America - 04/01/11

America (52.6% of asset mix) (with net present value in 1 year) 1. Manulife Financial (MFC) CA$31.4 STRONG BUY 2. Google Inc. (GOOG) US$754.6 BUY 3. Wells Fargo Financial (WFC) US$43.8 STRONG BUY 4. General Electric (GE) US$23.5 => US$25.2 HOLD => BUY 5. TD Bank (TD) CA$92.3 HOLD 6. American Express (AXP) US$48.6 HOLD (pending to update) 7. Suncor Energy (SU) CA$50.0 BUY (pending to update) · Mar 11 major transactions: switch Imperial Oil (IMO) CA$52.0 to Suncor Energy (SU) CA$41.3; add Canadian Pacific CA$61.20; sold TransCanada at CA$39.2 · General Electric may get into lawsuit on Japan’s nuclear crisis. So far, analysts think it is very unlikely for GE to have a high contingency loss. On the other hand, given the fact that lots of people rise concern about the security of nuclear power, Bilibala think GE will receive lots of additional orders · government will not and cannot replace all nuclear plant at once, clearer energy to use are wind & solar, which both will benefit GE · in order to improve security & safety, government need to spend more on existing nuclear plant, which will benefit GE as well · Investors rise concerns on the internal control of Berkshire Hathaway on how Warren Buffett handle David Sokol purchase of Lubrizol stocks in Jan 11 just before Berkshire Hathaway announce to acquire it in Mar 11 & took a capital gain of $3M. To me, even Mr Buffett think Sokol did nothing wrong, as a CEO of a well respected giant corporation, the way he managed this issue should be done better by taking action and disclose it earlier. · As some of you hold RIM (Research in Motion), let me spend some time to share my opinion. · 2010 revenue & profit up 33% & 47% to US$19.9B & US$3.4B compare to last year while net margin improved from 16.4% to 17.1% · According to its own outlook, 2011 revenue & profit will up 41% & 22% to US$28.0B & US$4.2B while net margin will fall from 17.1% to 14.8% (with a estimated 2011 market shares in smart phone of about 15%) · Some analysts said RIM will be the next Nortel Network, Bilibala don’t think that will be the case cuz: 1. RIM’s earning growth is strong, above 20% per year, while price over earnings ratio is just 9, in comparison to Nortel’s tiny earnings and over 100 P/E before it fall, they are totally different 2. RIM has no long term debt, while Nortel had tones!! · Yes, RIM’s growth is slowing down, its profit margin is dropping, but given its P/E ratio at 9, PEG ratio of 0.5. I still think RIM should have potential to climb back to CA$70. Even though I won’t recommend a BUY, but for those who are holding it, Bilibala’s suggestion is to hold till release of 1st quarter (around jun 2011), the price should climb back because I think its earnings will beat expectation. · With more information, Bilibala will revised Manulife Financial’s Japan earthquake impact. · Assume 30,000 death, 80% insurance penetration, 8% market shares, CA$0.5M coverage, 80% loss & found & submitted claims, offset with 10% reserve release, the additional losses set up for the event will be CA$0.7B, less 29% tax rate, after tax impact will be CA$0.49B, while equity market rebound, estimate drop in EPS is about CA$0.3. # Bilibala personally uses fair value @ 2016 to do all investment, however, I think for most small investors, net present value @ 2011 (fair value multiply by discount factor), would be more relevant. · STRONG BUY with NPV over MV above 30% · BUY btw 15% to 30% · HOLD btw (15%) to 15% · RE-RE-RECONSIDER below (15%)

America - 03/21/11

Bilibala Finance’s 7 Top Holding by Region:
(with net present value in 1 year)
(53.7% of asset mix)
1. Manulife Financial (MFC) CA$31.4 STRONG BUY
2. Google Inc. (GOOG) US$754.6 BUY
3. Wells Fargo Financial (WFC) US$43.8 STRONG BUY
4. General Electric (GE) US$23.5 HOLD
5. TD Bank (TD) CA$92.3 HOLD
6. American Express (AXP) US$48.6 HOLD (pending to update)
7. Suncor Energy (SU) CA$50.0 BUY (pending to update)

· Mar 11 major transactions: switch Imperial Oil (IMO) CA$52.0 to Suncor Energy (SU) CA$41.3; add Manulife (MFC) between C$15.8-C$16.2 add Berkshire Hathaway (BRK.B) US $85.0
· Warren Buffett pull the trigger to buy Lubrizol, a lubricant maker for $9B. Can’t tell whether it is good or not, but global demand on lubricant are rising. Also Berkshire Hathaway held 10% share in Munich Re (10% SwissRe is preferred shares only, will have no impact), It sure took the hit from Japan earthquake

# Bilibala personally uses fair value @ 2016 to do all investment, however, I think for most small investors, net present value @ 2011 (fair value multiply by discount factor), would be more relevant.
· STRONG BUY with NPV over MV above 30%
· BUY btw 15% to 30%
· HOLD btw (15%) to 15%
· RE-RE-RECONSIDER below (15%)

Top holding - America 03/11/11

Bilibala Finance’s 5 Top Holding by Region:
(with net present value in 1 year)
American
1. Manulife Financial (MFC) CA$31.4 STRONG BUY
2. Google Inc. (GOOG) US$745.1 => US$754.6 BUY
3. Wells Fargo Financial (WFC) US$43.8 STRONG BUY
4. General Electric (GE) US$23.5 HOLD
5. TD Bank (TD) CA$92.3 HOLD
6. American Express (AXP) US$48.6 HOLD (pending to update)
7. Suncor Energy (SU) CA$50.0 BUY (pending to update)
· Mar 11 major transactions: switch to Suncor Energy (SU) CA$41.34; add Berkshire Hathaway (BRK.B) US $85.0; add American Express (AXP) US$43.2
· Why Bilibala buy Suncor? Bilibala sold Petro Canada in 2008 at $37.0 when it announced it will merge with Suncor. At that time Suncor’s debt to equity ratio was high at 54%. Given the uncertainty of whether the “marriage” will be a success or disaster, I sold it and bought Imperial Oil, lower debt, better management & technology support by Exxon Mobil (XOM), by given up the potential growth opportunity of what Suncor & Petro Canada have. In 2 years, I can see the huge improvement in Suncor by lowering its debt to equity ratio to 34% with a promise by management they will lower it further before 30% in 2011. While Imperial Oil has already ran above my expectation & fulfill its mission, I will now switch to Suncor. The reason why Suncor fall short while oil price up is cuz it has investment in Libya and have higher uncertainty of potential losses & damage. I think the political issue can go on for a long period, but who ever gain power will not destroy the energy business
· Why Bilibala add Berkshire Hathaway? I’ve reviewed the whole 2010 annual report. Looks great as usual!! Add back cuz I found out Todd Comb (the one I don’t like or do not impress) only replace Liu in GEICO who manage a portfolio of $3-4B. Looking forward, its investment income growth may slow down, given the fact General Electric & Goldman Sech will most likely buy back the preferred shares on a 10% redemption fees this year. By that time, Berkshires Hathaway will have lower before tax dividend/interest income by $0.8B, which is a lot of $$.

