The Berkshire Beat: June 16, 2023

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

Happy Friday and welcome to our new subscribers!

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The latest news and notes out of Omaha…

• Back in April, Warren Buffett revealed that he had boosted Berkshire Hathaway’s stake in the five largest Japanese trading houses up to 7.4% each. He and Greg Abel even traveled over to Japan to meet with the leaders of these companies. And, at last month’s investor briefing, someone asked the Itochu executive team about its sit-down with the Oracle: “Mr. Buffett’s trip to Japan seemed to be mainly for general observation purposes, rather than focused on serious negotiations … In addition, we received wonderful gifts during our meeting. These were thoughtfully selected. We are impressed and will try to learn [from] his kind approach. I was impressed by the instant change in his facial expression and posture when the discussion touched on business. I could really feel his strong passion for business.”

  • Theron Mohamed of Business Insider notes that Buffett’s bet on the sogo shosha is paying off. “The five Japanese stocks have gained an average of 181% since Buffett’s original disclosure (August 2020). The upshot is that Berkshire’s holdings have ballooned in value from $6 billion to about $17 billion today.”

• 🤑 On Monday, Berkshire received $199.9 million in quarterly dividends from Chevron. Despite a little trimming in Q1 2023, Berkshire still owns 7.0% of CVX 0.00%↑ — a position currently valued at $20.9 billion. (Assuming, of course, that Buffett did not sell any more shares in the second quarter…)

• A blast from the past over at Ars Technica. As someone who follows Berkshire (the parent company of World Book Encyclopedia via Scott Fetzer) more closely than any sane person should, even I forgot that they’re still printing physical copies of the whole set. Tom Evans, editor-in-chief of World Book, “said that sales of the print edition are ‘in the thousands’ and that World Book always prints just enough copies to satisfy demand”. And, Evans adds, “There is still a demand!” Not bad at a $1,199 retail price.

The 2023 print edition of World Book Encyclopedia

• Paramount Global has popped nearly 18% over the last three weeks — probably in response to Byron Trott’s preferred equity investment in its controlling shareholder, National Amusements. CFO Naveen Chopra recently shared some more good news: the studio could close a lucrative sale of Simon & Schuster this year. That would provide some much-needed capital to the company’s coffers.

  • At the Gabelli Funds Media & Entertainment Symposium, Chopra also touched on a hot topic: consolidation. “It’s probably unwise to bet against consolidation in the media industry … Whether PARA 0.00%↑ is a seller of assets or whether we are a consolidator of assets — we’ll have to see.”

• Since last September, vice chairman Greg Abel has spent approximately $92.9 million of his own money on Berkshire stock. Those shares are now worth $115.1 million — for a gain of 23.8% in less than a year. An astute investment from the man who will, one day, sit atop the Berkshire throne.

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In the Spotlight: Beyond Ben Graham

First off, kudos to

The Rational Walk

for unearthing (and sharing) this gem. Written by Graham’s granddaughter, Charlotte, the Beyond Ben Graham blog lovingly captures the real Benjamin Graham: a man far less concerned with dollars and cents than with teaching and helping others.

The financial community may have immortalized Graham as “the father of value investing” — always crunching numbers and scrounging around for cigar butts — but such a formulaic image does great disservice to someone who can best be described as a renaissance man. Beyond Ben Graham provides an excellent (and much-needed) counterbalance to this popular, yet erroneous, narrative.

The latest entry recounts Charlotte’s recent visit to Omaha to meet with Warren Buffett and collect some of his papers for the Benjamin Graham Archive at Columbia.

Buffett has never hidden his profound admiration and gratitude for Graham as a teacher, a mentor, and a friend. And, in Charlotte’s account, those warm feelings come through loud and clear.

I told him that my grandfather made a huge difference in my life, too. I declared that was the reason I’d come to Omaha. “I want to preserve my grandfather’s legacy,” I proclaimed.

“Ben Graham will be long remembered,” [Buffett] assured me. “You don’t need to worry about that.”

On our second visit with Warren, I asked him: “Would you say that you and Ben became friends?” When he didn’t answer right away, I continued: “In some of Ben’s letters and postcards in your files, he expressed a wish for you and Susie to visit him in California. That sounds like friendship to me.”

“Well, I think I wanted the friendship more than he did.” Warren paused, and when he spoke again, his voice cracked. “Ben was my hero and my friend.” His light blue eyes widened and his face took on a youthful, eager, and fierce expression. “It helps to have heroes who are better than you.”

We even get a Ted Weschler shout-out!

In his gracious treatment of me and my husband, Warren embodied the kindness and generosity he saw in Ben Graham. He treats the twenty-four staffers who work with him at the Omaha office considerately, too. Investment manager Ted Weschler appeared relaxed and glad to be there. Each person we chatted with in the lunch room seemed at ease and content, in marked contrast to the stressed employees I have encountered in Bay Area tech firms.

While reading this, I couldn’t help but think of Morgan Housel’s recent piece, Compounding Optimism. In it, he asks: “Did Ben Graham know that his 1950s finance class would lead to 45,000 trekking to Omaha every year to hear his student speak? Of course not. It’s so hard to know what an idea … will influence — and what a person who’s influenced by it will go on to create.”

And, as Beyond Ben Graham illustrates, that influence extended far beyond mere security and market analysis. “The enduring bond between these two brilliant investors,” Charlotte writes, “turns out to be less about money and investment strategies and more about character, generosity, and magnanimity … than I ever expected.”

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More Must-Reads

Other awesome things that I read this week:

What If God Was a Hedge Fund Manager?

Investment Talk

• “This is why investors feel compelled to sell on the way down instead of on the way up. It’s why dreams are given up after a short setback and why struggling students drop out instead of seeking help. The view of the forest is obscured by that of the tree. At this tipping point, giving in to loss aversion is like pushing against an open door. We are hardwired to think this way.”

The Century Portfolio

Special Situation Investing

• “When selecting investments, I picture my grandchildren inheriting the stocks and try to imagine which companies will last and which companies will go to zero. I want a company that will elicit a “Grandpa was a genius!” response and not a “What the heck did XYZ company even do? Grandpa was an idiot!” response. In my estimation, there is a good chance that humans will need oil, minerals, exchanges, brokers, and a few other things in 100 years and, to the extent I can revenue share with those businesses, I feel secure thinking that these investments won’t go to zero.”

Surviving Markets: Why Great Investors Are Rare

Frederik Gieschen

• “The best players of the game, by definition, survive. They prioritize playing another day over the chance to do a little better today. To do so, they study failure.”