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Appointments

TransRe Restructures Data Science Team to Boost AI Capabilities

(BRK.A), (BRK.B)

Berkshire Hathaway’s TransRe has restructured its data science team to enhance the development and adoption of Artificial Intelligence, Machine Learning, and Large Language Models.

Otakar Hubschmann has been promoted to the newly created role of Chief Artificial Intelligence Officer, where he will lead TransRe’s Artificial Intelligence Team (TRAIT). Otakar joined TransRe in 2016 from a quantitative trading background and has since established a data science group. Under his leadership, the team has worked on automating data extraction and ingestion from submissions and contracts, and enabling rapid document comparison.

Socrates Pichardo, TransRe’s Chief Technology Officer, will also join TRAIT. Socrates, who has been with TransRe since 1993, has led several major IT projects, including the development of TransRe’s property underwriting platform and the company’s business cloud migration. He was appointed group CTO in 2017.

TRAIT aims to integrate AI’s rapidly developing capabilities with TransRe’s existing expertise to deliver additional insights for colleagues and clients. To ensure these capabilities are embedded within the operating units, TRAIT will report to TransRe’s Chief Operating Officer, Matt Mahoney.

© 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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Lessons From Warren Buffett

Lessons from Warren Buffett: The Importance of Intrinsic Value

A cornerstone of Warren Buffett’s strategy for identifying a worthwhile company, whether for full acquisition or just a minority stake, lies in determining its intrinsic value. For Buffett, intrinsic value is centered on the business’s future cash flow, akin to the interest paid on a bond. However, unlike bonds, stocks do not have their “interest rate” clearly printed.

At the 1997 Berkshire Hathaway Annual Meeting, Buffett explained, “If we could see what a business’s future cash inflows or outflows to and from the owners would be over the next hundred years, or until the business ceases to exist, and then discount that back at the appropriate interest rate, we would have a number for intrinsic value.”

Buffett likened this process to evaluating a bond with numerous future coupons. The value of a bond with 5% coupons differs from one with 7% coupons, just as different businesses have varying future “coupons.” The challenge for investors is estimating these future coupons, as they are not printed on the stock. This estimation is crucial for determining the intrinsic value and making informed investment decisions.

Buffett’s full explanation on determining intrinsic value

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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Jazwares

Jazwares Shines in Berkshire Hathaway’s Consumer Products Group

(BRK.A), (BRK.B)

In 2024, Berkshire Hathaway’s Jazwares, a leading global toy company, has emerged as a standout performer within Berkshire’s consumer products group. Jazwares reported a remarkable 20.3% revenue increase in the first half of the year. Acquired through Berkshire’s October 2022 takeover of Alleghany Corp., Jazwares is the creative powerhouse behind Squishmallows, the world’s number one toy.

The consumer products group encompasses a diverse range of businesses, including recreational vehicles (Forest River), apparel and footwear (Fruit of the Loom, Garan, Fechheimer, H.H. Brown Shoe Group, and Brooks Sports), high-performance batteries (Duracell), custom picture framing (Larson-Juhl), and jewelry (Richline).

The group’s revenues grew by $137 million (3.9%) in the second quarter and $278 million (4.0%) in the first six months of 2024 compared to the same periods in 2023. This growth was driven primarily by higher revenues from Forest River, Jazwares, and Brooks Sports.

© 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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Precision Castparts

Berkshire ‘s Precision Castparts Sees Robust Growth in Aerospace Sector for First Half of 2024

(BRK.A), (BRK.B)

Precision Castparts Corporation (PCC), a subsidiary of Berkshire Hathaway, reported robust financial results for the first half of fiscal year 2024, driven by strong demand for its aerospace products.

PCC’s revenues reached $2.7 billion in the second quarter and $5.2 billion in the first six months of 2024, marking increases of 15.0% and 12.6%, respectively, compared to 2023. This growth was primarily due to higher demand for aerospace products and, to a lesser extent, power generation products.

Long-term industry forecasts predict continued growth and strong demand for air travel and aerospace products.

PCC’s pre-tax earnings saw a significant rise of 27.5% in the second quarter and 22.4% in the first six months of 2024 compared to the previous year, driven by increased sales and improved manufacturing and operating efficiencies. Future revenue and earnings growth will depend on PCC’s ability to scale production to meet the anticipated rise in aerospace product demand.

PCC is a global, diversified manufacturer of complex metal components and products, serving the aerospace, power, and general industrial markets. Its Airframe Products division is a leading manufacturer of engineered fasteners, fastening systems, metal components, and assemblies for various sectors, including aerospace, transportation, and power generation.

© 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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BNSF

BNSF Railway Honored for Disability Inclusion Excellence

(BRK.A), (BRK.B)

BNSF Railway, part of Berkshire Hathaway, has earned a top score of 100 on the 2024 Disability Equality Index, marking it as a “Best Place to Work for Disability Inclusion” for the second consecutive year.

