Berkshire Hathaway Inc (BRK.B)

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>>> Warren Buffett: Charlie Munger was the 'architect' of the modern Berkshire Hathaway


Yahoo Finance

by Myles Udland

Feb 24, 2024


https://finance.yahoo.com/news/warren-buffett-charlie-munger-was-the-architect-of-the-modern-berkshire-hathaway-145356261.html


Warren Buffett's annual letter to Berkshire Hathaway (BRK-A, BRK-B) shareholders published Saturday morning marked the first missive sent to his investors since his longtime right-hand man, Charlie Munger, died last November at 99 years old.

To begin his letter to Berkshire shareholders, Buffett reminded readers of the role Munger played in creating what is now the country's largest conglomerate. A conglomerate, Buffett wrote Saturday, that has "by far...the largest GAAP net worth recorded by any American business."

"In reality, Charlie was the 'architect' of the present Berkshire, and I acted as the 'general contractor' to carry out the day-by-day construction of his vision," Buffett wrote.

"Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades. In a way his relationship with me was part older brother, part loving father. Even when he knew he was right, he gave me the reins, and when I blundered he never — never — reminded me of my mistake."

"In the physical world, great buildings are linked to their architect while those who had poured the concrete or installed the windows are soon forgotten," Buffett wrote.

"Berkshire has become a great company. Though I have long been in charge of the construction crew; Charlie should forever be credited with being the architect."

'I made a dumb decision'

Buffett and Munger both grew up in Omaha, where Berkshire is still headquartered. The two, however, didn't meet until 1959, when Buffett was 29 and Munger 35.

A lawyer by trade and a founding partner at the law firm Munger, Tolles, & Olson which bears his name, Munger was named vice chairman at Berkshire Hathaway in the late '70s.

But Munger and Buffett's investing relationship began long before this formal engagement, with Buffett writing Saturday it was Munger who told him in 1962, "that I had made a dumb decision in buying control of Berkshire."

At the time, Berkshire Hathaway was a struggling textile manufacturer in New England. Textile operations later ended, but the Berkshire Hathaway of today still bears the company's name.

Buffett wrote Saturday that, "Charlie, in 1965, promptly advised me: 'Warren, forget about ever buying another company like Berkshire. But now that you control Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices. In other words, abandon everything you learned from your hero, Ben Graham. It works but only when practiced at small scale.' With much back-sliding I subsequently followed his instructions."

Elsewhere in his letter to shareholders, Buffett wrote, "Our goal at Berkshire is simple: We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring."

But Buffett noted the advice from Munger offered nearly 60 years ago to only buy "wonderful businesses purchased at fair prices" means the days Buffett and Berkshire Hathaway had plenty of investment opportunities to choose from are "long behind us."

"This combination of the two necessities I've described for acquiring businesses has for long been our goal in purchases and, for a while, we had an abundance of candidates to evaluate," Buffett wrote.

"If I missed one — and I missed plenty — another always came along. Those days are long behind us; size did us in, though increased competition for purchases was also a factor."

Berkshire purchased insurance company Alleghany for $11.6 billion 2022 and took full control of rest stop operator Pilot earlier this year. Prior to these deals, the company hadn't made a sizable acquisition since its 2015 purchase of Precision Castparts for $37 billion.

"There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others," Buffett continued.

"Some we can value; some we can't. And, if we can, they have to be attractively priced. Outside the U.S., there are essentially no candidates that are meaningful options for capital deployment at Berkshire. All in all, we have no possibility of eye-popping performance."

A 'severe' disappointment

Buffett also touched on the struggles at Berkshire's railroad and utilities businesses in 2023, with the latter serving as a "severe earnings disappointment last year."

In Buffett's view, a shifting regulatory outlook in some states has "broken" a model that relied on private investment backed by what Buffett called a "fixed-but-satisfactory-return" for these operators. Agreements that were made on a state-by-state basis.

"Whatever the case at Berkshire, the final result for the utility industry may be ominous: Certain utilities might no longer attract the savings of American citizens and will be forced to adopt the public-power model," Buffett wrote. "Nebraska made this choice in the 1930s and there are many public-power operations throughout the country. Eventually, voters, taxpayers and users will decide which model they prefer.

"When the dust settles, America’s power needs and the consequent capital expenditure will be staggering. I did not anticipate or even consider the adverse developments in regulatory returns and, along with Berkshire’s two partners at BHE, I made a costly mistake in not doing so."

'Berkshire is built to last'

As he does most years, Buffett also took extensive time in this year's letter to write about his overarching investment philosophy and how it impacts the current iteration of Berkshire Hathaway.

For aspiring investors looking to Buffett for insights on how to manage their own portfolios, these passages are the main draw.

The modern Berkshire Hathaway, in Buffett's view, is built to both protect against and take advantage of the inevitable seizures and panics that have, and will again, gripped markets.

"Indeed, markets can — and will — unpredictably seize up or even vanish as they did for four months in 1914 and for a few days in 2001," Buffett wrote. "If you believe that American investors are now more stable than in the past, think back to September 2008. Speed of communication and the wonders of technology facilitate instant worldwide paralysis, and we have come a long way since smoke signals. Such instant panics won't happen often — but they will happen."

In turn, Berkshire holds a pile of cash and highly-liquid Treasury bills that Buffett called "far in excess of what conventional wisdom deems necessary."

Berkshire also does not pay dividends — a preordained cash outlay for companies — and makes no commitment on the size of any future stock buybacks. Buffett runs Berkshire Hathaway in a manner that keeps cash on hand for the sake of keeping cash on hand, not for some planned future deployment.

"During the 2008 panic, Berkshire generated cash from operations and did not rely in any manner on commercial paper, bank lines or debt markets," Buffett wrote. "We did not predict the time of an economic paralysis but we were always prepared for one.

"Extreme fiscal conservatism is a corporate pledge we make to those who have joined us in ownership of Berkshire."

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[Monksdream]

BRK.B new 52 week high

[bar1080]

Thanks. I'm having trouble keeping up with BRK's near-daily ATHs. Now $407. Congrats to Buffett on dumping his UPS holding. That minuscule holding was always a head scratcher and a big bowser for me lately. .

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Bar, Here's a summary of some of Berkshire's recent buy / sell activities (link below). It isn't meant to be all inclusive, but merely summarizes Berkshire's portfolio changes as outlined in various financial articles. I'm going to try to at least keep up with the changes in each new quarter. Your approach of just buying Berkshire stock itself would be a lot easier, but I like doing things the hard way I guess, lol -


https://investorshub.advfn.com/Long-Term-Stocks-36147


Berkshire Portfolio Changes -
***********************************

2023 - O4 - Sales
********************
Apple - Reduced
DR Horton - Sold all
Globe Life - Sold all
Hewlett Packard - Reduced
Markel - Sold all
Paramount Global - Reduced
StoneCo - Sold all

2023 - Q4 - Buys
********************
Chevron - added
Occidental - added
Sirius XM - added
Mystery Stock - bought / added


========================================

2023 - Q3 - Sales ($7 Bil total)
*********************

Activision - Sold 100% (sold prior to MSFT acquisition closing)
Amazon - Reduced 5% (holds 1.3 Bil)
Aon - Reduced 5% (holds $1.3 Bil)
Celanese - Sold all
Chevron - Reduced 10% (holds $18.6 Bil)
General Motors - Sold all
Globe Life - Reduced 67% (holds $184 mil)
Hewlett Packard - Reduced 15% (holds $2.6 Bil)
Johnson & Johnson - Sold all
Liberty Media - Spun off Atlanta Braves team
Markel - Reduced 66% (holds $234 mil)
Mondelez - Sold all
Procter & Gamble - Sold all
United Parcel Service - Sold all

2023 - Q3 - Buys ($1.7 Bil total)
*********************
Sirius XM - Bought $44 mil (new holding)
Mystery Stock - Bought (most of the $1.7 Bil)



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[bar1080]

I've read a number of articles about chocolate shortages this year.

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Bar, Yes, a lot of the insurance stocks are way up now. We know Buffett likes to get a substantial discount, and Progressive (PGR) did have a sizable dip in the middle of last year, which is when Buffett apparently started buying the mystery stock. So that part would fit, but now PGR is sky high and no longer a bargain. It also has a huge 110 bil market cap, and Chubb's is also over 100 bil, so the mystery stock is probably something smaller. Travelers has a $50 bil market cap, and WR Berkley is 29 bil, so these might be contenders, but just a wild guess. Both are way up though, so no longer bargains.

Some other insurance related ideas from my own stock list would be -- AJG, BRO, EG, KNSL, and some smaller caps RLI, CBZ. But again, not exactly bargains.

