gfp927z
6 days ago
OXY / carbon capture - >>> Big Oil Urges Trump Not to Gut Biden’s Climate Law
The Wall Street Journal
by Collin Eaton, Benoît Morenne
10-6-24
https://www.msn.com/en-us/news/politics/big-oil-urges-trump-not-to-gut-biden-s-climate-law/ar-AA1rLuX7?cvid=54bdd711ae1748c1fe427f19366b02e2&ei=41
Oil companies are conveying an unlikely message to the GOP and its presidential candidate: Spare President Biden’s signature climate law. At least the parts that benefit the oil industry.
In discussions with former President Trump’s campaign and his allies in Congress, oil giants including Exxon Mobil, Phillips 66 and Occidental Petroleum have extolled the benefits of the Inflation Reduction Act. Many in the fossil-fuel industry opposed the law when it passed in 2022 but have come to love provisions that earmark billions of dollars for low-carbon energy projects they are betting on.
Some executives in the largely pro-Trump oil industry are worried the former president, if re-elected, would side with conservative lawmakers who want to gut the IRA. They fear losing tax credits vital for their investments in renewable fuel, carbon capture and hydrogen, costly technologies requiring U.S. support to survive their early years.
At a Houston fundraiser for Trump in May, Occidental CEO Vicki Hollub took her case directly to the candidate, saying tax credits propping up the company’s huge investments in technology to collect carbon directly from the air should be preserved, people familiar with the matter said. The company is building its first $1.3 billion direct-air capture plant in West Texas and aims to erect dozens more in the coming years.
Exxon has also told the Trump campaign it wants to preserve portions of the IRA. It and Chevron, the two largest U.S. oil companies, have promised to pump more than $30 billion combined into carbon capture, hydrogen, biofuels and other low-carbon technologies, virtually all of which rely on tax credits in the IRA to be viable.
Meanwhile, company officials at Phillips 66, a $58 billion U.S. oil refiner, have told members of Congress the IRA’s tax credits are important for its business, people familiar with the matter said. Instead of crude oil, the company’s renewable fuels are made from used cooking oil, vegetable oil, fats and the like, which qualify it for large tax credits.
“There are elements of the IRA that the general industry says would be bad to unwind,” Mark Lashier, CEO of Phillips 66, said in an interview last month. “Everybody is working out their contingency plans for either administration.”
Green politics
Trump has called Biden’s climate efforts the “Green New Scam” and last month promised to cut unspent IRA funds. With the backing of influential conservative think tanks, Republicans in Congress have tried to repeal the law and provisions in it dozens of times and are expected to push for cuts again next year during the legislature’s budget reconciliation.
Oil billionaires are some of Trump’s biggest backers, and the candidate has privately promised to deliver on many of the policies on their wish lists if elected.
Trump hasn’t fleshed out his plans for the climate law.
Energy policy has emerged as a key campaign issue. Trump has attacked Vice President Kamala Harris’s support for a fracking ban when she was a presidential candidate in 2019, a policy she has since backtracked on.
During the presidential debate in September, Harris touted her support for the IRA, which she said had kindled clean-energy investment but also spurred the record oil production levels reached during the Biden administration. If elected, she has promised to back investment in diverse energy sources.
Some oil lobbyists have told Trump’s campaign the industry’s IRA-backed projects will be a boon to U.S. jobs and manufacturing as major oil companies invest billions.
Karoline Leavitt, a spokeswoman for the Trump campaign, said Trump’s policies turned the U.S. into a net exporter of energy.
“He cut red tape and gave the industry more freedom to do what they do best—utilize the liquid gold under our feet to produce clean energy for America and the world,” she said.
Political strategists said Trump may try to rebrand the law, given the support for it among officials and companies in some Republican-leaning states, such as Oklahoma and South Carolina, who see it as a draw for new investments and jobs.
“If we win, we need to take a scalpel, not an ax, to the IRA,” said Sen. Kevin Cramer (R., N.D.). North Dakota is well-known for its booming oil fields in the Bakken Shale. Oil companies there aim to inject industrial carbon dioxide into the ground to recover more crude, which would also make them eligible for carbon-capture subsidies.
