Posts for Ticker ‘Buffett’

Kraft Options Continue Volume Surge (KFT)

Kraft_logoThis has been a very unusual week over at Kraft Foods Inc. (NYSE: KFT).   Interestingly enough, this may be irrelevant from the company’s significant earnings win at the start of the week.   We noticed highly unusual options trading at VSinvestor this week and you can see on yesterday’s post just how much the interest has grown.  This is also for the current expiration month rather than on farther outlying month expiration dates. If you look below, you’ll see that the activity is continuing this week for the AUGUST contracts:

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Posted on: August 1, 2008 – 11:15 am in Buffett, Food, Options, ,

Warren Buffett Calls Recession (BRK.A, BRK.B)

Warren Buffett of Berkshire Hathaway (NYSE: BRK.A, BRK.B) has been on CNBC this morning discussing his Wrigley’s bid this morning.  Interestingly enough this interview was more of a general discussion about the current economic climate and strategy since he said, "We are in a recession." 

The call in the last few minutes also noted that the classic definition of a recession being negative GDP for two consecutive quarters and a 0.1% growth may keep the classic definition from being there.  He also noted that the National Bureau of Economic Research is the one who officially calls the classic recession, and that definition is far different "from the man in the streets."

He also noted that the current trade policies will weaken the dollar, although he noted how he was also surprised that inflation hasn’t been higher from commodity costs. Warren Buffett also said he thinks this will deeper and longer than many people think.

We have been in "recession mode" according to our own internal readings for the entire part of 2008.  Whether or not GDP will show a true negative number or not is immaterial.  Things started heading south ahead of Christmas, and the wings were ripped off the plane mid-flight starting in January to February.

The Fed interventions and actions to save the financial institutions have done more than the rate cuts, and we’ve noted that the FOMC should maybe take that throttle off of rate cuts now.  The rates get advertised in the windows for lower rates, but you can’t qualify.

Berkshire Hathaway’s holdings for the end of Q1 are not yet out, but here is a partial list of his most recent holdings as of the last filing date.

Jon C. Ogg
April 28, 2008

Posted on: April 28, 2008 – 7:57 am in Buffett, , ,

Warren Buffett Ready To Save Muni Bond Insurance (BRK-A, ABK, MBI, SCA)

Warren Buffett of Berkshire Hathaway (NYSE: BRK-A, BRK-B) just appeared on CNBC with his plan to save the bond insurance business in the U.S. for municipal bond issuers.  He noted that last week he sent an offer to the top three bond insurers with a plan to acquire the outstanding municipal bond insurance operations of each.  His offer was roughly 1.5-times the remaining premiums left on the life of each insurance contract.

While we did not get a list of these, the two obvious ones are MBIA inc. (NYSE: MBI) and Ambac Financial Group, Inc. (NYSE: ABK).  Presumably the third one would be FGIC, or likely it could be Security Capital Assurance Ltd. (NYSE: SCA).  Most shares are higher after Buffett came on CNBC with his plan:
SCA +9% at $2.24; MBI +3% at $14.00; ABK +4.5% at $10.96.

Mr. Buffett did note that this was initially a $5 Billion proposition and that he would keep all earnings inside the entities for a period of 10-years.  He also noted that one rebuffed his offer and two he has not heard back from.

What is important here is that this will at least take care of the municipal bond side even if those other bond insurance operations in mortgages, CDO’s, and CLO’s were to fail.  But Buffett is drawing his line in the sand on what risks he will take and which he will not take.  These plans would not include insuring mortgages, CDO’s and CLO’s.  That is why the bond insurers are not jumping at this offer.  They’d be giving away their top operations to feed their leeches.

He even made a note about how his new municipal bond insurance unit received a 2% premium merely to reinsure a muni that had already been insured so it could maintain its triple-A rating even if the bond insurer failed.  No wonder he’s willing to step up.  If you have a few billion dollars lying around and have a solid insurance holding company operations this sounds like a layup when you consider the fact that it takes the worst scenarios to cause municipal defaults.   

Perhaps the most important issue at hand is that this will at least put a floor on the blood-letting that has been seen in the municipal bond arena.  It won’t help the mortgage and CDO insurance operations, although there is an obvious tertiary benefit in that this at least in theory saves part of those businesses.

