gfp927z
7 일 전
>>> Warren Buffett Defends His Growing Cash Pile
The Wall Street Journal
by Karen Langley
2-22-25
https://www.msn.com/en-us/money/other/warren-buffett-defends-his-growing-cash-pile/ar-AA1zzAep?ocid=entnewsntp&pc=U531&cvid=6d67a0c1a9f84120bd5f5e866cca2cf1&ei=31
Warren Buffett says Berkshire Hathaway still prefers owning businesses.
Berkshire’s chairman and chief executive told shareholders in his annual letter Saturday that while the company’s ownership of stocks declined last year, the value of the operating businesses it owns increased. Berkshire runs a range of subsidiaries in such industries as rail, utilities and insurance.
A recent buildup in the Omaha, Neb., conglomerate’s mountain of cash and Treasury bills has drawn attention among investors. Berkshire ended 2024 with $321.4 billion in cash and Treasury bills, after accounting for a payable it recorded for buying the short-term government debt. That marked a new record and a 3.6% increase from three months earlier.
“Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities,” Buffett wrote. “That preference won’t change.”
Buffett said Berkshire’s ownership of “marketable equities” declined last year. But the famed stock picker offered assurance that the company hasn’t changed its investment approach.
“Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities—mostly American equities although many of these will have international operations of significance,” he wrote. “Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned.”
Buffett and his deputies are searching for investment opportunities while stocks trade at records, with the S&P 500 clinching another high in recent days.
An exception to Berkshire’s focus on U.S. investments, Buffett wrote, is its growing investment in Japan. In July 2019, Berkshire began buying shares of five Japanese trading companies: Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo.
A year ago, Buffett wrote that Berkshire owned about 9% of each of the five companies and that it had told each company it wouldn’t increase its stake beyond 9.9%.
But Berkshire received the companies’ blessings to buy some more, Buffett wrote in his new letter. He praised the companies for their use of capital, their management and their attitude toward shareholders.
“As we approached this limit, the five companies agreed to moderately relax the ceiling,” he said. “Over time, you will likely see Berkshire’s ownership of all five increase somewhat.”
At the end of 2024, the market value of Berkshire’s Japan holdings had reached $23.5 billion, Buffett wrote.
Buffett also wrote about Berkshire’s practice of not paying dividends, other than on one occasion in 1967. He said the decisions to reinvest Berkshire’s money over the years, rather than paying some of it out, have had big results. Berkshire’s market value passed $1 trillion last year.
“In a very minor way, Berkshire shareholders have participated in the American miracle by foregoing dividends, thereby electing to reinvest rather than consume,” he wrote. “Originally, this reinvestment was tiny, almost meaningless, but over time, it mushroomed, reflecting the mixture of a sustained culture of savings, combined with the magic of long-term compounding.”One more way Berkshire isn’t spending its cash: stock buybacks. The company reported it repurchased no shares in the final three months of 2024, a second consecutive quarter without buybacks. The lack of buybacks suggests Buffett doesn’t think Berkshire’s stock is cheap.
Berkshire also released its results for 2024, reporting a profit of $89 billion, down from $96.2 billion in 2023. The company’s operating earnings, which exclude some investment results, rose to $47.4 billion.
Buffett encourages shareholders to pay attention to operating earnings. Berkshire’s net income includes unrealized gains and losses from its stock investments, causing the bottom-line earnings figure to fluctuate when markets are volatile.
Its stock has risen to start the year, with both Class A and Class B shares up about 5.6%, compared with the S&P 500’s 2.2% gain. Both Berkshire share classes closed at records in recent days.
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7 일 전
Berkshire Hathaway reports record operating earnings as cash pile swells further
By: Investing.com | February 22, 2025
Warren Buffett's Berkshire Hathaway (NYSE:BRKa) (NYSE:BRKb) reported record operating earnings for 2024, driven by strong performance in its insurance businesses and higher investment income. Meanwhile, the firm's cash position rose to a new high of $334.20 billion in the fourth quarter.
Berkshire's operating earnings, which exclude investment gains and losses, rose 27% to $47.4 billion in 2024, compared to $37.4 billion in 2023. For the fourth quarter, operating earnings jumped 71% to $14.5 billion.
The conglomerate's insurance underwriting profit more than doubled to $9 billion in 2024, led by a turnaround at auto insurer GEICO. Insurance investment income surged 43% to $13.7 billion as higher interest rates boosted returns on Berkshire's cash pile.
Net earnings attributable to shareholders fell 7.5% to $89 billion for the full year, mainly due to lower investment gains compared to 2023.
Berkshire paid a record $26.8 billion in corporate income taxes to the U.S. government in 2024, which Buffett highlighted as "about 5% of what all of corporate America paid."
In his annual letter to shareholders, Buffett praised GEICO CEO Todd Combs for reshaping the auto insurer: "In five years, Todd Combs has reshaped GEICO in a major way, increasing efficiency and bringing underwriting practices up to date."
Buffett also discussed Berkshire's growing investments in five major Japanese trading companies, saying the holdings are "for the very long term" and may increase over time.
The 94-year-old CEO reiterated his preference for equity investments over cash, stating "Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned."
Buffett said it won't be long before Greg Abel replaces him as CEO and will be writing the annual letter.
