Berkshire Hathaway Slashes Amazon Stake

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1:02Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. All right. We got Scarlet Food, Paul Sweeney. We're live here in our Bloomberg Interactive Broker Studio. We're streaming live on YouTube and at Bloomberg.com. Buffett goes out like a bear with$5 billion in Q4 sales. That's according to the 13 Fs. Matthew Palazzola joins us here, senior analyst. He covers the insurance companies, including Berkshire Hathaway for Bloomberg Intelligence.

1:45He's covered that company for decades here. Was this the last quarter where Warren Buffett was actively managing, maybe, I guess, the account, along with his co-managers there? So this is maybe the last time we can say Warren Buffett sold this or bought this? Yes, it is. So he was the CEO as of the fourth quarter. So these moves that we're looking at in the 13F took place in the fourth quarter of last year. To be totally fair, he's been stepping back. He probably wasn't behind a lot of this anyway, but this is actually the last quarter that you could even attribute these things to him. He remains chairman, so you never know.

2:21He'd be looming behind the scenes, but his last quarter as CEO. go. And the thing about his investment in Apple was that he famously said he was only investing in things that he understood in that typically did not include technology companies. But Apple, I guess he saw more as a consumer company than anything else. Yeah, I think so. And I think the, you know, his thing was moats, right? And probably still is. But the iPhone moat and the infrastructure built in, I think those were appealing things. They have been pairing that investment, as we know. Now, part of that, and it's kind of a twist because he had said this at the annual meeting a couple of meetings ago, that it was kind of tax reasons, that they had these huge unrealized gains in there.

3:03And he thought taxes would be going up. Now, they're certainly not going to go up under the current administration kind of anytime soon. But Buffett is always long-term thinking. So I think that's what he was looking at is we've got tens of billions of dollars of unrealized gains that will be taxed. And I think it does still hold true that in 10 years from now, probably the corporate tax rate could be higher. And that was his concern and part of the reason they were taking down those big gains in those big positions. The conglomerate also cut its Amazon stake by 75%. They did. Wowzer. So Amazon, they initially got into Amazon in 2019.

3:39That was one of his investment deputies, I think, brought it to him then. Again, also like tech, but a retailer, right? That position we calculated was up about 130 % to 140 % over the time they hold it. Nice, but kind of in line with the S &P 500. So it didn't really outperform. So I think it was kind of taking some money off the table. They sold, I believe, like$1.7 billion worth of that stock, cutting most of the position. So that one, I think, was probably company-specific. Didn't really outperform. They bought$4 billion of Alphabet last quarter. So, you know, the kind of tech aversion, you know, may be changing over time.

4:20What did he increase stakes in? So two big ones, Chevron and Chubb. So Chevron is their fifth biggest holding, I think. They interestingly, I don't know if they were kind of betting on U.S. intervention in Venezuela, which happened kind of after the quarter. So you can't say that like Maduro got taken out and this stuff happened and they did it and reactions did it before, but maybe they were reading the tea leaves there. I don't know. It's a big holding for them. I think the kind of geopolitical energy play makes total sense. The other one is Chubb, which I don't want to get too excited thinking about an insurance mega deal here, but they are now the second, well, they've been the second largest holder of Chubb stock.

5:07Chubb makes total sense. It is, in our view, a BI, a cream of the crop insurance company, global reach, still growing nicely, great management. It's a company that Berkshire would want to own. Now, Berkshire's got their own massive insurance business. The interesting thing is you've got two massive insurance businesses. They're actually quite complimentary if one were to want to put them together. So the Berkshire business, very big personal auto in Geico, very big reinsurance, global reinsurance. Those are two businesses that Chubb is not really in. There's some overlap in the US specialty businesses that they're both in, but it would be phenomenally complementary of those two businesses.

5:51I think there's probably a lot of hurdles to some sort of total deal there. Chubb's market cap is$130 billion. Berkshire has$300 billion of cash so they theoretically could buy chub in cash if they wanted to but uh i think it's probably some cultural issues and would chub really want to sell as the other thing but uh you know it is something it as a stock something berkshire would want to is that a strategy that berkshire actually follows through on where it starts off with a stake and then eventually decides you know what we're just going to buy the whole thing scarlet yeah they do do that so i think with burlington northern which is a little bit before time when they bought it they did things like that where they acquire the public stake and then they build it over time.