I guess we'll find out eventually. Hershey has been down 30% for some time, so a relative bargain, and it has an iconic brand. But it sounds like the mystery stock is likely in finance / insurance / banking.



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[bar1080]

I'm curious too. My long-held Travelers Insurance stock is at all-time high right now.

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>>> Berkshire Hathaway's Mystery Stock: Have Buffett and Munger Finally Bought the Stock They Can't Stop Praising?


Motley Fool

By Courtney Carlsen

Nov 24, 2023


https://www.fool.com/investing/2023/11/24/berkshire-hathaways-mystery-stock-have-buffett-and/


KEY POINTS

Berkshire Hathaway requested confidentiality on some third-quarter stock purchases of $1.7 billion. It frequently uses such measures when accumulating large positions, to avoid being front-run by market participants.

The purchase is likely a stock in the banking, insurance, or financial sector, based on its quarterly earnings report.

The conglomerate is quietly accumulating over $1 billion in stock in a mystery company. Could it be this longtime competitor?

Berkshire Hathaway's (BRK.A 0.51%) (BRK.B 0.63%) legendary performance is undeniable. Since CEO Warren Buffett took over the failing textile business in 1965, the stock has returned investors 20% compounded annually -- doubling the S&P 500's average annual return in the same period.

This track record of success is why investors eagerly await Berkshire Hathaway's quarterly form 13-F, a required filing by the Securities and Exchange Commission (SEC) that discloses institutional investors' investing activity during the period. In the third quarter, Berkshire Hathaway purchased $1.7 billion in stock. However, a sizeable chunk of that amount is in a mystery stock on which Berkshire has requested confidential treatment.

Buffett and his team at Berkshire occasionally request confidentiality when they accumulate a stock position and don't want to tip off the markets until they finish buying. The company last requested confidentiality when building stakes in Chevron and Verizon Communications in 2020.

The move has investors speculating over what could be the next big position for Berkshire Hathaway. One company that could be on the short list has previously earned high praise from Buffett and Berkshire Hathaway Vice Chairman Charlie Munger. Here's what that stock is and why it could be the next stock in Berkshire's $354 billion portfolio.

Is this the mystery stock that Berkshire Hathaway bought in the third quarter?

In the third quarter, Berkshire Hathaway sold off part of its holdings in Globe Life, Markel, and Aon, all insurance companies within the financial sector. However, in its third-quarter earnings report, the conglomerate reported that its cost basis for investments in banks, insurance, and finance stocks increased by about $1.2 billion.

There are numerous potential investments that Buffett and his team could've bought. One intriguing stock that the conglomerate could have added during the period is Progressive (PGR). Progressive is the second-largest auto insurance company in the U.S., trailing only State Farm. The third-largest auto insurance company is Berkshire Hathaway's own GEICO, which it acquired in 1996.

When it comes to future leaders in the industry, Buffett sees it as a two-horse race between Progressive and GEICO. During Berkshire’s 2019 annual shareholder meeting, Buffett said

I have always thought for a very long time [that] Progressive has been very well run. They have an appetite for growth. Sometimes they copy us. Sometimes we copy them. And I think that will be true five years from now, ten years from now.

Even Munger sang Progressive's praises, saying, "In the nature of things, every once in a while, somebody is a little better at something than we are."

Progressive's underwriting discipline makes it a top dog in a highly competitive industry

To understand Progressive's stellar performance, you have to go back to 1965, when Peter B. Lewis, son of one of the co-founders, Joseph Lewis, took over the company. At the time, insurers commonly accepted that they would break even on their policies, and the actual returns would come from their investment portfolios. Lewis rejected this notion and instead set a goal that Progressive would earn an underwriting profit on its policies, even if it meant forgoing drivers who wanted lower-cost policies.

When it went public in 1971, the company prioritized achieving a combined ratio of 96, meaning it would earn $0.04 of profit for every dollar of premium earned. This philosophy has been core to Progressive's disciplined underwriting and is a big reason for the insurer's massive success.

You can analyze Progressive's disciplined underwriting by looking at its loss ratio. This ratio is one component of the combined ratio (the expense ratio being the other) and calculates the percentage of losses to premiums earned. Good companies can control losses and keep loss ratios in check, which Progressive has done exceptionally well. Over the last eight years, Progressive's loss ratio has averaged 72%, an excellent number in the highly competitive auto insurance industry. GEICO, also a solid underwriter, averaged 83% over that period.

Berkshire Hathaway's head of insurance had this to say about Progressive's outperformance

Ajit Jain is Berkshire Hathaway's Vice Chair of Insurance Operations and is also on the board of directors. Jain has worked for Berkshire since 1986 and has extensive knowledge about its insurance operations. Buffett has showered Jain with praise, mentioning in his 2012 annual letter to shareholders: "Ajit insures risks that no one else has the desire or the capital to take on. His operation combines capacity, speed, decisiveness and, most important, brains in a manner unique in the business."

Jain appreciates Progressive's underwriting performance and has credited its outperformance to several factors, including its use of telematics. Telematics uses driver data like mileage driven, speed, and braking time and personalizes rates for drivers based on this information.

When it comes to pricing models, more data helps Progressive make more informed decisions, manage its risk well, and keep loss ratios low. In 2019, Jain said that GEICO is working on its telematics program and hoped to catch up to Progressive over time. However, as you can see above, Progressive continues to outperform on the important loss ratio metric.

A stellar stock to own, regardless of whether Berkshire is buying it

It's possible that Berkshire Hathaway sees Progressive's ongoing outperformance and decided to add shares to its $354 billion portfolio. Progressive's long history of collecting driver data is one part of its stellar underwriting performance, and maybe Buffett and his team caved and wanted a piece of the action.

However, investors can't know for sure if Berkshire is buying Progressive until the company posts its fourth-quarter filing (assuming the purchase is not still marked as confidential), which won't come out until mid-February. Regardless, Progressive has been an excellent long-term performer for investors, and even if Berkshire isn't buying it, it can make an excellent addition to your portfolio today.

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Board, Anyone care to guess what Buffett's 'mystery' stock purchase has been over the last two quarters? Berkshire reportedly filed a reporting exemption in Q3 and Q4. Sounds like Progressive (PGR) is a distinct possibility (see next post). I was thinking it might be Hershey (HSY) since there was some possible interest in 2021 (article below), but it looks more likely the mystery company is something in the 'banking / insurance / finance' sector -


>>> Is Hershey Warren Buffett's Kind of Business?


Motley Fool

By Brett Schafer

Jun 30, 2021


https://www.fool.com/investing/2021/06/30/is-hershey-warren-buffetts-kind-of-business/


The Oracle of Omaha may be going after the candy giant.

Last week, a report came out that Hershey's (HSY) corporate jet recently flew to Omaha, Nebraska, where Warren Buffett's conglomerate Berkshire Hathaway (BRK.B) is headquartered. It's unknown what the jet was doing in Omaha, but analyst Don Bilson of Gordon Hackett's research team speculated that the Oracle of Omaha may be looking to acquire the chocolate company.

Bilson has been right with these reports in the past, predicting Berkshire's financing of Occidental Petroleum's takeover of Anadarko Petroleum after tracking the company's jet back in 2019. What would a Hershey deal mean for Berkshire Hathaway? Let's take a look.

What Hershey owns

Milton Hershey founded the Hershey Chocolate company more than 125 years ago. In 1900, the first Hershey bar was sold, and the company hasn't looked back since.

Hershey's still sells its famous chocolate bars around the globe but has bought and incubated many other candy and snack brands over the years. Its current portfolio includes popular brands like Hershey bars and kisses, Reese's, Twizzlers, and Ice Breakers. It also has new, health-focused brands like Skinny Pop, which have helped the company grow, as well.

The business is as steady as it comes

Chocolate and candy bars may be considered simple or even "boring" by many investors, but Hershey's stock has put up fantastic returns over the long haul. Since 1972, shares have gone up 14,000%, while the S&P 500 has "only" grown 4,000% over that time span. And those returns don't include the consistent dividend Hershey pays out to shareholders, which currently yields 1.84%.

Why has Hershey's stock done so well over the long term? There are many factors, but the main reason is that it has consistently grown its free cash flow. Before 2000, Hershey generated well below $500 million in free cash flow a year. Over the last 12 months, it generated over $1.6 billion in free cash flow. Couple that with the fact Hershey's share count has gone from 360 million in 1992 down to 206 million today, and you can see why the stock has done so well over the decades.

