You might feel that leverage speeds up compounding. The problem is that leverage is more like compounding's hidden enemy: One million times zero equals zero.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 17
More from Barron's ;-)
Warren Buffett’s Berkshire Hathaway could report record third-quarter operating earnings along with many other property and casualty insurers, thanks in part to an unusually light hurricane season so far. No named hurricanes made landfall in the U.S. during September for the first time in a decade, and the lack of major storm activity has continued into the first half of October.
CFRA’s Cathy Seifert lifted her Berkshire operating earnings estimate by 15 cents to $5.55 for the third quarter using the company’s Class B shares. That would be a record quarter for Berkshire and translate into about $12 billion of after-tax operating profits. She boosted her 2025 projection by 15 cents to $20.65 for the B shares. She lifted her price target on the B shares to $510, against a current price of $495, but maintained a Hold rating on the stock.
The company should have a robust third-quarter based on both operating earnings (which exclude investment gains or losses) and overall profits given strong gains in the company’s $300 billion equity portfolio led by Apple. Barron’s estimates that third-quarter book value could top $485,000 based on the A shares, up close to 5% versus the June 30 figure.
Berkshire’s Class A stock, now at $743,000, trades for about 1.5 times that third-quarter estimate, in line with the price-to-book ratio in recent years.
No. of Recommendations: 17
The world is making less and less sense with each passing day. It will be good to get something from Berkshire to read. Even if it’s just footnotes on insurance reserves and to admire the growing pile of dry powder.
No. of Recommendations: 2
<<<It will be good to get something from Berkshire to read.>>>
Indeed.
The norm is however to not say anything other than what’s stated directly to the shareholders from March to May.
I have been listening to the CNBC AGM archives and everything that ever needs to be said has already been said.
The current situation is no different from the past ones. Not one bit. As Buffett often says “It’s the human condition”
No. of Recommendations: 2
I would argue that the current situation could indeed be different. We have a new CEO. Will he be more aggressive with acquisitions? Less aggressive?
No. of Recommendations: 29
I would argue that the current situation could indeed be different. We have a new CEO. Will he be more aggressive with acquisitions? Less aggressive?
Good question.
I'll argue that until the investment opportunities change, nothing significant will change in the outlook for BRK.
We're already at the size where it takes a really huge stock buy or acquisition to move the needle for BRK. And more than one.
And, we're already at the market where such opportunities don't now exist - and won't until we have a major, really major, market correction. 300+ billion is an awfully lot of money to deploy. $10 billion size chunks won't move the needle.
Plus, we're bound by a board decision, driven by Buffett, that we can't do buybacks until the stock is below a conservatively estimated IV. It isn't now, and not particularly close.
Also, the Buffett family and most long term shareholders don't want dividends because of the tax consequences.
None of the foregoing have changed. We're waiting, Buffett very patiently, for the major stock market correction.
The new CEO will also face some serious negotiations with Buffett, and really the Buffett family after he passes. What is the Berkshire culture really? Can he become more aggressive on competing for acquisitions - or is he bound to either the "no interest" position on competitive auctions or "one offer and done" on other opportunities? It's clear that Berkshire owned companies weren't held to aggressive cost controls before management moved to Greg and Ajit. See Gen Re, Geico, BNSF, etc. for examples - and a general consensus that Greg has tightened performance standards. How far can he go before the violates the "limited oversight to abdication" that Buffett has practiced? What will be the management turnover if he decides that reducing costs will have to be a major strategy if BRK is to grow profits? And consolidation of the existing management structure?
(An aside. I'm not arguing that Buffett did wrong in his management style. His time was much better spent on investing than managing businesses. I do argue that those priorities are different in current markets. Even if markets do collapse, and Buffett gets a last chance to deploy a lot of capital, the size issue will still remain. And tighter management will be needed going forward.)
So, maybe the current situation is really different than the past. But it's not because we're changing CEO's. It's because the investment opportunities at BRK's size are driving change.
Buffett's pulling back may reflect that. Let's see how his heirs recognize that.
No. of Recommendations: 1
If under Greg the culture changes the way you seem to suggest it should (tighter management), it wouldn´t be Berkshire Hathaway anymore but simply a normal company as many others.
Not my Berkshire where e.g. after the founder of "Louis", Europe's largest and oldest motorcycle equipment outfit chain died, the widow, looking for a "forever" place for the "child" he and she reared, contacted Berkshire, which bought it. End of Berkshire as my "forever" company. Just a normal more or less profitable company.
No. of Recommendations: 18
I think the future growth opportunities and operating efficiency opportunities in our fantastic collection of businesses like GEICO, Burlington Northern, the Furniture Group and our energy/utility companies are just fine. And will be quite rewarding long term.
Does one worry about the future of Progressive or Amex or Goldman Sachs because those companies might not buy many new businesses to supplement their future income streams?
Berkshire is a tremendous collection of wholly owned companies that generate cash TODAY for the benefit of its owners--namely us. I keep feeling like everyone's looking at this as a mutual fund. This is ENTIRELY DIFFERENT from a mutual fund...its similar to owning a stock(s)or a business outright. Which we DO. Numerous large ones. They don't stop earning because Greg Abel has to wait to find MORE.
You worry we won't find an elephant? Sure, but what's the rush? History ASSURES its availability. Everyone's so worried that we can't buy more great large businesses...get back to me the day of earnings release in 2 weeks and tell me what this sleepy company's EARNING NOW --with $340 Billion in cash- dragged hands tied behind its back...and how many companies in the world earn more than what we'll report in 2 weeks. Even before that cash is eventually deployed.
No. of Recommendations: 2
“ Does one worry about the future of Progressive or Amex or Goldman Sachs because those companies might not buy many new businesses to supplement their future income streams?“ What percent of those companies market caps are in t bills? Thank you.
