Postcards: Two Random "Buys" Around Warren Buffett

I love the random opportunities that the market gives you. Today, I'll talk about a stock you can buy and get a 45-day interest-free loan from Warren Buffett. And Berkshire for 80 cents on the dollar.                                                                                                                                                                                                                                                                                                                                                                                                                 Forwarded this email? [Subscribe here]() for more [Postcards: Two Random "Buys" Around Warren Buffett]( I love the random opportunities that the market gives you. Today, I'll talk about a stock you can buy and get a 45-day interest-free loan from Warren Buffett. And Berkshire for 80 cents on the dollar. [Garrett {NAME}]( Nov 21   [READ IN APP](   Well I married me a wife, she's been trouble all my life  Run me out in the cold rain and snow  Rain and snow, run me out in the cold rain and snow The Grateful Dead, Cold Rain and Snow Dear Fellow Expat: Oh, that’s right. Maryland in November is rainy and cold. If the sky were any grayer in this city right now, I’d swear that elephants are flying overhead. The chilly weather gave me a reason to go to Ocean Pride and have a Half and Half, a bowl of soup that is half Maryland Crab and half Cream of Crab. I rank it the second-best soup on York Road, after the Irish Onion soup at my father’s restaurant. Today, I’ll keep this conversation brief. I have soup to eat. I want to discuss two interesting stories about Warren Buffett. I just had a 15-minute conversation with Porter Stansberry about Buffett, as it was a subject of his column, [The Big Secret on Wall Street]( on Friday. I think you’ll like these two ideas. Loans from Warren Did you know that if you buy shares of Amazon.com (AMZN), you benefit from a 45-day, interest-free loan from Warren Buffett? It’s true. Amazon sells its own branded batteries on its platform. But it also sells Duracell batteries, a company Buffett bought last decade from Procter & Gamble (PG). Whenever Amazon sells a product on its platform, it doesn’t pay out its vendor - in this case, Duracell - for at least 45 days. They cycle that cash flow into their Accounts Payable. The company technically - if it wants to - buy 30-day bonds and benefit from higher interest rates. But just having that cash on their balance sheet increases their capital efficiency. And it’s not just Duracell. Amazon has a staggering $79.6 billion in payables on its balance sheet. I’ve long complained [about this business practice]( - they’re not paying vendors for 45 days. That delay impacts small businesses’ ability to meet payroll, streamline manufacturing, and compete against Amazon’s branded products. A few years ago - I asked [Lara O’Conner Hodgso]( the President and CEO of payment company Now and an Entrepreneur in Residence at Harvard Business School, [what would happen if all major S&P 500 companies]( forced to pay their vendors within 15 days. “Garrett,” she said. “The stock market would collapse.” Buying Buffett For 80 Cents on the Dollar Now, this is a really cool story. Let’s talk about the Warren Buffett Closed-End Fund. A lot of people avoid closed-end funds because of their misunderstanding of risk. But let’s do a quick recap. Let’s say a money manager opens a new fund portfolio comprising stocks, bonds, or other investments. The manager sells a fixed number of shares on an exchange like the NYSE. Because it’s fixed, there will never be more shares issued. Investors buy the shares, which trade on a stock market like any other equity. But here’s the important part. Closed-end funds don’t trade like mutual funds and mirror their net asset value (NAV) at the end of the trading day. Instead, they are disconnected from their NAV. They trade irrationally. Sometimes, closed-end funds trade at a premium to the total fund’s net asset value. Sometimes, they will trade at a discount. Imagine there’s a closed-end fund called “Republic Fund.” It trades at $18 per share. But the NAV may sit at $20. In this case, the fund trades at a 10% discount to its NAV. But what if the fund trades for $22 and has an NAV of $20? Well, the fund trades at a 10% premium. Now let’s show you how to buy into Buffett for 80 cents on the dollar. Buying Buffett for Pennies The cost of one Class A share in Berkshire Hathaway is eye-watering. This afternoon, shares closed just around $546,000 for each Class A share. But if you want a backdoor investment into Buffett, check this out. It’s called the SRH Total Return Fund (STEW). This is a closed-end fund, and owns $532 million in BRK Class A stock and another $117 million in BRK.B stock. It also owns a lot of stocks that Buffett loves like JPMorgan Chase (JPM), Yum! Brands (YUM), and Enterprise Product Partners (EPD). Here’s a breakdown of the portfolio from October. CEFConnect.com STEW trades at a 20% discount to its net asset value. Shares trade at $13.37 compared to the NAV of $16.70. Plus, it pays a distribution (dividend) of 4.1%. This is a portfolio of Warren Buffett’s favorite companies at 80 cents on the dollar. You’re welcome. Stay positive, Garrett {NAME} You're currently a free subscriber to [Postcards from the Florida Republic](. For the full experience, [upgrade your subscription.]( [Upgrade to paid](   [Like]( [Comment]( [Restack](   © 2023 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()