The Berkshire Beat: July 12, 2024
All of the latest Warren Buffett and Berkshire Hathaway news! Including updates on Sun Valley, Apple, Occidental Petroleum, Mitsui, Chubb, and more...
Happy Friday and welcome to our new subscribers!
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It’s my birthday today — and, in true Kingswell fashion, I will be celebrating the occasion with a cheeseburger and Blizzard at my local Dairy Queen. Much like Warren Buffett, my tastebuds never really grew up.
Oh, and a quick reminder that there will be two bonuses for paid supporters this month. So, if you’ve been on the fence about upgrading, now is the time.
Let’s kick off the big day by checking in on the latest news and notes out of Omaha…
Last week, I mentioned that Warren Buffett was not on the guest list for this year’s Allen & Co. Sun Valley Conference — but that vice chairman Greg Abel would be there in his place. But, as it turns out, Abel is not the only one repping Berkshire Hathaway at the uber-exclusive media confab. According to the New York Times, Todd Combs and Ted Weschler are also in attendance.
Apple cannot be stopped. After a blistering 22.8% gain in the second quarter, Apple actually picked up the pace during the first two weeks of July. Over just the first nine business days of Q3 2024, AAPL 0.00%↑ soared another 8.1%. The Cupertino-based tech giant’s market cap now sits a hair under $3.5 trillion. I guess Mr. Market really likes Apple Intelligence.
Apple thinks everyone else will, too. According to Bloomberg, the company anticipates 10% shipment growth for its upcoming iPhone 16 models in 2024 — spurred by those aforementioned Apple Intelligence features coming to the new phones. Apple reportedly told suppliers and partners that it’s aiming to ship 90 million flagship iPhone 16 devices this year.
Occidental Petroleum’s carbon credit biz lands another big fish. Oxy subsidiary 1PointFive announced a landmark deal to sell 500,000 metric tons of carbon removal credits to Microsoft over the next six years. This is “the largest single purchase of carbon removal credits enabled by Direct Air Capture to date” and should help Microsoft offset increased AI-related energy use. These credits will come from STRATOS, an in-progress DAC facility in Texas that is scheduled to begin operations sometime next year.
On Wednesday, Oxy revealed that its worldwide average realized oil price in the second quarter was $79.89 per barrel.
In this year’s annual letter to shareholders, Warren Buffett praised the five Berkshire-backed Japanese trading houses for their “shareholder-friendly policies” — including share repurchases at attractive prices. Mitsui recently provided an update on its own buyback program — with 9,859,900 shares repurchased in May and June. The company has authorized total repurchases of up to 40 million shares for $1.2 billion through September 20. That would add up to 2.64% of Mitsui’s outstanding share count.
On July 1, Mitsui completed a 2-for-1 stock split that it hopes will “allow for investing to become accessible for our shareholders, as well as enable greater liquidity in our stock and further expansion of our investor base”. The above numbers are pre-split, so Mitsui will now aim to repurchase 80 million shares.
On Twitter/X, an old Warren Buffett quote — about fixing the U.S. deficit — got some new attention. Back in 2011, Buffett told Becky Quick: “I could end the deficit in five minutes. You just pass a law that says that any time there’s a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election.” Elon Musk weighed in and called it a “great idea”. And, while Buffett said these comments in somewhat tongue-in-cheek fashion, his larger point is unquestionably true: Even the stickiest problems can be overcome by putting the proper incentives in place.
Chubb CEO Evan Greenberg: “We’re Actually A Growth Company!”
Over the past year, Berkshire Hathaway clandestinely amassed a 6.4% position in Zurich-based insurer Chubb. At last check, it’s currently valued at $6.7 billion.
Chubb CEO Evan Greenberg, son of legendary AIG chief Hank Greenberg, made the media rounds last month and spoke about Warren Buffett’s sizable investment in his company.
“I know Warren and I have an amazing regard for his capabilities,” he told CNBC’s Jim Cramer. “He may be the world’s greatest investor of his time — and what a builder. What he has accomplished speaks for itself. And he knows insurance!”
“That he would choose to invest in Chubb and become a significant long-term shareholder is so gratifying and such a vote of confidence. We’re honored.”
But he doesn’t think that it was Chubb’s dividend that attracted the Oracle of Omaha. “We’re actually a low-yielding stock,” he told Liz Claman on Fox Business Network. “It’s about a 1.4% [yield]. He’s not buying it for the dividend.”
Greenberg added that Chubb only pays out a “very small percentage of our earnings” on the dividend. A fact that he admits causes some grumbling among shareholders.
Instead, he believes that Buffett sees a bright future ahead for the insurer. “We’re actually a growth company. Our earnings have been growing at double digits for the last few years and, as we look forward, we’ll continue robust earnings growth.”
Greenberg expects this growth will come from three main engines: (1) underwriting on property-casualty lines, (2) investment income boosted by higher interest rates, and (3) a growing life insurance business in Asia.
But, in my opinion, the thing that probably impressed Buffett the most is that Chubb practices disciplined underwriting right out of the Berkshire playbook.
“[Underwriting] is the soul of who we are,” said Greenberg. “Every company that is successful, the wellhead of success is first of all to know who you are and what is the purpose for which you exist. Ours is to underwrite and to assume risk.”
“Everyone says, ‘Oh, yes, I walk away when it isn’t priced or structured right,’ but very few are willing to pay that price and shrink. We’ve proven that [we will do that]. In any business where we fundamentally can’t achieve the right return, we will walk away.”
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The Must List
Other awesome things that I read this week…
Why Pursue Financial Independence? || Value Stock Geek
“The more clutter and complications you have in your life, the more stressed and anxious you become. It starts gradually, but before you know it, you’re overwhelmed by unnecessary distractions that consume your thoughts and dictate your life. Simplifying your life can significantly reduce this stress and bring you greater peace of mind.”
Charlie Munger’s Home: A Place To Know More || Mark Tobak
“In June 2022, I was privileged to visit Charlie Munger at his home in Pasadena, California, one of ten people who joined him for dinner on his patio. Charlie hosted many such dinners and those assembled were, as I was, honored and grateful to bask in his presence and gather pearls of wisdom on life, history, family, business, and investment.”
Buffett on Ignoring Stock Price Fluctuations and Thinking Like a Business Owner || Dividend Growth Investor
“Sometimes Mr. Market offers a tremendous bargain and sometimes Mr. Market offers a ridiculously high price for an asset. Most of the time, it pays to just ignore Mr. Market, unless you want to take advantage of this moody fellow. People who focus too much on stock price fluctuations end up being influenced by the manic depressive Mr. Market. They feel the urge to do something, which leads to many investors selling low and buying high.”
Happy birthday!
Don’t forget to have a Dilly Bar too. Happy Birthday. May you have as many birthdays as Warren and then some. Why aren’t there any health books on the Buffett diet? 😉