Month: November 2024

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Lessons From Warren Buffett

Lessons From Warren Buffett: Why Buffett Rejects Beta as a Measure of Risk

Warren Buffett challenges the conventional view of a stock’s beta as a measure of risk. Beta, which measures a stock’s volatility, is often used by investors to assess risk, with the belief that high beta stocks carry more potential for both gain and loss. However, Buffett disagrees with this approach.

At the 1994 Berkshire Hathaway Annual Meeting, he explained that volatility is not an accurate indicator of risk. He pointed out that financial markets have adopted beta as a popular measure of risk, but for him, it’s irrelevant.

“It became very fashionable in the academic world, and then that spilled over into the financial markets, to define risk in terms of volatility, of which beta became a measure, but that is no measure of risk to us,” Buffett said at the 1994 Berkshire Hathaway Annual Meeting. “Interesting thing is that using conventional measures of risk, something whose return varies from year to year between plus-20 percent and plus-80 percent is riskier, as defined, than something whose return is 5 percent a year every year. We just think the financial world has gone haywire in terms of measures of risk.”

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2024 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.

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CORT

Berkshire’s CORT Tenting Solutions Unveils Luxury Midnight Skyline Pavilion in the Pacific Northwest

(BRK.A), (BRK.B)

CORT Tenting Solutions, a Berkshire Hathaway company and leader in event structures, has introduced the Midnight Skyline Pavilion, a luxurious event structure poised to redefine the Pacific Northwest’s event landscape.

Exclusively designed for CORT, the Midnight Skyline Pavilion boasts a sleek midnight black frame with clear ceilings and sidewalls, creating a striking, floating effect. Its versatile design allows it to transform from a modern conservatory to a grand cathedral-like space, providing a captivating centerpiece for any occasion.

The Pavilion’s modular build offers numerous customization options, including a choice of walls (opaque, glass, or hard), elegant glass doors, and elevated flooring. Clients can personalize each element, tailoring the structure to fit any vision. “The Midnight Skyline Pavilion represents our commitment to quality and innovation,” said Phil Heidt, Group Vice President at CORT. “Its modern aesthetic and versatility make it a game-changer for memorable events.”

Built for durability, the Pavilion withstands all weather conditions, making it a reliable choice for events year-round. Janelle Doig of the Museum of Pop Culture attests to CORT’s reliability, saying, “Their attention to safety and style lets us focus on guest experience.” Partnering with luxury manufacturers like Losberger De Boer, CORT continues to bring top-quality event solutions to market.

© 2024 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.

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Lubrizol

Lubrizol Expands Partnership with Oil Store Across Europe, Middle East, and Africa

(BRK.A), (BRK.B)

The Lubrizol Corporation, part of Berkshire Hathaway, has expanded its partnership with Oil Store, naming it a channel partner for Lubrizol’s refrigeration and heat transfer fluid brands across the U.K., Europe, the Middle East, and North Africa. This move builds on an already successful collaboration in the U.K., aiming to meet increasing demand in new markets.

Lubrizol provides a range of premium fluid engineering brands, including CPI® industrial refrigeration products, Paratherm® heat transfer fluids, and refrigeration solutions such as Emkarate RL®, Icematic®, and Solest®. Through this partnership, Oil Store can now deliver Lubrizol’s technology and solutions across a wider geographic area, addressing specific market needs.

“Reliability is crucial to us, which is why we seek partners who share our commitment to excellence,” said O’Neil Pinto, Vice President of Lubrizol Fluid Engineering. “This collaboration with Oil Store supports our growth and customer service goals.”

Daniel Tait, managing director of Oil Store, praised the success of the initial U.K. partnership, adding, “We are thrilled to extend our services to new regions, maintaining the quality and dedication our U.K. customers have come to trust.”

© 2024 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.

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Financials

Berkshire Hathaway’s $26.3B Q3 Profit Driven by Investment Gains

(BRK.A), (BRK.B)

Berkshire Hathaway reported a sharp improvement in its third-quarter 2024 results, showing a net profit of $26.3 billion, a significant rebound from a $12.8 billion loss in the same period last year. This surge was largely due to strong investment gains of $16.2 billion, compared to a substantial investment loss of $23.5 billion in Q3 2023.

Warren Buffett has long cautioned that changes in portfolio value do not give a true picture of the company’s health, and points to Berkshire’s operating earnings as a better barometer.

The conglomerate’s operating earnings were slightly down, totaling $10.1 billion, compared to $10.8 billion in the previous year’s third quarter.

Key contributors to operating earnings included insurance underwriting and investment income, as well as steady returns from its BNSF railway and energy businesses.

Earnings per Class A share rose to $18,272, compared to a loss of $8,824 per share last year. Meanwhile, Class B shares mirrored this trend, with earnings reaching $12.18 per share.

For the first nine months of 2024, Berkshire achieved $69.3 billion in net earnings, up from $58.6 billion in 2023, reflecting improved returns from both investments and core operations.

Cash on hand swelled to a record $325.2 billion, primarily the result of Berkshire’s continued sale of some of its Apple shares and Bank of America shares.

Year to date, Berkshire also repurchased $2.9 billion in shares, however, as the price of the stock has soared to record territory, Warren Buffett has stopped his buybacks, and there were none in the third quarter.

The firm cautioned that quarterly investment gains are volatile and may not fully reflect its long-term performance.

©2024 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.