12]
- NV Energy (electricity and natural gas in most of Nevada)
- Metalogic Inspections Services[13] (Oil and Gas, Power Generation, Fabrication, Pipeline, Services)
- Intelligent Energy Solutions[14] (Heat Pumps, Solar Panels, and Biomass Boilers)
- AltaLink (Electric Utility in Canada) for C$3.24 billion in 2014 [15]
In 2017, BHE's proposed acquisition of Oncor Electric Delivery Company LLC[16] was terminated after BHE was outbid by Sempra.[17][18]
BHE investigates producing up to 90 thousand tonnes of lithium carbonate per year (and other minerals) from its 350 MW geothermal power plants in the Lithium Valley next to the Salton Sea in California.[19][20]
gfp927z
1 month ago
Bar, Yes, I doubt Buffett would be interesting in the cannabis sector under any circumstances because of ethical reasons, plus it would be a bad move from a public relations standpoint. But Ben Graham would probably be all over those stocks, if he believed the value was there.
I haven't followed the sector closely, but I think one of the problems is overproduction - they just cranked out too much supply, but there are probably a lot of other problems. The one pot related stock I'm considering is Scotts Miracle Gro (SMG). They have their regular lawn + garden business, but also a Hawthorne unit which is a big supplier for the cannabis industry, hydroponics, etc. They may be spinning it out as a separate unit (?), but if the broader cannabis sector finally recovers, I figure SMG should be a beneficiary, and they have their traditional business, so it's a low risk way to play it, SMG had been a nice long term buy / hold prior to it being caught in the cannabis vortex. Anyway, getting exposure to the pot sector is not a high priority imo, but maybe a small position might make sense.
Fwiw, in keeping with the Buffet / Munger focus on great stocks at a discount, I've taken some small positions in stocks that have been strong long term holdings, but have run into some headwinds. I remember Buffett saying that he largely avoids turnarounds 'because they rarely turn around', but most of these are more 'contrarian values', rather than deep turnarounds. Here are some current ideas (link below), and additional ideas are welcome :o) The ones highlighted in red I have, but only small positions -
Contrarian Value Ideas -
https://investorshub.advfn.com/Contrarian-Value-Ideas-30183
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gfp927z
1 month ago
Bar, >> market caps over $10 billion <<
Yes, a good strategy. While I have a bunch of them under $10 bil (link below), anything under $1 bil is rare. Currently only one - Climb Global Solutions (CLMB), which I found largely from it's nice 10-15 year chart, which is very rare for a microcap. The last one was Winmark (WINA), but it's now over $1 bil.
Looking at how Buffett, Munger, and Graham approached investing in the early days, what jumps out is how aggressive they were. But Buffett says for us regular investors (mere mortals), the idea is to be extremely diversified, and mainly use index funds. So basically the opposite of his own 'Oracle' approach. I figure some individual stocks are OK, but only small positions and widely diversified.
Buy / Hold Stocks (by market cap) -
https://investorshub.advfn.com/Buy-Hold-Stocks-42434
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gfp927z
1 month ago
Bar, >> is this a stock Warren or Charlie would buy? <<
I ask that question too, but not having Buffett's stock analysis abilities (or anything close), I end up screening individual stocks mainly based on their 10-15 year charts. Does the chart have the steadiness and trajectory over time that would indicate a stable, consistently profitable business, and sound capable management? When the long term chart qualifies (CTAS for example), the rest of the analysis is usually favorable (margins, return on equity / assets, debt level, net income, cash flow, lack of shorts, div payout %, etc). But I figure Buffett would reject most of my picks based on valuation.
Buffett says a big problem is that the group of stocks qualifying for purchase by Berkshire is very limited, and they've been thoroughly picked over by others looking for the same type of bargains, hence Berkshire's huge cash position. The problem stems from his success --> having so much $ to invest means only the largest cap companies can be considered. If Buffett could go back to managing smaller sums, he could shoot the lights out every year like in the early days. But now he is forced into large and mega cap ideas.
Speaking of which, I see Apple is under anti-trust investigation by the US govt (link below). So that's the risk of having so much invested in one stock -
>>> Justice Department files antitrust suit against Apple <<<
https://finance.yahoo.com/news/justice-department-files-antitrust-suit-against-apple-145514025.html
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gfp927z
1 month ago
Bar, >> subscriptions <<
No subscriptions, just regular info and articles from the internet. Buffett, Weschler, and Combs say they each read ~ 500 pages / day, so it's no wonder they have such great results :o)
Buffett also says that for people who are not professional money managers (ie just about everyone), extreme diversification is the way to go --> broad, low cost index funds (video below). And he also says to avoid trading.
