gfp927z
3 weeks ago
Shiller P/E ratio - >>> The Oracle of Omaha's $56 billion silent warning foreshadows potential trouble for Wall Street
https://finance.yahoo.com/news/warren-buffetts-56-billion-silent-092100169.html
Although Warren Buffett has consistently shied away from offering negative takes on the U.S. economy and/or stock market during his nearly six-decade tenure as CEO of Berkshire Hathaway, $56 billion of net-equity security sales over an 18-month stretch speaks volumes without the Oracle of Omaha having to say a word.
The culprit for this consistent net-selling activity looks to be a historically pricey stock market and the irrational behavior of some of its participants.
In Buffett's annual letter to shareholders that was released in February, he had this to say about the "casino-like behavior" he wants no part of:
Though the stock market is massively larger than it was in our early years, today's active participants are neither more emotionally stable nor better taught than I was in school. For whatever reasons, markets now exhibit far more casino-like behaviors than they did when I was young. The casino now resides in many homes and daily tempts the occupants.
At the end of the day, Warren Buffett and his team want a fair deal on a great business, and they aren't willing to waiver from this ideal. As the S&P 500's Shiller price-to-earnings (P/E) ratio shows, there simply aren't many good deals at the moment.
The Shiller P/E ratio, which is also known as the cyclical adjusted price-to-earnings ratio (CAPE ratio), is based on average inflation-adjusted earnings from the last 10 years. This differs from the traditional P/E ratio which only examines trailing-12-month earnings. The beauty of the Shiller P/E averaging earnings over a 10-year period is that it minimizes the impact of one-off events (e.g., the COVID-19 lockdowns).
As of the closing bell on May 3, the S&P 500's Shiller P/E stood at 34.05. This is nearly double its average reading of 17.11 when back-tested to 1871, and it's the third-highest reading during a bull market in over 150 years.
Perhaps the bigger concern is what's historically followed the five previous instances where the Shiller P/E ratio surpassed 30 during a bull market rally. Following all five prior instances, the S&P 500 or Dow Jones Industrial Average went on to lose between 20% and 89% of their respective value. Though the Shiller P/E ratio isn't a timing tool -- i.e., stocks can stay pricey for multiple quarters, if not years -- readings above 30 tend to be a precursor to big moves lower in the stock market.
The lack of desire by Buffett and his team to buy stocks during an 18-month stretch suggests they expect valuations to contract.
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gfp927z
3 weeks ago
>>> Berkshire Hathaway’s Jain Sells Over Half of Class A Shares
Bloomberg
by Alexandre Rajbhandari
September 12, 2024
https://finance.yahoo.com/news/berkshire-hathaway-jain-sells-over-143854442.html
(Bloomberg) -- Berkshire Hathaway Inc.’s vice chair of insurance operations, Ajit Jain, sold $139 million worth of his Class A shares in Warren Buffett’s conglomerate.
Jain, one of Buffett’s top lieutenants, disposed of 200 of the Class A shares for about $695,418 each, according to a regulatory filing Wednesday. The disposal means the longterm executive is left with control of 166 such shares, 61 of which he directly owns.
When reached by phone, Jain declined to comment. Berkshire Hathaway didn’t immediately respond to a request for comment.
The move marks a shift for Jain, who added 50 Class A shares to his holding between March 2023 and March this year. Still, he has been trimming his Class B stake in the conglomerate over the years, selling more than 70,000 such shares from March 2020 to March 2024, according to past proxy filings.
The executive joined Berkshire Hathaway in 1986 to work on the conglomerate’s insurance operations, which include car insurer GEICO.
Buffett has long praised Jain, saying in 2017 that he’s probably made more money for Berkshire than Buffett has. In 2018, Jain and Greg Abel were named vice chairmen of the firm, with Abel, who’s a decade younger than Jain, eventually being tapped as Buffett’s successor.
Investors have questioned whether Jain would stick around to help Abel run things once Buffett, now 94, leaves the firm. Jain still owns more Class B shares than Abel.
“We continue to be comfortable that the interests of Mr. Jain and Mr. Abel are aligned with shareholders,” James Shanahan, an analyst at Edward Jones who covers Berkshire Hathaway, told Bloomberg.
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EnchantedTitan62
1 month ago
As a decade plus owner of Warren's gem, there's plenty more holdings which include Dairy Queen, Duracell, Nebraska furniture mart, a few home builders - I think Clayton Homes, I believe he bought out Mid american energy, possibly Fruit of the Loom, Sees Candy, so many more. I'll never part with it. 🍷
gfp927z
1 month ago
The real reason Buffett loves OXY -
--> 'Carbon Capture and Storage (CCS) will grow into a $4 trillion market by 2050' (per Exxon) -
>>> What Is Carbon Capture and Storage?
