Berkshire Beat: Buffett Goes Back to the (Oil) Well
All of the latest Warren Buffett and Berkshire Hathaway news! Including updates on Apple, Occidental Petroleum, See's Candies, Chevron, NetJets, and more...
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Let’s get started with the latest news and notes out of Omaha…
BACK AT IT: Warren Buffett shelled out $258.8 million on 4.3 million shares of Occidental Petroleum over the past week and a half. Berkshire Hathaway now owns 28.5% of the O&G giant — and that’s not even counting those unexercised warrants from the Anadarko deal. (Oxy’s outstanding share count crept up by seven million in Q1 2024, which has slightly diluted Berkshire’s ownership percentage.)
Of particular note, 1.75 million of Berkshire’s new haul comes at an average price above $60 per share. It definitely isn’t true that Buffett only buys Oxy stock when it dips under $60 — he went up to $63 per share as recently as October — but it is something of a rarity.
APPLE & AI: Earlier this week, Apple previewed its much-anticipated AI platform (dubbed Apple Intelligence) which is slated to release sometime this fall. It includes a new partnership with OpenAI and will offer several buzzy features — like a better Siri experience and the ability to generate new emojis on the fly — that Apple hopes will spur a so-called super-cycle of iPhone upgrades. Especially since only the latest iPhone models (15 Pro and up) can run Apple Intelligence.
Ben Thompson over at Stratechery had this to say about Apple’s announcement: “Apple is positioning itself as an AI Aggregator. The company owns users and, by extension, generative AI demand by virtue of owning its platforms, and it is deepening its moat through Apple Intelligence, which only Apple can do; that demand is then being brought to bear on suppliers who probably have to eat the costs of getting privileged access to Apple’s user base.”
Mr. Market seems to agree. Apple hit new all-time highs on both Tuesday and Wednesday, regained a $3 trillion market cap, and even passed Microsoft to once again become the world’s most valuable company.
GOING NUCLEAR: On Monday, Bill Gates and his TerraPower group broke ground on an advanced nuclear reactor in Kemmerer, Wyoming. This reactor, which will be cooled by sodium rather than water (and, as a result, should operate at lower, safer pressures), will be built adjacent to PacifiCorp’s Naughton Power Plant. The BHE plant hopes to eventually transition away from coal and natural gas — and draw its carbon-free energy directly from this reactor.
While in Kemmerer, former Berkshire director Gates played a little Texas hold ‘em with the locals. And won rave reviews for his friendly, laidback manner.
READING LIST: A new edition of The Intelligent Investor is due out on October 22. And I know many of us had some questions about what will be different in this 75th anniversary edition. Jason Zweig shared an update on Twitter/X: “[Ben Graham’s] brilliant original text is intact. I’ve updated the annotations and written an all-new commentary on each chapter, putting his insights into context for today’s investors.”
AND A FEW ODDS & ENDS…
Berkshire collected $200.5 million in quarterly dividends from Chevron on Monday. (Assuming, of course, that Buffett did not buy or sell any more shares in Q2 2024.)
Speaking of Chevron, the company put out a helpful explainer on how technology continues to unlock the Permian Basin’s potential.
An unusually litigious year for Berkshire continues as NetJets recently filed suit against its pilots union for defamation “over statements about its commitment to safety and training pilots”.
In the Spotlight: See’s Candies CEO Pat Egan on Cocoa, Collabs, and Charlie
See’s Candies CEO Pat Egan loves sweet treats and Charlie Munger quotes. Sounds like just my kind of guy.
Last month, CNBC’s Becky Quick talked turkey chocolate with Egan at the Berkshire Hathaway annual shareholders meeting. “We’re doing very well,” he said. “Our retail business is up. Our e-commerce business is up. We feel good about the future — because we’re See’s.”
The See’s team arrived in Omaha with 11.5 tons of product — and, once again, proved to be an especially popular corner of the CHI Health Center Arena showroom.
