Weekend Update - W2639

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Berkshire Gave Up the Quiet Exit

Berkshire’s real commitment to Lennar this month was the paperwork, more than the two hundred and twelve million dollars. On Thursday, September seventeenth, Berkshire crossed ten percent ownership of Lennar¹. Past that line the rules of owning a stock change. Every share it buys or sells now goes public within two business days, and any profit on a purchase and sale inside six months gets handed back to Lennar².

That is a strange thing for Berkshire to walk into on purpose. This is a company that asked the SEC to keep its Chubb stake off the public record for two full quarters while it was still buying, and only showed its hand in amended filings in May of twenty-twenty-four³. Berkshire likes to build in the dark.

It built most of Lennar in the dark too. Until that Thursday the only public record was the quarterly 13F, which lands a month and a half after each quarter closes. It shows about seven million Class A shares in mid-twenty-twenty-five, left alone for two quarters, then ten million by March and thirteen million by June⁴. By the morning Berkshire crossed the line, the Form 3 put the count at twenty-one million⁵. Eight million shares went on the books over a summer when nobody outside Omaha could see them.

Then Lennar reported, on Wednesday the sixteenth: the miss, the guide cut⁶. Berkshire bought the next three sessions, crossed ten percent on the first of them, and filed Monday night⁷. The stock popped Tuesday on the disclosure⁸.

The audio stopped there. The filings kept going. Wednesday through Friday, Berkshire bought again, about another hundred and thirty-six million dollars per a second Form 4 filed Friday⁹, and it paid about four dollars a share more than on the first batch. The first batch’s own disclosure had moved the price. Berkshire paid up for its own signal. A buyer who cares mainly about price stops at nine point nine percent, where the buying stays private. A buyer who crosses the line and keeps going has decided that size matters more than the last four dollars.

The part that deserves the most attention runs the other way. Above ten percent, selling is public too. Every share Berkshire trims will print within two business days, and a holder that has just taught the market to refresh EDGAR for its name cannot leave quietly. Add the six-month short-swing rule, and nothing Berkshire bought this week can be sold at a profit before late March without the gain going to Lennar¹⁰. Berkshire gave up the quiet exit. That is a duration commitment written into securities law, which binds harder than any shareholder letter.

It is also a Lennar bet, not a housing basket. The same June 13F that shows thirteen million Lennar shares shows a few thousand shares of D.R. Horton, the country’s largest builder by homes closed¹¹. Berkshire picked one balance sheet to wait out the housing cycle with.

The Cash Flow Memo’s Lennar page was drafted in July, off the last filed quarter, and Berkshire’s second batch was bought against a worse one. The cashflow read is in Marcus’s column below. Short version: the screen that builds our leaderboard would never have surfaced this trade.

What changes the read. Three filings, in order. The next Form 4: another week of buying says Berkshire has not reached its size; silence says it has. Lennar’s 10-Q, due in October, re-anchors the free cash flow math the memo is still carrying from before the miss. And Berkshire’s third-quarter 13F, due mid-November, shows whether that conviction stops at Lennar or spreads to builders it can still buy in private. The thesis breaks on a single letter. A transaction code of S on a Berkshire Form 4 for Lennar, a sale made in public before new orders turn, would say the duration call was a trade.

Wall Street’s consensus on Lennar: five Underperform-or-Underweight ratings and three Holds in the week and a half around the print, not a Buy among them, with the last month’s price targets averaging about seventy-one dollars¹². Three of those bearish calls were reiterated on the Friday Berkshire bought its biggest single block of the month¹³. The Street published an opinion. Berkshire filed one with the SEC.

The Tape — W2639

Universe of 94 cashflow-memo names, snap dates 2026-09-18 → 2026-09-25. Composite is rank-sum percentile of FCF Yield + NTM Revenue Growth (higher = better balance). Banks and finance-book names shown separately.