Motley Fool
By Matthew DiLallo
May 23, 2024
https://www.fool.com/terms/c/carbon-capture-and-storage/?utm_source=yahoo-host-full&utm_medium=feed&utm_campaign=article&referring_guid=7e55019b-8b30-4cb6-ab10-9be59d85310d
Key Points
Carbon capture and storage captures carbon dioxide emissions for permanent storage or usage.
CCS could play a vital role in reducing global emissions.
The technology could prove to be very lucrative for oil companies.
Carbon capture and storage, or CCS, is a process that captures carbon dioxide gas emissions and safely sequesters them underground. It helps reduce carbon emissions that are harmful to the environment and contribute to climate change. Companies and governments are investing heavily in CCS to make the technology commercially viable so it can contribute to a lower-carbon world.
Understanding carbon capture and storage
Carbon capture and storage is a three-step process:
Carbon dioxide emissions are captured from a source, such as a chemical or steel plant, or directly from the atmosphere.
The captured carbon dioxide gas is transported by pipeline to a sequestration or utilization site.
The carbon dioxide is either injected into a deep underground formation for permanent storage or utilized to produce oil or a higher-value product.
CCS helps reduce carbon emissions by capturing them from the source or the atmosphere. The greenhouse gas is then permanently stored or utilized so that it doesn't cause additional harm to the environment.
What are the types of carbon capture and storage?
There are two main types of CCS technology: point-source capture and direct air capture (DAC).
Point-source capture involves installing carbon capture technology at the emissions source to capture and separate carbon dioxide from flue gas. The pure stream of carbon dioxide gas will then flow through a pipeline to a sequestration or utilization site.
A DAC system is a purpose-built facility that extracts carbon dioxide from the atmosphere. DAC technology uses an engineered mechanical system that pulls in air and extracts carbon dioxide through a series of chemical reactions.
In many ways, DAC is similar to what plants and trees do in photosynthesis, though at a faster pace and with a smaller physical footprint. However, it's a more expensive process than a point-source capture system because carbon dioxide in the air is much more diluted than flue gas from an industrial plant.
Once captured, carbon dioxide flows through pipelines to sequestration or utilization sites. Carbon dioxide is commonly used in enhanced oil recovery (EOR), where oil companies inject carbon dioxide into a legacy oil reservoir to increase pressure and raise production rates.
The process stores the carbon dioxide while boosting oil production. Captured carbon dioxide can also be permanently sequestered in a non-oil-producing underground formation or utilized for industrial applications.
Why carbon capture and storage is important
The Intergovernmental Panel on Climate Change has highlighted the role that CCS could play in reducing carbon emissions and their impact on global warming. The world is investing heavily in renewable energy sources, like wind and solar energy, to help reduce the need for carbon-based fuels.
However, countries will also need to deploy technologies that remove carbon dioxide from the atmosphere to help reduce the impact of hard-to-abate heavy industries, such as steel, cement, chemicals, and other industrial manufacturing.
Energy companies believe CCS can provide them with a dual benefit. They believe it could extend the life of fossil fuels usage while also becoming a very lucrative global market. Oil giant ExxonMobil estimates CCS will grow into a $4 trillion market by 2050. That's about 60% of the global market it sees for oil and gas by that time.
Many energy companies are investing heavily in CCS technologies. For example, Occidental Petroleum has a long history of using carbon dioxide in EOR. It's leveraging that expertise to become an emerging leader in CCS.
The company is building the world's largest DAC site in Texas. It was also an early investor in DAC technology company Carbon Engineering, which it acquired in 2023 for $1.1 billion.
The STRATOS facility will be able to capture 500,000 tonnes of carbon dioxide per year when it comes online in 2025. Occidental is working to commercialize the project by selling carbon credits to companies seeking to achieve their emission-reduction targets.
STRATOS is one of many DAC projects the company hopes to develop. It also plans to license its DAC technology. Occidental believes it could eventually make as much money from CCS as it currently does from its oil and gas production business.
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gfp927z
2 months ago
>>> Berkshire Buys Ulta Beauty and Heico Stock, Sells Snowflake in Second Quarter
Barron's
by Andrew Bary
Aug 14, 2024
https://www.barrons.com/articles/berkshire-buffett-ulta-beauty-snowflake-chubb-13f-stocks-9f755841?siteid=yhoof2
Berkshire Hathaway bought small stakes in Heico (HEI) and Ulta Beauty (ULTA) in the second quarter, while adding to its holding in Chubb (CB), according to the company’s quarterly 13-F filing released Wednesday after the market closed.
Berkshire eliminated its holding of 6.1 million shares of Snowflake (SNOW), the software company, which it bought at the time of the company’s initial public offering in 2020. That holding was worth about $1.2 billion at the end of March.
