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The Berkshire Beat: November 17, 2023
All of the latest Berkshire Hathaway news and my must-reads of the week!
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The latest news and notes out of Omaha…
On Tuesday evening, Berkshire Hathaway released its latest 13F — which revealed Warren Buffett and co.’s market moves during Q3 2023. And, for the fourth quarter in a row, Berkshire ended up as a net seller of stocks — with $7 billion of sales and just $1.7 billion of new purchases. Read all about it below.
In an interview with CNBC’s Becky Quick that was filmed earlier this week, Charlie Munger came out swinging against the recent ProPublica story that cast aspersions on Buffett’s investing activity in his personal portfolio.
“I don’t think there’s the slightest chance that Warren Buffett is doing something that is deeply evil to make money for himself.”
“He cares more about what happens to Berkshire than he cares about what happens to his own money. He’s giving all of his own money away. He doesn’t even have it anymore — showing how little he thinks of it.”
“Having [pledged all of his money to philanthropy], they say he was a dirty SOB and is taking advantage of Berkshire to make money. It’s not a plausible argument. It’s [just] one more ridiculous thing that is said about Berkshire.”
🤑 Yesterday was a big dividend day for Berkshire with $219.7 million pouring into the company’s coffers via Cupertino. Apple is, by far, the largest holding in Berkshire’s portfolio: 915.5 million shares at a current value of $173.7 billion.
Berkshire also pocketed quarterly dividends of $8.7 million from Ally Financial and $2.5 million from Aon on Wednesday.
Speaking of Apple, here’s an intriguing nugget from the company’s latest earnings report: The rapidly-growing Services segment ($22.3 billion) nearly equaled the combined sales of the Mac, iPad, and Wearables/Home segments ($23.4 billion) in the September 30 quarter. It won’t be long before Services — which includes online subscriptions, iCloud, the App Store, etc. — eclipses the entire non-iPhone cohort of Apple products.
And, in other Apple news, John Gruber over at Daring Fireball put the upcoming Vision Pro mixed-reality headset through its paces — and came away suitably impressed. “Nothing you’ve ever viewed on a screen, however, can prepare you for the experience of watching these spatial videos, especially the ones you will have shot yourself, of your own family and friends,” he wrote. “They truly are more like memories than videos … Prepare to be moved, emotionally, when you experience this.”
Brad Gerstner of Altimeter Capital joined the Art of Investing podcast this week and touched on several Berkshire-related topics like Forest River, Snowflake, and his friendship with Ted Weschler.
“I was in Omaha having dinner with Ted Weschler. We were talking about Uber and he said, ‘Uber is a technology company I can understand.’ I said, ‘Why, Ted?’ and he said, ‘Because it’s a verb. You Uber [someplace]. We like verbs in Omaha. We get consumer products that people love and that are irreplaceable. And, as far as we’re concerned, that’s the attribute that makes Uber most interesting.’”
Starting next year, BNSF Railway, J.B. Hunt, and GMXT will launch a new intermodal service that promises to shave off a day of transit time between Monterrey (Mexico) and Chicago. “Our organizations are committed to growth in Mexico and this joint service offering is a direct reflection of that commitment,” says Katie Farmer of BNSF. “By utilizing this capacity and expertise of the largest intermodal railroad in the U.S., the largest railroad in Mexico, and the largest domestic intermodal carrier, this product will seamlessly connect the North American intermodal network.”
The November “bonus” for paid supporters will come out on Monday. I’m very excited to bring you another annotated transcript of a (relatively) recent Warren Buffett interview. If you’ve been on the fence about upgrading to a paid subscription, there’s no time like the present. Plus, you get immediate access to the four annotated transcripts that have already been released.
And, as always, the first 2,000-ish words (counting footnotes) will be available to everyone. I’ve tried to do my best to ensure that no one feels short-changed.
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The Ins & Outs of Berkshire Hathaway’s Q3 2023 Stock Portfolio
Each quarter, all investment managers with more than $100 million of assets under their control must file a report (Form 13F) with the SEC to disclose any changes in their portfolio. Meaning that, once per quarter, we get a peek inside Berkshire Hathaway’s massive securities operation.
A few things to keep in mind:
(1) Don’t turn 13Fs into anything more than an academic exercise. These are not cheat sheets of what your next move in the market should be. Nor are they endorsements about the future prospects of any company.
(2) Any moves revealed in these filings are only current as of September 30, 2023 — so they’re already six weeks old and quite possibly out of date. Woe to the coat-tailer!
(3) On the plus side, 13Fs demonstrate how different investors — even those who espouse the same value-based principles — go about their business in drastically different ways. As Warren Buffett says, “In investing, there’s more than one way to get to heaven.”
