Berkshire Hathaway's Mystery Stock Revealed: It's Chubb!
Berkshire Hathaway's Mystery Stock Revealed: It's Chubb!
The Berkshire Beat #70: All of the latest Warren Buffett and Berkshire Hathaway news
Happy Friday and welcome to our new subscribers!
On Wednesday afternoon, Berkshire Hathaway lifted the lid on its investment activity during Q1 2024. For the sixth quarter in a row, Warren Buffett and co. ended up as net sellers of stock — with $20 billion of sales and just $2.7 billion of new purchases.
But, happily, there’s still plenty to talk about.
Starting with that small matter of Berkshire’s mystery stock…
IT’S CHUBB! For the past three quarters, Berkshire has been confidentially snapping up shares of a mystery company — and, now, we (finally) know its identity: Zurich-based insurer Chubb. The CB 0.00%↑ position — 25.9 million shares currently valued at $6.8 billion — immediately jumps into the top ten of Berkshire’s massive stock portfolio. As a major player in the global insurance industry, Chubb certainly fits right into Berkshire’s (and Buffett’s) wheelhouse.
Lawrence Cunningham, author of Berkshire Beyond Buffett and other Berkshire-related books, hopped on CNBC to break down the Chubb investment. “Chubb is an acknowledged high-quality business led by an outstanding CEO, [Evan] Greenberg,” he said. “They’re making significant investments in Asia — which I think is attractive to Berkshire and Buffett. And, you know, insurance is right in the sweet spot of Berkshire’s circle of competence and Buffett’s circle of competence. It’s not really a big surprise that he might select Chubb.”
He sounded a note of caution for anyone expecting Berkshire to push on and acquire Chubb as a whole. “You don’t know that just because [Buffett] bought a position in Chubb today that he won’t sell it tomorrow,” said Cunningham. “So I’d be cautious about reading too much into it.”
According to the amended 13Fs filed on Wednesday, Berkshire bought 8.1 million shares in Q3 2023, 12 million shares in Q4 2023, and 5.8 million shares in Q1 2024.
Confidential treatment for this investment was well deserved: Chubb hit a new 52-week high yesterday after Berkshire’s interest became public knowledge.
✨ The rest of Berkshire’s filing mostly went to form. We already knew about the frequent purchases of Liberty Media Sirius XM tracking stock, the 4.3 million shares of Occidental Petroleum bought in February, and the 116.2 million shares sold of Apple. Other than the Chubb bombshell, there weren’t many surprises here.
✨ For the 15th (!?!) consecutive quarter, Buffett chopped and changed his Chevron position — selling 3.1 million shares in Q1 2024. That’s got to be some sort of record.
✨ Berkshire fully exited HP — no surprise considering the heavy selling late last year — and slashed 88.1% of its Paramount Global position. Buffett evidently sold the remaining bit of PARA 0.00%↑ in Q2 2024.
It’s important to keep in mind that these filings provide a snapshot in time — the stock portfolio as of March 31, 2024 — so any information is already six weeks old and quite possibly out of date. For example, we know that Berkshire is already out of Paramount, even though the 13F only shows the sales from the first quarter.
Remember: Don’t turn 13Fs into anything more than an academic exercise. These are not cheat sheets of what your next move in the market should be. Nor are they endorsements about the future prospects of any company. No matter who’s doing the buying or selling.
“The filings are interesting,” Cunningham told CNBC, “but [Buffett] is not required to explain his rationale. So the rest of us have to do our own homework. It’s very easy to just follow what Warren does, but I think that’s probably a mistake.”
✨ Berkshire also trimmed its Louisiana-Pacific and Sirius XM positions, though the SIRI 0.00%↑ sale may just be rebalancing the investment into Liberty Media trackers ahead of the planned combination later this year.
✨ The number of stocks in Berkshire’s portfolio continues to drop. Since Q3 2023, Berkshire has fully exited 13 positions (including Paramount), while opening just two new ones in Chubb and Sirius XM. I’m not counting the Liberty Live tracking stock or Atlanta Braves Holdings in this because Berkshire only received those shares through reclassifications and split-offs of its existing investments in Liberty Media.
In the Spotlight: Berkshire Hathaway Directors at the AGM
Notable business leaders, investors, and shareholders all flock to Omaha each year for the festivities surrounding Berkshire Hathaway’s annual meeting. And the media does not miss the chance to pepper them with questions about all things Berkshire.
Basically, in the span of a few days, we get an avalanche of interviews and comments from people close to Warren Buffett and Charlie Munger — along with a closer look at the conglomerate’s operations. This year, there were so many that I’m still trying to catch up on all of them.
