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A Berkshire Hathaway Bright Spot: Energy. Here Are the Numbers – Barron’s

Illustration: Elias Stein

Andrew Bary, Barron’s

EnergiesNet.com 11 11 2022

Warren Buffett likes energy. Berkshire Hathaway now owns some $58 billion of Chevron and Occidental Petroleum securities. It isn’t Berkshire’s largest holding; that would be insurance, led by auto insurer Geico; 6% of Apple, worth $135 billion; and the Burlington Northern Santa Fe railroad, at $130 billion based on the market value of its similarly sized public rival Union Pacific.

But energy is this year’s focus. About half of Berkshire’s $66 billion of stock purchases in 2022 have been in energy. Berkshire owns over 8% of Chevron, the No. 2 U.S. energy company—80% acquired this year—that is now worth some $32 billion with a gain of about $8 billion, based on a Barron’s estimate. Berkshire’s 20% Occidental Petroleum stake, all bought this year, is worth $15 billion with an estimated profit of some $5 billion. Berkshire also has $10 billion of OXY preferred stock with an 8% dividend yield.

Other Berkshire equity purchases haven’t fared as well this year, including Paramount GlobalHP Inc., and Citigroup. All three are in the red.

Buffett was asked at Berkshire’s 2021 shareholder meeting whether he was comfortable owning oil stocks. “If you expect perfection in your spouse or your friends or in a company, you’re not going to find it,” he said. “Chevron is not an evil company in the least.” Buffett then asked Vice Chairman Charlie Munger for his view. “You can imagine two things,” Munger said. “A young man marries into your family. He’s an English professor at, say, Swarthmore, or he works for Chevron. Which would you pick? I’d take the guy from Chevron.”

Write to Andrew Bary at andrew.bary@barrons.com


Past the Peak?

Meta Platforms began layoffs of 13% of its 87,000-person workforce. Berkshire Hathaway took a quarterly loss, mostly on its investment portfolio and insurance payouts, while buying back shares. Heavy spending on streaming depressed Walt Disney’s profits. And Elon Musk sold $4 billion in Tesla shares. Stocks rose to start the week, then slipped on election uncertainty. October inflation slowed to 7.7%, fueling the biggest rally since 2020. On the week, the Dow industrials rose 4.15%, to 33,749.18; the S&P 500 was up 5.9%, to 3993.05; and the Nasdaq Composite soared 8.1%, to 11323.33.

A Crypto Coronary

It started with a Twitter spat between crypto-exchange leaders Sam Bankman-Fried of FTX and Changpeng Zhao of Binance, over Binance selling off $588 million in FTX tokens. By Tuesday, FTX found itself in a liquidity squeeze and turned to Binance for a bailout. Binance began due diligence, only to pull out on Wednesday. FTX halted withdrawals, Bankman-Fried hunted for $8 billion, regulators moved in, and crypto tokens fell. On Friday, FTX declared bankruptcy and Bankman-Fried quit.

No Wave

Democrats turned back a much-predicted GOP wave. Republicans neared control of the House, two key Senate races remain undecided, and a third, Georgia, is going to a December runoff. Former President Donald Trump, hinting at running again, saw many of his candidates lose. Trump attacked Florida Gov. Ron DeSantis, a rival, who had won re-election easily.

Russia Exits Kherson

Moscow ordered a retreat from Kherson, and Ukrainian forces quickly moved into the key city. Ukraine President Zelensky said talks with Russia are possible—on Ukrainian terms.

More Covid in China

Covid cases hit a six-month high in China, and the country’s National Health Commission promised to be “unrelenting” on curbs. Exports fell in October. Apple warned of iPhone 14 supply delays in China, and Bloomberg reported that the company expects to make three million fewer iPhone 14s in 2022. Distressed investor Oaktree sold a 2.2 million-square-foot plot in Hong Kong for $637 million that had been slated for a Versailles-styled mansion for China Evergrande’s chairman. Evergrande took a loss of $770 million on the project.

Annals of Deal Making

Walgreens Boots Alliance’s urgent-care business, Village Practice Management, said it was merging with Summit Health, the parent of CityMD, for $9 billion. Insurer Cigna is investing in the deal… Philip Morris International won approval from Elliott Management to buy Swedish Match for $15.7 billion. Elliott is Swedish Match’s biggest shareholder…Taiwan’s Foxconn plans to invest $170 million in Lordstown Motors and partner on an electric truck. The deal requires the U.S. Committee on Foreign Investment’s OK…Elon Musk told Twitter staff that bankruptcy was possible as more executives exited.

Write to Robert Teitelman at bob.teitelman@dowjones.com

marketwatch.com 11 11 2022

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