The Berkshire Beat: July 26, 2024
All of the latest Warren Buffett and Berkshire Hathaway news! Including updates on BYD, Bank of America, Occidental Petroleum, Sirius XM, PacifiCorp, and more...
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The latest news and notes out of Omaha…
Berkshire Hathaway sold 52.8 million shares of Bank of America for $2.3 billion over six consecutive business days between July 17-24. After making waves by selling some Apple stock earlier this year, Warren Buffett is now paring back on his second-largest position as well. Whether he’s taking profits, trying to get the holding under 10%, or something else altogether — we’ll just have to wait and see. Berkshire’s position in BAC 0.00%↑ now sits at 12.5%. If Buffett opts to keep selling, the next SEC filing would be due out on Monday evening.
Berkshire’s investment in Bank of America is one of my favorites for purely non-business reasons. Back in 2011, Buffett was sitting in his bathtub when inspiration struck him to offer the bank one of his patented deals: a $5 billion preferred stock purchase (yielding 6% annually) with warrants for 700 million common shares in tow. If only my bath-time could be so profitable…
Buffett is still selling BYD, too. A new filing out of Hong Kong revealed that Berkshire’s stake in the Chinese EV maker’s H-shares has now dropped to just 4.94% (as of July 16). Since the position is under 5%, Berkshire will no longer have to immediately disclose future sales. So, unless the company says something, any further sales will be done in secret.
When Adam Mead talks Berkshire, I listen. The author of The Complete Financial History of Berkshire Hathaway joined the “Value: After Hours” podcast on Tuesday and discussed both his personal investment approach and the future of Berkshire in the post-Buffett era. Watch the whole thing here.
The antitrust waiting period for Occidental Petroleum’s acquisition of CrownRock expired last week, paving the way for the deal to close next month. And, now, Oxy is turning its attention to financing the $12 billion deal. The O&G giant plans to sell about $5 billion in bonds to help pay for CrownRock — and Colombian oiler Ecopetrol might chip in another $3.6 billion in exchange for 30% of CrownRock’s assets. Any proceeds from Ecopetrol will be used to “pay down a portion of [Occidental’s] term loans”.
Reuters reports that Oxy is also closing in on a deal to sell its assets in the Barilla Draw region to Permian Resources for about $1 billion.
The combination of Sirius XM Holdings and Liberty Media’s Sirius XM tracking stock is also right around the corner. If Liberty shareholders vote in favor of the merger at a special meeting next month, “New Sirius XM” should begin trading on or about September 9.
I cringe every time I see a news alert pop up with PacifiCorp in the title. The BHE subsidiary now stands accused of colluding with lawyers to push lowball settlements related to the Oregon wildfires. PacifiCorp called the allegations “false, preposterous, and desperate” and countered that plaintiffs are better off receiving money now via settlements rather than incurring higher legal fees while pursuing a class-action suit.
Warren Buffett: I’m Ready for a Clayton Home!
It’s hard to believe that anything Warren Buffett said over annual meeting weekend could have flown under the radar — but here’s something that just might apply.
Buffett tagged along with CNBC’s Becky Quick for her interview with Clayton Homes CEO Kevin Clayton and gave the company’s newest “modern manufactured home” model his personal seal of approval.
The Oracle of Omaha famously still lives in the same house that he purchased for $31,500 in the late 1950s. So many other multibillionaires would trade up for palatial mansions in sunny locales, but he decided to stay put in comfortable quarters.
But, according to Buffett himself, a Clayton home is awfully tempting…
“Both my wife and my doctor and, actually me myself, would all like me to tear down the house that I have now and actually put one [of these] in there,” he said. “It would be on one floor. They don’t like me going up and down the stairs. I would be very, very, very happy in that house.”
(If nothing else, Buffett is the consummate company man. And his comments seem to confirm rumors from last year’s Sun Valley Conference that he’s got balance issues.)
“I’ve got the $300,000,” he laughed. “I’m ready to buy — and Astrid is ready to buy — but I’m not sure that the neighbors [want me] to tear down my present house.”
“I’m ready,” he said again. “I bought a lot of those homes 21 years ago [when Berkshire acquired Clayton] and I’d just like one for myself.”
“We know you’re good for it,” said Kevin Clayton.
✨ During the Q&A session at this year’s annual meeting, Buffett explained how he tries to redirect day-to-day operational questions from managers to either Greg Abel or Ajit Jain. But an offhand comment here to Kevin Clayton revealed that Buffett still keeps himself plenty involved.
While discussing the size of Clayton’s mortgage business ($25 billion with 400,000 customers), Buffett asked him, “Did you buy that portfolio we talked about the other day?”
“We did,” said Clayton.
If Buffett is still discussing possible mortgage portfolio additions with Kevin Clayton, I think it’s fair to say that he’s still completely dialed into the Berkshire machine.
✨ Earlier, I mentioned how Buffett decided to invest in Bank of America while sitting in his bathtub. The acquisition of Clayton Homes occurred under similarly memorable circumstances.
Students from the University of Tennessee visited Buffett in Omaha and gifted him an autographed copy of founder James Clayton’s autobiography. That set the wheels in motion for Berkshire to buy the whole company.
“It was a good day [when] the students sent me down to Clayton,” he said. “[Those students] certainly were the first ones that gave me a business tip. They always want stock tips from me — and they gave me a business tip.”
“I gave that professor (Al Auxier) a share of A [stock] and I gave the students each some B stock,” he laughed. “I hope they all held onto it!”
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The Must List
Other awesome things that I read this week…
Becoming Berkshire: 1967 — National Indemnity ||
“Buffett had met Jack [Ringwalt] during the earlier days of the Buffett Limited Partnership. As the legend goes, Ringwalt offered to invest $10,000 in the partnership. However, Buffett stated it should be $50,000. Ringwalt replied, ‘If you think I am going to let a punk kid like you handle $50,000 of my money, you are even nuttier than I thought!’”
“Importantly, a moat is not the economic engine of the business. Instead, a moat’s value derives from the castle it’s protecting. I’m sure a buggy whip company or two had moats in the early 20th century, but they were worthless once the Model T hit the streets. Competitors don’t attack castle ruins — they’re after big, shiny castles. And the bigger and shinier the castle, the wider the moat must be to keep them at bay.”
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