Tag Archives: Warren Buffett

Tracy Britt Cool Leaving Berkshire Hathaway

(BRK.A), (BRK.B)

One of Warren Buffett’s most trusted lieutenants is leaving Berkshire Hathaway. Tracy Britt Cool will be leaving the company to form her own business acquisition company.

Britt Cool plans to launch a new long-term platform to acquire and build businesses. She will use her experience from Berkshire Hathaway as a value investor and an entrepreneurial-minded operator to focus on buying and growing companies that are smaller than Berkshire Hathaway’s size threshold for acquisitions.

Britt Cool has been with Berkshire Hathaway for 10 years. In addition to serving as CEO of Pampered Chef for the last 5 years, she has held a variety of roles including Financial Assistant to the Chairman, board member of Kraft Heinz, and Chairman of several Berkshire Hathaway companies.

To support a smooth transition, Britt Cool will remain with Pampered Chef until March 2020, when Pampered Chef’s Chief Operating Officer Andrew Treanor will become CEO.

“While it has been a difficult decision to leave such an amazing and well-respected company, it has been an honor and a privilege to work with Warren Buffett, as well as many accomplished colleagues,” Britt Cool shared. “I’m proud of my time at Berkshire Hathaway and am grateful to have helped grow several Berkshire companies, including Pampered Chef. Our team has transformed Pampered Chef into a vibrant company that is growing, innovating, and enriching lives. I’m confident Andrew is the right leader to continue to drive our growth and success.”

Over the last five years, Pampered Chef focused on rebuilding the foundation of the business and creating new engines for growth through a renewed focus on the independent consultant base, a refreshed brand, enhanced product innovation, expanded international footprint, and significant digital channel growth. Following more than a decade of decline, the company has meaningfully grown sales and earnings over the last 5 years. It has grown into a strong and diverse business with more than 50% of Pampered Chef’s business now coming from digital sales, up from approximately 10% in 2014.

Warren E. Buffett, Chairman and CEO of Berkshire Hathaway, stated: “Five years ago I asked Tracy to redirect and re-energize Pampered Chef. Direct selling was encountering new challenges and Pampered Chef’s sales and earnings had been declining. Under Tracy’s leadership, major financial gains have been achieved. Even more important, our corps of consultants is rapidly growing and prospering. Tracy is handing Andrew a company infused with excitement and momentum.”

“As a founder, I couldn’t have asked for a better leader and partner in rebuilding Pampered Chef than Tracy. She has played a critical role leading the company’s transformation and building a strong team to continue our growth,” said Doris Christopher, Founder and Chairman of Pampered Chef. “I’m confident in Andrew’s leadership and Pampered Chef’s growth, and I’m excited for what Tracy will do next. I know she will be successful in building even more companies and will be a strong partner to founders, entrepreneurs, and management teams.”

© 2019 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Warren Buffett Prevails in Battle with Carl Icahn

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Famed activist investor Carl Icahn has come up short in his battle with Warren Buffett over Occidental Petroleum’s acquisition of Anadarko Petroleum.

The deal closed on August 8, which puts in place Berkshire Hathaway’s funding deal of the takeover.

At the end of April, Buffett announced that Berkshire would invest $10 billion in Occidental in exchange for preferred stock and warrants to purchase common stock. The investment enabled Occidental to top Chevron’s bid for Anadarko.

The deal infuriated Icahn, who castigated Occidental’s CEO and President Vicki Hollub, and railed that “The whole thing is a travesty.”

In exchange for $10 billion, Berkshire Hathaway received 100,000 shares of cumulative perpetual preferred stock with a liquidation value of $100,000 per share and 8% annual dividend. Berkshire can redeem the shares for cash at the option of Occidental in at least 10 years for 105% of the liquidation price, in addition to all dividends.

Berkshire also received warrants to purchase up to 80 million shares of common stock with an exercise price of $62.50 per share, with an expiration date of up to one year after Berkshire redeems its preferred stock.

In a letter to Occidental shareholders written after the announcement, Icahn expressed his displeasure, stating that “Buffett figuratively took her to the cleaners,” and that it was “like taking candy from a baby.”

That may be, but Berkshire will now be receiving 8% for as long as it holds its preferred stock, which looks mighty good in these days of falling interest rates. Berkshire will be receiving $800 million a year, and may make millions more if oil prices rise and make its warrants valuable.

