The Berkshire Beat: August 2, 2024
All of the latest Warren Buffett and Berkshire Hathaway news! Including updates on Bank of America, Chevron, Occidental Petroleum, Itochu, BNSF, Lubrizol, and more...
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Set your alarm clock: Berkshire Hathaway will release its Q2 2024 earnings report bright and early tomorrow morning at 8 a.m. ET.
Did Warren Buffett sell more Apple stock? Is Berkshire’s cash pile really over $200 billion? How many shares did Buffett and co. repurchase?
I’ll be back on Monday with the answers to all of these questions.
But, in the meantime, let’s check in on the latest news and notes out of Omaha…
Warren Buffett’s summer sell-off continues. He has now sold Bank of America stock on twelve consecutive trading days: a total of 90.4 million shares of BAC 0.00%↑ going out the door for more than $3.8 billion. Buffett started selling on July 17 and hasn’t stopped yet — dropping Berkshire Hathaway’s stake in the bank down to 12.1%.
Occidental Petroleum’s $12 billion CrownRock acquisition is a done deal — it officially closed late last night. Now, it’s time for the divestitures. Oxy hopes to sell $4.5 billion to $6 billion of assets over the next eighteen months to reduce debt. On Monday, the company agreed to sell 27,500 net acres in the Barilla Draw (and 2,000 net acres in the New Mexico Delaware Basin) to Permian Resources for $818 million. Oxy also confirmed that it had lined up another $152 million of dispositions — bringing the total up to $970 million.
“We are pleased with the significant progress to date on our divestiture program,” said CEO Vicki Hollub, “which is aimed at de-risking the financing of the CrownRock acquisition and accelerating our shareholder return pathway.”
Last week, I mentioned that Ecopetrol S.A. might buy 30% of CrownRock’s assets for $3.6 billion. That’s not going to happen. On July 31, the Colombian oiler notified Oxy that “it has decided not to acquire any interest in the CrownRock assets”.
Elsewhere in the Berkshire energy empire, Chevron’s $53 billion acquisition of Hess remains stuck in limbo. Exxon Mobil claims it holds a right of first refusal to Hess’s interests in Guyana — which, if true, would scupper the whole deal. And any chance of a quick resolution is now out the window as arbitration over this matter will not begin until May 2025.
“Chevron and Hess had expected and requested that this hearing be held earlier,” said a Chevron spokesman, “but the arbitrators’ common schedules did not make this possible.”
Melinda French Gates told the New York Times it “did not surprise me” that Warren Buffett would entrust his wealth to his children — and not The Gates Foundation — after his death. Back in June, Buffett announced that his fortune will now be left to a charitable trust overseen by his three children — and rather abruptly said that “The Gates Foundation has no money coming after my death”. Melinda Gates resigned as co-chair of the foundation earlier this year. “It’s been a decision that I think [Buffett] has been coming to over time,” she said.
According to Trains, intermodal business for large railroads boomed during the first half of 2024. BNSF, the Berkshire-owned railroad, “is leading the pack, up 394,000 units, or 16% year over year”. That’s because intermodal volume shifted to the West Coast “amid continued problems in the Red Sea [the Houthi terrorists] and the ongoing stalemate in East Coast labor talks”. Let’s hope we see some of this improvement reflected in tomorrow’s earnings report. It’s been a while since we got any good news out of BNSF.
If South Korea succeeds in reversing its dire fertility rate, it will have Berkshire-backed Itochu to thank. The country sent the vice chairman of its population committee to Itochu last month to study how the Japanese trading house handles its employees’ work-life balance and child care. In 2023, South Korea’s birth rate fell to a shockingly low 0.72 — way below replacement level. Itochu, for its part, uses in-house child care facilities and free breakfasts to convince employees to come to work early, rather than staying late at night.
Nikkei: “According to [Itochu], the fertility rate among its employees increased from 0.6 in 2012 to 1.97 by 2021 as a result of its work-style measures.”
