On Saturday Warren Buffett will answer questions about his company in public, in front of an audience of 20,000(ish) people at the Omaha CenturyLink Center. It is part of the Berkshire Hathaway annual meeting.
There will be six each from analysts Jay Gelb of Barclays, Jonathan Brandt of Ruane, Cunniff & Goldfarb, and Greggory Warren of Morningstar. Shareholders in attendance can queue up at a microphone, while journalists Andrew Ross Sorkin of the New York Times, Becky Quick of CNBC and Carol Loomis of Fortune will ask the best questions sent to them by email.
As FT Alphaville won’t be there (and would be exiled to the stadium’s rafters with the FT’s Stephen Foley and the rest of the world’s press anyway), here are the questions we suggest that someone put to the great Sage — with some explanation of why they’re important. Read more
Now, it’s not as if we’ve ever done frivolous speculation here on FT Alphaville. Plus, possibly the successor mystery is overblown: everyone knows Warren Buffett’s successor will have been at Berkshire Hathaway forever, that person will be loved by the board, and the whole thing is really about BRK’s ability to operate with enormous amounts of investor trust and goodwill (to go with its insurance goodwill, haha), etc.
But… Read more
It’s not new that Berkshire Hathaway’s Warren Buffett prefers productive assets to unproductive ones, but his latest letter to shareholders sets out his compelling argument…
…The major asset in this category is gold, currently a huge favorite of investors who fear almost all otherassets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however,has two significant shortcomings, being neither of much use nor procreative. True, gold has someindustrial and decorative utility, but the demand for these purposes is both limited and incapable ofsoaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will stillown one ounce at its end. Read more
Tesco has been boosted by the revelation that Warren Buffett’s Berkshire Hathaway group spent about £500m raising his stake in the embattled retailer after its shock profit warning last week, the FT reports. A regulatory filing showed on Thursday that the US billionaire’s investment vehicle increased its stake in the world’s third biggest supermarket chain by sales from 3.21 per cent to 5.08 per cent over two days – January 12, the day Tesco issued its first profit warning in 20 years, and January 13. The move by Berkshire Hathaway, which controls investments in listed entities worth about $67bn, is likely to be taken by some other investors as a sign of confidence in Britain’s biggest supermarket chain by market share.
Investors have dumped Bank of America, driving its share price to a near three-year low of $4.99 and raising fresh worries over the state of the second-largest US bank by assets, reports the FT. The bank’s shares are trading at about 38 per cent of tangible book value, meaning investors either do not believe the value of BofA’s assets or fear the company is understating its liabilities, analysts said. The stock has plummeted 63 per cent this year, more than rivals JPMorgan Chase, Citigroup and Wells Fargo, as concerns over falling US home prices and unknown mortgage liabilities from the bank’s purchase of Countrywide Financial continue to haunt BofA more than two years after the recession officially ended. The Sage of Omaha’s $5bn investment in the bank, made over summer, is now $1.5bn underwater, reports the WSJ’s Deal Journal. However, Berkshire Hathaway’s holding comes with other benefits such as warrants that don’t expire for 10 years and around $300m in dividend payments a year.
Warren Buffett’s Berkshire Hathaway invested $23.9bn in third quarter of the year – the highest level in at least 15 years – as the investor upped equity investments and diversified away from his traditional consumer and financial company focus, Bloomberg reported. Buffett’s purchases included $6.9bn of equities, $5bn of preferred shares and warrants in Bank of America and the $9bn acquisition of Lubrizol Corporation. Buffett deployed his counter-cyclical firepower in the third quarter as stock valuations declined amid the US debt ceiling debacle and the ongoing eurozone debt saga. Partly as a result of the spending splurge Berkshire Hathaway’s cash balance has fallen from $47.9bn on June 30 to $34.8bn, as of end-September. Buffett last spent more than $20bn in a given quarter during the second and fourth quarters of 2008, respectively, Bloomberg noted.