So it's simple, but why don't more people do it? A few reasons come to mind -- 1) An overly cavalier attitude, especially in the early years of investing, 2) The lure of 'get rich quick', 3) The 'drug' of active trading, 4) Index funds are boring, 5) Individual stocks/sectors are a fun / interesting hobby.
With #5, I figure the idea is to have the benefits of the hobby, while minimizing the risk. Therefore small individual positions, with the bulk of the stock allocation in the broad index / S+P 500. And for the individual stock side --> find stocks like CTAS :o)
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gfp927z
1 month ago
Bar, >> Japanese bank <<
The proposed target bank in the article is Mitsubishi UFJ Financial Group (MUFG), with a market cap ~ $120 bil. But as Prudent Capitalist pointed out, the idea would be for Berkshire to buy a sizable chunk, rather than acquiring the entire bank. MUFG also has a stake in Morgan Stanley (see below), so MUFG sounds like a distinct possibility to be the mystery stock.
Another angle is that with Japan finally reversing their ZIRP / negative % policy, their banking sector could benefit. Unlike most sectors, bank stocks can go up during rising %. So perhaps Buffett had an early 'heads up' on the Japanese % reversal, and he loaded up on MUFG early.
>>> MUFG is the largest bank by assets in Japan. More importantly, it's trading at a reasonably low forward P/E ratio of less than 12, and is valued modestly below its reported book value. High-quality banks trading below their book value have often been a lure that's attracted Buffett. Comparatively, Morgan Stanley is valued about 60% above its book value.
Furthermore, MUFG is actually riding Morgan Stanley's coattails to massive profits since the financial crisis more than 15 years ago. Mitsubishi UFJ Financial Group purchased $9 billion worth of preferred stock in Morgan Stanley following the collapse of Lehman Brothers. This stake in Morgan Stanley has consistently generated between 30% and 40% of MUFG's annual profits in recent years.
Why buy Morgan Stanley stock when Buffett can get exposure to Morgan Stanley via Mitsubishi UFJ Financial Group at a fraction of the cost? I strongly believe MUFG to be the confidential stock Warren Buffett is buying at Berkshire Hathaway. <<<
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DiscoverGold
1 month ago
Berkshire Hathaway speeds up stock buybacks
By: Reuters | March 18, 2024
Berkshire Hathaway BRK.A has increased its pace of repurchasing its own shares, a sign that longtime Chairman Warren Buffett considers them undervalued and a good place to spend excess cash.
In its proxy filing on Friday, Berkshire said it repurchased the equivalent of 3,808 Class A shares this year through March 6, spending approximately $2.2 billion to $2.4 billion depending on the dates of the buybacks.
Nearly three-quarters of the repurchases took place after Feb. 12.
Berkshire repurchased $2.2 billion of its own stock in last year's fourth quarter, and $9.2 billion in all of 2023.
Its peak year for buybacks was 2021, when they totaled $27 billion.
Buffett, 93, has run Omaha, Nebraska-based Berkshire since 1965, and oversees buybacks and other major capital allocation decisions.
Repurchases help Buffett deploy some of the conglomerate's cash and equivalents, which totaled $167.6 billion at year end.
Berkshire has said it will maintain a $30 billion cash cushion, and that "financial strength and redundant liquiditywill always be of paramount importance."
Through Friday, Berkshire's share price was up 14% this year, about twice the gain for the Standard & Poor's 500 SPX.
Read Full Story »»»
DiscoverGold
gfp927z
1 month ago
Concerning Buffett's 'mystery stock', it could be more than one stock, in which case the 'over $100 bil market cap' assumption would be incorrect. The unaccounted-for $5 billion in Q3 + Q4 last year might be divided between two or more stocks.
Another key data point noted is the lack of the required SEC filing when Berkshire accumulates over 5% of a company. The reason could be the same as above --> the unaccounted-for $5 bil could be split among two or more stocks. For example - $2.5 in one $60 bil company, and another $2.5 bil in another $60 bil company. So neither would reach the 5% threshold, therefore no required SEC filing.