# Bilibala personally uses fair value @ 2016 to do all investment, however, I think for most small investors, net present value @ 2011 (fair value multiply by discount factor), would be more relevant.
· STRONG BUY with NPV over MV above 30%
· BUY btw 15% to 30%
· HOLD btw (15%) to 15%
· RE-RE-RECONSIDER below (15%)

Top Holding - US/Canada

1. Manulife Financial (MFC) CA$31.4 STRONG BUY
2. Google Inc. (GOOG) US$745.1 BUY
3. Wells Fargo Financial (WFC) US$41.1 => US$43.8 STRONG BUY
4. General Electric (GE) US$19.7 => US$23.5 HOLD
5. TD Bank (TD) CA$83.8 => CA$92.3 HOLD
6. American Express (AXP) US$48.6 HOLD
7. Imperial Oil (IMO) CA$47.8 HOLD
· Mar 11 major transactions: add Berkshire Hathaway (BRK.B) US $85.0; add American Express (AXP) US$43.2
· TD Bank report great results!! Compare to 1q10:
· 1q11 adjusted EPS up 8% to CA$1.74; net interest income up 11%, fee income up 5%, loan provision down by 20%, book value down up slightly by 3%
· 1q earnings usually the highest among all quarters (cuz more investment & underwriting activities) so I don’t think this result will repeat in 2q-4q
· As interest rate may rise in 2H2011, it may hurt TD’s interest margin
· Regulatory change on mortgage (from 35 year to 30 year start from Apr 11) may hurt real estate market’s activities, but should have no impact on TD’s interest income
· Even the interest rate may rise & higher gas price offset with the lower unemployment rate & slow economy pick up, I think loan provision will stay flat for 2011 compare to 2010
· 2011 adjusted EPS expectation is CA$6.46
· Great reminder from Warren Buffett in 2010 annual report: http://bilibala-life.blogspot.com/

# Bilibala personally uses fair value @ 2016 to do all investment, however, I think for most small investors, net present value @ 2011 (fair value multiply by discount factor), would be more relevant.
· STRONG BUY with NPV over MV above 30%
· BUY btw 15% to 30%
· HOLD btw (15%) to 15%
· RE-RE-RECONSIDER below (15%)

Top holding in USA 12/23/10

1. Google Inc. (GOOG) US$745.1 BUY
2. Wells Fargo Financial (WFC) US$41.1 STRONG BUY
3. General Electric (GE) US$19.7 BUY => HOLD
4. American Express (AXP) US$48.6 HOLD
5. Walt’s Disney (DIS) US$36.99 HOLD

• American Express share price down recently from US$46.5 to US$41.0 (climb back a bit) on the worry USA government will be more restricted in credit card service charges. Last week, VISA & Master Card share price got the hit as the regulator reform the debit card service charges.
• General Electric’s (I will use GE in below, it is how its own press release name themselves though) share price did not recover as fast as the big 4 banks, nor the giant industrial corp such as Caterpillar, the main reason is because of GE Capital – the finance segment @ GE.
  1. GE is an industrial / technology corp which manufacture energy / power / health equipments & devices
  2. With its strong financial position, they are able to borrow short term loan cheap enough and lent it through GE Capital to their customers in long term (just like u buy a car through finance & then Honda/Nissan/Mini Copper lend $$ to u)
  3. After the financial crisis, GE gets harder to borrow cheaper, therefore, its GE Capital interest spread got narrow down at the same time rise a potential cash flow issues (cuz they borrow in short term but lent it for long term)
  4. Investors has an ongoing cash concern on GE, that’s why its share price only up about 130% from bottom compare to say Wells Fargo which up 250%.

Top holding in USA 12/10/10

1. Google Inc. (GOOG) US$745.1 BUY
2. Wells Fargo Financial (WFC) US$41.1 STRONG BUY
3. General Electric (GE) US$19.7 BUY
4. American Express (AXP) US$48.6 HOLD
5. Walt’s Disney (DIS) US$36.99 HOLD

• Government decided to extend the tax cut policy for another 2 years, positive impact to retail & credit market
• Initial jobless claim fall to 421k this week, looks like the trend is continue to fall from 450k to 425k, positive sign on job market.
• BOD of General Electric increase dividends by 17% to 14 cents per shares per qtr, a positive sign on industrial sector capital loan market, no change to NPV.

Top holding in USA 11/01/10

1. Google Inc. (GOOG)
2. Wells Fargo Financial (WFC)
3. Exxon Mobil (XOM)
4. General Electric (GE)
5. American Express (AXP)

• Exxon Mobil net income up 55% mainly thx to oil price rise (bad for all drivers) and refinery margin increased, oil supply & demand kind of reach an equilibrium point, on the other hand, as USA, UK & Japan’s QE2.0 (print more $$) project, oil price should rise back to US$100 per bbl as what I predict 2 years ago. If so, Exxon Mobil should have room to rise back to US$75.
• General Electric net income up 29% while revenue down 5% mainly on energy infrastructure segment (that’s why stock price down cuz ppl focus on their revenue). Revenue down reflect the global capital expenditures on corporate infrastructure down during and after financial crisis, but as one will notice, GE’s profit margin continue to rise means, GE’s products & services are more profitable in a dollar to dollar basis and this trend has continue for the past two 2 years. I still need to complete the trend analysis.

巴(不得)飛凸

周六晨早近 8點, 不是做懶訓豬, 而是 refresh 呀 refresh 在床邊的 laptop. 皆因今日(2/28)是股神巴菲特主理的公司 Berkshire Hathaway Inc(巴郡)派成績表和巴菲特出 chairperson's letter 的大日子. 已經和巴菲特作了三年* 伙伴(股神是這樣稱呼其小股東)的 Bilibala 自然要先睹為快.* Bilibala 當其 B股$4,900跌至 $2,300 時曾分了大半年手 :P還記得上年今日, 當所有人信心跌到谷底, 當所有數據同股/債市跌到似乎仍未見底的時侯. 神就借著巴郡的年報大大安慰了 Billy 和 Bilibala. Bilibala 在今年巴郡的年報又學習了不少:

• 巴菲特對 book value 的理解: 巴菲特認為 book value 雖然無法完全反映甚至低估其內在價值, 但比起隱含市場心理, 波動非常的 stock price/market value 更反映企業的成果. 金融風暴, 傳媒集中佈導巴菲特如何老貓燒鬚, 巴郡book value 跌 9.6% . 忘記了同期 S&P 500 跌了 37%. 兩年打下來, 巴郡book value升8.3%, S&P 500 仍是跌20.3%. 可見傳媒愛嘩眾取寵, 有時非常誤導
• 對企業收購合併(即投資企業)的合理值有新體會. 依家收購合併以股換股方式合併, 何謂合理收購價變得難以計算. 但巴菲特有他獨到見解. 他還笑言有次他投資的大銀行高價收購一迷你銀行. 巴菲特:「似乎太貴」那大銀行 CEO:「不打緊, 那只是間迷你銀行, 無關痛癢.」巴菲特的拍擋芒果:「我們是否因為吠我們的惡狗是狗仔而非聖班納而鼓掌?」(哈哈)

巴菲特亦好謙虛, 值得牙刷刷的 Bilibala 羞愧和學效:

• 之前GEICO的員工反對我(巴菲特)開信用咭生意, 我不聽勸, 結果虧損. 我一直以為我越老越聰明, 原來我只是老了
• 假如我, 芒果和 Ajit (Mid America Energy CEO)坐沉船一齊掉下海, 而你只能救一個, 請你救 Ajit. 因為你最需要他
• Netjet 由收購至今虧損不少, 負債不斷加, 沒有及時向你們報告是我的不是
• CEO應為企業過失負 100% 責任

巴郡仍有 $5B(稅後) derivative liabilities, 除掉浮盈 net earnings 每年大約是$4B, $56B的股票未來 5年大約會再升 $12B(稅後), 再加 $8B 新股, 所以, 5年後 shareholders equity 應有 $180B. 以 1.6倍 book value計, 巴郡值 $288B, 較現在$193B 市值高 49%, 每股內在值應是 US$123.78.