Berkshire bought 690,000 shares of Ulta Beauty that were worth $266 million at the end of the second quarter and just over a million shares of Heico, a supplier to the aerospace industry. That stake was worth $185 million on June 30.
Berkshire also bought about a million shares of insurer Chubb. It held 27 million shares worth $6.9 billion on June 30.
Berkshire trimmed its stake in Capital One Financial by about 2.6 million shares to 9.8 million shares in the second quarter.
Berkshire was a light buyer of stocks in the second quarter, purchasing less than $2 billion, while selling about $77 billion, mostly Apple
That stake fell nearly 50% to 400 million shares and was reported in Berkshire’s recently released 10-Q report for the second quarter.
Ulta Beauty stock was higher in after-hours trading, rising 13% to $371.70. The stock was down about 33% in 2024 as of the close of trading Wednesday and Berkshire appears to have taken advantage of that weakness.
Berkshire CEO Warren Buffett oversees the company’s equity portfolio of more than $300 billion, but he delegates authority over about 10% of it to investment managers Todd Combs and Ted Weschler. They operate independently of Buffett.
The new holdings in Heico and Ulta Beauty could be investments by Combs or Weschler given their small size. Buffett tends to accumulate holdings of at least $3 billion in order to move the needle given the large size of the Berkshire portfolio and Berkshire’s market capitalization of $940 billion.
The Snowflake holding is believed to have been initiated by Combs. At the time of the Snowflake IPO in 2020, the company’s CEO Frank Slootman said most of his Berkshire interactions had been with Combs.
The Snowflake investment likely wasn’t particularly profitable for Berkshire—a demonstration of the dangers of buying richly priced IPOs. Snowflake went public in late 2020 at $120 and its stock price averaged about $150 a share in the second quarter. The stock is below that level now, trading down 1.5% to $125.41 in after-hours action on Wednesday.
Berkshire eliminated its holding in Paramount Global in the second quarter—a move that Buffett telegraphed at his company’s annual meeting in May.
The company reduced its sizable holding in Chevron by four million shares to about 119 million shares that were worth $18.6 billion on June 30. That move was disclosed in the 10-Q.
Berkshire also bought about 92 million shares of Sirius XM Holdings, the satellite radio company, in the second quarter. It held 133 million shares on June 30, a stake that is now worth about $400 million. Berkshire also is the largest shareholder of Liberty Sirius XM Holdings, a tracking stock for Sirius XM, with a stake of about 30%. The two companies are due to merge in September.
DiscoverGold
2 months ago
Berkshire Hathaway Earnings: Strong Insurance Results Continue to Lift Revenue and Profitability
By: Morningstar | August 5, 2024
• Record cash on hand as Buffett slashes Apple stock position.
Wide-moat-rated Berkshire Hathaway BRK.A/BRK.B reported adjusted, second-quarter operating results that were more or less in line with our expectations. We are leaving our $640,000 per Class A and $427 per Class B share fair value estimates in place.
Second-quarter (first-half) revenue, including unrealized and realized gains/losses from Berkshire’s investment portfolios, decreased to $117.5 billion ($209.3 billion) from $125.6 billion ($245.7 billion) in the year-ago period(s) as the company lapped significant unrealized and realized investment gains during the first half of 2023. Excluding the impact of investment gains/losses and other adjustments, second-quarter operating revenue increased 1.2%, and first-half OR increased 3.2% year over year to $93.7 billion ($183.5 billion).
Operating earnings, exclusive of investment gains/losses, increased 15.5% (26.0%) year over year to $11.6 billion ($22.8 billion) during the June quarter (first half of the year), with strong insurance results continuing to compensate for weakness in other segments. When including the impact of the investment gains/losses, reported operating earnings decreased to $30.3 billion ($43.1 billion) from $35.9 billion ($71.4 billion) in the prior year’s period(s).
Book value per share, which still serves as a decent proxy for measuring changes in Berkshire’s intrinsic value, increased 4.5% sequentially and 11.4% year over year to $415,668 (from $397,627 and $372,966 at the end of March 2024 and June 2023, respectively).
Record Cash on Hand As Berkshire Slashes Apple Stock
Of note was the fact that Berkshire sold off close to half of its Apple AAPL stake and invested the proceeds in US Treasury Bills.
The company closed out the second quarter with a record $276.9 billion in cash and cash equivalents, up from $189.0 billion at the end of March 2024. Free cash flow reached $9.1 billion in the second quarter, and Berkshire also sold on a net basis $75.5 billion of its stock holdings (primarily Apple, from what we can tell) in an apparent derisking move (noting that Apple’s shares ran up 23% during the second quarter).
Read Full Story »»»
DiscoverGold
gfp927z
2 months ago
>>> What Buffett's huge Apple sale really means
The Street
by Charley Blaine
Aug 4, 2024
https://finance.yahoo.com/news/buffetts-huge-apple-sale-really-215832027.html
When Berkshire Hathaway (BRK.B) announced its earnings on Saturday, much was made of a note deep in its detailed filing.