6:32That's why there was a lot of speculation about Occidental. Buffett then came out and threw cold water on it saying that. But it seemed like it was going along with their playbook of huge acquisitions that they made before. So now that Warren's out, can we have a serious discussion about a dividend? We can, I think. We'll get you on the phone with Greg Abel and see what he says. But, you know, I think our take has been in the early years, Abel will probably adhere to the ethos of Berkshire. And I don't think he's going to come in and start breaking down walls. I don't think anyone would like to see that, especially if Buffett's still there.

7:08And they have tremendous excess capital. Buffett has praised Abel as being a great capital allocator, great capital manager. And they've also said we literally can't, there's so much money, we can't put it to work. in a reasonable way. So it would make sense to see something happen there. And I think, look, the other thesis is they're not going to be as good at anything anymore, right? There's no better investor than Buffett. You have Ajit Jain, who is the head of the insurance operations. He's been selling a lot of stock. Perhaps he's getting close to retirement. So they're not going to be good at any of these things anymore.

7:39Some sort of capital return will be a big catalyst. Stay with us. More from Bloomberg Intelligence coming up after this. I'm Barry Ritholtz, inviting you to join me for the Masters in Business podcast. Every week, we bring you fascinating conversations with the people who shape markets, investing, and business. CEOs, fund managers, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market, whether you own stocks, bonds, real estate commodities, crypto, you really need to hear these conversations. Sometimes it's behaviorists like Dick Thaler or Bob Schiller.

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9:12decision to mostly sit out the AI arms race has turned it into an outlier. Ryan Vlastelka, he's an equities reporter for Bloomberg News. He's based out there in Chicago. Ryan, is this a good thing for Apple, a bad thing? Because historically, it's been like, hey, Apple, when are you guys going to get on this AI bandwagon? And maybe now it's kind of working out to their benefit that they're not so much on that. Yeah. So in this market, it, obviously there has been a lot of AI related volatility. There's been a lot of concern about the amount of money that big tech companies are spending on AI, but Apple isn't really spending on AI in that way.

9:49There's been a lot of concern about AI disrupting software companies. Apple isn't really software. There's a lot of concerns about AI disrupting all parts of the market, whether it's financial services, legal services, data, all these kinds of things, none of which really involve Apple. But at the same time, Apple is probably going to be the major way that people access AI services on their phones, on their computers, on their tablets, so on and so forth, which means it has a certain amount of upside potential related to the technology without having to spend on it the way companies like Microsoft or Alphabet or Meta are.

10:25So it's kind of perfectly positioned in this current environment when there's concern about both AI spending, but also AI disruption. So it kind of worked out that Apple hasn't made very much progress on AI, but on overall, the fact that it didn't do a lot on AI was kind of falling behind. In fact, losing talent was something that was a drag on the stock, say, a year ago. Yeah, people were concerned about this, but a few weeks ago it announced a multi-year partnership with Alphabet where Google is going to be providing the technology behind Apple's AI, including Siri. That was seen as a way for people to feel really relieved that they are going to be involved with AI, have some kind of offering from a highly respected AI lab model provider in Alphabet without having to pay for it or have developed their own in-house stuff, which is obviously an area of huge competition, heavy expenses.

11:17I think the four major spenders this year are spending$650 billion, so they are stepping out of that and they don't have to worry about that. Stay with us. More from Bloomberg Intelligence coming up after this. This is Tom Keen inviting you to join us for the Bloomberg Surveillance Podcast. It's about making you smarter every business day. I'm Paul Sweeney. We bring you complete coverage of the U.S. market open. We cover stocks, bonds, commodities, even crypto, all the information you need to excel. And I'm Alexis Christophorus. Bloomberg Surveillance also brings you the analysis behind the headlines.

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12:31You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. One of the big gainers today, and it happened even before the market opened, Paul, is MSGS, MSG Sports. It is the owner of the Knicks and the Rangers, not the owner of MSG Networks because that's another business. Yes. There's a whole bunch of businesses within MSG. I mean, it's kind of difficult to follow. Yeah. And that's after they sold their cable business years ago.

13:04So now they just focus on their entertainment. And then there's Sphere Entertainment, which is the big sphere in Las Vegas. Awesome. So all of James Dolan's media properties and assets, you know, in this suite of publicly traded companies. Let's bring in Randall Williams. He is our business of sports reporter here at Bloomberg. Brigham. Randall, you have been following this story about this potential split of the New York Knicks and the New York Rangers within MSG Sports. This is something that a lot of people have been calling for for a long time. Yeah, you look at the enterprise value of the Knicks and Rangers and what they're traded at, it's$7 billion.