“This recognition solidifies our efforts toward becoming a more inclusive and diverse place to work,” said Dustin Almaguer, vice president of compliance and audit, and executive sponsor of BNSF’s Disability Inclusion Alliance (DIA) business resource group. “We are committed to building upon our progress so our railroad continues to be a leader in fostering a trusted environment where everyone feels included and valued for who they uniquely are.”

The Disability Equality Index, created in 2015 by Disability and the American Association of People with Disabilities (AAPD), encourages best practices in workplace disability inclusion and equality. Celebrating its 10th year, the index is a comprehensive tool for businesses aiming to positively impact the employment of people with disabilities.

BNSF’s evaluation included categories such as culture and leadership, enterprise-wide access, employment practices, community engagement, supplier diversity, and responsible procurement.

“We’re extremely proud of the 542 national and international companies that are taking a proactive role in leading progress toward disability inclusion, setting a benchmark for others to follow,” said Jill Houghton, President and CEO of Disability. “Their dedication to fostering inclusive workplaces not only attracts top talent but also drives innovation and creates sustainable performance in today’s global 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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Financials

Berkshire Hathaway Share Repurchases Continue in Q2 at Reduced Pace

(BRK.A), (BRK.B)

Berkshire Hathaway continued its stock buybacks in the second quarter of 2024, but at greatly reduced amount than in the first quarter of 2024.

Berkshire Hathaway, the renowned conglomerate led by Warren Buffett, used approximately $345 million of its cash to repurchase Berkshire shares during the second quarter of 2024, bringing the six-month total to $2.9 billion.

On June 30, 2024, there were 1,436,696 Class A equivalent shares outstanding, a reduction of 555 Class A equivalent shares outstanding from March 31, 2024.

Buffett has a clear and conservative approach to share repurchases. Berkshire’s repurchase program allows for the repurchase of Class A and Class B shares, but only when the stock price is below Berkshire’s intrinsic value, as determined by Buffett. There is no obligation to repurchase a minimum number of shares, nor is there a cap on the maximum amount of shares that can be repurchased. However, Buffett ensures that repurchases do not reduce Berkshire’s holdings of cash, cash equivalents, and U.S. Treasury Bills below $30 billion. This emphasis on financial strength and liquidity is paramount for Berkshire.

© 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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Brooks

Brooks Running Achieves Record Quarterly Revenue in Q2 2024

(BRK.A), (BRK.B)

Brooks Running, a subsidiary of Berkshire Hathaway, has set a new global quarterly revenue record in Q2 2024, marking a 15% year-over-year increase. This growth was driven by robust performance in both wholesale and direct-to-consumer channels.

In North America, Brooks saw a 19% year-over-year revenue increase, fueled by the success of the Glycerin 21 super franchise, Ghost Max, and the launch of Ghost 16. The brand has maintained its No. 1 market share in the adult performance running footwear market at U.S. national retail for the 10th consecutive quarter and held the top spot in the U.S. specialty footwear retail segment through the first half of 2024.

The Europe, Middle East, and Africa (EMEA) region also returned to growth, with a 4% revenue increase as the retail landscape improved. In France and Germany, Brooks’ market share in the adult performance running footwear category grew nearly a full point year over year, with sales up 12% in France and 10% in Germany in Q1 2024 compared to Q1 2023.

In the Asia Pacific and Latin America (APLA) region, Brooks recently opened its first retail store in Shanghai, with a second location planned for later this year, along with new storefronts in Beijing and Guangzhou.

“Brooks’ record results this quarter demonstrate the strength of our brand, business, and product,” said CEO Dan Sheridan. “We believe sharp focus on the performance category creates mass appeal as we continue to deliver innovative, premium products and experiences that runners and active people value.”

Following Sheridan’s appointment as CEO in April, former Vice President, Managing Director of Brooks International Matt Dodge will become President and Chief Operating Officer on August 1. Dodge returns to Seattle after six years of growing Brooks’ business in the EMEA and APLA regions. Josh Vaughan will take over as Managing Director in EMEA, bringing over 15 years of experience in the outdoor performance industry, including roles at icebreaker and Smartwool.

© 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 to Build Major Manufacturing Facility in Aurangabad, India

(BRK.A), (BRK.B)

Berkshire Hathaway’s The Lubrizol Corporation, a global leader in specialty chemicals, has announced its plan to purchase a 120-acre plot in Aurangabad, India. This new manufacturing facility will initially support the region’s growing transportation and industrial fluid markets. The first phase of this project, representing an investment of around $200 million, marks Lubrizol’s largest investment in India to date and builds on previous commitments in the region.

Upon completion, the Aurangabad plant will become Lubrizol’s second-largest manufacturing facility worldwide and its largest in India. Construction will proceed in phases over the next several years, with provisions for future expansion.

“Lubrizol has made meaningful investments in India for more than five decades,” said Flavio Kliger, President of Lubrizol Additives. “This new state-of-the-art manufacturing facility will enhance our local capacity and capabilities for our Additives business, with potential support for other Lubrizol businesses and regions in the future.”

