The Berkshire Beat: July 7, 2023

All of the latest Berkshire Hathaway news and my must-reads of the week!

Happy Friday and welcome to our new subscribers!

The latest news and notes out of Omaha…

• Warren Buffett’s money machine never stops. On Monday, Berkshire Hathaway received $184 million in quarterly dividends from Coca-Cola — and, somewhat less impressively, $4.6 million from Paramount Global. Then, on Wednesday, $31.75 million rolled in from HP Inc.

  • Buffett wrote about his Coca-Cola dividends in this 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.” That’s a very safe bet. This year, Coca-Cola will pay $736 million in dividends to Berkshire.

  • The Oracle was less effusive about Paramount’s recent dividend cut. “It’s not good news when any company cuts its dividend dramatically,” he said in May.

• Here’s another fun fact for any dividend lovers in the crowd. Over three consecutive business days — June 30, July 3, and July 5 — Berkshire collected $577.8 million in dividends from Bank of America, Kraft Heinz, Coca-Cola, Paramount, and HP. More ammunition for the elephant gun! (h/t ShrewdInvestor8)

• Bank of America was, notably, one of the few major lenders not to raise its dividend last week after taking the Federal Reserve’s stress test. In fact, BAC 0.00%↑ is now in discussions with the Fed to clarify “differing results between the central bank’s stress test and the company’s own” health check. Not too sure what to make of this, but definitely something to keep an eye on.

  • Update: Bank of America just announced that it plans to hike its dividend by 9% starting in the third quarter.

• Last Friday, Apple made some history. For the first time ever, the Cupertino-based tech giant finished the day with a market cap over $3 trillion. Apple scuffled through 2022, but it’s been a rocket ship so far this year.

• The Nebraska Furniture Mart empire welcomes a new heir: On July 1, the late Rose Blumkin’s great-great-grandchild worked his first shift at NFM — becoming the first member of the family’s fifth-generation to join the family biz. “It feels good to help out with what my ancestors built and be a part of something bigger than me,” seventeen-year-old A.J. Shefsky told the Omaha World-Herald. He plans to study business in college and, then, return to work at NFM. (Mrs. B would be proud.)

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In the Spotlight: Berkshire Hathaway Director Wallace Weitz

As an Omaha-based value investor, Wallace “Wally” Weitz has probably gotten used to living in Warren Buffett’s shadow. But, last year, Weitz took a well-deserved step into the spotlight when he joined Berkshire Hathaway’s board of directors.

His careful stewardship of client capital at Weitz Funds over the last forty years makes him a natural fit for the Berkshire board. Weitz is also well-steeped in the company’s unique culture and philosophy, being both a long-time shareholder and frequent attendee of Berkshire’s annual meeting.

And, while Weitz is very much his own man, he invests quite similarly to Buffett. In the early 1990s, Weitz not only held Berkshire stock — but other related securities like the Washington Post, Cap Cities/ABC, and the Daily Journal, too.

“I guess you could say we’re influenced by Buffett’s view of what value is,” Weitz told Forbes in 1992, “but I don’t think this fund is a proxy for him.”

This year, Weitz Funds celebrates its fortieth anniversary — and, although Wally has stepped back to some extent, he headlined the firm’s recent annual meeting (May 24, 2023) and showed himself to be as perceptive and knowledgeable as ever.

On the banking “crisis”:

I don’t think we have to worry about bank runs going forward because I think people should know the Fed is going to make sure depositors are safe. Not shareholders, but depositors … so don’t worry about your deposits.

On rising interest rates:

5% really is not [that] high. In my fifty years of doing this, 5% is probably on the low end of normal — so I think everybody’s going to be able to live with it once they get used to it.

But investors had gotten used to the Fed just rushing in and bailing everybody out when their stocks went down or their bonds went down. I take [Jerome] Powell at his word … when he says no cuts this year. It really isn’t that important to know when that’s going to happen. What matters is having companies that can deal with whatever the Fed policy is.

On how downturns create opportunity:

I write about this in the letters and I guess people think I’m just, you know, whistling Dixie. But I really mean it when I say that economic adversity and recessions and financial distress in the system can be great for the companies that are ready to take advantage of that.

Berkshire wouldn’t own the railroad if there hadn’t been a bear market. And, let’s see, Danaher and NBC and Berkshire all took advantage of [General Electric] in three different periods of GE distress. If you’re on the right side of the ledger with your companies, you shouldn’t worry about a recession.

On his future:

Somebody out in the lobby asked me if I had retired or was thinking about retiring — and I haven’t been really. But, ever since I went on the Berkshire board a year ago, I look down the table and the CEO (Buffett) is 92 and the vice chairman (Munger) is 99.

We went on a field trip to take a four-hour trip on one of the Burlington trains and have all the [BNSF] management come in and tell us about what’s going on with the railroad. Charlie was there in his wheelchair … sat at the head of the table and he was peppering them with questions the whole four hours. So I just feel very young and it’s a good thing.

Weitz sounds rejuvenated by joining Berkshire’s board and witnessing firsthand the energy and enthusiasm of the conglomerate’s resident nonagenarians. Don’t expect him to head for the exits any time soon.

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More Must-Reads

Other awesome things that I read this week…

How Toy Sensation Squishmallows Joined Warren Buffett’s Conglomerate (CNBC // Yun Li)

• “‘We’re thrilled to be part of [Berkshire Hathaway],’ Laura Zebersky said in an interview. ‘It’s better than we could have ever anticipated and being around the greatest leaders in the world is phenomenal — and being able to explore the synergies is also something we are interested in.’”

How To Do Great Work (Paul Graham)

• “Many more people could try to do great work than do. What holds them back is a combination of modesty and fear. It seems presumptuous to try to be Newton or Shakespeare. It also seems hard; surely, if you tried something like that, you’d fail … Few people consciously decide not to try to do great work. But that’s what’s going on subconsciously; they shy away from the question.”

The Golden Century (Sir John Templeton)

• “Those investors who want to benefit from the future progress of the nation must give the utmost care to the proper selection of their investments. During the first half century, many investors failed to share in the growth of the nation, because they invested in the wrong kinds of investments or in the wrong industries.”