The Berkshire Beat: January 3, 2025
All of the latest Warren Buffett and Berkshire Hathaway news!
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On November 28, 2024 — the one year anniversary of Charlie Munger’s death — his close friend Li Lu answered questions about the late polymath on the Chinese social network Zhenghe Island.
It had been an unimaginably tragic year for Li — losing the man “who was like a father to me” in November and then his oldest daughter Julia a few months later. Nevertheless, he graciously shared many stories and insights into his friendship with Charlie and even a few of the many lessons he learned along the way.
After Charlie’s wife passed away, the pair shifted their usual breakfast meetings to Tuesday evening dinners. They chose that day as a nod to the book “Tuesdays with Morrie” — in which a young protege visits his older mentor each and every week on that day. They kept up the tradition for more than ten years. “It left many warm memories,” said Li, “and I also learned a lot.”
He also provided a few more details about Charlie’s final days. “Charlie died on Thanksgiving weekend,” said Li. “He was with his family and, during dinner, he was still chatting and laughing as usual. But when it came time for dessert, he felt a little uncomfortable and was taken to the hospital early the next morning. About a day later, he passed away.”
It can be difficult to hold up a contemporary figure as a role model “because real people have all kinds of problems”. When studying the lives of the eminent dead, their nobler aspects tend to stand out — while any rougher edges are sanded away with the passage of time. But, with Charlie, that was never a problem. “We talked almost every few days,” said Li, “but I never found that anything he did disappointed me. On the contrary, his thinking and behavior continue to inspire me.”
To illustrate how all investing is merely a matter of probability — and your particular tolerance for risk — Li Lu told of a lunch he attended with both Charlie and Elon Musk. In between discussions of “batteries and various scientific issues”, he witnessed how the two men had drastically different views on risk. “Musk has a high tolerance for risk,” he said. “He believes that even if there is only a 5% chance of success, you should do it because the return rate is very high. This is the same as the idea of venture capital … For Charlie, he may need more than an 80% chance of success before he will do it — so he only needs to invest in 5 companies. Whether to invest in the way of VC or Charlie’s way is everyone’s choice.”
Li added, “Musk himself will tell you very clearly that the probability of success when he does this thing is extremely low — but this thing is worth doing and the return after success is very high. This is the basic logic of venture capital investment.”
Speaking of Charlie needing to be very sure before pulling the trigger on an investment… Li Lu noted that Charlie read Barron’s every week for nigh on 50 years — and finally found an idea worth acting upon in the final year of his life. “There was a stock that everyone disliked [because] it might not be particularly politically correct,” he said. “Charlie studied this company for a long time and invested in it when he was 99 years old. The week before he died, this stock had doubled from the time he started investing to that time. So he still had a passion for investment … and he could still go against the market consensus and live to see the stock double.” Sadly, Li Lu did not reveal the name of Charlie’s parting mystery stock — though he did mention that it still remains in the Munger family portfolio and “is still performing very well”. A legend to the very end.
And, now, the latest news and notes out of Omaha…
2024 is now in the books — and, for the third time in four years, Berkshire Hathaway beat the S&P 500. Both the Class A (+25.5%) and Class B shares (+27.1%) shares outpaced the benchmark index’s total return of 25.0%. Making this result all the more impressive is that the S&P 500’s strong performance was buoyed by banner years from most of the so-called Magnificent 7, while Berkshire carried more cash than ever and paused its once prolific share repurchase activity.
The largest holdings in Berkshire’s stock portfolio (at least as of September 30) also crushed it in 2024. The big winners are Apple (+30.1%), American Express (+58.4%), and Bank of America (+30.5%) — while Kraft Heinz, Occidental Petroleum, and Chevron all ended the year in negative territory. (These numbers do not include any dividends paid out to Berkshire during the year — just price gains or losses.)
Someone at Berkshire keeps buying Verisign stock. 76,487 more shares of VRSN 0.00%↑ were purchased — for a total of $15.6 million — between December 26-30. Berkshire now owns 13.8% of the internet registry company. What’s the big draw? Verisign posts margins that are the envy of pretty much everyone. In Q3 2024, its gross margin approached 90% — with a net margin north of 50%.
A little Berkshire Hathaway Energy news to close out the year. Back on Christmas Eve, BHE agreed to merge with a “certain indirect wholly owned subsidiary of Berkshire Hathaway” known as BHE B. (I admit: I had never heard of BHE B before.) It “owns eight investments in wind-powered generating facilities sponsored by third parties, commonly referred to as tax equity investments, and had net assets as of September 30, 2024, of approximately $1 billion”. Then, on December 31, BHE issued 481,000 shares of 4% perpetual preferred stock as part of this transaction.
🤑 New year, same steady stream of dividends. Today, Berkshire will collect $24.6 million from Chubb in quarterly dividends.
Wednesday would have been Charlie Munger’s 101st birthday. So it seems only fitting that Mark Tobak highlighted one of my favorite Munger-isms — “If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century, you’re not fit to be a common shareholder and you deserve the mediocre results you’re going to get” — in his latest article over at Hedge Fund Alpha.
Great! The last pick of Charlie Munger is absolute contrarian and definitely a gem. We also made the deep dive into his pick in our article
Very nice interview with Mr Munger.