The Berkshire Beat: September 27, 2024
All of the latest Warren Buffett and Berkshire Hathaway news! Including updates on Greg Abel, Bank of America, Occidental Petroleum, Kraft Heinz, Chevron, Bertie Buffett Elliott, and more...
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Let’s kick off this week’s roundup with the latest news and notes out of Omaha…
WARREN BUFFETT SOLD ANOTHER 21.6 MILLION SHARES OF BANK OF AMERICA BETWEEN SEPTEMBER 20-24. At an average price of $40.01 per share, Berkshire Hathaway pocketed $862.7 million from this most recent sale. Berkshire’s stake in BAC 0.00%↑ now drops to 10.5% — moving us ever closer to the day when we won’t get regular updates on further sales. At this pace, Berkshire might cross that magic 10% threshold in the next week or two. (Price depending, of course.)
Berkshire has now unloaded 218.5 million shares of Bank of America for $8.95 billion since July 17. For the time being, it ranks as the third-largest holding (currently valued at $32.2 billion) in Berkshire’s massive stock portfolio — behind just Apple and American Express — but it could also fall behind Coca-Cola in the coming weeks if Buffett keeps selling.
BERKSHIRE VICE CHAIRMAN GREG ABEL USUALLY KEEPS A PRETTY LOW PROFILE. But, this week, he returned to his native Canada to receive a leadership award and attend the 25th annual Global Business Forum in Banff, Alberta. While there, Buffett’s heir apparent spoke to the Calgary Herald about his career up to this point and the challenges that lie ahead.
Entrepreneurial roots: “From a young age,” he said, “business intrigued me. It was as simple as, back in the day, you could collect pop bottles. People had a tendency to throw them away — and we’d get a nickel. I almost viewed it as a business. How many [bottles] could I pick up in a week and take them and clean them, fill the room, and you’d get your dollar? And, then, [I’d ask myself], ‘Why couldn’t I get $1.05 next week?’”
The young Abel carefully plotted his route home from school so as to maximize the number of discarded pop bottles that he could collect.
Lifelong learner: “[A career in business] was an opportunity to continually learn. You could look at businesses and you knew that, irrespective of the business, there is this opportunity for the business to get better [and] for yourself to get better. One of the things that really intrigued me at that time [in college] was this opportunity, at an early point in my life, to see this wide breadth of experiences across companies and industries — and then start that lifelong journey of learning. I know that’s what drew me in early … It’s still what attracts me today.”
AI on the mind: “I think we’re all watching artificial intelligence and [asking], ‘What does that mean to your company? What does that mean to your industry? What does it mean to your employees? Your customers?’ We are in a learning moment [with AI]. We’re in the early innings … I think we can all see some pretty big risks — and we can see some pretty big opportunities.”
MY FAVORITE PART OF THAT ABEL INTERVIEW, THOUGH, COMES FROM DAWN FARRELL OF TRANS MOUNTAIN CORP. She met Abel more than twenty years ago during negotiations between Abel’s MidAmerican Energy and Farrell’s TransAlta — and the future Berkshire vice chairman made a big impression. “Right out of the gate,” she said, “he’s super Canadian, highly likable, and as honest as the day is long. [He is] as authentic and as real as any person you’re ever going to get. He knows where the right deal is and what the right price is — and how you need to work on it. And he’s a man of his word. So if he says, ‘Let’s get this done,’ we get it done.”
THE FTC IS REPORTEDLY SET TO APPROVE CHEVRON’S $53 BILLION ACQUISITION OF HESS. That’s not the end of the story, though, as the two companies remain mired in arbitration with Exxon Mobil over a disputed right of first refusal on Hess’s coveted assets in Guyana. The three-judge arbitration panel will take up the case in May 2025 — with a decision not expected until next fall.
CHARLIE MUNGER MIGHT BE GONE, BUT HIS LEGACY LIVES ON. Stripe co-founder John Collison told David Rubenstein that one bit of advice from Charlie had an outsized impact on his own career. “Charlie Munger had the great quote about taking a simple idea and taking it really seriously,” he said. “I think maybe people don’t take the core idea [of their business] seriously enough. The idea behind Stripe is we think that there could be more internet commerce [and] more successful internet companies created if we lowered the cost of doing so and if we made it easier to do so. We’re taking that core idea really, really seriously.”
