The Berkshire Beat: November 29, 2024
All of the latest Warren Buffett and Berkshire Hathaway news!
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Earlier this week, Warren Buffett converted 1,600 of his Berkshire Hathaway Class A shares into 2.4 million Class B shares and donated them all to four family foundations. All in all, it works out to a $1.15 billion gift to kick off the Thanksgiving holiday.
This latest round of charitable giving leaves Buffett with 206,363 Class A shares (and 1,333 Class B ones) — good for a 14.4% economic interest in Berkshire and 30.2% of the voting power.
Buffett has now given away — in total — over 399 million Class B shares that would be worth approximately $192.8 billion today. (h/t The Rational Walk)
Twenty years ago, Buffett and his first wife owned 508,998 Class A shares. If he had held onto it all, his current fortune would come in right around $370 billion — edging out Elon Musk as the world’s richest individual by nearly $50 billion.
This Thanksgiving gift seems especially fitting because gratitude and thankfulness has long been the bedrock of Warren Buffett’s approach to business and life.
And, even better, Buffett snuck in a whole mini-letter to shareholders at the end of the press release announcing his share conversion. In it, he lays out plans for his eventual posthumous giving and explains why he will require unanimity among his three children for any and all donations.
It’s a letter uniquely suited for the Thanksgiving season — full of appreciation for the circumstances that made his success possible as well as the fact that his children grew into able stewards who can be trusted to efficiently distribute billions of dollars.
Other news and notes out of Omaha…
Berkshire Hathaway cruised into the holiday at new all-time highs. On Wednesday, both the Class A ($723,549) and Class B ($483.08) shares closed at record highs. With one month still to go, Berkshire’s Class A shares lead the benchmark S&P 500 index by six percentage points — with the Class B shares ahead by more than eight.
AM Best revised its outlook for some members of Berkshire’s GUARD insurance unit from stable to negative. “The negative outlook reflects sharp deterioration in GUARD’s underwriting results that began in the 2023 calendar year and worsened in the first nine months of 2024,” says the press release. But, on a happier note, AM Best lauded the insurer for taking “significant steps to improve its underwriting” such as discontinuing troublesome lines of business and bringing in an “almost entirely new senior leadership team tasked with restoring its operating performance”.
The rating agency concedes that its concerns are “greatly mitigated by the group’s position as a subsidiary of Berkshire Hathaway” — and that a significant capital infusion from National Indemnity Co. in Q2 2024 shows that Berkshire remains committed to righting the ship at GUARD.
American Express CEO Stephen Squeri explained to CNBC what sets his company apart from all of the credit card competition. “Our business is really a three-legged revenue stool,” he said. “We have the fees that we get from merchants from spending. We have card member fees which, for 25 straight quarters now has been in double digits [of growth] — and we just had 18% growth in the third quarter. And then we have interest income. But 75% of our revenues come from fees, not from interest income — which is very different than our card competitors. That speaks to the engagement of our cardholders.”
There’s never a dull moment with PacifiCorp. The Berkshire Hathaway Energy subsidiary, which has been in the news for all the wrong reasons (like mounting wildfire litigation) in recent years, is now facing an entirely different kind of headache from the states in which it operates. Some of them are pressuring the utility to break up and separate its regional brands Rocky Mountain Power (Utah, Wyoming, and Idaho) and Pacific Power (Oregon, Washington, and California) to better reflect those states’ preferred energy policies. Something to keep an eye on in the coming years.
Occidental Petroleum has its eyes on Arkansas. The O&G giant has secured some leases there related to the huge lithium discovery in the state’s Smackover Formation. And, while Oxy holds a 100% interest in these leases, Berkshire Hathaway Energy has an option — as part of its TerraLithium joint venture — on future developments in the state if they choose to move ahead on this project.
What does Berkshire see in PoolCorp? Earlier this month, Berkshire revealed a new ~$150 million investment in the Louisiana-based swimming pool supplies distributor. If you’d like to learn more about the company, Pool Magazine provides an overview. (Though it does fall into the trap of assuming that all Berkshire investments are made by Buffett himself. At this size, it’s much more likely to be Ted or Todd’s pick.)
“PoolCorp is the undisputed leader in the pool supply industry. Its extensive distribution network and wide range of products give it a significant edge over competitors, creating high barriers to entry.”
“While PoolCorp’s business is partly cyclical — affected by new pool construction and larger renovations — it also benefits from consistent demand for maintenance and repair products. Even when new installations slow, pool owners still need chemicals, equipment repairs, and accessories.”
“This resilience was evident in the company’s third quarter 2024 results, which posted $1.5 billion in net sales — the second-highest [Q3] revenue in its history.”
🤑 Dividends: Berkshire collected $151,745 in quarterly dividends from Jefferies Financial Group this week.
Yesterday was the one year anniversary of Charlie Munger’s passing. I released an annotated transcript of his final interview with Becky Quick on Monday and have been re-watching as many of his other interviews as I can find. This is one of my all-time favorites. “Can you be cheerful when you’re absolutely mired in deep hatred and resentment?” he asked. “Of course you can’t. So why would you take it on?”
And, fittingly, Mark Tobak over at Hedge Fund Alpha wrote about one of Charlie’s very favorite subjects: Costco.
Maybe BHE could break up Pacificorp and sell the subs. I know selling units isn’t the Berkshire way but Buffett seemed really down on the utility sector in the annual letter.
Thanks good post the wisdom of Charlie