The Berkshire Beat: July 19, 2024
All of the latest Warren Buffett and Berkshire Hathaway news! Including new all-time highs and updates on Helzberg Diamonds, Japan, Occidental Petroleum, and more...
Happy Friday and welcome to our new subscribers!
Special thanks, too, to those who recently became paid supporters! ❤️
And many thanks for all of the birthday wishes last week!
All in all, it was a very on-brand celebration for me: I started off with breakfast at McDonald’s, proceeded to eat a disturbing amount of See’s Candies throughout the day, and then capped it all off with a Blizzard from Dairy Queen.
I think Warren Buffett would approve. 🫡
Let’s kick off this week’s letter with the latest news and notes out of Omaha…
What a week for Berkshire Hathaway — which soared to new all-time highs on Monday, Tuesday, Wednesday, and Thursday. Both classes of Berkshire stock are now ahead of the benchmark S&P 500 index on the year. Plus, Berkshire’s market cap rose above $950 billion for the first time ever. Next stop: $1 trillion.
Some financial sites show $741,971.40 as the all-time high for Class A shares, but that lofty price was erroneously caused by the NYSE glitch on June 3. Personally, I don’t count that as a legit all-time high.
These are heady days for Berkshire’s common stock portfolio, too. The market value of the portfolio eclipsed the $400 billion mark for the first time in recent weeks — fueled by Berkshire’s four largest holdings. All four have been on a tear over the past three months.
Apple: +34.2%
Bank of America: +20.2%
American Express: +14.6%
Coca-Cola: +10.7%
Let’s check in on “The Land of the Rising Dividend”. A big part of Warren Buffett’s interest in the five leading Japanese trading houses stems from their commitment to returning cash to shareholders. He specifically praised them for intelligent share repurchase policies in his latest annual letter — but steadily growing dividends don’t hurt, either. All five recently announced dividend hikes that will take effect in December: Itochu will now make bi-annual payments of ¥100, Marubeni ¥45, Mitsubishi ¥50, Mitsui ¥50, and Sumitomo ¥65.
While those dividends might still be a few months away, a couple of checks did roll into Omaha this week. Berkshire received nearly $225 million in quarterly dividends from Occidental Petroleum on Monday. That includes $54.8 million via the common stock position and $169.8 million via the preferred shares from the Anadarko financing. And, somewhat less impressively, Berkshire will also collect $76,286 from Lennar today.
FYI: Buffett bought shares of Oxy on nine consecutive business days between June 5 and June 17, which complicates the calculation of this dividend payment since the record date was June 10. I tried my best to piece together which shares were — and were not — eligible for this dividend.
Helzberg Diamonds CEO: “Jewelry Resonates Even In Tough Times”
During this year’s Berkshire Hathaway shareholders weekend, Becky Quick spoke to the (relatively) new CEO of one of the conglomerate’s oldest subsidiaries.
Brad Hampton took up the top spot at Helzberg Diamonds in July 2022, after five years learning the ropes of the jewelry biz as the company’s CFO.
(Helzberg, if you recall, joined the Berkshire family back in 1994 after CEO Barnett Helzberg Jr. pitched his company directly to Warren Buffett after a serendipitous meeting on the streets of New York City. I wrote more about that funny story here.)
Hampton, in his short stint atop the jeweler, has faced an uncertain economy — and fears of an imminent recession — almost from day one. But, he says, the consumer is still hanging in there.
“The consumer is definitely showing some resilience,” he told Quick. “Consumer confidence has remained high despite all of the indicators in the economy that might say otherwise. But there are beginning to be some pressures on consumers. The inflationary environment is taking a little toll — especially at lower income levels.”
“Fortunately, jewelry resonates even in tough times. People still get engaged and still have big milestones in their lives.”
💎 Hampton noted that his company’s smaller average ticket number is partly the result of the shift to lab-grown diamonds. “You absolutely cannot tell the difference,” he said. “Chemically, they are identical to natural diamonds. They’re just grown above the ground with amazing technology and craft.”
And, while these lab-grown gems sell for lower prices than their natural counterparts, that’s not necessarily bad news for Helzberg. “Margin is actually a little better in the lab-grown space,” said Hampton. “That’s been a big thing for the industry.”
🛍️ During the pandemic, Helzberg right-sized its portfolio of stores by closing 20% of its mall-based retail locations. “We took advantage of Covid to restructure the business,” he told Quick. “It gave us an opportunity to step back and look at our real estate portfolio — and that restructuring actually enables us to come out of the pandemic stronger than we went in.”
Digital sales, too, are now an area of emphasis. “We’re investing heavily in e-commerce because that’s a trend that obviously picked up during Covid,” he said. “We’re seeing a lot of growth there.”
💼 As one of the newest additions to Berkshire’s stable of managers, Hampton cherishes the opportunity to mix and mingle with so many other CEOs at the annual shareholders meeting.
“Berkshire is really unique in that we have this ownership culture that the subsidiaries are empowered to act as owners — and we run our businesses [as we see fit],” he said. “But we also have this amazing family of companies to reach out to for best practices and even collaborations.” (Helzberg teamed up with See’s Candies for a Mother’s Day promotion this year.)
Fingers crossed that we see even more intra-Berkshire synergy in the years to come.
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The Must List
Other awesome things that I read this week…
Walter Schloss, Nifty Fifty, Current Market Valuations and Opportunities ||
“One of the things I like about him was his detached view of the stock market and even his own portfolio companies. He came in at 9 a.m., left by 4:30, and didn’t seem to be bothered by bad events (that were inevitable, especially with so many stocks). He once said, ‘Let the Tisch’s worry about that’ when his son was asking him about his view on some problems going on at Loews, one of his investments.”
Claim Checks ||
“We know that Warren Buffett continues to care very much about Berkshire Hathaway which is directly tied to his wealth. This is due to two main reasons. First, he has a fiduciary duty to other shareholders of Berkshire Hathaway who have entrusted him with their capital. Many of those shareholders very much care about the accumulation of claim checks. Second, Mr. Buffett’s claim checks will end up in foundations set up to benefit causes that he cares about.”
“Ordinary investors, like you and me, have only a few smart tools within our disposal. Notably, to stick to our strategy and stay the course, while ignoring the songs of the sirens. Someone will always be getting rich faster than you or me, but that’s not the end of the world, as long as we reach our own goals and objectives. Keeping up with the Joneses can be costly, and derail our train on its way to financial independence.”
How Much Knowledge Was Lost to History? ||
“Collected knowledge is the mark of a civilization’s greatness. It’s the repository of skills and wisdom that it can draw from to design new buildings, overcome new problems, and create new works of history-defining art. At the same time, libraries are among the most fragile institutions in culture. A single attack can wipe out a civilization’s centralized collection of knowledge.”
How Benjamin Graham Survived World Panic on Wall Street || Beyond Ben Graham
“According to William Silber, a professor at NYU’s Stern School of Business, shutting down Wall Street for more than four months was just as ‘unthinkable’ in 1914 as it would be today. Yet William McAdoo effectively stopped foreign investors from accessing U.S. gold, enabling America to maintain the gold standard. Silber posits that McAdoo’s skillful handling of the Great Financial Crisis of 1914 empowered America to win out over Britain for financial supremacy. Monetary triumph never entered Ben’s head. I picture my twenty-year-old grandfather making his start just when Wall Street shuttered its doors. He must have felt like a young player called up to the big leagues, only to see Major League Baseball go on strike.”
Those dividends from the Japanese trading houses cover the interest on the Yen denominated debt many times over - very impressively done by Buffett.
Thanks again for the update, Kevin. I wish you a good weekend.