So, today, let’s take a look at what some Berkshire directors had to say…
✨ In the run-up to this year’s meeting, Chris Davis released a short video to explain why the annual pilgrimage to Omaha remains vitally important.
“I remember being asked once by Warren, ‘Why do you guys come [to the annual meeting] every year? The message doesn’t change very much.’ I said, ‘Well, we go to church every Sunday — and the message doesn’t change very much [there], either.’ It’s a reminder about a certain value system and a certain way of looking at the world.”
Davis also shared a few memories of the late Charlie Munger. “Charlie was very comfortable doing nothing for long periods of time,” he said. “Often, in the investment industry, professionals are uncomfortable with that.”
“Charlie and I used to admire the man who built the Suez Canal — the architect was a man named Ferdinand de Lesseps. He had a quote that Charlie and I both liked. It said, ‘Patience sometimes requires more strength of character than does action.’ For investors, patience is sort of the fundamental pillar.”
✨ Sue Decker — Berkshire’s lead independent director — spoke to Becky Quick the day before the annual meeting and paid tribute to Charlie Munger’s incredible legacy. “He left a blueprint that guides us in [our] decision-making,” she said. “So he may be absent, but his impact will go on forever. His seat will be empty, but he’s all around us. He’s in the air that we breathe. He’s in the DNA of Berkshire.”
Decker also touched on two issues of particular interest to Berkshire shareholders:
Will Berkshire ever pay a dividend? “[Share repurchase] is a form of cash return to shareholders that is … completely discretionary in any one year. Once you start a dividend, it can be pulled — but the goal is never to stop. In the hierarchy of choices, a special dividend is something in between. Something that, on the Costco board, we’ve employed really successfully. But it’s not something that we’re discussing right now. Over time, things could change — but I think that redeploying capital through share repurchases is the preferred method at the moment.”
What’s going on with the BHE wildfire litigation? “We’ve reserved about $2.5 billion [for wildfire liabilities]. That’s roughly what we estimate the impact will be [and] that’s something that Berkshire can easily absorb. The near-term issues are not so significant for Berkshire. We’ll get through it. It’s a huge company — a trillion dollar balance sheet — so it’s going to be manageable. The bigger question is how does that relationship evolve between the government and the utility sector.”
✨ Ron Olson, meanwhile, told attendees at the Value Investors Conference that vice chairman Greg Abel is every bit as good as advertised. Even if he will never be quite the showman that Warren Buffett is.
“Greg is not somebody who is going to be as likely to create the kind of following in the press that Warren has had,” he said. “On the other hand, I have every reason to believe that he will run the companies that we have responsibility for in the same way that Warren ran them.”
“Greg is not going to be as entertaining as Warren and Charlie have been through the years,” added Olson.
Abel may not put on a show, but he still gets the job done. Case in point: the recent legal battle over Pilot’s valuation.
“It was not pleasant going through the litigation [with the Haslam family],” said Olson. “That was a problem that Warren put in Greg Abel’s lap. His preparation and thinking was impressive. He is strategic in his thinking — and he is decisive in his judgment.”
Olson also told CNBC that while Abel may not get the same kind of deference that Buffett does as CEO, the board will not hold him back from making quick decisions (even really big ones) when the situation calls for it.
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The Must List
Other awesome things that I read this week…
Lessons from the 2024 Berkshire Meeting || Novel Investor
“Most people want a shortcut. They want a simple formula they can use to find the next Apple. Instead, they got a story about how Buffett and Munger bought a department store, that it was a mistake, and that their unique mindsets delight in studying failures. The lessons they learned about consumer behavior from investments in that department store … and many others played a big role in recognizing the opportunity that was Apple.”
The Algorithm Behind Jim Simons’s Success ||
“Speaking of insecurity, I found it remarkable that Simons quit his successful academic career at age 40 to start messing around in markets. Simons was an accomplished mathematician but a beginner in markets. It wasn’t a flashy beginning either, working out of a ‘dreary Long Island strip mall, next to a woman’s clothing boutique and two doors from a pizza joint’. Talk about taking career risk.”
“We human beings are prone to be fearful. All living things have a deep-seated sense of fear. It’s what kept our ancestors alive. If your ancestor saw something dangerous looking around the corner, it’s better to be safe than sorry. The person sitting around and waiting for the danger to come to them is eventually wrong and dies. We’ve evolved from the people that stayed alive. As a result, we’re hard-wired to be fearful.”