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gfp927z
2 주 전
STZ looks like another Weschler / Combs pick. They reportedly bought it in Q4, which was right before STZ dropped by ~ 1/3, so not the best timing. The STZ chart had basically been going sideways for ~ 7 years or so, until crumbling in 2025.
There seems to be a pattern developing with these smaller Berkshire picks, with long periods of a flat / sideways movement (3 years or more) prior to the purchase. This was the case for DPZ, POOL, VRSN, and now STZ. Another similarity is that they were all phenomenal LT stocks prior to their extended flat periods.
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gfp927z
2 주 전
>>> Warren Buffett Is Out of Step With Markets. Berkshire Hathaway Keeps Selling Stocks.
Barron's
by Andrew Bary
Feb 17, 2025
https://www.barrons.com/articles/warren-buffett-berkshire-hathaway-stocks-sales-portfolio-holdings-92567500?siteid=yhoof2
Warren Buffett is out of step with the markets.
The S&P 500 returned 25% in 2024 and is up another 4% this year, but Berkshire Hathaway refuses to join the party and continues to be a net seller of stocks.
CEO Buffett, who oversees Berkshire’s $300 billion equity portfolio, is unenthusiastic about equities with the S&P 500 hitting new highs.
It may take a sizable selloff to get Buffett excited about stocks and few see that coming in 2025. Since he turned 90 in 2020, Buffett has been cautious on stocks. The Berkshire CEO turns 95 in August and celebrates his 60th year at the helm in 2025.
The company’s 13-F report on its fourth-quarter equity holdings released late Friday showed that Berkshire was a net seller of about $6 billion of stocks in the period, according to an analysis by Edward Jones analyst James Shanahan.
The pace of sales lightened from the first three quarters of 2024 when Berkshire had net sales of $127 billion of stocks. In those nine months, Berkshire bought just under $6 billion of stocks and sold $133 billion, mostly Apple.
There was only one notable new purchase in the fourth quarter: about $1 billion of Constellation Brands, the wine, beer, and spirits company. Berkshire sold about $5 billion of Bank of America, unloaded $3 billion of Citigroup, and didn’t change its Apple stake, which remains at 300 million shares. The Citi stake is nearly gone, totaling about $1 billion now. Some investors thought he might make Citi a major financial holding like Bank of America after buying about $3 billion of the banking company but Buffett went in the opposite direction.
Looking back at 2024, Berkshire was a buyer of a handful of stocks, including Chubb, Occidental Petroleum, Sirius XM Holdings, Domino’s Pizza, and Constellation, but none of those purchases was particularly large.
And a few of the buys—Sirius, Domino’s, Constellation—probably were made by Ted Weschler or Todd Combs, two Berkshire investment managers who operate independently of Buffett and run about 10% of the equity portfolio. Smaller holdings of under $3 billion often are their positions.
Buffett, who handles the other 90%, likely was the buyer of insurer Chubb and Occidental. The Chubb stake, revealed in the first half of 2024, totals about $7 billion. The Occidental holding is about $13 billion, a nearly 30% stake in the energy company. Berkshire began accumulating the Occidental stake in 2022.
Apple was the big story in 2024 as Berkshire cut its holding by about two-thirds to 300 million shares, a stake now worth $73 billion, making it the company’s largest stock investment, ahead of No. 2 American Express at about $47 billion. Berkshire sold about $110 billion of Apple last year and $14 billion worth of Bank of America, Barron’s estimates.
Neither of those sales was well-timed. Barron’s estimates that Berkshire got an average price of about $185 for Apple—against a current $244—and a little over $40 for Bank of America, versus a current $47. That means Berkshire may have left over $35 billion on the table with the Apple sales.
Berkshire is due to report its fourth-quarter earnings on Saturday morning and should release its annual report and shareholder letter at the same time.
It’s a good bet that Berkshire’s cash and equivalents, which hit a record $310 billion on Sept. 30, was higher at year-end due in part to the stock sales in the fourth quarter.
Buffett has been out of step with the markets before, including during the Internet bubble of the late 1990s. He was vindicated then and could be rewarded once again.
Berkshire investors don’t seem upset about mistimed sales and missed buying opportunities, particularly among the Magnificent Seven stocks that have led the market. Berkshire owns Apple, having bought it from 2016-2018, and has a small stake in Amazon.com.
The Berkshire Class A shares, which ended Friday at $719,000, are up 6.5% this year, about two percentage points ahead of the S&P 500. The stock roughly matched the market last year.
Holding more cash than any other American company—and having the opportunity to deploy it if the markets crater—seems to sit well with the Berkshire faithful.
gfp927z
3 주 전
Another conglomerate to split (Honeywell). What could Berkshire look like in 10 years?
- Insurance
- Energy
- Railroad
- Manufacturing
- Services / Retail
- Industrial
>>> Honeywell, one of the few remaining US industrial conglomerates, will split into three companies
AP
by MICHELLE CHAPMAN
February 6, 2025
https://finance.yahoo.com/news/honeywell-one-few-remaining-us-113124365.html
Honeywell, one of the last remaining U.S. industrial conglomerates, will split into three independent companies, following in the footsteps of manufacturing giants like General Electric and Alcoa.
The company said Thursday that it will separate from its automation and aerospace technologies businesses. Including plans announced earlier to spin off its advanced materials business, Honeywell will consist of three smaller entities in hopes that they will each be more agile.
