Warren Buffet's new investment ideas

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BeanCity
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Warren Buffet's new investment ideas

Post by BeanCity » Mon May 06, 2019 12:34 pm

I thought it was interesting Warren Buffett just invested $10 Billion into the oil and gas industry (and said he would have done $20 Billion if they let him). In the age where the media portrays the oil and gas sector as a declining trend, WB bucks that thought, and must have some serious confidence in the coming years that oil and gas will provide good returns. What do other Bogleheads think of the E&P Sector?

*Note: this is not a political post.

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bertilak
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Re: Warren Buffet's new investment ideas

Post by bertilak » Mon May 06, 2019 12:47 pm

Buffett's made some good calls (mostly) and some bad calls (a few).

To me this means I wouldn't risk betting that any given call is a good one. If one in five of his calls are bad do you want to take that 20% risk? You need to average out risks since in this life you don't get many grabs at the gold ring.

If you like Buffett's strategy, invest in Berkshire Hathaway to go with all his calls averaged out. Don't make a big bet on just one of them.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

Progman
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Re: Warren Buffet's new investment ideas

Post by Progman » Mon May 06, 2019 2:04 pm

+1 on not taking just one idea from Warren

This investment you are referring was for a specific company and a specific project (permian basin). If you look at the competition for the oil & gas industry - they are the ones gaining market share. I'm no expert on that, and this is not political, but renewable energy cost has dropped a lot in the last decade and they have a pretty compelling case (the variable cost is free).

fabdog
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Re: Warren Buffet's new investment ideas

Post by fabdog » Mon May 06, 2019 2:07 pm

not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike

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Re: Warren Buffet's new investment ideas

Post by Grt2bOutdoors » Mon May 06, 2019 2:12 pm

fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Wiggums
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Re: Warren Buffet's new investment ideas

Post by Wiggums » Mon May 06, 2019 2:17 pm

Berkshire had committed to invest $10 billion in the company to help fund its proposed acquisition of Anadarko Petroleum. Berkshire would make the investment by purchasing 100,000 shares of preferred stock, which pays out an 8% annual dividend.

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TheTimeLord
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Re: Warren Buffet's new investment ideas

Post by TheTimeLord » Mon May 06, 2019 2:20 pm

BeanCity wrote:
Mon May 06, 2019 12:34 pm
I thought it was interesting Warren Buffett just invested $10 Billion into the oil and gas industry (and said he would have done $20 Billion if they let him). In the age where the media portrays the oil and gas sector as a declining trend, WB bucks that thought, and must have some serious confidence in the coming years that oil and gas will provide good returns. What do other Bogleheads think of the E&P Sector?

*Note: this is not a political post.
Pretty sure Occidental won't give you the same deal on your $10,000.

https://www.cnbc.com/2019/04/30/buffett ... eover.html
Here’s how the Berkshire deal is structured:

-Berkshire will receive 100,000 shares of cumulative perpetual preferred stock with a value of $100,000 a share.
-The conglomerate also gets a warrant to purchase up to 80 million shares of Occidental at an exercise price of $62.50 a share.
-The preferred stock will accrue dividends at 8% annually.

The Oracle of Omaha is an active investor across the energy sector.

Berkshire Hathaway is one of the top shareholders in oil refiner Phillips 66, and the firm took a new stake in Canadian oil and gas company Suncor earlier this year. Through Berkshire Hathaway Energy, Buffett has invested billions in natural gas power plants and pipelines, renewable energy and electric transmission and distribution.
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Re: Warren Buffet's new investment ideas

Post by WildBill » Mon May 06, 2019 2:33 pm

Grt2bOutdoors wrote:
Mon May 06, 2019 2:12 pm
fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
Howdy

Pretty harsh on old Warren.

This investment is one he has done many times- he provides financing to a firm in the form of preferred stock and gets a good return on the money. He also gets warrants on the stock that give him additional upside. It is a good deal for Berkshire, and a decent deal for Oxy. He did the same sort of deal in 2009 with GE and Goldman Sachs.

