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SAT, JAN 27, 2024
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Berkshire shares rally to all-time closing highs
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After seven straight days of gains that propelled Berkshire Hathaway's Class A shares 6.8% higher, the stock closed today at a fresh all-time high of $582,300 per share. Over the past five years, they have increased by almost 92% vs. the S&P's 83.5% gain, excluding dividends. (Including dividends, the S&P was up around 107% for the five years ending December 31, 2023.) |
The more widely held Class B shares have also closed higher in each of the past seven trading sessions.
They are up 7.3% over that period, finishing today at $385.40. That's a bit more than a 90% gain for the past five years. |
Barron's gives the credit to "fresh gains in Apple (the company’s largest equity holding), strength in the insurance sector, and expectations of robust fourth-quarter results" when they are released late next month.
CNBC Pro reports UBS analyst Brian Meredith has raised his 12-month price target for the B shares to $435 from $410, which would be a gain of 13% from today's close.
Meredith thinks Berkshire will be repurchasing more shares since the stock is trading around 14% below the company's intrinsic value, which is lower than the average 18% discount over the past eight years but still at a level that has prompted past buybacks. In addition, Meredith thinks "[t]he fundamental outlook for BRK’s Insurance and Non-Insurance businesses in 2024 is good at a reasonable price." Investor's Business
Daily, however, advises that based on the B shares' chart, "Now is not an ideal time to jump in because it isn't near a proper buy zone."
(A reader sent an email in response to last week's bullish chart reading noting that Buffett himself doesn't think much of technical analysis.) |
Berkshire makes small addition to a bet that could be a big winner |
Berkshire has added another $45 million to its wager on Liberty SiriusXM's tracking stocks.
In SEC filings this week, it reported purchases over three days of 439 thousand shares of Class A voting shares (LSXMA) for $13.6 million (average price: $30.99) and 1.0 million shares of Class C nonvoting stock (LSXMK) for $31.1 million (average price: $30.97).
It's the third time this month Berkshire has disclosed a 3-day series of purchases.
But even with all that daily activity, it has spent just $212 million, which isn't much by Berkshire's standards, and the additions are a small percentage of the positions' $2.2 billion market value. |
That $2.2 billion, however, could turn into more than $3.1 billion later this year, and that's real money, even at Berkshire.
As Barron's Andrew Bary explains, Liberty plans to merge the SiriusXM tracking stocks with Sirius XM Holdings (SIRI) in the third quarter of this year.
It will do that by exchanging 8.4 shares of SIRI for each tracking stock share.
SIRI closed today at $5.34, LSXMA ended at $30.97, and LSXMK finished at $30.90.
If the exchange happened right now, each tracking stock share would turn into 8.4 SIRI shares with a value of (8.4 times $5.34 equals) $44.86, generating a gain for Berkshire of 45% from the current value of its tracking stocks.
As Bary writes, the trade seems "too easy to resist," and hedge funds like Israel Englander's Millennium Management, Steve Cohen's Point72, and Seth Klarman's Baupost Group were big holders of the tracking stock as of the end of September, based on quarterly disclosures.
(Berkshire portfolio manager Ted Weschler is thought to be responsible for its LSXMA and LSXMK positions, Bary says.) |
Millenium Chairman and CEO Israel Englander in 2010, Point72 Chairman and CEO Steven Cohen in 2011, Baupost Group CEO & Portfolio Manager Seth Klarman in 2019 (Reuters file photos: Phil McCarten, Steve Marcus, Brendan McDermid)
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Why haven't arbitragers closed the gap already? Bary says it is difficult for them to "buy the tracking stock and sell short Sirius XM to lock in the spread because of high short interest in Sirius stock," which also has a float of just 16%.
All that short interest indicates bears think SIRI is too high and its "true value" is closer to the price implied by the current levels of the tracking stocks, $31 divided by 8.4, which is $3.69. They see a risk SIRI could fall sharply once the exchange is completed, making the trade quite resistible. |
Buffett reportedly endorses Citigroup CEO's reorganization plans |
Warren Buffett wants Citigroup CEO Jane Fraser to continue her major reorganization of the bank, which already includes plans to cut 10% of its workforce - roughly 20,000 employees - over the "medium term."
Reuters quotes a source who was on a conference call last week in which Fraser told senior bank executives that Buffett endorsed her efforts when the two met for lunch recently. |
Citigroup CEO Jane Fraser at the Milken Institute Global Conference in Beverly Hills, California, May 1, 2023. Photo: REUTERS | Mike Blake |
A Berkshire representative confirmed to Reuters that the lunch did take place but did not provide any further details. Berkshire reported holding 55.2 million shares as of the end of September. They would have a market value of almost $3 billion based on today's close of $53.67.
After the Reuters report, Wells Fargo bank analyst Mike Mayo endorsed Buffett's endorsement.
CNBC Pro quotes him as saying in a note to clients, "Leave it to the ‘Oracle of Omaha’ to keen in on the 1 of est. 12+ Citi restructurings that may work. Warren Buffett supports the CEO’s restructuring. If so, this is one more person who thinks this time is different." Earlier this year, Mayo called Citigroup his top banking pick and predicted the stock will double over the next three years. |
BUFFETT AROUND THE INTERNET Some links may require a subscription |
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HIGHLIGHTS FROM THE ARCHIVE |
Growth and value are not distinct categories (2000) |
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BERKSHIRE'S TOP U.S. STOCK HOLDINGS - Jan. 26, 2024 |
Berkshire's top holdings of disclosed publicly traded stocks in the U.S., Japan, and Hong Kong, by market value, based on today's closing prices.
Holdings are as of September 30, 2023 as reported in Berkshire Hathaway’s 13F filing on November 14, 2023, except for: The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker. In response to a reader request, I have added a column to the top holdings table comparing the value of each stock to the total value of Berkshire's reported equity portfolio. The Portfolio Tracker continues to show that percentage for all of Berkshire's positions. |
Please send any questions or comments about the newsletter to me at alex.crippen@nbcuni.com. (Sorry, but we don't forward questions or comments to Buffett himself.) If you aren't already subscribed to this newsletter, you can sign up here.
Also, Buffett's annual letters to shareholders are highly-recommended reading. There are collected here on Berkshire's website. -- Alex Crippen, Editor, Warren Buffett Watch |
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