Munger_Disciple

BNSF news: https://www.wsj.com/articles/bnsf-railway-furloughs-mechanics-in-kansas-nebraska-c56ba7a5?mod=hp_minor_pos13

Yes indeed.

BHE is named a defendant in lawsuit on real estate commissions: https://www.wsj.com/finance/warren-buffett-is-getting-dragged-into-the-real-estate-commissions-litigation-79696153?mod=hp_lead_pos10

Thanks @John Hjorth & @gfp. The number in gfp's post seems to be correct as I remember it. The rest are owned by First Manhattan's clients I believe.

I thought the Gottesman's stake in Berkshire is worth a lot more than $1 billion. Perhaps already distributed to heirs?

@gfp If you don't mind sharing, what % of your portfolio is in FFH? And what do you expect the book value to compound at long term (not the next couple of years)? Any thoughts on relative performance you expect vs BRK going forward? Thanks

Excellent points! I have had pleasant LT experience (22 years+) with Berkshire in my taxable account which I continue to hold. But I expect lower returns going forward from BRK. I view FFH as riskier (in almost all respects) than BRK with potentially higher medium term return, so I own less of it compared to BRK primarily in my tax deferred account. I don't think FFH can duplicate the 1980-2000 success of Berkshire going forward even if its management is as good (& it is not). Even BRK couldn't duplicate its past success today if starting out with a much smaller capital base & younger versions Warren, Charlie, Ajit & Greg. There is way too much competition.

I consider it an honor to be muted by you.

For the benefit of at least one of the newer posters on this board who seems to think he knows everything, I would just say this: @gfp is one of the best posters with deep knowledge of the companies he comments on. I truly respect, enjoy and look forward to reading his posts and I always learn something new from him. There are very few posters on this board board I feel this way & @gfp is one of the best.

I know what you mean; very much appreciate all your posts.

Got it, thanks

I take it you manage SMAs? Is there a web site people can get information? Thanks

I don't think "they" read anything.

Yes. I also think he is more frustrated about BHE than BNSF in the bigger scheme of things: "Our second and even more severe earnings disappointment last year occurred at BHE."

Excellent point. Plus BHE projects tend to be very long term projects like the transmission project Buffett referred to in the 2023 letter.

Yes, I pointed out the possibility of a dividend in an earlier post. I hope they don't have to pay a dividend, and find some decent opportunity to reinvest the earnings. But the reality is that if investing big sums in BHE is off the table, Buffett is signaling that they may have to pay a dividend (instead of buying back a ton of shares) if the stock trades closer to its intrinsic value, as it seems to currently.

On BHE there was a big change in Buffett's thinking from 2021 to 2023. 2021 AR: "Berkshire will always be building." 2022 AR: "And yes, our shareholders will continue to save and prosper by retaining earnings. At Berkshire, there will be no finish line." 2023 AR: "Berkshire can sustain financial surprises but we will not knowingly throw good money after bad...... 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."

I found the following comments from Buffett's letter noteworthy: Buffett basically declared that the days of acquiring large private businesses is over due to Berkshire's size & increased competition from PE. He said "Berkshire does not currently pay dividends". Perhaps preparing shareholders for the day they might have to given the potential issues facing BHE? He especially seemed negative about BHE's prospects (and perhaps a bit less so about BNSF though he pointed out labor wage increases driven by President & Congress). If Berkshire can't reinvest huge earnings into more capex at BHE at decent regulated returns, it would indeed be a negative for Berkshire. Buffett said Greg is ready to be CEO tomorrow in all aspects; not a surprise but perhaps preparing shareholders for the eventuality. Given the problems at BHE & BNSF, he seemed to appreciate the virtues of Coke & Amex holdings even more than he used to. He really seemed to have a high opinion of Vicki at OXY. I thought it was funny Buffett was trying to entice shareholders to attend the annual meeting by dangling the prospect of getting to meet his very rich & attractive nieces in Omaha.

Perhaps Buffett has become more mindful of the advantages of long term holdings Coke & Amex which keep chugging along in light of new problems at BNSF & BHE.

This guy is seriously funny!

The most important thing to remember is that the alternative has to be far superior to an existing good holding because (1) tax drag when selling the current position takes away a good chunk of 2-3% per year assuming one is holding the new investment for a decade and more if holding for a shorter period, and (2) there is a possibility one doesn't understand the new position as well as the prior holding, so this creates additional risk.

Thanks for the great points made. I sold Berkshire in my tax deferred accounts and swapped it for FFH last year but taxes are a significant consideration for me (I live in CA) in taxable accounts. I agree we shouldn't let taxes completely dictate our portfolio. I think BRK is fully valued now (but not overvalued).

@gfp What do you think is a decent allocation to BRK in one's portfolio? I agree with your views. I think tax considerations make it very hard to sell BRK (for long term holders) even if it is at intrinsic value which it appears to be at currently because the alternative needs to outperform BRK after paying taxes on BRK sale if one diversifies. And the S&P 500 index is trading at a high valuation.

+1 Book value & its growth are good proxies for the intrinsic value of FFH for this reason I think assuming FFH's marks are conservative. GAAP accounting is the main reason BRK's intrinsic value far exceeds book and likely one of the main reasons Buffett abandoned the book value metric (that and significant share repurchases above book but below intrinsic value).

Thanks