Do not see anything outrageous- willing lender, willing borrower.

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

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TheTimeLord
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Re: Warren Buffet's new investment ideas

Post by TheTimeLord » Mon May 06, 2019 2:39 pm

Grt2bOutdoors wrote:
Mon May 06, 2019 2:12 pm
fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
You a Chevron shareholder or a dividend investor?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

HawkeyePierce
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Re: Warren Buffet's new investment ideas

Post by HawkeyePierce » Mon May 06, 2019 3:08 pm

TheTimeLord wrote:
Mon May 06, 2019 2:39 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 2:12 pm
fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
You a Chevron shareholder or a dividend investor?
Or an Occidental shareholder. The NYSE requires companies to hold a shareholder vote on any transaction that requires issuing more than 20% of their stock. In this case Oxy is issuing 30% but doing so in two separate but related transactions—a little over 10% to Buffet and a little under 20% to Anadarko.

https://www.bloomberg.com/opinion/artic ... h-deposits (scroll down to the "Oxydarko" section)

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Re: Warren Buffet's new investment ideas

Post by Grt2bOutdoors » Mon May 06, 2019 3:12 pm

WildBill wrote:
Mon May 06, 2019 2:33 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 2:12 pm
fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
Howdy

Pretty harsh on old Warren.

This investment is one he has done many times- he provides financing to a firm in the form of preferred stock and gets a good return on the money. He also gets warrants on the stock that give him additional upside. It is a good deal for Berkshire, and a decent deal for Oxy. He did the same sort of deal in 2009 with GE and Goldman Sachs.

Do not see anything outrageous- willing lender, willing borrower.

W B
The deal is structured in such a manner, that the shareholders of Oxy can not vote on it since it doesn't affect more than 19.9% of common equity. Instead, Warren can dilute the existing shareholders by 16% and because its under the 19.9% threshold the issuing of common equity via warrant is not required to be put to a vote by common shareholders. This is most likely structured in this matter to avoid a proxy battle. The willingness of the borrower is who's willingness, the CEO and board of Oxy or that of the common stockholder, the one whose equity is at stake? A good return on money?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Stinky
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Re: Warren Buffet's new investment ideas

Post by Stinky » Mon May 06, 2019 3:14 pm

WildBill wrote:
Mon May 06, 2019 2:33 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 2:12 pm
fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
Howdy

Pretty harsh on old Warren.

This investment is one he has done many times- he provides financing to a firm in the form of preferred stock and gets a good return on the money. He also gets warrants on the stock that give him additional upside. It is a good deal for Berkshire, and a decent deal for Oxy. He did the same sort of deal in 2009 with GE and Goldman Sachs.

Do not see anything outrageous- willing lender, willing borrower.

W B
+1. I like your logic.
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Re: Warren Buffet's new investment ideas

Post by Grt2bOutdoors » Mon May 06, 2019 3:18 pm

TheTimeLord wrote:
Mon May 06, 2019 2:39 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 2:12 pm
fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
You a Chevron shareholder or a dividend investor?
Why yes, I am, it's shares are included in the Total Stock Market Index, are they not? I also own some BRK.B directly, but this is not a question of whether I'm a shareholder or not, it's a question of the deal on its merits. An 8% preferred dividend is quite rich, selling 10 percent of the company in approximately 6 or some odd years with your own money to another uninterested entity, is quite another. See, Warren is going to collect $800 million a year, in exactly 6.25 years, he's going to turn around and convert the preferred to cash, exercising the warrant and purchasing the stock for free. Oh, and he get's his $10 billion back. You can see why he likes the deal. As for Oxy shareholders, the deal has an odor to it.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Warren Buffet's new investment ideas

