BRK Q2 '24 Earnings

[gfp]

Remember the good old days, when news of Mars buying up Kellanova's Cheez-its would involve a call to Omaha and a nice bespoke preferred stock deal?

 

What would the rate be on something like that today - 8% plus some redemption premium?

[schin]

16 minutes ago, Eldad said:

If this continues to get worse it’s going to be a little awkward when he does his America will be fine interview with Becky. 

 

It'll be awesome if this get so crazy that BoA asks for convertible bonds as a show of confidence from Warren. LOL.

[John Hjorth]

34 minutes ago, schin said:

 

It'll be awesome if this get so crazy that BoA asks for convertible bonds as a show of confidence from Warren. LOL.

 

Spin of thought, I would say.

 

This is not about lack of liquidity and / or lack of capital in the banks.

[charlieruane]

14 hours ago, Eldad said:

I mean at this point what Buffett says he cares about or why he does or doesn’t do things may not be reliable. There has been a very high level of hypocrisy lately as it relates to the Berkshire financial maxims. 

 

You're not wrong. I'm reminded of this exchange from the 2017 annual meeting (although to be fair, the firm has grown a lot since then, and cash is now wildly more attractive, so there are good reasons to believe the $150B figure Buffett cited is outdated for good reason): 

 

JAY GELB: Berkshire’s cash and Treasury bill holdings are approaching $100 billion. Warren, a year ago, you said Berkshire might increase its minimum valuation for share buybacks above 1.2 times book value if this occurred. What are your latest thoughts on raising the share with purchase threshold?

 

WARREN: ... At the moment, we’re still optimistic enough about deploying the capital that we wouldn’t be inclined to move to a price much closer where there’s only a narrow spread between an intrinsic value and the repurchase price. But, at a point the burden of proof is definitely on us. I mean, the last thing we like to do is own something that a hundred times earnings where the earnings can’t grow. As you point out, we got almost $100 billion. It’s $90 billion plus invested in a business—we’ll call it a business—where we’re paying almost a hundred times earnings and it’s kind of a lousy business.

 

CHARLIE: It’s more after every tax earnings.

 

WARREN: Yeah, so we don’t like that and we shouldn’t use your money that way for a long period of time. And then, the question is, are we going to be able to deploy it? And I would say that history is on our side, but it would be more fun if the phone would ring instead of just relying on history books. I am sure that sometime in the next 10 years—and it could be next week or it could be nine years from now— there will be markets in which we can do intelligent things on a big scale. But it would be no fun if that happens to be nine years off—and I don’t think it will be—but just based on how humans behave and how governments behave and how the world behaves. But like I say at a point, the burden of proof really shifts to us big time and there’s no way I can come back here three years from now and tell you that we hold $150 billion or so in cash or more snd we think we’re doing something brilliant by doing it. Charlie?

 

CHARLIE: Well, I agree with you and the answer is maybe.

Edited August 5 by charlieruane

[Eldad]

12 minutes ago, charlieruane said:

 

You're not wrong. I'm reminded of this exchange from the 2017 annual meeting (although to be fair, the firm has grown a lot since then, and cash is now wildly more attractive, so there are good reasons to believe the $150B figure Buffett cites is outdated for good reason): 

 

JAY GELB: Berkshire’s cash and Treasury bill holdings are approaching $100 billion. Warren, a year ago, you said Berkshire might increase its minimum valuation for share buybacks above 1.2 times book value if this occurred. What are your latest thoughts on raising the share with purchase threshold?

 

WARREN: ... At the moment, we’re still optimistic enough about deploying the capital that we wouldn’t be inclined to move to a price much closer where there’s only a narrow spread between an intrinsic value and the repurchase price. But, at a point the burden of proof is definitely on us. I mean, the last thing we like to do is own something that a hundred times earnings where the earnings can’t grow. As you point out, we got almost $100 billion. It’s $90 billion plus invested in a business—we’ll call it a business—where we’re paying almost a hundred times earnings and it’s kind of a lousy business.

 

CHARLIE: It’s more after every tax earnings.

 

WARREN: Yeah, so we don’t like that and we shouldn’t use your money that way for a long period of time. And then, the question is, are we going to be able to deploy it? And I would say that history is on our side, but it would be more fun if the phone would ring instead of just relying on history books. I am sure that sometime in the next 10 years—and it could be next week or it could be nine years from now— there will be markets in which we can do intelligent things on a big scale.