The industry’s support for the IRA only extends so far. Many oppose tax credits for renewable energy and purchasing electric vehicles, saying those incentives undermine competition with gas- and diesel-powered vehicles. Smaller frackers, which aren’t investing in low-carbon technologies, mostly dislike the entirety of the law.
In recent months, Biden’s administration has signaled it is rushing to fund clean-energy projects from a $400 billion lending program created by the IRA. A second Trump administration might slow-walk spending by federal agencies meant to support those projects, said Gordon Huddleston, president of investment firm and natural-gas producer Aethon Energy Management.
“The DOE would just slow down giving out money in a Trump administration,” he said.
A small, vocal faction of GOP budget hard-liners could make it difficult for Trump to preserve even parts of the IRA. The law would make for a tempting target to offset fiscal deficits as the party pushes to renew its 2017 tax cuts next year.
Big bets
The oil industry has fought Biden’s administration for years on restricting fracking, rules for drilling in the Gulf of Mexico and other environmental regulations. But companies that are investing in low-carbon projects stand to lose much if Biden’s climate law is repealed or watered down.
Occidental, one of America’s largest oil producers, is betting big on a largely unproven technology—at a large scale—to suck carbon dioxide from the atmosphere and store it underground.
The process is costly and Occidental has said benefits from federal subsidies of $180 per metric ton of CO2 captured that way and stored permanently will boost the endeavor. Its CEO has for years personally lobbied in Washington to increase the value of the credits.
Bolstered by the IRA, Phillips 66 has transformed a 128-year-old Rodeo, Calif., oil refinery into one that can pump 50,000 barrel-per-day of renewable diesel and aviation fuel.
But the economics of producing renewable fuels are challenging and some of the refiner’s competitors, including Chevron, BP and Shell, have scaled back on similar plans this year. Losing IRA credits would make the business even more difficult.
Oil-and-gas companies are stressing that the IRA is valuable to the country’s economy now in hopes of avoiding tougher conversations after the election, lobbyists said.
“It’s really striking the degree of commitment the industry has made to low-carbon businesses like carbon capture, biofuels and hydrogen,” said Daniel Yergin, the vice chairman of S&P Global and a veteran chronicler of energy trends.
gfp927z
1 month ago
Shiller P/E ratio - >>> The Oracle of Omaha's $56 billion silent warning foreshadows potential trouble for Wall Street
https://finance.yahoo.com/news/warren-buffetts-56-billion-silent-092100169.html
Although Warren Buffett has consistently shied away from offering negative takes on the U.S. economy and/or stock market during his nearly six-decade tenure as CEO of Berkshire Hathaway, $56 billion of net-equity security sales over an 18-month stretch speaks volumes without the Oracle of Omaha having to say a word.
The culprit for this consistent net-selling activity looks to be a historically pricey stock market and the irrational behavior of some of its participants.
In Buffett's annual letter to shareholders that was released in February, he had this to say about the "casino-like behavior" he wants no part of:
Though the stock market is massively larger than it was in our early years, today's active participants are neither more emotionally stable nor better taught than I was in school. For whatever reasons, markets now exhibit far more casino-like behaviors than they did when I was young. The casino now resides in many homes and daily tempts the occupants.
At the end of the day, Warren Buffett and his team want a fair deal on a great business, and they aren't willing to waiver from this ideal. As the S&P 500's Shiller price-to-earnings (P/E) ratio shows, there simply aren't many good deals at the moment.
The Shiller P/E ratio, which is also known as the cyclical adjusted price-to-earnings ratio (CAPE ratio), is based on average inflation-adjusted earnings from the last 10 years. This differs from the traditional P/E ratio which only examines trailing-12-month earnings. The beauty of the Shiller P/E averaging earnings over a 10-year period is that it minimizes the impact of one-off events (e.g., the COVID-19 lockdowns).
As of the closing bell on May 3, the S&P 500's Shiller P/E stood at 34.05. This is nearly double its average reading of 17.11 when back-tested to 1871, and it's the third-highest reading during a bull market in over 150 years.