Post by Grt2bOutdoors » Mon May 06, 2019 3:21 pm

HawkeyePierce wrote:
Mon May 06, 2019 3:08 pm
TheTimeLord wrote:
Mon May 06, 2019 2:39 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 2:12 pm
fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
You a Chevron shareholder or a dividend investor?
Or an Occidental shareholder. The NYSE requires companies to hold a shareholder vote on any transaction that requires issuing more than 20% of their stock. In this case Oxy is issuing 30% but doing so in two separate but related transactions—a little over 10% to Buffet and a little under 20% to Anadarko.

https://www.bloomberg.com/opinion/artic ... h-deposits (scroll down to the "Oxydarko" section)
Nope, only through index funds do I hold Oxy, though I do own some Brk.b.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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TheTimeLord
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Re: Warren Buffet's new investment ideas

Post by TheTimeLord » Mon May 06, 2019 3:21 pm

Stinky wrote:
Mon May 06, 2019 3:14 pm
WildBill wrote:
Mon May 06, 2019 2:33 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 2:12 pm
fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
Howdy

Pretty harsh on old Warren.

This investment is one he has done many times- he provides financing to a firm in the form of preferred stock and gets a good return on the money. He also gets warrants on the stock that give him additional upside. It is a good deal for Berkshire, and a decent deal for Oxy. He did the same sort of deal in 2009 with GE and Goldman Sachs.

Do not see anything outrageous- willing lender, willing borrower.

W B
+1. I like your logic.
Exactly, 100% Berkshire boilerplate. If Oxy score big with the acquisition then Berkshire does great on the warrants and Oxy shareholders are rewarded. If Oxy stock plummets then warrants become worthless.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

WildBill
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Re: Warren Buffet's new investment ideas

Post by WildBill » Mon May 06, 2019 4:32 pm

Grt2bOutdoors wrote:
Mon May 06, 2019 3:12 pm
WildBill wrote:
Mon May 06, 2019 2:33 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 2:12 pm
fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
Howdy

Pretty harsh on old Warren.

This investment is one he has done many times- he provides financing to a firm in the form of preferred stock and gets a good return on the money. He also gets warrants on the stock that give him additional upside. It is a good deal for Berkshire, and a decent deal for Oxy. He did the same sort of deal in 2009 with GE and Goldman Sachs.

Do not see anything outrageous- willing lender, willing borrower.

W B
The deal is structured in such a manner, that the shareholders of Oxy can not vote on it since it doesn't affect more than 19.9% of common equity. Instead, Warren can dilute the existing shareholders by 16% and because its under the 19.9% threshold the issuing of common equity via warrant is not required to be put to a vote by common shareholders. This is most likely structured in this matter to avoid a proxy battle. The willingness of the borrower is who's willingness, the CEO and board of Oxy or that of the common stockholder, the one whose equity is at stake? A good return on money?
Howdy

Oxy is betting that they can earn out better than they are paying on the preferred. Maybe they are right; maybe they are wrong. I am sure they have done the numbers.

The number of institutions that can front you $ 10 billion on an unsecured loan with a couple of phone calls is limited. That is why Buffet gets the calls. And he charges what he thinks the market will bear. He would be doing his own shareholders a disservice otherwise.

These folks are all adult businesspeople and this is a straightforward deal with risk and potential reward for both parties. What’s the point of name calling?

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

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Stinky
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Re: Warren Buffet's new investment ideas

Post by Stinky » Mon May 06, 2019 5:03 pm

WildBill wrote:
Mon May 06, 2019 4:32 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 3:12 pm
WildBill wrote:
Mon May 06, 2019 2:33 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 2:12 pm
fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
Howdy

Pretty harsh on old Warren.

This investment is one he has done many times- he provides financing to a firm in the form of preferred stock and gets a good return on the money. He also gets warrants on the stock that give him additional upside. It is a good deal for Berkshire, and a decent deal for Oxy. He did the same sort of deal in 2009 with GE and Goldman Sachs.