Opinion on Berkshire Hathaway

Bilibala: after reading Berkshire Hathaway's 100 pages annual report on the weekend and I've increased the fair value of class B share from US$117 to US$123.

http://www.cnbc.com/id/35647669

Buffett Loses Last AAA Rating as S&P Cuts Berkshire

Bilibala: now day, holding an AAA credit rating means nothing. With such low interest rate, if cash flow is not an issue, why not borrow and invest? This hold true to corporation and so to individual.

http://www.businessweek.com/news/2010-02-04/buffett-loses-last-aaa-rating-as-s-p-cuts-berkshire-update1-.html
(Adds shares in sixth paragraph, S&P comment in 11th.)
By Andrew Frye

Feb. 4 (Bloomberg) -- Warren Buffett’s Berkshire Hathaway Inc. was stripped of its last AAA credit rating by Standard & Poor’s after the billionaire investor agreed to buy railroad Burlington Northern Santa Fe Corp.

Berkshire, which is taking on debt to fund the $26 billion takeover, was cut one level to AA+ from S&P’s highest grade, the ratings firm said today in a statement. The downgrade comes the same day Berkshire filed to sell $8 billion of notes to fund the Burlington Northern purchase, and concludes a review that S&P announced on Nov. 4, the day after Berkshire disclosed the deal.
“The railroad acquisition will reduce what historically has been extremely strong capital adequacy and liquidity,” S&P said. “Risk tolerances appear to have increased.”

Buffett, 79, has called the railroad takeover an “all-in wager” on the U.S. economy. Berkshire lost its top credit grades at Fitch Ratings in March and at Moody’s Investors Service in April amid a slump in the firm’s manufacturing, retail and travel units. The earlier downgrades were on concern about Buffett’s successor and the firm’s derivative bets.

The ratings firms “are hedging their bets in the event of another economic downturn,” said Michael Yoshikami, chief investment strategist at Berkshire shareholder YCMNet Advisors. Buffett’s firm is “expanding in economically sensitive businesses, like the railroads,” he said.
Berkshire’s Class A shares fell $3,250, or 2.9 percent, to $108,450 at 2:07 p.m. in New York Stock Exchange composite trading. Buffett didn’t respond to a request for comment left with an assistant.

Wounded Pride
General Electric Co. and drugmaker Pfizer Inc. are among companies that lost their top credit grades from S&P in the past year. Berkshire, which Buffett built into a $170 billion company over four decades, was raised to AAA at S&P in 1989.

Berkshire reported its first loss since 2001 in the first quarter of 2009 as Buffett’s stock bets soured. The firm returned to profit in the second and third quarters as equity indexes advanced. Still, losses at Berkshire’s NetJets subsidiary and earnings declines at Clayton Homes contributed to a pretax profit plunge of more than half at Berkshire’s manufacturing, service and retailing units in the first nine months of 2009.

Spending the Stockpile
Buffett, the second-richest American, positioned Berkshire to weather a contraction in the U.S. economy by stockpiling $44 billion in cash. Starting in 2008, when corporate borrowing costs surged, he drew on that hoard to finance Goldman Sachs Group Inc., GE, Swiss Reinsurance Co. and the Mars Inc. takeover of chewing-gum maker Wm. Wrigley Jr. Co. Berkshire had about $26.9 billion of cash as of Sept. 30.

“Albeit weakened, we view the company’s liquidity position and balance sheet as still very strong.,” S&P said.

Berkshire is using $8 billion of the cash stockpile on the purchase of Forth Worth, Texas-based Burlington Northern, and said in the debt prospectus today it plans to sell $8 billion of senior unsecured notes. The notes may be sold as soon as today, according to a person familiar with the offering. The railroad deal is expected to be completed this quarter.

Buffett, Berkshire’s chairman and chief executive officer, said in May that the loss of top credit grades from Fitch and Moody’s had “no economic impact” on Berkshire. “My pride may be wounded just a bit,” he said in a Bloomberg Television interview.

Bond Yields
Corporate debt with an AA rating yields an average of 3.72 percent, or 12 basis points more than AAA bonds, according to Bank of America Merrill Lynch data as of yesterday. That means companies ranked AA pay an average of $1.2 million a year in extra interest costs on $1 billion of debt. The spread between AAA debt and AA bonds has tightened about 59 basis points since the beginning of 2009.

Berkshire’s AA+ ranking is between S&P’s AAA and AA ratings. The company’s 4 percent notes due in 2012 fell 0.13 cents on the dollar to 105.5 cents to yield 1.42 percent, or a spread of 60 basis points more than similar-maturity Treasuries, as of 10:34 a.m. New York time, according to Trace, the bond- price reporting system of the Financial Industry Regulatory Authority. A basis point is 0.01 percentage point.

S&P joins Fitch in citing concern about Buffett’s eventual departure from the company. Buffett has said he’ll be replaced by three or more people: a CEO from a list he and the board of directors keep, at least one person to manage investments and his son Howard Buffett, who has been picked to be the next chairman to carry on Berkshire’s corporate culture.

‘Ongoing Concern’
“Uncertainty surrounding management succession and management structure, corporate culture, and business strategy following an eventual transition of the company’s leadership from current CEO Warren Buffett is an ongoing concern,” S&P said. “This, in our view, is only partially mitigated by a board-approved succession plan.”

Mohnish Pabrai, the founder of Irvine, California-based Pabrai Investment Funds and a Berkshire shareholder, said the ratings company cut the grade because it “doesn’t like the uncertainty.”

“There is a very clear-cut succession plan, but he hasn’t shared it with Mr. S and Mr. P,” Pabrai said. Berkshire has “a very deep bench” of potential replacements.

The ratings company lowered Berkshire’s long-term counterparty credit rating and the financial strength ratings on the company’s main insurance operations to AA+ from AAA.

Berkshire and its subsidiaries cut about 3,000 jobs since December and now employ about 222,000 people, the company said in the debt prospectus today. That’s 1.3 percent less than the figure the company reported six weeks ago, and almost 10 percent below the 246,083 disclosed in the company’s 2008 annual report.

--With assistance from John Detrixhe in New York. Editors: Erik Holm, Dan Kraut
To contact the reporter on this story: Andrew Frye in New York at +1-212-617-1869 or afrye@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at +1-212-617-2432 or dkraut2@bloomberg.net

Berkshire surges after being chosen for S&P 500

http://www.reuters.com/article/idUSTRE60Q43G20100127?feedType=nl&feedName=usdai

NEW YORK (Reuters) - Shares of Berkshire Hathaway Inc surged on Wednesday after Standard & Poor's said it will add the company run by billionaire Warren Buffett to its S&P 500 stock index.

=> Berkshire Hathaway finally in S&P, this is a good news to lots of investors. On the other hand, stock price in long run in line with its earning performance (EPS) instead of whether it is in or out of an index. Therefore, this short term new is irrelevant to Bilibala's fair value on Berkshire Hathaway calculation. I personally think Berkshire Hathaway (class B share) worth US$120.

Berkshire's Class B shares rose $3.20, or 4.7 percent, to $71.20 in morning trading. The Omaha, Nebraska-based company's Class A shares rose $5,064, or 5 percent, to $106,815.