But it would be no fun if that happens to be nine years off—and I don’t think it will be—but just based on how humans behave and how governments behave and how the world behaves. But like I say at a point, the burden of proof really shifts to us big time and there’s no way I can come back here three years from now and tell you that we hold $150 billion or so in cash or more snd we think we’re doing something brilliant by doing it. Charlie?

 

CHARLIE: Well, I agree with you and the answer is maybe.

Haha yeah well I guess the earnings are now 20x but for how much longer? 3 & 6 month treasuries may go to 50x earnings in the next 3 months or so and then back to 100x soon after that. 
 

But like Charlie says “maybe” is the correct answer. 
 

 

 

 

[gfp]

For those that like more detail, here are the BHE and BNSF 10-Qs

 

BHE:

https://www.sec.gov/ix?doc=/Archives/edgar/data/1081316/000108131624000016/bhe-20240630.htm

 

BNSF:

https://www.sec.gov/ix?doc=/Archives/edgar/data/934612/000093461224000012/bni-20240630.htm

[UK]

This is from SA:

 

PacifiCorp faces at least $46B in claims related to wildfires in the western U.S. following recent lawsuits in Oregon, the utility company disclosed late Monday in a Form 10-Q filing.

Plaintiffs in four separate mass complaints filed between April 29 and July 31 are seeking $43B in economic, non-economic and punitive damages linked to the catastrophic Labor Day fires in September 2020, part of broader litigation that has yielded several jury verdicts against PacifiCorp, as explained by S&P Global; the utility is appealing the verdicts.

"PacifiCorp believes the magnitude of damages sought by the class members in the James mass complaints to be of remote likelihood of being awarded based on the amounts awarded in the jury verdicts," the filing said.

Berkshire Hathaway (BRK.B) (BRK.A) reported an additional ~$3B in outstanding complaints and demands filed against PacifiCorp in Oregon and California, "excluding any doubling or trebling of damages."

PacifiCorp said it has paid $1.02B in settlements related to wildfires in Oregon and California and has reached agreements to pay another $199M, and has reported $2.66B in cumulative estimated probable wildfire-related losses through the end of Q2.

 

46 B? I really hate this US style / Better Call Saul litigation...nothing ever good come from it for me.

 

Edited August 6 by UK

[scorpioncapital]

The flipside of disallowing litigation (as some countries have done) is that REAL crime is under compensated by virtue of being compensated by the whims of the Government (usually its pocket book and the desire not to raise taxes, which essentially makes the entire population complicit in underpaying for real crimes). That seems a bit problematic too.

Edited August 6 by scorpioncapital

[Munger_Disciple]

1 hour ago, UK said:

This is from SA:

 

PacifiCorp faces at least $46B in claims related to wildfires in the western U.S. following recent lawsuits in Oregon, the utility company disclosed late Monday in a Form 10-Q filing.

Plaintiffs in four separate mass complaints filed between April 29 and July 31 are seeking $43B in economic, non-economic and punitive damages linked to the catastrophic Labor Day fires in September 2020, part of broader litigation that has yielded several jury verdicts against PacifiCorp, as explained by S&P Global; the utility is appealing the verdicts.

"PacifiCorp believes the magnitude of damages sought by the class members in the James mass complaints to be of remote likelihood of being awarded based on the amounts awarded in the jury verdicts," the filing said.

Berkshire Hathaway (BRK.B) (BRK.A) reported an additional ~$3B in outstanding complaints and demands filed against PacifiCorp in Oregon and California, "excluding any doubling or trebling of damages."

PacifiCorp said it has paid $1.02B in settlements related to wildfires in Oregon and California and has reached agreements to pay another $199M, and has reported $2.66B in cumulative estimated probable wildfire-related losses through the end of Q2.

 

46 B? I really hate this US style / Better Call Saul litigation...nothing ever good come from it for me.

 

 

I hope this is not (to fund the ridiculous lawsuits) why Warren sold Apple .

Edited August 6 by Munger_Disciple

[gfp]

1 hour ago, Munger_Disciple said:

 

I hope this is not (to fund the ridiculous lawsuits) why Warren sold Apple .

It may be one reason they are selling BYD but definitely not Apple.  BHE can bankrupt Pacificorp in a worst case. I don’t expect that at all. I expect methodical settlements and plenty of liquidity to pay them. 
 

