Thanks for the summary! Berkshire is in great shape as the transition approaches. With the stock back under 1.5x BV repurchases may soon resume. Berkshire has posted over $48 billion in net operating earnings alone over the past four quarters so the market cap is only slightly above 20x, and of course we have to add in some normalized figure for investment gains as well, so the normalized PE might be mid-teens. Reasonable in absolute terms and cheap relative to other mega caps.
Any theory on why the dismal numbers from Pilot? I know Abel made some managerial changes there but that was quite a while ago. Did the Haslem family sell them a lemon?
Hi John — I really wish we got more information on Pilot in the 10-Q because it was such a surprise to see it drop into the red. Pilot’s revenue actually increased $252 million in the third quarter and then, when discussing the earnings decline, the commentary combines the third quarter and first nine months of the year so it’s tough to see what actually caused the drop in this quarter specifically.
It’s a long ways off, but if Pilot is still struggling into next year I hope Abel explains what’s going on in either his annual letter or the AGM Q&A.
The fact that Chevron remains in Berkshire's top five holdings while the concentration drops from 71% to 66% suggests they're letting other positions grow rather than activly selling. Given the energy transition headwinds facing oil majors, Buffett's continued commitment to Chevron as a core holding is interesting. The stock's dividend yield and cash generation still make it attractive relative to tech valuations, especially with that $354B cash pile earning Treasury rates. Abel will inherit a portfolio where energy remains a meaningful bet despite all the ESG pressure.
The shift from 71% to 66% concentration in the big five holdings (Apple, AmEx, BofA, Coke, Chevron) suggests more portfolio diversification while maintaining the core bluechip fortress. What's interesting is the insurance float reaching $176B with negative cost, essentially providing free leverage for the Treasury bill stack at 4%+ yields. The operating earnings stripping out FX noise shows the 17.6% growth is more sustainable than the headline 33.6%, which validates the business quality thesis over market tiiming.
BH Reinsurance Group's 79.4% combined ratio is impressive, especially when you consider how mild hurricane activity has been compared to recent years. The $176 billion float with negative cost is essentially a massive source of free capital for Berkshire to deploy. Your point about GEICO's policy acquisition expenses being money well spent is spot on, gaining market share while maintaining an 84.3% combined ratio is exactly what reinsurers like Everest Re are trying to achive in their specialty lines too.
Thanks for the summary! Berkshire is in great shape as the transition approaches. With the stock back under 1.5x BV repurchases may soon resume. Berkshire has posted over $48 billion in net operating earnings alone over the past four quarters so the market cap is only slightly above 20x, and of course we have to add in some normalized figure for investment gains as well, so the normalized PE might be mid-teens. Reasonable in absolute terms and cheap relative to other mega caps.
I agree — it seems like we’re getting closer and closer to share repurchases starting back up again.
Any theory on why the dismal numbers from Pilot? I know Abel made some managerial changes there but that was quite a while ago. Did the Haslem family sell them a lemon?
Hi John — I really wish we got more information on Pilot in the 10-Q because it was such a surprise to see it drop into the red. Pilot’s revenue actually increased $252 million in the third quarter and then, when discussing the earnings decline, the commentary combines the third quarter and first nine months of the year so it’s tough to see what actually caused the drop in this quarter specifically.
It’s a long ways off, but if Pilot is still struggling into next year I hope Abel explains what’s going on in either his annual letter or the AGM Q&A.
The fact that Chevron remains in Berkshire's top five holdings while the concentration drops from 71% to 66% suggests they're letting other positions grow rather than activly selling. Given the energy transition headwinds facing oil majors, Buffett's continued commitment to Chevron as a core holding is interesting. The stock's dividend yield and cash generation still make it attractive relative to tech valuations, especially with that $354B cash pile earning Treasury rates. Abel will inherit a portfolio where energy remains a meaningful bet despite all the ESG pressure.
The shift from 71% to 66% concentration in the big five holdings (Apple, AmEx, BofA, Coke, Chevron) suggests more portfolio diversification while maintaining the core bluechip fortress. What's interesting is the insurance float reaching $176B with negative cost, essentially providing free leverage for the Treasury bill stack at 4%+ yields. The operating earnings stripping out FX noise shows the 17.6% growth is more sustainable than the headline 33.6%, which validates the business quality thesis over market tiiming.
BH Reinsurance Group's 79.4% combined ratio is impressive, especially when you consider how mild hurricane activity has been compared to recent years. The $176 billion float with negative cost is essentially a massive source of free capital for Berkshire to deploy. Your point about GEICO's policy acquisition expenses being money well spent is spot on, gaining market share while maintaining an 84.3% combined ratio is exactly what reinsurers like Everest Re are trying to achive in their specialty lines too.