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FRI, APR 12, 2024
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Satellite radio exchange play slides underwater as bet increases |
Berkshire Hathaway has been steadily adding this year to its positions in two tracking stocks (LSXMA and LSXMK) connected to Liberty Media's Sirius XM radio service.
In SEC filings tonight (Friday) three hours after the market close, it disclosed the purchases over the past three days of another 1.9 million shares for $50.1 million.
Combined with shares it bought on April 4 through April 8, it has spent $147.3 million so far this month and almost $1.2 billion since January 2.
The apparent goal: take advantage of a price differential in an upcoming reorganization that was announced in mid-December in which each tracking stock share will be exchanged for 8.4 shares of Sirius XM Holdings (SIRI).
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At the beginning of the year, it looked like a good deal. SIRI was trading at $5.49 per share, putting the exchange value at more than $46 for a tracking share then valued at less than $30.
Since then, however, SIRI has dropped by more than 41% to close at $3.21 today.
In the last week, based on SIRI's closing price each day, the value of the shares Berkshire would receive for the tracking stock shares it has bought this year has dropped below what it paid for them.
As of tonight, Berkshire has paid $1.18 billion this year for 40.3 million tracking shares that would, at SIRI's current price, be exchanged for 338.6 million shares valued at $1.09 billion, for a loss of around $90 million.
It's also lost money, on paper, just with the tracking shares it has bought this year. Based on tonight's close, they are valued at just over $1.0 billion.
Things could change before the exchange takes place. It's expected to happen in this year's third quarter, although it could come earlier.
Berkshire may be playing another game altogether, but right now it looks like the money it has spent adding to its LSXMA and LSXMK positions this year isn't going to be a winning investment. |
Berkshire's partner in Kraft Heinz merger 'quietly' sells its stake |
Nine years after working with Berkshire Hathaway to engineer the merger of Kraft Foods and Heinz, the Brazilian private equity form 3G Capital has sold all of its 16% stake in Kraft Heinz.
In a statement to CNBC, Kraft Heinz said, "3G has not been involved in the management of Kraft Heinz, nor have they been on the Board for several years. They had continued to be an investor and were treated as we do any investor.
"We did learn from their recent filing that 3G exited the Kraft Heinz stock entirely in 2023." |
Commemorative items for sale on display at the Kraft Heinz booth during the 2016 Berkshire shareholders meeting. REUTERS/Ryan Henriksen |
Berkshire remains Kraft Heinz's biggest shareholder with a 26.8% stake currently valued at $11.7 billion. That's roughly 3% of its equity portfolio.
After a devastating earnings miss in 2019 that included a $15.4 billion write-down for two of Kraft Heinz's best-known brands, Buffett told CNBC that he was "wrong in a couple ways" on the company and that Berkshire and 3G had "overpaid" for Kraft.
He noted big retailers were putting a lot of downward price pressure on packaged goods companies. |
Some investors blamed 3G's cost-cutting at Kraft Heinz for the company's troubles, a criticism that Buffett rejected as he denied any tensions with 3G. |
Berkshire avoids massive sell-off for insurance stock hit by fraud allegations |
Berkshire Hathaway completely eliminated what had been a three-quarters of a billion dollars position in Globe Life just months before fraud allegations this week cut the insurance company's stock price by almost half.
In a lengthy post on its website yesterday, short-seller Fuzzy Panda Research said it had "uncovered extensive allegations of insurance fraud ignored by management despite being obvious and reported hundreds of times," including "policies written for dead and fictitious people ... forged signatures ... funds withdrawn from consumers' bank accounts without approval ... fictitious bank accounts used to fund numerous fake policies, so agents hit their bonuses."
It also accused executives of involvement in a "bribery & kickback scheme that a lawsuit estimates netted them >$65 million." |
After closing 53% lower at a more than 10-year low of $49.17 Thursday, GL bounced back a bit as the company issued a statement refuting the allegations. It said the Fuzzy Panda report "mischaracterizes facts and uses unsubstantiated claims and conjecture to present an overall picture of Globe Life that is deliberately false, misleading and defamatory" to drive down the insurer's stock for a "short-term profit." Globe Life first appeared in Berkshire's portfolio in 2019. The position was valued at $700 million at the end of last year's first quarter, but was completely eliminated with sales in the second, third, and fourth quarters. One of the bullet points Fuzzy Panda uses to support its short recommendation is "Warren Buffett Dumped the Stock."
Given the relatively small size of the position, it was almost certainly controlled by one of Berkshire's portfolio managers, not by Buffett himself. We do not know what prompted that manager to sell, but it does now look like a good move. |
Bidding starts next month in first post-Buffett 'Power Lunch' auction |
A charity auction of a lunch with Salesforce Chairman and CEO Marc Benioff, taking over from Warren Buffett, is scheduled to begin on Sunday, May 5 at 10:30 pm ET.
Online bidding on eBay, which starts at $25,000, will continue through Friday, May 10 at 10:30 PM ET. All bidders need to be pre-qualified before the auction begins.
For more than 20 years, the winning bidder shared a meal with Buffett in auctions that raised $53 million to support San Francisco's GLIDE, an organization that addresses "poverty, housing and homelessness, and racial and social justice." |
Salesforce CEO Marc Benioff at the World Economic Forum in Davos, Switzerland, Jan. 18, 2024. REUTERS/Denis Balibouse |
In April 2022, after a two-year pandemic break, organizers said the auction that year would be Buffett's "grand finale." The bidding raised a record $19 million. There was no auction in 2023. Last November, SFist reported Buffett had announced at a GLIDE holiday gathering that Benioff would be hosting the lunch in 2024 and beyond. In a news release detailing this year's auction, Buffett is quoted as saying, "The baton is in the right hands with Marc Benioff. He's going to do a wonderful job improving on what I did over the years." |
BUFFETT AROUND THE INTERNET Some links may require a subscription |
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HIGHLIGHTS FROM THE ARCHIVE |
Business schools have made investing 'more difficult' (2012) |
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BERKSHIRE'S TOP U.S. STOCK HOLDINGS - Apr. 12, 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 December 31, 2023 as reported in Berkshire Hathaway’s 13F filing on February 14, 2024, except for: The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker. |
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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