- Buffett sizably increased share buybacks to $8.97b, which is more than he has ever bought bringing the total buyback for the year to $24.7b reducing share count by 5.2%.
- Cash on books remained steady at $138B.
- Cash and stock portfolio represent over 50% of the company’s value.
- Sum of the parts valuation shows 25% upside
Current Price: $252 Price Target: $300 (raised from $280)
Position Size: 3.0% TTM Performance: 34.4%
Segment highlights from the quarter:
- Geico earnings more than doubled on lower loss ratio
- Berkshire Hathaway Reinsurance continues to struggle with $-2.7b in losses
- Low interest rates highlight Berkshire’s competitive advantage of an investment portfolio being invested primarily in equities and being less dependent on bond market yields
- Railroads – YoY revenue fell -11.3% and earnings fell -5.8% with pandemic slowdowns
- Berkshire energy – YoY revenue up 4.5% and earnings up 8.8%
- Manufacturing, service and retail – Profits fell -14% due to pandemic
- $11b write down of Precision Castparts purchased in 2016. They sell many parts to the aerospace industry
Stock portfolio highlights:
- Investment in Apple is worth $120b
- Since 2019 Berkshire has cut allocation to finance stocks from 41% to 24%
- Dumped airline stocks
- Latest filing shows
- Added Verizon which is now 6th largest holding
- Added Chevron
Valuation: Berkshire is selling at a 25% discount to intrinsic value using sum of the parts. Their cash of $138b represents $57 per share for B shares.
Berkshire remains a core holding, is currently undervalued and is defensively positioned to take advantage of opportunities as they arise.
Please let me know if you have any questions.
Thanks,
John
($brk/b.us)
John R. Ingram CFA
Chief Investment Officer
Partner
Direct: 617.226.0021
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109
Berkshire-2020-annual.pdf