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Stocks B / Berkshire Hathaway


Subject:  Re: Investing BRK's Cash Date:  2/12/2018  8:28 PM
Author:  TransverseSlice Number:  234455 of 250474

BRK's primary challenge - to find homes for its cash flow

Some rambling thoughts:

As far as being the buyer of choice goes, Buffett has to wait for the phone to ring or have the
opportunity to ask a CEO something along the lines of "would you be offended if I made an offer that
you could take to your board of directors?".

For private businesses, there just aren't many choices in the U.S. (as texirish has effectively
pointed out) as far as large elephants go. For publicly listed businesses, the odds are that such a
business is already in the equity portfolio.

Financing 3G is another outlet.

The outlet with good potential, in my opinion, is as "lender of last resort" to banks (worldwide).
This can soak up plenty of capital, but requires distress in a large well collateralized loan book
(basically home mortgages).

Berkshire is also the "end of the road" for large long tailed insurance liabilities. Potential there too.

What you want are things "collateralized" by LARGE physical assets with LONG lives that earn an
acceptable rate of return (higher than 10%).

The obvious candidate: critical infrastructure.

Already in utilities. Further railway consolidation in N. America is probably decades away.

Pipelines, refineries and the like... partly in utilities. I would bet though that if the management
of Phillips 66 ever expressed even the slightest desire of going private, Buffett would jump on it.

What else? Operations that require a large real estate footprint, but still earn decent returns
(without much real leverage). Auto dealers. Check. Possible future consolidation here (need to wait
for the phone to ring again though).

Always been a bit surprised that Berkshire never picked up Copart when it was trading at obvious
discounts (maybe was too small - it's only about $10B market cap now and it isnt undervalued now by

REITS? Not a good idea with the previous tax regime, but maybe now...

Public Storage (at a much lower price) would be the obvious candidate.

Major market meltdowns? Well the issue here is what do you mean by meltdown. Panics/blips that last
a couple of days aren't enough to pick up much (at Berkshire's size) of anything except the biggest
names (which Berkshire is pretty much in already). Not that many shares are actually traded at the
lowest ticks. A complete systemic meltdown or a financial crisis where everything looks like it's
the end of times (I am not talking about share quotes here, but actual conditions) are by definition
rare. Counting on another 2008-09 in Buffett's remaining lifetime is unrealistic (and probably not
something anyone should even hope for).
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