Telltales Yield — Top 10

From the Cashflow Desk — Marcus Graham

The composite is built to miss the week’s biggest trade. It scores FCF yield plus NTM revenue growth, and a homebuilder near the bottom of an order cycle carries consensus NTM growth of 1.7% — which is why Lennar appears in neither table above. Going into the print, the memo had Lennar at 16x trailing FCF on $1.8B, 10-Q confirmed; the Q3 release is not a filing, so we re-anchor when the 10-Q lands in October. The leaderboard rewards growth consensus can already see. Berkshire is paying for growth consensus has written down to zero. I read it as a rate call, and the screen has no column for rates. The test is Lennar’s Q4 print in December: if orders are still falling high single digits with mortgage rates unchanged, the 16x anchor comes down and the screen was right to ignore it.

Telltales Yield — Bottom 10

This Week’s Reporters

Sector Medians

Debt / FCF Watch (highest leverage on TTM FCF)

Weekly Price Movement

Top 5 (week-over-week price)

Bottom 5 (week-over-week price)

Banks (shown separately — FCF metric not meaningful)

Finance-book — FCF not comparable

Customer-float / captive-finance / reserve businesses (IBKR broker float, KMX CarMax Auto Finance, PYPL customer funds, CRCL stablecoin reserves). The memo’s operating-FCF method overstates their FCF, so they are held off the ranked leaderboard pending the P&L-waterfall rebuild.

Data Gaps

91 of 92 ranked-eligible names ranked. 1 dropped for missing FCF yield or NTM revenue growth; 7 shown separately (banks + finance-book, FCF not comparable).

Source: cashflow-memo master_2026-09-25.csv. NTM growth from analyst-estimates consensus. Composite is a percentile rank, not a recommendation.

The Issue — This Week's Brief

The Cashflow Memo

Nobody Paid for the Quarter

Costco beat and nobody cared, Lennar missed and Berkshire bought ten percent

The Telltales Weekend Update. Ava Cabot and analyst Marcus Graham walk through what happened this week — and what’s coming next — across the 99 companies in the Cash Flow Memo. About 14 minutes. No filler.

Download the memo at telltales.us. Hunt, Jason, and Mike are back Wednesday on episode E2640.

Chapter markers

* Time | Segment

* 0:00 | Cold open — nobody paid for the quarter

* 0:45 | Theme — pharma buys what it doesn’t own (Merck, Lilly)

* 4:45 | Deep dive — Lennar, and the $212 million disagreement

* 8:45 | Rapid-fire — Costco, Generac, Micron, Nike

* 11:45 | Close — Consensus Watch and the forward week

* 12:45 | Disclaimer

Full transcript

Cold open

Ava: Nobody paid for the quarter this week. They paid for the one after next.

Ava: Costco beat on both lines and the stock went nowhere[^news-cost-flat-20260925]. Lennar missed its quarter and cut its full-year guide[^news-len-guidance-20260924] — and Berkshire bought $212 million of it anyway[^news-len-berkshire-20260924]. Eli Lilly wrote a $2.8 billion check for a clinical-stage company[^news-lly-ataibeckley-20260925], a business with nothing on a pharmacy shelf. Every one of those is the same trade. The number in the release was not what anybody was pricing. Not this quarter — the one after next.

Ava: Telltales Weekend Update. I’m Ava Cabot, with Marcus Graham at the cashflow desk.

Theme — Pharma buys what it doesn’t own

Ava: Start with the drug companies, because they explain the rest of the week. Merck had one of the stranger seven-day stretches you will ever see out of a company that size — page 15 of the memo, and it spent the week buying, winning, and killing. It agreed to buy EyeBio — $1.3 billion up front, up to $3 billion with milestones[^news-mrk-eyebio-20260924]. It won an FDA approval with Eisai for a kidney-cancer combination[^news-mrk-eisai-20260925]. It hit the primary endpoint in a pivotal trial for diabetic macular edema, per the company’s own release[^news-mrk-brunello-20260925]. And then it walked away from something: Merck and Daiichi Sankyo pulled their accelerated-approval application in small-cell lung cancer, saying the evidence wasn’t sufficient[^news-mrk-daiichi-20260925].

Ava: Three different verdicts on three different assets, inside five days. Marcus, the cashflow take.