Perhaps the bigger concern is what's historically followed the five previous instances where the Shiller P/E ratio surpassed 30 during a bull market rally. Following all five prior instances, the S&P 500 or Dow Jones Industrial Average went on to lose between 20% and 89% of their respective value. Though the Shiller P/E ratio isn't a timing tool -- i.e., stocks can stay pricey for multiple quarters, if not years -- readings above 30 tend to be a precursor to big moves lower in the stock market.
The lack of desire by Buffett and his team to buy stocks during an 18-month stretch suggests they expect valuations to contract.
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gfp927z
1 month ago
>>> Berkshire Hathaway’s Jain Sells Over Half of Class A Shares
Bloomberg
by Alexandre Rajbhandari
September 12, 2024
https://finance.yahoo.com/news/berkshire-hathaway-jain-sells-over-143854442.html
(Bloomberg) -- Berkshire Hathaway Inc.’s vice chair of insurance operations, Ajit Jain, sold $139 million worth of his Class A shares in Warren Buffett’s conglomerate.
Jain, one of Buffett’s top lieutenants, disposed of 200 of the Class A shares for about $695,418 each, according to a regulatory filing Wednesday. The disposal means the longterm executive is left with control of 166 such shares, 61 of which he directly owns.
When reached by phone, Jain declined to comment. Berkshire Hathaway didn’t immediately respond to a request for comment.
The move marks a shift for Jain, who added 50 Class A shares to his holding between March 2023 and March this year. Still, he has been trimming his Class B stake in the conglomerate over the years, selling more than 70,000 such shares from March 2020 to March 2024, according to past proxy filings.
The executive joined Berkshire Hathaway in 1986 to work on the conglomerate’s insurance operations, which include car insurer GEICO.
Buffett has long praised Jain, saying in 2017 that he’s probably made more money for Berkshire than Buffett has. In 2018, Jain and Greg Abel were named vice chairmen of the firm, with Abel, who’s a decade younger than Jain, eventually being tapped as Buffett’s successor.
Investors have questioned whether Jain would stick around to help Abel run things once Buffett, now 94, leaves the firm. Jain still owns more Class B shares than Abel.
“We continue to be comfortable that the interests of Mr. Jain and Mr. Abel are aligned with shareholders,” James Shanahan, an analyst at Edward Jones who covers Berkshire Hathaway, told Bloomberg.
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gfp927z
2 months ago
The real reason Buffett loves OXY -
--> 'Carbon Capture and Storage (CCS) will grow into a $4 trillion market by 2050' (per Exxon) -
>>> What Is Carbon Capture and Storage?
Motley Fool
By Matthew DiLallo
May 23, 2024
https://www.fool.com/terms/c/carbon-capture-and-storage/?utm_source=yahoo-host-full&utm_medium=feed&utm_campaign=article&referring_guid=7e55019b-8b30-4cb6-ab10-9be59d85310d
Key Points
Carbon capture and storage captures carbon dioxide emissions for permanent storage or usage.
CCS could play a vital role in reducing global emissions.
The technology could prove to be very lucrative for oil companies.
Carbon capture and storage, or CCS, is a process that captures carbon dioxide gas emissions and safely sequesters them underground. It helps reduce carbon emissions that are harmful to the environment and contribute to climate change. Companies and governments are investing heavily in CCS to make the technology commercially viable so it can contribute to a lower-carbon world.
Understanding carbon capture and storage
Carbon capture and storage is a three-step process:
Carbon dioxide emissions are captured from a source, such as a chemical or steel plant, or directly from the atmosphere.
The captured carbon dioxide gas is transported by pipeline to a sequestration or utilization site.
The carbon dioxide is either injected into a deep underground formation for permanent storage or utilized to produce oil or a higher-value product.
CCS helps reduce carbon emissions by capturing them from the source or the atmosphere. The greenhouse gas is then permanently stored or utilized so that it doesn't cause additional harm to the environment.
What are the types of carbon capture and storage?
