Swinging For The Fences? Not So For Berkshire Hathaway
Struggling through Berkshire Hathaway’s annual report, I suddenly realized that Warren Buffett didn’t want his readers to peruse too deeply. Pages filled with a couple of dozen footnotes, half the type-size of a typical printed page.
Berkshire’s annual is about as user friendly as a telephone directory or proxy statement composed in Wall Street gibberish designed to obfuscate how management is raiding the piggy bank.
By chance, Buffett and I are the same forlorn age, 92. My eyesight is diminishing to the point where I take 7 drops daily, to keep pressure down to mid-teens. Otherwise, higher pressure would shoot into the thirties and destroy the optic nerve. Let somebody else keep a seeing-eye dog and sell pencils.
Our paths crossed some 60 years ago, when American Express got swindled by Tino DeAngelis. Tino leased their oil storage tanks for his salad oil inventory. Then, he siphoned off his oil and filled the tanks with water. The loss for Am Ex then was sizable, but not fatal.
I held AXP for a couple of years. Warren still owns his and it bloomed into a major portfolio holding. Same goes for Geico which 60 years ago discounted premiums in its fire and casualty business. I bought a block from Goldman Sachs at 4 bucks and sold it a couple of years later, for $12. Berkshire still owns its initial position plus the remainder of Geico.
Did I learn anything by over-trading? Practically nothing. Geico today, is a mature fire and casualty underwriter, having a better year currently than in 2022. I’m disinterested. You don’t buy BRK for its Geico. Maybe, for Apple’s viability.
Apple ticks around $180 with a 12-month range of $124 to $198. It represents Buffet's initial splash into technology, but he was late to the sector.
How many investors or money managers are stout-hearted enough to take outsized portfolio positions like Apple? Not what they learned at your local business school. Apple for BRK tots up to a $180 billion position. This number dwarfs all other outsized positions, collectively, such as American Express, Bank of America, Coca-Cola and Chevron.
Yet, another aspect to Berkshire is its underweighted investment in equities. No pounding the table here to reinvest its bundle of money into equities.
A fat percentage of assets here rests in money market paper like Treasuries. I’m curious about Apple when compared with Microsoft. Both are 10% weightings in the NASDAQ 100 Index. I’ve 10% of my assets in MSFT, very little in Apple. And the winner is…..
BRK’s equity portfolio totted up to $318 billion, end of quarter, where it sat a year ago. This is a hang back posture. Capital in money market paper has risen year- over-year by $34 billion. Seems indicative of capital conservation. Buffett may own Apple but otherwise hanging back, waiting for his pitch.
I’m disinterested in Berkshire's outsized equity holdings in rails, oil and consumer goods operators. Does he regard all such as his faith-in-America gesture, that will grow and prosper over coming decades.
Warren has got it right: Belief in America pays off. He wants to go down in economic history as more than just an equities player, but a force in the country's prosperity.
What Warren has accomplished with his buy-and-hold construct, I matched in the contemporary art market. My activity dates back to early fifties when Abstract Expressionism bloomed in the Big Apple. I bought and held the best I could afford or pay for on time. Think of it, Jackson Pollock and Mark Rothko canvases sold for a thousand bucks. Which was actually more than I could afford then.