Month: August 2022

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Lessons From Warren Buffett

Lessons From Warren Buffett: You Don’t Need to Be Good at Market Timing, Just Investing

Warren Buffett is living proof that you don’t have to spend your energy timing the stock market to be a successful investor. As Buffett notes, “we haven’t the faintest idea what the stock market is going to do when it opens on Monday.” For Buffett, more important than trying to time the market, is recognizing when a particular stock is undervalued.

“I totally missed, you know, in March of 2020,” Warren Buffett said at the 2022 Berkshire Hathaway Annual Meeting. “We have not been good at timing. We’ve been reasonably good at figuring out when we were getting enough for our money. And we had no idea when we bought anything (well, we always hoped it would go down for a while so we could buy more) and we hoped even after we were done buying and ran out of money that if it was cheap the company would keep buying, in effect, taking our interest up. I mean, that’s stuff you can learn it in fourth grade. But it’s not what’s taught in school.”

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
Brooks

Brooks Running Achieves Double-Digit Growth in Q2

(BRK.A), (BRK.B)

Berkshire Hathaway’s running shoe and fitness apparel company, Brooks Running, for the second consecutive quarter holds the top spot in the U.S. adult performance running footwear market with 21% market share based on revenue, and continued its momentum with record global revenue, up 11% compared to the second quarter of 2021.

In the face of ongoing economic and supply chain stressors, Brooks began to meet strong demand in May, keeping the company on track for projected double-digit revenue growth in 2022.

Brooks captured five of the top 25 adult performance running footwear shoes at U.S. retail in the first half of 2022: the Ghost 14, Adrenaline GTS 22, Adrenaline GTS 21, Revel 5, and Glycerin 19. The Ghost and Adrenaline maintained their positions as the top two selling franchise lines in the U.S. market, with a combined 14% of sales revenue.

“We’ve seen great excitement over our revolutionary nitrogen-infusion technology and the launch of our Glycerin 20 franchise, and we look forward to bringing the carbon neutral Ghost 15 to runners this November,” said CEO Jim Weber. “By spreading the run and its energy to an even greater number of individuals across the globe, Brooks has captured double-digit growth with more to come in the second half of this year.”

The running market around the world continues to normalize after the COVID-19 pandemic’s disruptive impact on consumer behavior, retail markets, and the supply chain. While the running footwear market in the U.S. was down 10% in Q2 versus last year, Brooks’ long-term growth outlook remains positive as global participation is expected to grow coming out of the pandemic and outpace historical trends.

Manufacturing recovery allowed Brooks to fully meet demand beginning in May and launch the highly anticipated Glycerin 20 franchise in June, both key factors in achieving 12% revenue growth in the U.S. and 38% revenue growth in the Europe, Middle East, and Africa regions in the second quarter. Brooks also began a soft launch into the China market in Q2, focusing on digital sales. With over 20 million people in China running, the country represents a large market for premium running footwear, with over $1.5 billion in sales and 13 million pairs sold annually.

Brooks gains insight through human and science-based research to deliver products for any type of runner. Brooks launched its latest footwear innovation in engineered midsole technology with the nitrogen-infused DNA LOFT v3. This technology allows Brooks to control cell structures and density in its midsoles, fine-tuning the underfoot experience of each style to meet the different needs, preferences, and environments of runners.

Developed through the brands’ BlueLine Lab, this nitrogen-infused technology provides more cushioning in the midsole without sacrificing weight. Road runners and trail runners can reap the benefits when wearing the Glycerin 20 franchise or Caldera 6 shoes. Brooks will continue to invest in technology to bring innovation into more products that deliver the performance gear that every runner deserves.

Brooks was back to in-person running events this past quarter, engaging runners in the community and representing the brand at the highest levels of the sport. Four Brooks athletes competed at the World Athletics Championships, and the brand gathered the nation’s top high school runners to compete in the Brooks PR Invitational and attempt a personal record (PR). Now in its 10th year, the event saw the fastest U.S. time recorded in the girls’ 400m in 2022 and a record in the boys’ mile.

This August, Brooks launched a global brand campaign, “It’s Your Run.” The campaign is a celebration of the creative ways all types of runners get to their personal finish lines. Built on the insight that running can be hard for even for the most committed runners, the campaign focuses on the creative ways that runners achieve their best run.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
Announcements

Berkshire Adds $100 Million to Cash Pile

(BRK.A), (BRK.B)

No matter how much Berkshire Hathaway seems to spend on stock purchases and acquisitions, it always seems to end up with even more cash. And you can add an additional $100 million to its cash pile.

