>> Hello, I'm Susan Dziubinski. Welcome to a bonus episode of The Morning Filter podcast. Now, as our regular viewers and listeners know, we're doing some bonus episodes of the podcast, sitting down with various Morningstar experts to discuss topics that you've told us you want to hear more about. So, if you have an idea for a bonus episode, send it to us via our email address, which is The Morning Filter at morningstar.com. Now, today's bonus episode is focusing on one of my colleague Dave Sekera's stock picks from earlier this year. That's Berkshire Hathaway. Now, it's a good time to be talking about Berkshire with Warren Buffett stepping down as CEO at the end of last year. There are plenty of questions about what the future could bring. And today, I'm joined by someone who knows more about Berkshire Hathaway than most anyone, and that's Greg Warren. Greg is a senior analyst with Morningstar, and he covers Berkshire Hathaway. Well, Greg, thank you for being here, and welcome back to The Morning Filter. We usually talk to you after Berkshire Hathaway's annual meeting, but we've got a lot to talk about, so we didn't want to wait until then to bring you in. So, uh >> Well, thanks for having me, Susan. Yeah. So, we were talking before we started filming, and I said to you, "I can't remember a time when you were not Morningstar's Berkshire Hathaway analyst." So, how long have you been covering the company for us? Let's see. I believe our first report, or at least my first report, came out in December of 2010. So, we're looking at what, 15 plus years from there. >> So, so quite some time. Now, before the pandemic uh hit, you were one of three people that Berkshire had sort of hand-selected to be on the analyst panel at the annual meeting. And so you had the opportunity to ask Warren Buffett and Charlie Munger some questions. So what sort of What Why do you think you were one of the lucky three? Well, it was it was a process for Berkshire. They They actually introduced the analyst panel in 2012. They already had journalist panel in place, but they they wanted to bring some analysts in. And I think the key for Buffett was he was trying to get more company-specific questions into the mix because the Q&A up until then had been really shareholder driven. Mhm. And it could veer off topic a lot. So from that perspective, that was his goal. Unfortunately, that first year they brought in three sell-side insurance analysts. And they really got into the weeds. >> Yeah. And it really, you know, a lot of complaints for shareholders. >> >> It was just It was It was nitpicky, you know, really sort of, you know, things that weren't really sort of where Buffett had hoped to go with the conversation. So that second year he brought in a buy-side analyst. One of the sell-side analysts he brought back and they were going to rotate. Mhm. >> >> And then he brought in a Berkshire bear. Oh, okay. >> Now, unfortunately, you know, the Berkshire bear didn't do himself any favors. >> >> You know, he didn't really ask tough questions and he basically kind of grandstanded a bit. So, you know, that was kind of a failure in that regard. But the the the sell-side and buy-side analysts being there was good. Now in the middle of all this we had been in communication with with, you know, Berkshire saying, "Look, you know, we cover you. You know, you're familiar with our stuff." And they were like, "Okay, we'll put you in the the rotation with the insurance analysts." But then we just kept pressing and saying, "Look, we're independent research. We fit a nice niche between the buy-side and the sell-side guys." And they took a chance on that in 2014. And, you know, we did a good enough job, you know, then and continued to do a good solid job much like Jonathan Brandt did on the the buy-side where we were getting asked back every year. Mhm. Now, it was a bit of a disappointment that, you know, in our regards for them to sort of, you know, kill the panel. Right. You know, some of it was COVID-related, some of it was just sort of, you know, they they wanted to make some changes. But as I look at it now, you know, they no longer have the analyst panel, they don't really even have a journalist panel. Mhm. So, it's almost like the the value of the question and answer session is I in my view sort of gone down a bit. >> Mhm. So, you know, given that you were a panelist, you know, what are some of the things, you know, during your time going to the meeting and asking these questions, >> >> what sort of stood out to you about Warren and Charlie maybe the most or maybe just about the meeting in general? Well, you know, we were always trying to avoid getting peanut brittle thrown at us from from Charlie. You know, I used to always tell Jonathan that it was like, "Look, you know, my whole goal here is to A, not ask a dumb question, >> Mhm. and B, not ask the same question twice. So, you know, you you had to be diligent, you had to be focused, you know, we would come to the meeting in, you know, with anywhere between 10 and 25 questions, even though we only got six. Mhm. Mhm. Um but but overall, I I always felt it was a good useful exercise, you know, as an analyst, because you know, here's a company that very, very rarely talks to anybody. >> Mhm. You know, so you're always looking for nuggets through conversations we're having with the press or at the meeting. And and it was always our sort of goal to elicit