Berkshire has been selling lots of shares of Apple (AAPL) , and the value of its investment had fallen from $174.3 billion on December 31 and $135 billion at the end of the first quarter to $84.2 billion as of June 30. From December to June, that's a decline of about 50%.
Berkshire owned 915.6 million shares of Apple as of Jan. 2, according to Apple's proxy statement. The share count is probably now about 450 million shares, worth around $88 billion as of Friday.
At the company's annual meeting in May, Chairman Warren Buffett had told shareholders that Berkshire was trimming its Apple stake, largely because its investment in the tech giant had done so well it had huge capital gains. Other than that, he said at the time, he loves what Apple does.
(Buffett started investing in Apple in 2016, a late-comer to the tech party. The late Charlie Munger, Buffett's long-time partner, talked Buffett into investing in Apple, telling the Oracle of Omaha it was more a consumer stock than a tech stock.)
A magnificent stock pick
Selling some shares now may also be simple prudence. Selling now reduces Berkshire's risk to a frothy stock market. Either way, Buffett wasn't complaining about the long-term capital gains tax that might hit — about 20% of the profit. But when you've made so much money from one stock, you can afford the taxes.
How big a gain? From the shares bought between 2016 and 2018, the gain would be over 400%. For shares bought between 2022 and the first quarter of 2023, the last time Berkshire was known to add to its Apple position, the gain would be 20% before taxes.
There is a counter-narrative. Some Apple watchers, plus CNBC's Jim Cramer, think there may also be concern about Apple's big China business. Revenue in products and services in China was off 6.5% from a year ago in Apple's fiscal third quarter and off 10% for the fiscal year-to-date.
The political tensions between China and the United States may be a worry, too.
Apple shares holding their own in market turmoil
Apple investors seem more confident about the company now. The stock was up 23.6% in the second quarter of 2024, after a 10.9% loss in the first quarter. It's up 3.9% in the third quarter.
Moreover, in a week where Amazon.com (AMZN) fell 8%, Microsoft (MSFT) dropped 4%, and Nvidia (NVDA) fell 5.1%, Apple was up 1%. It is up 14.2% this year.
Apple has returned to being the most valuable company in the world with a market capitalization of $3.37 trillion. That is still a bit pricey: Its forward price-earnings ratio is about 30. The Standard & Poor's 500's forward p/e is about 22, down from 22.72 as stocks were peaking.
So, what has Berkshire and Buffett done with the cash realized by these gains? Mostly put them in cash and Treasury bills. An easy source of cash to pay the capital gains taxes — if Berkshire can't find a way to shelter the gains.
More importantly, Buffett and Berkshire are waiting.
Remember, Buffett (and Berkshire Hathaway) is a classic value investor who doesn't chase the hot stock. Buffett and Berkshire look for great companies appropriately priced. (Munger had weaned Buffett off just buying cheap stocks.)
So, like a lot of investors, Buffett and his investment management team are watching the stock market's current volatility to run its course. In other words, looking for good buys at better prices. They have the cash.
gfp927z
2 months ago
Chubb - >>> Berkshire Hathaway Added 26 Million Shares of This Stock in the Past 3 Quarters: Here's Why It's a Smart Buy Today
by Courtney Carlsen
Motley Fool
Aug 3, 2024
https://finance.yahoo.com/news/berkshire-hathaway-added-26-million-222400906.html
Since becoming CEO at Berkshire Hathaway in 1965, Warren Buffett has delivered 19.8% compound annual returns to investors, or enough to turn a $100 investment into $4.4 million today. Buffett's extended track record of success is one reason investors eagerly await the release of Berkshire's quarterly report showing the stocks the conglomerate bought and sold during the quarter.
Over the past three quarters, Berkshire Hathaway has bought shares of Chubb stock hand over fist and kept its buying confidential for two quarters. Berkshire owns 26 million shares of the insurer as of March 31, worth roughly $7.2 billion today. Here's why Chubb is a smart buy for investors today.
Why Buffett is drawn to insurance investments
Buffett loves the insurance industry, going back to his days as a student at Columbia Business School. At the time, Buffett learned under Benjamin Graham, who invested in GEICO in 1948. It was one of the best-performing assets during Graham's career.
When Buffett acquired Berkshire Hathaway in 1965, it was a failing textile company that was barely staying afloat. In 1967, Berkshire acquired the insurer National Indemnity, which Buffett credits as a turning point in Berkshire Hathaway's history.
Insurance companies' cash flows make them appealing investments, which is why Buffett continues to invest heavily in them. A few years ago, Berkshire Hathaway acquired Alleghany for $11.6 billion, adding to its list of insurance companies owned by Berkshire Hathaway, including GEICO, National Indemnity, Berkshire Hathaway Primary Group, and Berkshire Hathaway Reinsurance Group.