Marcus: Merck is the cheapest large-cap drug company the memo prices, and it spent the week buying something that doesn’t sell yet. The memo has Merck at 23x free cash flow[^memo-mrk-evfcf-20260831], on $18 billion of trailing free cash flow[^memo-mrk-fcf-20260831], against $44 billion of net debt[^memo-mrk-netdebt-20260831]. A multiple that low is the market saying it has already marked down the back half of the decade. So the EyeBio check and the Daiichi withdrawal are the same decision made twice — fund the pipeline you believe, stop funding the one you don’t. The withdrawal is the part I’d weight. A company pulling its own filing is repricing its pipeline before the agency does it for them.

Ava: Pulling your own filing. That is not a press release anybody enjoys writing.

Ava: Now Lilly. Different problem entirely. Lilly did four things in five days. It agreed to buy AtaiBeckley, clinical stage, for $2.8 billion[^news-lly-ataibeckley-20260925]. It signed a research and license agreement with China’s InnoCare worth up to $3.35 billion[^news-lly-innocare-20260925]. It took an FDA approval for Onswik, a once-weekly basal insulin for type 2 diabetes[^news-lly-onswik-20260924]. And it broke ground on a $6.5 billion manufacturing plant in Houston[^news-lly-houston-20260924]. And then Dave Ricks went on television and said the thing that actually matters. 700,000 new seniors have started GLP-1s since Medicare coverage opened in July — and 70% of them picked Lilly[^news-lly-medicare-20260921]. He put the share of new pill starts going to Lilly’s Foundayo at about a third[^news-lly-foundayo-20260921].

Marcus: At Lilly’s multiple, the deals and the approval don’t move it. The memo has Lilly at 50x free cash flow[^memo-lly-evfcf-20260824]. At 50x, a new plant and an insulin approval are rounding. What you are being asked to pay for is the Medicare cohort — that 70% of 700,000 new starts[^news-lly-medicare-20260921], and the pill share Ricks quoted alongside it points the same direction. Hold that and the multiple has a story behind it. Lose it and nothing else on this week’s list closes the gap.

Ava: One at 23x, one at 50x, doing the same thing in the same week.

Marcus: Same act, opposite reasons. Merck is buying because at 23x the market has already written its pipeline down. Lilly is buying because at 50x the price assumes a pipeline that has to keep arriving. Neither check is about this quarter. What I’d watch into year-end is whether either of them has to fund the next one with borrowed money. Merck is already carrying $44 billion of net debt.

Deep dive — Lennar

Ava: The sharpest disagreement in the market this week was about a homebuilder, and it was not close. Lennar, page 17 of the memo, reported. Earnings of $1.23 against a consensus of $1.29, with revenue down 8%[^news-len-q3miss-20260923]. New orders fell 9%, on deliveries of 20,840 homes[^news-len-orders-20260924]. Then management took about 2,000 homes off both ends of the full-year delivery guide, down to 80,000-81,000[^news-len-guidance-20260924]. That is a bad quarter under any reading of it. And while it was landing, Berkshire Hathaway bought $212 million of the stock across three September sessions and took the position past 10% of the company[^news-len-berkshire-20260924].

Marcus: Berkshire is not underwriting this quarter. Nobody buys 10% of a homebuilder for a delivery guide. The memo has Lennar at 16x free cash flow going into this print[^memo-len-evfcf-20260706], on $1.8 billion of trailing free cash flow[^memo-len-fcf-20260706] — and that page was drafted off the last filed quarter, so we re-anchor when the 10-Q lands. At a stake that size you are buying the land and the balance sheet, and you are accepting an ugly income statement for as long as mortgage rates sit where they sit.

Ava: So the print is almost beside the point.

Marcus: The print is the entry price. But separate them, because they measure different things. Taking 2,000 homes off the guide is a statement about what Lennar can build and close[^news-len-guidance-20260924]. Orders down 9% is a statement about who is walking into the sales office[^news-len-orders-20260924]. Management controls the first one. The bond market controls the second. Orders are what I’d track into the next print, because that is the number that tells you whether this is a cycle bottom or a step down.