What it could mean for Berkshire Hathaway

Hershey has all the makings of a Berkshire Hathaway subsidiary. Buffett already owns junk-food companies like Sees Candies and Dairy Queen, while also owning large chunks of Coca-Cola and McDonald's stock. He loves businesses that are incredibly predictable like candy, which is why investors speculate he would love owning Hershey under the Berkshire umbrella. And while many governments are cracking down and regulating sugar consumption around the world, people will likely be consuming chocolate 50 years from now, just as they did 50 years ago.

On top of being a Buffett-style business, Hershey's may only have one suitor -- Berkshire. The Hershey Trust Company has over 80% of the voting rights of Hershey stock and likely doesn't want a buyer that would interfere with the business operations. Berkshire Hathaway famously has a hands-off approach with its subsidiaries, which could help in negotiations with Hershey shareholders.

One thing Buffett may not like is the price he would have to pay to acquire the Hershey company. The stock currently trades at a market cap of $36 billion, giving it a price-to-free-cash-flow (P/FCF) of 22.5. This doesn't look expensive on a trailing basis, but Buffett hates to overpay for a business and would likely need to offer a decent premium to Hershey's current market cap to convince the Hershey Trust to sell.

With over $145 billion in cash on its balance sheet, Berkshire has plenty of ammo to do a Hershey deal. Unless he can get it at a reasonable price, however, Buffett's unlikely to pull the trigger and buy the Hershey company.

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>>> 4 Warren Buffett Stocks to Buy After Berkshire Hathaway’s Latest 13F Filing

Plus, the stocks Berkshire bought and sold last quarter.


Morningstar

by Susan Dziubinski

Feb 14, 2024


https://www.morningstar.com/stocks/4-warren-buffett-stocks-buy-after-berkshire-hathaways-latest-13f-filing


Warren Buffett’s Berkshire Hathaway BRK.A BRK.B has released its fourth-quarter 2023 13F. The report indicates that Berkshire wasn’t a big buyer of stocks last quarter. That’s not surprising, given that stocks skyrocketed during the period: The Morningstar US Market Index was up about 12% during the fourth quarter.

Here’s a look at some of the stocks that Warren Buffett and his team bought and sold during the fourth quarter, as well as several of the most undervalued Buffett stocks to buy in Berkshire Hathaway’s portfolio today.

What Stocks Berkshire Hathaway Bought Last Quarter

Chevron CVX
Add to Existing
3 stars

Occidental Petroleum OXY
Add to Existing
3 stars

Sirius XM Holdings SIRI
Add to Existing
5 stars


Berkshire Hathaway’s fourth-quarter 13F didn’t indicate that Buffett added any new names to the publicly traded portfolio. According to the report, Berkshire simply added to existing positions in Chevron CVX, Occidental Petroleum OXY, and Sirius XM Holdings SIRI.

Berkshire Hathaway 13F Filing: More Sells Than Buys in Quieter Q4

However, it’s what Berkshire Hathaway didn’t report that has the financial media abuzz. Explains Morningstar strategist Greggory Warren:

“The SEC occasionally permits confidential treatment for new stock purchases by large portfolio managers, exempting them required disclosure in quarterly 13F filings when ‘such action is necessary or appropriate in the public interest and for the protection of investors or to maintain fair and orderly markets.’ Berkshire received an exemption last quarter (much as it has at different times in the past), as well as for the third quarter of 2023, and now its biggest stock purchase during the third and fourth quarters remains a mystery to investors. Eventually, the company will disclose the stock (or stocks) that they have been buying.”

What Stocks Berkshire Hathaway Sold Last Quarter

Apple AAPL
Scaled Back
2 stars

D.R. Horton DHI
Sold Entirely
3 stars

Globe Life GL
Sold Entirely
3 stars (Quantitative Rating)

HP HPQ
Scaled Back
3 stars

Markel Group MKL
Sold Entirely
3 stars

Paramount Global PARA
Scaled Back
4 stars

StoneCo STNE
Sold Entirely
4 stars (Quantitative Rating)


Notably, Berkshire trimmed its position in Apple AAPL during the quarter. But despite the haircut, Apple stock remains Berkshire’s top holding—by a landslide. Buffett and his team slashed their positions in HP HPQ and Paramount Global PARA. Berkshire entirely sold out of its positions in D.R. Horton DHI, Globe Life GL, Markel Group MKL, and StoneCo STNE.

4 Warren Buffett Stocks to Buy Now

Many of the publicly traded stocks held by Berkshire Hathaway are fairly valued or overvalued today, according to Morningstar’s metrics. Here are some of the stocks among its holdings in the latest quarter that looked undervalued as of Feb. 13, 2024.

Charter Communications CHTR
Citigroup C
Kraft Heinz KHC
Kroger KR

Here’s a little bit about why we like each of these stocks at these prices, along with some key metrics for each. All data is as of Feb.

Charter Communications

Morningstar Rating: 5 stars
Morningstar Economic Moat Rating: Narrow
Morningstar Capital Allocation Rating: Standard
Industry: Telecom Services

Berkshire Hathaway owns about 2.6% of Charter Communications’ stock. The company is the result of a 2016 merger of three cable companies: legacy Charter, Time Warner Cable, and Bright House Networks. We think the company has carved out a narrow economic moat, thanks to its efficient scale and cost advantage. Charter Communications stock currently trades a whopping 47% below our $550 fair value estimate.

Here’s what Morningstar director Mike Hodel had to say about the stock after the company’s fourth-quarter earnings release:

Ugly headline numbers marred Charter’s fourth-quarter results. While we don’t see much reason to change our long-term view of the firm, the next couple of years are shaping up to be more challenging than we had expected. We are trimming our fair value estimate to $550 from $580, but we believe the market has overreacted to current weakness.

Customer metrics were very weak, especially given Charter's emphasis on volumes over price. The firm lost 61,000 net broadband customers during the quarter, far worse than the 105,000 added a year ago and the first loss since the second quarter of 2022. Management didn’t flag any recent changes in the competitive environment. Fixed-wireless customer gains and fixed-line results from AT&T and Verizon were generally consistent with recent performance. Charter also claims that it hasn’t seen an impact on broadband customer losses as Spectrum One bundle discounts expire. We agree with management that small changes in customer wins and losses get undue attention when net customer growth is near zero, but those changes haven’t gone in Charter’s favor recently.

Average revenue per residential broadband customer increased only 2.2% year over year, as Spectrum One bundle discounts are allocated between broadband and wireless revenue. Total revenue per residential customer was roughly flat versus a year ago, with television losses offsetting wireless and broadband gains. Residential revenue was flat year over year and total revenue increased 0.3% on modest business services growth, largely offset by a sharp drop in political ad revenue.

Management provided capital spending expectations through 2027 to shed more light on the firm’s investment plans. Charter expects annual spending in 2024 and 2025 to be above $12 billion, about $1 billion more in total than we had forecast. The firm believes spending will drop sharply in 2027, excluding any additional subsidized project wins, to $8 billion, which we suspect is overly aggressive.

Mike Hodel, Morningstar director

Citigroup

Morningstar Rating: 4 stars
Morningstar Economic Moat Rating: None
Morningstar Capital Allocation Rating: Standard
Industry: Banks—Diversified

Citigroup isn’t Berkshire Hathaway’s favorite bank: That honor goes to Bank of America BAC, which is one of the top holdings in Berkshire’s publicly traded portfolio. But Citigroup stock is more attractive from a valuation perspective today, according to Morningstar. Citigroup stock currently trades 20% below our $66 fair value estimate.

Here’s what Morningstar analyst Suryansh Sharma has to say about the stock after the company’s fourth-quarter earnings release:

Citigroup posted a disappointing set of numbers in the fourth quarter with a loss of $1.8 billion, or $1.16 per share. The quarterly loss was primarily due to various nonrecurring charges, including $1.7 billion for an FDIC special assessment charge for uninsured deposits of certain failed banks during the banking turmoil, $0.8 billion for restructuring charges related to organizational simplification, $0.9 billion to account for the impact of Argentina currency devaluation, and $1.3 billion in transfer risk related to Russia and Argentina. Citi’s earnings per share is estimated to be $0.84 after excluding the nonrecurring charges.

While the quarterly results were lackluster, 2024 guidance was encouraging. Management guided for 2024 revenue of $80 billion to $81 billion, up 4% from the full-year 2023 level. Management expects net interest income to be down modestly in 2024 due to lower interest rates. Management’s 2024 guidance for net interest income assumes mid-single-digit loan growth driven by the card business and modest deposit growth. The noninterest income implied from the company guidance points to strong results in Treasury and Trade Solutions and a rebound in the investment banking and wealth businesses.