There are two main types of CCS technology: point-source capture and direct air capture (DAC).
Point-source capture involves installing carbon capture technology at the emissions source to capture and separate carbon dioxide from flue gas. The pure stream of carbon dioxide gas will then flow through a pipeline to a sequestration or utilization site.
A DAC system is a purpose-built facility that extracts carbon dioxide from the atmosphere. DAC technology uses an engineered mechanical system that pulls in air and extracts carbon dioxide through a series of chemical reactions.
In many ways, DAC is similar to what plants and trees do in photosynthesis, though at a faster pace and with a smaller physical footprint. However, it's a more expensive process than a point-source capture system because carbon dioxide in the air is much more diluted than flue gas from an industrial plant.
Once captured, carbon dioxide flows through pipelines to sequestration or utilization sites. Carbon dioxide is commonly used in enhanced oil recovery (EOR), where oil companies inject carbon dioxide into a legacy oil reservoir to increase pressure and raise production rates.
The process stores the carbon dioxide while boosting oil production. Captured carbon dioxide can also be permanently sequestered in a non-oil-producing underground formation or utilized for industrial applications.
Why carbon capture and storage is important
The Intergovernmental Panel on Climate Change has highlighted the role that CCS could play in reducing carbon emissions and their impact on global warming. The world is investing heavily in renewable energy sources, like wind and solar energy, to help reduce the need for carbon-based fuels.
However, countries will also need to deploy technologies that remove carbon dioxide from the atmosphere to help reduce the impact of hard-to-abate heavy industries, such as steel, cement, chemicals, and other industrial manufacturing.
Energy companies believe CCS can provide them with a dual benefit. They believe it could extend the life of fossil fuels usage while also becoming a very lucrative global market. Oil giant ExxonMobil estimates CCS will grow into a $4 trillion market by 2050. That's about 60% of the global market it sees for oil and gas by that time.
Many energy companies are investing heavily in CCS technologies. For example, Occidental Petroleum has a long history of using carbon dioxide in EOR. It's leveraging that expertise to become an emerging leader in CCS.
The company is building the world's largest DAC site in Texas. It was also an early investor in DAC technology company Carbon Engineering, which it acquired in 2023 for $1.1 billion.
The STRATOS facility will be able to capture 500,000 tonnes of carbon dioxide per year when it comes online in 2025. Occidental is working to commercialize the project by selling carbon credits to companies seeking to achieve their emission-reduction targets.
STRATOS is one of many DAC projects the company hopes to develop. It also plans to license its DAC technology. Occidental believes it could eventually make as much money from CCS as it currently does from its oil and gas production business.
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gfp927z
2 months ago
>>> Berkshire Buys Ulta Beauty and Heico Stock, Sells Snowflake in Second Quarter
Barron's
by Andrew Bary
Aug 14, 2024
https://www.barrons.com/articles/berkshire-buffett-ulta-beauty-snowflake-chubb-13f-stocks-9f755841?siteid=yhoof2
Berkshire Hathaway bought small stakes in Heico (HEI) and Ulta Beauty (ULTA) in the second quarter, while adding to its holding in Chubb (CB), according to the company’s quarterly 13-F filing released Wednesday after the market closed.
Berkshire eliminated its holding of 6.1 million shares of Snowflake (SNOW), the software company, which it bought at the time of the company’s initial public offering in 2020. That holding was worth about $1.2 billion at the end of March.
Berkshire bought 690,000 shares of Ulta Beauty that were worth $266 million at the end of the second quarter and just over a million shares of Heico, a supplier to the aerospace industry. That stake was worth $185 million on June 30.
Berkshire also bought about a million shares of insurer Chubb. It held 27 million shares worth $6.9 billion on June 30.
Berkshire trimmed its stake in Capital One Financial by about 2.6 million shares to 9.8 million shares in the second quarter.
Berkshire was a light buyer of stocks in the second quarter, purchasing less than $2 billion, while selling about $77 billion, mostly Apple
That stake fell nearly 50% to 400 million shares and was reported in Berkshire’s recently released 10-Q report for the second quarter.