That kind of brand power really pays off during uncertain economic times. “The good news is that people need their candy — and they definitely need their See’s — so our sales are solid,” said Egan. “Our basket size — the amount that people are buying at a given time — has definitely been hit a little bit, but we’re still doing well.”
In fact, See’s just wrapped up its best first quarter ever. Though Egan tempered that news by pointing out that the Easter holiday fell in Q1 this year.
One sticky wicket for the chocolatier is the rising price of cocoa. Even though See’s secures its cocoa contracts 12-18 months out — which somewhat shielded the company from higher costs — it will soon be time to pay the piper. “The back end of the year is going to pinch us,” said Egan. “We will definitely be touching prices later this year.”
Cocoa makes up nearly 50% of the cost of an average piece of See’s candy, leaving Egan little choice but to hike prices.
But, he said, See’s unique circumstances mean that he’s never forced into difficult decisions like this one from above. “The beautiful thing about being part of the Berkshire family is that we have the most patient capital on the face of the planet.”
✨ This year, See’s is also dipping its toes into collaborations with other Berkshire companies like Helzberg Diamonds (for Mother’s Day) and Jazwares (an October gift set featuring a co-branded Squishmallows plush, chocolate box, and tote bag).
“They’re all such good brands,” Egan told Quick. “There’s a common integrity and common platform of how we operate. We don’t do [collaborations] a lot and we definitely don’t do it just because, but if the opportunity is there — as Warren [Buffett] would say — we definitely want to take advantage of it.”
✨ What did Egan learn from the late, great Charlie Munger? “Simplicity,” he said instantly. “Just being able to get to the core of the matter, to not over-think things, and really understand, ‘Where do you want to go and how do you want to get there?’”
“If you look at his quotes, he’s just so brilliant. He packed so much intelligence into a small number of words … He was just such a great teacher.”
Egan added that he keeps a collection of Munger-isms on his desk and hands them out to See’s senior staff whenever the situation calls for it. Smart guy.
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The Must List
Other awesome things that I read this week…
What Babson Students Learned From Warren Buffett In Omaha || Babson College
“Buffett discussed Berkshire’s large cash stockpile, $189 billion, and how he expects it to keep growing since the company has no investments it’s currently interested in making … That resonated with [Griffin] Martin. ‘He taught an important lesson that sometimes doing nothing can be the right thing,’ Martin said. ‘If there are not any truly attractive investment ideas in your pipeline, it can be OK to wait until the time is right to deploy capital.’”
“Can you imagine how much of an investor’s mental capacity is squandered daily by checking price quotations? How much of their attention is wasted annually on the minutiae of stock market ebbs and flows? Investors like to occupy themselves by telling stories in between the movement of security prices … Earnings come around once per quarter, so it’s tempting to fill the time with busy work.”
Berkshire Hathaway’s Bet On Scripps May Be A Rare Misfire || Barron’s
“In a statement, Scripps CEO Adam Symson told Barron’s: ‘The decision to defer Berkshire’s preferred dividend and focus that cash on traditional bank debt aligns with our #1 priority being the reduction of traditional bank debt and our leverage ratio.’ Symson added that ‘the fundamentals of our business are strong, and while the stock price and bond trading levels don’t reflect that right now, we believe aggressive moves to de-lever are key tailwinds’.”
Nvidia Is Only One Reason For The AI Euphoria — FOMO Is The Other ||
&“With the cap-ex dollar tap continuing to flow, the rockstar in Nvidia’s [Jensen] Huang will continue to drive the show. I leave you with this quote from Huang’s speech about buying Nvidia’s latest GPUs at Computex 2024: ‘The more you buy, the more you save,’ Huang said. ‘This is CEO math. It is not accurate, but it is correct.’”
My Obsession With Minimalist Writing ||
“Whether it’s a book, an article, a LinkedIn profile, or your newsletter’s description, people often ramble just like they do in real life. Explaining what you do is much harder to do in 1 sentence than in a full page because it requires a scarce commodity: clarity. Clarify your vision, and your vision will clarify your words.”
Thanks for the shoutout 🙏🏼🙏🏼