Seritage Growth Properties, a national owner and developer of 161 retail, residential and mixed-use properties, announced that on August 5, 2022, the Company made a voluntary prepayment of $100 million toward its $1.6 billion term loan facility provided by Berkshire Hathaway Life Insurance Company of Nebraska. With the prepayment, $1.34 billion of the term loan facility remains outstanding.

At June 30, 2022, Berkshire’s insurance float was approximately $147 billion, relatively unchanged from the end of the prior quarter.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
Minority Stock Positions

Berkshire Hathaway Pushes Its Occidental Petroleum Stake Above 20%

(BRK.A), (BRK.B)

A dip in the price of Occidental Petroleum below $60 has Warren Buffett resuming his purchases of OXY shares, spending $391 million for just under 6.7 million Occidental shares between Aug. 4 and Aug. 8.

Berkshire now owns 188.4 million Occidental shares, which is 20.2% of all outstanding shares.

The purchases bring Berkshire Hathaway’s stake to over 20% and enable it to add a portion Occidental’s earnings to its own depending on the accounting method it chooses.

In its latest Form 4 filing, Berkshire made purchases at prices as low as $57.326 and as high as $60.0162.

In addition to its over 20% stake in OXY common stock, Berkshire also holds 100,000 series A preferred stock shares and warrants that Berkshire can exercise for roughly 84M shares of common stock at $59.624 per share.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future

Categories
Berkshire Hathaway Energy

Berkshire Hathaway Acquires Greg Abel’s Stake in Berkshire Hathaway Energy

(BRK.A), (BRK.B)

Warren Buffett had to look no further than his own Vice Chairman for his latest acquisition. In its just released quarterly report for Q2 2022, Berkshire Hathaway noted that in June it had acquired Vice Chairman Greg Abel’s 1% stake in Berkshire Hathaway Energy for $870 million.

The purchase was at a significant premium and Berkshire took a $362 million charge to capital.

With the acquisition, Berkshire now owns 92% of BHE, with the family of the late Berkshire board director Walter Scott owning the remaining 8%. It is considered likely that Berkshire will acquire that stake as well.

Greg Abel, who is currently overseeing Berkshire’s day-to-day operations, and will take over at some point for Warren Buffett as Chairman, has not commented on the transaction.

In 2000, Berkshire Hathaway made it first acquisition into the energy sector when it acquired MidAmerican Energy Holdings Company, later renamed Berkshire Hathaway Energy, for a value of approximately $9 billion. Other investors, who in total invested approximately $300 million, were Walter Scott, the former chairman of Peter Kiewit Sons’ Inc. and MidAmerican’s largest individual shareholder, and certain Scott family interests, and David L. Sokol, who at the time was the Chairman and Chief Executive Officer of MidAmerican. At the time, Greg Abel was MidAmerican’s president.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
Financial Reports

Berkshire Hathaway Operating Earnings Skyrocket in Second Quarter

(BRK.A), (BRK.B)

Berkshire Hathaway’s operating earnings jumped 38.8% in the second quarter of 2020, as the conglomerate recorded sharp gains in all of its business sectors, including insurance, railroad (BNSF), and its utilities and energy businesses.

Total operating earnings were $9.283 billion for the second quarter, as compared to $6.686 billion for the same quarter in 2021.

Total operating earnings for the first six months of 2022 were $16.323 billion, as compared to $13.704 billion for the same period in 2021.

At June 30, 2022, insurance float was approximately $147 billion, relatively unchanged from yearend 2021.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
Financial Reports

Berkshire Hathaway Slows Stock Buybacks in Q2

(BRK.A), (BRK.B)

Berkshire Hathaway spent roughly $1 Billion on stock buybacks in the second quarter of 2020, less than a third of what the company repurchased in the first quarter.