13:36But you look at what the Lakers sold for alone,$10 billion. And I think the Knicks obviously are in a larger market than New York. The Lakers have won more titles. But New York is New York. And so both the Knicks and the Rangers, I think, would carry a tremendous value, maybe$12 billion combined. And that's on the low end. So is this maybe a first step for selling one of the teams, selling a piece of one of the teams? Getting into speculative territory there. With James Dolan, that's always a fun place to play. Look, I mean, Silver Lake owns a piece of MSG Sports. And so that's 5 % or it's a 10 % stake, but probably 5 % each.

14:13And when you think about someone wanting to buy into that, You would want to know how much each individually is worth. If not, you're buying into something and it's like you could be buying in at a supreme price or maybe something that's a little bit lower. And I think buyers who are interested in there have been several over the years want a want a more precise price. And so do the shareholders of MSG Sports. So what's held up the company from being split up up until now? because there's been a lot of calls for it. The enterprise value trading at a discount to the actual value of each franchise has been there for a while.

14:50I know the answer. Tell us. Super voting stock is from the Dolan thing. Control. Yeah, I think that James Dolan has long been the controlling person for all of these companies. He decides what - For better, for worse. Yes, exactly. He decides what he wants to do, and there is a board of directors that voted on this, but this would have never been up for a vote had James Dolan not said, you know what, maybe we should consider this. And then from there on, you know, things happen and they vote on this. Madison Square Garden and James Dolan, did they own the garden itself, the building? Believe so.

15:21Yeah, because that's always a big, that's always a big part of it too. Do you own the arena that you plan or do you - Yes, I had a - But in a different publicly traded company, right? Exactly. That's the thing. Exactly. And I had a Bloomberg Terminal Reader and the original copy that I wrote this morning, I said that Madison Square Garden was one of the most famous arenas in the world and someone quickly someone quickly replied and said no it is the most famous arena in the world so madison square garden is a huge you know attraction when you think about arenas in new york there's the barclays center of course which is newer but the legacy of new york is often rooted in msg and the events that it's held over many many years yeah i mean first of all and they also put in i think close to a billion dollars in renovation several years ago so they really upgraded the garden and what's one of the many great things about going to the Garden is they have the photos on the wall, the concourses, all the great events, whether it's a concert, a game, whatever.

16:14And there's thousands of them. There's no there's no venue that has a greater history, I would argue, than Madison Square Garden that is still, you know, open and operational. And that's a that's part of this. I mean, you think about the Knicks playoff run last year, you think about the Rangers and what they've done. Not the past two seasons, but in the seasons before that, all of these things, when they eventually win, you know, God willing, it isn't MSG. It isn't one of the deals where, you know, they're in a way game and then they have to come back. If it happens in MSG, that will probably be the biggest moment in that arena in the last 25 years.

16:45And so whoever wants to buy into that potentially is going to want a good value out of it. There was also a note from Lightshed that pointed out that there's a new tax law that goes into effect for the 2028 fiscal year that for public companies limits deductions on$1 million to$1 million per covered employees. For sports teams, it's easy to find a lot of employees that make at least$1 million a year. So once this goes through in 2028, that's going to put the company in a negative free cash flow situation unless the Knicks, for instance, go deep into a playoff run or the Rangers go deep into a playoff run.

17:20So it also allows the company, you know, for tax reasons to be in a better position. Absolutely. I mean, there's not a lot of publicly traded sports companies out there for this reason in particular. And you think about all of the big ones, you think about the Cronky Sports and Entertainment, which houses the Rams, the Nuggets, I believe another soccer team and so many more. It's private. And that's that's for a reason. But this one is unique. And Madison Square Garden is Madison Square Garden. The Knicks is the Knicks and the Rangers, the Rangers. Another big trade that a lot of people are thinking about in professional sports is in the NFL with the Seattle Seahawks.

17:53Yes. What's the status of that? Because that NFL teams don't come along very often. Sure. So the NFL's finance committee has been talking about this for over a year. And I think things just are at a point now where the ownership group in Seattle, the trust of Paul Allen, the former co-founder of Microsoft, is at a point where they're ready to sell. They hired some lawyers, right? They have. That's reported by SBJ. I don't believe the paperwork is signed just yet, but I trust Ben Fisher. And, you know, I think that that will happen later this year, whether that's at the NFL League meetings in Phoenix around the end of March and April.

