August 29, 2014 Comments

Liquor Stores N.A. is updated and rated Sell at $13.37. I mentioned in recent posts that I had pretty much given up on this entity and had sold my shares. With a strong gain in the price in the past two weeks (which gains did not seem based on any news from the company as the shares did not gain in the first day after the earnings release) it seems opportune to sell these shares. It seems to me that the company is weak and it is going to take some kind of restructuring for earnings to recover to acceptable levels. The company seems to indicate that the dividend will not be cut but the financials would seem to suggest it should be.

With Warren Buffett’s $3 billion preferred share investment in the Tim Hortons deal in the news, it is interesting to look at his similar $8 billion investment in 9% preferred shares of Heinz with the same partner called 3G.

Berkshire’s Q2 report indicated that it made the expected $360 million in the first half of 2014 on these shares. But that it lost $20 million on its half of the common shares of Heinz. In other words 3G (which only owns common shares) made a loss of $20 billion on Heinz in the first half of 2014 while Berkshire made $340 million even after deducting its share of the losses. This seems a bit hilarious and is par for the course for Buffett who certainly knows how to make a profitable deal.

In the case of Tim Hortons, Berkshire is not involved in the common shares and is very much a passive investor simply collecting the 9% on $3 billion. Berkshire has approximately $55 billion in cash (out of total assets of $504 billion) and this$3 billion at 9% is a nice alternative to cash that earns next to nothing. This investment is really not much of an endorsement of Tim Hortons or Burger King since Berkshire is not investing in the common shares. It simply gets its 9% on $3 billion.

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