those kind of nuggets from Charlie or from Warren. And we we got quite a few over the years. So, I mean, it was it was it was always in our view a very useful exercise. >> Mhm. Hopefully as as time goes on and, you know, they continue to do the the meeting, you know, and it is you know, sizeable, I I would like to see them bring back, you know, the panel back. Yeah. Um so, let's talk a little bit about last year's annual meeting, and I know you and I were both in our respective homes watching it and listening to it. And um you know, Warren sort of dropped the big news right at the end of the meeting in May 2025 that he was going to retire at the end of 2025. So, were you surprised? Yeah. Yeah, I think shocked would probably be more. I mean you know, everybody I talked to over there and and everybody who was watching that you know, I communicated with they were all sort of same thing. We did not expect this. And he kept it pretty tight to the vest which you know, is impressive. Um you know, given how you know, um you know, things have had a knack of slipping out at some point or another. In fact, you know, the fact that Abel was going to be CEO, you know, Charlie Munger let slip at a meeting. Right. Right. Um so, it it it it it was impressive that they were able to keep it that quiet. Um but yeah, >> >> I mean our our our feeling had always been that they would have to carry him out. Mhm. That he would be there working until he was done. Right. Um and you know, so him coming out and saying, "Look, I'm stepping away." was was kind of a shocker. >> Mhm. Um he's still going to be around. He's still going to be in the offices. He's still there as a sounding board for Greg. But it But it did surprise us to see sort of him make that announcement then. Well, then let Oh. But I I also feel like you know, Greg's what? 62 now, I think. >> So, it it's probably important to make the change now because I mean his goal all along has been to have somebody there who's going to be around for a long time. Right. >> and and and consistency. Yeah, and continuing to sort of you know, put this off. I mean it it just it it would sort of wear down that time frame. Yeah. So, let's talk a little bit about Greg Abel who has, you know, taken over as CEO right at the end of last year. So, what would you say are his strengths and then, you know, is there anything that you think that he might do differently? He He's different than Buffett. He's an operations guy. Mhm. And and I think at this point in Berkshire's life cycle, they need an operations guy. Um you know, Buffett was never interested Mhm. in overseeing the operations. He was not interested in getting down in the in the in the weeds and understanding how the businesses operated. He was he was content with getting your updates regularly from the managers and the capital coming up from from from below. So, different management style, you know, to begin with. And I And again, like I said, I think that's what Berkshire needs at this point. There There're definitely places within the organization where I think they would benefit from having somebody who's more operations focused, you know, helping the to to improve things. You know, and Greg's always been in our view a little bit more of a alpha personality, a little bit more driven. Mhm. Um you know, Buffett is is less confrontational. Mhm. You know, prefers to sort of be, you know, you know, in the background. So, it it it it will change. And like I said, I think Berkshire needs to do that because we've we've gone from this, you know, historical, you know, 60-plus years where Buffett ran the show, you know, built up this very very large business, had a certain way of doing things, and that worked for the most part for a long time. You know, but it's gotten to the point now where there's just so much excess capital on the books. Yeah. Um and there's the the environment which they're operating has shifted or you know, the way they'd like to operate, you know, which is, you know, continuing to acquire companies and actually, you know, make big-scale investments in stocks. It's a lot harder for them to do that than it was, say, 20 30 years ago. >> Sure. Let's talk a little bit about one of their, you know, larger investments, and that's Kraft Heinz. Now, earlier this year, uh Berkshire filed paperwork, uh sort of indicating that, you know, "Hey market, we might get rid of our substantial stake in Kraft Heinz stock." No promise, but by filing the paperwork, that's sort of a a big signal that they might. Um so, before we talk a little bit about what might happen with that, give us a brief reminder about, first of all, how big that Kraft Heinz stake is, and how Berkshire first got involved with Kraft Heinz. Yeah, it's it's still about 28% of the equity. So, that's that's how much they own. And and and Berkshire came by that by you know, originally back in 2013, they they joined up with 3G Capital and bought out um Heinz um Heinz Foods, which you know, which was standalone at that point. Um and their initial stake included, you know, preferred preferred stock plus plus cash for the equity. Um in 2015, 3G engineered the merger with Kraft Foods, which you know, gave us the Kraft Heinz business. And yeah, it seemed like everything was was all right. You know, Berkshire did have to sort of give up the preferred stock within a few years. Um that was a nice 9% yield on that, which which you