Banks, insurance and finance

During the period before Berkshire’s 13F comes out, we can speculate on the new buying in the category “Banks, insurance and finance” - which increased by almost $10 Billion by cost basis during the quarter. We know quite a few of the stocks Berkshire purchased in the quarter (CVX, OXY, HPQ, ATVI, AAPL, top-up on all 5 Japanese trading companies) and we know he did not add to BAC or USB (too close to 10% on USB).

I don’t think anything we know he purchased would fit into the “Banks, insurance and finance” category.

The $9+ Billion of buying doesn’t have to be all in one security, of course. It could also represent several smaller buys of securities by Ted and Todd combined (although much of the money they manage for Berkshire is pension fund money that doesn’t show up on Berkshire’s shareholder reports - for instance Berkshire’s DaVita doesn’t show up in the Annual report because half is in pension plans.)

So we have something to speculate about. I have heard some say JPM but I would personally be surprised if he bought more of a huge money center bank. Unless he bought Citi because it just got so cheap and left for dead he couldn’t pass. But I doubt that he would get involved in another big bank and Citi is currently sitting with a $93 Billion market cap and repurchasing shares. Warren was willing to sell Wells at a similar valuation when he didn’t trust the company anymore - so he certainly has the fortitude to pass on a cheap date with C.

So I wonder what Insurance and finance stock(s) it could be? Anyone with a speculation? We’ll know soon enough I suppose

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Barron’s this morning also touched on these potential buys as well although they did not speculate on what Buffett may have bought with that $10 billion other than it was likely financials.
They also said there was a good chance they dumped the Verizon stake.

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Buffett also mentioned that he bought German securities. Could one of them be Deutsche Bank?

It fell sharply from 18.5 Eur to 8.9 Eur in Feb. With ECB raising rates and Euro exchange rate to USD declining sharply to 1.05 from 1.22 a year ago, it probably is a better buy for US investors than at any time in decades. PB=0.3, Fwd PE 6.3, Yield = 2%. Plus Buffett could have borrowed in Euros cheaper than 2%, like he did in JPY to buy higher yielding Japanese trading houses.

Jim keeps emphasizing that DB is probably the worst bank in the world and should be euthanized. But it is 2B2F and at some price it may be a buy.

Commerzbank is another German bank even worse than Deutsche:

Buffett may have been buying a basket of banks to reduce the risk like he did Japanese trading houses.

Another possibility is Munich Re:

For the current year, Munich Re forecasts profit of 3.3 billion euros.

It said that reinsurance contract renewals at the start of the year rose by the overall volume of premiums as well as by price.

“Propelled by this momentum, we will resolutely tap into the favourable market environment as we increase our profit to 3.3 billion euros in 2022,” Chief Executive Officer Joachim Wenning said.…

Again share price dropped sharply in Feb.

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Jim keeps emphasizing that DB is probably the worst bank in the world and should be euthanized.

Well, I’m not sure it’s the worst. That’s a pretty tough competition!
They’re certainly among the worst of the very large banks.

It appears they have no hope of having a positive return on capital above any reasonable estimate of their cost of capital.
Pretty much everybody knows that, which is why they pretty much never trade above book value.
Current price is about 27% of book I think, meaning the market thinks management will destroy three quarters of the assets they’ve been trusted to manage.
It’s hard to make a case that the market is greatly wrong about that.

So yeah, shareholders (and the world) would be better off if they simply liquidated everything and paid the money out.
I have always assumed that the only thing holding them back is the brutal cost of severance pay in Germany, meaning the book value can’t be realized.
Otherwise I’d pass the hat to raise the funds to do an LBO myself: quadruple your money overnight!

I think (and hope) that if Mr Buffett is buying European financials, it would be high quality ones.
Handelsbanken with its 5% yield and historically amazing capital strength?
Or at least if he’s dumpster diving, picking one that is, if not well run, at least pretty consistently profitable and dirt cheap.
Banco Santander at a 15-20% earnings yield?