Ava: And here is the part that doesn’t fit the headline. In the same week it cut the delivery guide, Lennar declared its regular 50-cent quarterly dividend[^news-len-dividend-20260923], and it opened a brand-new division in Iowa — five communities around Des Moines[^news-len-iowa-20260924].

Marcus: That tells you what kind of downturn management thinks this is. You don’t stand up a new division in a market you’re leaving. The memo has Lennar carrying $2.5 billion of net debt[^memo-len-netdebt-20260706] against that $1.8 billion of trailing free cash flow[^memo-len-fcf-20260706] — that is the balance sheet paying for a new geography and a 50-cent dividend in the same week it guides deliveries down. Read those together and you get a company slowing into a rate problem while it keeps buying optionality for the recovery.

Ava: And Berkshire has taken the other side of that.

Marcus: The other side of the next three years of it. I’d weight it as a duration call rather than a quarter call — call it a position that the mortgage rate is a cyclical number and the housing shortage is a structural one. What would change my read is that order line. If orders are still falling high single digits two prints from now with rates unchanged, the structural half of the argument is weaker than it looks, and the 16x anchor comes down with it.

Ava: $212 million, into a miss and a guidance cut. That is the trade of the week, and it isn’t about the week.

Rapid-fire

Ava: Four to close, starting with Costco, and this one is the whole show in a single print. Fiscal-year revenue of $303 billion, up 10%; earnings of $20.76 a share, up 15% — straight from the company[^news-cost-q4-20260924]. It beat, and the stock sat there[^news-cost-flat-20260925]. The memo has Costco at 52x free cash flow[^memo-cost-evfcf-20260727], and that is the answer. At 52x, a good quarter is the baseline, not the news. The rest of Costco’s week is more interesting than the beat was. 33 new warehouses are coming in fiscal 2027[^news-cost-expansion-20260925]. $184 million of tariff refunds are going back into prices rather than into margin[^news-cost-tariff-20260925]. And the food-court churro is back[^news-cost-flat-20260925]. Costco knows precisely which of those three the members will notice.

Ava: One follow-up on last week’s lead. Analysts now have Generac’s data-center revenue topping $3 billion by 2028, on the back of the Amazon deal[^news-gnrc-datacenters-20260925].

Ava: Two forward-week names and we’re done. Micron reports Wednesday[^earn-mu]. Two things sit underneath that print. A Munich court handed China’s YMTC two injunctions over 3D NAND patents that could restrict Micron’s supply into Germany[^news-mu-ymtc-20260924]. And Micron’s two-year buyback moratorium, the one attached to its CHIPS Act money, expires in December[^news-mu-buyback-20260923]. The memo has Micron at 24x free cash flow[^memo-mu-evfcf-20260831] on $43 billion of trailing free cash flow[^memo-mu-fcf-20260831]. A company that size with the buyback handcuffs coming off before year-end is a capital-allocation story wearing a memory print. Micron also named Deirdre Hanford to run its research labs and put out a 512GB DDR5 server module it calls the first of its kind[^news-mu-ddr5-20260925].

Ava: Nike reports Thursday[^earn-nke], and walks in off a downgrade. Bank of America moved Nike to Underperform and cut its price target from $47 to $30[^news-nke-bofa-20260925]. The same week, Kylian Mbappé ended a 20-year relationship with Nike and signed his boot deal with On[^news-nke-mbappe-20260922]. The memo has Nike at 16x free cash flow[^memo-nke-evfcf-20260706]. Cheap, if the brand is intact. And CarMax opens the week Tuesday[^earn-kmx].

Close

Ava: That’s the show. Wall Street’s consensus this week was written in price targets: Bank of America took Nike from $47 down to $30[^news-nke-bofa-20260925]. That’s a forecast. Berkshire’s $212 million is a position.

Ava: Three prints in the forward week, and on this week’s evidence not one of them is what will set the price. Watch the 90 minutes after each release, not the release.

Ava: On Wednesday’s show, Hunt put the 30-year mortgage at 7.15, 7.20, and said plainly that it hurts housing[^ep-e2639]. That same week, Lennar cut its guide and Berkshire crossed 10%. Both of those are true at once, and that is the whole episode: the quarter is not what anybody is buying.