18:24And then I think NFL owners would like to have a new owner by the time the new season starts. How much of a stake do they own in the Seahawks? I mean, is this, you know, like a super stake or is it just, you know, It's a control stake in a team. That wouldn't have happened in, you know, since the commanders are sold for six billion dollars. So whoever buys the Seahawks calls the shots. Yeah, exactly. And is it any sense whether it's going to be a billionaire, a financing group? Look, there's so many buyers. The NFL's finance structure sees that a controlling owner has to have 30 percent of a team up front.

19:01So it is in a situation where, you know, you can take on some debt, but not a lot. And 30 percent, I would imagine I said this earlier, I think the Seahawks will trade for at minimum eight billion dollars. 30 percent of that is going to be around two and a half in cash. There's not a lot of people who are willing to just write a two and a half billion dollar check in cash and then raise the money around it because it isn't just raising the money. It's communicating to those people that you're trying to bring in your ownership group that, hey, I run this, but you're welcome to come on board the ship so long as you understand that you're not the captain.

19:30Right. And that's tough for a lot of people. Josh Harris did it, but he did it without private equity. Private equity is an option now. And so whoever buys this, whether it be, you know, Jeff Bezos or whoever, who Jeff Bezos considered buying the commanders is going to have to write a hefty check. Stay with us. More from Bloomberg Intelligence coming up after this.

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20:57You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts. or watch us live on YouTube. Let's talk a little technology here. I got the S &P, I mean, I got the NASDAQ, which is where you find a lot of the tech names. It's up 1.4 % today, so that's a nice move. And there's always news in the tech sector, which is why we have to chat with Mandeep Singh and Anurag Rana and all the folks at Bloomberg Intelligence who cover the tech space so often.

21:30Meta platforms agreed to deploy millions of NVIDIA processors over the next few years. Mandeep, what does this mean? Is it new? What's going on here? Well, I mean, it's not really new because Meta is among the top two customers for NVIDIA chips. So it's more to do with the fact that not only are they using the GPUs from NVIDIA, they're also using the CPUs now. And Intel and AMD used to own that market of server CPUs. And what NVIDIA is saying is will give you a better throughput, a better performance if you end up using our GPU cluster, complement our CPUs. And I think overall, I mean, that's Meta's way of making sure they get the supply from NVIDIA, because we heard that at least 10 times from Jensen this year, that demand is really strong, and they get to decide who they allocate their chips to.

22:32So this is one way that Meta is making sure they have the supply. Yeah, well, it makes a lot of sense. So again, the hyperscalers spending more and, you know, striking up new deals. Let's talk a little bit about Uber. It's planning to spend more than $100 million to really supercharge its robo-taxi charging stations. How are you thinking about whether this changes the profile of what Uber is as a company? I think for Uber, given the scale of their rides, you know, they do over 13 billion rides a year. Compare that to a Waymo that just did 20 million rides a year. Let's go back. Say those numbers again.

23:1013 billion rides for Uber. And just to put it in context, that equates to maybe 10 million rides a day. And Waymo did 20 million rides in the whole year, the past 12 months, which was phenomenal growth for them. But that's the scale that Uber is operating at. And that's their pitch that, you know, if you've got two robot taxi players, they will eventually have to tap our network. If you've got five players, then there's all the more reason to use Uber as the network to deploy a robot taxi fleet, because the hard part in this business is managing the wait times. You can have a fleet of Waymo cars, but people don't have the patience to wait for 10 minutes, you know, for a So that's the scale at which Uber operates.

23:59It allows them to keep the ETAs really low, which is why people use these services. And that's, I think, what's keeping them. This has been one of the great inventions of my lifetime, the whole ride sharing thing. Think about how it's changed your life. I know. I mean, it's - Back in the day, what did you have to do, right? Yeah. And, you know, we have with our kids, we have this thing, you know, don't drink and drive, don't drink and drive. They're like, nobody drinks and drive. Yeah, I know. They look at you like you're crazy because there's a solution for that. Actually, the people who drink and drive are full-grown adults.

24:27Yes, yes. That's who does that. It's Gen X. Yeah, and you can actually get parking on college campuses now. And that was a huge problem at Duke. You can never get parking space. Now they're like, yeah, we've got parking all over the place because the kids are Ubering everywhere. Absolutely. So Uber technologies, are they fully globally penetrated right now? Or is there some big part of the world where, like China, where they're just not a player? Yeah, they're not a player in China. And the big threat is what the Chinese autonomous driving companies are trying to do is they're trying to roll out their fleet, not only in China, but outside in Europe as well.