Do not see anything outrageous- willing lender, willing borrower.

W B
The deal is structured in such a manner, that the shareholders of Oxy can not vote on it since it doesn't affect more than 19.9% of common equity. Instead, Warren can dilute the existing shareholders by 16% and because its under the 19.9% threshold the issuing of common equity via warrant is not required to be put to a vote by common shareholders. This is most likely structured in this matter to avoid a proxy battle. The willingness of the borrower is who's willingness, the CEO and board of Oxy or that of the common stockholder, the one whose equity is at stake? A good return on money?
Howdy

Oxy is betting that they can earn out better than they are paying on the preferred. Maybe they are right; maybe they are wrong. I am sure they have done the numbers.

The number of institutions that can front you $ 10 billion on an unsecured loan with a couple of phone calls is limited. That is why Buffet gets the calls. And he charges what he thinks the market will bear. He would be doing his own shareholders a disservice otherwise.

These folks are all adult businesspeople and this is a straightforward deal with risk and potential reward for both parties. What’s the point of name calling?

W B
Once again, I agree with WildBill.

Oxy shareholders voted the Board into place. The Board installed management.

If the shareholders don’t like the deal that their Board and their management negotiated, their can kick out their Board. Or better yet, just sell their shares.
It's a GREAT day to be alive - Travis Tritt

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Re: Warren Buffet's new investment ideas

Post by Grt2bOutdoors » Mon May 06, 2019 5:30 pm

If it weren’t WB doing the lending, instead say a payday shop or a pawn shop, would you be of the same opinion? Maybe, maybe not.

In any event, it will be interesting to see how this all plays out, maybe some one will take out Oxy. Now that would be reminiscent of the 80’s.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Warren Buffet's new investment ideas

Post by BionicBillWalsh » Mon May 06, 2019 6:11 pm

Grt2bOutdoors wrote:
Mon May 06, 2019 2:12 pm
fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
You must hate capitalism.

Warren doesn't typically solicit these deals. They come to him. He would be derelict to BRK shareholders by not making this deal. Plus, nothing is solidified yet. Chevron can still up their offer.
Luigi follow only the Ferraris

bondsr4me
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Re: Warren Buffet's new investment ideas

Post by bondsr4me » Mon May 06, 2019 6:19 pm

BionicBillWalsh wrote:
Mon May 06, 2019 6:11 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 2:12 pm
fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
You must hate capitalism.

Warren doesn't typically solicit these deals. They come to him. He would be derelict to BRK shareholders by not making this deal. Plus, nothing is solidified yet. Chevron can still up their offer.
+1 agreed.
Nobody put a gun to anyone’s head for this or any other WB deal.

WildBill
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Re: Warren Buffet's new investment ideas

Post by WildBill » Mon May 06, 2019 6:47 pm

Grt2bOutdoors wrote:
Mon May 06, 2019 5:30 pm
If it weren’t WB doing the lending, instead say a payday shop or a pawn shop, would you be of the same opinion? Maybe, maybe not.

In any event, it will be interesting to see how this all plays out, maybe some one will take out Oxy. Now that would be reminiscent of the 80’s.
Howdy

Comparing Oxy to some poor guy being victimized by a loan shark is so preposterous it is comical.

I suspect somewhere within that multi-billion dollar, tens of thousands of employee corporation there is at least one nerd who has done the numbers and thought it through and figured they will earn out on the preferred😀

I know when we were doing similar deals we often took the time to figure out if we would earn out above the cost of capital😎

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

Grt2bOutdoors
Posts: 20982
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Warren Buffet's new investment ideas

Post by Grt2bOutdoors » Mon May 06, 2019 8:06 pm

WildBill wrote:
Mon May 06, 2019 6:47 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 5:30 pm
If it weren’t WB doing the lending, instead say a payday shop or a pawn shop, would you be of the same opinion? Maybe, maybe not.

