The Berkshire Beat: December 13, 2024
All of the latest Warren Buffett and Berkshire Hathaway news!
Happy Friday and welcome to our new subscribers!
Special thanks, too, to those who recently became paid supporters! ❤️
The Berkshire Beat typically focuses on what’s happening right now with Warren Buffett and Berkshire Hathaway. But, if I’m being honest, the many timeless lessons and stories from years gone by play just as big of a role in my decision-making process as any and all late-breaking news.
As such, Buffett’s early investments — when he was still struggling to make his way in this world — hold a very special place in my heart.
One of which, surprisingly, found its way back into the news this week.
A reader kindly sent me the link to a new digital archive celebrating the typography of the old Sanborn Map Company. If that name sounds familiar, it’s because Sanborn Map was one of Buffett’s earliest — and biggest — investments for his partnership.
Sanborn specialized in the “publication and continuous revision of extremely detailed maps of all cities of the United States” which were used by fire insurance companies to calculate premiums for all kinds of properties based on the location of water mains, fire hydrants, etc.
It was never an especially thrilling business, but Sanborn devoted such care and artistry to each map’s design that it has since become something of a cult classic among typography aficionados. Hence the new digital archive.
By the time Buffett came on the scene, fierce competition had eroded the old-school cartographic juggernaut’s once-impressive moat (and earning power) down to nothing.
What intrigued him, though, was the company’s stock portfolio of “thirty or forty other securities of high quality”. During the good years, Sanborn had smartly socked away unneeded capital in this growing collection of blue chip stocks — and it was this value that Buffett hoped to unlock when he invested 35% of his partners’ assets in Sanborn.
Initially, he sought to put the map business back on solid footing and restore some of its lost earning power. But his call for reform fell on deaf ears among Sanborn’s other board members — who, it must be said, had very little skin in the game and seemed to show more allegiance to the fire insurance industry than to Sanborn itself.
It all ended happily enough for Buffett Partnership Ltd., though. A compromise was reached to basically cash out existing shareholders via stock from Sanborn’s portfolio. 72% of Sanborn’s outstanding stock was “repurchased” in this manner — and BPL walked away with a 50% profit on its largest investment to date.
All because Buffett was willing to dig a little deeper than others — discovering the hidden value in Sanborn Map’s stock portfolio while the wider world saw only a relic of the past in its death throes. Life-changing gains lurk in the most unexpected places.
And, now, the latest news and notes out of Omaha…
I keep stumbling on more cool stories about the late Pete Liegl. After the Forest River CEO faxed Warren Buffett and offered to sell his RV company to Berkshire Hathaway, the two men met to discuss what Liegl’s compensation would look like under this new arrangement. “We had dinner and I brought up the topic of salary,” Buffett once told a group of college students. “I told him to name whatever number he wanted and I would sign the check. He asked what I made. I told him $100,000 and he said he didn’t want to make more than me — so we settled on $100,000.”
The cost of CEO security has taken on increased importance after last week’s murder of UnitedHealthcare’s chief executive. According to the most recent proxy statement, Berkshire spent $313,595 on Warren Buffett’s personal and home security in 2023.
recently wrote a great article on this subject.Last month, BNSF Railway recorded its fifth-best month of “dwell” time ever. (Dwell measures the amount of time between a train car’s arrival and departure from a terminal. Basically, the less dwell time, the better.) Yet another encouraging sign that consultant Ed Harris’s work to make BNSF more efficient is taking root throughout the entire system. “These accomplishments to drive greater efficiency and productivity while maintaining safe operations is a win/win for our employees and customers,” said COO Matt Igoe. “I’m looking forward to building upon this success as we finish out the year and head into 2025.”
BNSF’s Southern California On-Dock operations also set a new record with 1.5 million lifts so far in 2024 (eclipsing the old high-water mark of 1.48 million).
And, for the second time in five weeks, NetJets set a new record of its own — with December 1 being its “highest demand day” ever. The Berkshire-owned private jet company shared on LinkedIn that the Sunday after Thanksgiving is typically one of its busiest days of the year — and this one was no exception. “A heartfelt thank you to everyone who worked tirelessly over the holiday to serve our Owners,” said president Patrick Gallagher.
🤑 Dividends: This week, Berkshire collected quarterly dividends from two of its largest holdings — $193.3 million from Chevron and $20.9 million from Moody’s.
Apple’s Vision Pro mixed-reality headset — the tech giant’s first new product category in nearly a decade — was named Popular Science’s innovation of the year. “Virtual displays, AR game boards, and other digital artifacts integrate seamlessly into your view of the real world. It’s actually jarring to take the headset off and see the real world free of floating UI.” Popular Science says that if Apple can get this $3,500 device down to a more consumer-friendly price point, it’s got a “true game-changer” on its hands.
I’m glad to see Vision Pro picking up some awards — because it hasn’t exactly set the sales charts on fire. (Though, to be fair, no one really expected it to with that aforementioned $3,500 price tag.) Mark Gurman shared some of the grisly details over at Bloomberg: “Since the Vision Pro went on sale in February, I’m told that the company has sold fewer than half a million units. And a large number of Vision Pro buyers (those who haven’t returned it) aren’t using the product as much as Apple anticipated, according to internal data gathered by the company.”
Occidental Petroleum’s Thaimar Ramirez (president of the oiler’s Midland Basin unit) gushed over the impact of Oxy’s latest acquisition. “The [CrownRock] team is what we thought they were,” she told Hart Energy. “The assets are what we thought they were. The team has been over-delivering … They always say that they’re a relentless optimization organization — and they show it with the results.”
I don’t know whether Einstein really said that compound interest is the eighth wonder of the world or not. But if he didn’t, he should have. For your weekend reading list, Mark Tobak takes a closer look at the magic of compounding — with lots of Buffett and Munger quotes to boot — over at Hedge Fund Alpha.