In the Spotlight: Lubrizol CEO Rebecca Liebert
I don’t really understand what it is that Lubrizol makes, but — owing to it being headquartered in Cleveland — it automatically qualifies as one of my favorite Berkshire Hathaway subsidiaries. What can I say? I’m a homer.
If asked, I blurt out, “Lubrizol makes fuel additives,” and try to say it confidently enough that no one asks any follow-up questions.
It’s not a plan that will work forever, so I do my best to stay abreast of company news in hopes that some of it might seep into my brain through osmosis. It hasn’t worked so far, but hope springs eternal.
And that brings me to Becky Quick’s interview with Lubrizol CEO Rebecca Liebert from annual meeting weekend…
✨ Lubrizol made its name in fuel additives before branching out into other fields like health and beauty. Liebert singled out the evolution of Carbopol, a molecule created by Lubrizol in the 1960s, as emblematic of the company’s current-day focus. Carbopol polymers can now be found in skin care and hair care products — as well as laundry detergents, car polishes, and dishwashing liquids.
And, as Carbopol spreads into more and more products, Lubrizol has made it more environmentally-friendly than ever. “We’ve recently taken what was a fully synthetic molecule and made it biodegradable,” said Liebert. “That’s what our customers and our customers’ customers are looking for.”
✨ Liebert also told Quick that both commodity prices and employment issues are stabilizing after the stormy days of the pandemic. “Hiring now is easier than it was during that Covid crunch time,” she said, “but it’s not without challenges.”
“We need to see more of our youngsters want to go into math and science. Lubrizol is a very large supporter of STEM education and STEM scholarships. We just want to see more students want to go [study] in this area.”
✨ And, in some late-breaking news, Lubrizol just announced that it will build a new manufacturing facility on a 120-acre plot in Aurangabad, India. When completed in 2028 — to coincide with Lubrizol’s 100th anniversary — the Aurangabad plant will become the company’s second-largest manufacturing facility in the whole world. India remains a critical part of Lubrizol’s global growth strategy.
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The Must List
Other awesome things that I read this week…
The Complex Personality of Phil Fisher ||
“Phil’s daily routine was marked by simplicity and a strong adherence to habits, reflecting his deep-seated aversion to change and his preference for solitude. After publishing Common Stocks and Uncommon Profits in 1958, his typical day involved working standard office hours, from 9 AM to 4 PM, after which he would commute home by train, reading during his journey unless he fell asleep. His evenings were spent quietly at home, reading murder mysteries or business materials, highlighting his need for personal time after formal family dinners.”
Why Bill Gates, Warren Buffett, and Ray Dalio Favor Junk-Food Stocks || Fortune
“In a 2022 report, for example, Coca-Cola highlighted that in developed markets, only 32% of beverages are non-commercial — basically tap water that is consumed at home. The rest of the market is alcohol, hot beverages, and cold drinks like bottled water and fizzy drinks. This statistic flips in developing and emerging markets, where 69% of drinks consumed are tap water, with just 16% of the market enjoying cold beverages.”
“In doing research for this piece, I went through a bunch of old files. While it has nothing to do with the write up, I feel compelled to say that Ted Weschler seems like a genuinely nice person. We know Buffett has a pretty strict policy on the type of people he will work with. Weschler is obviously a great investor. I’ll be cheering him on from the sidelines.”
Thanks for sharing my post, Kingswell! Indeed, Fisher's personality was kind of "weird". I was talking to a friend about Fisher's personality and he believed he could have "Asperger" (like Burry) or "Autism".
My thinking on Warren’s change in the distribution of his remaining shares on his death is that the annual gifts to the foundations are made in converted B shares and sold, thus diminishing the A share voting control. By using the trust arrangement, he can extend his control of Berkshire through the A shares and, thus, diminish the eventual prospect of non-Berkshire owners trying to breakup the company for a quick profit.