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I believe you would do well in studying the details of the deals you have mentioned before concluding they are failures. Berkshire financed Occidental Petroleu

I believe you would do well in studying the details of the deals you have mentioned before concluding they are failures. Berkshire financed Occidental Petroleum's acquisition of Anadarco by giving $10 bn in cash. In return, BRK received: - $10bn wort of perpetual cumulative preferred shares with a coupon of 8% (e.g. $800m a year). OXY can choose to pay in common shares instead of cash, but in this case Berkshire will get a discount. They have done this for the most recent quarterly dividend payment, since OXY's share price is so depressed, the $200m add up to a sizable position in OXY. If OXY doesn't pay the dividend, the coupon rises to 9% and has to be paid latter. OXY can redeem these shares at 105% of the nominal value in about 10 years. - warrants to purchase 80m common shares until 2030, the strike price is $62.5, so this option is far out of the money. But given the extremely long duration (11 years) it is quite possible that those warrants become extremely valuable over time. Let's wait for a few years and see how Berkshire does on the OXY trade.

Scoundreller 6y ago
Ya, IMO, when he beats the market, it's his access to deals that the public can't get and then stamping your celebrity endorsement on it. Maybe in the past there was lots of deep-value out there, but now we have analysts working every strategy. Or squeeze a percent or two of efficiency by taking companies private under 1 umbrella. On average it works out, but it doesn't take many mistakes to sour it.
- mxschumacher 6y ago
  When Buffett cut cheques to Goldman, GE and Bank of America in the financial crisis of 2009/2010 there were not many other players willing or able to invest billions of dollars. Berkshire might have the most solid balance sheet in the world - they are strong when others are losing their shirt. The source of Berkshire's strong performance was a combination of very good investments (buying American express in 1964) and insurance float, a great credit facility with negative interest rates. Given the size of the private businesses Berkshire owns, it is quite naive to assess the firm purely on stock-picking performance of Buffett. The operating results really matter, producing $25bn+ of operating profits per year isn't too shabby.

Scoundreller 6y ago

Ya, IMO, when he beats the market, it's his access to deals that the public can't get and then stamping your celebrity endorsement on it. Maybe in the past there was lots of deep-value out there, but now we have analysts working every strategy. Or squeeze a percent or two of efficiency by taking companies private under 1 umbrella. On average it works out, but it doesn't take many mistakes to sour it.

mxschumacher 6y ago
When Buffett cut cheques to Goldman, GE and Bank of America in the financial crisis of 2009/2010 there were not many other players willing or able to invest billions of dollars. Berkshire might have the most solid balance sheet in the world - they are strong when others are losing their shirt. The source of Berkshire's strong performance was a combination of very good investments (buying American express in 1964) and insurance float, a great credit facility with negative interest rates. Given the size of the private businesses Berkshire owns, it is quite naive to assess the firm purely on stock-picking performance of Buffett. The operating results really matter, producing $25bn+ of operating profits per year isn't too shabby.