xboojum

ALLE (which I've owned in size in the past) always struck me as something that would fold up nicely in the Berkshire construction mfg. sectors with Johns Mansfield and Benjamin Moore (I think it's a better business than either, honestly).

I for one think that's really interesting context, so thanks. And I am I think in the "swing, you bum!" peanut gallery, where I don't think that building up a dragon's hoard of capital and waiting for a downturn while just doing nothing around the margins is the best strategy, so I'm hoping that having a touch more centralized and active governance under Abel gets things moving while we wait, possibly another decade, to fire that elephant gun. (I remain disappointed that Marmon, which I hoped would turn into something like ITW as a place that could soak up capital for a lot of different uses, doesn't seem to have really turned into that.) Selling down the Apple investment as far as he did without anything apparent to do with the cash other than clip coupons was dispiriting to me. Finally, the mention of Dairy Queen was interesting not for the McDonald's comparison, which truly is ludicrous, but there does seem to be some movement in a company that I think was probably undermanaged for a decade or more of Berkshire's ownership.

I'll make myself unpopular not by defending this take (which I think is bad) but by saying that I do think there's something to the idea that ownership by Berkshire prevents most subsidiaries from really dominating their industry; the capital getting sent upstream rather than reinvested in the business is the right decision for mediocre businesses (or even ones like See's that don't have much opportunity to reinvest) and the wrong one for world-beaters. Of course most of the businesses under the umbrella are somewhere in-between, making things trickier, but it's a pretty common pattern, comparing e.g. Benjamin Moore to Sherwin Williams, or BNSF to the independent Class I rail companies, or even in recent years GEICO (for decades a world-beater!) to Progressive. But the prescriptions in the tweet are bad because he doesn't seem to understand why Buffett diversified, and the individual comparisons (Nebraska Furniture Mart, a furniture store with a bare handful of locations, vs. Home Depot, one of the great American retail successes of the last 50 years that doesn't sell furniture?) are risible, but I think it's probably true, overall, that Berkshire's subsidiaries tend to underinvest in themselves compared to their hindsight-selected category winners. There's a reason he's comparing (and it's a bad comparison) See's to Hershey's and not Sow Good (or Kraft). The other thing is that if he's complaining about Buffett not producing the results he did in his relative youth, Buffett's results as a pure stock-picker aren't as good as they were in his youth! It's not just size; the market doesn't reward the same things that Buffett was zeroed in on when he was accumulating his stake in Coca-Cola or Cap Cities. Those opportunities largely don't exist any more! He's probably right that if someone could reliably compound the $300 billion cash pile at 20% a year, selling off the subsidiaries and becoming a pure-play insurance-and-securities company would make people more money, but that's like asking why Warren doesn't wave his arms and fly to the moon. A final issue that this guy elides is that the Western power companies, where Buffett really was happy to reinvest billions upon billions of dollars, got hit by the one-two of tax changes under Trump and global warming-enhanced fire risk (which certainly aren't unique to BHE, look at PG&E).

Never say never, but it seems to me that true elephant-sized takeover of a private business is pretty unlikely at this point. If you were a family-owned giant like, say, Mars, why would you choose less money and still give up control to Berkshire? Something the size of e.g. Sheetz could certainly be taken down, but as you say, that's essentially an OxyChem-sized deal at this point rather than a needle-mover. And I think they could be doing more of these, but they've never built up the repeatable framework for doing serial acquisitions. They might be able to land some public companies, too, but as private equity has gotten bigger and bigger (and Buffett has shown an admirable unwillingness to overpay) that seems less likely, too, although Alleghany was a welcome exception (although not that much bigger than OxyChem). There just aren't that many $50 billion-plus acquisitions out there that make sense, don't involve a nosebleed control premium, and would represent a willing partnership; I think you'd have to see some sort of market dislocation for it to happen.

Brooks is a wonderful company that makes a great product (I wear Ghosts when I run) but absolutely aren't the definitive leaders in the category of even "running shoes", let alone "athletic shoes": https://therunningchannel.com/what-are-the-most-popular-running-shoes-usa/. BH Automotive is I believe about a third the size of Lithia. I'm not sure what field you could even say Marmon Group leads in (versus Kerlite or Union Tank Car or something). (Flight Safety is a great answer. I think Clayton Homes and Shaw are both the largest in their field, at least if you restrict comparison to carpet versus overall flooring. Forest River, depending on what segment you look at, probably fits the bill too.)