Ulta Beauty stock was higher in after-hours trading, rising 13% to $371.70. The stock was down about 33% in 2024 as of the close of trading Wednesday and Berkshire appears to have taken advantage of that weakness.
Berkshire CEO Warren Buffett oversees the company’s equity portfolio of more than $300 billion, but he delegates authority over about 10% of it to investment managers Todd Combs and Ted Weschler. They operate independently of Buffett.
The new holdings in Heico and Ulta Beauty could be investments by Combs or Weschler given their small size. Buffett tends to accumulate holdings of at least $3 billion in order to move the needle given the large size of the Berkshire portfolio and Berkshire’s market capitalization of $940 billion.
The Snowflake holding is believed to have been initiated by Combs. At the time of the Snowflake IPO in 2020, the company’s CEO Frank Slootman said most of his Berkshire interactions had been with Combs.
The Snowflake investment likely wasn’t particularly profitable for Berkshire—a demonstration of the dangers of buying richly priced IPOs. Snowflake went public in late 2020 at $120 and its stock price averaged about $150 a share in the second quarter. The stock is below that level now, trading down 1.5% to $125.41 in after-hours action on Wednesday.
Berkshire eliminated its holding in Paramount Global in the second quarter—a move that Buffett telegraphed at his company’s annual meeting in May.
The company reduced its sizable holding in Chevron by four million shares to about 119 million shares that were worth $18.6 billion on June 30. That move was disclosed in the 10-Q.
Berkshire also bought about 92 million shares of Sirius XM Holdings, the satellite radio company, in the second quarter. It held 133 million shares on June 30, a stake that is now worth about $400 million. Berkshire also is the largest shareholder of Liberty Sirius XM Holdings, a tracking stock for Sirius XM, with a stake of about 30%. The two companies are due to merge in September.
DiscoverGold
2 months ago
Berkshire Hathaway Earnings: Strong Insurance Results Continue to Lift Revenue and Profitability
By: Morningstar | August 5, 2024
• Record cash on hand as Buffett slashes Apple stock position.
Wide-moat-rated Berkshire Hathaway BRK.A/BRK.B reported adjusted, second-quarter operating results that were more or less in line with our expectations. We are leaving our $640,000 per Class A and $427 per Class B share fair value estimates in place.
Second-quarter (first-half) revenue, including unrealized and realized gains/losses from Berkshire’s investment portfolios, decreased to $117.5 billion ($209.3 billion) from $125.6 billion ($245.7 billion) in the year-ago period(s) as the company lapped significant unrealized and realized investment gains during the first half of 2023. Excluding the impact of investment gains/losses and other adjustments, second-quarter operating revenue increased 1.2%, and first-half OR increased 3.2% year over year to $93.7 billion ($183.5 billion).
Operating earnings, exclusive of investment gains/losses, increased 15.5% (26.0%) year over year to $11.6 billion ($22.8 billion) during the June quarter (first half of the year), with strong insurance results continuing to compensate for weakness in other segments. When including the impact of the investment gains/losses, reported operating earnings decreased to $30.3 billion ($43.1 billion) from $35.9 billion ($71.4 billion) in the prior year’s period(s).
Book value per share, which still serves as a decent proxy for measuring changes in Berkshire’s intrinsic value, increased 4.5% sequentially and 11.4% year over year to $415,668 (from $397,627 and $372,966 at the end of March 2024 and June 2023, respectively).
Record Cash on Hand As Berkshire Slashes Apple Stock
Of note was the fact that Berkshire sold off close to half of its Apple AAPL stake and invested the proceeds in US Treasury Bills.
The company closed out the second quarter with a record $276.9 billion in cash and cash equivalents, up from $189.0 billion at the end of March 2024. Free cash flow reached $9.1 billion in the second quarter, and Berkshire also sold on a net basis $75.5 billion of its stock holdings (primarily Apple, from what we can tell) in an apparent derisking move (noting that Apple’s shares ran up 23% during the second quarter).