"Many Berkshire shares are in the hands of investors, including Buffett, who are unlikely to sell," said James Armstrong, president of Henry H. Armstrong Associates in Pittsburgh. "That could produce a larger than normal spike in the stock price because it is being added to the index."

S&P late Tuesday said Berkshire will replace Burlington Northern Santa Fe Corp in the S&P 500, and the S&P 100 index of big blue-chip companies, on a date to be announced.

Berkshire is buying Burlington, the second-largest U.S. railroad company, in a roughly $26.4 billion stock-and-cash transaction expected to close as soon as next month.

Buffett, the world's second-richest person, will still own about one-fourth of Berkshire's stock after the merger closes.

The addition of Berkshire to the S&P 500 follows the Omaha, Nebraska-based company's 50-for-1 split last week of its B shares to make it easier for Burlington investors to swap their shares for Berkshire shares in a tax-free way.

Adding Berkshire to the S&P 500 also forces the portfolio managers who track the index to buy its shares. They may have to pay up because most Berkshire investors consider the stock a long-term investment.

"The split made it easier for small investors to buy, and when index investors have to buy the stock, that increases demand even more," said Vahan Janjigian, author of "Even Buffett Isn't Perfect: What You Can -- and Can't -- Learn from the World's Greatest Investor."

Despite its $158 billion market value, Berkshire was long excluded from the S&P 500 because its shares were not liquid enough. It is the largest publicly-traded U.S. company not in the index.
The company had no comment on the S&P announcement.

Berkshire operates roughly 80 businesses including Geico insurance, Dairy Queen ice cream and Fruit of the Loom undergarments. It also has tens of billions of dollars of stock and bond investments.

Last week Buffett told CNBC television the stock split could give Berkshire about 700,000 investors.

S&P is a unit of McGraw-Hill Cos.
(Reporting by Jonathan Stempel. Editing by Robert MacMillan)

Bilibala mailbox 10/01/21

Question:
brk.b goes up to 72 this morning. is it too high to buy? or focus onwfc? how about mfc? why u suggest to buy more? thanks

Answer:
Berkshire Hathaway
Berkshire Hathaway go up these 2 days from $65.0 (or $3,250 before split) to above $72.0 because of

• the stock split which trigger the transaction volume to go up because the price is lot more "attractive" & "relatively cheaper" in an irrational investment sense after it dropped from $3,300 to only $66.0
• Warren Buffett indirectly mentioned in an interview that the stock price is undervalue

In long run, Berkshire Hathaway's price is still undervalue, however, to most of the investors, will refuse to buy when it is going up.

On the other hand, stock split has no impact to the value of a company, if i assume everything else is constant, price will adjust back to where it should be after a short term rally.

Wells Fargo
I have a better idea on Wells Fargo’s 2010 outlook after a flash review of its 4q09 and 2009 results. I think its EPS should be able to rise from US$1.75 in 2009 to US$2.85 & US$3.05 in 2010 & 2011. Given the following:

• Continue improve in net interest margin
• Expect the loan provision to drop smoothly in 2010 and further in 2011
• Paid off the $25B TARP in 4q09 – will save $420M dividend expenses per qtr
• House market recover Its 12 months target price should at least be US$34.77.

I personally think Wells Fargo worth US$60.0 by the end of 2014 (5 years from now).Given the current stock price is US$27.82 (01/20/10’s closed), there will be a potential return of 25% in the coming 12 months.

Manulife Financial
I see significant improve in investors confident to equity market. Manulife’s 4Q sales should improve while sum at risk will fall. Bilibala increases its fair value from C$31 to C$35.
I need to review its 4q09 & 2009 result before I can hold firm on my opinion.

Warren against Kraft's deal

Bilibala: When you go to supermarket, u wish u will receive discount on things u need and u want to buy, same apply to investment. Value is your choice. You can invest or acquire something for the purpose of just keep expanding. You need to growth in the better and smart way!!

By Andrew Frye
Jan. 5 (Bloomberg) -- Warren Buffett, who worked behind the scenes to undermine Coca-Cola Co.’s bid for Quaker Oats 10 years ago, has gone public to rein in Kraft Foods Inc.’s Irene Rosenfeld in her quest to acquire Cadbury Plc.

Buffett’s Berkshire Hathaway Inc., Kraft’s biggest shareholder, said today that Rosenfeld was seeking a “blank check” and urged fellow investors to oppose her plan to authorize the issuance as many as 370 million shares. Northfield, Illinois-based Kraft, which has bid 10.6 billion pounds ($17 billion) for Cadbury, first announced its intention in September to buy the company.

“It’s unusual for Berkshire to put out any sort of comment like this publicly,” said Glenn Tongue, a partner at T2 Partners LLC, which holds investments in Omaha, Nebraska-based Berkshire and Kraft and doesn’t want the foodmaker to increase its bid. “As a shareholder I love seeing this because at the current offer this deal makes plenty of sense.”

Buffett, who has said shareholders need to act like owners, is calling for caution in negotiations after Cadbury said Kraft’s offer was insufficient. In publicly urging investors to join him, the 79-year-old Berkshire chairman is drawing on his power as a 9.4-percent owner of Kraft and the standing he’s gained in financial markets as the world’s preeminent investor.

“If he says no, everybody else is going to pile on and say no too,” said Justin Fuller, a partner at Midway Capital Research & Management who runs the buffettologist.com Web site.

Berkshire said it may support a Cadbury takeover if it concludes this month that the final offer “does not destroy value for Kraft shareholders.” Buffett didn’t immediately respond to a request for comment on what terms he would endorse.

‘Expensive Proposition’

“I don’t think that he’s opposed to the acquisition, I think he’s opposed to the use of stock,” said Gerald Martin, a finance professor at American University’s Kogod School of Business in Washington. “He feels that the shares are so undervalued that it would be an expensive proposition.”

Buffett won a global following as the “Oracle of Omaha” by profiting from investments in out-of-favor stocks and businesses. Berkshire, the biggest shareholder in Coca-Cola, American Express Co. and Wells Fargo & Co., used profits last year to buy stock in some of the world’s biggest companies, including Exxon Mobil Corp. and Kraft rival Nestle SA.

Buffett was the most vocal dissenter on Atlanta-based Coca- Cola’s board when directors met in 2000 to discuss a $15.3 billion bid by then-Chief Executive Officer Douglas Daft for Quaker Oats, the maker of Gatorade, Cap’n Crunch cereal and Rice-A-Roni. Buffett argued the price was too high because a stock swap proposed as part of the deal would give up more than 10 percent of Coca-Cola, board member James Williams said in a 2004 interview.

‘Very Scarce’

The board voted against the acquisition and PepsiCo Inc. bought Quaker Oats instead, completing the purchase in August 2001 for $14 billion.

“I’m not surprised that Berkshire would resist issuing shares,” said Tom Russo, partner at Gardner Russo & Gardner, which holds Berkshire, Cadbury and Vevey, Switzerland-based Nestle. Buffett “has had the longstanding belief that equity capital is very scarce.”

Rosenfeld, CEO at Kraft since 2006, is seeking to buy the U.K.-based maker of Creme Eggs and Trident gum to expand its business outside the U.S. Kraft raised the cash portion of the Cadbury bid today after agreeing to sell pizza brands including DiGiorno and Tombstone to Nestle, the world’s largest food company.