BHE itself is not at risk of bankruptcy.  Berkshire not even close 

[Munger_Disciple]

9 minutes ago, gfp said:

It may be one reason they are selling BYD but definitely not Apple.  BHE can bankrupt Pacificorp in a worst case. I don’t expect that at all. I expect methodical settlements and plenty of liquidity to pay them. 
 

BHE itself is not at risk of bankruptcy.  Berkshire not even close 

 

Mine was a tongue in cheek comment, not serious , but you are 100% correct @gfp. BYD is owned by BHE and it makes sense that they use BYD proceeds in a tax efficient manner (avoiding capital gains taxes) by paying for settlements.

 

It really does make one wonder if utility investments are a good use of BHE capital going forward if they can lose all the equity due to 1 year fire exposure. Sounds more like a super cat business w/o any upfront premiums. 

Edited August 6 by Munger_Disciple

[gfp]

Poor Berkshire only owns 70 shares of BHE!  Imagine calling the family with the other 6 shares and asking them to pony up their share. 

[Munger_Disciple]

4 hours ago, gfp said:

Poor Berkshire only owns 70 shares of BHE!  Imagine calling the family with the other 6 shares and asking them to pony up their share. 

 

The Scott estate should exchange their BHE shares for Berkshire stock. It seems like a poor decision not to have done so along with Abel redemption. 

Edited August 6 by Munger_Disciple

[Munger_Disciple]

4 hours ago, gfp said:

Poor Berkshire only owns 70 shares of BHE!  Imagine calling the family with the other 6 shares and asking them to pony up their share. 

 

Technically BHE has 75.63 million shares outstanding. All the numbers in the financials are in the millions which is why the number of shares has been rounded to 76. 

 

It is also interesting that capex for the first six months of 2024 roughly equals that for 2023 & double the depreciation. So BHE's capex seems steady and is not increasing. It would be interesting to see if the future Capex will decrease in light of wild fire payments. 

Edited August 6 by Munger_Disciple

[UK]

https://www.bloomberg.com/opinion/articles/2024-08-05/warren-buffett-s-277-billion-hoard-after-unloading-apple-is-a-warning

 

But nothing really new or interesting.

[Castanza]

On 8/3/2024 at 11:26 AM, 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. 

 

Might not have been valuation that spooked him. Perhaps the manufacturing aspect alone was enough to reduce. AAPL valuation doesn't look bad imo. Service Revenue grew 14% and now makes up 30% of total rev. I think that's a really good sign of things to come and AAPL moving away from complete reliance on HW. Especially with the new AI platform coming on the next rendition of iPhone (which will require 15+ model year to use), I think this upgrade cycle might be pretty solid. Currently down (1%) this last Q which is a nothing burger imo. R&D only grew 3% which is very conservative as well; especially when compared to peers GOOG, MSFT, META etc. 

[UK]

https://www.economist.com/finance-and-economics/2024/08/08/why-warren-buffett-has-built-a-mighty-cash-mountain

 

Again, nothing really new, except maybe for a nice illustration:)

 

Edited August 8 by UK

[UK]

https://www.barrons.com/amp/articles/dimon-buffett-recession-stocks-what-to-know-today-5d6803b5

 

“I was with Warren Buffett yesterday,” Dimon said in an interview on CNBC on Wednesday. “And we always talk about the resiliency of America. It is extraordinary.”

[Spooky]

On 8/4/2024 at 2:29 AM, UK said:

 

Yes, I agree, more likely than not, quite soon this extra will be either spend somehow (elephant?) or somehow (special dividend, but hopefully something else/creative?) returned to shareholders. What I doubt, it is some kind of market timing, as some headlines a starting to suggest, but what do I know...

In my opinion these moves don’t say anything about market timing and media writing about it don’t have a clue. How many times has Buffett said they don’t focus on the macro but on the intrinsic value of businesses? Clearly, he thinks Apple is overvalued and without Munger he is not just going to hold it forever. I also think the argument about clearing the decks for Greg makes sense, give him a big war chest and right sizing positions that Warren knows intimately.

[nwoodman]

47 minutes ago, Spooky said:

In my opinion these moves don’t say anything about market timing and media writing about it don’t have a clue. How many times has Buffett said they don’t focus on the macro but on the intrinsic value of businesses? Clearly, he thinks Apple is overvalued and without Munger he is not just going to hold it forever. I also think the argument about clearing the decks for Greg makes sense, give him a big war chest and right sizing positions that Warren knows intimately.

Occam’s razor springs to mind.