In any event, it will be interesting to see how this all plays out, maybe some one will take out Oxy. Now that would be reminiscent of the 80’s.
Howdy

Comparing Oxy to some poor guy being victimized by a loan shark is so preposterous it is comical.

I suspect somewhere within that multi-billion dollar, tens of thousands of employee corporation there is at least one nerd who has done the numbers and thought it through and figured they will earn out on the preferred😀

I know when we were doing similar deals we often took the time to figure out if we would earn out above the cost of capital😎

W B
It's the underlying shareholders of Oxy who will be left holding the bag, if the calculations are off. Those are the potential victims.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

DonIce
Posts: 601
Joined: Thu Feb 21, 2019 6:44 pm

Re: Warren Buffet's new investment ideas

Post by DonIce » Mon May 06, 2019 8:11 pm

Grt2bOutdoors wrote:
Mon May 06, 2019 8:06 pm
It's the underlying shareholders of Oxy who will be left holding the bag, if the calculations are off. Those are the potential victims.
Seems to me that the shareholders of Occidental are free to sell their shares if they don't like the company's decisions. No one is forcing them to hold those shares.

bgf
Posts: 969
Joined: Fri Nov 10, 2017 9:35 am

Re: Warren Buffet's new investment ideas

Post by bgf » Mon May 06, 2019 8:21 pm

Grt2bOutdoors wrote:
Mon May 06, 2019 2:12 pm
fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
He's a loan shark or a vulture, if you consider just for lending his name and not even money, he gets $50 million up front. That is what is called a vulture. The greed is written all over it. As for Oxy agreeing to such terms, just shows how desperate they really are for this deal that they would dilute the existing shareholders by that large a percentage, signing away 10% of the company for less than 6.25X annual preferred dividend on the loan. Outrageous!
lol. if this simple business deal gets you this worked up i wonder how you've made it this long in life without your head exploding.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

KandT
Posts: 107
Joined: Sun Mar 26, 2017 2:32 am

Re: Warren Buffet's new investment ideas

Post by KandT » Mon May 06, 2019 8:22 pm

fabdog wrote:
Mon May 06, 2019 2:07 pm
not clear Buffett is making a wager on Oil and Gas (Permian or not) vs getting an outstanding price for lending to the company. 8% dividend on the preferred plus in the money options. I am sure he would have gone twice as much if they had let him. As long as he can see a path to getting paid back I am sure he views this as an excellent use of idle cash

Not sure you or I could get the same deal :)

Mike
I already learned this lesson about 20 years ago. A broker told me to invest in Level 3 communications and Warren Buffet had just taken a big investment position with them. I bought it and it sucked. Then I read about Warren Buffet's deal which was nothing like buying stock from my broker!!!

Trust me he lives in a completely different world and has the capital to get different deals. Of course, I am a big fan of his but his name gets misused so often that if he weren't so dang wealthy I would feel badly for him :wink:

WildBill
Posts: 478
Joined: Wed Jun 29, 2016 10:47 pm
Location: San Antonio, Texas

Re: Warren Buffet's new investment ideas

Post by WildBill » Mon May 06, 2019 8:41 pm

Grt2bOutdoors wrote:
Mon May 06, 2019 8:06 pm
WildBill wrote:
Mon May 06, 2019 6:47 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 5:30 pm
If it weren’t WB doing the lending, instead say a payday shop or a pawn shop, would you be of the same opinion? Maybe, maybe not.

In any event, it will be interesting to see how this all plays out, maybe some one will take out Oxy. Now that would be reminiscent of the 80’s.
Howdy

Comparing Oxy to some poor guy being victimized by a loan shark is so preposterous it is comical.

