Page 37 - Investment Advisor April/May 2022

“Our country would have done “There are, of course, other insur- 7. A POWERFUL POSITION
splendidly in the years since 1965 with- ers with excellent business models and Berkshire Hathaway Energy is the
out Berkshire,” he said. “Absent our prospects,” he says. “Replication of firm’s “final giant.” It earned $4 billion
American home, however, Berkshire Berkshire’s operation, however, would in 2021 vs. $122 million in 2000, when
would never have come close to becom- be almost impossible.” Berkshire first acquired an interest in
ing what it is today.” BHE. Berkshire owns over 91% of the
5. NO ‘SMALL POTATOES’ company today.
3. THE VALUE OF ‘FLOAT’ Berkshire owns “a mere 5.55%, up While BHE did not generate any solar
Since it bought insurer National from 5.39% a year earlier,” of Apple, or wind power in 2000, it “has become a
Indemnity in 1967, Berkshire has been Buffet points out, and each 0.1% of the utility powerhouse (no groaning, please)
“the world leader in insurance ‘float,’” tech giant’s 2021 earnings represented and a leading force in wind, solar and
Buffett said. Float, which he says is $100 million. transmission throughout much of the
money that the firm holds “and United States,” Buffett explained.
can invest but that does not ‘Our country would have Looking ahead, he adds, the
belong to us,” now stands at $147 energy firm has the leadership,
billion. Over the past 55 years or done splendidly in the capital and “the appetite for the
so, Berkshire has earned a small years since 1965 without huge power projects that our coun-
profit on underwriting activities try needs.”
produced by its float. Berkshire,’ he said. ‘Absent
Buffett notes that float “is 8. CASH AND TREASURY BILLS
very sticky.” In other words, our American home, Berkshire’s balance sheet includes
while funds tied to Berkshire’s $144 billion of cash and equiva-
insurance operations fluctuate however, Berkshire would lents (excluding the holdings of
each day, “their aggregate total BNSF and BHE). The vast major-
is immune from precipitous never have come close to ity, or $120 billion, is held in U.S.
decline.” This gives the firm the Treasury bills, “all maturing in less
ability to think long term about becoming what it is today.’ than a year.”
its investments. This means the firm finances
Buffett also credits Ajit Jain, the firm’s Last year, Apple paid Berkshire $785 about 1⁄2 of 1% of the publicly held
vice president of insurance operations, million in dividends, and its “share” of national debt, he says.
with stewardship of Berkshire’s float. Apple earnings was “a staggering $5.6 “Charlie [Munger] and I have pledged
billion,” he added. that Berkshire … will always hold more
4. THE FIRST OF ITS FOUR GIANTS “Much of what the company retained than $30 billion of cash and equivalents,”
Berkshire’s holdings include “many was used to repurchase Apple shares, Buffett said. “We want your company to
dozens of businesses,” Buffett says, and an act we applaud. Tim Cook, Apple’s be financially impregnable and never
some of these entities — like Marmon brilliant CEO, quite properly regards dependent on the kindness of strangers
Holdings — “have a collection of subsid- users of Apple products as his first love,” (or even that of friends).”
iaries of their own.” Buffett noted. While Buffett says he likes to
At the same time, Buffett notes keep all of his net worth in equities,
that its “Big Four” investments are 6. THE NO. 1 ARTERY “Berkshire’s current 80%-or-so posi-
responsible for “a very large chunk BNSF, the firm’s “third giant,” is the tion in businesses is a consequence of
of Berkshire’s value.” At the top of most important pathway of American my failure to find entire companies or
the list is its group of insurers and commerce, he says, making it “an small portions thereof (that is, market-
“the extraordinary amount of capital indispensable asset for America as able stocks) which meet our criteria for
we invest to back up their promises,” well as for Berkshire.” The rail- long-term holding.”
he says. road had earnings of $6 billion in Cash-heavy periods are not “pleasant,”
What they sell “will never be obsolete, 2021, and its trains moved a total of he adds, but they aren’t “permanent.”
and sales volume will generally increase 535 million tons of cargo last year.
along with both economic growth and “You can be proud of your railroad,” Janet Levaux is editor-in-chief of Investment
inflation,” he notes. Buffett stated. Advisor. She can be reached at [email protected].

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