know, is disappointing to sort of give up. So, everything's been on the stock since then. You know, unfortunately, you know, 3G's way of running businesses sometimes um can starve them for resources. You know, and and and they did a great job of sort of improving the margins, but same time, they cut so much to the bone that it created problems for them. And you know, the packaged food industry continues to change. You know, so the dynamics of the business were not keeping up with what was going on, you know, within the industry. Um and you know, and and it's you know, even though last year, you know, him and Abel were quite vocal about, you know, some of the changes Kraft was proposing, it wasn't the first time. You know, I mean, he's he's they've written the company down a few times over the years. You know, so their their cost basis I think is 8 and 1/2 billion right now. So now, to your point, you know, both Buffett and Abel were in the media, you know, last year saying, you know, they were dissatisfied with that investment and how it had turned out. And then Kraft Heinz announced that it was going to split. And I remember Buffett coming out and saying, yeah, well, that's not going to solve >> >> He said it more politely than that, but that's really not going to solve the problems. So then, um it's Kraft Heinz recently backtracked and said, oh, we're not going to split after all." So, given all of this and given what, you know, Greg Abel said in the shareholder letter that came out over last weekend, you know, do you think they're going to sell? I think they're sellers. >> Okay. Okay. I I think the issue is it's been a slow-motion separation. You know, I I think if you go back 5 6 years ago, Buffett was out there saying, "Hey, if if 3G ever decide to sell, we'd be buyers." Okay. You know, and then 3G was selling and they weren't buyers. >> Right. Right. And and and then you get to the notion of, you know, a couple years back, he was like, you know, you know, this was a mistake. You know, it it didn't pan out the way we thought. And then last year the I mean, last year before the the announcement they were going to split the company, Berkshire, you know, pulled out of the board. Yeah. So, this has been Yeah. The this this this confidence in in Kraft Heinz has been slowly deteriorating over the years. So, that's that's why I think even now. I mean, they did the filing what, in early January? The CEO of the new CEO came out in early February said, "Hey, we're putting pause on this." I I I think they knew that they were probably going to put a pause on it and I don't think it changed their mind. I I I think at this point it's if if I looked at the portfolio, it was it would probably be one of the, you know, highest likely stock to be, you know, trimmed or sold in the near term. All right, well, then that perfect segue into my next question, Greg. Thanks for that. So, you wrote a great stock analyst note after um Berkshire had filed this paperwork about Kraft Heinz and you had a great little line in there, which was something along the lines of Kraft Heinz wasn't going to be the only change we'd see in the public portfolio. You were expecting more streamlining to come. What makes you think that? I Well, I think for two reasons. One, just just from the fact that the portfolio is huge. You know, and and we've already seen Berkshire willing to to trim back stakes in Apple and Bank of America the past couple years. Um in fact, I think they've they've reduced Apple the Apple stake by 3/4 and Bank of America by 60% just in the past 2 years. So, so there's a willingness there. Um and you know, it it's yeah, I think it was what, 313 billion total I think if you include the equity investment holdings at the end of last year. Um there's there's definitely a case to be made that you know, if if Abel wants a portfolio that's a bit more focused and a bit easier to sort of, you know, um pay attention to that that it'd make sense to to trim back some holdings. You know, so I think from that perspective that's one. I think the other thing is Todd Combs is gone now. Yeah. You know, he left at the end of last year. And they're likely to continue to sell off holdings that he had. And if you think about the holdings that he was probably responsible for I mean, Visa, Mastercard probably jump out right away because those were bought 2011. Those were holdings he had when he was at Castle Point before he joined Berkshire. Um he's always been focused on financial services, fintech, um you know, sort of value stocks. Uh I think I remember what the other one I was thinking about that could likely fall into that realm. But but overall, there's there's other holdings within the portfolio that we're likely to see fall off as the year progresses cuz we saw this oh, was it 20 years ago when Lou Simpson left? Because he was managing the the GEICO portfolio. Okay. And you know, they it basically, you know, fell under, you know, Buffett's auspices and and he slowly gradually traded off some of those holdings. Now, you mentioned Bank of America and Apple and Berkshire released its fourth quarter 2025 13F a couple weeks ago. Um and that of course covered that final quarter where Buffett was still CEO. And you know, they continued to scale back in Apple though it's still the largest holding, continued to scale back in in Bank of America. Um do you expect these two stocks to remain in the portfolio