Cadbury fell 3.2 percent to 779 pence in London, the biggest drop in eight months. Kraft added 91 cents, or 3.3 percent, to $28.34 at 3:11 p.m. in New York Stock Exchange composite trading. That values Berkshire’s stake at more than $3.9 billion.

‘Very Expensive Currency’

Buffett said Kraft shares were “very expensive ‘currency’” after falling about 17 percent in the two years ended last week, and he criticized management for seeking to issue stock at current prices after repurchasing shares at $33 in 2007. Kraft executives “have to do a lot of things right to justify this price,” Buffett said in a September interview on CNBC.

“We agree that Kraft Foods shares are deeply undervalued,” the foodmaker said in a statement. “We intend to remain disciplined in this process.”

NEW YORK/LONDON (Reuters) - Warren Buffett came out against Kraft's (KFT.N) $16.8 billion hostile offer for Britain's Cadbury (CBRY.L) as a threat to shareholder value, undermining the U.S. foodmaker's attempt to woo investors with a sweeter bid.

Deals
Kraft Chief Executive Irene Rosenfeld had sought to grab Cadbury investors' attention by raising the cash portion of its bid on Tuesday. But the rare intervention by Buffett a few hours later showed she has yet to win over Kraft's largest shareholder and one of the world's most admired investors, as well as giving Cadbury new ammunition in its defense.

Buffett's Berkshire Hathaway (BRKa.N) said in a statement it was voting against Kraft's proposal to float 370 million shares to fund the Cadbury bid while the company's stock remains undervalued, calling it a request for a blank check from shareholders. The company holds 9.4 percent of Kraft.

Berkshire said it could reconsider its vote if convinced the bid does not destroy shareholder value. Kraft could also ultimately offer fewer shares.

"It's very unusual for Buffett to speak out like this," said Justin Fuller, an analyst who follows Berkshire for Midway Capital Research & Management and publishes the Buffettologist.com blog.

"Cadbury doesn't want to do a deal at this price and this resistance from Kraft's largest shareholder hurts the deal's chances of getting done."

Cadbury Chairman Roger Carr quickly seized on the Berkshire statement as a sign that Rosenfeld was being squeezed in her most ambitious gambit yet as CEO.

"Kraft talks about discipline in making their derisory offer but it's really about management weakness," Carr said in a statement. "Their offer is limited by powerful Kraft shareholders restricting the stock content and constrained by Kraft's rating agencies limiting the cash content."

A source familiar with the situation said Kraft had been in constant communication with its largest shareholder throughout the Cadbury bid process, and that Buffett was apprised of Kraft's position before the Tuesday announcement.

But it appeared that the two sides did not see eye-to-eye, prompting the Berkshire statement.
"If Buffett votes against something -- that carries a great deal of weight with other shareholders .... When he says no, no is what he says and means," said Jerry Bruni, CEO and portfolio manager of J.V. Bruni and Co, based in Colorado Springs, Co.

Kraft shares were up 3.5 percent Tuesday afternoon while Cadbury slipped 3.2 percent. Cadbury shares are trading about 3 percent higher than Kraft's current offer, down from a spread of about 10 percent on Monday.

NESTLE DEAL FUNDS REVISED KRAFT OFFER
Earlier, Kraft revised its 10.4 billion pound ($16.8 billion) bid, offering shareholders the option of an additional 60 pence cash per share for the maker of Dairy Milk chocolate and Trident gum.
The extra cash brings the cash portion to 360p and is funded from a deal whereby Switzerland's Nestle (NESN.VX) will buy Kraft's North American frozen pizza business for $3.7 billion. Nestle also ruled itself out of any bid war for Cadbury.

Rosenfeld has stuck to her guns since her initial approach to Cadbury late last summer, determined not to overpay and convinced that a rival bidder would not emerge. Some Buffett watchers believe she could yet bring the Sage of Omaha on board.

"I don't think he's throwing a monkey wrench in the deal. This is Warren Buffett 101," said Frank Betz, a principal at Carret/Zane Capital Management LLP and an owner of Berkshire shares who has played bridge with Buffett.

A Kraft spokeswoman said the company agrees its shares are "deeply undervalued," would remain disciplined and would not do anything that hurts shareholder value.

"He is our largest investor and one of the most respected investors in the world, so of course we take his opinion seriously," she said of Buffett.

Cadbury shares fell to 779p on Tuesday, compared with Kraft's cash-and-share bid value of about 758p. Many analysts and investors still expect Kraft will need to pay 800 pence per share or above to win over Cadbury.

KRAFT STILL A FRONT-RUNNER
Buffett's surprise announcement overshadowed news that a key rival to Kraft took itself, and possibly other suitors, out of the running.

"Nestle's decision effectively leaves Kraft as the overwhelming front-runner .... Nestle's decision effectively removes Ferrero and Hershey from the field as competitive forces," said analyst Jeremy Batstone-Carr at Charles Stanley.

U.S.-based Hershey (HSY.N) and Italy's Ferrero expressed interest in bidding for Cadbury in November, but they need to come up with fully financed bids by January 23 to succeed under British rules. Analysts had expected Nestle might team up with Hershey, while Ferrero was seen as needing financial help.

Kraft said it would give detailed terms of the alternative cash offer by a January 19 deadline under British takeover rules. The U.S. food maker also extended its deadline for Cadbury shareholders to accept its offer to February 2.

(Additional reporting by Raji Menon, Victoria Howley, Jessica Hall, Michael Erman, Sam Cage, Jessica Wohl and Aaron Pressman; Editing by Richard Chang)

Berkshire Hathaway to 50 for 1 split

http://www.gurufocus.com/news.php?id=76985

Berkshire Hathaway's Board of Directors believes a 50-for-1 split of the company's B shares is advisable regardless of whether the deal to buy Burlington Northern Santa Fe Corp. goes through, according to an SEC filing yesterday.

=> Yeah!!! after the 50-to-1 split, everyone can invest in Berkshire Hathaway la.

Berkshire's SEC filing states that: "the Corporation’s Board of Directors believes that the split is advisable regardless of the BNSF transaction, and thus the Class B stock split is not contingent on the closing of the BNSF acquisition and, if approved by our shareholders, is expected to be effective prior to the date of such closing."

This is an interesting revelation. Warren Buffett has said the stock was being split so people owning small stakes in BNI could choose to get Berkshire B shares as part of a tax-free transaction. The SEC filing suggests that Berkshire wanted to split the B shares anyway. The A shares aren't being split. The split, if done today, would take Berkshire B shares from about $3,450 per share to about $69 per share. This makes the stock more accessible to the small-potatoes investor, adds trading volume and makes it more likely that the stock will be added to the S&P 500. That will force index funds to buy the stock, creating a steady flow of demand. It makes Berkshire a more mainstream stock and seems to be a step toward the post-Buffett era.

Here is what Buffett biographer Alice Schroeder had to say about the split in a recent Bloomberg column regarding the BNSF deal:

A final motive I am confident about is that Buffett finally has a plausible excuse to split Berkshire’s B shares. He has spilled a lot of ink over the years decrying stock splits.
A 50- to-1 ratio isn’t a stock split, it is a mincing. Why do it? Buffett has just given Standard & Poor’s the ticket it needs to add Berkshire to the S&P 500 Index at a time when S&P is desperate for large, solvent, high-quality companies to replace the casualties of last year’s carnage. It is high time for Standard & Poor’s to do this, but the stock’s liquidity has always been the sticking point. Buffett would never admit to wanting Berkshire to join the S&P, but becoming an acknowledged peer to other major companies is part of the path to his legacy.

