The Berkshire Beat: October 18, 2024
All of the latest Warren Buffett and Berkshire Hathaway news!
Happy Friday and welcome to our new subscribers!
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An all-new edition of The Intelligent Investor — to celebrate the classic text’s 75th anniversary — comes out on Tuesday, October 22. HarperCollins kindly sent me an advance copy so that I can write up a review of the new edition for release day.
That should be hitting your inboxes on Tuesday morning.
But, in the meantime, let’s check in on the latest news and notes out of Omaha…
BRAD GERSTNER OF ALTIMETER CAPITAL TOLD A COUPLE OF COOL WARREN BUFFETT STORIES ON THE MEB FABER SHOW. “I once asked [Warren] Buffett what he could have done to improve his performance,” Gerstner told Faber earlier this month. “He said, ‘Slept more and gone into the office less.’ He said when you do all the work as an investor and you do all this analysis, everything looks like signal. You want to do something. But, 95% of the time, you have to do all your homework, you have to study, you have to think — and, then, do nothing. It was that high-conviction, qualitative insight that led you into the investment [in the first place] so don’t let little data points along the way scare you out of the investment.”
He also offered up an interesting take on Buffett’s huge investment in Apple. “What [Buffett] always gets scared about around technology is that technologists find a gold mine, but then they take all the gold out of the mine and they go make another bet with it and lose it all in the second bet. He says, ‘Pull the gold out of the gold mine and send me my share [through] buybacks and dividends.’ When Apple made a decision that they were going to send upwards of 100% of their free cash flow on an annual basis back to shareholders, I’m sure Buffett said, ‘Where do I wire the money?’”
JUST WHEN I THOUGHT I WAS OUT… According to a new filing, Bank of America repurchased $3.5 billion of its own stock in the third quarter — reducing its outstanding share count to approximately 7.69 billion. That meant Berkshire Hathaway once again owned more than 10% of BAC 0.00%↑ — 10.08% to be exact — and must report any further sales within two business days. And it did just that last night after Buffett sold 8.7 million more shares on Tuesday for $369.9 million. (The man certainly does not let any grass grow under his feet.) This drops Berkshire back under that all-important 10% threshold.
THIS IS GETTING SIRIUS. Berkshire purchased another 3.6 million shares of Sirius XM last week at an average price of $24.33 a piece. That’s good for a total outlay of $86.7 million. Berkshire now owns 32.1% of the satellite radio and streaming provider. SIRI 0.00%↑ surged about 9% to start the week due to Berkshire’s renewed interest.
Despite Buffett’s fondness for the Siriusly Sinatra station, this is almost certainly not his investment position. The Oracle has said many times that he affords Todd Combs and Ted Weschler free rein over their allotted money, but a reader on X raised an interesting point. Several of Berkshire’s non-Buffett holdings are well above 10% of those particular companies (necessitating timely disclosures) — and some are even well north of that number. I wonder if Buffett and/or Greg Abel get more involved with these Ted or Todd picks as the positions reach 10, 20, or 30%.
THE WARREN AND CHARLIE SHOW. One of the comments on the most recent AGM At-A-Glance compared Buffett and Munger to a “Hollywood comedy team of the Golden Age”. And, this week, I stumbled upon this old clip of the two in action. I’m amazed at how quickly they can go from making a serious point about leverage to leaving the audience in stitches with a wry remark.
BROOKS IS GOING TO DISNEY WORLD. A multi-year collaboration makes Berkshire-owned Brooks the official running shoe for runDisney — with Brooks also slated to create Disney-themed running shoes and other merchandise for Club runDisney members. A smart move to tap into this rabid fan community that is more than willing to pay premium prices for Disney-branded products. (I know because I am one.) The runDisney season — which spans six races at both Walt Disney World and Disneyland — draws over 170,000 runners each year.
DIVIDENDS: Berkshire received over $225 million in quarterly dividends from Occidental Petroleum this week. That includes $56.2 million via its common stock position and $169.8 million via the preferred shares from the Anadarko deal. And, somewhat less impressively, Berkshire also collected $573,747 from Diageo.
DAVID EINHORN DISCUSSED BUFFETT’S RECENT STOCK SALES IN HIS Q3 2024 LETTER TO GREENLIGHT CAPITAL PARTNERS. “Our sense is that Mr. Buffett’s portfolio adjustments are not a prediction that the market will fall next week, next month, or even next quarter,” he wrote. “Rather, these stock sales more likely express a long-term view that right now is not a great time to have a lot of equity exposure, and that the opportunity set is expected to be better at some point in the not-so-distant future.”
Adam Mead: “We’re witnessing [Berkshire’s] transition plan in action”
On a recent episode of the Talking Billions podcast, the great
told host (also great) that we’re already getting a glimpse at what the post-Buffett era will look like at Berkshire Hathaway.A lot of people have this feeling [that] after Buffett, it’s this demarcation point. I’m of the opinion that we are, especially this year with Munger gone, we’re witnessing the transition. This is a living transition, if you will, because it’s not going to be [these huge changes] the day after Buffett dies or the day after he decides to step down. This was all part of the plan — an overlapping, seamless transition.
That’s what I really saw this year: A lot more — whether it’s actual or just more explicit to the shareholder — more of a deference to Greg [Abel].
“Greg will handle that.” Buffett was in charge of BNSF until Greg took it over. “Greg will answer the questions.”
Buffett wants to have Greg be in charge of all the investments, at least from [the standpoint that] the buck stops with him. So I think what we’re witnessing is the transition plan in action.
Baranowski then touched on the egalitarian nature of investing — and how Buffett lives that out through his concern and consideration for the average shareholder.
“We all have the same economic right,” he said. “If this company decides to pay a dividend of 10 cents per share, it doesn’t matter that I [only] have a single share — I’m getting the 10 cents. [If] I know the founder or I don’t know the founder, [if] I have the same last name as the founder or not, it doesn’t matter. I get the 10 cents.”
“It’s a very powerful thing that’s not a given everywhere in the world. We kind of earned it and maybe we forgot it — and Buffett reminds us, ‘I’m treating you all the same way I’m treating my sister.’ I think it’s phenomenal.”
If Greg Abel can do for BNSF’s margins what he did for MSR over the past five years, that will be a very positive sign for the ongoing succession plan. I agree that this plan is already in action. At 94, Warren Buffett knows that his time actively running the company is running out. I’m sure that Charlie Munger warned him about how things progress once in your 90s. In his final interview, Charlie sadly commented on how his energy level at 99 was so much less than even a few years before. Sad but a reality of life. Most people get to this stage 10-15 years earlier.
A shame you didn't include Einhorns comments about Buffett as the greatest market timer!