Read Full Story »»»
DiscoverGold
gfp927z
2 months ago
>>> What Buffett's huge Apple sale really means
The Street
by Charley Blaine
Aug 4, 2024
https://finance.yahoo.com/news/buffetts-huge-apple-sale-really-215832027.html
When Berkshire Hathaway (BRK.B) announced its earnings on Saturday, much was made of a note deep in its detailed filing.
Berkshire has been selling lots of shares of Apple (AAPL) , and the value of its investment had fallen from $174.3 billion on December 31 and $135 billion at the end of the first quarter to $84.2 billion as of June 30. From December to June, that's a decline of about 50%.
Berkshire owned 915.6 million shares of Apple as of Jan. 2, according to Apple's proxy statement. The share count is probably now about 450 million shares, worth around $88 billion as of Friday.
At the company's annual meeting in May, Chairman Warren Buffett had told shareholders that Berkshire was trimming its Apple stake, largely because its investment in the tech giant had done so well it had huge capital gains. Other than that, he said at the time, he loves what Apple does.
(Buffett started investing in Apple in 2016, a late-comer to the tech party. The late Charlie Munger, Buffett's long-time partner, talked Buffett into investing in Apple, telling the Oracle of Omaha it was more a consumer stock than a tech stock.)
A magnificent stock pick
Selling some shares now may also be simple prudence. Selling now reduces Berkshire's risk to a frothy stock market. Either way, Buffett wasn't complaining about the long-term capital gains tax that might hit — about 20% of the profit. But when you've made so much money from one stock, you can afford the taxes.
How big a gain? From the shares bought between 2016 and 2018, the gain would be over 400%. For shares bought between 2022 and the first quarter of 2023, the last time Berkshire was known to add to its Apple position, the gain would be 20% before taxes.
There is a counter-narrative. Some Apple watchers, plus CNBC's Jim Cramer, think there may also be concern about Apple's big China business. Revenue in products and services in China was off 6.5% from a year ago in Apple's fiscal third quarter and off 10% for the fiscal year-to-date.
The political tensions between China and the United States may be a worry, too.
Apple shares holding their own in market turmoil
Apple investors seem more confident about the company now. The stock was up 23.6% in the second quarter of 2024, after a 10.9% loss in the first quarter. It's up 3.9% in the third quarter.
Moreover, in a week where Amazon.com (AMZN) fell 8%, Microsoft (MSFT) dropped 4%, and Nvidia (NVDA) fell 5.1%, Apple was up 1%. It is up 14.2% this year.
Apple has returned to being the most valuable company in the world with a market capitalization of $3.37 trillion. That is still a bit pricey: Its forward price-earnings ratio is about 30. The Standard & Poor's 500's forward p/e is about 22, down from 22.72 as stocks were peaking.
So, what has Berkshire and Buffett done with the cash realized by these gains? Mostly put them in cash and Treasury bills. An easy source of cash to pay the capital gains taxes — if Berkshire can't find a way to shelter the gains.
More importantly, Buffett and Berkshire are waiting.
Remember, Buffett (and Berkshire Hathaway) is a classic value investor who doesn't chase the hot stock. Buffett and Berkshire look for great companies appropriately priced. (Munger had weaned Buffett off just buying cheap stocks.)
So, like a lot of investors, Buffett and his investment management team are watching the stock market's current volatility to run its course. In other words, looking for good buys at better prices. They have the cash.
gfp927z
2 months ago
Chubb - >>> Berkshire Hathaway Added 26 Million Shares of This Stock in the Past 3 Quarters: Here's Why It's a Smart Buy Today
by Courtney Carlsen
Motley Fool
Aug 3, 2024
https://finance.yahoo.com/news/berkshire-hathaway-added-26-million-222400906.html
Since becoming CEO at Berkshire Hathaway in 1965, Warren Buffett has delivered 19.8% compound annual returns to investors, or enough to turn a $100 investment into $4.4 million today. Buffett's extended track record of success is one reason investors eagerly await the release of Berkshire's quarterly report showing the stocks the conglomerate bought and sold during the quarter.