The company has expectations for $53.5 billion to $53.8 billion in expenses for full-year 2024, down around 1% from $54.3 billion in 2023. Citi’s management has also set a medium-term expense target of $51 billion to $53 billion, which we think is ambitious but achievable. Citi announced a major 20,000 headcount reduction program to reach its medium-term expense reduction target. For context, this is approximately 10% of its 2023 workforce. Expense reduction will continue to be a key deliverable for management and is instrumental in achieving higher returns. Citi remains a complex turnaround story with substantial execution-related uncertainties. We do not plan to materially change our $66 fair value estimate as we incorporate fourth-quarter results.

Suryansh Sharma, Morningstar analyst

Kraft Heinz

Morningstar Rating: 5 stars
Morningstar Economic Moat Rating: None
Morningstar Capital Allocation Rating: Standard
Industry: Packaged Foods

Berkshire Hathaway owns more than 26% of Kraft Heinz’s stock. The packaged-foods manufacturer has revamped its road map and is now focused on consistently driving profitable growth. We think Kraft Heinz stock is worth $53 per share, and shares are trading at a 32% discount to that fair value today.

Here’s what Morningstar director Erin Lash thinks of Kraft Heinz’s fourth-quarter results:

The market soured on no-moat Kraft Heinz following mixed fourth-quarter marks, sending shares down by a mid-single-digit percentage. While its adjusted gross margin popped 260 basis points to 34.8%, organic sales slipped 0.7% on a 4.4% degradation in volume. This shortfall was particularly acute on its home turf (around three fourths of its total sales), where organic sales fell 3% on a 5.5% downdraft in volumes. Beyond a few one-time factors (related to trade timing and retail inventories, which compressed sales by 150 basis points), management was also forthright that consumers are struggling under the weight of higher interest rates and a reduction in SNAP benefits.

The combination of Kraft Heinz’s fiscal 2023 results, the outlook for fiscal 2024 (flat to 2% organic sales growth—which squares with our forecast—and a 1%-3% uptick in adjusted earnings per share, slightly outpacing our profit estimates), and time value should warrant a low-single-digit percentage bump to our $53 fair value estimate. With shares trading around a 30% discount to our valuation, while offering a 4% dividend yield, we think investors should stock up.

We surmise Kraft Heinz is working vigorously to thwart looming challenges. For one, it boosted spending on research and development—wedded in data and analytics—by 15% last year while raising marketing spending at a commensurate rate, which we applaud. The fruits of these efforts were realized in a stabilizing share position across a host of categories (qualitatively referenced) and 150 basis points of shelf space gains (including through club and dollar stores) over the past year. We don’t expect Kraft Heinz will back down from these pursuits; we think it will expend more than 6% of sales annually on its brands while investing around 3.5% of sales to enhance its capacity and digital competence. Further, we’re encouraged by management’s assertion that it doesn’t intend to squander resources on unprofitable promotions, which we see as judicious.

Erin Lash, Morningstar director

Kroger

Morningstar Rating: 4 stars
Morningstar Economic Moat Rating: Narrow
Morningstar Capital Allocation Rating: Exemplary
Industry: Grocery Stores

Berkshire Hathaway owns about 7% of Kroger’s outstanding shares. Kroger and rival Albertsons have announced merger plans, though regulatory hurdles persist. We think Kroger has carved out a narrow economic moat and is run by a management team that has done an exemplary job of allocating capital. Kroger stock trades 14% below our $53 fair value estimate.

Here’s Morningstar senior analyst Dan Wasiolek’s take on Kroger’s business strategy and outlook:

Of the traditional grocers, we believe Kroger’s scale, partnerships, private-label fare, and data capabilities uniquely position the company to defend its returns against competition that should intensify as Amazon, mass merchandisers, and hard discounters continue to price aggressively to boost volume. We contend that Kroger still benefits from enduring intangible assets and cost advantages, even if its acquisition of Albertsons is derailed by regulators.

Grocers use price as a primary lever to drive traffic, necessitating efficiency and cost leverage to deliver returns. We expect this environment to endure as the industry changes, with an omnichannel experience likely to prevail as customers use a combination of deliver-to-home, click-and-collect, and in-store shopping, particularly since most American consumers drive past grocers on their commutes and home delivery can be inconvenient for buyers with uncertain schedules (although the COVID-19 pandemic likely accelerated delivery adoption in the long term). In physical retail, we anticipate shoppers will choose sellers based on convenience, price, and breadth of assortment, demanding high value as well as a compelling store environment.

Kroger should be able to capitalize on the changing landscape. We maintain that its local market scale allows it to derive cost leverage that fuels competitive pricing and the investments needed to build on its presence in the emerging channels. Its progress should be accelerated by partnerships (with Ocado, Walgreens, Microsoft, and others) that we do not believe are available to smaller rivals because they cannot deliver the same value to counterparts.

Nearly all Kroger's transactions are derived from its loyalty database, providing consumer insights that should play a large role in its digital transformation, fueling promotional efforts and customer engagement while informing assortment and providing salable insights as nongrocery revenue streams. We expect data to play a key role in efforts to drive traffic, efficiency, and conversion that few can match.

More About Warren Buffett Stock Picks

Warren Buffett has said that he doesn’t consider himself to be a stock-picker; instead, he’s a company-picker. That comment pretty much encapsulates how he thinks about stocks: They’re parts of businesses.

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[Monksdream]

BRK,b new 52=week high

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Buying panic to get info BRK

[DiscoverGold]

BREAKING: WARREN BUFFETT AND BERKSHIRE HATHAWAY $BRK.B JUST UPDATED THEIR PORTFOLIO (1/X)
By: Evan | February 14, 2024

• BREAKING:

WARREN BUFFETT AND BERKSHIRE HATHAWAY $BRK.B JUST UPDATED THEIR PORTFOLIO (1/X)



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[DiscoverGold]

Warren Buffett and Berkshire Hathaway's $BRK.B stock portfolio should be updated later today. We will see what their portfolio looked like as of the end of Q4
By: Savvy Trader | February 14, 2024

• Warren Buffett and Berkshire Hathaway's $BRK.B stock portfolio should be updated later today

We will see what their portfolio looked like as of the end of Q4

Here's their last portfolio updated for Q3.



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>>> Warren Buffett Just Added $246 Million to 1 of Berkshire Hathaway's Top Holdings


by Adam Levy

Motley Fool

February 12, 2024


https://finance.yahoo.com/news/warren-buffett-just-added-246-100100988.html


While Warren Buffett hasn't seen a whole lot to like in the stock market recently, there's one stock he seemingly can't get enough of.

Over the last couple of years, he's built up a 28% stake in Occidental Petroleum (NYSE: OXY) for Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). That makes it one of Berkshire's top holdings, just behind fellow oil and gas company Chevron (NYSE: CVX).

The Oracle of Omaha has added to his Occidental position on three separate occasions since the start of December. His most recent purchase for Berkshire Hathaway's portfolio amounted to about $246 million. That follows purchases of about $589 million and $312 million in December. Meanwhile, Berkshire still owns about $8.5 billion worth of preferred shares in Occidental, which pay an 8% dividend.

Here's why Occidental has become Buffett's favorite energy stock and could soon top Chevron as Berkshire's biggest investment in the industry.

A big bet on oil prices

Occidental and Chevron are both integrated oil and gas companies. However, where Chevron makes most of its money from downstream operations like refineries and chemical plants, Occidental is heavily invested in drilling oil out of the ground. As a result, Occidental's business is much more closely tied to the price of oil.

Its strong position in the Permian Basin gives it a cheap source of oil production. It strengthened that position with the acquisition of Anadarko, supported by Berkshire's $10 billion investment in the company. More recently, it added CrownRock last December, when Buffett started buying up shares again.

Occidental's big investments in the Permian Basin have put pressure on its balance sheet. The company now holds a significant amount of debt. Management plans to divest non-core assets to accelerate the paydown of that debt. It did something similar following the Anadarko acquisition in 2019 and the subsequent drop in oil prices in 2020.

The moves to add more cheap sources of oil make sense in light of Occidental CEO Vicki Hollub's extreme bullishness on the price of the commodity. For one, she said the CrownRock acquisition will generate an additional $1 billion in cash flow in its first year as long as oil prices remain above $70. That was exactly the spot price of oil at the time of the acquisition, and it's only climbed to the mid-70s since.

More recently, Hollub has noted the potential for an oil supply shortage as soon as 2025. A production cut from OPEC combined with growing demand from China will push oil prices higher, she says. As a result, she sees oil climbing to $80 per barrel by the end of the year.

Buffett has a lot of confidence in Hollub. He called her "an extraordinary manager" at Berkshire's 2023 Shareholder meeting in May. After managing the company through the depressed oil prices of 2020 right after acquiring Anadarko, she seems to be up for almost any task.