Berkshire Hathaway, the candy-to-cargo train conglomerate controlled by Warren Buffett, will buy back its own shares for the first time, as the famed stock investor declared the market value of his own company to be extremely cheap, reports the FT. Berkshire’s board said its cash hoard could be used for share buy-backs, provided the group paid no more than a 10 per cent premium to current book value and its consolidated cash holdings did not fall below $20bn. Lex warns against reading too much into it. But Heard on the Street argues that the move may be a dangerous one, if investors see the buy back price as a ceiling rather than a floor.
Maybe “looking on as your shares break under $100,000” is the new “having an idea in the bath”…
Berkshire Hathaway Authorizes Repurchase Program Read more
Warren Buffett has hired a second money manager at Berkshire Hathaway, a move interpreted as another piece of his closely guarded succession plan into place, the Wall Street Journal reports. The Omaha-based conglomerate named Ted Weschler, a 50-year-old from Charlottesville as an investment manager. Weschler currently runs hedge fund Peninsula Capital Advisors which holds roughly $2bn in assets, says the WSJ. Weschler met Buffett last year after winning a meal with him at a charity auction. He is understood to be winding down his fund before joining Berkshire in early 2012. Warren Buffett, who turned 81 at the end of August and remains in good health, currently has no public plans to relinquish any of his roles at Berkshire. He is chairman and chief executive and oversees the company’s $110bn portfolio of stocks, bonds and other investments.
Warren Buffett’s Berkshire Hathaway has agreed to invest $5bn to shore up confidence in Bank of America, the FT reports, in a deal that underscores the billionaire’s role in stabilising US financial institutions in times of crisis. News of the Berkshire deal on Thursday sent BofA’s shares sharply higher. They settled at $7.63, up 9 per cent. People familiar with the matter told the FT that Mr Buffett on Wednesday signalled to Brian Moynihan, BofA’s chief executive, that he was willing to invest. While Mr Moynihan maintained that the bank did not need extra capital, he agreed Berkshire’s move could ease Wall Street’s nerves.
By John McDermott, Cardiff Garcia, and Joseph Cotterill
BofA’s Buffett bounce was at 13 per cent at pixel time, paring gains from a 20 per cent high earlier on Thursday. Part of this may be due to a reverse torpedo-like situation, according to the experts at Data Explorers. There was a 16 per cent increase in the amount of shares out on loan (a proxy for shorting) this week, which may have been partly due to hopes for profit taking on a rebound. Read more
Warren Buffett’s Berkshire Hathaway offered $3.25bn for reinsurer Transatlantic Holdings, Bloomberg reports, after rival bids dropped in value as markets fell. Transatlantic struck a deal in June to sell itself to Allied World Assurance Company Holdings, which agreed to exchange 0.88 of a share for each Transatlantic share. The transaction was valued at $3.2bn based on prices at the time. Then in July, Bermuda-based Validus Holdings made an unsolicited cash-and-stock offer in July that was valued at about $3.5bn, before equity markets plunged. Berkshire Hathaway has given Transatlantic until close of business on Monday to accept the $52 per share offer. Reuters says the offer comes after Berkshire’s second-quarter profits prompted some analysts to call for the company to spend more of its $47.89bn cash pile.
Citigroup has dropped $4bn of property assets from its attempt to sell OneMain, its rebranded CitiFinancial consumer lending unit, to Centerbridge, Leucadia and Berkshire Hathaway, says the FT. OneMain’s price in a sale would likely now be around $9bn, having begun with $13.5bn at the beginning of talks. Citi has insisted that it will not accept less than book value for the unit, originally about $2bn. After the changes the value is closer to $1.5bn, people close to the matter said. Part of the problem is Moody’s granting OneMain a lower credit rating than expected, making a deal harder to finance, according to Reuters.
