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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.

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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

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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.

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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.

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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.

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BNSF

BNSF Expands Intermodal Capacity in Pacific Northwest

(BRK.A), (BRK.B)

BNSF Railway has received approval from the Commissioners of the Northwest Seaport Alliance to develop and operate a domestic intermodal facility at Lot M in the Tacoma Harbor.

The new BNSF facility will increase cargo volumes moving to and from the NWSA and inland U.S. markets via rail. The adoption of this lease uniquely positions the NWSA as a port directly served by two mainline railroads in the domestic movement of containers.

“Growing the NWSA’s domestic intermodal volumes has long been a goal for the Seattle and Tacoma gateway,” stated NWSA Co-Chair and Port of Tacoma Commissioner President Don Meyer. “The new facility will increase job opportunities while reducing truck emissions associated with moving cargo to inland markets.”

BNSF currently operates a domestic intermodal facility in Tukwila serving the NWSA’s Seattle Harbor. The new Tacoma intermodal facility will bring additional key rail assets to the Pacific Northwest region with the potential for more than 50,000 container lifts in subsequent years.

“The new Tacoma South facility builds upon our joint initiative with J.B. Hunt to substantially improve capacity in the intermodal marketplace while also meeting the expanding needs of our customers,” said Tom Williams, BNSF group vice president, Consumer Products. “Our collaboration with the NWSA will help support greater warehousing and distribution needs in the fast-growing greater Seattle area.”

Currently, cargo movement occurs by truck to more than 40 transload facilities in the Puget Sound or directly by rail to inland locations. The increase in domestic rail movement will add additional jobs to NWSA-licensed facilities while reducing fuel consumption and air emissions that are caused by trucks throughout the Puget Sound region.

Operations at the new facility are expected to begin in August of this year.

© 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.

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Lessons From Warren Buffett

Lessons From Warren Buffett: Which Annual Reports Are Worth Reading?

There are so many public companies, each producing an annual report, that it can overwhelming as to where to start if you want read annual reports. Warren Buffett uses a very simple approach, he starts with reading the reports of companies that he understands and avoids the rest. How valuable is an annual report? Buffett believes it has all you need to know in order to decide whether to buy a stock. He cites his purchase of Coca-Cola stock as a prime example.

“We start by looking at the reports of companies that we think we can understand,” Warren Buffett said at the 1998 Berkshire Hathaway Annual Meeting. “And then we see from that report whether the management is telling us about the things that we would want to know about if we owned a hundred percent of the company. . . . For example, I would say that the Coca-Cola annual report over the last good many years is an enormously informative document. I mean, I can’t think of any way if I’d have a conversation with Roberto Goizueta, or now Doug Ivester, and they were telling me about the business, they would not be telling me more than I get from reading that annual report. We bought that stock based on an annual report. We did not buy it based on any conversation of any kind with the top management of Coca-Cola before we bought our interest. We simply bought it based on reading the annual report, plus our knowledge of how the business worked.”

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.