BRK Q2 '24 Earnings

[gfp]

10Q is out.  Cash and T-bills higher than expected!

https://berkshirehathaway.com/qtrly/2ndqtr24.pdf

 

Press release here:

https://berkshirehathaway.com/news/aug0324.pdf

 

Share repurchases down to $345m in the quarter.  Float up $1 Billion from Q1.

 

Buffett at AGM: "I'm not afraid to pay taxes on realized gains" (or something like that)

Proceeds to sell $77 Billion of equities in Q2 - over $25 Billion per month

Edited August 3 by gfp

[John Hjorth]

EOP 2024H1 :

 

Cash USD 36.884 B

Short term US T-Bills USD 234.618 B

Total USD 271.502 B

 

- - - o 0 o - - -

 

[Excluding cash in Railraoad, Utilities and Energy USD 5.440]

 

- - - o 0 o - - -

 

That's a lot!

 

- - - o 0 o - - -

 

Edit :

 

A boatload AAPL shares have been disposed during 2024Q2. [Market value AAPL postion : At YE2023 USD 174.3 B, at EOP 2024H1 USD 84.2 B, see p. 9.]

Edited August 3 by John Hjorth

[newtovalue]

Looks like he sold a ton of AAPL. Position is down to $84 billion from $174 billion in Q1.

[gfp]

If my envelope math is correct he is down to about 400m AAPL shares at quarter end (from 789.37m AAPL shares at Q1 quarter end)

 

Looks like CVX is down to ~ 118.9m shares from 122.98m, another trim there

 

Obviously BYD was being sold in the quarter.

 

Subsequent to quarter-end we have the BAC sales.  Seems possible he stopped selling AAPL after quarter-end but we'll see next Q.

 

Tax rate is ~ 20% on these sales.  US. Treasury is about to get some big checks from Omaha next two quarters.

Edited August 3 by gfp

[thepupil]

Awesome! I love it. 

[backtothebeach]

Dang, $276.9 billion in cash and equivalents. He is either de-risking, and getting ahead of possible tax increases, or has an elephant in sight ... or all of the above.

[MarioP]

No buyback in june. It means no buyback over 400$ per B share. Combine this with all the equity sells and you get a Buffett very bearish 

Edited August 3 by MarioP

[gfp]

I love how Warren and Marc won't total up the weighted average interest rate on their borrowings.  No need to be gaudy  

 

edit: (it would say 2.786%)

 

 

Edited August 3 by gfp

[John Hjorth]

2 minutes ago, backtothebeach said:

Dang, $276.9 billion in cash and equivalents. He is either de-risking, and getting ahead of possible tax increases, or has an elephant in sight ... or all of the above.

 

Or preparing for an extraordinary [perhaps one-time] dividend [, all which I consider among my worst mightmares ...]

[nwoodman]

Book Value Calculation:

Total Shareholders' Equity: $601.7 billion

Class A shares outstanding: 553,302

Class B shares outstanding: 1,325,090,508 Class B to Class A conversion ratio: 1,500 to 1

Total equivalent Class A shares: 553,302 + (1,325,090,508 / 1,500) = 1,436,696

Book Value per Class A Share: $601.7 billion / 1,436,696 = $418,811

Book Value per Class B Share: $418,811 / 1,500 = $279.21

 

P/B Calculation:

Book Value per Class A Share: $418,811

Market Price per Class A Share: $641,435

P/B Ratio = $641,435 / $418,811 ≈ 1.53

Edited August 3 by nwoodman

[Luke]

Brutal apple sale...

[MarioP]

Thanks for the numbers Nwoodman. I was calculating that to complete my previous post. It means the buybacks stopped around 1,5x P/B

[Luke]

39 minutes ago, backtothebeach said:

Dang, $276.9 billion in cash and equivalents. He is either de-risking, and getting ahead of possible tax increases, or has an elephant in sight ... or all of the above.

Where could he possibly allocate 100b...needs to be a highly liquid megacap of which we have few and prices are not great either? 

 

Apple is better than Cash.

Edited August 3 by Luke

[nwoodman]

19 minutes ago, MarioP said:

Thanks for the numbers Nwoodman. I was calculating that to complete my previous post. It means the buybacks stopped around 1,5x P/B

Yep, 1.4-1.5x’s seems to be the limit.  Consistent with what many of us view as a proxy on FV and the maximum price that gives you a shot at 10% returns IMHO.

[KPO]

11 minutes ago, Luke said:

Where could he possibly allocate 100b...needs to be a highly liquid megacap of which we have few and prices are not great either? 

 

Apple is better than Cash.

If it wasn’t such a shit show at the moment I’d suggest BA, but given where it is now I’ll bet DE. That said, the most likely answer is probably nothing. Just positioning his successor well. 

[wabuffo]

Looks like he sold a ton of AAPL. Position is down to $84 billion from $174 billion in Q1.

 

… and with AAPL’s share price higher in July than all of Q2, it’s likely that Buffett has continued to sell more.  Cash position could be approaching $300b.

 

Interesting stat, by my fingers-and-toes math, BRK owns 4.2% of all T-Bills issued by the US Federal government.  In fact, Buffett owns more bills than even the Federal Reserve does. Wild.  Yellen should send him a Christmas card this year.