Berkshire will hold a special shareholders meeting in January to vote on the stock split and a few related matters, according to the SEC filing. An exact date wasn't given. The vote should just be a formality, as Buffett has already said he'll be voting for the change, and he controls 31.6 percent of the voting power. Other shareholders will follow.

In addition to approving the stock split, Berkshire shareholders will be authorizing the company to increase the number of B shares issued from 55 million to 3.225 billion. This will account for the 50-to-1 split and create enough B shares for each A share to be converted.

Of course all A shares won't be converted to B shares, but it's gradually happening, thanks mostly to Buffett's annual donations to the Bill & Melinda Gates Foundation and the foundations of his late wife and children. Buffett's A shares are slowly being converted to B shares as part of the donations.

The conversion rate will now be 1,500 B shares for every one A share (A shares can be converted to B shares but not vice-versa). Each B share will have one-ten-thousandth (1/10,000th) the voting power of an A share, which is again proportional to the current 1/200th ratio.

Only shareholders who own Berkshire stock as of the close of business Nov. 30 will be able to vote at the special shareholders meeting in January. Most of the votes will likely be done by proxy, and people who don't return the materials will be counted as voting in favor of the recommendations.

The Burlington deal, through which Berkshire will buy the $26 billion in BNI stock that it doesn't already own, is expected to close in the first quarter sometime after the special shareholders meeting. Berkshire is expected to finance the deal by issuing about $10 billion worth of stock, paying $8 billion in cash on its own books and paying another $8 billion in cash borrowed from Wells Fargo and J.P. Morgan Chase on favorable terms.

Iterview with Warren Buffett by FOX Business Network's Liz Claman

This is the transcript of the interview with Warren Buffett by FOX Business Network's Liz Claman. You can also watch the video below.

LIZ CLAMAN, FOX BUSINESS NETWORK ANCHOR: Let's get to the story of the day. Berkshire Hathaway making this huge bet on the railroads. One in particular, acquiring Burlington Northern Santa Fe in a deal worth about $44 billion. Let's talk to the man behind the deal. It was all his idea. On the phone, Warren Buffett, chairman and CEO of Berkshire Hathaway. Hello, Warren, how are you?

WARREN BUFFETT, CHAIRMAN/ CEO, BERKSHIRE HATHAWAY: Hi, Liz.

CLAMAN: What did you do? Did you wake up one day and say, " I think I'll spend another $26 billion in cash and stock for a railroad."? How did this come about?

BUFFETT: It came about because our board had a meeting (ph) scheduled for a year down in Fort Worth. The reason we have three different businesses we own in Fort Worth. And my Debbie Ballsonnick (ph), my assistant said, "Let's do the next one in Fort Worth and check out those companies." So, we went down there a week ago last Thursday. And I went down a couple of hours earlier -- early because there were two people I wanted to see. One, my friend John Roach and then the other one was Matt Rose over at BNSF. And while I was over there, we had about ten minutes alone after some vice presidents made a presentation. And I said, "Matt, if you're ever looking for a home for the railroad, Berkshire would make a good one." And he didn't throw me out of the office, so the next day I made him an offer, and he said he would take it to the directors and the rest is history.

CLAMAN: So, it's a ten-minute meeting and then a week. That's awfully fast, but this is how you operate. You had already owned, of course, about 24 percent of Burlington Northern. What was it that crystalized your belief in that 10 minutes or the vice president's presentation that you ought to buy the whole thing?

BUFFETT: It wasn't -- it wasn't -- you know, I felt good about it from the time we bought our first stock in 2006. But if we hadn't scheduled the meeting down there, probably wouldn't have happened. At least it wouldn't have happened now. But I -- you know, I like the business very much. I think the management is the best there is, and, like I say, when I didn't get thrown out of the office, I made it specific, and it was a good offer from their standpoint. And they decided to accept it. And now we're going to own a railroad. And we never fool around on things, Liz. I mean, I tell the lawyers, get this thing done, you know.

CLAMAN: I think Debbie Ballsonnick, your assistant who thought it best to put the meeting down there should get the big high five. No doubt at all.

BUFFETT: Well, yes, you'll see we didn't have an investment banker on the deal, but maybe we should have put her down.

CLAMAN: She's smart enough to do it. What is it, Warren, you see in the railroad transport area versus trucking or air cargo?

BUFFETT: Well, the rails move a freight at a much more environmentally friendly way than the truckers do. And they also only use about a third of the fuel. So, it's helping -- it helps our trade balance in the long run. It helps in terms of the atmosphere. It is a very, very efficient, effective, environmentally friendly way of moving freight. And, you know, our rail system is a huge asset to the country.

CLAMAN: BNI, of course, hauls about 10 percent of the nation's electricity-generating coal. Is this, Warren, a bet somehow on coal?

BUFFETT: Well, they haul a lot of coal and coal from the Powder River Basin in the West -- is more competitive, it's lower-sulfur coal than in the East. So, it will be around a long time. But coal, over the long run, coal will diminish in relative importance.

CLAMAN: There's a growing anti-rail lobby in Washington right now. I know you know because you do your homework on this stuff with a push by the shippers to re-regulate the rails -- the Railroad Antitrust Enforcement Act, if you will. Do you have any friends in Washington who assured you that railroads would not be re-regulated? Because I would imagine if the Obama administration went along with the shippers to regulate the rails, that might hurt your investment.

BUFFETT: Well, I would say since the Staggers Act back in 1980, which diminished the regulation substantially, you've had enormous progress with the rail system. You've decreased prices on inflation-adjusted terms significantly. So, I would say that the deregulation that took place starting in starting in 1980 is actually benefited the shippers enormously. And we're moving far, far more freight with using far less fuel, very efficiently. My guess is that people will see the rail for what they are, really an outstanding way of moving freight around the country.

CLAMAN: Cheapest, best way. But then there's cap-and-trade, Warren. Some analysts are very skittish about coal and a possible backlash if cap-and-trade goes through. You mentioned now -- you said, we're going to see a diminishing of coal use. But what do you think cap-and-trade would do to the business if that went through?

BUFFETT: It won't change the composition of what utilities are doing tomorrow or next week or next year. The utilities over time are going to use less coal and probably more nuclear. Our own utility, for example, uses wind very substantially in Iowa. So, over time, coal is going to diminish somewhat. Now, I think that will hit Eastern coal more than Western coal, but that's a fact of life over a considerable period of time. And that's true whether there's cap-and-trade or not, yes.

CLAMAN: The way you structured this deal, you're using some Berkshire stock for this and then $16 billion, I believe, in cash to pull it off. The Berkshire board approved a what? -- 50-to-1 split for the Class B(ph) shares. Why not all cash, Warren? Are you trying to preserve your cash at this point?

BUFFETT: I like to have a very comfortable level of cash. This is also the minimum amount of stock we can give and still have people be able to elect a tax-free deal that own BNSF stock currently. If we were going to use -- I don't like using stock, I can tell you that. I don't like issuing Berkshire shares.

CLAMAN: Is this the first time you've used stock?

BUFFETT: No. No, we've used it before. In fact, if you go back to (INAUDIBLE) deal, that was an all-stock deal. But generally speaking, I'm not enthused about using stock. But using 40 percent and considering the fact we already own some, which we also bought for cash, we're mostly using cash in this transaction.

CLAMAN: You just mentioned the tax-free aspect. Can you clarify a little bit on that?