© 2019 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Commentary: Here’s One Big Thing to Like in Buffett’s Annual Letter

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Warren Buffett may be frustrated that he can’t find any “elephants” to acquire, but he did give hope to Berkshire investors that there is one elephant-sized company that he would love to own more of, Berkshire Hathaway.

In his just released Annual Letter to Shareholders, Buffett stated “it is likely that – over time – Berkshire will be a significant repurchaser of its shares…”

While Buffett made no mention of paying a dividend, which is something he has been negative on in the past, he is clearly willing to put more of Berkshire’s $112 billion in cash into stock buybacks if the price is right.

It’s a process that’s already begun.

In the 3rd quarter of 2018, Berkshire bought back $928 million of its stock, which brought the 2018 total to more than $1.3 billion.

Now, with no big acquisition moves on the horizon, Buffett seems to be warming even more to the idea.

Remember, he stated that in future buybacks Berkshire would be a “significant repurchaser.”

Does this indicate that future buybacks could be substantially larger than what we saw last year?

It all comes down to price, and whether in Buffett’s opinion Berkshire is trading below its intrinsic value.

“If the market prices a departing partner’s interest at, say, 90¢ on the dollar, continuing shareholders reap an increase in per-share intrinsic value with every repurchase by the company,” Buffett explained.

“Assuming that we buy at a discount to Berkshire’s intrinsic value – which certainly will be our intention – repurchases will benefit both those shareholders leaving the company and those who stay,” Buffett said.

Ever cautious, Buffett is only interested in buybacks if they create value for shareholders, noting that “Blindly buying an overpriced stock is value destructive, a fact lost on many promotional or ever-optimistic CEOs.”

In his letter, Buffett also highlighted how over the years stock repurchases of some of the minority stakes Berkshire holds have given it an increasing share of those companies without spending a dime.

He pointed out that “Berkshire’s holdings of American Express have remained unchanged over the past eight years. Meanwhile, our ownership increased from 12.6% to 17.9% because of repurchases made by the company. Last year, Berkshire’s portion of the $6.9 billion earned by American Express was $1.2 billion, about 96% of the $1.3 billion we paid for our stake in the company. When earnings increase and shares outstanding decrease, owners – over time – usually do well.”

And over time, as Berkshire increases its own buybacks, hopefully shareholders will do well too.

© 2019 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Hathaway Exits Home Capital Position

(BRK.A), (BRK.B)

Berkshire Hathaway is substantially exiting its position in Canadian alternative lender Home Capital Group following the completion of the company’s Substantial Issuer Bid process.

In 2017, Berkshire invested in the company and provided financing that helped stabilize the lender, however, shareholders thwarted its plans for more extensive ownership.

“We are delighted to see Home Capital back on its feet with healthy liquidity and a solid capital position,” Warren Buffett said in a statement. “In June of 2017, when some were questioning Home’s staying power, Berkshire agreed to lend the Company $2 billion. The team at Home was a pleasure to deal with and have worked to thoughtfully strengthen Home over the last 18 months. As part of the loan commitment Berkshire also committed to provide $400 million of equity financing to Home – $153 million with the funding of the credit line and an additional $247 million contingent upon shareholder approval; shareholders did not approve the additional investment and, as a result (coupled with a full repayment of Berkshire’s credit line) Berkshire’s investment in Home is now not of a size to justify our ongoing involvement. Although we have decided to substantially exit from our investment, we will continue to cheer from the sidelines for our friends at Home.”

© 2018 David Mazor


Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Hathaway Powers Ahead with Rising Profits, Stock Buy-Back

(BRK.A), (BRK.B)

Berkshire Hathaway’s operating profits soared in the third quarter of 2018, as quarterly operating profit was almost double from 2017.

For the 9 months of 2018 the net earnings attributable to Berkshire shareholders reached $29.413 as compared to $12.389 billion for the first 9 months of 2017.

Insurance underwriting income was one of the drivers of the growth, generating $441 million in the third quarter, versus a loss of $1.4 billion in the year-ago period.

The company also posted strong revenues in its railroad, utilities and energy, and its other businesses.

Berkshire’s enormous minority positions in a slew of leading corporations, including Apple, Southwest Airlines, General Motors, Bank of America, American Express, and Wells Fargo, grew by almost $12 billion.

Berkshire also reported that its insurance float had grown to $118 billion, an increase of $2 billion over the end of the second quarter.

