قالب وردپرس درنا توس
Home / Business / Buffett can choose between insurance companies and airlines to strengthen Berkshire

Buffett can choose between insurance companies and airlines to strengthen Berkshire



It's time for Warren Buffett to break up his extra-large wallet.

While the billionaire this weekend sees around 40,000 Berkshire Hathaway (BRK.A) shareholders from around the world in Omaha, Neb., Freut, many of Buffett and Vice Chairman Charles Munger will want to know what they are planning [19659002] Some owners will want to know if Buffett will spend some of the $ 116 billion that Berkshire has on acquisitions to bolster its already substantial holdings, or whether it will use the money to buy more shares in companies already claimed ,

Buffett has said he is looking for five qualities in a possible acquisition, including lasting competitive strengths, high-quality management, good returns, opportunities for internal growth, and a reasonable price.

"This last requirement proved to be a barrier to virtually every transaction we reviewed in 201

7, as prices for decent but by no means spectacular companies reached an all-time high," Buffett said in his letter to shareholders in February [196592002]. With Buffett's stock portfolio performing well this year, Buffett could inspire Berkshire shareholders with a spectacular deal.

Buffett's biggest losers were Kraft Heinz Co. (KHC) with a minus of 30%; Procter & Gamble Co. (PG) by 21%; Southwest Airlines Co. (LUV), down 20%; American Airlines Group Inc. (AAL), down 19%; and Charter Communications Inc (CHTR), down 18%. Maybe that's why he should rethink his remarks in February when he said he was open to buying a whole airline.

"It's a business that is always dependent on someone doing something very stupid in competition, and they've done so many times in the past," Buffett told CNBC at the time , "It can turn into tough competition that wipes out profits, or it can be a company that is more decent but still faces a lot of competition, and it's really hard to know how it will develop."

Berkshire also holds shares in United Continental (UAL) and Delta Airlines (DAL). That could mean that JetBlue (JBLU) stocks are in play for Buffett.

Hunter Keay of Wolfe Research said the application of Buffett's five criteria on airlines leads to two likely candidates: Southwest or Delta, "due to cash flow, balance sheet, brand reputation, and overall overall quality," he wrote in a note to investors [19659002] Berkshire's biggest winners on the stock exchange this year are MasterCard Inc. (MA), an increase of 23%; Sirius XM Holdings Inc. (SIRI), an increase of 18%; Phillips 66 (PSX), down 14%; Visa Inc. (V), 11% more; and Moody's Corp. (MCO), according to FactSet also by 11%.

Buffett's Bread & Butter

The insurance business has traditionally been the biggest gem in Berkshire's portfolio, as its combination of insurance companies recorded 14 consecutive years of underwriting profit more than $ 28 billion generated. This strip ended in 2017 after three major hurricanes hit Texas, Florida and Puerto Rico and devastated California's California wildfires.

Yet, the state of Berkshire's finances is such that Buffett believes he can withstand even worse disasters than in 2017, he said in his letter to shareholders in February. Even in the case of a US megacast disaster that causes insured losses of $ 400 billion or more-the annual likelihood of which is about 2 percent-"no business comes anywhere near Berkshire" to financially face a catastrophe of this magnitude to be prepared to be written. Berkshire's share of a $ 400 billion loss could be $ 12 billion, he estimated.

Buffett could add that to its current portfolio, which includes auto and personal insurer GEICO, a reinsurance group with National Indemnity Co. (NICO). and general reinsurance company; a retroactive reinsurance arrangement with various subsidiaries of the American International Group; and the Berkshire Hathaway Primary Group, which includes commercial insurers in treatment errors, workers' compensation, automobiles, general liability, property and various specialty insurance policies for small, medium and large customers.

Meanwhile, Lower Corporate Taxes in the US May Promote Buffett complements the manufacturing business of its conglomerate, many of which are based in the US. Such businesses as Lubrizol, IMC, Precision Castparts and others are highly profitable, generating margins of more than 13% before taxes last year.

Berkshire's Building Products Group, which among other things makes floors, insulation, roofing, tile and paint, is another profitable part of Berkshire that could be added next year.

Should President Trump meet US repair and replacement plans? Infrastructure, Berkshire may wish to benefit from such spending, including Vulcan Material Co. (VMC), Marti n Marietta Materials Inc. (MLM) or Quanta Services Inc. (PWR), which provides infrastructure services through the purchase of companies willing to primarily for the oil and gas and electrical industries.


Source link