 

Bill

[Luke]

Just now, wabuffo said:

Looks like he sold a ton of AAPL. Position is down to $84 billion from $174 billion in Q1.

 

… and with AAPL’s share price higher in July than all of Q2, it’s likely that Buffett has continued to sell more.  Cash position could be approaching $300b.

 

Interesting stat, by my fingers-and-toes math, BRK owns 4.2% of all T-Bills issued by the US Federal government.  In fact, Buffett owns more bills than even the Federal Reserve does. Wild.  Yellen should send him a Christmas card this year.

 

Bill

Crazy...! Really wondering what he thinks going that big in cash/treasuries, Apple is their "best" business...

[John Hjorth]

27 minutes ago, wabuffo said:

Looks like he sold a ton of AAPL. Position is down to $84 billion from $174 billion in Q1.

 

… Interesting stat, by my fingers-and-toes math, BRK owns 4.2% of all T-Bills issued by the US Federal government.  In fact, Buffett owns more bills than even the Federal Reserve does. Wild.  Yellen should send him a Christmas card this year.

 

Bill

 

Thanks Bill [ @wabuffo ],

 

Perhaps US Internal Revenue Service should consider to look up an internal expense account to do the same [I mean to consider Mr. Buffet for a Christmas card, too].

 

According some very rough back-of-the-envelope calculations of mine I came up with today, that the tax on the realized gain on the sale of AAPL shares is in the area of USD 13 billion.

 

To give this amount of funds a tangible perspective, I've read somewhere not so long ago that this amount of USD roughly equals the cost of construction of the gallee USS Gerald R. Ford.

 

Edited August 3 by John Hjorth

[Spooky]

How did Berkshire’s operating results look? Any signs of weakness in their underlying businesses? I’m on the road and can’t check.

[gfp]

8 minutes ago, Spooky said:

How did Berkshire’s operating results look? Any signs of weakness in their underlying businesses? I’m on the road and can’t check.

 

Berkshire operating results were pretty good.  GEICO is back to strong profits and the rest of insurance was also profitable on underwriting.  Most of the operating businesses were around flat.  Squishmallows are selling well.  Railroad is flat.  BHE is doing better than it appears because they continue to accrue wildfire liabilities.  BHE will surprise to the upside once the wildfire stuff stops flowing through.  Union tank car had some softness after a very long good period.  PCC had some growth, still below their long term expectations.

 

And interest income is exploding as you might imagine.  Fun fact, Wells Fargo even pays Berkshire 5.2% interest on their regular operating bank account at NICO.  Somehow my local bank's checking offering isn't quite measuring up.

[charlieruane]

@gfp Great thoughts, as always! Where'd you find the Wells Fargo fun fact? Ha. 

[73 Reds]

46 minutes ago, charlieruane said:

I went back to the 2024 annual meeting transcript and pulled the following, which I found helpful. Basically, he finds cash "quite attractive" given the alternatives these days: 

 

We own Coca-Cola, which is a wonderful business, and we own Apple, which is an even better business. And we will own, unless something really extraordinary happens, we will own Apple and American Express and Coca-Cola when Greg takes over this place. And it’s such a simple approach that it’s almost deceptive. Most things, if you keep working harder and harder at it, you learn a little more math or you learn a little more physics, but investments, you don’t really have to do that. You really have to have your mindset properly. So, we will end up, if something dramatically happens that really changes our capital allocation strategy, we will have Apple as our largest investment, but I don’t mind at all, under current conditions, building the cash position. I think when I look at the alternative of what’s available, the equity markets, and I look at the composition of what’s going on in the world, we find it quite attractive.

And one thing that may surprise you, but we… Almost everybody I know pays a lot more attention to not paying taxes, and I think they should. We don’t mind paying taxes at Berkshire, and we are paying a 21% federal rate on the gains we’re taking in Apple. And that rate was 35% not that long ago, and it’s been 52% in the past when I’ve been operating. And the government owns… The federal government owns a part of the earnings of the business we make. They don’t own the assets, but they own a percentage of the earnings, and they can change that percentage any year.

The irony is he sold "an even better business" and kept a mere "wonderful" business.  Certainly valuation is a (the) reason but one has to wonder whether he would buy shares of KO today over AAPL. 

[gfp]

19 minutes ago, charlieruane said:

@gfp Great thoughts, as always! Where'd you find the Wells Fargo fun fact? Ha. 

 

I mis-remembered - it was 5.44%.  I suppose that is some type of treasury sweep account but it is also their ready cash "checking" account so not a bad deal.  

[Spooky]

26 minutes ago, 73 Reds said:

The irony is he sold "an even better business" and kept a mere "wonderful" business.  Certainly valuation is a (the) reason but one has to wonder whether he would buy shares of KO today over AAPL. 

Munger would probably say it’s a mistake again!

[John Hjorth]

14 minutes ago, gfp said:

 

I mis-remembered - it was 5.44%. ...

 

I'll refrain from commenting on your precision related to stating 5.2 % originally above, obviously then originally by memory. You obviously have a very good memory, - that combined with being observant is very powerful.