"The formation of three independent, industry-leading companies builds on the powerful foundation we have created, positioning each to pursue tailored growth strategies, and unlock significant value for shareholders and customers,” Honeywell Chairman and CEO Vimal Kapur said in a statement.
Honeywell had said in December that it was considering spinning off its aerospace division. The public announcement arrived about one month after Elliott Investment Management revealed a stake of more than $5 billion in the aerospace, automation and materials company. Elliott had been pushing for the Charlotte, North Carolina, company to separate its automation and aerospace businesses.
The board of Honeywell International Inc. had been exploring strategic options for the company since earlier in 2024.
The company, which makes everything from eye solution to barcode readers, has been seeking ways to make itself more nimble. Over the past year and a half, just after Kapur took over as CEO, Honeywell has announced plans for the advanced materials business spinoff, entered into an agreement to sell its personal protective equipment business, and made several acquisitions.
The separation of the automation and aerospace technologies businesses is expected to be completed in the second half of 2026. The spinoff of the advanced materials business is anticipated to be completed by the end of this year or early next year.
Like Honeywell, other U.S. conglomerates have been pressured by shareholders to simplify their structures, allowing each segment of the company to move more freely and adapt to changes in their respective markets.
Iconic CEOs like Jack Welch of General Electric spent years building corporate American behemoths with the belief that with scale came power. Yet those massive companies were forced to compete with upstarts with a narrow focus and a more clearly defined set of goals.
Investors also wanted a more clear view of the priorities within each division, which became more murky as the companies grew.
In 2015 metals maker Alcoa said that it was splitting into two independent companies, separating its bauxite, aluminum and casting operations from its engineering, transportation and global rolled products businesses.
GE announced in 2021 that it was dividing itself into three public companies focused on aviation, health care and energy. At the time, the move was viewed as a potential signal of the end of conglomerates as a whole thanks to the move toward a digital economy.
Shares fell almost 3% before the market opened Thursday.
<<<
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3 주 전
Berkshire Hathaway Inc. (BRK.B) Is a Trending Stock
By: Zacks Investment Research | February 5, 2025
Berkshire Hathaway B (BRK.B) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock's performance in the near term.
Shares of this company have returned +3.2% over the past month versus the Zacks S&P 500 composite's +1.7% change. The Zacks Insurance - Property and Casualty industry, to which Berkshire Hathaway B belongs, has gained 2.5% over this period. Now the key question is: Where could the stock be headed in the near term?
Although media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.
Earnings Estimate Revisions
Here at Zacks, we prioritize appraising the change in the projection of a company's future earnings over anything else. That's because we believe the present value of its future stream of earnings is what determines the fair value for its stock.
Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
Berkshire Hathaway B is expected to post earnings of $4.43 per share for the current quarter, representing a year-over-year change of +13%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
For the current fiscal year, the consensus earnings estimate of $19.78 points to a change of +15.1% from the prior year. Over the last 30 days, this estimate has changed -0.2%.
For the next fiscal year, the consensus earnings estimate of $19.94 indicates a change of +0.8% from what Berkshire Hathaway B is expected to report a year ago. Over the past month, the estimate has changed -0.2%.
Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Berkshire Hathaway B is rated Zacks Rank #4 (Sell).
The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:
12 Month EPS
Revenue Growth Forecast
While earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.
For Berkshire Hathaway B, the consensus sales estimate for the current quarter of $88.3 billion indicates a year-over-year change of -5.4%. For the current and next fiscal years, $364.82 billion and $375.35 billion estimates indicate +0.1% and +2.9% changes, respectively.
Last Reported Results and Surprise History
Berkshire Hathaway B reported revenues of $93 billion in the last reported quarter, representing a year-over-year change of -0.2%. EPS of $4.68 for the same period compares with $4.96 a year ago.
Compared to the Zacks Consensus Estimate of $96.62 billion, the reported revenues represent a surprise of -3.75%. The EPS surprise was -2.7%.
Over the last four quarters, Berkshire Hathaway B surpassed consensus EPS estimates three times. The company topped consensus revenue estimates two times over this period.
Valuation
No investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.
While comparing the current values of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock's price.
The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.
Berkshire Hathaway B is graded D on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.
Bottom Line
The facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Berkshire Hathaway B. However, its Zacks Rank #4 does suggest that it may underperform the broader market in the near term.
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1 월 전
BRK.B Stock Lags Industry in 6 Months, Trades at Discount
By: Zacks Investment Research | January 17, 2025
Berkshire Hathaway Inc. (BRK.B) shares have gained 4.7% in the past six months, underperforming the industry’s 13.6% growth, the sector’s increase of 8.7% and the S&P 500 composite’s rise of 7.8%.
Berkshire Hathaway is a conglomerate with more than 90 subsidiaries engaged in diverse business activities. About 40% of Berkshire’s operating earnings came from its insurance underwriting and insurance investment subsidiaries in 2023. Other operations, including utilities and energy, and manufacturing, service and retail, combined accounted for the remaining 60%.
Berkshire Underperforms Industry, Sector & S&P in 6 Months
However, Berkshire shares are trading well above the 50-day moving average, signaling a short-term bullish trend and making it an attractive option for investors from a technical perspective.
BRK.B Price Movement vs. 50-Day Moving Average
Based on short-term price targets offered by four analysts, the Zacks average price target is $496.50 per share. The average suggests a potential 8.3% upside from Thursday’s closing price.