over time? Maybe just at smaller positions than they are rather than the number one and number two? Depends on your time frame. >> >> Hm. Yeah, that's fair. >> Um I I I don't think they're averse to to to selling. And and and I think what I think what people need to focus on too is is why are they selling? Mhm. You know, and and and and in in my view you know, yes, it's building up cash that's that's going to a big reserve that that Greg can use, you know, sort of break a glass in case of emergency big fund. Right. Right. I've always felt that way. I always felt that the build up in the cash on the the balance sheet was was to give them a lot more flexibility. >> Mhm. But I think there's also some tax considerations going on here. >> Mhm. You know, I I pointed this out a few years ago when they first started selling Apple was like you know, Berkshire is subject to the 15% corporate alternative minimum tax. And if they don't pay an effective tax rate more than 15%, you know, in cash taxes over a three-year running period they will be taxed on their unrealized gains. Interesting. >> And basically what they're doing is they're realizing gains to ensure that they get over that hump. Wow. >> You know, over that over that time frame. And and that's why that that in my opinion is the main reason why we see them selling off Apple and and and Bank of America. It's also because they're sitting on such huge unrealized gains on them. Even after all the selling they've done, and we're still talking about billions. >> Right. I think it's like almost 50 billion on on Apple. Right. And and 21 billion or something like that on on Bank of America they're sitting on unrealized gains. Yeah. So from that perspective it it it makes sense for them to sort of approach it from from from from that angle. And these are names that help them in that regard. >> Mhm. You know, Yeah. I mean, it's harder for them to say go after and sell Coke or or American Express or Moody's because the cost bases on those are so low. >> Right. What what is the complexion look like right now from an an asset allocation standpoint, so to speak, between, you know, the the public portfolio, cash, and then sort of the private companies? Well, had the numbers in my head before I came in here. I think cash and T-bills right now. So, basically cash equivalents is about 373 billion. Okay. The investment portfolio, I think we said was about 320 billion. >> Okay. In that realm, the equity. Okay. Um and then the bonds are de minimis. They're like 18 billion dollars. >> So, you've got a a a cash portfolio that's larger than your Than your >> invested portfolio in in equities and in stock. Um and I think all in is I think it was like 705 billion. So, I think that's the number I had in my head. >> Um So, that's all liquid assets that are available to them. >> On the private side, it's a you know, we still haven't done our updates, you know, for end of 4Q, but you know, prior to that, you know, it was about 455 million. Okay. Okay. >> So, you add those two together, it's 1. what? 5 something in there. >> Yeah. You know, so so so definitely, or I should say billion. I've said million a a a I said billion. >> Yeah. Okay. So, then let's talk a little bit about sort of the the private company stake, which you know, you know, we don't talk quite as much about, you know, do you expect changes there with Greg Abel in charge? I guess those would be harder changes to make in general because they own the companies outright, but um >> I mean we expect we expect to see changes. I mean like you know, even though he didn't say it in the letter, Mhm. you know, BNSF has to adopt, you know, precision scheduled running. You know, he said he was disappointed with the gap in profitability between them and his largest peers, which means Union Pacific. And that's what we've been saying for Mhm. >> five plus years now. Um So, that that will be coming down the pike. Um >> Okay. And there there's definitely other areas where you know, I I felt for many years that, you know, Berkshire's managers may be harming themselves in the long run by focusing more on sending capital up to Berkshire, to the corporate, than, you know, delving into sort of their long-term, you know, needs. I mean, we saw that with GEICO, where the you know, the company underinvested in their tech stack, you know, their their ability to sort of improve and upgrade their their technology systems to allow them to run telematics. Right. >> You know, and it went on for such a long time until Ajit Jain came in there and basically was like, we need to fix that. And even then, it still took three or four years for them to sort of get that right. So, from that perspective, I mean, those are those are the things I think he's probably identified, you know, cuz he he started overseeing the non-insurance businesses in early 2018. Um and we're, you know, talked to the managers, you know, figured out where where they were, what their focus was. But I think he's always sort of held back on on pushing anything harder because really he didn't have the the full authority because Buffett was still in charge. Um but now that he is in charge, I would expect to see some of that, you know, coming down a little bit harder. Okay. Now, last December, and you mentioned this, that um Todd Combs, who had been overseeing GEICO, um was leaving Berkshire for a new position at uh JP Morgan uh Chase. So, what