The buybacks have slowed dramatically from 2021’s pace, reflecting Berkshire’s rising share price. In the fourth quarter of 2021, Berkshire repurchased $6.9 billion in combined Class A and Class B common stock, and Berkshire’s $27 billion in buybacks for 2021 was a record for the company.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
Berkshire Hathaway Energy

Berkshire Hathaway Energy to Acquire 400 MW of Wind Generation in Montana

Berkshire Hathaway Energy and NaturEner USA, LLC have applied to the Federal Energy Regulatory Commission for BHE to acquire from NaturEner USA its 100 percent upstream equity interests in the NaturEner Wind Project Companies.

The transaction will give BHE roughly 400 MW of wind generation in Montana from three wind farms: Glacier I, Glacier II and Rim Rock.

Glacier 1 operates a 106.5 MW wind-powered generating facility in Glacier and Toole Counties, Montana, and limited interconnection facilities, and is interconnected to the NorthWestern Energy transmission system.

Glacier 2 owns and operates a 103.5 MW wind-powered generating facility in Glacier and Toole Counties, Montana, and limited interconnection facilities, and is interconnected to the Glacier Electric Cooperative transmission system.

Rim Rock owns and operates a 189 MW wind-powered generating facility in Glacier and Toole Counties, Montana, which is interconnected with the transmission facilities of MATL LLP.

BHE Transmission wholly owns MATL, which owns a 230-kV merchant transmission line running from Great Falls, Montana to Lethbridge, Canada.

Berkshire Hathaway Energy and NaturEner USA have requested a shortened comment period of 21 days to allow for the issuance of an order on or before October 3, 2022.

According to their application, a shortened comment period and expedited consideration are appropriate because the Proposed Transaction does not involve a merger, does not require an Appendix A analysis, and is consistent with Commission precedent.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
Insurance

Berkshire Hathaway Insurer Uses AI Software to Determine Wildfire Fire Risk

(BRK.A), (BRK.B)

With devastation from wildfires growing every year, Berkshire Hathaway Homestate Companies is now using advanced software that analyzes a property that falls within a wildfire perimeter and predicts how likely is it to be destroyed.

A recent report from Aon found there were three separate wildfires in 2021 alone that generated economic losses beyond $1 billion, which outlines the growing importance of property-specific risk models for maintaining coverage in wildfire-prone states.

BHHC is using Zesty.ai’s wildfire model (Z-FIRE™) that combines vital property details and actual loss data with machine learning to produce a predictive risk score.

BHHC has expanded their partnership with Zesty.ai, extending the use of Zesty.ai’s AI-powered wildfire risk model, Z-FIRE™, to 12 states.

Z-FIRE™ will be used to inform both underwriting and rating decisions, and the partnership expansion comes at a critical time for the insurance industry.

“Unfortunately, wildfires are impacting communities well beyond the western U.S., and managing that risk requires advanced models that help us truly understand wildfire risk at the individual-property level. Zesty.ai’s model has outperformed our homegrown wildfire risk model,” said Brian Hall, Vice President – Products and Underwriting at Berkshire Hathaway Homestate Companies. “We started working with Zesty.ai last year and saw an immediate opportunity to leverage granular wildfire insights that allow us to confidently write policies that commensurate with a property’s true risk.”

Z-FIRE™ not only provides regional and property-specific risk scores but also an explanation of the specific risk factors affecting the property. Using artificial intelligence that has been trained on more than 1,500 wildfire events across more than 20 years of historical loss data, it considers property-level features that influence risk.

Topography, historical climate data and critical factors extracted from high-resolution imagery such as building materials and surrounding vegetation in multiple defensible spaces are taken into account. This empowers insurers with a true property-level risk score that effectively splits risk, while providing the flexibility to recognize mitigation efforts by homeowners and their respective communities.

“The Berkshire Hathaway Homestate Companies have always been known for taking a progressive, innovative approach to risk management, and as wildfires continue to reach new geographies we commend them for being proactive with their approach to rating and underwriting around wildfire risk,” said Attila Toth, Founder & CEO of Zesty.ai. “The broad adoption of Z-FIRE™, which is now used in rating and underwriting across the entire Western US, is a critical piece of hardening the insurance industry and their customers to defend against climate risks.”

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
GEICO

GEICO Shutters All 38 California Offices

(BRK.A), (BRK.B)

GEICO has closed all 38 of its offices in California and laid off several hundred employees.

According to the insurer, the move will not impact its ability to write policies in the state.

“We continue to write policies in California, and we remain available through our direct channels for the more than 2.18 million California customers presently insured with us,” GEICO said in a Sacramento Bee article.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.