BRK.B Shares are Cheap
BRK.B shares are trading in line with the Zacks Property and Casualty Insurance industry. Its price-to-book value of 1.58X is lower than the industry average of 1.68X.
This insurance behemoth has a market capitalization of $997.3 billion. The average volume of shares traded in the last three months was 4 million.
The stock remains attractively valued compared with other insurers like The Progressive Corporation PGR and The Allstate Corporation ALL.
Downward Estimate Revision
The consensus estimate for 2025 has moved 3 cents south in the past seven days, reflecting analyst pessimism.
Yet, the Zacks Consensus Estimate earnings for 2025 is pegged at $19.94, indicating a 0.8% year-over-year increase on 2.9% higher revenues of $375.4 billion. The expected long-term earnings growth rate is pegged at 7%.
Factors Favoring Berkshire
Berkshire’s insurance operations contribute around one-fourth of its top line. Increased exposure, prudent underwriting standards and better pricing poise the insurance business for long-term growth. However, underwriting profitability and in turn the combined ratio gets affected due to catastrophes.
Continued insurance business growth fuels an increase in float, drives earnings and generates maximum return on equity.
The Utilities and Energy, and Manufacturing, Service and Retail businesses are economically sensitive non-insurance businesses. Thus, their performances are linked with the health of the economy. Given improving economic health, these businesses are poised to grow.
The Utilities and Energy business has grown with increased revenue contributions from Burlington Northern SantaFe Corp. However, unfavorable changes in the business mix and lower fuel surcharge revenues are areas of concern. Lower fuel costs are expected to limit any downside. Nonetheless, demand for utilities is expected to be strong in the future and will drive earnings growth.
Collectively, these have driven revenues and facilitated margin expansion over the past many years.
With a huge cash hoard, we believe Berkshire Hathaway will successfully continue its acquisition spree, acquiring entities that have consistent earnings power and boast impressive returns on equity. While big acquisitions open up more business opportunities for the company, bolt-on acquisitions ramp up the earnings of the existing business.
Warren Buffett has always eyed acquisitions or made investments in properties that are undervalued or have growth potential. Investments in Coca-Cola, American Express, Apple, Chevron and Occidental Petroleum show the investment acumen of Warren Buffett.
This insurer distributes wealth to shareholders through share buybacks. Berkshire Hathaway bought back shares worth $2.9 billion in the first nine months of 2024.
Berkshire’s Return on Capital Compares Unfavorably With Industry
Return on equity (“ROE”) in the trailing 12 months was 6.9%, underperforming the industry average of 7.6%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders. It's noteworthy that though BRK.B’s ROE lags the industry average, the company has successfully improved the same.
Its return on invested capital (ROIC) has increased every year since 2020. This reflects BRK.B’s efficiency in utilizing funds to generate income. However, ROIC in the trailing 12 months was 5.5%, lower than the industry average of 5.8%.
What Should Investors Do Now?
Holding shares of Berkshire Hathaway renders dynamism to shareholders’ portfolios. Also, it has Warren Buffett at its helm, who has been creating tremendous value for shareholders over nearly six decades with his unique skills. However, unfavorable return on capital and downward estimate revisions keep us cautious.
Thus, investors who already hold Berkshire shares should continue to retain this Zacks Rank #3 (Hold) stock in their portfolio, while others can wait for some more time as this behemoth is unlikely to disappoint any time.
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2 월 전
Why Does Warren Buffett Hold So Much Cash?
By: Barchart | January 5, 2025
Given the financial environment in which cash is sometimes considered as useless, Warren Buffett's approach of keeping large cash reserves stands out and generates investor interest and speculation. Renowned for his sharp investing style, Buffett's decision to retain large wealth in a market of growth invites more research. One of the most successful investors in the world would pick liquidity over instant gratification for why? Analyzing his strategy helps us to find the ideas guiding such a choice, so providing insightful information for those wishing to replicate Buffett's famed financial acumen. As of December 2024, Warren Buffett's Berkshire Hathaway holds a record $325 billion in cash.
The Philosophy Of Cash Reserves
Long stressing the value of cash not only as a reserve but also as a strategic asset fundamental to Warren Buffett's whole investing style. Historically, Buffett has argued for keeping large capital on hand to guarantee Berkshire Hathaway's capacity for quick and forceful response when prospects present themselves. From this vantage point, cash is a tool in the investment playbook for both defense and attack. From a defensive standpoint, it provides a barrier against financial uncertainty, enabling the business to withstand economic downturns free from the agony of selling other assets at bad times.
Cash gives unmatched flexibility on demand. It helps Buffett to seize unanticipated prospects requiring swift response, often during market crashes or when unusual assets lose value. Buffett's ability to buy significant interests or entire businesses at reasonable prices free from outside financing depends on this flexibility. Buffett makes sure (BRK.B) can always make decisions others, who might be over-leveraged or cash-strapped, cannot by keeping liquidity. This strategy emphasizes a basic aspect of his philosophy: cash as a tool to take advantage of the inefficiencies in the market, not as a static part of his portfolio. Buffett’s strategic use of cash reserves is (BRK.B)'s purchase of Alleghany Corporation in 2022. This acquisition is a classic demonstration of how Buffett uses his cash holdings to make significant moves without relying on external financing.
