The Berkshire Beat: June 21, 2024
All of the latest Warren Buffett and Berkshire Hathaway news! Including updates on Occidental Petroleum, BYD, Liberty Media, BNSF, Todd Combs, and more...
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The latest news and notes out of Omaha…
Warren Buffett bought more Occidental Petroleum stock on nine business days in a row between June 5-17. (And if his shopping spree extended beyond Monday, we should find out later tonight.) Buffett’s latest round of OXY 0.00%↑ purchases adds 2.95 million shares to Berkshire Hathaway’s haul at an average price of $59.70 per share. That rings up to a total cost of $175.9 million. Berkshire now owns 28.8% of the O&G giant.
And, of course, there’s that little matter of the warrants from the Anadarko deal. If Buffett elects to purchase those extra 83+ million shares — which are currently in the money — Berkshire’s stake would jump up to 34.9%. 👀
BYD is still on Buffett’s chopping block. On Monday, a new filing out of Hong Kong revealed that Berkshire reduced its position in the Chinese EV maker’s H-shares to 6.90% (as of June 11). This comes as something of a surprise — at least to me — because it had been almost eight months since we last got word of Buffett selling any BYD stock. It’s tough to tell whether he has been offloading shares in dribs and drabs all along or if sales ramped back up in recent weeks.
Due to Hong Kong regulations, the next filing will come if — or when — Berkshire’s ownership percentage dips under 6%.
Berkshire also sold 65,330 shares of Liberty Live Series A stock last week for $2.2 million. The conglomerate received LLYVA 0.00%↑ as part of Liberty Media’s reclassification last August — and continues to hold nearly 5 million shares of its Series A and 11.1 million shares of its Series C.
I’ve always considered Warren Buffett’s ability to purchase a company from its founder — and then convince said (newly-rich) founder to work as hard as ever under Berkshire ownership — to be his superpower. Berkshire director Ronald Olson spoke to Bloomberg Television over the weekend and shared one of Buffett’s tactics. “One question Warren always asked was: ‘Is this person going to love the money more than he loves the business?’ Berkshire’s about to make them very rich. If they did [love the money more], it wasn’t a deal. If they loved the business more, that’s who we want.”
When asked about preserving Berkshire’s unique culture in the post-Buffett era, Olson pledged that “every board member understands the most important thing we can do to sustain this company is to not let that culture slip away”. But, he laughed, “let’s not get ahead of ourselves. [Warren’s] not going anywhere soon. I had a wonderful conversation with him yesterday and the enthusiasm and the thinking is still there just like it always was.”
BNSF Railway must pay $394.5 million to the Swinomish Indian Tribal Community for running too many crude-oil trains across tribal land. The railroad is expected to appeal the district court’s verdict.
In the Spotlight: Todd Combs on “Value Investing with Legends”
I am still — six weeks later — digging out from underneath the avalanche of Berkshire Hathaway-related interviews and podcasts released during AGM weekend.
One that kinda flew under the radar was Todd Combs’s appearance on the “Value Investing with Legends” podcast hosted by Michael Mauboussin and Tano Santos.
In this special episode, Combs shared his memories of Charlie Munger and revealed the many lessons that he learned firsthand from the late polymath.
(1) Warren Buffett is right. Charlie Munger was the architect of Berkshire.
Charlie really flipped that switch to getting [Warren] to buy wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices.
The part [of Ben Graham] that Warren and Charlie stayed true to … is that valuation does matter. You can’t just say, “Go buy wonderful businesses at any price.” That is not going to have a good ending.
There are these qualitative aspects that Warren would say Charlie got him to appreciate. The valuation and the compounding of wonderful businesses is far more on the qualitative end of the spectrum — in terms of quality of management, moats, pricing power, brands, all these things that they’ve talked about over the years. A lot of that may not — and probably isn’t — captured in static-state valuation metrics.
(2) One-decision stocks are the key to long-term compounding.
Charlie used to espouse the virtues of what he called “one-decision stocks” [that] you could just buy and hold. Costco, Berkshire, Coca-Cola, etc. that had these wonderful aspects. That strategy is, as he would say, simple but not easy.
Simple is the most important factor in scalability — so Charlie would always talk about being long-term greedy versus short-term greedy.
You’re far better off finding that one compounder versus the 20 cigar butts where you have three decisions. You have to buy it, you have to sell it, and then you have to buy another one. He would joke and say that he was lazy — which he wasn’t.
(3) Investing is different from running a business. (Although becoming adept at one often helps with the other.)
It’s like being on a submarine. If you’re an investor, you’ve got the hatch open, you’ve got a 360° periscope, and you’re looking around [for an opportunity]. As an operator, you’re down in the boiler room and you’re trying to figure out why the pipe is clanking or that the heat light is running a little hot or something like that.
Combs also delivered a quick rundown of the lessons he learned from Charlie:
✨ “He would always talk about living life rationally and being devoid of pitfalls such as envy, resentment, and self-pity.”
✨ “Take a simple idea and take it seriously.”
✨ “He would always, always espouse — to anyone and everyone — that it’s a moral duty to learn and to get better every single day.”
✨ “Find super-talented people and then get out of their way and let them do their magic.”
✨ “He would talk about the seamless web of [deserved] trust that is so important — because, if you don’t have that, you can have all these high IQ people but you’re not going to get anything done.”
✨ “Simple scales.”
✨ “We should actively try to destroy what we think are our best ideas and our most closely-held beliefs.”
✨ “Find win-win situations and only enter into transactions where, if the situation was reversed, you’d be comfortable being on the other side. That’s core to his, Warren’s, and Berkshire’s ethos and culture.”
And, as Combs also pointed out, Charlie lived these lessons every single day of his life.
“He didn’t just talk about these things,” said Combs. “He actually had it in his DNA.”
“I’ve never met anyone with less friction between thought and action.”
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The Must List
Other awesome things that I read this week…
Quiet Compounding || Morgan Housel
“Every few years you hear a story of a country bumpkin with no education and a low-wage job who managed to save and compound tens of millions of dollars. The story is always the same: They just quietly saved and invested for decades. They never bragged, never flaunted, never compared themselves to others or worried that they trailed their benchmark last quarter.”
Daily Journal Annual Meeting Notes ||
“‘We will announce what we plan to do with the securities portfolio,’ [said CEO Steven Myhill-Jones]. ‘Charlie and I had a lot of conversations about this. We last had a conversation about this on November 13. We are getting advice from a remarkable network of people on this — incredible folks I was surprised I’d get to speak to.’”
Interview: Vitaliy Katsenelson ||
“Composing music and investing requires access to the supercomputer of the subconscious mind. They are nonlinear activities — input and output are not directly, but rather loosely, connected — and they bring a lot of creative joy with them. There is also a lot of creative pain in both, as well as the pain of failure.”