Berkshire Links to GM and Bombardier ( NetJets)

English: Bombardier CSeries mockup Italiano: M...
English: Bombardier CSeries mockup Italiano: Modello dimostrativo del Bombardier CSeries (Photo credit: Wikipedia)

Berkshire Hathaway (BRK.A : NYSE : US$123,897.57)

General Motors (GM : NYSE : US$20.31 

Bombardier* (BBD.B : TSX : $4.04)

“She may not look like much, but she’s got it where it counts, kid.” – Star Wars –Han Solo to Luke Skywalker (on first seeing the

Millennium Falcon).

Many aircraft manufacturers have used the Farnborough International Air Show (FIA), which will take place July 9-15, as a key venue to announce major orders. In the past, based on a decade or more of trading data both before and after the air show, some investors have purchased BBD shares in late June or early July before the run-up to the show and then sold the shares during the show.

 BBD shares have tended to peak on approximately the second or third day of the show, as major aircraft orders typically have been announced by then, or investors have become increasingly concerned that large orders will fail to materialize. BBD shares have typically traded higher on average 9.1% in 10 of the last 15 years during the week before the air show and sold off every year following the show on average 8.1%. However, the average net change from five days before to five days after the show since 1997 is less than 0.5%, making no apparent long-term impact on the share price.

BBD held its Pre-Farnborough airshow briefing in late June, the company expects total business jet deliveries in 2012 to be roughly flat YoY with return to sustained growth in 2013. On commercial aircraft, there was a slight change versus prior year forecast and no change to CSeries total aircraft market of 6,900 (BBD expects a 50% market share). Europe is challenging, but emerging markets are still promising, and North America prospects have improved. Could Farnborough be a letdown?

How do you top the biggest business jet order in your history? Recently, NetJets, a private jet-sharing company owned by Warren Buffett‘s Berkshire Hathaway (BRK.A) , said it would buy up to 425 new business jets from Bombardier and from U.S. planemaker Cessna Aircraft in a $9.6 billion deal to renew its North American and European fleets. BBD’s portion of the order is worth up to $7.3 billion and includes up to 275 of the company’s Challenger business aircraft (the transaction comprises 100 firm orders on two different types of Challenger jets, and options for 175 more).

 BBD also signed a long-term service agreement with NetJets that could be worth an extra $2.3 billion if all of NetJets’ options on Bombardier aircraft are fully exercised. Farnborough holds its air show on even-numbered years in July, while Paris holds its airshow on odd-numbered years in June. Both Farnborough and Paris are important events for the aerospace industry, known particularly for the announcement of new developments and orders.

 General Motors Stake

Warren Buffett’s Berkshire Hathaway acquired its largest stake in General Motors before the automaker plummeted Friday, as the billionaire chairman hands more responsibility to deputy stock pickers.

 Berkshire accumulated about  8.47 million shares of GM through February 3 at an average price of $24.35, according to data compiled by Bloomberg. Omaha, Nebraska-based Berkshire’s full stake was reported in a separate regulatory filing in May that didn’t disclose the purchase price or date. Berkshire bought another 1.53 million GM shares through February 14 for an average of $25.46 each, the insurance filings showed.

Taken together, the holdings had lost an estimated $40 million in value from the drop in the stock, assuming no shares were sold. An analyst believes GM’s slump may provide Berkshire with another opportunity to buy shares in a company that could benefit as U.S. consumers replace aging cars. As Buffett tends to focus on the long-term development of the companies he invests in, analysts speculate that one quarter’s results would not be a cause of worry for him.


AIG – Getting Out Of The Treasury Witness Protection Program

Rear view of the Treasury Department building ...
Image via Wikipedia

American Intl. Group (AIG : NYSE : US$28.41)
The U.S. Treasury Department is selling 206.9 million AIG shares for $29 a piece as it looks to wind down bailout programs from the 2008 financial crisis.

In a statement released Thursday, March 8 the Treasury said it expects to
earn about $6 billion from the sale and that AIG had agreed to by roughly half of the offering. The Treasury last sold shares of AIG in May 2011, also at a price of $29 per share, cutting its stake from 92% to 77%.

The most recent sale cuts the Treasury’s stake to roughly 70% according to Bloomberg. Additionally, AIG and the treasury announced a plan to repay $8.5 billion in obligations to the government. The insurer will use $5.6 billion from the expected proceeds of the AIA share sale, $1.6 billion
from the wind down of a Federal Reserve controlled vehicle and $1.6 billion from the proceeds of a sale to MetLife (MET) completed in 2010. As the economy strengthens and the market climbs, the Treasury looks to continue unwinding bailouts.

It still holds a majority stake in Ally Financial and has a significant stake in General Motors (GM).

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General Motors – or is that Government Motors ?

General Motors automobile mural
General Motors automobile mural (Photo credit: Toban Black)

Q;Will the bailouts be repaid  – right  now repayment rests on sales of government stock  portfolios.

Will GM return to full throttle ?

THESIS: GM has managed to find the light at the end of the tunnel.

J.D. Power confirmed that Detroit is gaining ground on its foreign rivals in terms of vehicle dependability. Today, there’s more good news for fans of the Big Three: General Motors (GM) has announced stunning financial results from 2011, marking the first time in years that Chrysler, Ford (F), and GM have all been profitable at the same time.

Now that 2011’s beans have been counted, GM says it brought in $150.3 billion over the course of calendar year — an 11% increase over 2010. After bills were paid, GM was left with $7.6 billion in net revenue, up from $4.7 billion last year.

GM’s strongest performance was in North America, where the company recorded earnings before interest and taxes of $7.2 billion. Also faring well: GM’s International Operations division, which includes the booming Chinese market. There, the company reported an EBIT-adjusted gain of $1.9 billion. Not surprisingly, financially volatile Europe was GM’s weak spot, generating an EBIT-adjusted loss of $0.7 billion.

GM’s success is attributable to a number of factors — not least of which are (a) spinning off and shuttering four brands to focus on core products, and (b) working hard to gain a foothold in China and other emerging markets. Ford has taken a similar approach, and it recently released itsbest earnings report since 1998.

Even Chrysler, which has added two brands to its family since its 2009 bankruptcy, posted a profit for 2011 — its first since 2005.

This marks the first time since 2004 that all three Detroit companies have been in the black.

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