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Holly LaFon
Holly LaFon
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Wally Weitz Comments on Berkshire Hathaway and Bank of America

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July 17, 2017 | About:
Most of our assets are invested in companies we have owned for many years, but the companies themselves have not been standing still. Berkshire Hathaway (NYSE:BRK.A) has been in our clients’ accounts continuously since 1976, but today’s Berkshire is very different from that of 40, 30, 20 or even 10 years ago. Recent headlines trumpet Berkshire’s $12 billion profit on its Bank of America (NYSE:BAC) investment. In fact, that investment was made in 2011 when Buffett lent BAC a badly needed $5 billion. Berkshire received a convertible preferred stock with a 6% yield ($300 million per year) convertible into BAC shares worth over $17 billion today. Berkshire’s internal rate of return on this investment is about 18% per year.

Berkshire currently holds about $100 billion in cash available for future deals. Investments like BAC (and similar lifelines thrown to Goldman Sachs and General Electric (NYSE:GE) in 2008) are rare and tend to arise in times of economic stress. Neither we nor Warren can predict when the next “deal” will present itself, but Warren and his investment team are both patient in waiting for great opportunities and bold in seizing them.

From Wallace Weitz (Trades, Portfolio)'s June 2017 Value Matters letter.


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