Ava: Hunt, Jason, and Mike are back Wednesday on episode 2640. Download this week’s Cash Flow Memo at telltales.us, and send us a note through the Substack — we read them.

Ava: The show is produced entirely with AI tools, and both voices you’re hearing are AI-generated.

Disclaimer

Ava: This podcast is intended for informational purposes only. You should always do your own work to determine if an investment is suitable for you. The views expressed on this podcast are the host alone and do not constitute an offer to sell or a recommendation to purchase, or a solicitation of an offer to buy any security, nor a recommendation for any investment product or service. While certain information contained herein has been obtained from sources believed to be reliable, neither the host nor any of their employers or their affiliates have independently verified this information, and its accuracy and completeness cannot be guaranteed. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, timeliness, or completeness of this information. The host and all employers and their affiliated persons assume no liability for this information and no obligation to update the information or analysis contained herein in the future, and may or may not hold positions in the securities mentioned.

Sources

* CNBC. (2026, September 21). Eli Lilly CEO says 700,000 new seniors have started GLP-1s after Medicare coverage, and 70% are on Lilly drugs. CNBC. https://www.cnbc.com/2026/09/21/eli-lilly-ceo-david-ricks-glp-1s-medicare-coverage.html

* CNBC. (2026, September 21). Eli Lilly CEO tells CNBC one-third of new GLP-1 pill patients are taking Foundayo, as drugmaker ramps up production. CNBC. https://www.cnbc.com/2026/09/21/lilly-is-ramping-up-future-manufacturing-for-foundayo-obesity-pill.html

* CNBC. (2026, September 22). Soccer superstar Kylian Mbappé on ending 20-year journey with Nike: It was time to change. CNBC. https://www.cnbc.com/2026/09/21/kylian-mbappe-nike-exit-on-soccer-footwear.html

* CNBC. (2026, September 23). History rhymes for Meta, and our plan for Micron ahead of earnings. CNBC. https://www.cnbc.com/2026/09/23/history-rhymes-for-meta-and-our-plan-for-micron-ahead-of-earnings.html

* CNBC. (2026, September 23). Lennar shares pop as Berkshire builds almost a 10% stake in beleaguered homebuilder. CNBC. https://www.cnbc.com/2026/09/22/lennar-shares-pop-as-berkshire-builds-almost-a-10percent-stake-in-beleaguered-homebuilder.html

* CNBC. (2026, September 25). Risks are rising for Nike’s turnaround, Bank of America says. Sell shares now. CNBC. https://www.cnbc.com/2026/09/25/risks-are-rising-for-nikes-turnaround-bank-of-america-says.html

* Construction Dive. (2026, September 24). Eli Lilly breaks ground on $6.5B Houston manufacturing plant. Construction Dive. https://www.constructiondive.com/news/eli-lilly-breaks-ground-houston-manufacturing-plant/831307/

* Costco Wholesale Corporation. (2026, September 24). Costco Wholesale Corporation reports fourth quarter and fiscal year 2026 operating results [Press release]. Costco Investor Relations. https://investor.costco.com/news/news-details/2026/Costco-Wholesale-Corporation-Reports-Fourth-Quarter-and-Fiscal-Year-2026-Operating-Results/default.aspx

* Eastern Herald. (2026, September 24). Lennar (NYSE:LEN) stock falls 1.22% to $82.03 on September 23: Berkshire crosses 10%. Eastern Herald. https://easternherald.com/2026/09/24/lennar-len-stock-berkshire-hathaway-10-percent-september-23/

* HousingWire. (2026, September 24). Lennar’s new Iowa division opens 5 Des Moines-area communities. HousingWire. https://www.housingwire.com/articles/lennar-enters-des-moines-market/

* Investing.com. (2026, September 24). Eli Lilly gets FDA approval for once-weekly diabetes insulin. Investing.com. https://www.investing.com/news/stock-market-news/eli-lilly-gets-fda-approval-for-onceweekly-diabetes-insulin-93CH-4914987

* Lennar Corporation. (2026, September 23). Lennar Corporation declares quarterly dividends [Press release]. Lennar Newsroom. https://newsroom.lennar.com/2026-09-23-Lennar-Corporation-Declares-Quarterly-Dividends