I suspect somewhere within that multi-billion dollar, tens of thousands of employee corporation there is at least one nerd who has done the numbers and thought it through and figured they will earn out on the preferred😀

I know when we were doing similar deals we often took the time to figure out if we would earn out above the cost of capital😎

W B
It's the underlying shareholders of Oxy who will be left holding the bag, if the calculations are off. Those are the potential victims.
Howdy

That is absolutely true and it was is also true that risk is unavoidable and has been present in every investment, every business and every deal since the beginning of time.

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

Grt2bOutdoors
Posts: 20982
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Warren Buffet's new investment ideas

Post by Grt2bOutdoors » Mon May 06, 2019 8:45 pm

WildBill wrote:
Mon May 06, 2019 8:41 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 8:06 pm
WildBill wrote:
Mon May 06, 2019 6:47 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 5:30 pm
If it weren’t WB doing the lending, instead say a payday shop or a pawn shop, would you be of the same opinion? Maybe, maybe not.

In any event, it will be interesting to see how this all plays out, maybe some one will take out Oxy. Now that would be reminiscent of the 80’s.
Howdy

Comparing Oxy to some poor guy being victimized by a loan shark is so preposterous it is comical.

I suspect somewhere within that multi-billion dollar, tens of thousands of employee corporation there is at least one nerd who has done the numbers and thought it through and figured they will earn out on the preferred😀

I know when we were doing similar deals we often took the time to figure out if we would earn out above the cost of capital😎

W B
It's the underlying shareholders of Oxy who will be left holding the bag, if the calculations are off. Those are the potential victims.
Howdy

That is absolutely true and it was is also true that risk is unavoidable and has been present in every investment, every business and every deal since the beginning of time.

W B
Agreed. That's why equity is for risk, bonds (high quality :wink: ) are for safety.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
Posts: 20982
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Warren Buffet's new investment ideas

Post by Grt2bOutdoors » Mon May 06, 2019 8:50 pm

DonIce wrote:
Mon May 06, 2019 8:11 pm
Grt2bOutdoors wrote:
Mon May 06, 2019 8:06 pm
It's the underlying shareholders of Oxy who will be left holding the bag, if the calculations are off. Those are the potential victims.
Seems to me that the shareholders of Occidental are free to sell their shares if they don't like the company's decisions. No one is forcing them to hold those shares.
They are, but let's just say that Oxy is worth much higher than currently traded price due to a mis-pricing by market. A true value investment if you will. You are holding the shares DonIce and out comes the news of this deal. Would you then (assuming you are the owner of those Oxy shares) feel free to sell them for a price below what you believe them to be worth?

In any event, it's going to get interesting - just read the target company now sees Oxy deal as being superior to Chevron's. Chevron now has 4 days to respond with their next move; new offer or move on.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

DonIce
Posts: 601
Joined: Thu Feb 21, 2019 6:44 pm

Re: Warren Buffet's new investment ideas

Post by DonIce » Mon May 06, 2019 8:58 pm

Grt2bOutdoors wrote:
Mon May 06, 2019 8:50 pm
They are, but let's just say that Oxy is worth much higher than currently traded price due to a mis-pricing by market. A true value investment if you will. You are holding the shares DonIce and out comes the news of this deal. Would you then (assuming you are the owner of those Oxy shares) feel free to sell them for a price below what you believe them to be worth?
If I believed that the shares would decline in value as a result of a bad deal, I would sell. If I believed the shares would increase in value, I would hold (or buy more). Looking at the price history of oxy, it doesn't seem that its share price declined since this deal made it into the news. Therefore if an investor doesn't like the deal, they can presently sell the shares for no less than they could have sold them for before the deal. I am skeptical that an individual investor could astutely identify that these shares were significantly "mis-priced".

In reality, most bogleheads buy their stocks through funds, usually passive index funds. By investing passively, the individual investor gives up the ability/need to express opinions on whether particular stocks are likely to go up or down. Instead, you rely on other investors, who do analyze individual companies, to price the stock correctly. So hopefully they did their job and priced it correctly, accounting for the situation that the company is in given the deals that it makes.

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