Chubb is one of the largest and best at managing risk
Chubb is one of the world's largest property and casualty insurance companies and underwrites various policies, including personal automotive, homeowners, accident and health, agriculture, and reinsurance.
The company has an excellent risk management history, which you can observe by its combined ratio. This essential insurance metric is the sum of claims costs (how much an insurance company pays out on a policy) and expenses (like employee compensation or fixed overhead) divided by the premiums the company collects.
Over the past two decades, Chubb's average combined ratio was 90.8%, well below the industry average of 100%. This matters because it translates into free cash flow, which the company uses to pay dividends, buy back shares, or invest in things like bonds and stocks. Chubb's solid growth is why it has raised its dividend payout for 31 consecutive years.
Another benefit of investing in insurance is the timing of cash flows. Insurers collect premiums upfront and pay out claims down the road. In the time between, the company can invest this money, known as "float," usually in short-term Treasury bills. As policies expire, companies keep their profits and can build an extensive investment portfolio over time.
Chubb has a $113 billion investment portfolio primarily invested in fixed-income securities. Last year, it earned $4.9 billion in investment income, up 32% year over year, and its yield on average invested assets improved from 3.4% to 4.2% as it benefited from rising interest rates. Through the first six months of 2024, Chubb's net investment income has increased another 27% from last year.
Chubb is well positioned
The Federal Reserve is projected to cut interest rates sometime this year and into next, which could negatively impact Chubb's investment portfolio in the short term. However, some longtime market participants think interest rates could stay elevated.
For example, Howard Marks of Oaktree Capital Management has described a "sea change," saying, "For various reasons, the Fed is not going to go back to the ultra-low interest rates over the last 13 years" in a 2023 interview on the Motley Fool Money podcast. If that's the case, insurers like Chubb will benefit by earning more interest income than was possible in the decade and a half prior.
JPMorgan Chase CEO Jamie Dimon also cautioned that "there are still multiple inflationary forces in front of us" due to fiscal deficits, rising interest rates, and stubbornly high inflation. Chubb is already a solid company to own, and if inflationary pressures persist, it has the pricing power to adapt to rising costs, giving it stellar potential for the next decade and beyond.
gfp927z
2 months ago
Apple - >>> Why Warren Buffett’s Berkshire Dumped 55.8% Of Its Apple Stock
Forbes
by Peter Cohan
Aug 3, 2024
https://www.forbes.com/sites/petercohan/2024/08/03/why-warren-buffett-dumped-56-of-berkshires-apple-stock/
Warren Buffett dumped 55.8% of Berkshire Hathaway’s holdings of Apple stock in the first six months of 2024, according to Reuters.
Since the end of 2023 Berkshire has sold 505 million Apple shares — 115 million in the first quarter and another 390 million in the second quarter. As of June 30, that represents a 55.8% reduction in Berkshire’s Apple holdings since the beginning of the year, Reuters noted.
Why did he sell so much Apple stock? Should other investors follow suit?
I do not know why Buffett sold such a huge chunk of Berkshire’s Apple stock. However, Apple’s tepid growth rate and high valuation suggest the famed investor may have concluded the stock’s prospects are not great.
While Apple’s AI offerings could give consumers a reason to upgrade, the iPhone maker’s declining revenues in China, its regulatory woes, and the absence of a compelling growth vector — particularly if Apple Intelligence does not prove to be a killer app — could mean Apple will be lucky to achieve low single digit revenue growth.
I suspect other investors will take a cue from Buffett.
Apple has been a good investment. Since Buffett began buying he iPhone maker’s stock in 2016, Berkshire has spent roughly $40 billion. Apple shares have delivered a total return of nearly 800% since Berkshire first disclosed its stake, noted the Financial Times.
gfp927z
2 months ago
Bank of America - >>> Warren Buffett Just Sold $1.5 Billion of Berkshire Hathaway's Second-Largest Holding. Here's Why.
Motley Fool
by Adam Levy
Jul 24, 2024
https://finance.yahoo.com/news/warren-buffett-just-sold-1-081700022.html
Warren Buffett keeps selling stocks. The Oracle of Omaha has been a net seller of equities for his company's portfolio in each of the last six quarters, as reported by Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). The odds are good he'll make it seven in a row when Berkshire reports next month, and now he's going for eight with another major stock sale.
A recent filing with the U.S. Securities and Exchange Commission (SEC) revealed that Buffett sold $1.5 billion of Berkshire Hathaway's second-largest equity holding, Bank of America (NYSE: BAC). The sale represents just a 3.3% reduction in Berkshire's stake in the bank but could be just the start.