* MarketScreener. (2026, September 25). Merck, Eisai renal cell cancer drug combination gets US FDA approval. MarketScreener. https://www.marketscreener.com/news/merck-eisai-renal-cell-cancer-drug-combination-gets-us-fda-approval-ce785adfdc80f726

* Merck & Co. (2026, September 25). Merck’s remigromig, a tri-specific agonist of the Wnt pathway, met primary endpoint in the pivotal Phase 2b/3 BRUNELLO study of adults with diabetic macular edema [Press release]. https://www.merck.com/news/mercks-remigromig-a-tri-specific-agonist-of-the-wingless-related-integration-site-wnt-pathway-met-primary-endpoint-in-the-pivotal-phase-2b-3-brunello-study-of-adults-with-diabetic-macular/

* Mugglehead. (2026, September 25). Merck, Daiichi withdraw ifinatamab FDA application. Mugglehead. https://mugglehead.com/merck-daiichi-sankyo-withdraw-ifinatamab-deruxtecan-bla/

* MyNorthwest. (2026, September 25). Costco receives $184M in tariff refunds, plans to pass savings to shoppers. MyNorthwest. https://mynorthwest.com/local/costco-tariff-refunds/4279798

* Ophthalmology Times. (2026, September 24). Merck to acquire EyeBio for upfront payment of $1.3 billion. Ophthalmology Times. https://www.ophthalmologytimes.com/view/merck-to-acquire-eyebio-for-upfront-payment-of-1-3-billion

* PharmExec. (2026, September 25). Eli Lilly to acquire AtaiBeckley for $2.8 billion. Pharmaceutical Executive. https://www.pharmexec.com/view/lilly-acquire-ataibeckley-2-billion

* PharmExec. (2026, September 25). InnoCare enters $3.35 billion research collaboration and license agreement with Eli Lilly. Pharmaceutical Executive. https://www.pharmexec.com/view/innocare-3-billion-research-collaboration-license-agreement-eli-lilly

* Pomegra News. (2026, September 24). Lennar Q3 2026 miss deepens housing crisis signal. Pomegra. https://pomegra.io/news/lennar-q3-2026-miss-deepens-housing-crisis-signal

* StocksToTrade. (2026, September 25). GNRC soars as Generac lands $8B Amazon data center deal. StocksToTrade. https://stockstotrade.com/news/generacholdlingsinc-gnrc-news-2026_09_25-2/

* The Hill. (2026, September 25). 33 new Costco stores announced. Here’s what we know about their locations. The Hill. https://thehill.com/business/6112042-33-new-costco-locations-announced-heres-what-we-know-about-their-locations/

* TheStreet. (2026, September 24). Berkshire buys $212 million of tumbling housing stock. TheStreet. https://www.thestreet.com/investing/stocks/berkshire-hathaway-buys-212-million-lennar-len-stock

* Tom’s Hardware. (2026, September 24). China’s YMTC wins patent battle against Micron in ongoing 3-year legal war over memory patents; new injunctions could restrict Micron’s supply into Germany. Tom’s Hardware. https://www.tomshardware.com/pc-components/storage/chinas-ymtc-wins-patent-battle-against-micron-in-ongoing-3-year-legal-war-over-memory-patents-new-injunctions-could-restrict-microns-supply-into-germany

* Yahoo Finance. (2026, September 25). Costco confirms its food court churro is coming back — COST stock flat despite Q4 beat. Yahoo Finance. https://finance.yahoo.com/markets/stocks/articles/costco-confirms-food-court-churro-043258079.html

* Yahoo Finance. (2026, September 25). Is Micron (MU) quietly recasting its AI memory strategy with new leadership and 512GB DDR5? Yahoo Finance. https://sg.finance.yahoo.com/news/micron-mu-quietly-recasting-ai-021239442.html

Note: reference 22 is cited twice in the episode — once for the Amazon supply agreement terms and once for the sell-side $3 billion 2028 data-center revenue estimate carried in the same article.

Internal data

Internal data is provided on a best efforts basis.

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