Tag: Buffett

Berkshire paid the most corporate income tax in the US, or about “5% of what all of corporate America paid”.

Buffett complained a bit about US fiscal recklessness and the inability of fixed income securities to protect buying power.

Buffett still prefers equity – but he didn’t say public equity!

“P/C insurance growth is dependent on increased economic risk. No risk – no need for insurance. ”

Berkshire borrowed “fixed” rate in yen! How beautiful the transactions were. But if Japan’s interest rate were to rise significantly in the future (when Berkshire needs to refinance), will Berkshire find those Japanese dividend less attractive?

Wage increases due to inflation and negotiation reduced BNSF earnings, in a degree more than Buffett expected. Revenues also fell.

Buffett increased holdings in Japan’s “conglomerates” – these companies are diversified, repurchasing their shares, receiving lower wages at C-level, and reluctant to issue shares. Those purchases began in 2019.

There were some problems with BHE – no fixed return as a utility, and with rising climate change induced problems.

Stick with wonderful businesses! “Patience pays, and one wonderful business can offset the many mediocre decisions that are inevitable.”

When TTI’s founder was considering a sale, Berkshire was preferred over competitors and other financial buyers, as Berkshire won’t cut back-end jobs and won’t be a reseller.

“Teaching, like writing, has helped me develop and clarify my own thoughts.” – totally agree.

 

 

Berkshire’s structure – “Although our form is corporate, our attitude is partnership.”

There are two different type of individual investors with Berkshire – those own and trade stocks, and those “who simply trust us to represent their interests, whatever the future may bring”.

Berkshire has become the No.1 owner of US PP&E. The runner-up is AT&T.

Buffett and Munger on repurchases – “neither of us feels any urgency to buy an estimated $1 of value for a very real 95 cents.”

One source of funding or leverage Berkshire has is deferred tax liabilities, which is a interest rate free loan. Those rose from unrealized gains and accelerated depreciation.

In the next annual letter, Buffett will not list book value per share any more; instead, the per share market value will be compared vs. S&P 500.

Redefining risk-free: “risk-free” long-term bonds in 2012 were a far riskier investment than a long-term investment in common stocks, as

investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.

Another lesson from Buffett – stick with big, “easy” decisions and eschew activity.

For certain stocks, Buffett has no intention to sell, however, those are still considered “available for sale” stocks.

Buffet’s tax lesson on dividends – “For a non-insurance company – which describes Berkshire Hathaway, the parent – the federal tax rate is
effectively 101⁄2 cents per $1 of dividends received. Furthermore, a non-insurance company that owns more than 20% of an investee owes taxes of only 7 cents per $1 of dividends. That rate applies, for example, to the substantial dividends we receive from our 27% ownership of Kraft Heinz, all of it held by the parent company.”

Buffett compared results of HFs vs. S&P 500 over the past 9 years. On average S&P 500 won.

Berkshire added the sixth “powerhouse”, which is Precision Castparts Corp for manufacturer aerospace components.

Haha I liked this quote – “utility was the only business that would automatically earn more money by redecorating the boss’s office”.

When technology changes “destroyed” some industries, what to do? Buffett suggested a better safety net for those “who are willing to work but find their specific talents judged of small value because of market forces. “. Well said I think.

 

Buffett added a new column for the “market” value of Berkshire’s share. This is important as “cost-based carrying value” was never revalued up. Thus, over time “the gap between Berkshire’s intrinsic value and its book value has materially widened”.

“a business with terrific economics can be a bad investment if it is bought for too high a price”.

Buffett recognized the investment failure in Tesco, and said he should have exited earlier.