(4) Speaking of Buffett, any study of Berkshire’s 13F should come with an additional word of warning:
Not all investments revealed herein were made by Warren Buffett.
With Todd Combs and Ted Weschler managing an ever-increasing portion of Berkshire’s portfolio, it can be difficult to discern which investments belong to Buffett and which come from his lieutenants.
Some brave souls attempt to read the tea leaves or make deductions based on a particular position’s size or industry, but — at the end of the day — everyone’s just guessing.
(So, whenever I write “Buffett bought…” or “Buffett sold…” a particular security, it might actually be Combs or Weschler’s handiwork. Such is the inherent uncertainty that all Berkshire students must labor under.)
Okay, so with all of that out of the way, let’s take a look at Berkshire’s investing activity in the third quarter…
As you can probably guess from the sea of red in the list above, Berkshire was (once again) a net seller of stocks during Q3 2023 — with $7 billion of sales and just $1.7 billion of new purchases.
But, happily, there’s still plenty to talk about:
A lot of the media coverage over the past few days zeroed in on those 223,645 shares of Atlanta Braves Holdings. But those “Buffett Invests In Braves!” headlines are more than a little misleading. Berkshire received these shares as part of a split-off to all Liberty Formula One common shareholders back in July.
Likewise, the Liberty Live A & C shares arrived via an August reclassification of Liberty Media’s (many) tracking stocks. So, unless I’m missing something, these three are not really new “purchases” per se.
The 13F also revealed that Berkshire is omitting one or more holding(s) after requesting — and receiving — confidential treatment. Some preliminary sleuthing through Berkshire’s recent 10-Q suggests that this mystery purchase likely belongs to the “Banks, Insurance, & Finance” category of stocks.
Don’t count on a quick resolution to this mystery. Back in Q3 2020, Berkshire made three confidential purchases — Chevron, Verizon, and Marsh & McLennan — but didn’t publicly reveal them until the next 13F came out in February 2021. So we probably won’t know the identity of this unnamed stock until Berkshire files an amended 13F in three months.
The most notable sales were ones that we already knew about — namely HP and Chevron. In fact, the only investing move that changed Berkshire’s portfolio by more than 0.5% was CVX 0.00%↑. The others barely moved the needle.
Buffett has now chopped and changed his Chevron position in thirteen(!) consecutive quarters. That has to be some kind of record.
As the third quarter ended, Berkshire looked to be careening towards the exit on HP. The selling started on September 11 and picked up steam as the month went on — with Berkshire offloading shares of HPQ 0.00%↑ in each of the last eight business days of September. (The sell-off continued into October, but that’s outside the scope of this particular filing.)
One possible explanation for Berkshire’s change of heart: HP had been a prolific repurchaser of its own shares for years — but that came to an abrupt end in 2023. From 2018 to 2022, HP bought back almost 660 million shares, which reduced its outstanding share count by over 40%. This year, though, that trend has reversed — with HP’s share count starting to creep up slightly.
Slashing Markel by 66.3% came as a slight surprise, while the writing had been on the wall for Celanese and GM. Berkshire also weeded out some of its smaller (more like microscopic) holdings, such as Procter & Gamble, UPS, Johnson & Johnson, and Mondelez.
All in all, a pretty quiet quarter for Berkshire Hathaway. But at least the mystery stock will provide some intrigue (and speculation) in the weeks to come.
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Other awesome things that I read this week…
“It is one thing to be a good investor. But the hidden variable in the success of Warren [Buffett] and Berkshire has been his ability to communicate effectively. One does not build a business around ‘picking up the phone’ unless you cultivate the relationships around you to the point where they want to become your partner. This type of outcome wouldn’t happen if Warren wasn’t a student of [Dale] Carnegie.”
“Warren Buffett’s history with RJR stock shows how he thinks about investing. But we can learn a broader lesson from him. He calls himself an ‘asset allocator’. He says that this is his one real skill and had he been born at any other time in history, this skill would have been worthless … His asset allocation ability would have been of little use if he were a European serf in the Middle Ages where his only asset was a mule. You have no opportunity to allocate assets if you spend all day looking at the south end of a north-bound mule.”
“Do you wake up on Saturday morning thinking about diving into the latest issue of the Value Line Investment Survey, going page by page through each report, taking notes, and diving into the 10-Ks of companies that interest you? If so, that’s great, but you are in a tiny minority. If you have that level of interest and the requisite analytical skills, you might have a chance of competing with investors like Warren Buffett, Todd Combs, and Ted Weschler, and others who live and breathe stocks every day of their lives.”
“Even a business that does well over time would have long periods of time where the stock price goes nowhere. Being a long-term investor is not easy, because to earn the great returns of investing, you need to be sitting through the long periods of poor performance, in order to experience the joys of good performance. There is no way around that.”