Berkshire Beat: Howard Buffett on Berkshire Hathaway's Culture & Future
Berkshire Beat: Howard Buffett on Berkshire Hathaway's Culture & Future
All of the latest Warren Buffett and Berkshire Hathaway news! Including updates on Coca-Cola, Occidental Petroleum, Brooks Running, Jazwares, BYD, PacifiCorp, and more...
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What a way to start the week: There I was, innocently wasting time on the internet instead of working, when this tweet from Yun Li popped up on my screen.
It seems that a glitch at the New York Stock Exchange sent Berkshire Hathaway’s Class A shares (among dozens of others) tumbling down in price.
If you tried to buy this mother of all dips, better luck next time. The NYSE halted trading of all affected stocks, fixed the problem, and canceled any buy orders that managed to slip through the cracks.
Alas, my dream of someday owning an A share remains as far off as ever…
(Though, if you’d like to push me a little closer to that goal by upgrading to a paid subscription, you’ll get no complaints from me.)
Well, anyway, let’s move on to the latest news and notes out of Omaha…
HOWARD BUFFETT: We don’t hear much from the next generation of Buffetts. Which is a shame because both Howard and Susie serve as Berkshire directors — with the former also on deck to become non-executive chairman upon his father’s exit. Last week, Howard joined Yahoo Finance’s Opening Bid and spoke with Brian Sozzi about his foundation’s efforts in Ukraine and Berkshire’s enduring culture.
First things first: Howard is not here to rock the boat. “Berkshire has a great board, great management, and Greg [Abel] and Ajit [Jain] are phenomenal,” he said. “I won’t be running the company as non-executive chairman. My job will be to support Greg in every way that I can.”
“Berkshire’s culture is pretty simple,” said Howard. “You do what you say you’re going to do and you do it when you say you’re going to do it. You’re honest about it. You make mistakes and you accept responsibility for those mistakes. It’s really not that complicated.”
“None of us own yachts,” he said. “None of us have vacation houses in France. I didn’t grow up that way and that isn’t how [my dad] lives. The way he is personally comes through in Berkshire.”
His eventual role as non-executive chairman will limit Howard’s international travel — especially to war-torn countries. “I’ve been in Ukraine five times in 2022, five times in 2023, and probably 4-5 times this year,” he said. “Those are trips I won’t make [as chairman]. I will need to be around to do my job and my responsibilities. The risk level of what I do today probably gets decreased.”
What’s the best piece of financial advice he received from his father? “That’s easy,” said Howard. “Read The Intelligent Investor. Buy the best thing you can and hold onto it. It’s that simple.”
Howard sounds like he would fit in well around these parts. “I own a certain amount of stocks,” he said. “I don’t buy and trade [them]. I probably haven’t traded a stock for years.”
LITHIUM VALLEY: On Tuesday, Occidental Petroleum and Berkshire Hathaway Energy announced a new joint venture to extract lithium from geothermal brine in California. As a first step, TerraLithium (a wholly-owned Oxy subsidiary) will use its patented Direct Lithium Extraction method at a BHE Renewables plant in the Imperial Valley. If all goes well, BHE Renewables plans to “build, own, and operate commercial lithium production facilities” in the area. Lithium remains a key component in batteries for EVs, consumer electronics like smartphones, energy grid storage, and more. Synergy. You love to see it.
TIME 100: Four different Berkshire-related outfits were named to Time’s list of the 100 Most Influential Companies for 2024. Jazwares, acquired as part of the Alleghany deal, topped $1 billion in revenue last year thanks to its uber-popular Squishmallows brand. (Kudos to Alleghany management for snapping up Jazwares back before the toymaker hit it big. Berkshire shareholders appreciate your foresight!)
Three other members of the Berkshire investment portfolio — BYD, Amazon, and Nubank — made the list, too.
KING OF THE HILL: According to Beverage Digest, Coca-Cola remains the top soda in the United States by some distance — with 19.2% market share as compared to runners-up Dr. Pepper and Pepsi at 8.3%. Two other Coca-Cola brands — Sprite (8.1%) and Diet Coke (7.8%) — round out the top five.
SLOW AND STEADY WINS THE RACE: Brooks Running CEO Dan Sheridan — and his predecessor Jim Weber — recently spoke to Fortune about the company’s goal to reach $4 billion in revenue. Brooks is currently 95% footwear now, but plans to become a bigger player in the running apparel market in the future. Weber says that Berkshire is completely on board with a slow growth strategy at Brooks, preferring careful brand-building to chasing volume at any cost. “We’ve always run Brooks so it looks a little sleepy from the outside,” he says, “but it’s built to last.”