Strategic Considerations For High Cash Holdings
Buffett's approach to market values and his ability to seize value opportunities highlight his strategic concerns for preserving large cash reserves. The present high market values mostly guide Buffett's cautious approach to investing since they sometimes result in a lack of value-driven chances. These surroundings force him to save a lot of money instead of using capital on expensive companies. His approach is based on discovering significant value at reasonable prices; so, he likes the protection and preparedness that cash offers when such chances are few because of distorted market values.
Particularly with his investments in (OXY), Buffett's recent actions in the energy sector show great benefit from this calculated wealth buildup. Buffett's (BRK.B) was positioned to dramatically increase its ownership in (OXY) when market conditions changed, and the energy sector presented a profitable opening. Berkshire's capacity to purchase shares without outside funding helped it to accumulate a sizable portion of (OXY). The large financial reserves Buffett had enabled him to act quickly and forcefully when a worthwhile investment opportunity at last surfaced.
Moreover, a key element of Buffett's approach to risk management is carrying cash. It serves as a financial moat shielding (BRK.B) from having to sell other assets at a loss in recessionary times. This feature of liquidity guarantees that the business can negotiate financial uncertainty without sacrificing its investment objectives, therefore acting as a barrier against possible market corrections or economic downturns. The deliberate use of cash reserves during the purchase of OXY shares emphasizes how Buffett uses liquidity not just to protect the portfolio but also to grab investment opportunities matching with his long-term investing criterion. In Berkshire Hathaway's larger investment plan, this approach stresses cash not only as a reserve but also as an active strategic tool.
Buffett's Past Utilization Of Cash
Buffett's deliberate management of cash reserves has regularly let (BRK.B) take advantage of market downturns and buy distressed assets at discounted prices, a strategy that has greatly increased long-term shareholder value. Although there are many historical precedents, a couple especially show this approach clearly.
Buffett leveraged Berkshire's large cash reserves to offer critical funding to businesses like (GS) and (GE) during the financial crisis of 2008, when many businesses were barely surviving. Buffett obtained lucrative terms only by buying preferred stocks with appealing dividend yields and warrants for future purchases at cheap prices, therefore leveraging his available liquidity and the dire conditions of the sellers. These actions not only gave Berkshire significant profits when the market healed but also confirmed its standing as a financial powerhouse able to help big businesses in crisis.
Further noteworthy is Berkshire's early 2010s stake in (BAC). During a time the bank was rebuilding from the collapse of the housing market, Buffett bought $5 billion in preferred shares. Along with stabilizing the business, this calculated use of cash made great profits for Berkshire as the banking industry healed.
These events highlight how important Buffett's cash reserves have been in enabling Berkshire to make opportunistic investments that others would not be able to afford, hence supporting his reputation for strategic vision and patience. These purchases have shown great long-term value development, proving the continuing significance of liquidity in an investing plan.
Implications For Current Market Conditions
Given the changing interest rates, ongoing inflation, and uncertain market liquidity of today's economic environment, Warren Buffett's choice to keep significant cash reserves is especially illuminating. Based on current economic data, one finds a complex climate in which conventional investments can carry more risk. Designed to fight inflation, rising interest rates have the double impact of raising borrowing costs, so lowering market values and company profitability. Under such conditions, Buffett's inclination for cash holdings shows a defensive approach meant to protect assets from possible declines and market volatility.
Comparatively, this conservative approach reminds me of his attitude during the early 2000s dot-com bubble implosion and the 2008 financial crisis, where fast and strategic purchases within market turbulence were made possible by great cash reserves. But today's economic situation also differs greatly in terms of global economic interconnectedness and the speed of information flow, which can affect the time and type of Buffett's investments. His present cash-heavy posture may also represent a mistrust of the present high valuations in technology and other growth industries, repeating prior events whereby he eschewed overpriced markets in favor of waiting for more favorable conditions.
What Investors Can Learn From Buffett’s Strategy
Warren Buffett's cash holding technique teaches important lessons that individual investors can employ to improve their own investment methods. Buffett's approach emphasizes the need to keep enough liquidity not just as a defense against market downturns but also to grab possible investments that might become unannounced. Personal investors can avoid the usual mistake of being too leveraged by copying this strategy, therefore guaranteeing they have the freedom to move when rare chances arise free from the pressure of bad market conditions.
One must strike a balance between prudence and opportunism. Keeping cash can be seen not only defensively but also as an active approach ready to take advantage of market inefficiencies. This balanced view helps investors to negotiate financial markets more boldly and make deliberate actions in line with long-term financial objectives.
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2 월 전
BRK.B (Berkshire Hathaway) Weekly Analysis
By: TrendSpider | January 3, 2025
• Warren Buffett’s Berkshire Hathaway has started putting its massive $325 billion cash pile to work, recently adding to its stakes in Occidental Petroleum, Sirius XM, and VeriSign. SIRI, a leader in satellite radio, has struggled this past year, while VRSN, a dominant force in domain registrations, continues to deliver strong margins. These moves hint at renewed market optimism from the Oracle of Omaha.
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gfp927z
2 월 전
Looking at the VRSN, POOL, DPZ buys, since these are relatively small positions (by Berkshire standards), they are most likely Weschler / Combs picks. There are some similarities in their charts -- all former strong LT growth stocks that went flat in recent years. The DPZ and POOL charts have been flat for ~ 4 years, and VRSN flat for almost 6 years. So definitely a pattern here in the stock selection process.
