MEL

@nachkari Agree with both points

@nachkari What do you own for the next 3 years? Just metals? Austerity bad for oil no?

@ohcapideas Thanks!

@liebo7 was stated in 2010 annual report

Thread on Berkshire’s acquisition record… I’ve always been fascinated by $BRK acquisitions of entire companies, mostly because it’s a lot harder to judge performance than it is for stock market investments. It’s a lot easier to do a case study on Berkshire’s purchases of Coke, Gillette, Washington Post, AmEx, etc. because most everything you need to determine returns valuations are public. Some years ago I started trying to analyze Berkshire’s wholly owned acquisitions for lessons learned by doing rough estimates on deal prices, revenue, PTI at acquisition (a lot of this information is actually public), estimating financials today (which by reconciling segment information in the annual report, I think is possible to come out with pretty reasonable estimate) and coming up with some rough number for how much of net income over the years was distributed back up to Berkshire – you can actually come up with some very realistic and fairly precise estimates for modified IRR, essentially the same annualized return they’d get had these been public company investments. Thought I’d share a few of the things I’ve noticed and collected. This is probably a strange thread, but I really don’t promote anything, don’t have a Substack and thought at least some people would find this fascinating. I’ll just emphasize for the record something that’s obvious – I think these numbers are directionally pretty correct, but they are just my estimates and don’t want to make the mistake of implying any false precision.

@ohcapideas How do we know that netjets was charged a fee to use berkshires credit? How do you estimate that expense?

Sixth is Net Jets, which at one point was nearly a disaster. It as a very un-Berkshire like acquisition as it must have been much more about the potential for the industry and Buffett’s personal experience as a customer than current cash flows. The acquisition cost $725 million in 1998. I’m guessing that Berkshire paid about 1x sales or thereabouts, but I’m doubtful they were doing much better than breaking even at the time. There’s discussion in the 2010 Annual Report on Net Jets including the disclosure that in the eleven years following the acquisition, cumulative pre-tax losses were $157 million. Although, this figure seems to have been heavily distorted by the fact that losses in 2009 were $711 million. So, from 1998 to 2008, profits were likely modest but existent. In 2010, the company seems to have turned permanently profitable after David Sokol was called on to fix things, earnings $207 million, despite paying a fee of $38 million to use Berkshire’s credit. I’m guessing today that revenue is about $9 billion and pre-tax income is $1.2 billion and I’d think Net Jets would be worth in the neighborhood of $16 billion as a result. Importantly, despite the losses in 2009, I did not model any additional capital contributions from Berkshire – and I don’t think they made any. They did guarantee Net Jets credit for a time, eventually charging a fee to do so. But, given the capital intensity of the business and the limited profitability early on, I don’t think distributions to Berkshire have been extremely high. Still, they don’t need to have been for a great result and given the above figures the return to Berkshire has been about 13%.

@nachkari welcome back

@Midnight_Captl @grok what type of specialty gas could this be referring to?

We’ve heard from some sources in adjacent businesses that Nvidia has gone 4-5 layers into the Supply Chain to secure critical raw materials for their products, such as specialized gas from Japan that is used in the production of HBM. These materials are a now a choke point for other major businesses. Jensen knows the computing Supply Chain better than anyone alive, and he is using that knowledge to cement and extend his lead. $NVDA

@zephyr_z9 How do you get this style? Can you make a similar one for electroplating?

The most advanced form of deposition

@nachkari @MarkJCarney Favorite way to express this view?

@ReadwiseReader hello - I have noticed that my ghostreader summaries have stopped working. It is still toggled on in my preferences, but the summaries provided are not actually summarizes - just the first few sentences of text in the article. any suggestions on how to fix? thx!

@homsiT @readwise Yes pls

anyone interested in helping to test a top-secret new @readwise AI feature for your highlights? :)

@nachkari What’s the appropriate market response you are not seeing, just rates down?

@nachkari Helps that they don’t have infrastructure/cost structure supporting ICE product line…probably fine, HEVs the only off-ramp for legacy OEMs

@LibertyRPF Indeed it is tricky. Just sort of inevitably understates the implied value of the operating businesses

@liebo7 Maybe not. It's always tricky, like with the insurance float, if it's zero coast or even with a combined ratio below 100, it's technically a liability, but a very long-lived one that acts like an asset. But you make a good point.

If you buy $1000 of Berkshire Hathaway, here's the implied value of the operating businesses vs the cash pile and publicly traded stocks in the portfolio:

@jordanschneider Perfect, thanks! I stumped Google with my spelling attempts :)

@liebo7 thanks for listening!!

@jordanschneider enjoyed the podcast with rahm. What is the Allan Liu book you recommended? I can’t seem to find it/him anywhere. Thanks!

@benthompson Thought exercise - if Apple made it impossible to install third party apps (a la when it was launched), would many of their problems go away?

Obviously will discuss the case more on Dithering tomorrow and Stratechery next week, but retconning the Microsoft case to claim credit for the iPod is annoying and a distraction.

wut

@nachkari Throwing things against the wall to see what sticks

@RobDonnelly47 @benthompson Great tip, thanks!

@liebo7 @benthompson The trick is to use something with an extension cable. This minimizes the weight that the outlet needs to hold up. It's also great for foreign travel, since you only need one travel convertor.

Apple Vision Pro in an economy seat is life-changing. Movie experience is a total escape, and here the Mac screen-sharing makes a massive difference. Anyone flying long-haul regularly: it's worth it. Absolutely worth it.