Should you follow Buffett into Occidental?

Shares of Occidental have gotten off to a poor start in 2024. While Chevron shares have climbed about 2% since the start of the year, Occidental is down about 3.5%.

Moreover, the valuation for Occidental is extremely attractive. Shares currently trade for an enterprise value/earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of just 5x. By comparison, Chevron trades for a 6.6x multiple.

That said, there's a lot more risk in buying Occidental than competing oil and gas companies. For one, it's heavily reliant on the price of oil. As explained, the bulk of its revenue comes from drilling, not downstream operations. Moreover, Occidental's balance sheet includes substantial levels of debt following the CrownRock acquisition. That leverage puts added pressure on management if oil prices decline in the future, making it less profitable to drill.

It's important to note that while Buffett is very confident in the future of Occidental, it's still less than 4% of Berkshire's equity portfolio and an even smaller percentage of the conglomerate's total holdings when you include its cash position and wholly owned subsidiaries. So, remaining diversified is key.

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Warren Buffett's Funniest Wittiest Moments -

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Warren Buffett’s Morning Routine -

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Now, that's interesting.

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>>> Warren Buffett Says Steve Jobs Once Called Him Asking For Advice On How To Invest Apple's Cash — Then He Completely Ignored The Advice


Benzinga

by Jeannine Mancini

February 12, 2024


https://finance.yahoo.com/news/warren-buffett-says-steve-jobs-192312997.html


Warren Buffett shared a look into a conversation with Steve Jobs about Apple Inc.'s financial strategy during a 2012 appearance on CNBC’s “Squawk Box.”

In the "Ask Warren" segment, Buffett said, “It was an interesting conversation because I hadn’t talked to him in a long time. He said, ‘We’ve got all this cash. What should we do with it?’ So we went over the alternatives. It was kind of interesting.”

This dialogue between two titans of industry sheds light on the decision-making process at one of the world’s most valuable companies.

Jobs, known for his transformative role in making Apple a global technology leader, reached out to Buffett to seek advice on the company’s cash-management strategies. Buffett, a legendary investor and chairman of Berkshire Hathaway Inc., outlined the four primary options available for deploying cash: stock buybacks, dividends, acquisitions or holding onto it.

Despite Jobs’s acknowledgment that Apple’s stock was undervalued, indicating that buybacks could be a wise choice, he ultimately decided against taking any action, preferring to maintain the company’s cash reserves.

“I went through the logic of each thing. He told me they would not have the chance to make big acquisitions that would require lots of money," Buffett said. "And then I asked him the question, I said, ‘I would use it for buybacks if I thought my stock was undervalued.’ And I said, ‘How do you feel about that?’ The stock was 200-and-something. He said, ‘I think my stock is very undervalued.’ I said, ‘Well, what better to do with your money?’"

Jobs liked having the cash and that was what he ultimately decided was his best option. Buffett added that Jobs interpreted their conversation as Buffett endorsing his decision to hold onto the cash. "I later learned that he said I agreed with him to do nothing with the cash," Buffett said.

The conversation between Jobs and Buffett highlights a cautious approach to financial management, contrasting sharply with the actions taken by Jobs’s successor Tim Cook. Under Cook’s leadership, Apple has aggressively pursued stock buybacks, spending over $500 billion on them in the last decade. According to Business Insider, this expenditure surpasses the market capitalization of major corporations like Visa Inc., JPMorgan Chase & Co., and ExxonMobil Corp., underscoring the scale of Apple’s commitment to repurchasing its shares.

Apple’s buyback strategy has enhanced shareholder value and increased the stake of Berkshire Hathaway in the tech giant without additional investment. Berkshire Hathaway, owning nearly 6% of Apple, has seen its ownership stake grow as a result of these buybacks.

Buffett has publicly supported Apple’s repurchase efforts, noting in his 2021 letter to shareholders the positive impact of the buybacks on both Berkshire’s holdings and Apple’s broader ecosystem.

“Much of what the company retained was used to repurchase Apple shares, an act we applaud,” Buffett wrote. “Tim Cook, Apple’s brilliant CEO, quite properly regards users of Apple products as his first love, but all of his other constituencies benefit from Tim’s managerial touch as well.”

While Jobs exhibited a preference for liquidity and financial flexibility, Cook has leveraged Apple’s financial strength to actively manage its capital structure, reinforcing the company’s position as a leader in the technology sector and delivering value to its shareholders and stakeholders alike.

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[DiscoverGold]

Berkshire Hathaway $BRK.B filed for their purchase of 4.3M additional shares of Occidental $OXY for $245.9M
By: Evan | February 6, 2024

• Warren Buffett and Berkshire Hathaway $BRK.B filed for their purchase of 4.3M additional shares of Occidental $OXY for $245.9M.



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[Monksdream]

BRK.B new 52 week high

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Warren Buffett and Berkshire Hathaway’s $BRK.B portfolio from 2001 to 2023
By: Evan | February 1, 2024

Warren Buffett and Berkshire Hathaway’s $BRK.B portfolio from 2001 to 2023 pic.twitter.com/1HsVRBGDvY

— Evan (@StockMKTNewz) February 1, 2024

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[Monksdream]

BRK.b new all time high

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Berkshire Hathaway $BRK.B breaking out to new all-time highs this week
By: TrendSpider | January 26, 2024

• Berkshire Hathaway breaking out to new all-time highs this week.



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Is Warren Buffett's stock market view reflected in Berkshire Hathaway's $150 billion cash hoard?
By: Mark Hulbert | January 22, 2024

Berkshire's cash allocation hasn't been constant, but has fluctuated in a narrow range

Some financial advisers are asserting that Buffett is finding it harder than ever to find undervalued companies to acquire.

Warren Buffett's company may be sitting on a record amount of cash, but that doesn't necessarily mean the famed investor thinks the stock market is overvalued.

It's important to point this out in order to counter the narrative that has emerged since the latest quarterly report from Buffett's company, Berkshire Hathaway (BRK.A) (BRK.B). Some financial advisers are asserting that the conglomerate's huge cash hoard - more than $150 billion in cash and short-term investments, largest ever in the company's near-60-year history - indicates that Buffett is finding it harder than ever to find undervalued companies to acquire. If so, that in turn would imply that the stock market is dangerously overvalued.

Put in its proper context, however, Berkshire's current cash level is unexceptional. As a percentage of the company's total assets, that level is almost precisely equal to its historical average. Think about it this way: Because Berkshire has grown as a company, a constant percentage allocation to cash translates to a growing dollar amount held in cash and short-term investments. All Berkshire's expanding cash hoard might be telling us is that the company is bigger than it used to be.

As you can see from the chart below, though Berkshire's cash allocation hasn't been constant, it has fluctuated in a narrow range. Berkshire's most recent allocation - 15.7% - is essentially no different than it 15.5% average since 2011.

The chart also includes a plot of the S&P 500 SPX, showing that changes in Berkshire's cash level are not inversely correlated with the market's ups and downs. Such an inverse correlation would exist if Buffett's allocation to cash reflected a contrarian reaction to an over- or undervalued market. Instead, there often has been a positive correlation between the two series. During 2022's bear market, for example, the cash allocation fell - opposite of what you would expect on the theory that the allocation reflects a growing number of bargains on Wall Street.

This does not mean Buffett is a bad market timer. After all, he doesn't believe in market timing in the first place. Fluctuations in Berkshire's cash level are largely due to other factors unrelated to market timing. The drop in the company's cash allocation in 2022, for example, largely reflected the acquisition of Allegheny Corp. for $11.6 billion in cash.

The bottom line? While Warren Buffett may believe that the stock market is overvalued, you can't conclude this from Berkshire's current allocation to cash and short-term investments.

A broader takeaway from this discussion is the value of adopting a skeptical attitude towards Wall Street assertions. Not all are misleading, but many of them are - even those that superficially seem compelling.

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[fung_derf]

Howard Stern must be sooo happy.

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Warren Buffett and Berkshire Hathaway $BRK.B just filed for its purchase of an additional $85 Million worth of Liberty Media $LSXMK $LSXMA
By: Evan | January 17, 2024

• Warren Buffett and Berkshire Hathaway $BRK.B just filed for its purchase of an additional $85 Million worth of Liberty Media $LSXMK $LSXMA



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Bar, >> Sumitomo <<

Yes, I'm still kicking myself for selling those Japanese stocks that Buffett likes so much. They were up nice, but have continued to zoom. But watching N. Korea routinely lobbing missiles into the Sea of Japan has cooled my enthusiasm for that part of the world. I remember Munger saying how the rising geopolitical risks have made Asia a much riskier place to invest, although he was mainly referring to China and Taiwan. He said that those five Japanese conglomerates were so phenomenally cheap, investing in them was like printing free money.