There's no doubt Bank of America has been a very successful investment for Buffett and Berkshire Hathaway shareholders. And Buffett is famously quoted as saying his favorite investment holding period is "forever." So why is he selling shares now?
There are a few reasons Buffett might have sold Bank of America stock.
After the stock's strong performance over the last eight months, shares are currently trading at levels unseen since the start of 2022. Despite the strong financial and operational performance underlying that price appreciation, Buffett may believe the shares are now fully valued, so he's taking money off the table as a result.
Another reason may have less to do with the current valuation and more to do with locking in gains at a favorable tax rate. Buffett's cost basis on those Bank of America shares is just over $14, on average. That means over two-thirds of the proceeds from Buffett's sales are taxable gains.
Buffett hasn't been shy about taking gains on some of his favorite stocks lately. He sold billions worth of Apple (NASDAQ: AAPL) shares in the fourth and first quarters.
When asked why he sold Apple shares at the annual shareholder meeting in May, Buffett explained that he was happy to pay taxes at the current favorable tax rate of 21%. He expects the rate will increase in the future. However, he said he expects Apple to remain Berkshire Hathaway's largest equity holding for some time.
The same factors may have led him to take the tax hit on Bank of America shares now. That may suggest Buffett still likes the business and the stock but doesn't see it growing as quickly as it has in the recent past — at least not enough to justify paying higher taxes on the gains later.
Should you buy or sell Bank of America stock?
Bank of America saw its shares fall in price as interest rates climbed. That's because the bank has high exposure to longer-duration bonds, which currently carry low interest rates. As a result, the bank missed out on opportunities to buy securities with higher coupons as interest rates climbed.
Bank of America's decision to invest in longer-duration bonds has an outsized effect on a metric called net interest income (NII). That's the difference between the revenue generated by the bank's interest-bearing assets and the expense it pays on interest-bearing liabilities. Since the bank holds long-term bonds but has to pay market rates, NII declined as interest rates increased.
But management says NII has hit its trough. It's forecasting growth in the third and fourth quarters this year, reaching $14.5 billion in the fourth quarter.
The good news is Bank of America is poised to do well, relative to its peers if the Fed cuts interest rates (as it is expected to later this year). The knife cuts both ways, so to speak.
With a price-to-book value of 1.25, Bank of America's shares look fairly priced. Buffett's sale appears to be more about taxes than anything specific about the company or its stock.
DiscoverGold
3 months ago
Berkshire Hathaway Equity Portfolio Tops $400 Billion. The Stock Is Lagging
By: Barron's | July 10, 2024
Berkshire Hathaway's equity portfolio has moved above $400 billion led by a recent surge in the company's largest holding, Apple, which hit a record high Tuesday.
The rising value of the Berkshire equity portfolio, which is tracked by CNBC based on the most recent filings, hasn't done a lot for Berkshire's share price. It is up about 1% so far this quarter, below where it stood at the end of the first quarter.
Berkshire's Class A shares are up 0.7% Tuesday to $618,400 but are behind the S&P 500 this year with a gain of 14.3%, about three percentage points behind the index. When Berkshire peaked at nearly $650,000 in late February, it was comfortably ahead of the market. The Berkshire Class B shares are up 0.5% at $411 Tuesday.
Berkshire fans see opportunity with the stock lagging behind the portfolio and the valuation of the shares contracting.
Berkshire now trades for about 1.45 times our estimate aof June 30 book value of $425,000 per class A share and closer to 1.4 times our estimate of the current book value of $430,000 per A share. The stock peaked at over 1.6 times book earlier this year and is now in line with its five-year average.
The equity portfolio now accounts for about 45% of Berkshire's market value of $890 billion. The stock trades for about 21 times estimated 2024 earnings per share but the valuation is lower based on "look-through" earnings, a measure favorite by some Berkshire watchers that includes a pro rata share earnings of the companies in the equity portfolio.
The Berkshire portfolio is dominated by Apple, which represents about 44% of the holdings. CNBC includes all the Berkshire equity holdings in its calculation, including Kraft Heinz and Occidental Petroleum, which Berkshire carries separately under the equity method of accounting since it owns over 20% of both companies. Those two holdings total about $25 billion.
But Apple is the driver of the Berkshire portfolio even with CEO Warren Buffett cutting the Apple stake by more than 10% in the first quarter of 2024 to about 790 million shares. Some Berkshire watchers expect a further reduction in the Apple stake in the second quarter. The company is due to report results on Aug. 3.
Apple has surged 33% since the end of first quarter and hit a new high Tuesday. The stock is 0.2% at $228.25 and has risen 8% since June 30, reclaiming the top spot in the stock market from Microsoft and Nvidia.
Apple is now ahead of the S&P 500 this year. Other winners in the Berkshire equity portfolio this year include Bank of America and American Express.