Over the past three quarters, Berkshire Hathaway has bought shares of Chubb stock hand over fist and kept its buying confidential for two quarters. Berkshire owns 26 million shares of the insurer as of March 31, worth roughly $7.2 billion today. Here's why Chubb is a smart buy for investors today.
Why Buffett is drawn to insurance investments
Buffett loves the insurance industry, going back to his days as a student at Columbia Business School. At the time, Buffett learned under Benjamin Graham, who invested in GEICO in 1948. It was one of the best-performing assets during Graham's career.
When Buffett acquired Berkshire Hathaway in 1965, it was a failing textile company that was barely staying afloat. In 1967, Berkshire acquired the insurer National Indemnity, which Buffett credits as a turning point in Berkshire Hathaway's history.
Insurance companies' cash flows make them appealing investments, which is why Buffett continues to invest heavily in them. A few years ago, Berkshire Hathaway acquired Alleghany for $11.6 billion, adding to its list of insurance companies owned by Berkshire Hathaway, including GEICO, National Indemnity, Berkshire Hathaway Primary Group, and Berkshire Hathaway Reinsurance Group.
Chubb is one of the largest and best at managing risk
Chubb is one of the world's largest property and casualty insurance companies and underwrites various policies, including personal automotive, homeowners, accident and health, agriculture, and reinsurance.
The company has an excellent risk management history, which you can observe by its combined ratio. This essential insurance metric is the sum of claims costs (how much an insurance company pays out on a policy) and expenses (like employee compensation or fixed overhead) divided by the premiums the company collects.
Over the past two decades, Chubb's average combined ratio was 90.8%, well below the industry average of 100%. This matters because it translates into free cash flow, which the company uses to pay dividends, buy back shares, or invest in things like bonds and stocks. Chubb's solid growth is why it has raised its dividend payout for 31 consecutive years.
Another benefit of investing in insurance is the timing of cash flows. Insurers collect premiums upfront and pay out claims down the road. In the time between, the company can invest this money, known as "float," usually in short-term Treasury bills. As policies expire, companies keep their profits and can build an extensive investment portfolio over time.
Chubb has a $113 billion investment portfolio primarily invested in fixed-income securities. Last year, it earned $4.9 billion in investment income, up 32% year over year, and its yield on average invested assets improved from 3.4% to 4.2% as it benefited from rising interest rates. Through the first six months of 2024, Chubb's net investment income has increased another 27% from last year.
Chubb is well positioned
The Federal Reserve is projected to cut interest rates sometime this year and into next, which could negatively impact Chubb's investment portfolio in the short term. However, some longtime market participants think interest rates could stay elevated.
For example, Howard Marks of Oaktree Capital Management has described a "sea change," saying, "For various reasons, the Fed is not going to go back to the ultra-low interest rates over the last 13 years" in a 2023 interview on the Motley Fool Money podcast. If that's the case, insurers like Chubb will benefit by earning more interest income than was possible in the decade and a half prior.
JPMorgan Chase CEO Jamie Dimon also cautioned that "there are still multiple inflationary forces in front of us" due to fiscal deficits, rising interest rates, and stubbornly high inflation. Chubb is already a solid company to own, and if inflationary pressures persist, it has the pricing power to adapt to rising costs, giving it stellar potential for the next decade and beyond.
gfp927z
2 months ago
Apple - >>> Why Warren Buffett’s Berkshire Dumped 55.8% Of Its Apple Stock
Forbes
by Peter Cohan
Aug 3, 2024
https://www.forbes.com/sites/petercohan/2024/08/03/why-warren-buffett-dumped-56-of-berkshires-apple-stock/
Warren Buffett dumped 55.8% of Berkshire Hathaway’s holdings of Apple stock in the first six months of 2024, according to Reuters.
Since the end of 2023 Berkshire has sold 505 million Apple shares — 115 million in the first quarter and another 390 million in the second quarter. As of June 30, that represents a 55.8% reduction in Berkshire’s Apple holdings since the beginning of the year, Reuters noted.
Why did he sell so much Apple stock? Should other investors follow suit?