WITH BERKSHIRE HITTING RECORD HIGHS IN RECENT MONTHS, SOME SHAREHOLDERS HAVE GRAPPLED WITH THE QUESTION: “TO SELL OR NOT TO SELL?”
wrote about how he handled this very dilemma — selling some shares in August before buying them back a month later. It’s a very honest appraisal of the many considerations that investors face when selling part of a “permanent” holding and then having to decide how to redeploy that money.“I was able to purchase the shares at a weighted average price that was about 1.5% lower than the price at which I sold shares so I ‘came out ahead’,” he wrote. “Unfortunately, I did not really ‘come out ahead’ because of the brain damage associated with this situation. I created needless stress when I should have just been ‘sitting on my ass’ when it comes to my investment in Berkshire.”
DIVIDENDS: This week, Berkshire received $224.6 million in quarterly dividends from Bank of America and $130.3 million from Kraft Heinz. Another small step on the road to that $300 billion cash pile.
EARLIER THIS MONTH, OCCIDENTAL PETROLEUM CEO VICKI HOLLUB DID A GUEST SPOT ON THE “MY CLIMATE JOURNEY” PODCAST. That episode isn’t out yet, but Energy Intelligence got its hands on some of Hollub’s comments about Direct Air Capture and what can be done with the captured carbon dioxide. She confirmed that 70% of the carbon reduction credits from the Stratos DAC plant have already been sold — with both Air Nippon Airways and Airbus on board for multi-year contracts.
Hollub also pledged that Oxy’s captured carbon dioxide would be put to use — and not just sequestered away underground. “Ultimately,” she said, “the world is going to recognize that putting CO2 in a brine reservoir is a waste of CO2. We could use it for sustainable aviation fuels or we could put it in cement.”
IT DOESN’T GET AS MUCH ATTENTION AS HIS FINANCIAL ADVICE, BUT WARREN BUFFETT OFTEN PREACHES THE IMPORTANCE OF GRATITUDE. So I was very happy to see Buffett’s “blessed life” test pop in a recent issue of
’s newsletter (via ).
In the Spotlight: “Buy and Hold” Bertie
In this year’s annual letter to Berkshire Hathaway shareholders, Warren Buffett thrust his sister Bertie into the spotlight like never before. He called her “the perfect mental model” of who he writes these letters for — and interspersed frequent mentions of his surviving sister throughout the entire letter.
For a coffee can investor like myself, I especially enjoyed the section that discussed (the lack of) Bertie’s investment activity. In 1980, she stopped trading stocks and put all of her money into Berkshire and one publicly-held mutual fund. “She made no new trades during the next 43 years,” her brother wrote proudly.
“I figured out that Warren was better than I was [with money],” Bertie told Becky Quick back in May. “It sounds so simple, but that’s just what happened. I thought, ‘This is ridiculous! He is so good.’”
“The hardest thing for me — and I think it’s hard for a lot of investors — is that Berkshire Hathaway doesn’t pay dividends,” she continued, “and I was in a place in my life where I wanted some dividends. Warren said, ‘Well, you just sell the stock.’”
Once Bertie picked her jaw up off the floor at the idea of her brother telling her to sell part of her Berkshire principal, she realized that he meant that shareholders could always “create” their own dividends through carefully-considered sales.
(I think it’s pretty funny that Buffett couldn’t even escape the dividend question from his own family members.)
Bertie learned another important investment lesson while playing Monopoly with her older brother as children. “I was so happy because I was saving up the money in little piles in front of me,” she said, “but I noticed, as the game went on, I was landing on more and more properties [that] had houses and hotels. Pretty soon, all my money was gone. I realized — too late — that it was a better strategy to buy property than hoard the money.”
She also joked that, by always beating her in Monopoly growing up, she “trained him to be a winner” in business. “He loved [winning] so much, he just kept going.”
One useful “mental model” for the psychological problem of selling shares of a company to “create” a dividend is to think about one’s ownership as a percentage of the company, even if it is a tiny percentage. If a company repurchases stock and, consequently, has a declining share count, it is possible to sell shares without reducing one’s ownership as a percentage of the company. For example, if Berkshire repurchases 2% of its shares outstanding in a given year, a shareholder can sell 2% of his shares and still own the same percentage of Berkshire. This can potentially make it feel less like consuming principal.