Read Full Story »»»
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DiscoverGold
3 months ago
Why Investors are Betting Big on Berkshire Hathaway Class B Shares Right Now
By: Karl Montevirgen | June 26, 2024
• Berkshire Hathaway Class B shares are poised for an explosive breakout
• Fundamentally, BRK/B has been a consistent outperformer and is diversified among different sectors
• BRK/B is working its way through a symmetrical triangle formation and could breakout in either direction
Berkshire Hathaway needs no introduction. The name is synonymous with two iconic investors—Warren Buffett (the Oracle of Omaha) and the late Charlie Munger.
Currently, Berkshire's Class B shares (BRK/B) appear to be hovering at a tense standstill, poised for a major breakout either upward or downward. The shares are midpoint at a narrowing symmetrical triangle pattern. Which way is it likely to break? And is it still a worthy investment?
Why Buy Berkshire Hathaway Shares?
Here are four reasons:
1— Berkshire Hathaway tends to beat the S&P 500 over 90% of the time. In the image below, StockCharts' PerfCharts illustrates BRK/B's relative performance against the broader market.
CHART 1. PERFCHART COMPARING BRK/B TO THE S&P 500. The definition of outperformance?
2— BRK/B provides instant diversification in sectors (though not weightings). Still, the company's holdings in insurance, utilities, energy, transportation, and consumer goods are well-thought and managed (it's Warren Buffett, after all).
3— The company is loaded with cash. This is a big deal: if the market crashes, Berkshire Hathaway has plenty of ammo to take advantage of buying value stocks at a low price while everyone on Wall Street is panicking.
4— Share prices are still reasonably valued. Its P/B ratio is 1.55; you can view this using StockCharts' Symbol Summary.
Looking Back 20 Years
BRK/B may not have the most impressive SCTR score (68.5), but again, looking back over 20 years, it has averaged around the 60 range. Still, its uptrend has been nothing less than impressive.
Looking at a weekly chart, its relative performance against the S&P 500 ($SPX) shows a consistent beat, save for the years leading up to the 2008 financial crisis and the 2000 Dot.com bubble (not shown on the chart).
CHART 2. 20-YEAR WEEKLY CHART OF BRK/B. Note that not all mediocre SCTR readings indicate mediocre performance.
Is BRK/B Poised for an Explosive Move?
Take a look at BRK/B's daily chart (see below).
CHART 3. DAILY CHART OF BRK/B. It appears as if BRK/B shares are poised for an explosive move. Still, triangle formations can go either way; the trick to getting the odds in your favor is to look at the buying or selling pressure leading to the anticipated breakout.
Currently, BRK/B is working its way through a symmetrical triangle formation, which, according to Edwards and Magee in Technical Analysis of Stock Trends (1948), suggests that roughly 75% of symmetrical triangles are continuation patterns and the rest mark reversals. Still, the direction of price movement in triangle patterns is uncertain until a breakout occurs. The breakout will provide confirmation of the potential price direction.
But if you look at the momentum leading up to the anticipated breakout, the signs are bullish, as both the Chaikin Money Flow and Accumulation/Distribution Line indicate that buying pressure is on the rise.
Whether you go long following an upside breakout or before it takes place, a few points below the bottom of the triangle formation at $395 serves as a good stop loss level, as it also marks the most recent swing low. If price falls below that level, the next "technical" support level will likely be in the $370 range.
The Takeaway
Berkshire Hathaway Class B shares (BRK/B) have a lot going for them, making them a solid buy for many investors. The stock often outpaces the S&P 500, provides robust diversification, the company has ample cash reserves, and its current valuation is attractive. While the stock's near-term movement is uncertain as it navigates a symmetrical triangle pattern, momentum suggests a positive breakout could be on the horizon. But it all boils down to this: would you bet in favor of or against the Oracle of Omaha?
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gfp927z
3 months ago
>>> Warren Buffett Just Bought $435 Million of This Stock and Plans to Hold It Forever
by Adam Levy
The Motley Fool
Jun 26, 2024
https://finance.yahoo.com/news/warren-buffett-just-bought-435-085000603.html
Lately, there aren't a lot of stocks Warren Buffett has found interesting enough to add to Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) $385 billion portfolio. Buffett, through Berkshire, has made only a handful of purchases during the current bull market.
Truth be told, Buffett has sold more stocks than he's bought in each of the last six quarters. Some of his biggest sales last quarter included a portion of his top holding, Apple, as well as all of Berkshire's position in Paramount Global stock and the rest of Berkshire's stake in HP. But he's been consistently adding to some positions in 2024, including one of his biggest holdings.
So far in June, Buffett spent another $435 million on Occidental Petroleum (NYSE: OXY) to make it Berkshire's sixth-largest position.
More recent Securities and Exchange Commission filings reveal purchases of Occidental Petroleum between June 5 and June 17. Buffett has been snapping up shares of Occidental when it trades around $60 per share, and investors may want to follow his lead.