I do not know why Buffett sold such a huge chunk of Berkshire’s Apple stock. However, Apple’s tepid growth rate and high valuation suggest the famed investor may have concluded the stock’s prospects are not great.
While Apple’s AI offerings could give consumers a reason to upgrade, the iPhone maker’s declining revenues in China, its regulatory woes, and the absence of a compelling growth vector — particularly if Apple Intelligence does not prove to be a killer app — could mean Apple will be lucky to achieve low single digit revenue growth.
I suspect other investors will take a cue from Buffett.
Apple has been a good investment. Since Buffett began buying he iPhone maker’s stock in 2016, Berkshire has spent roughly $40 billion. Apple shares have delivered a total return of nearly 800% since Berkshire first disclosed its stake, noted the Financial Times.
gfp927z
3 months ago
Bank of America - >>> Warren Buffett Just Sold $1.5 Billion of Berkshire Hathaway's Second-Largest Holding. Here's Why.
Motley Fool
by Adam Levy
Jul 24, 2024
https://finance.yahoo.com/news/warren-buffett-just-sold-1-081700022.html
Warren Buffett keeps selling stocks. The Oracle of Omaha has been a net seller of equities for his company's portfolio in each of the last six quarters, as reported by Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). The odds are good he'll make it seven in a row when Berkshire reports next month, and now he's going for eight with another major stock sale.
A recent filing with the U.S. Securities and Exchange Commission (SEC) revealed that Buffett sold $1.5 billion of Berkshire Hathaway's second-largest equity holding, Bank of America (NYSE: BAC). The sale represents just a 3.3% reduction in Berkshire's stake in the bank but could be just the start.
There's no doubt Bank of America has been a very successful investment for Buffett and Berkshire Hathaway shareholders. And Buffett is famously quoted as saying his favorite investment holding period is "forever." So why is he selling shares now?
There are a few reasons Buffett might have sold Bank of America stock.
After the stock's strong performance over the last eight months, shares are currently trading at levels unseen since the start of 2022. Despite the strong financial and operational performance underlying that price appreciation, Buffett may believe the shares are now fully valued, so he's taking money off the table as a result.
Another reason may have less to do with the current valuation and more to do with locking in gains at a favorable tax rate. Buffett's cost basis on those Bank of America shares is just over $14, on average. That means over two-thirds of the proceeds from Buffett's sales are taxable gains.
Buffett hasn't been shy about taking gains on some of his favorite stocks lately. He sold billions worth of Apple (NASDAQ: AAPL) shares in the fourth and first quarters.
When asked why he sold Apple shares at the annual shareholder meeting in May, Buffett explained that he was happy to pay taxes at the current favorable tax rate of 21%. He expects the rate will increase in the future. However, he said he expects Apple to remain Berkshire Hathaway's largest equity holding for some time.
The same factors may have led him to take the tax hit on Bank of America shares now. That may suggest Buffett still likes the business and the stock but doesn't see it growing as quickly as it has in the recent past — at least not enough to justify paying higher taxes on the gains later.
Should you buy or sell Bank of America stock?
Bank of America saw its shares fall in price as interest rates climbed. That's because the bank has high exposure to longer-duration bonds, which currently carry low interest rates. As a result, the bank missed out on opportunities to buy securities with higher coupons as interest rates climbed.
Bank of America's decision to invest in longer-duration bonds has an outsized effect on a metric called net interest income (NII). That's the difference between the revenue generated by the bank's interest-bearing assets and the expense it pays on interest-bearing liabilities. Since the bank holds long-term bonds but has to pay market rates, NII declined as interest rates increased.
But management says NII has hit its trough. It's forecasting growth in the third and fourth quarters this year, reaching $14.5 billion in the fourth quarter.
The good news is Bank of America is poised to do well, relative to its peers if the Fed cuts interest rates (as it is expected to later this year). The knife cuts both ways, so to speak.
With a price-to-book value of 1.25, Bank of America's shares look fairly priced. Buffett's sale appears to be more about taxes than anything specific about the company or its stock.
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