The conglomerate also revealed that Warren Buffett had Berkshire repurchase over $928 Million in Berkshire Stock.

The move was the first buy-back since 2012 and confirms Buffett’s position that the shares are undervalued.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Commentary: Buffett and Munger Right on Cryptocurrencies, So Far

(BRK.A), (BRK.B)

It’s no secret that Warren Buffett and Charlie Munger have been famously down on cryptocurrencies.

“Bitcoin is like rat poison squared,” Buffett said during the 2018 Berkshire Hathaway annual meeting.

That Buffett, and Berkshire’s vice-chairman Charlie Munger, are naysayers on cryptocurrencies is no surprise. As the world’s leading value investors, speculative assets are exactly the things they avoid.

While Buffett’s “rat poison,” comment did not come with a detailed explanation, it was, however, supplemented by Munger’s take that cryptocurrencies are “totally asinine.”

On the speculative trading frenzy that bid prices up to astronomical levels at the end of 2017, that didn’t impress Munger much either.

“Someone else is trading turds and you decide I can’t be left out,” Munger noted wryly.

Since May, cryptocurrency prices have continued their downward march, including heavy selling on Monday and Tuesday.

Why? Perhaps it’s because the highly touted utility of Bitcoin, Ethereum, etc. have yet to prove compelling to anyone but speculators.

A Currency, or a Speculative Asset?

People that tout Bitcoin and other cryptocurrencies are really believers in the rise of a nonproductive asset that is no different than gold, silver, or the alligator infested swamp land offered during the Florida land speculation of the 1920s.

Cryptocurrencies are an asset that is moving up or down daily based on what Benjamin Graham would have called speculation, and what can also be called gambling.

Devotees will wax poetic about the unique properties of blockchain, the supposed anonymity of cryptocurrencies, and other virtues of virtual currencies that show its utility, but to do that is to ignore that these assets are not being bought and used as what they are touted as, currencies.

After all, a currency is supposed to be a medium of exchange between two parties for goods and services, not a speculative asset class that you stash in your safety deposit box on a thumb drive.

As for its unique utility, that also hasn’t impressed Munger all that much.

“The fact that it’s clever computer science doesn’t mean it should be widely used, and that respectable people should encourage other people to speculate on it,” Munger said on CNBC’s Squawk Box.

Put aside its so-called utility, let’s talk about why people really got excited about Bitcoin in the first place. It inflated in value at an astronomical rate, and people were becoming cryptocurrency millionaires or billionaires overnight without doing anything.

But wait, this extreme bidding upward in the marketplace is not a feature of currencies. It is a feature of speculative asset fevers reminiscent of the Dutch Tulip Mania of the 1500s.

While historically currencies have periodically plunged in value due to hyper-inflation (just look at Venezuela to see that phenomenon), the same process does not happen in reverse.

There’s a simple explanation for that. Plunging values for currencies reflect a lack of faith in a currency as a method of exchange. The more extreme that pessimism, the more currency it takes to overcome it.

But, currencies of the more sound variety, which in essence have more faith placed in them by creditors, do not get bouts of extreme faith that shoot them up astronomically. They increase or decrease in a much narrower range.

Accepting Bitcoin as a currency is no different than asking to get paid in casino chips or lottery tickets. You are hoping for a second transaction to determine its value. At the casino it’s spinning the roulette wheel, and with cryptocurrencies it’s betting in the marketplace that someone will pay you more for your Bitcoins than the valuation you got them at.

All speculative bubbles are full of enablers. They are so-called experts that tell you why this time is different, hucksters telling the masses not to be left out, and true believers that have adopted the asset as a religion.

It’s a familiar tale that always has a sad ending for all but a few.

“Bitcoin is worthless, artificial gold,” Munger noted on Squawk Box. “Now that is not something I think the world needs.”

So, far, both Buffett and Munger are being proven right.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Commentary: Buffett Not the Only Billionaire into Restaurant Brands International

(BRK.A), (BRK.B)

One of Warren Buffett’s best deals in recent years was his 2014 financing of Burger King’s acquisition of Canadian Restaurant Chain Tim Hortons.

The deal was financed by Berkshire Hathaway, and Berkshire’s role gave the conglomerate ownership and control over 4.18% of the outstanding Common Shares and 14.37% of the total number of votes attached to all outstanding voting shares of the newly created Restaurant Brands International.

The company has continued to grow, and in 2017 gobbled up Popeyes Louisiana Kitchen for $1.8 billion.

