FRI, FEB 28, 2025

WARREN BUFFETT WATCH

Strong profits send Berkshire to new highs this week

Berkshire Hathaway shares rallied to four fresh record high closes this week after the company reported a record high quarterly profit over the weekend with help from a surge for insurance profits.

Its market value is now above $1.1 billion.

After new highs on Monday, Tuesday, and Thursday, Berkshire's Class A stock closed today at a record $775,000, up 2.9% today and 7.3% this week.

The more widely held Class B also closed at a record high for the fourth time this week, ending today up 2.3% at $513.83. That's also a gain of 7.3% for the week.

The benchmark S&P fell a bit less than 1% over the same period.

Wall Street analysts liked the earnings numbers.

CNBC Pro UBS analyst Brian Meredith told clients, "GEICO appears to have firmly turned the corner with strong sequential growth in policies in force (PIF) and continuing attractive underwriting margins."

He raised his 12-month price target for the B shares to $557 from $536.

VIDEO: Macrae Sykes, Gabelli Funds portfolio manager, joins ‘Squawk Box’ on Monday morning to break down Warren Buffett’s annual letter to shareholders.

TD Cowen’s Andrew Kligerman wrote in a note, "Strong underwriting in 4Q24 shows again why [property and casualty insurance] is Berkshire’s core business."

At Barron's, however, Andrew Bary calls the earnings "excellent," but "not quite as strong as they looked" due to a one-time currency gain of $1.2 billion after taxes generated by dollar strength reducing the value of Berkshire's yen-denominated debt.

In a separate piece, he quotes Berkshire investor Chris Bloomstran as saying the company's rising price is bringing it closer to its intrinsic value than it's been in years, potentially limiting further gains.

Japanese 'trading houses' gain as Buffett says stakes will rise

Shares of the five Japanese stocks that Berkshire Hathaway started buying in 2019 rallied this week after Buffett predicted the stakes will "likely increase ... somewhat" over time.

Known as "trading houses," Itocchu, Marubeni, Mitsubishi, Mitsui, and Sumitomo are conglomerates with broad investments in Japan and globally that Buffett favorably compares to his own company.

In his annual letter Saturday, Buffett praised the companies, saying they "increase dividends when appropriate, they repurchase their shares when it is sensible to do so, and their top managers are far less aggressive in their compensation programs than their U.S. counterparts."

"Our holdings of the five are for the very long term, and we are committed to supporting their boards of directors. From the start, we also agreed to keep Berkshire’s holdings below 10% of each company’s shares. But, as we approached this limit, the five companies agreed to moderately relax the ceiling. Over time, you will likely see Berkshire’s ownership of all five increase somewhat."

Ackman: Abel will do a better job managing Berkshire's units

Billionaire investor Bill Ackman is a really big fan of Warren Buffett, but he thinks Berkshire's next CEO will be a more aggressive manager, especially when it comes to the operating companies.

In an appearance on the "World According to Boyar" podcast, Ackman said CEO-designate Greg Abel is "more of an operator" who will be able to extract a "lot of value" by running the businesses better.

Bill Ackman speaks at CNBC's Delivering Alpha conference in New York City on Sept. 28, 2023. Photo: CNBC | Adam Jeffery

"Burlington Northern, for example, is the biggest railroad but it's probably the least efficiently operated of all the railroads.

"I think Buffett is reluctant to in any way get involved in fixing companies and he has CEOs that he probably should have replaced years ago.

"I think the next generation of leadership will be a little more disciplined at making sure the right people run the companies."

Ackman recounted how his firm sold Berkshire shares at a loss after he saw Buffett as "frozen" near the start of the Covid pandemic in 2020, unwilling to take advantage of what Ackman correctly thought was an "amazing opportunity to buy stocks."

Currently Ackman is trying to create what he calls a "modern-day Berkshire" by acquiring Howard Hughs Holdings and turning it into a diversified holding company.

New administration takes Berkshire company off the hook

The Consumer Financial Protection Bureau has dismissed its own lawsuit that accused Berkshire's Vanderbilt Mortgage and Finance of "setting families up to fail" by ignoring "clear and obvious red flags" that low-income borrowers would not be able to pay back loans.

That suit was filed on January 6.

Now, after Inauguration Day, it was one of several actions dropped by the CFPB this week "with prejudice," meaning they cannot be refiled.

Supporters of the Consumer Financial Protection Bureau (CFPB) rally on February 10 in Washington after its acting director told the agency's staff to stay away from the office and do no work. Photo: REUTERS/Craig Hudson

Earlier this month, the Trump administration told the agency to stop nearly all its work.

Employees have sued to block what they say are Elon Musk's plans to fire nearly all its 1700 workers and "wind down" the agency that was created after the 2008 financial crisis.

BUFFETT AROUND THE INTERNET

Some links may require a subscription

Barron's on MSN: Buffett Played Hardball in Buying Utility Stake From Partner’s Estate

Barron's on MSN: Berkshire Hathaway Borrows From Elon Musk’s Playbook in Geico Turnaround

Reuters on CNBC.com: Berkshire Hathaway removes diversity and inclusion from annual report

CNBC Make It: 3 tips from Warren Buffett’s 2025 shareholder letter that can make you a smarter investor

CNBC Make It: Warren Buffett: You don’t need to attend college to be a great CEO—‘I never look at where a candidate has gone to school’

CNBC Make It: Warren Buffett: Charlie Munger taught me to avoid this ‘cardinal sin’—it helped me become a better leader

HIGHLIGHTS FROM THE ARCHIVE

Money managers have gotten 'something for nothing' (1997)

Warren Buffett explains why he’s critical of money managers.

BERKSHIRE STOCK WATCH

Four weeks

Twelve months

BERKSHIRE'S TOP U.S. STOCK HOLDINGS - Feb. 28, 2025

Berkshire's top holdings of disclosed publicly traded stocks in the U.S., Japan, and Hong Kong, by market value, based on today's closing prices.

Holdings are as of December 31, 2024 as reported in Berkshire Hathaway's 13F filing on February 14, 2025, except for:

Mitsubishi, which is as of June 12, 2023. Tokyo Stock Exchange prices are converted to U.S. dollars from Japanese yen.
Occidental Petroleum, which is as of February 7, 2025

The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.

QUESTIONS OR COMMENTS

Please send any questions or comments about the newsletter to me at alex.crippen@nbcuni.com. (Sorry, but we don't forward questions or comments to Buffett himself.)

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Also, Buffett's annual letters to shareholders are highly recommended reading. There are collected here on Berkshire's website.

-- Alex Crippen, Editor, Warren Buffett Watch

900 Sylvan Avenue, Englewood Cliffs, NJ 07632

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