The Berkshire Beat: September 13, 2024
All of the latest Warren Buffett and Berkshire Hathaway news! Including updates on Ajit Jain, Bank of America, Apple, Chevron, Brooks Running, Sirius XM, Occidental Petroleum, and more...
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Let’s get started with the latest news and notes out of Omaha…
Warren Buffett unloaded 5.8 million more shares of Bank of America — for the princely sum of $228.7 million — between September 6 and September 10. That makes it twelve trading days in a row that Buffett has sold BAC 0.00%↑ stock. After this latest round of sales, Berkshire Hathaway’s stake in Bank of America dropped to 11.05%. On Wednesday, the lender’s stock price sank into the $38 range — which might end this current selling streak. If you dig into the footnotes of Berkshire’s BoA-related Form 4s, you will see that the lowest price that Buffett has sold at is $39.00 on the dot. Make of that what you will.
On Tuesday, Bank of America CEO Brian Moynihan spoke about Berkshire’s recent sales. “I don’t know what exactly [Buffett] is doing because, frankly, we can’t ask,” he said at the Barclays Global Financial Services Conference. “We wouldn’t ask.” Moynihan also pointed out that the market was absorbing the sold stock pretty well — with Bank of America itself buying some — and that “life will go on” either way.
“[Buffett] has been a great investor for our company,” said Moynihan. “He stabilized our company.” He also praised Buffett for having “the guts to [invest in Bank of America] in a big way. It’s been a fabulous return for him. We’re happy that he gets it.”
On September 9, Berkshire vice chairman Ajit Jain sold 200 of his Class A shares at an average price of $695,417.65 a piece. That leaves the insurance maestro with just 61 Class A shares (and 466 Class B shares) — though his family trusts own another 55 A shares and the Jain Foundation has a sizable stake of 50 A shares and 124,308 B shares. Your guess is as good as mine on this one.
Last week, I wondered whether Occidental Petroleum hitting a 52-week low of $54 would spur Buffett to start buying again. It didn’t. Then, just two days ago, OXY 0.00%↑ actually dipped under $50 for a few minutes. Maybe that will get Berkshire moving. We’ll find out tonight.
“New Sirius XM” started trading on the Nasdaq this week after completion of the split-off and combination of Liberty Media’s SXM tracking stock and the old Sirius XM Holdings. The new entity has 339,133,937 shares of common stock outstanding — with Berkshire in possession of 101.38 million of them (according to CNBC’s Portfolio Tracker). If correct, that gives Berkshire a 29.9% stake in the new Sirius XM.
Chevron vice chairman Mike Nelson discussed his company’s beleaguered Hess deal — which remains mired in arbitration — on Yahoo Finance last week. “You may remember,” said Nelson, “when we announced the Hess deal we talked about, ‘We don’t have to do this deal. We’re doing this deal because it’s so good for both companies.’ One of the reasons we didn’t have to do this deal was because we have a growth profile existing in our corporation. In fact, we have free cash flow growth in the 10% range over the next three years.”
Nelson mentioned Chevron’s deepwater work in the Gulf of Mexico and its Tengiz operation in Kazakhstan as near-term drivers of cash flow, as well as the eastern Mediterranean and Argentina as future opportunities. “There’s growth trajectory with or without the Hess transaction,” he said. “But we believe the Hess transaction is good for both shareholders.”
🤑 Dividends: Speaking of Chevron, the O&G giant paid out $193.3 million in quarterly dividends to Berkshire this week. (Assuming, of course, that Buffett did not buy or sell any more shares so far in Q3 2024.)
Berkshire’s biggest holding, Apple, had an up-and-down week. On Monday, Apple revealed its new iPhone 16 lineup (with Apple Intelligence, a new Camera Control button, and other bells and whistles) at its “Glowtime” event in Cupertino. This is always an important moment for Apple, what with the iPhone accounting for more than 50% of the company’s annual revenue. And, according to most reports, the new iPhones were well-received by those in attendance.
On the downside, Apple got stuck with a $14.4 billion tax bill after the European Court of Justice handed down a final decision against the company. This cash has been sitting in an escrow account pending the court’s ruling and Apple will now incur a one-time income tax charge of up to $10 billion in the current quarter.
Hedge Fund Alpha traces the rise of Berkshire into a trillion dollar company to its unerring constancy — and the compounding that comes along with that. “Charlie Munger’s beloved thinking tool of inversion prescribes just how to achieve constancy: avoid inconstancy,” writes Mark Tobak. “Inconstancy is borne of unreliability. Indeed, Charlie attributed his own success not to his formidable intelligence, but his constancy.”
New Brooks CEO Dan Sheridan Is Off And Running
It’s been more than four months since Berkshire Hathaway’s annual shareholders meeting — and I’m still trying to catch up on all of the interviews and media coverage.
Of all the many interviews that Becky Quick did that weekend, one of the most interesting was with Brooks Running CEO Dan Sheridan — who had just ascended to the top spot one week before.
It’s no secret that running was one of the big winners of the pandemic — with people eager to get outside and blow off some steam at a time when most gyms were closed. And, according to Sheridan, that tailwind looks like it’s sticking around.
“Participation rates were sticky after Covid,” he told Quick, “with more people running and walking than ever. Now, we’ve seen races come back in all of our markets. Race registration is up 10% year over year in the United States. That drove our growth in the first quarter. We grew 13% in the U.S. in the first quarter — and our e-commerce business grew over 20%.”
And, while that domestic growth is great and all, Sheridan has his eyes set on international expansion. “We’ve just got great growth opportunities coming,” he said. “The biggest is globally. We’re about 85% North America right now — so our opportunity is to spread this brand in our global markets.”
China, of course, is the biggest prize. “We launched in China a couple years ago,” said Sheridan. “It’s been slow growth for us at first … but we’re going to launch some stores in China. It will be our first kind of entry into brick and mortar.”
Brooks grew 180% in China during the first quarter of this year — with Sheridan attributing some of that success to “the growth of the middle class” there. This economic stability brings with it more time for health and wellness. “When we see those trends,” he said, “we know immediately that our brand will be right in the middle of that.”
My favorite part of the interview, though, was when Sheridan spoke about his interactions with Berkshire vice chairman Greg Abel — the man who will, one day, run the whole show. “Greg is one of the most attentive managers I’ve ever [worked with],” he said, calling his working relationship with Abel “incredible”.
“The way I explain it is that, at any moment, you can pick up the phone and call Greg,” said Sheridan. “He’s such a wise man in terms of the guidance that he gives us. Over the last couple years, one of the things he has always said is focus on your customer — and that has served us really well.”
Do you think Ajit will quit Berkshire?
Brooks is an interesting company. For a few years, I used Brooks running shoes exclusively since I like to buy from Berkshire subsidiaries. But a few years ago, the shoes stopped going on sale regularly while Nikes were regularly on sale so I switched. This obviously indicates that saving $30-40 per pair of shoes is important enough for a guy who goes through 5 pairs of running shoes per year, but it might also show that Brooks has more pricing power than its competitors. Both Nike and Brooks make great products. To me, however, they are not differentiated from each other enough to favor one over another if there’s a price difference!