AND A FEW ODDS & ENDS…
A report from JPMorgan Chase estimates that Berkshire owns about 3% of the entire Treasury Bill market. 🤯
Variety gots its hands on the guest list for this summer’s Allen & Co. confab in Sun Valley — and regular attendee Warren Buffett is not on it?!?!
A kind reader sent along news from Oregon that mediation between PacifiCorp and wildfire victims has failed — with the plaintiffs’ lawyers now asking to fast track trials in this class action lawsuit.
What’s the opposite of a gift that keeps on giving? Well, whatever it is, that’s PacifiCorp these days. Another week, another wildfire settlement. This one for $178 million — bringing the total to over $900 million now.
In the Spotlight: Robert Hagstrom on The Investor’s Podcast
Over the weekend, the great Robert Hagstrom — chief investment officer at EquityCompass and author of The Warren Buffett Way — appeared on The Investor’s Podcast to chat about the new 30th Anniversary edition of his celebrated book.
The wide-ranging conversation touched on many lessons that we can learn from Buffett’s example — but one point, in particular, struck me as deserving special mention. (Especially in light of Tuesday’s article on making sure that everyone on your team is rowing in the same direction.)
Warren Buffett famously made his first investment at the age of 11, when both he and his sister purchased three shares of Cities Service Preferred. And, as so often happens to so many of us, the stock price immediately dropped — from $38.25 to as low as $27.
By all accounts, Warren wasn’t overly distressed by this fluctuation. But the same could not be said for his sister, who fretted that they were going to lose all of their hard-earned money. Her worries eventually wore Warren down and he cashed out at the first profitable opportunity.
“He finally just had to sell the stock because he couldn’t take the harassment anymore from his sister,” said Hagstrom. “He made just a little money — not a lot — but had he held onto it for another year or two, he probably would have tripled his money.”
The young Buffetts missed out completely on Cities Service’s run to $202, which likely served as an early lesson on the wisdom of buy-and-hold investing.
But it also foretold another aspect of the Warren Buffett story: He did not want to deal with people — even his own sister — yelling at him about a stock’s short-term swings. Or peering over his shoulder and judging each and every move that he made.
Judge him by his long-term record. That’s fine. But, in the meantime, keep the noise to a minimum and let him get on with his work.
(Fun fact: Occidental Petroleum acquired Cities Service in 1982. A small part of Buffett’s first investment still lives on in the Berkshire Hathaway portfolio today.)
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The Must List
Other awesome things that I read this week…
The Other Side of the Trade ||
“If my trade had filled and the NYSE had not invalidated all such trades, I would have no doubt felt temporary euphoria followed by quite a bit of guilt and regret. This might seem like virtue signaling, but I think it is how I would have actually felt given adequate time to reflect on what actually took place.”
Joel Greenblatt’s Greatest Investment ||
“A deli employee hangs up his apron after a long shift. It’s a Monday, and the deli man heads home. He fires up his new computer. It’s the first computer he’s ever owned — gifted to him by a family member. The deli man, a long-time stock enthusiast and skilled investor, logs onto a Yahoo message board and writes a series of posts. He’s honed in on an obscure bank with an even more obscure capital structure. The deli man believes that this particular bank may be the best value of its kind in the United States.”
Marjorie Bradt — A Hidden Dividend Millionaire || Dividend Growth Investor
“Here was all this wealth, but Marjorie hadn’t lifted a finger to earn it. She hadn’t foreseen the raging inflation of the 1970s, the surge in gold, the run of small caps, then large caps, then small caps again. She didn’t predict anything — and she didn’t have to. She just held and held, reinvesting every dividend, letting these rising dividend payments do all of the work.”
The Ultimate Inflation Fighter: Investment || Mark Tobak
“Branded products with customer loyalty can hike prices with aplomb, in ordinary times and inflationary times. If you like and admire a product, you’re almost proud to pay it: ‘It’s worth it and I’m worth it!’ You’ve shown the world you have both money and taste. Who quits Apple iPhones or uses other than Heinz Ketchup (60% market share U.S.; 80% in Europe)? Pepsi beats Coke on blind taste tests and has more sugar and caffeine — but fewer loyalists.”