I'm a "you gotta do more" guy, to be honest*, but some of the ice is already breaking, at least; Scott Fetzer sold Kirby vacuums to I believe a private equity company in 2020 or 2021. * I think a 100% legitimate criticism of Berkshire is that the combination of the hands-off approach Buffett takes and the strategy of pulingl capital up to the parent companies means that there are places, particularly in the midsized operating companies, where Berkshire's low cost of capital could have been used to make the businesses a lot bette. Uniform companies and paint companies both benefit from the network effect of having the most locations/customers on a route, but Fechheimer and Benjamin Moore just aren't playing the same game Cintas/Sherwin Williams are; Marmon doesn't seem to have served as the ITW-style rollup I thought it was going to be; etc.

Why would Fairfax care about an enormous decline in auto insurance claims? (Separately, why would large language models reduce workers comp claims?)

The advantage of the Duracell swap (or the Florida television station with Graham Holdings) was that he didn't have to pay capital gains taxes on the stock he exchanged, whereas he's underwater with the OXY position as a whole and flush with cash. The 8% coupon from the preferred is better than he can get clipping T-bills. Further, from OXY's point of view, the preferred equity, not debt, and they're trying to shed debt. I can't see why a non-cash transaction makes sense for either side.

It's not the same but it rhymes: https://www.ft.com/content/cdb5ad3e-1c11-48af-9852-00ccc147abbf (subprime auto lender Tricolor blew up, and now it looks like debt-fueled auto parts rollup First Brands is going to have to file Chapter 11 after dodgy accounting). See also https://www.bloomberg.com/news/articles/2025-09-17/tricolor-bankruptcy-subprime-auto-lender-s-collapse-fuels-asset-fight:

Dave Waters of Alluvial Capital wrote up Grupo Herdez (salsa and sauces maker) about 18 months ago; it popped 30% today on news that McCormick is buying out half of Herdez's (previously 50%) stake in their Mexican JV at a $3 billion valuation. https://alluvial.substack.com/p/a-mexican-blue-chip-bargain

FWIW I checked Wikipedia, and the volume they were putting through factory outlet stores was sufficient that they couldn't fill it solely through factory seconds and started using it as a way to clear shoes that weren't selling due to fashion issues, seasonality, etc.: Harold Alfond on Wikipedia

It's worth remembering that part of Dexter's secret sauce was the use of factory outlet stores, which is a model they invented; if they're moving a significant amount of their inventory via selling factory seconds (as they originally and perhaps always were were) or more cheaply made/finished models to compete with lower-cost models (which is what a lot of "factory outlet" stores sell; I don't know about Dexter specifically), and then there's no reason to go to a special store to buy the discounted ones because you can just go to Wal-Mart or Payless to buy a cheaper pair made in Vietnam, the whole model collapses. I don't think Dexter had any particular brand equity; they were just optimized to make and sell cheap shoes, and then one day shipping containers started delivering a better mousetrap.

From a comment on the sports blog Defector: * JJ Redick is in college: LeBron 27/7/7 * JJ Redick, NBA rookie: LeBron 27/7/6 * JJ Redick, NBA starter: LeBron 27/7/6 * JJ Redick, 15 year vet, LeBron 25/8/8 * JJ Redick analyst/podcaster: LeBron 26/8/7 * JJ Redick is LeBron's coach: LeBron 25/9/8 Just a machine.

https://www.geico.com/driveeasy/ GEICO has created their own version of telematics. They were just late to the game and aren't using it effectively yet, as far as I can tell. (If Todd can improve things, there's no shame in GEICO running second-best behind Progressive, which seems to be shooting the lights out right now; a lot of the complaints about a less pleasant culture at the GEICO home offices sound like the sorts of things that happen when a company is underperforming and the CEO wants to trim deadwood.) And say what you will about BNSF, they didn't just wake up and realize, "Oh, precision scheduling is a thing!"; there has been a conscious management decision, going back years, that they don't want it (whether due to the fact that it pisses off customers—which it does—or a desire for better relations with their unions or concerns about regulation, I don't know, or maybe something internal; you'll note that even with Harris parachuting in as an operations consultant, they're not talking about implementing it). The Ben Simmons comparison is funny, not because anything important at Berkshire has collapsed as thoroughly as The Process, but because I think there's something to the idea that the Buffett of 2024 is afraid to shoot! Things have repeatedly worked out poorly to suboptimally for him over the past decade, offset by the enormous success of Apple and the solid performance at size of the sogo shosha investments.

I think you're misreading the statement, which says "relative to". So if their margins were five points better than Norfolk's and now they're four points better, that's relative slipping.