The third data point they cite is that Berkshire's "banks, insurance, and finance" category grew by $2.38 bil during Q4-23, which occurred despite Berkshire selling their last holdings of Markel and Globe Life (which by my inexact math would have yielded in the $325 mil range). But this entire 3rd data point is fuzzy, since some of that $2.38 bil growth was presumably due to changes in the market value of Berkshire's already existing stock positions. So how much of the $2.38 bil was due to that, and how much due to the new 'mystery stock' purchases? So the numbers are fuzzy, but at minimum we can say that Berkshire likely bought a big chunk (maybe $2 bil range) of something in Q4 and it is in the 'banks, insurance, finance' sector. But again, that ~ $2 bil could have been divided among several different stocks.
So.. the mystery stock's $100 bil market cap assumption seems bogus, at least based on the currently available info. Also, the assumption that Buffett wants to fully acquire the mystery stock has not been established, and he may merely be looking for a sizable chunk of one or more companies.
Anyway, the mystery continues.. :o)
---
DiscoverGold
1 month ago
New Clues Strongly Suggest This Is the "Confidential Stock" Warren Buffett Has Been Buying
By: The Motley Fool | March 18, 2024
• Berkshire Hathaway is secretly building up its stake in one or more companies. New clues and details point to one very specific stock.
For nearly 60 years, Berkshire Hathaway (BRK.A -0.04%) (BRK.B 0.07%) CEO Warren Buffett has captivated the attention of professional and retail investors by running circles around Wall Street many times over. Since becoming CEO in the mid-1960s, he's overseen an aggregate return of 4,938,103% in his company's Class A shares (BRK.A), as of the closing bell on March 14. For the sake of comparison, this is 146 times greater than the aggregate total return of the S&P 500, including dividends paid, over the same period.
Even though the affably named "Oracle of Omaha" won't be right all the time, his track record suggests he has a knack for finding value that's hiding in plain sight. That's why investors wait so anxiously for Berkshire Hathaway's Form 13F filings with the Securities and Exchange Commission (SEC).
Berkshire Hathaway's 13F is a powerful tool for investors
A 13F is a required filing each quarter for institutional money managers who are overseeing at least $100 million in assets under management. As of March 14, Buffett and his team had $366 billion of invested assets spread across 45 stocks and two index funds.
What makes 13Fs valuable is they allow investors to easily see what Wall Street's brightest and most successful money managers have been buying, selling, and holding. These filings can provide valuable insight into what stocks and trends are piquing the interest of Wall Street's top investors.
For example, Berkshire Hathaway's 13Fs have shown that Warren Buffett and his investing aides, Todd Combs and Ted Weschler, have been actively adding to their positions in two energy stocks: Chevron (CVX -0.09%) and Occidental Petroleum (OXY 0.88%). Though energy stocks have historically not accounted for a sizable percentage of Berkshire's invested assets, the combination of Chevron and Occidental comprise nearly 10% of the aforementioned $366 billion portfolio.
Having this much capital put to work in two integrated oil and gas stocks is a pretty clear message that Berkshire Hathaway's brightest minds expect the spot price of oil to remain above historic norms, if not head even higher. Years of capital underinvestment during the COVID-19 pandemic has led to tight global oil supply, which is helping to lift the spot price of crude.
Being able to track the investments Warren Buffett makes has allowed investors to ride his coattails to potentially life-changing returns.
New clues emerge about the "confidential stock" Warren Buffett is buying
However, Berkshire Hathaway's 13F isn't telling the full story in more ways than one. In addition to Warren Buffett's company having a $621 million "secret" portfolio, Berkshire Hathaway has also been granted an exemption by the SEC for confidential treatment regarding one or more of its holdings.
In other words, Buffett and his team are building a position in one or more companies, and they don't want the cat to be let out of the bag while doing so. Since investors tend to pile into the stocks Buffett and his aides purchase, this confidential treatment allows Berkshire to, presumably, build its stake at a lower cost basis.
Berkshire's last two quarterly 13Fs have come with this confidential treatment disclosure, which means the Oracle of Omaha and his aides have been purchasing shares of a stock, or multiple stocks, from perhaps July through December. Though I've previously thrown a dart at which mystery stock this might be, new clues point to a very specific company as Warren Buffett's "confidential stock."