Jon C. Ogg
February 12, 2008

Posted on: February 12, 2008 – 8:54 am in Buffett, Financial Stocks, Turnarounds, , , , , , , ,

Buffett Trims Some Rail Holdings (UNP, NSC, BNI, BRK-A)

It appears Warren Buffett may have cooled a bit toward the railroad sector.  An SEC filing Monday evening showed that Bekshire Hathaway (NYSE:BRK-A) trimmed a 10.5 million share stake of Union Pacific (NYSE:UNP) down to 7.411 million shares.  It also lowered its prior 6.4 million share stake in Norfolk Southern (NYSE:NSC) to 3.757 million shares.  Unfortunately there is no mention of its 17% stake in Burlington Northern Santa Fe Corp. (NYSE:BNI).

Keep in mind that these positions have a longer lookback date.  The "as of" date here was listed as June 30, 2007, so that is quite a long lookback.  Berkshire Hathaway gets an extended filing because of its position and its confidentiality period ended in these reduced positions.

As energy costs rise, the first place you see the impact is usually in the transportation stocks. Union Pacific shares are indicated down slightly by 0.5% and Norfolk Southern shares are indicated down 1% in thin pre-market volume.

Jon C. Ogg
October 16, 2007

Posted on: October 16, 2007 – 7:43 am in Buffett, , , , ,

Maybe Warren Buffett Prefers Nickel & Dime Railroad Additions Over a Whale of a Deal (BNI, BRK-A)

Shares of Burlington Northern Santa Fe Corp. (NYSE:BNI) are indicated higher Tuesday after Warrner Buffett’s Berkshire Hathaway (NYSE:BRK-A) upped its stake in the railroad company.  In a filing from Monday evening, it was seen that Berkshire Hathaway has purchased roughly 10.1 million shares of common stock last week on three different days.  This latest rail share purchase bring Buffett’s stake up to as much as 14.8% on a fully diluted basis.

Shares of Burlington Northern closed at $80.33 on Monday, and shares are indicated at $81.00 to $82.00 in early pre-market indications on Tuesday.  This is actually still in the middle of the $64.75 to $95.47 trading range seen over the last 52-weeks.   

With just over 52 million shares now held, this latest transaction at an implied $81.00 stock value would have an implied market value of over $4.2 Billion.  We still have yet to see a ‘whale of a deal’ from Buffett, and the total market cap of this one is north of $28 Billion.  Warren & Co. had nearly $50 Billion in purely cash and liquidity in its arsenal as of June 30, and that is before looking at its other assets that could be converted to cash or equivalents in a few days if it sold off some of its publicly traded stocks.

Jon C. Ogg
August 28, 2007

Posted on: August 28, 2007 – 6:33 am in Buffett, , , , ,

Entrenched Corporate Leader: Eddie Lampert (SHLD)

Could You imagine Sears (SHLD-NASDAQ) without Eddie Lampert?  Last week we noted that one of Jim Cramer’s "CEO’s Who Get the Benefit of the Doubt" was also one of our most entrenched CEO’s.  Eddie Lampert is that person, although he is technically the Chairman of the Board.  He is the one credited with getting this back to where it is.  Sure, it’s by team effort; but go ask anyone who they think is really responsible bringing back Sears & K-Mart.  It’s Lampert.

In reality, Eddie Lampert is a true mystery to many "retail analysts" on Wall Street because they are having to evaluate a retail company that is now worth $28 Billion since the combination of Sears and K-Mart that is not merely a large retailer.  In fact, the retail efforts have recently been mixed instead of the turnarounds seen in prior quarters.  The wildcard for just analyzing this as a retailer is that this is still a large real estate holder that is deemed as undervalued on the books versus what the remaining dirt might really fetch in a true sale lease-back, and when you culminate the real estate with the point that this is really a hidden hedge fund it is mystifying. 

As long as Eddie Lampert doesn’t start to AND then continue to consistently make costly errors quarter after quarter, no one is going to say anything.  Even if they did, they don’t have the votes or shares to influence a change.  Shareholders have been so rewarded that any major hit to the stock might just make investors think there is a shot to go back in.  As long as investors feel like he is potentially the next Warren Buffett, he is virtually immune from any criticism or efforts against him. 

With the potentiality that he has been mentioned (via rumors and occasional holdings) as potentially rolling up numerous other retail related efforts, and seeing those stocks rise, he is well-heeled there AND wherever else he wants to go.  Much more money has been made investing with Eddie Lampert than against him.

Jon C. Ogg
April 5, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: April 5, 2007 – 2:01 pm in Retail, , ,