I think it's fair to say that we may have reached the limits of the strategy Buffett has been running for the last fifteen-plus years of sending money from the subsidiaries to BH and then from BH to the utilities for investment. If Western utilities are truly permanently a worse business due to wildfire risk (I have my doubts, but it's certainly possible) despite all the tax benefits of investing in renewables and BNSF is going to be hobbled either relatively because they don't do precision scheduling—or absolutely because of labor disputes or repricing in the industry (which, again, I have my doubts); there are no elephant-sized private businesses on the scale of a Mars or even, IDK, Sheetz that Berkshire can buy at a reasonable price (this one I buy); and there aren't outlets where Buffett is willing to make purchases in the public markets (there certainly don't seem to be many currently), where does the money go? Japan? South Korea? Fighting regulators to buy Chubb? Opening up a Flying J on every corner? The secondary reason that the Apple purchase was so good is that it's one of the few places where Buffett could pour essentially an unlimited amount of money without personally distorting the market, and it's a little frustrating if unsurprising that he didn't choose a second tech titan that could also support $30-50 billion of investment back when they were priced less breathtakingly. I think this is the top strategic problem Abel is going to have to tackle, because I don't think repurchases at $700,000 an A share make sense. I think personally there's still juice to be squeezed from utilities because I think a lot of the current issues are transient and utility boards are going to start offering incentives to bury lines and install monitoring, but even that only gets you so far (although it would be a big help), and it became pretty clear years ago that Marmon is not going to turn into a mini-Danaher the way I once thought it might. Having a subsidiary that supports large amounts of reinvestment at reasonable returns would be hugely beneficial as T-bill rates slowly come down. [Edit to add] And this is why Buffett was so excited to work with 3G! A turnkey LBO shop with a reproducible set of behaviors that can be used to turn a pile of cash into a lean, mean consumer goods company gushing cash flow would have been incredibly valuable for Berkshire to partner with, possibly even more valuable (to Buffett) than having one in house because of the distance for avoiding reputational hit. But it didn't work out, because it didn't scale well and 3G had to target companies like Kraft that were a worse fit and/or everyone else caught up and/or all of the improvements that 3G brought were temporary and required increasingly-large acquisitions to keep the numbers going up as the sugar rush wore off. There's a reason that TerraVest, Constellation, Danaher, etc. get valued so highly.

GEICO has never been the largest auto insurer—I believe they were the fifth largest American auto insurer when they became a wholly-owned subsidiary, and a torrent of advertising money grew them all the way to second place (before they fell back to third), but they've at not time have they had more policies in force than State Farm.

9.4 billion dollars in yen-denominated debt, per the 10-Q.

https://www.seattletimes.com/seattle-news/climate-lab/judge-orders-bnsf-to-pay-wa-tribe-400m-for-trespass/ BNSF found to have violated terms of an easement regarding access to Snohomish tribal land, fined $400 million. (BNSF apparently admitted the violation but didn't think they should pay that much.)

It got thrown out by the initial trial judge; this is an appeal of that initial ruling, so you're hoping it's not reversed. (IANAL but I presume that the fact that the district court judge didn't buy it is a good sign that GEICO's contract is not so sloppily written.)

I think this is 100% correct and one of the reasons that the annual letter this year was somewhat distressing; if Buffett is down on BNSF on labor concerns and utilities for a multiplicity of reasons, where's does the money go? There's a New Mexico-based utility, PNM, that is at multiyear lows after a blocked acquisition, and on geographic grounds it seems like it would slot so nicely into BHE, but it sounds like Buffett isn't interested in expanding his utility holdings. I had hoped that Marmon would turn out to be something like a mini-ITW or (pre-biotech) -Danaher, but that doesn't seem to have been the case. The realtor rollup is maybe secularly threatened, and I don't even know if the car dealership acquisitions are still ongoing. The "platform business" idea that got Valeant's stink all over it, that a company was vastly more valuable if it could reproducibly grow through acquisition, would be well suited to just this sort of circumstance, but unless you're Constellation it's hard to see how you could scale it to tens of billions of dollars a year, every year. Genuinely a tough problem, even though Berkshire (juiced by the Apple grand slam) has performed really well all things considered over the past ten years. Like a lot of you, I think there are going to be significant capital returns at some point after Abel takes over, if not a carveout of some of the businesses.

Welp! (To be fair, that was three whole months ago.)

Buffett had people for that -- Harry Bottle was the fixer at Dempster Mill, for instance.

I had hoped that Marmon would turn into this for small/midsized industrials. It's not clear if it hasn't, really, or if the acquisitions are just not sizable enough, even in aggregate, to be really noticeable.

In this otherwise rather grim story about declining toy sales in the UK, it's noted that the bestselling toy in the UK last year was Jazwares' Squishmallows: https://www.theguardian.com/business/2024/jan/23/squishmallows-uk-toy-sales-games-action-figures