Other interesting similarities include the relatively large short positions in POOL (8-10% range) and DPZ (6-8%), although VRSN is only 2-3% range. The balance sheets are all decent, with no red flags, so not too much to get in the way of a recovery. Verisign has phenomenal margins (56-69%) and ROA is 42%.
It would be interesting to see the bull case for these stocks, and the factors indicating a revival in their businesses. Lots of investors are undoubtedly analyzing the Weschler / Combs picks to get a feel for the style / approach of the new guys.
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gfp927z
2 월 전
>>> All 41 Stocks Warren Buffett Has In Berkshire Hathaway's Portfolio
Forbes
by Catherine Brock
Updated Dec 3, 2024
https://www.forbes.com/sites/investor-hub/article/all-stocks-warren-buffett-berkshire-hathaway-portfolio/
TABLE OF CONTENTS
Understanding Warren Buffett's Investing Strategy
Warren Buffett's Top 10 Investments
Berkshire Hathaway's Other Holdings
Recent Changes To The Portfolio
Why Is Warren Buffett Known As One Of The Best Investors?
Billionaire investor Warren Buffett has the job of delivering value to the shareholders of Berkshire Hathaway (BRK.A)(BRK.B), the massive conglomerate he runs. Buffett's preferred value-creation strategy involves buying good companies outright. But when the timing is right, he will also take partial ownership positions via public stock trades.
Investors watch Buffett's public stock moves closely for inspiration. He is known for his methodical investing process, and his trades signal where he sees value and where he doesn't. See what takeaways you can gather from this review of the entire Berkshire Hathaway stock portfolio, overseen by the Oracle of Omaha himself.
Understanding Warren Buffett's Investing Strategy
Buffett is a value investor who favors proven business models, ironclad competitive advantages and savvy leadership teams. He chooses reliable companies he can hold for the long term, in part because he doesn't believe it's possible to time the market.
The value approach involves estimating a company's intrinsic value and using that number to set a maximum buy price. The target price would incorporate a margin of safety to minimize downside risk and enhance upside potential. As an example, if Buffett decides Company A has a fair value of $100 per share, he might not want to pay more than $65 for it. In that case, the margin of safety is 35%.
If Company A stock is trading around $100, it isn't investable. If a temporary circumstance, such as a market crash, pulls the price down to $65, it may be time to buy. You can see this in action during weak markets when Berkshire deploys more cash into stock shares.
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Warren Buffett's Top 10 Investments
The SEC requires Berkshire Hathaway to report its public stock holdings quarterly via Form 13F. Berkshire also discloses "insider" trades on Form 4. The conglomerate is an insider where it owns 10% or more of another company's outstanding stock.
All 41 Warren Buffett stocks below are compiled from Berkshire's Form 13F as of June 30, 2024, plus subsequent Form 4 filings related to the Bank of America (BAC) position. Position values are calculated from stock prices as of September 9, 2024.
The top 10 stocks in the Berkshire Hathaway portfolio are:
Apple (AAPL): $87.37 billion
American Express Company (AXP): $38.09 billion
Bank of America (BAC): $34.14 billion
Coca-Cola (KO): $28.79 billion
Chevron (CVX): $16.78 billion
Occidental Petroleum (OXY): $13.38 billion
Moody's (MCA): $11.90 billion
Kraft Heinz (KHC): $11.73 billion
Chubb Limited (CB): $7.88 billion
Davita (DVA): $5.44 billion
Berkshire Hathaway's Other Holdings
Smaller Berkshire Hathaway stock positions range in value from $3.29 billion for Citibank to $9 million for Atlanta Braves Holdings. Of note are several positions issued by Liberty Media, which have since been restructured to split off the Sirius XM satellite radio business. Interestingly, the Berkshire portfolio also includes two small S&P 500 ETF positions with an aggregate value of $42 million.
Here are the remaining positions in the Berkshire portfolio, after the top 10:
Citigroup (C): $3.29 billion
Kroger (KR): $2.61 billion
Visa (V): $2.36 billion
Verisign (VRSN): $2.33 billion
Mastercard (MA): $1.94 billion
Amazon (AMZN): $1.74 billion
Liberty SiriusXM Group (LSXMK): $1.56 billion
Nu Holdings Ltd (NU): $1.47 billion
Aon PLC (AON): $1.43 billion
Capital One Financial (COF): $1.41 billion
Charter Communications (CHTR): $1.25 billion
Ally Financial (ALLY): $1.15 billion
T-mobile (TMUS): $911 million
Liberty SiriusXM Group (LSXMA): $786 million
Formula One Group (FWONK): $585 million
Louisiana Pacific (LPX): $561 million
Liberty Live Group (LLYVK): $429 million
Floor & Décor Holdings (FND): $427 million
Sirius XM Holdings (SIRI): $355 million
Heico (HEI.A): $267 million
Ulta Beauty (ULTA): $263 million
Liberty Live Group (LLYVA): $191 million
NVR (NVR): $102 million
Diageo PLC (DEO): $29 million
Lennar (LEN.B): $28 million
Jefferies Financial Group (JEF): $25 million
Liberty Latin America (LILA): $24 million
Vanguard 500 ETF (VOOVanguard S&P 500 ETF 0.0%): $22 million
SPDR S&P 500 ETF (SPYPrincipal Shareholder Yield Index ETF 0.0%SPDR S&P 500 ETF Trust 0.0%): $21 million
Liberty Latin America Class C (LILAK): $12 million
Atlanta Braves Holdings (BATRK): $9 million
Recent Changes To The Portfolio
A comparison of recent filings reveals where Buffett is trimming or enhancing Berkshire's stock holdings. Form 4 shows several liquidations of Bank of America, reducing the portfolio's share count to about 864 million shares as of September 4, from more than 1 billion on June 30, 2024.