BUFFETT: Well, 40 percent of the deal will be stock, and everybody will be able to opt whether they want stock or cash. And if less than 40 percent opt for stock, they get an all-stock allocation. And if more than 40 percent, still, people who opt for stock will get mostly a stock allocation. And to the extent they get stock, it will be a tax-free exchange.

CLAMAN: To acquire a company of this size when transportation demand is down, of course, as you said, is really a bet on the U.S. economy. In fact, in the release you called it an all-out wager on the economic future of the United States. When do you see the total recovery taking hold?

BUFFETT: I don't know. But it doesn't really make any difference in terms of this acquisition. If we're going to hold something for a hundred years, the next week or month or year doesn't really make any difference. If we hold it a hundred years, I guarantee you there will be some recessionary years in that period. And it really doesn't make any difference whether it's the first year or the fifth year or the eighteenth year. We're in for keeps.

CLAMAN: It's funny you did this with the rails because just two weeks ago we had Bob Oldstein of the Oldstein Funds on saying the rails are overstating their earnings and underdepreciating their equipment. Do you see it that way? Did you look into that?

BUFFETT: It's true. I didn't have to listen to that, but it's true any company that has long-life assets is replacing assets that they bought many years ago with things that cost more money now. That's true of our utility business, that's true of any business. It's true -- if you build a plant that 30 years ago had a 30-year life. When you go to replace that same plant, it's going to cost you more money. That's a fact of life in an inflationary economy.

CLAMAN: One year ago in September, we were all so nervous, and that's when President Bush and Hank Paulson pushed through T.A.R.P. Since then, we've had the stimulus. You have said when you treat a patient with such a huge amount of medicine, the likes of which we've never done before, somewhere down the line, we're going to see the ramifications. What do you think those ramifications will be, and aren't you worried to make such a huge purchase knowing that that may come to pass

BUFFETT: I'd be more worried holding cash. I think that if you look at the side effects of the incredible dosage that we've had to give -- and I think that dosage has been 100 percent appropriate; I'm not knocking that. But when you apply the kind of medicine we've applied, you may have sort of unprecedented aftereffects, too. But the one thing about those unprecedented aftereffects is they're going to be very bad for cash. I would much rather own working assets than have cash in a period that well could become inflationary down the road.

CLAMAN: But that's with the headwinds, though. You told me back in May and repeat in June the commercial real estate would, quote, "hit the skids big-time," and now we see that it is. What makes you think the businesses would ship more goods by a railroad when that kind of headwind is blowing in dark clouds? Or is this such a long-term bet at this point that you're not looking the next two years out?

BUFFETT: OK. Thank you, Liz.

BUFFETT: I don't know what will ship next year, but I would bet a lot of money -- in fact, we have bet a lot of money -- ten years from now there will be more people in the United States and they will be consuming more things than they consume now. And that will be more so 20 years from now and 30 years from now. So, there's going to be goods moving around for more and more people who are going to be consuming more and more of them, and certainly, rails should not only get a share but probably should probably get a little more than their share. It's a bet on the American economy essentially continuing to prosper over time just as it's prospered every since 1776.

CLAMAN: A lot of employers you're taking on here. Universal healthcare is at the forefront of a lot of people's minds. Do you think as you look what the government is attempting to do and Congress, now is the time to tackle such an expensive problem?

BUFFETT: Well, I think it's long past the time we tackle health care. But one of the real problems is the incentives in the system, and they’re very tough to get to. But we do spend 16 percent or so GDP on health care in the United States. And we have to figure out some way to slow down that particular engine.

CLAMAN: Do you think the wealthy should be taxed to pay for healthcare for all?

BUFFETT: I think the wealthy overall should be taxed more relative to the poor and the middle class.

CLAMAN: Here's a worry, though. The House bill calls for that 5 percent surtax on the wealthy, but it’s not indexed for inflation. Could that end up mimicking the alternative minimum tax which originally was supposed to tax only the rich, and now, as you know, police officers and teachers have to pay it?

BUFFETT: Well, I haven't read the 1,900 some pages in their entirety. I do know they have the 5 percent tax -- I think it's on incomes of over $500,000 or something. You're right, the way I read it, it's not index. But as a practical matter, I think that the wealthy have had their share of overall taxes, counting payroll taxes diminish significantly in the last 20 years. So I think that if you're looking for more revenue from the citizenry, I think the rich are the place to look.

CLAMAN: And that's you.

BUFFETT: That's me, right!

CLAMAN: You're okay with it?

BUFFETT: Absolutely.

CLAMAN: I always take your temperature each time we speak when it comes to President Pbama. Back in June, the last time you spoke you were very happy with all he's done. Does that sentiment continue?

BUFFETT: I am very, very glad I worked for and voted for President Obama, and I think he's the right man to have in the job.

CLAMAN: You're not concerned about all the spending that's going on at the moment?

BUFFETT: I think it's been -- I think it's necessary. I think a lot of the things we've done in of the last year or 15 months will have aftereffects. But I think they've been very important. We came very close to going into the abyss a year ago. And, you know, they've had to do some very unusual things, and some will have later costs. But they still were the right things to do.

CLAMAN: You wrote in back in August in the "Times" "the dollar's destiny lies with Congress." And with the deficit for 2009 -- listen, the numbers keep changing but $1.4 trillion, 10 percent of GDP high since 1945. Are you buying foreign currencies now or at least playing that carry trade since the dollar's so weak and there are other currencies with better yield? And I know you don't like to talk about what you're doing but, you know, as you see the dollar.

BUFFETT: You're seeing us get rid of a lot of dollars today in exchange for a lot of assets. So, I would rather own physical assets than own dollars.

CLAMAN: OK. As we finish up here, I have to ask, is this Burlington Northern purchase really just a chance to beef up your Lionel Train collection you have in the attic?

(LAUGHTER)

BUFFETT: I've got -- I’ve got a pretty good railroad on the third floor, but it’s nothing compared to the Burlington Northern...

CLAMAN: Yes. Matt Rose of Burlington Northern just said he's getting thousands and thousands of railcars to add to that collection.

BUFFETT: Yes. Right! Right! (LAUGHTER)

CLAMAN: Thank you so much, Mr. Buffett.

Genearl Electric 3q09 results

General Electric Co. stock fell the most since July after third-quarter profit declined 45 percent and lower real estate and consumer lending caused sales to drop more than analysts predicted.

GE fell 71 cents, or 4.2 percent, to $16.08 in New York Stock Exchange trading. The shares earlier declined 5.6 percent, the most on an intraday basis since July 17.

Chief executive Jeffrey Immelt is shrinking the finance unit and considering a reduced stake in NBC Universal as he builds energy, transportation, and health care businesses. The GE Capital plan is ahead of schedule and cut into sales, he said in an interview yesterday. Higher consumer finance losses and fewer real estate transactions hurt GE Capital.

“We expected GECS to report a pretax loss of about $275 million,’’ Citigroup Inc.’s Jeffrey Sprague, ranked the top multiple-industry analyst by Institutional Investor in 2009, wrote in a note to clients. “Instead the loss was $997 million’’ before a $1.14 billion tax credit.
Revenue fell 20 percent to $37.8 billion, trailing the $39.7 billion average estimate in a Bloomberg survey, the Fairfield, Conn., company said in a statement.

Profit from continuing operations declined to $2.45 billion, or 22 cents a share.

