The Berkshire Beat: July 5, 2024
All of the latest Warren Buffett and Berkshire Hathaway news! Including updates on Coca-Cola, Chubb, Bank of America, Itochu, Buffett's philanthropy, and more...
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I’m back from California — slightly sunburnt and with a newfound addiction to See’s Candies peanut brittle in tow.
Even the box of brittle I brought home with me is now nothing more than a memory.
Setting aside my gluttony for the moment, let’s take a look at the latest news and notes out of Omaha…
Q2 2024 came to a close last week — and Berkshire Hathaway is now looking up at the S&P 500. At the end of the second quarter, the benchmark index’s YTD total return clocked in at 15.3% — outpacing both Berkshire’s Class A shares at 12.8% and Class B shares at 14.1%.
In terms of Berkshire’s common stock portfolio, Apple shook off its malaise with an eye-popping 22.8% gain in the second quarter. On the flip side, Kraft Heinz nosedived 12.7%.
Warren Buffett’s money machine never stops. On Monday, Berkshire received $194 million in quarterly dividends from one of its oldest holdings, Coca-Cola. And, today, another $23.6 million rolled in from new boy Chubb.
Buffett wrote about KO 0.00%↑ dividends in last year’s annual letter. “The cash dividend we received from Coke in 1994 was $75 million. By 2022, the dividend had increased to $704 million. Growth occurred every year, just as certain as birthdays. All Charlie [Munger] and I were required to do was cash Coke’s quarterly dividend checks. We expect that those checks are highly likely to grow.” And so they have. This year, Coca-Cola will pay $776 million in dividends to Berkshire — more than 10x the amount from 1994.
Speaking of dividends, Bank of America announced plans to raise its quarterly dividend by 8% to $0.26 per share. That means, on an annual basis, Berkshire will now collect over $1 billion in dividends from BAC 0.00%↑ alone.
The Allen & Co. Sun Valley Conference — sometimes called “summer camp for billionaires” — kicks off next week without one very familiar face. Warren Buffett, who regularly attends this annual confab of powerbrokers, is not on either of the guest lists published by Variety and Bloomberg.
Berkshire, though, will be well represented by vice chairman (and CEO heir apparent) Greg Abel. Perhaps this is just the latest baton passed from Buffett to his eventual successor.
Last month, Itochu obtained licensing rights in Asia for Berkshire subsidiary Fruit of the Loom. The Japanese conglomerate is aiming for $124 million in sales over the next five years. “This will be our first joint project with Berkshire,” Itochu CFO Tsuyoshi Hachimura told Nikkei — and called it a “sign” of Berkshire’s trust in the trading house.
And that might not be the end of it. Nikkei added that Itochu “is discussing partnership opportunities with Warren Buffett’s Berkshire Hathaway after securing [this] apparel tie-up”.
Melinda French Gates recently delivered the commencement address at Stanford University and shared her favorite Munger-ism with the graduates. “Charlie famously said that the highest form which civilization can reach is a seamless web of deserved trust,” she said. “Totally reliable people, correctly trusting each other. What a thing to aspire to.”
And, on a similar note, Josh Friedman of Canyon Partners credited Charlie with the best investment advice that he ever received. “Charlie Munger used to have a saying that things fall into three categories: Yes, no, and too complicated to figure out,” he told Bloomberg’s David Rubenstein. “We kind of ignore that a little bit because we tend to gravitate toward complexity, but I think there’s a basic message in there that’s a terrific one — which is that you have to be patient. You have to be aggressive when the opportunities are abundant and you have to be quite disciplined at a time when they’re not. If you look at that period that we lived through where rates were ridiculously low, it was easy to put money to work in things that were silly in retrospect. That was true in venture capital. It was true in equity markets. It was true in credit markets, particularly. Having the kind of patience and discipline that Charlie Munger and Warren Buffett have had is a great lesson for everyone in the investment world.”
In the Spotlight: Warren Buffett Shakes Up Philanthropy Plans
On Friday morning, Warren Buffett announced $5.3 billion in donations to the Bill & Melinda Gates Foundation and several other family-run charitable organizations.
But, in a surprising twist, Buffett told the Wall Street Journal that he has a new plan in place for future giving — and, after his death, his remaining wealth will go into a new charitable trust run by his children.
Under this new arrangement, Buffett’s three children — Howard, Susan, and Peter — must unanimously agree on which causes will be supported.
“I like to think outside the box,” laughed Buffett, “but I’m not sure if I can think outside the box when it’s 6 feet below the surface and do a better job than three people who are on the surface who I trust completely.”
“[My wealth] should be used to help the people that haven’t been as lucky as we have been. There’s eight billion people in the world, and me and my kids, we’ve been in the luckiest 100th of 1% or something. There’s lots of ways to help people.”
Buffett said that the Gates Foundation will continue to receive donations during his lifetime — but that’s it. “The Gates Foundation has no money coming after my death,” he said rather abruptly.
The Oracle hinted at such a move late last year when he wrote: “My three children are the executors of my current will as well as the named trustees of the charitable trust that will receive 99%-plus of my wealth pursuant to the provisions of the will. They were not fully prepared for this awesome responsibility in 2006, but they are now.”
Seems obvious in retrospect, but many of us missed it at the time.
✨ After this latest round of charitable giving, Buffett still owns 207,963 Class A shares (and another 1,353 Class B shares) — leaving him with 30.0% of the aggregate voting power and 14.5% of the economic interest at Berkshire Hathaway.
✨ With Buffett’s current holding of Class A shares accounting for 37.0% of outstanding shares, we can get a very rough idea of recent repurchase activity. If my back-of-the-napkin math is correct, there are close to 500 less Class A shares outstanding than there were on April 19.
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The Must List
Other awesome things that I read this week…
Warren Buffett’s Evolving Estate Plan ||
“Warren Buffett cares a great deal about Berkshire’s culture and how it will evolve in the decades after his death. The owners of Class A stock will have a disproportionate influence on the culture. Knowing that Mr. Buffett’s children will have this influence, at least for a decade and perhaps longer, is reassuring.”
“Folks talk about Buffett buying Mid-Continent Tab Card and other cheap securities in the 1950s. We’re often told that those opportunities are extinct. But Nick has proved that these things still exist. Nobody will tell you about them, though. You have to find them on your own.”
8 Important Lessons I Want To Stamp Into My Brain ||
“It’s easy to get caught up in the complex minutiae the world tries to sell you as the solution. But most things in life come from doing the dead-simple basics, repeatedly, for longer than the average person is willing.”
Apple Watch Is Becoming Doctors’ Favorite Medical Device || Wall Street Journal
“Doctors are opting for the Apple Watch because of the device’s simplicity, affordability, and ubiquity — Apple shipped about 40 million of its watches in 2023 alone, and even more in previous years. Compliance is also an issue with medical-monitoring devices, and this is an area in which the consumer focus of the Apple Watch, which must appeal to as wide an array of people as possible, helps. One study of nearly 200 individuals found that they wore the watch four out of five days, for an average of more than 14 hours a day. That compares favorably with patient adherence to other treatments, such as medication and exercise, which is often a fraction of what doctors recommend.”
Nice find on Buffett not being on the list for the Sun Valley Conference. I think that's an event he has enjoyed quite a bit in the past. It's as much a social event as a networking opportunity ... I hope his health is holding up. But I am confident that anything really serious would be disclosed to Berkshire shareholders. Good to know that Abel will be there.