>>> Sumitomo Clarifies Buffett Comments After Trading House Stocks Jump


Bloomberg

by Shoko Oda and Stephen Stapczynski

January 16, 2024


https://finance.yahoo.com/news/sumitomo-clarifies-buffett-comments-trading-045019498.html


(Bloomberg) -- Japanese trading house Sumitomo Corp. sought to clarify that comments by its chief executive officer on new investments by Warren Buffett were referring to previous statements from Berkshire Hathaway Inc.

Shares in the trading houses — known as sogo shosha — advanced Wednesday after Barron’s quoted Sumitomo’s Masayuki Hyodo as saying Berkshire’s stake “is increasing — not only Sumitomo, but all five trading companies.”

A Sumitomo spokesperson told Bloomberg News that Hyodo’s response referred to Berkshire’s previous public comments about potentially boosting its stakes in the companies to 9.9%. Sumitomo is only aware of Berkshire’s holdings via public disclosures, and the US company currently holds 8.23% of the Japanese firm, the spokesperson said.

The so-called Oracle of Omaha traveled to Japan last April to meet with executives from the five companies for the first time. Berkshire subsequently raised its stakes in the trading houses to an average of more than 8.5%. It said in June that it hopes to eventually own 9.9% of each of the firms, and that it won’t make purchases past that point without approval from the respective boards.

The purchases by the legendary US investor helped to propel gains in the Japanese stock market last year, with the market trying to scope out what his next targets might be.

Sumitomo Corp. jumped as much as 3% on Wednesday. The other major trading houses also increased, with Mitsubishi Corp. climbing as much as 5% and Mitsui & Co. as much as 3.5%. The similar intraday gains for Itochu Corp. and Marubeni Corp. were 2.6% and 4.2%, respectively.

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[DiscoverGold]

Warren Buffett and Berkshire Hathaway $BRK.B just filed that they currently own 34% of Occidental $OXY
By: Evan | January 10, 2024

• Warren Buffett and Berkshire Hathaway $BRK.B just filed that they currently own 34% of Occidental $OXY



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[Prudent Capitalist]

Settlement now confirmed. As I stated a number of weeks back, this dispute cried out for a negotiated settlement, and that has now occurred.

[DiscoverGold]

Berkshire Hathaway $BRK.B breakout incoming?
By: TrendSpider | January 7, 2024

• Buffett breakout incoming? $BRK.B



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"Trial canceled in Haslam family suit vs. Berkshire Hathaway over truck-stop company value"

It was not immediately clear why the trial was canceled and if Berkshire Hathaway — which is headed by CEO Warren Buffett — or the Haslams have settled their dispute involving Pilot Travel Centers, the biggest truck-stop chain in the United States."

https://www.cnbc.com/2024/01/07/trial-canceled-in-berkshire-hathaway-suit-by-haslam-family.html

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Apple - >>> Why Wall Street is cooling on Apple stock


Yahoo Finance

by Hamza Shaban

January 4, 2024


https://finance.yahoo.com/news/why-wall-street-is-cooling-on-apple-stock-194143216.html


The brightest light on Wall Street is dimmer at the start of 2024.

Apple (AAPL), the most valuable company on the market, has endured a bruising run in the first days of the new year. The iPhone maker, which commands about 7% of the weight of the S&P 500 (^GSPC) index, steering the fate of investor portfolios, drew two stock downgrades this week, pulling shares down more than 5% and raising concerns about weakening iPhone demand.

Barclays struck the first blow. Analysts there cut Apple's rating to Underweight and dropped their price target to $160, representing what was a roughly 17% stock price drop for the tech giant from last year.

"We rate Apple Under Weight as questions persist about the deterioration of iPhone upgrade demand with rising competition in the premium smartphone segment," the analysts wrote.

The follow-up punch landed Thursday, when analysts at Piper Sandler downgraded their rating on Apple's stock to Neutral from Overweight and sliced their price target by $15 to $205. Apple shares were trading hands at around $182 as of Thursday afternoon.

"We are concerned about handset inventories entering into 1H24 and also feel that growth rates have peaked for unit sales," said lead analyst Harsh Kumar in a note to clients. "Deteriorating macro environment in China could also weigh on handset business."

The percentage of analysts with a bullish rating on the stock is at a three-year low, according to Bloomberg data.

Apple's iPhone revenue sank about $5 billion in 2023 from the year prior. The flagship iPhone accounts for roughly half the company’s total revenue. Sales of Macs, iPads, and wearables also declined, as rising inflation and interest rates pressured consumers.

But bullish analysts focus on Apple's growing services businesses, which swelled from $78 billion in 2022 to $85 billion in 2023. In the most recent quarter revenue from services ballooned by almost 20% compared to the same period the year before. Apple's enormous user base and the strength of its services are a crucial component of more optimistic readings on the company's future. Wedbush analysts led by Dan Ives pin the value of Apple's services business as high as $1.6 trillion and predict that Cupertino will become the first $4 trillion company by the end of 2024.

Skeptical observers, however, see heightened risks even in Apple's most promising segment. Barclays noted that services might attract more regulatory scrutiny. Investigations into the app store could intensify, especially as other tech giants brace for a wave of significant antitrust rulings this year. How Big Tech figures into the US presidential election and how aggressively the next administration will pursue competition enforcement is another major factor for tech stocks.

Apple's lucrative agreement to use Google as the default search engine in its Safari browser, which is estimated to bring in billions of dollars to its services business, could also be under threat. Closing arguments for the Department of Justice's antitrust case against the search giant are scheduled for the spring.

Apple's dimming prospects among some analysts coincide with a stock performance that lags behind other members of the Magnificent Seven.

All the names in the elite, tech-centric group handily beat out the benchmark S&P 500 index. But Apple claimed the lowest position, rising roughly 50% in 2023. That’s nothing to sneeze at, but is notable compared to the staggering gains of Nvidia (NVDA) and Meta (META), up 239% and 194%, respectively, or even Microsoft's (MSFT) more modest 57% rise. The Nasdaq 100's (^NDX) increase of 54% managed to edge out Apple too.

Where much of the tech world and even players outside it have scrambled to get in on the AI hype — releasing products, announcing new ventures or simply reciting the words "AI" — Apple CEO Tim Cook has taken a more subtle approach. That too may have played a factor in the market's cooling reception.

In recent earnings calls, Cook has explained that AI is already integrated into the Apple consumer experience. It's just that the company doesn't call out the technologies explicitly, as if it were a marketing gimmick, but relies instead on weaving AI into its products and focusing on the customer benefit. In another rhetorical move that appeared to be gently critical of other tech leaders, Cook said the company tends to unveil new technologies when they are ready for users. And not before.

If there is a consumer tech company defined by how its products make users feel — for the vibes rather than the intricacies of its software, it's Apple. So not showboating about what's coming in the AI development cycle has its benefits.

But a more pessimistic interpretation is that as rivals like Microsoft and Meta lean into their large language models, framing generative AI as tech's next great frontier, Apple is getting left behind. And most of us already have phones.

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[DiscoverGold]

Warren Buffett's Biggest Bets in 2024: 57.4% of Berkshire Hathaway's $367.5 Billion Stock Portfolio Is Held in Just 2 Stocks
By: The Motley Fool | January 2, 2024

Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett's financial track record is legendary. The Omaha, Nebraska, native has led his company to market-crushing success through multiple decades and informed and inspired millions of investors around the world.

Strikingly, the famous moneyman has delivered incredible returns while largely avoiding the time-honored practice of portfolio diversification. Buffett does advocate diverse holdings for less-experienced investors, calling it "protection against ignorance." But for investors who know what they are doing, he says it makes little sense. For this experienced investor, roughly 57.4% of Berkshire's $367.5 billion portfolio is concentrated in just two stocks.

Read on as two Motley Fool contributors explain why Buffett has placed huge bets on a duo of industry-leading companies.

Apple is an excellent innovator

Parkev Tatevosian: Surprisingly, the Oracle of Omaha has directed that 47.9% of Berkshire Hathaway's portfolio be invested in Apple (NASDAQ: AAPL) stock. I say surprisingly not because Apple is not worth investment, but because it's unusual to see even professional investors with such a concentrated portfolio. Nevertheless, I can understand why Warren Buffett likes Apple. It is one of the most innovative businesses worldwide, has a proven track record, and sells at a reasonable valuation.