During the second quarter, Berkshire Hathaway also sold 389 million shares of Apple and exited positions in Paramount Global (PARA) and data warehouse provider Snowflake (SNOW). Additionally, Berkshire reduced its holdings in Chevron, Capital One Financial, Floor & Décor Holdings and T-Mobile.
Also in the quarter, Berkshire opened new positions with Ulta Beauty and aerospace parts provider Heico. Additionally, the conglomerate increased its ownership of Occidental Petroleum with the purchase of 7.2 million shares. Berkshire now owns more than 25% of the oil and gas company.
Berkshire also shuffled around its Liberty Media and Sirius holdings in advance of the restructuring transactions that were implemented on September 9.
Why Is Warren Buffett Known As One Of The Best Investors?
Buffett started investing when he was 10 years old and took the helm at Berkshire Hathaway when he was 35. At the time, Berkshire was a textile manufacturer. Today, in Buffett's 94th year, Berkshire Hathaway is a diversified holding company and S&P 500 constituent worth nearly $1 trillion. Buffett himself is worth an estimated $142 billion.
He has documented his time at Berkshire with annual letters to the company's shareholders. Some of Buffett's most memorable quotes have come from these letters, mixed in among his updates on different areas of the business. He also includes a running annual comparison of Berkshire's market value growth and the growth in the S&P 500. There isn't a consistent winner every year, but there is a clear winner over time.
Between 1965 and 2023, Berkshire Hathaway grew at a compound annual rate of 19.8%—nearly double the S&P 500's 10.2%. While other investors have beaten the market by wider margins, none have done it for as long as Buffett has.
He has proven, repeatedly, that investors don't have to trade heavily or time the market to create wealth. The approach can be so much simpler: Buy good companies at value prices and hold them indefinitely. In this strategy, compounding does the heavy lifting to create outsized gains over time.
gfp927z
2 월 전
Bar, For LT buy / hold discipline, it also helps to have mountains of built up cap gains, as you have. That way it would be too costly to sell and pay the tax, so the incentive is to contiunue to hold, So the gains compound, and you have a $ machine. Buffett talks about the power of compounded returns over time being the key to wealth building -
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gfp927z
2 월 전
Bar, >> too much in fixed income <<
Yes, the LT return of bonds is dwarfed by the S+P 500, but having those relatively safe bonds reduces overall volatility, and thus prevents the need for as much Tagamet. So they serve an essential role if it allows an investor to 'stay the course' on the stock side.
Fwiw, I have a 50% allocation in bonds (3 year T-Note ladder), and the stability it provides makes it possible to maintain the stock allocation. Unfortunately the bond returns after inflation will be minimal, but without those bonds I wouldn't be able to stomach the stock allocation angst.
I'm a nervous nellie though, and the 25% allocation I have in stocks is a constant worry. Buffett and Peter Lynch both said that if a 20% or 30% drop in the stock market would keep you up at night, you shouldn't be in the stock market. I'm more comfortable with the 'hit and run' approach, grabbing the profits when they build up, and then retreating to the safety of cash. That's something you have to change though, to get the LT benefit of owning stocks. Fwiw, the last 5 years have been so choppy, the 'in and out' approach has actually done better than buy / hold, but that performance isn't likely to be repeated.
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gfp927z
2 월 전
Bar, Yes, using the S+P 500 saves a lot of time researching individual stocks. Buffett says he reads 500 pages of info per day, mostly stock related, so not having to do that would free up a lot of time.
Btw, SPLG has an ultra low expense ratio --> 0.02% vrs 0.09% for SPY, so even lower than VOO or IVV (both 0.03%). The downside is the daily volume is lower so it's bid/ask spread is wider. So SPY is used more by active traders, and SPLG for LT buy / hold.
A nice aspect with the S+P 500 index is you get the Mag 7 side, but in lower amounts than with the QQQ. And you also get everything else, so all bases are covered. Then just add a group of favorite individual stocks, and the stock allocation is complete. We owe a debt of gratitude to Jack Bogle -
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gfp927z
2 월 전
Bar, OT - Plant based protein fizzled as an investment fad, but using more plant protein as a substitute for animal protein is still destined to increase based on demographics. With over 7 bil people on the planet, there just isn't enough animal protein to go around. Large food companies already use tons of soy protein in their processed products, also pea and oat protein, but most of that is to improve texture, and not for the nutritional benefit of the protein.
Replacing animal protein with fungi (mushrooms) and algae protein seems like a promising area (Meati Foods). Not that I'd invest in it, but it's interesting. A really wild approach is 3-D printed food protein (Steakholder Foods - STKL), but unsurprisingly the stock has bombed out. Hopefully the ultimate answer isn't 'Soylent Green', yikes.
But investment-wise, you are right to avoid these areas. While they are intriguing, better to follow Buffett and go with the junk food stocks like McDonalds, Pepsico, Mondelez, and for dessert maybe stop at Dairy Queen :o) And for the resulting obese and sickly public, add in some Big Pharma drug stocks, and then some Service Corp Intl (funeral services).