While there are genuinely thousands of publicly traded companies that Buffett could, in theory, be putting his money to work in, three clues quickly narrow down the field. First, we can examine how much Berkshire Hathaway spent purchasing equity securities during the third and fourth quarters and compare this figure to the rough value of the stocks purchased during those respective quarters, as listed in Berkshire's 13Fs. In the neighborhood of $5 billion in equity security purchases is unaccounted for on a combined basis over the second-half of 2023.
What's interesting about this figure is that Berkshire Hathaway would be required to file with the SEC once it's reached at least a 5% stake in a publicly traded company. Since there's currently no filing, it intimates that the company Buffett and his team are secretly buying has a market cap of $100 billion or more. That eliminates all but 120 publicly traded companies in the U.S.
Secondly, Berkshire Hathaway's fourth-quarter operating results show that the company's cost basis for equity securities held in "banks, insurance, and finance" grew by $2.38 billion to $27.14 billion from the September-ended quarter. This cost basis grew despite Buffett and Co. selling stakes in insurers Markel Group and Globe Life. This is something my Foolish colleague Adam Levy pointed out two weeks ago, and all but ensures that Buffett's confidential stock hails from the financial sector.
There are only 24 stocks with a $100 billion or greater market cap found in the financial sector.
The third clue is that Warren Buffett loves a good deal and will stubbornly sit on his hands until he gets one. This means any stock with a relatively high forward price-to-earnings (P/E) ratio is off the table. Setting the forward P/E cap at 15 reduces the number of candidates to just 13.
Here's the confidential stock Berkshire Hathaway is likely buying
Among the 13 remaining financial stocks are a handful of companies Berkshire already owns, including Bank of America, American Express, and Citigroup, as well as companies that were sold within the past few quarters or years, such as JPMorgan Chase, Goldman Sachs, and Wells Fargo. It's highly unlikely Buffett would reenter JPMorgan Chase, Goldman Sachs, or Wells Fargo on a confidential basis, and we'd see buying activity via the 13F if it was the former three stocks Berkshire currently owns.
This leaves seven possible choices:
Morgan Stanley (MS -0.47%)
HSBC Holdings
Royal Bank of Canada
Mitsubishi UFJ Financial Group (MUFG 1.57%)
Toronto Dominion Bank
Chubb
UBS Group
Having followed Buffett's trading activity for so long, I can't recall a time when he's shown much, if any, interest in Canadian banks. Furthermore, while the Oracle of Omaha is willing to go to bat for a reclamation project in the U.S. (e.g., Bank of America in 2011), European banks aren't his cup of tea. This likely eliminates HSBC, UBS, Toronto Dominion, and Royal Bank of Canada from the discussion.
To go one step further, Berkshire's investment team just purged its portfolio of Markel and Globe Life, meaning there's probably not a big desire to pile into an internationally based insurer like Chubb.
This leaves two companies that meet what Warren Buffett is looking for: Morgan Stanley and Mitsubishi UFJ Financial Group, which is better known as "MUFG."
Morgan Stanley can't be ruled out as Berkshire's potential "secret" buy. It's valued at 12 times forward-year earnings and generates a substantial portion of its sales and profits from the company's wealth management division. In theory, wealth management should help insulate Morgan Stanley from inevitable downturns in the U.S. and global economy.
In Warren Buffett's recently released annual letter to shareholders, he described the small group of companies he values as core holdings that will be held "indefinitely." While Coca-Cola and American Express unsurprisingly made the list, the Oracle of Omaha touted Occidental Petroleum and the five Japanese trading houses -- Mitsubishi, Mitsui, Itochu, Sumitomo, and Marubeni -- as companies he'd never sell. In fact, Buffett has upped his company's stake to around 9% in each of these Japanese trading houses. Berkshire's investment team have not hidden their belief that Japan's economy can outperform over the long run.
MUFG is the largest bank by assets in Japan. More importantly, it's trading at a reasonably low forward P/E ratio of less than 12, and is valued modestly below its reported book value. High-quality banks trading below their book value have often been a lure that's attracted Buffett. Comparatively, Morgan Stanley is valued about 60% above its book value.
Furthermore, MUFG is actually riding Morgan Stanley's coattails to massive profits since the financial crisis more than 15 years ago. Mitsubishi UFJ Financial Group purchased $9 billion worth of preferred stock in Morgan Stanley following the collapse of Lehman Brothers. This stake in Morgan Stanley has consistently generated between 30% and 40% of MUFG's annual profits in recent years.
