Which Berkshire Business Would You Sell Off Assuming No Tax Hits?

In their recent episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discussed Which Berkshire Business Would You Sell Off Assuming No Tax Hits? Here’s an excerpt from the episode:

Tobias: All right, I’ve got a question. What Berkshire business would you sell off assuming no tax hits?

Jake: Oof.

Bill: Think Fruit of the Loom could go.

Tobias: [giggles]

Bill: I think there’s a lot of them that I wouldn’t mind carving. I’ll tell you what I wouldn’t sell, Oriental Trading Company. That’s a fucking business. [Whistles]

Jake: Mm.

Bill: It’s just not big enough.

Jake: Odd, poor choice there. I like it.

Bill: Yeah, came from inside [crosstalk]

$AAPL Fairly Priced

Jake: If they were me, and this is how wrong and out of tune I am, but I would probably be trimming more Apple, if it was me.

Bill: It’s because you’re a hater.

Jake: No, it’s–[crosstalk]

Bill: Let’s just go to the market cap.

Jake: [laughs]

Bill: Check it out, folks.

Tobias: That’s the biggest company in the world right there. I think Meb Faber would say that basically, the biggest company in the world almost always underperforms for the obvious reason that to become the biggest company in the world, you tend to be pretty stretched.

Jake: Things had to go right.

Tobias: Some things had to go right. A lot of things had to go right and you had to get the multiple expansion too.

Bill: It’s not trading at that crazy of a multiple, man.

Tobias: I don’t disagree. I was just going to say this is one of the unusual periods in time where it’s not Exxon is the biggest company in the world or some oil producer is the biggest company in the world. It’s a company that potentially has a little bit– It’s a better-quality company.

Bill: It’s trading at a 4.5% free cash flow yield.

Tobias: Yeah.

Bill: That’s not that crazy for the best business ever? Now, yeah, you’ve got some hardware risk for sure, but it also just generated $90 billion in TTM free cash, like straight cash on me, like Randy Moss cash. Not like, “Oh, we got adjusted EBITDA shit.” It’s crazy.

Jake: Adjusted, yeah. No doubt. It’s an absolute– I mean it’s a money printer like, it would almost make Jaypal jealous.

Tobias: [laughs]

Bill: I’m interested to watch the suit. I want to actually read the documents. I’ve going to get those because that the suit about the app store, this is going to be interesting.

Tobias: What are they saying? It’s anti-competitive or they saying that they take it to–[crosstalk]

Bill: Yeah, this is the narrative or not the narrative. But this is what developers are saying about Apple. Like you think about Roblox, Roblox is a pretty incredible product. Apple’s just going to get to rake like–

Jake: 20% off the top.

Bill: In perpetuity?

Tobias: You create the ecosystem.

Bill: Yeah, no doubt.

Tobias: So, into the ecosystem. That’s football. That’s the way the game is played.

Bill: Yeah, well, this is–

Tobias: I created the customers for you. You get to roll out on my platform, and I had to do all the hard work. I had to go and build those bloody phones, you just get to sell to them.

Bill: This is why Buff Diggy is smarter than me when he said that it was the most valuable real estate in the world, and I heard what he said and still didn’t understand it.

Jake: [laughs]

Tobias: I still think Google’s a better business.

Bill: Yeah, they had nice earnings. So, did Facebook. That was crazy to see those prints.

Tobias: They are the most direct beneficiaries for the last 12 months though, that could– And Amazon as well. Amazon, nobody’s going to mention Amazon? It’s like 47% on a $100 billion base but then you lock everybody in their houses for a year, that’s probably what’s going to happen.

Jake: Yeah.

Bill: Yeah, I think big tech generally, it’s pretty incredible.

Jake: But is it a pull forward or not? Was that a secular trend that just keeps going?

Tobias: Should you get paid as a manager to hold FAMG?

Bill: I think a lot of managers have kept their job doing it.

Jake: Oof, amen.

Tobias: They’re probably the most widely held stocks run.

Bill: Yeah, I’m not sure they don’t deserve to be more bought.

Tobias: I think we’re coming up on time, amigos. Any closing words?

Bill: That’s the face, Jake.

Jake: [laughs] Yeah, there it is.

Tobias: What do I do? Do I have a closed face? [crosstalk]

Bill: I gave Jake something to cringe at.

Jake: You didn’t bail the world. Didn’t– [laughs] [crosstalk]

Bill: Apple, at a 4.5% free cash flow yield? That’s just not that rich relative to history or anything. These things–

Jake: Wow. Come on, not history, but relative to–

Bill: Well, you’re not. Yes, we are where we are in the world.

Jake: Don’t. You can’t give me T-bill at 6% as a–

Bill: Yes. Okay, you are correct on that.

Jake: But relative opportunity set today than your comment stance.

Bill: Google’s at 4% free cash flow yield, but these things are not that rich.

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