Apple's reputation as a trusted brand among consumers helps it retain those customers longer and encourages them to pay a premium for its products and services. That brand loyalty helped Apple grow revenue from $183 billion in 2014 to $383 billion in 2023. When it comes time to upgrade an Apple device, people often stick with the brand, especially because of the ecosystem Apple has built around it. For example, the Apple Watch integrates well with Apple's iPhone and is improved with services from Apple's App Store. If you have any of Apple's products, that ecosystem increases the inconvenience of switching to a rival brand.

The ability to charge a premium has proven to be profitable for Apple. The company's operating income rose from $53 billion to $114 billion in the abovementioned years.

And yet, throughout Berkshire's ownership of Apple stock where the stock price is up roughly 600%, the stock has never gotten too expensive to buy (when measured by the price-to-earnings ratio), giving Berkshire little reason to exit or dilute its investment in Apple stock. Perhaps those reading this article may consider following suit.

One of Buffett's greatest success stories

Keith Noonan: Today, Bank of America (NYSE: BAC) stands as Berkshire Hathaway's second-largest stock holding and accounts for roughly 9.5% of the company's portfolio. That represents an incredible vote of confidence from the Oracle of Omaha. But the stock actually started as a massive loser for Buffett.

After first purchasing BofA shares in 2007, Berkshire completely exited its position in the stock in the fourth quarter of 2010. The bank's earnings saw weak recovery on the heels of the Great Recession, and it faced ongoing pressures due to the housing crash, subprime mortgage crisis, and other macroeconomic risks.

Buffett contacted Bank of America CEO Brian Moynihan directly in 2011 with a surprising proposal to provide the struggling financial giant with investment capital. Ultimately, Berkshire wound up buying $5 billion worth of the bank's preferred stock.

Buffett's company also received warrants that would allow it to purchase 700 million shares of the bank's common stock at a price of $7.14 per share. It would up being an all-time great deal for Buffett.

In June 2017, BofA stock had seen a dramatic recovery and was trading above $24 per share. Berkshire announced that it would be exercising its warrants -- a move that immediately scored a $12 billion paper profit for the investment conglomerate. The announcement spurred even more short-term gains for the stock, and shares continued to climb in subsequent years -- but the deal has been even sweeter than a quick look at Bank of America's stock performance would suggest.

With the benefit of improving financial performance, BofA delivered impressive dividend growth since Buffett moved to exercise those stock warrants. The company currently pays an annual dividend of $0.96 per share -- working out to a 13.4% yield on those 700 million shares that Berkshire purchased at a share price of just $7.14.

Berkshire also purchased more of the bank's stock since its big warrant move and now owns roughly 1.03 billion shares of BofA stock. With its massive investment position, Buffett's company is generating almost $1 billion in annual dividend income just for sitting on its Bank of America stock. With the bank likely to deliver another payout increase next summer, Berkshire's annual dividend income from the stock will almost certainly cross the $1 billion threshold.

Despite a rocky start, Bank of America stock wound up being a massive winner for Buffett. There's a very good chance the financial services giant will remain Berkshire's second-largest holding in 2024 and beyond.

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[DiscoverGold]

Wishing everyone Merry Christmas and a Happy New Year!



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Warren Buffett and Berkshire Hathaway $BRK.B just filed for its purchase of 5.2M shares of Occidental $OXY for $312.1 Million
By: Evan | December 21, 2023

• Warren Buffett and Berkshire Hathaway $BRK.B just filed for its purchase of 5.2M shares of Occidental $OXY for $312.1 Million



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The 1996 IPO of class B share. "PROSPECTUS

DATED MAY 8, 1996"

https://www.sec.gov/Archives/edgar/data/109694/0000898430-96-001695.txt

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Imagine the special dividend BRK could pay in the unlikely event they were inclined. OTOH, many investors hold BRK simply because it doesn't pay a taxable dividend. BRK has only a paid one dividend since Buffett took control and that dividend was a dime in 1967.

Paying out that dime was one of the few dumb business moves Buffett made. Think how that dime would've grown if not paid out in '67!!!!!!!!!!!!!!!!

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>>> 3 Stocks I Bet Warren Buffett Wishes He Held Onto

Once these companies fell out of favor with the Oracle of Omaha, he sold them


By Joel Baglole

InvestorPlace

Oct 9, 2023


https://investorplace.com/2023/10/3-stocks-i-bet-warren-buffett-wishes-he-held-onto/#:~:text=While%20Buffett%20has%20never%20discussed,over%20the%20last%20five%20years.


In retrospect, some of Buffet’s stock sales may have been premature.

Costco (COST): Buffett sold this grocery retailer in 2020 at the height of its profits and sales.

Taiwan Semiconductor Manufacturing (TSM): He bought and sold his stake within just a few months.

Home Depot (HD): Buffett sold this stock during the financial crisis, taking a loss on his position.


Warren Buffett is widely considered the greatest investor of all-time.

His holding company, Berkshire Hathaway has a vast investment portfolio currently worth $340 billion. While Buffett is known as a long-term, buy-and-hold investor, at times he’s been known to change the holdings in his portfolio. Buffett hasn’t hesitated to expunge entire positions if he feels his investment thesis has changed.

For example, Buffett owned stock in most of the major U.S. airlines until the Covid-19 pandemic struck in 2020. He quickly sold them all. While many of his decisions appear wise in hindsight, including the airline stocks, Buffett may have sold some stocks too early. He may even regret dumping them. In fact, certain stocks Buffett sold have gone on to rise considerably.

Let’s dissect the three stocks that I bet Warren Buffett wishes he’d held firmly.


Costco (COST)

Buffett owned shares of Costco Wholesale (NASDAQ:COST) for 20 years before selling his entire stake in the grocery retailer in 2020. The optics of his timing may appear a bit strange.

In the summer of 2020, Costco’s profits were booming as people stocked up on groceries and supplies while sheltering-in-place during the pandemic. Costco’s sales were so robust in 2020 that the company declared a special, one-time dividend payment to stockholders of $10 per share in November of that year. Buffett missed it.

Over 20 years, Buffett built his COST stock position to $1.3 billion from an initial investment of $32 million in 1999. Additionally, Buffett’s business partner and Berkshire Hathaway Vice-Chairman Charlie Munger sits on Costco’s board of directors. He personally owns more than $60 million of Costco stock. Yet Buffett dumped his entire stake in Costco at its peak in 2020. While Buffett has never discussed his reasoning of selling his Costco shares, speculation reveals he felt the stock had become overvalued.

Since Buffett sold out of Costco, its share price has gained 60%. COST stock is up 145% over the last five years. By comparison, rival grocer Kroger (NYSE:KR), which Buffett currently has a $2.17 billion stake in, has seen its share price rise 60% in the past five years, which is less than half the gain of Costco’s stock.


Taiwan Semiconductor Manufacturing Co. (TSM)

Buffett’s relationship with Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) has been puzzling. He quickly bought and then sold the stock.

The Oracle of Omaha had initially taken a $4.1 billion stake in TSM stock during the Q3 of 2022. However, by February of this year, he had reduced his holdings in the stock by 86%. Come May, he’d exited the position altogether.

Analysts initially praised the purchase of TSM stock as prescient given the explosion of demand for microchips and semiconductors. Additionally, Taiwan Semiconductor fit with the type of stocks Buffett prefers. The company manufactures more than 60% of all the microchips and semiconductors worldwide, providing a near monopoly position. Although TSM stock is almost flat since Buffett sold his position in May, the share price is up 125% over the last five years.

Many analysts expect Taiwan Semiconductor to be a big beneficiary of the boom in artificial intelligence (AI) chips. In an uncharacteristic move, Buffett publicly explained his decision to quickly sell the stock after buying it, noting he was concerned about the China-Taiwan political situation.

“Taiwan Semiconductor is one of the best managed and most important companies in the world,” said Buffett, before adding, “I don’t like its location.”


Home Depot (HD)

Buffett was once a big fan of do-it-yourself home improvement retailer Home Depot (NYSE:HD). Berkshire Hathaway initially bought HD stock in mid-2005 during the housing boom.

At its peak, Berkshire’s position in Home Depot stock totaled 3.7 million shares worth nearly $150 million. Then, the 2008 financial crisis hit, plunging the U.S. housing market into collapse. Buffett wasted little time getting rid of his entire Home Depot stake.

Shedding a quarter of its position during Q2 of 2009, it was near the market’s low point. He sold the remainder of his position in 2010. At that time, the stock was trading between $20 and $25 a share, half the price Buffett paid a few years earlier. However, since the summer of 2010, HD stock has gained 875%. The stock peaked at an all-time high of $415 a share in December 2021 during the pandemic market boom.