Why buy Morgan Stanley stock when Buffett can get exposure to Morgan Stanley via Mitsubishi UFJ Financial Group at a fraction of the cost? I strongly believe MUFG to be the confidential stock Warren Buffett is buying at Berkshire Hathaway.
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DiscoverGold
DiscoverGold
2 months ago
Berkshire Buys More Liberty Sirius XM, Now Owns $2.2 Billion of Tracking Stock
By: Barrons | March 7, 2024
Berkshire Hathaway purchased about 3.7 million shares of Liberty Sirius XM Holdings, the tracking stock for Sirius XM Holdings, in recent days, bringing its stake in the tracker to almost 76 million shares, according to filings late Wednesday.
Berkshire now holds $2.2 billion of Liberty Sirius XM Holdings, a roughly 23% stake in the company. Berkshire purchased both the voting Class A shares an d nonvoting Class C shares for a total of more than $100 million from Monday through Wednesday of this week. Sirius XM operates a satellite radio network with over 32 million paying subscribers.
This continues intermittent purchases of the tracking stock so far this year by Berkshire. The Liberty Sirius XM voting A stock ended Wednesday at $29.38, down 0.1% while the nonvoting C shares finished at $29.25, off 0.2%.
Berkshire appears to be looking to capitalize on the spread between the value of the Sirius XM stock that will be received by Liberty Sirius XM shareholders under a deal reached in late 2023 and the current price of the tracking stock.
Sirius XM ended Wednesday at $4.19, up 0.5%. Liberty Sirius XM holders are due to get 8.4 shares of New Sirius XM for each share of the tracking stock. That's worth about $35, allowing Sirius XM holders to make about 20% ($6 a share divided by the current tracker stock price). The deal is due to close in the third quarter. Current Sirius XM holders will get the new stock on a share-for-share basis.
The spread has narrowed so far in 2024 as Sirius XM stock has come down from a price of about $5.50 in late December. The spread could narrow further as the closing date approaches and after the transaction closes — assuming the deal occurs. Liberty Media owns over 80% of Sirius XM and that stock could start hitting the market once the deal closes.
Some investors have bought the tracking stock and shorted Sirius to capture the spread, but that can be difficult to do now given the thin float in Sirius, high short interest in the stock, and high borrowing costs to short it.
Some Berkshire watchers think the company's Liberty Sirius XM holding is overseen by Ted Weschler, one of two Berkshire investment managers who run about 10% of the roughly $350 billion equity portfolio. CEO Warren Buffett oversees the rest. Weschler is believed to be close to Liberty Media CEO Greg Maffei.
DiscoverGold
bar1080
2 months ago
"Buffett Calls This Metric "Worse Than Useless," but Everyone Uses It. Here's How to Make Yourself a Smarter Investor."
"Investors look forward to Warren Buffett's annual shareholder letter, and in the 2023 version, released on Feb. 24, he didn't disappoint. It was chock-full of Buffett's typical down-to-earth, blunt, and solid investing advice mixed with his wit and humor.
He paid tribute to his decades-long investing partner, Charlie Munger, who passed away last year, and in a first, he addressed the letter as if he were writing to his sister Bertie.
She's a longtime Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) shareholder whom Buffett described as understanding "many accounting terms, but ... not ready for a CPA exam." In doing so, he's addressing the vast majority of individual investors.
In the letter, he points to Berkshire's earnings numbers, which look strange when you consider how they have changed over the past three years. And he calls the net income metric "worse than useless." Here's how he counsels investors to use it when evaluating a company.
Net income vs. operating income
Buffett highlighted Berkshire Hathaway's net income, in contrast with its operating income.
Metric
2021
2022
2023
Net income (loss)
$89.9 billion
($22.8 billion)
$96.2 billion
Operating income
$27.6 billion
$30.9 billion
$37.4 billion
Data source: Berkshire Hathaway.
He noted how something looks off with the changes in net income, so even though a public company has fulfilled its legal duty by reporting "this worse-than-useless 'net income' figure" according to regulations, it makes him uncomfortable.
The main difference between the two figures is unrealized capital gains and losses, which refers to price changes for stocks Berkshire Hathaway owns. Individual investors don't usually have to worry about unrealized capital gains or losses; gains or losses only come into play when they sell a stock, at which time there are capital gains tax considerations for the shareholder."
https://news.yahoo.com/finance/news/warren-buffett-calls-metric-worse-144000377.html
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