Citigroup has scaled back the planned sale of its former CitiFinancial unit as part of negotiations with Centerbridge and Leucadia, as potential buyers grapple with how to fund the business as a standalone entity. Citi is discussing a sale of about $9bn in assets, held within the consumer lending business recently renamed OneMain Financial, people familiar with the matter told the FT. About $4bn in property assets have been carved out of the sale. The bank has gone backwards and forwards with potential buyers as to the composition of the asset pool, those people said, which began at $13.5bn. Berkshire Hathaway, Warren Buffett’s investment vehicle, is providing financing to Centerbridge and Leucadia to help fund OneMain, one person familiar with the matter said.
Berkshire Hathaway has joined a consortium in exclusive talks to buy OneMain, the Citigroup consumer loan unit once known as CitiFinancial, says the WSJ. The consortium also includes Centerbridge Partners and Leucadia National, and may pay $8bn for the deal. OneMain has a book value of $2bn. Berkshire previously allied with Leucadia to purchase a commercial mortgage origination and servicing unit from Capmark in 2009. Citi restructured and rebranded OneMain earlier this year, says Reuters, as it prepared for a sale to remove the loans from its balance sheet.
Warren Buffett’s Berkshire Hathaway is considering legal action against David Sokol, Mr Buffett’s heir-apparent until his surprise resignation last month, after accusing him of violating company policies over share purchases, the FT reports. A probe by the audit committee concluded that Mr Sokol made “misleadingly incomplete disclosures” to Berkshire’s top managers over his dealings in $10m of shares in the US chemical group Lubrizol, the company said on Wednesday. Lubrizol was acquired by Berkshire for $9bn last month. The report said Berkshire was considering “possible legal action against Mr. Sokol to recover any damage the company has sustained, or his trading profits, or both”.
Warren Buffett’s Berkshire Hathaway is considering legal action against David Sokol, heir apparent to the billionaire investor until his surprise resignation last month, after accusing him of violating company policies over share purchases, reports the FT. A probe by Berkshire’s audit committee found that Sokol made “misleadingly incomplete disclosures” to top managers over his dealings in $10m of shares in US chemical group Lubrizol, acquired for $9bn in March, Berkshire said on Wednesday. The report said Berkshire was considering “possible legal action” against Sokol to recover “any damage the company has sustained, or his trading profits, or both”. DealBook says the move is a “stark turnaround for Berkshire, which has been careful not to criticise its former star manager”.
David Sokol, a former top deputy to US investor Warren Buffett, knew more about Lubrizol’s interest in a potential deal with Berkshire Hathaway than previously disclosed, a revelation that comes as the government examines Sokol’s personal stake in the chemical manufacturer, reports DealBook. A US regulatory filing on Monday showed Sokol was aware in mid-December that Lubrizol’s chief executive planned to talk to his board about a possible acquisition by Buffett’s firm, Berkshire Hathaway. A few weeks later, Sokol bought nearly 100,000 Lubizol shares. The fresh details again raise questions about Sokol’s decision to take a $10m stake in Lubrizol while orchestrating a potential takeover of it. The SEC is considering whether to open a formal investigation of the matter.
Courtesy of the WSJ; quote marks Warren’s own:
David Sokol has defended his decision to purchase stock in a company before recommending it to Warren Buffett, saying another key lieutenant had done the same thing, the FT reports. “I didn’t know anything that others didn’t know,” Sokol said in a CNBC interview. He had done nothing wrong or unethical, he said, but did add that “knowing today what I know, what I would have done differently is not bring the deal to Warren”. The SEC is likely to launch an inquiry into Sokol’s trades, a person familiar with the matter told the WSJ. The circumstances of Sokol’s purchases are a regulatory gray area at least, Reuters says.
Class A shares in Berkshire Hathaway dropped by 2.2% on Thursday, slicing billions of dollars in market value off the company’s market cap following the surprise resignation of David Sokol, heir apparent to Berkshire chief Warren Buffett, reports the FT. Despite investor shock at disclosures about Sokol’s trading in Lubrizol shares that appeared to trigger his departure, followers of Buffett were largely sanguine about the question of who would eventually replace him as chief executive. Lex warns that unless a new Buffett-like figure can be found, “complete with Buffett-like investment performance”, Berkshire “will have to work hard to justify its existence”. Bloomberg reports that US regulators are investigating Sokol’s trades in Lubrizol shares as Berkshire considered buying the US company.