A stock Buffett plans to hold forever
Buffett originally invested in Occidental in 2019, when he purchased $10 billion of preferred shares directly from the company for Berkshire Hathaway. That $10 billion investment helped finance Occidental's acquisition of Anadarko, strengthening its position in the Permian Basin.
While that acquisition left Occidental laden with debt just ahead of a tough period for the energy market that nobody could have predicted (the COVID-19 pandemic), management admirably navigated through the challenging environment. It suspended its dividend and strategically sold off assets to deleverage its balance sheet, and it's once again on solid footing.
Buffett has since added to his position in Occidental. With the most recent $435 million purchase, Berkshire Hathaway now owns about 28.8% of shares outstanding -- a stake worth about $15.9 billion. It also still owns about $8.5 billion of preferred shares, which include warrants to buy more of the company's common stock at $59.62 a share (it currently trades around $62.90).
In his most recent letter to Berkshire shareholders, Buffett praised Occidental CEO Vicki Hollub, saying the energy stock is a holding he plans to maintain indefinitely. "Under Vicki Hollub's leadership, Occidental is doing the right things for both its country and its owners," Buffett wrote. "We particularly like its vast oil and gas holdings in the United States, as well as its leadership in carbon-capture initiatives."
Occidental will add to its leading position in the Permian Basin this year with its $12 billion acquisition of CrownRock, which is set to close in the third quarter. Hollub will likely follow the same playbook as with the much larger Anadarko acquisition, selling off non-essential assets to reduce the amount of debt on Occidental's balance sheet. It's already exploring a sale of Permian assets worth over $1 billion, according to a report from Reuters in May.
A big bet on oil prices
While Occidental is an integrated energy company, the bulk of its revenue and income comes from drilling. It's in the business of acquiring land and separating oil from rock. That means that its profits depend heavily on the price of oil.
When it announced the CrownRock acquisition at the end of last year, it estimated it could generate an additional $1 billion in annual free cash flow assuming oil prices remain above $70 per barrel.
Hollub now expects oil prices to remain in the $80 to $85 range through 2025. Oil prices took a hit after the members of OPEC+ agreed earlier this month to a plan that would extend their production cuts into 2025, but that would also allow eight member nations to start easing back from their voluntary cuts beginning in October. However, crude prices quickly recovered to around $80.
Buffett took the opportunity to buy Occidental when oil prices came down, and he has already benefited from the slight recovery. Even if oil prices remain relatively stable, Occidental is well-positioned to generate significant cash flow for its shareholders.
Should investors follow Buffett's lead?
As mentioned, Buffett is buying Occidental shares practically any time they dip below $60. At that price, the stock trades at around 14 times forward earnings. That puts it firmly in the value stock territory, but it's not as attractive a valuation as some other oil producers and integrated energy companies carry.
But Occidental, under Hollub, is far more aggressive at growing its bottom line via acquisition and cost-cutting. That could result in far better profit growth over the long run, especially if oil prices consistently move higher. Her strategy brings with it considerable risk, but it also comes with much more potential growth in the long run. In the meantime, the company is certainly stable enough, generating plenty of cash to continue growing its operations while paying a nice dividend.
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DiscoverGold
4 months ago
Warren Buffett Sells More BYD Stock
By: Barron's | June 17, 2024
Berkshire Hathaway is selling shares of the Chinese electric-vehicle maker BYD again, leaving investors wondering what Warren Buffett's company thinks about the Chinese car maker and the EV market.
On June 11, Berkshire sold about 1.3 million BYD shares listed in Hong Kong, leaving Warren Buffett's company with about 75.7 million shares worth about $2.3 billion. Berkshire didn't immediately respond to a request for comment about the sale.
That Berkshire is scaling back its holdings is nothing new. Buffett's company has been unloading stock since 2022. More than a dozen sales have taken its stake down by roughly two-thirds from the peak of about 225 million.
Berkshire might be taking profits or its management might be worried about slowing EV sales growth or more EV competition. Investors just can't be sure.
In the past, Buffett has called the auto industry difficult, while Buffett's former partner Charlie Munger praised BYD and its lead over Tesla.
BYD shares rose 1.7% in overseas trading on Monday. Its U.S.-listed American depositary receipts were up 1.8% in premarket trading, while futures on the S&P 500 and Nasdaq Composite were flat and up 0.2%, respectively.
The stock's gain isn't a shock. The sales have already happened, and Berkshire has been a seller for years.
Coming into Monday trading, BYD's Hong Kong-listed shares were up about 9% so far this year. Investors have been balancing increasing competition among EV companies against growth in sales. Through May, BYD had shipped almost 1.3 million EVs this year, about 27% more than in the first five months of 2023.
BYD sells both plug-in hybrids and all-battery electric vehicles.
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