Please be positive and upbeat in your interactions, and avoid making negative or pessimistic comments. Instead, focus on the potential opportunities.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 26
Berkshire continues to have the vast majority of its company invested in
business ownership: 189 companies 100% of the stock —and what gets all of the media attention—and outsized attention here—partial business ownership through stocks.
Buffett stated this in a not so subtle way in this report…..matters we’ve kicked around here in our P/B comparison discussions. Truth is— you’d think he was hiding in a bunker based on what he called out as erroneous reporting. Cash holdings and no media perspective. He called people out on this. Please, folks, listen to what the Chairman says about these issues this weekend and previously: the importance of look through earnings, the clear, ongoing transition towards subsidiaries and away from equities over this millennium, and cash relative to a company worth >$1 Trillion and relative to its historic cash holding. This is BUFFETT’s Gospel—not mine.
Look at the earnings—it’s a machine pumping out nearly $1 Billion a week in operating earnings. That’s overwhelmingly from a business OWNERSHIP engine. You don’t get that in a bunker!
Meanwhile ..YET..the optionality Buffett has created is unprecedented. In a market decline he could buy several of the largest blue chip companies in the world with his cash. Paid 4.3% guaranteed while he waits.
Its heads I win…tails I win. Buffett has always played at a different level. Most people can’t comprehend this risk reward proposition. I feel like I’m watching an old Miller Lite commercial “Tastes great…no..less filling”.
“buffett is on OFFENSE generating $1 Billion a week in op earnings..no….Buffett is on DEFENSE $320 billion+ in cash!.
No. of Recommendations: 12
the clear, ongoing transition towards subsidiaries and away from equities over this millennium
Makes sense as a strategic goal, but I don't see it anywhere in the numbers I use to value the firm.
The value of the operating divisions, expressed as a % of the total observable value, has dropped maybe 5% in the last decade.
Different methods will give different numbers, but real investments per share have been rising a coupla percent per year faster than real operating earnings for years now. Maybe it's just because earnings have been weak for a long time, but that's hardly a lot of comfort.
Even before the recent fall-off, there was no upwards trend in the % of total value arising from operating earnings. Not that I have ever been able to discern.
If all the cash were deployed tomorrow to buy 100% of some gigantic company with lots of earnings, that would move the ratio. Siemens or Toyota or Verizon wouldn't be good fits, but would do wonders for operating earnings if wholly owned!
Jim
No. of Recommendations: 3
By my calculation, wholly owned subsidiaries are approaching a 100% premium to equities. Never has this ratio been this year.
It’s a complete reversal of the pre 2000 Berkshire. Again it’s Buffett pointing this out.
No. of Recommendations: 10
By my calculation, wholly owned subsidiaries are approaching a 100% premium to equities. Never has this ratio been this year.
Yes, equities are lower than they were as a portion of the pie. (I'm not sure what you mean as "premium", but no matter).
The change isn't huge, though, compared to various times in the past. Given that book has so far tracked value pretty well, one can estimate it that way: equities are 41.8% of book in these statements versus for example 46% at end 2012, 48% end 2014, 43% end 2016, 49% end 2018.
But I apologise, my reply was slightly off topic, speaking of the ratio of value from operating subsidiaries, to TOTAL value. i.e., the ratio of value from operating subs to (operating subs + all investments per share). On that view, I was just pointing out that the relative importance of operating subsidiaries has been flat to falling, not rising, for a very long time now.
In part this is simply because there haven't been any big acquisitions since BNSF, and maybe never will be again, so investments stack up while operating earnings lag in terms of growth rate. One would hope that small(er) acquisitions would offset this, but that doesn't seem to be the case in the last 15 years. The investment portfolio (cash, fixed income, and equities) has been becoming a larger part of the story. In this stretch, anyway.
Jim
No. of Recommendations: 6
It would be great to see wholly owned subsidiaries make bolt-on acquisitions. They may be able to acquire companies, too small for Buffett to bother with. And they should have deeper knowledge of their field than Buffett.
And Buffett could use some of the cash hoard to finance the purchase if the subsidiary needed it, at an appropriate rate.
No. of Recommendations: 12
It would be great to see wholly owned subsidiaries make bolt-on acquisitions. They may be able to acquire companies, too small for Buffett to bother with. And they should have deeper knowledge of their field than Buffett.
And Buffett could use some of the cash hoard to finance the purchase if the subsidiary needed it, at an appropriate rate.MThese bolt-ons still happen but mostly remain under the radar. Marmon's subsidiaries have been pretty consistent acquirers. -
a 2025 example:
https://www.marmon.com/news/microaire-completes-ac...a late 2023 example:
https://www.marmon.com/news/marmon-iei-to-acquire-...BHE bought more of CovePoint LNG in 2023 and that was a few billion dollars.
Allegany was a wonderful deal and it actually came with more cash and investments than it cost to acquire. Plus a bunch of nice operating companies like
https://www.wwafcosteel.com
