The Berkshire Beat: February 9, 2024
All of the latest Berkshire Hathaway news and my must-reads of the week!
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The latest news and notes out of Omaha…
What a week for Berkshire Hathaway! Both the Class A and Class B shares hit new all-time highs on Monday, Tuesday, and Wednesday — before cooling off a bit yesterday. And, even more impressively, the Class A shares breached the $600,000 mark for the first time ever. I hope Warren Buffett splurged for the bacon, egg, and cheese biscuit at McDonald’s at least a few times this week.
Berkshire purchased 4.3 million more shares of Occidental Petroleum over the first three business days of this month. Average price of $57.15 per share for a total outlay of $245.9 million. It had been just about six weeks since Buffett and co. last topped up the OXY 0.00%↑ position. Berkshire now owns 28.2% of the O&G giant.
If Buffett were to exercise those common stock warrants from the Anadarko deal, then Berkshire’s stake in Oxy would rise to 34.4%. 👀
This latest SEC filing also reveals that Oxy has not redeemed any more of Berkshire’s preferred shares since last check. 84,897 still remain.
And, just yesterday, Oxy raised its quarterly dividend by 22%.
Chevron also announced an 8% dividend increase late last week. Assuming that Berkshire did not buy or sell any more shares of CVX 0.00%↑ over the past four months, this will increase its quarterly dividend check from $166.5 million to $179.7 million. (Based on recent trends, though, that’s unlikely to be the case. Buffett has chopped and changed his Chevron position in thirteen consecutive quarters. We’ll find out next week if he did it again in Q4 2023.)
Jacob McDonough, author of Capital Allocation: The Financials of a New England Textile Mill (1955-1985), recently spoke to Business Insider about Berkshire.
“The Berkshire we know today all started from three failed businesses. Buffett not only salvaged his investment in these three businesses, he turned it into one company approaching a $1 trillion valuation. Just survival alone to this day would be impressive if you were dealt a hand of textiles, trading stamps, and department stores — but the success achieved despite this difficulty is even harder to comprehend.”
McDonough also weighed in on Berkshire’s acquisition of Pilot Travel Centers. “People will probably continue traveling on highways for many decades — and Pilot should be in some good locations to serve those customers. That is a durable advantage that would be difficult to ruin.”
Over on X, he added: “Buying the real estate [along the highways] years ago gives Pilot a solid competitive position today at their existing locations — and that advantage probably won’t go away.”
🤑 The dividends just keep rolling into Omaha. Today, Berkshire will receive $90.9 million from American Express and $2.6 million from Mastercard.
Last week, Apple reported Q1 2024 earnings — and Mr. Market was not thrilled. Even though revenue was up 2% (snapping four consecutive quarters of decline), relatively weak iPhone sales in China and underwhelming guidance for next quarter conspired to send the stock price spiraling. That drop proved fleeting, though, as AAPL 0.00%↑ has already mostly bounced back from its recent lows.
Apple repurchased 118 million shares for $20.5 billion during the December quarter. Berkshire’s stake in the company inched up from 5.88% to 5.93%.
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A Slow Read of Poor Charlie’s Almanack
Talk 1: Harvard School Commencement Speech
Now, finally, we turn to the real meat of Poor Charlie’s Almanack: eleven different speeches that Charlie Munger delivered during his long life. Seminal moments in which he preached the good news of rationality and discipline with unerring clarity.
Up first is his commencement address at Los Angeles’s Harvard School in 1986. Charlie had served as a trustee of the all-boys school for many years, but his most important connection was that he sent all five of his sons there. And, on that day, it was Philip Munger’s turn to graduate.
(Lucky guys. Imagine how incredible it would be to have Charlie Munger pop up as your high school graduation speaker!)
In his speech, Charlie employed his favorite mental model — inversion — to explain how the bright-eyed graduates could build a successful life. Or, to be more accurate, he expounded on the many ways in which they could be sure to guarantee themselves a miserable one. Left unsaid was that if they steered clear of this parade of horribles, their lives would be much the better for it.
Charlie acknowledged that his speech owed much to one that comedian Johnny Carson gave to Harvard School grads a few years back. Though he felt confident that he knew more about failure and struggle than the affable Carson.
“I am older than Carson was when he spoke,” Charlie said, “and I have failed and been miserable more often — and in more ways — than was possible for a charming humorist speaking at a younger age.”
Charlie mentioned the three keys to a miserable life that Carson had championed — and then added four more of his own:
Drug and alcohol use
Refusing to learn from the experience of others
Giving up after getting knocked down
Ignoring the power of inversion
Simply avoiding these common pitfalls of life will all but ensure a person’s ultimate success. In particular, Charlie highlighted the halo effect of reliability — pointing out that a reliable person will find it “hard to end up miserable even if you start disadvantaged”.
I had a roommate in college who was and is severely dyslexic. But he is perhaps the most reliable man I have ever known. He has had a wonderful life so far: an outstanding wife and children [and he is] chief executive of a multibillion-dollar corporation. If you want to avoid a conventional, main-culture, establishment result of this kind, you simply can’t count on your other handicaps to hold you back if you persist in being reliable.
Charlie closed his speech with one of my all-time favorite Munger-isms. One that perfectly sums up his inimitable way of giving inverted advice: “Gentlemen, may each of you rise [high] by spending each day of a long life aiming low.”
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Other awesome things that I read this week…
The Best Investors In The World Are Dead (Dividend Growth Investor)
“A few years ago, I read about a study conducted by Fidelity on its client brokerage accounts … They came to a stark discovery — the best investors were either dead or had forgotten to log on to their accounts for a long period of time. Perhaps they forgot their passwords and got locked out of their accounts, but didn’t bother resetting them. It makes intuitive sense that accounts where investors do little trading would do better than accounts that are more active.”
“Attending my first Berkshire AGM was definitely one of my highlights of 2023 … There is a plethora of external events for investors — too many to attend, in fact. Here is my guide to what to do to make the most of the weekend.”
Mentors (Ian Cassel)
“Mentors don’t have to be perfect, they just have to teach you something. He taught me the things I needed to learn. Over the years, you realize people come into your life for a reason. They are meant to show us what we could or shouldn’t let our lives become. Often seeing the bad is just as educational as seeing the good.”
A Few Thoughts on Spending Money (Morgan Housel)
“Money is a tool you can use. But if you’re not careful, it will use you. Sometimes the stuff you spend money on has so much influence over your autonomy and sanity that it’s not clear whether you own things or the things own you.”