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gfp927z
2 월 전
>>> Chubb Limited (NYSE:CB)
https://finance.yahoo.com/news/chubb-limited-cb-best-cash-174408177.html
Operating Cash Flow (TTM): $14.8 billion
Chubb Limited (NYSE:CB) ranks third on our list of the best cash-rich stocks that pay dividends. The insurance company offers a wide range of related products and services to its consumers. Insurance stocks are notable for their robust pricing power, which remains strong regardless of economic conditions. After catastrophic losses, insurers can raise premiums, and even when claims are lower, they can justify increases by highlighting future risks. In essence, insurers function as reliable, profit-generating entities.
Chubb Limited (NYSE:CB) stands out due to its focus on high-income customers, particularly in the homeowner insurance sector. Wealthier individuals are less likely to change their spending habits or default on bills and premiums during mild economic downturns, offering greater stability for the company. In the third quarter of 2024, the company reported a net income of $2.32 billion, which showed a 13.8% growth from the same period last year. The stock has returned by over 21% since the start of 2024.
In Q3, Chubb Limited (NYSE:CB) reported an operating cash flow of $4.55 billion, and its trailing twelve-month operating cash flow comes in at $14.8 billion. This solid cash position has allowed the company to raise its payouts for 31 consecutive years. Its quarterly dividend comes in at $0.91 per share for a dividend yield of 1.32%, as recorded on December 16.
The London Company made the following comment about CB in its Q3 2024 investor letter:
Initiated: Chubb Limited (NYSE:CB) – CB engages in the provision of commercial and personal property and casualty insurance, personal accident and health (A&H), reinsurance, and life insurance. While the company is headquartered outside the U.S., roughly 2/3 of its profits are generated in the U.S. with Asian markets representing another 20% of earnings. CB has a portfolio of top-performing, multibillion-dollar businesses that have substantial scale and yet potential for growth. CB has a culture of superior underwriting discipline, and management has a strong track record of expense control. CB also has a well-balanced mix of business by customer and product, with extensive distribution channels. We are attracted to CB’s globally diversified business model, superior underwriting and expense management, consistent and best-in-class profitability, upside potential from growth in Asia, and the potential to benefit from higher interest rates in its investment portfolio.
As per Insider Monkey's database of Q3 2024, 51 hedge funds held stakes in Chubb Limited (NYSE:CB), growing from 46 in the preceding quarter. These stakes are worth over $10 billion in total. Warren Buffett’s Berkshire Hathaway owned the largest stake in the company, valued at $7.8 billion.
Overall CB ranks 3rd on our list of the cash-rich dividend stocks to invest in now. While we acknowledge the potential of CB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
gfp927z
2 월 전
Bar, OT - >> S+P 500 <<
I've been using the S+P 500 ETFs (VOO, SPY, IVV, SPLG). Using four makes it easier to take occasional profits without getting into complicated cost basis calculations on partial positions, etc.
Previously I had been using the S+P 500 ETFs for half of the stock allocation, and individual stocks for the other half. But the S+P 500 is so simple, it seemed like a better way to go, and is what Buffett recommends for most investors. Being a 'collector', I had trouble limiting the number of individual stocks, and ended up with way too many to follow. Your approach of using the index, plus maybe 15 - 20 individual stocks would make a lot of sense, but I got carried away and ended up with over 200 stocks, lol. Nice LT stocks, but --> 'too much of a good thing' :o)
Fwiw, here was the full list (link below, see I-Box). I started with 20, then went to 50, then 100, and before long there were over 200. Only small positions in each, but it got out of hand. Part of the rationale was to make it too cumbersome to sell, and thus ensure long LT buy / hold. Using only the S+P 500 index makes it too easy to take profits, but I guess no system is perfect. I always have the urge to grab profits as they build up, which has actually worked well in recent years with the choppy market, but the better strategy to just sit tight, as you've been doing for decades.
https://investorshub.advfn.com/5G-Telecom-Sector-37555
(Note - the stocks with a blue rectangle designation to the right were fairly deep 'turnarounds', but I've modified that strategy to stocks only down by 10-15%, since these usually recover much faster and more predictably. Buffett said he avoids deep turnarounds since they don't usually turn around).
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gfp927z
2 월 전
Bar, I figure Heico is probably a Weschler / Combs pick, since it's a small position. But it's been a nice performing stock over the long term. Currently down over 15% from the Nov high, so could be a good buying opportunity.
A lot of stocks were oversold even before the recent dive, so looks like many bargains out there. Fwiw, I picked up a little Chubb today, which was Buffett's 'mystery stock' from earlier in the year. In the insurance broker sub-sector I also picked up some Marsh & McLennan (MMC), which had been a Berkshire holding a few years ago, and also some Arthur J. Gallagher (AJG). Both have been great long term performers, with phenomenal LT charts. Progressive (PGR) is another great one, and a key competitor to Geico.
Fwiw, I've been mainly using the S+P 500 for the stock allocation, but with so many great stocks getting hit it's hard to resist :o) It will be interesting to see if Buffett starts deploying some of that mountain of cash soon. Looks like he picked up more OXY, which was down to 45 yesterday, so a bargain compared to a few months ago. Not much of a pullback for Apple though, with an all time high today.
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