What made the deal one of Buffett’s best was Berkshire’s right to purchase 8,438,225 common shares of Restaurant Brands for a penny a share. The warrants came attached to 68,530,939 Class A 9.00% Cumulative Compounding Perpetual Preferred Shares that Berkshire acquired during the financing.

Berkshire has been sitting in the catbird seat, and with Restaurant Brands’ stock currently at $62.77 a share, Buffett is ahead a remarkable 620,770%.

It’s a reminder that Buffett is not just a great stock picker, he’s one the greatest dealmakers.

Restaurant Brands International, which trades under the symbol QSR, was trading in the $40s when the company was formed, and is still drawing interest at prices fifty percent higher than that.

Billionaire Kenneth C. Griffin has amassed 4.6 million shares of Restaurant Brands’ stock.

Griffin has been ranked as the 52nd richest person in America, and his Citadel LLC has developed a reputation for astute investments.

Griffin got his investing start in 1987, when as a 19-year-old sophomore at Harvard University, he started trading from his dorm room with a fax machine, a personal computer, and a telephone.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Revised Berkshire Hathaway Stock Repurchase Program Makes Stock Buyback More Likely

(BRK.A), (BRK.B)

In a move that makes a Berkshire Hathaway stock buyback much more likely, the Board of Directors of Berkshire Hathaway has authorized an amendment to Berkshire’s share repurchase program.

The earlier share repurchase program provided that the price paid for repurchases would not exceed a 20% premium over the then-current book value of such shares.

Under the amendment adopted by the Board of Directors, share repurchases can be made at any time that both Warren Buffett, Berkshire’s Chairman and CEO, and Charlie Munger, a Berkshire Vice Chairman, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined.

The current policy whereby share repurchases will not be made if they would reduce the value of Berkshire’s consolidated cash, cash equivalents and U.S. Treasury Bills holdings below $20 billion will continue. Berkshire will not initiate any share repurchases under the amended program until it publicly releases its second quarter earnings, currently scheduled after the close of the markets on Friday, August 3, 2018.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Buffett Converts Shares, Makes Multi-Billion Charitable Donations

(BRK.A), (BRK.B)

Warren Buffett is a generous guy. He’s made a massive fortune and now he’s giving much of it away. Buffett has converted 11,867 of his Class A shares into 17,800,500 Class B shares.

Of these Class B shares, 17,696,780 have been donated to five foundations: Bill & Melinda Gates Foundation, Susan Thompson Buffett Foundation, Sherwood Foundation, Howard G. Buffett Foundation and NoVo Foundation. These shares have a current value of $3.4 billion.

Buffett has never sold any shares of Berkshire. With the current gift, however, about 43% of his 2006 holdings have been given to the five foundations.

Their value at the time of the gifts, including the 2018 gift, totals about $31 billion.

Buffett is following his plan to have all of his Berkshire shares given to philanthropy through annual gifts that will be completed ten years after his estate is settled. In all cases, his A shares will first be converted into B shares immediately prior to the gift.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Finally Cashes Out of USG

(BRK.A), (BRK.B)

After 17 years riding USG’s stock up and down, Warren Buffett is finally going to cash out with a profit.

Gebr. Knauf KG and USG Corporation have entered into a definitive agreement pursuant to which Knauf will acquire all of the outstanding shares of USG in a transaction valued at approximately $7.0 billion.

Under the terms of the agreement, USG shareholders will receive $44.00 per share, which consists of $43.50 per share in cash payable upon closing of the transaction and a $0.50 per share special dividend that would be paid following shareholder approval of the transaction.

The price represents a premium of 31% to USG’s unaffected closing price of $33.51 and a 36% premium to the $32.36 average closing price for the preceding 12-month period, both as of March 23, 2018, and a multiple of approximately 11.6x USG’s adjusted EBITDA for the 12 months ended March 31, 2018.

The transaction was unanimously approved by USG’s Board of Directors.

Berkshire Hathaway has agreed to vote its shares in favor of the transaction. As of June 11, 2018, Berkshire Hathaway and its subsidiaries owns approximately 31% of the issued and outstanding shares of USG.

While Berkshire will exit its position with a profit, Warren Buffett had previously expressed his disappointment with the fortunes of the company.

“So just put that one down as not one of our brilliant ideas,” Buffett said. “Not a disaster,” he added.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.