… and when he looks back at Thursday’s interview with CNBC it might be with some regret.
When you are in a hole, stop digging etc… Read more
The Securities and Exchange Commission is probing David Sokol’s trades in Lubrizol shares before Berkshire Hathaway acquired the company, a source has told the FT. Sokol has unexpectedly resigned from Berkshire, depriving Warren Buffett of a lieutenant seen by analysts as his successor. In a letter to investors, Buffett said that neither he nor Sokol saw the Lubrizol trades as unlawful. Sokol’s departure throws Buffett’s quest for character and integrity in his successors into doubt, the WSJ says, which has also constructed a timeline of Sokol’s trading. FT Alphaville has nine further questions about the circumstances of the Lubrizol purchases.
David Sokol – widely seen as the likely successor to Warren Buffett at the helm of the billionaire investor’s Berkshire Hathaway firm, has unexpectedly resigned, reports the FT. Sokol oversaw several of Berkshire’s key holdings including MidAmerican Energy, and gained a reputation as a troubleshooter within the company. In a letter to investors, Buffett said Sokol had resigned to build his family’s fortune and his philanthropic ventures. He rejected the idea that Sokol had been fired. In recent weeks there had been speculation about Sokol’s role in Berkshire’s move to buy Lubrizol, a speciality chemicals company, for $9bn. Sokol had traded in and out of Lubrizol stock before recommending the company to Buffett. The SEC is examining Sokol’s purchase of the shares, said a person familiar with the matter. FT Alphaville raises some ‘lingering questions’ about Sokol while the FT provides separate background. DealJournal examines the timing of Sokol’s Lubrizol purchases.
By Cardiff Garcia and John McDermott
Sorry for the back-to-back press release based posts, but we think you’ll agree this is big news. And a mighty odd release it is, too. Brief commentary to follow: Read more
You hardcore financial types might have missed the below FT story, given it was in the Film & Television section of Friday’s paper and concerned a Hollywood starlet.
But wait! It’s financially relevant. We promise: Read more
Warren Buffett, the billionaire investor behind Berkshire Hathaway, has made good on his pledge to seek out larger deals, agreeing to buy Lubrizol, the speciality chemicals company, for $9bn in cash, the FT says. Just weeks after Mr Buffett told shareholders in Berkshire Hathaway that his “elephant gun” was ready for big acquisitions, Berkshire said it would pay $135 a share for Lubrizol, a 28 per cent premium to the stock’s close last week and higher than it has ever traded. Bloomberg adds that the $9bn payment for Lubrizol, means Buffett is getting the company at its Lehman-bust valuation.
Warren Buffett, the billionaire investor behind Berkshire Hathaway, has made good on his pledge to seek out larger deals, agreeing to buy Lubrizol, the speciality chemicals company, for $9bn in cash, reports the FT. Just weeks after Mr Buffett told shareholders in Berkshire Hathaway that his “elephant gun” was ready for big acquisitions, Berkshire said it would pay $135 a share for Lubrizol, a 28 per cent premium to the stock’s close last week and higher than it has ever traded. That values Lubrizol at $9.7bn, including net debt.
Warren Buffett’s Berkshire Hathaway recorded a $1bn fourth-quarter write-down on $2.1 bn in “junk” bonds of the Texas power producer formerly known as TXU Corp, reports the WSJ. The investment dates back to the height of the leveraged-buyout boom and is the only blot on an otherwise strong year for the conglomerate. The FT, meanwhile, reports that Bombardier has agreed to sell up to 120 aircraft to NetJets, the business jet company owned by Berkshire, for up to $6.7bn at catalogue prices. Although the actual price paid is often much lower, the deal reflects optimism about recovery in the business jet market. The deal, Bombardier’s largest such transaction, sent shares in the Canadian group up 8% on Wednesday.