The announcement of the Aurangabad plant aligns with Lubrizol’s strategy to boost local growth and capacity. In 2023, Lubrizol announced its most significant investment in over 50 years in India, including a $150 million pledge. This investment supports the construction of the world’s largest CPVC resin plant in Vilayat, Gujarat, doubling capacity at the Dahej site, opening a grease lab in Navi Mumbai, and fostering in-country job growth and innovation. Additionally, the company opened its first Global Capability Center in Pune this year to drive regional growth and collaboration.

“Lubrizol understands the importance of a local-for-local approach, from India-based manufacturing to in-region innovation to continued investment in local talent,” said Bhavana Bindra, Managing Director, Lubrizol IMEA. “We look forward to continuing to be partners in progress to our customers and serve as a catalyst for growth and inspired breakthroughs.”

“This announcement underscores our continued commitment to our employees, partners, and customers in the region,” said Nitin Mengi, Vice President Lubrizol Additives IMEA and Chairman & Managing Director, Lubrizol India Private Limited. “The growing transportation and industrial markets in India represent a tremendous opportunity, and Lubrizol is thrilled to be a part of the bright future of these industries.”

In addition to meeting domestic demand, the Aurangabad site will enable export opportunities to surrounding countries and other Lubrizol locations. Manufacturing at the new site is expected to commence in 2028, coinciding with Lubrizol’s 100th anniversary.

© 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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Appointments

BHHC Appoints Marj Hutchings as New CIO

(BRK.A), (BRK.B)

Berkshire Hathaway Homestate Companies (BHHC) Workers Compensation Division has announced Marj Hutchings as their new Chief Information Officer (CIO). With 35 years in technology, including 27 years in the insurance sector, Hutchings is set to lead the IT department’s administration, daily operations, and strategic planning.

“Marj is an exceptional technology leader whose vast experience and innovative mindset will be instrumental in driving our IT initiatives forward,” said Rob Darby, President and CEO of BHHC Workers Compensation. “Her extensive background in modernizing applications, data security, and cloud implementation aligns well with our strategic goals to enhance operational efficiency and deliver superior service and data security to our policyholders and agency partners.”

Before joining BHHC, Hutchings was CIO at State Fund, where she spearheaded a project to replace multiple independent systems with a unified software suite. Her expertise covers property and casualty claims systems, customer-facing web platforms, virtualization of production systems, and private cloud infrastructure implementation. She was also an original team member of Esurance, an Allstate company known for leveraging advanced technology to drive business strategy.

“We are excited to welcome Marj to our leadership team,” added Darby. “Her proven track record in technology management and her ability to lead complex projects make her an excellent fit for BHHC as we continue to innovate and expand our capabilities in the workers compensation insurance sector.”

Hutchings holds a Bachelor of Science in Business Administration/Computer Information Systems from Northern Arizona University and is a Leadership Fellow of the National Association of Corporate Directors (NACD).

BHHC, a group of six insurance carriers part of the Berkshire Hathaway insurance group, is headquartered in Omaha, Nebraska. With over 50 years in business, BHHC has grown from a regional carrier to a national insurance group, writing a diverse range of policies across the United States. The group includes Berkshire Hathaway Homestate Insurance Company, BHHC Special Risks Insurance Company, Continental Divide Insurance Company, Cypress Insurance Company, Oak River Insurance Company, and Redwood Fire and Casualty Insurance Company.

© 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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Lessons From Warren Buffett

Lessons from Warren Buffett: Four Key Factors That Made Warren Buffett a Multi-Billionaire

Warren Buffett’s ascent to becoming one of the world’s wealthiest individuals is often attributed to his exceptional investing skills. As of July 2024, Buffett’s fortune stood at over $157 billion, despite having donated more than $55 billion to philanthropic causes.

In a statement released in June 2024, announcing his latest charitable donations of 13,008,758 shares of Berkshire Hathaway “B” stock to five foundations, Buffett reflected on the simple yet powerful factors behind his wealth. He highlighted four key elements: a long runway, sound capital deployment, the American economic tailwind, and the power of compounding.

Long Runway: Buffett’s journey began early when he bought his first stock at age 11—three shares of Cities Service preferred at $38 per share. From that young age, he consistently invested, allowing his investments to grow over the next 83 years.

Sound Capital Deployment: Buffett emphasized not just saving but investing. He ensured that his money was actively working to generate more wealth. His strategy involved investing in stocks and businesses that would yield returns greater than the initial investment.

The American Tailwind: Buffett has frequently noted that the productivity and strength of U.S. businesses provide a favorable environment for prudent investors. The collective success of the U.S. economy has been a significant driver of his wealth.

Compounding: The ability of investments to compound over long periods has been crucial. Compounding adds exponential growth to investments, significantly boosting wealth over time.

While few may reach Buffett’s level of wealth, adopting his principles of early investing, strategic capital deployment, leveraging the strength of the economy, and harnessing the power of compounding can help individuals grow their own wealth effectively.

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.