Berkshire Hathaway 2q09 result comments

2q09 Highlight:

Revenue (net of FV items) down slightly -1.6% to $27B from 1q09

• Insurance: down 16.5% to $7.9B from 1q09, excluding retro reinsurance deal in 1q09, it is in fact by 3.1%

EPS up to $2.1B from ($1.0B) in 1q09

Buffett reaps $1 bln profit on China carmaker BYD

By Jonathan Stempel

NEW YORK, July 31 (Reuters) - Warren Buffett's Berkshire Hathaway Inc (BRKa.N) (BRKb.N) has realized a $1.02 billion paper profit on a 10-month-old investment in BYD Co (1211.HK) after shares in the Chinese car and battery maker quintupled.

Berkshire's MidAmerican Energy Holdings Co unit had agreed last Sept. 26 to buy 225 million BYD shares at HK$8 each, a transaction then worth about $230 million.

The China Securities Regulatory Commission on Thursday granted approval for the transaction, which gives Berkshire a 9.89 percent stake. BYD shares closed Friday at HK$42.90, valuing Berkshire's stake at HK$9.65 billion, or about $1.25 billion.

Hong Kong's benchmark Hang Seng index .HSI is up 10 percent since Berkshire revealed the BYD investment.

Berkshire agreed to the stake three days after deciding to buy $5 billion of Goldman Sachs Group Inc (GS.N) preferred shares, despite the then-pervasive market turmoil after Lehman Brothers Holdings Inc's (LEHMQ.PK) bankruptcy.

Warrants attached to the Goldman investment have since generated a $2 billion paper profit for Berkshire.

"Buffett has grown more comfortable investing in foreign companies in recent years," said Andy Kern, who writes the blog Berkshire Ruminations and is a doctoral candidate at the University of Missouri-Columbia.

"Domestically, Buffett is taking advantage of Berkshire's solid capital position," he added, "while internationally, it's more that Buffett is simply finding bargains."

Other non-U.S. investments by Berkshire include the reinsurer Swiss Re (RUKN.VX) and the South Korean steelmaker Posco (005490.KS).

Earlier this decade, Berkshire made a few billion dollars on what had been a $488 million investment in Chinese oil company PetroChina Co (601857.SS).

Buffett is the world's second-richest person, after Microsoft Corp (MSFT.O) co-founder and Berkshire director Bill Gates, according to Forbes magazine.

Founded in Shenzhen in 1995 as a maker of rechargeable batteries, BYD expanded into mobile phones and automobiles.

It expects to sell 400,000 vehicles this year, and targets the sale of as many as 9 million by 2025, according to Henry Li, general manager of BYD Auto's export arm.

BYD Auto launched its first plug-in hybrid vehicle, the F3 DM sedan, last December.

Berkshire, based in Omaha, Nebraska, is a roughly $150 billion conglomerate that has close to 80 businesses selling such things as car insurance, ice cream and underwear, and which invests in dozens of companies.

Analysts on average expect Berkshire on August 7 to report a decline in second-quarter operating profit. Net income and Berkshire's book value may grow if rising stock markets boost the value of Berkshire's derivatives contracts.

Berkshire Class A shares were up $305 at $97,100 in morning trading on the New York Stock Exchange. (US$1 = HK$7.75) (Additional reporting by James Pomfret and Joanne Chiu in Shenzhen; Editing by Steve Orlofsky)

GE 2q09 results

July 17, 2009 11:12 AM ET
General Electric Co’s profits tumbled 47 percent in the second quarter due to a lackluster performance from its finance arm and industrial divisions.

GE (NYSE: GE), based in Fairfield, Conn., reported net income of $2.6 billion, down from $5.4 billion in the same period last year. Earnings per share were 24 cents, down from 51 cents a year earlier.

Revenue dropped 17 percent to $39.1 billion, falling short of analysts’ predictions of $42.1 billion.
GE says its lending arm, GE Capital, posted profits of $590 million, 80 percent less than a year ago.

Atlanta-based GE Energy performed best of all of the company’s units in the second quarter. Revenue was down 6 percent from the year-ago period, but profit for the company’s energy segment jumped 13 percent. That unit reported earnings of $3.6 billion on revenue of $20.1 billion. The company attributed the increased profit to “pricing and cost moves.”

Industrial sales fell 7 percent to $26 billion, marked by a decline in demand for appliances, locomotive and hospital equipment.

GE Chairman and CEO Jeffrey Immelt said the company delivered “solid second-quarter results” in a challenging economic environment. It “remains on track to be profitable for the full year,” he said.

GE’s renewable energy business is based in Schenectady. GE Energy, which manufactures turbines, also has an operation in Schenectady. The company’s research headquarters is in nearby Niskayuna.

Copyright 2009 bizjournals.com

Bilibala's comments:
GE's EPS inline with my expectation, need to take a closer look before I can calculate the target price.

Berkshire Hathaway Looks Stronger Than Ever, The Price Is Just Right

July-12-2009
(GuruFocus, July 12, 2009) There is a Barron’s article today entited “ For Buffett Fans, the Price Is Right” written by Andrew Bary.

Andrew Bary has written several articles about Berkshire in the past few years. In late 2007, when the company's "A" shares were trading near $150,000, Bary penned a front-page cover story saying Berkshire was overpriced.

Last year Bary wrote another cover story making the case that MidAmerican Energy Chairman David Sokol is the most-likely candidate to succeed Buffett. Bary wrote a more bullish piece on Berkshire last year. Here are key points he made in the recent article:

1. Berkshire Hathaway is down 12% for the year. Its shares have not participated much in the stock market’s rally since the end of March.

2. Buffett stated that book value is a good proxy of Berkshire’s intrinsic value, and historically it has been.

3. On those terms, Berkshire shares look appealing, at just 1.2 times estimated current book value of $72,000 a share. In the past decade, the stock has traded for an average of 1.6 to 1.7 times book value, a measure of shareholder equity per share. The current price-to-book ratio is near the low reached in early 2000, when Berkshire's stock bottomed at about $40,000.

4. Book Value Estimate: Berkshire 's book value, which stood at $66,250 per share as of March 31, likely has risen since then because of the market's powerful rally. That has lifted the value of the company's famed equity portfolio, which now totals more than $50 billion. The market value of Berkshire's equity and bond derivatives also has increased, and we assume the company earned more than $1,000 a share from operations in the second quarter, in line with reported first-quarter figures. That's how we arrive at an estimated book value of $72,000 a share.

5. Reasons holding Berkshire's shares back:
a) Investors recently have favored economically sensitive and other "offensive" stocks;
b) Investors remain concerned about Buffett's miscalculated sale of long-term put options on $35 billion of equity indexes, including the Standard & Poor's 500, when stock prices were much higher;
c) Berkshire has taken a big hit on some of its own equity holdings, including large stakes in ConocoPhillips (COP). d) property-and-casualty insurers are out of favor amid concerns about weak insurance pricing. e)Warren Buffett turns 79 next month. The author thinks all are insignificant except Buffett's age.

6. Even if the market tanks again this year, the downside in Berkshire stock seems limited due to its low price/book ratio and the company's earnings power.

7. The company looks stronger than ever, due to its promising portfolio and some top-flight businesses. Investors could now buy that package for a low premium to book value and get the talents of Buffett, who continues to demonstrate his incomparable investment skills.

8. The B shares look like a better buy than the A shares, because they sell at a 3% discount to their theoretical value. But the discount has persisted for some time, and could continue, as the B shares can't be converted into A shares.

Bilibala comments:
I also have concern about his age, other than that, Berkshire is a great company to invest.