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[gfp927z]

Costco --> Munger remained a huge fan of Costco, even after Berkshire sold its stake in 2020 -


>>> Costco to Pay Special Dividend of $15 Per Share: What You Need to Know


Motley Fool

by Daniel Sparks

December 14, 2023


https://finance.yahoo.com/news/costco-pay-special-dividend-15-230100685.html


We knew it was coming. We just didn't know when.

Costco (NASDAQ: COST) Chief Financial Officer Richard Galanti's rhetoric in recent earnings calls, when asked about whether the company would pay out another special dividend, has been that it's "probably a question of when, not if." The day has finally come.

Costco announced on Thursday it would pay a special cash dividend of $15 per share on Jan. 12, 2024 to shareholders of record as of the close of business on Dec. 28. This, of course, is on top of the quarterly dividend the company has already committed to.

The news of Costco's special dividend builds on an upbeat quarterly financial update released on Thursday. The report, which featured double-digit year-over-year earnings-per-share growth, highlighted the membership-based wholesale warehouse's resilience, even in a challenging macroeconomic environment.

Costco's dividend history

This will be Costco's fifth-ever special dividend. Previous special dividends were paid in 2012, 2015, 2017, and 2020 in the amounts of $7, $5, $7, and $10, respectively. This makes the company's 2024 special dividend of $15 its largest, by far.

To fund this dividend, Costco will pay an aggregate amount of $6.7 billion to shareholders.

Unlike many of its peers, Costco operates its business with a significant net cash position. This means its interest expense is extremely low, which helps the company keep its cost structure low to pass those savings onto members. At the end of its just-reported fiscal first quarter, Costco had about $7 billion of debt and nearly $18 billion of cash, cash equivalents, and short-term investments. So there's plenty of cash to spare.

Costco also notably pays a meaningful, growing quarterly dividend of $1.02. The company's most recent hike came in at a double-digit rate of 12%.

Support for a high stock price

A robust special dividend comes at a good time for shareholders. The stock has soared nearly 40% year to date, giving the stock a somewhat pricey valuation. The stock's price-to-earnings ratio is now in the forties. Fortunately, a special dividend and double-digit growth in earnings per share help support this high valuation.

Speaking of Costco's earnings, the company's fiscal first-quarter revenue and earnings per share both came in higher than analysts' estimates. Total revenue of $57.8 billion was up from $54.4 billion in the year-ago quarter, beating analysts' average forecast for revenue of $57.7 billion. Earnings per share of $3.58 (up 17% year over year) was also higher than a consensus estimate of $3.42.

Sales in the quarter were helped by growing demand for the company's groceries and essentials. But strong growth in membership fees also helped. Membership fee revenue rose more than 8%, outpacing net sales growth by 2 percentage points.

Altogether, Costco's results offer a strong reminder of why the company's shares are worth a high premium. This is especially true ahead of a likely membership fee increase in the near future.

Just as management has hinted at a special dividend, it's also hinted that a membership fee increase is up for consideration. Indeed, it wouldn't be surprising to see Costco raise the prices of its memberships in 2024.

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[DiscoverGold]

Buffett does some last minute Christmas shopping:
By: TrendSpider | December 14, 2023

• Buffett does some last minute Christmas shopping:

• Bought $588,674,276 in $OXY shares
• Bought $588,674,276 in $BRK.A shares



Read Full Story »»»

DiscoverGold

[DiscoverGold]

Warren Buffett and Berkshire Hathaway $BRK.B just filed for its purchase of 10.5M shares of Occidental $OXY for $588.7 Million
By: Evan | December 14, 2023

• Warren Buffett and Berkshire Hathaway $BRK.B just filed for its purchase of 10.5M shares of Occidental $OXY for $588.7 Million.



Read Full Story »»»

DiscoverGold

[bar1080]

Why is it a "nice" discount to A? I've used Finviz to track both the A and the B class shares. Class A usually very slightly outperforms. Why? Do some investors think the A shares will benefit from a possible restructuring or struggle for control of Berkshire upon Buffett's death?

[Prudent Capitalist]

Bingo! B shares still trading at a nice discount to the BRK.A shares. Hmmmm......

[bar1080]

Berkshire Class B Stock Is Relative Bargain as Spread to A Widens

BRK's Class A stock is trading at a wider-than-usual 2.5% premium to the company’s Class B stock after moving more than a half percentage point Monday.

https://www.barrons.com/articles/berkshire-class-b-stock-discount-7574d193

[DiscoverGold]

Berkshire Hathaway more than halves stake in HP
By: Investing | December 11, 2023

Warren Buffett's Berkshire Hathaway (NYSE:BRKa) more than halved its stake in HP (NYSE:HPQ) inc, as the conglomerate continues to trim its holdings in the PC and printer maker, according to a regulatory filing Monday.

Following the latest reduction for the reporting period ending Nov. 30, the company now holds a 5.2% stake, about 51.5 million shares in HP from nearly 100M previously.

The conglomerate has been trimming its stake in the PC and printer maker after amassing a double digit stake early last year.

Read Full Story »»»

DiscoverGold

[gfp927z]

>>> Occidental lands $12 billion takeover of shale producer CrownRock


Reuters

Dec 11, 2023

By Sabrina Valle and Sourasis Bose


https://finance.yahoo.com/news/occidental-petroleum-buy-crownrock-12-120620740.html


HOUSTON (Reuters) - Occidental Petroleum on Monday agreed to buy closely-held U.S. shale oil producer CrownRock in a cash-and-stock deal valued at $12 billion including debt, expanding its presence in the largest U.S. shale oilfield.

The deal comes amid a new wave of shale consolidation underpinned by Exxon Mobil's $60 billion proposed deal for Pioneer Natural Resources and Chevron's $53 billion agreement for Hess.

If approved, the CrownRock takeover would make Occidental a bigger player in the Permian shale field than Chevron and Hess combined. Its total production was 1.2 million boed at Sept. 30.

The CrownRock deal, expected to close in the first quarter of 2024, would boost Occidental's Permian production by 170,000 barrels of oil and gas production per day to 750,000 boed.

"We found CrownRock to be a strategic fit, giving us the opportunity to build scale in the Midland Basin and positioning us to drive value creation for our shareholders with immediate free cash flow accretion," said Occidental CEO Vicki Hollub.

Occidental's shares rose less than 1% to $56.96 in morning trade.

U.S. oil producers are using the post-Pandemic profit boom to expand their holdings and build assets to secure higher output and drilling inventory. That has led to a series of deals in the two years since the 2020 price crash.

U.S. oil is trading at about $71 per barrel, encouraging higher output as members of the Organization of Petroleum Exporting Countries pare oil quotas.

Occidental said it will finance the purchase with $9.1 billion of new debt, the assumption of CrownRock's $1.2 billion of existing debt and will issue $1.7 billion in common stock.

"The CrownRock assets are generally perceived to be of high quality, but investors are likely to question the merits of adding leverage to the Occidental balance sheet at this point in the cycle," said Third Bridge energy analyst Peter McNally.

Occidental had about $18.6 billion in long-term debt as of Sept. 30 and the deal would increase its debt to nearly $28 billion. CrownRock would be its first big deal since a widely criticized debt-laden purchase of Anadarko Petroleum in 2019.

"We are pretty negative on this deal," said Sankey Research analyst Paul Sankey. "You're adding a load of debt, when arguable you should be paying with shares".

Occidental plans to reduce its debt by about $15 billion and by at least $4.5 billion in the next 12 months from asset sales and cash flow.

Hollub said in a CNBC interview that Warren Buffett's Berkshire Hathaway, which had helped finance the Anadarko purchase, was not involved in the CrownRock deal.

Occidental said it will raise its quarterly dividend by 4 cents, to 22 cents a share, and expects to retain its investment grade credit ratings.

Cole Smead, CEO of Smead Capital Management, which owns about 5.9 million shares of Occidental in its U.S. portfolio said the deal showed "the optimism that Vicki and the folks at OXY exude right now about the future of the oil and gas business and the prices they are getting to take advantage of that".

Reuters first reported in September that CrownRock was preparing to explore a sale that could give it an enterprise value of well over $10 billion.

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[weedtrader420]

Both of them are old pieces of💩💩 Warren needs to be in prison with Bubba. there shouldn’t be no Berkshire halfway shares they should give the money back to the people he stole it from. America. he’s been robbing America, all his life both of them.

[Snowy_Owl]

"They probably killed Charlie..."

I noticed you 'upvoted' your response. Urban slang has a term for that: Masturliker - A person who performs self gratification in a public forum or on social media by liking their own comments or posts.