did you make of that, and are you expecting to maybe see I know I think their CFO Yeah. moved out as, you know, retired as well. So, you know, talk a little bit about executive changes at Berkshire aside from, of course, Warren Buffett. I mean, with with Marc Hamburg, it doesn't surprise me. I mean, he's he's been there forever. And he was the CFO, right? Okay. So, so his his departure doesn't surprise me. I mean, um and and you know, basically he was bringing in in somebody he knows. It's, you know, a guy who was running running the books over at at Berkshire Hathaway Energy for a long, long time. So, from from that perspective, um that wasn't too surprising. Todd Todd leaving was a bit of a surprise. >> Mhm. Um I thought he did a fantastic job at Geico. I I don't think he got enough credit, you know, from investors for what a monumental task he had to deal with. Because if you don't remember, he took over in December of 2019. Mhm. And at that point Geico was already dealing with several years of poor underwriting performance based on poor decisions they made. You know, they they got too aggressive, you know, going after market share, underwrote a lot of business they shouldn't have. >> Mhm. And you know, it it it basically hurt them, you know, on the loss ratio front for for many years. And you know, so when he came in, he was going to target that. And then lo and behold, COVID hit. >> Right. And the whole US auto insurance market got turned on its head for for a number of years. I mean, we're only we're only really now sort of getting back to sort of normalized results. >> Yeah. Um but it's taken I mean, you know, auto insurance prices are up 55% >> Yeah. in the past year and a half of 2020. Yeah. So so from that perspective, I mean, it's you know, they had to do that because, you know, the the cost of replacing vehicles, the cost of replacement parts, Right. >> even the the the amount of incidences, amount of accidents, the severity of accidents and stuff like that, what spiked. Right. >> For for a number of years. I mean, some of that's starting to come down. >> Right. But the inflation's still there. I mean, the inflation didn't go away. Right. So so we'll have to see how things pan out from here. I mean, it would it would be nice to have him sort of in the helm because we're we're we're looking at a probably a multi-year sort of declining price environment, you know, for this because the state regulators at this point >> Yeah. you know, are starting to look at the the profitability of the industry and they're they're they're calling for Right. >> for pricing to come down. So so from that perspective, be interesting to see what happens. But I mean, he hadn't been as focused on the the investment portfolio in that time. >> Right. You know, and and he got a you know, he's been sitting on the board of JP Morgan for a number of years. He's very close with Jamie Dimon. So he got an offer that he just couldn't refuse. And it's it's a good opportunity for him. So, so I understand why, but same time, you know, I I I think I think it's just one less good advisor that Abel have a right hand to help him over there. >> Fair. All right, let's talk a little bit about the cash hoard that seems to be growing every time we get a new uh earnings report or 13F to look at. Um now, you know, of course Berkshire hasn't bagged >> >> a big private deal in a long time. Um what do you think of that? Like given would you expect there to be more private deals with with Greg Abel in charge? I mean, or has it just been Do you think he's going to be I hate to say it this way, but like less picky than Warren Buffett would have been like What What could be a catalyst here for a Yeah, it's it's it Berkshire's had a tough time the past 10 to 15 years. Um mainly because, you know, Buffett has had a very sort of strict um discipline Mhm. and criteria when it comes to doing acquisitions. And then his his modus operandi always has been, you know, he puts a price on the table. That's it. >> >> He doesn't renegotiate, he doesn't, you know, rework it or anything else. And that's cost him some deals over the years. Yeah. And the problem is in that time frame, you know, from the from the financial crisis till now, um private equity, private capital has raised tons and tons and tons of money. And when you're dealing with those guys who don't have a problem Yeah. you know, um pushing the envelope when it comes to to to to price and deals and stuff like that, it just gets harder to sort of, you know, get anything done. Mhm. Now, they've managed to do some things over time. I mean, Alleghany, I in my opinion, was a was a good deal. Mhm. Um you know, the the Oxy deal looks like it was a pretty good deal last year. Um you know, Precision Cast Parts, not so much. So, I mean, I think from that perspective, we'll have to see what happens, but you know, I was a little disappointed with the letter in in the fact that he dismissed one deal that would basically knock a big chunk of cash off the books. Yeah, let's talk about that shareholder letter. So, that came out over the weekend. I read it, of course you read it and wrote about it. Um, and it was a very different letter than the letters we would get from Warren Buffett every year. So, talk about it. Well, all I can say is 18 pages. >> >> It was a lot to sit through. Um, I I I feel like he did a good job from the outset of of explaining Berkshire. You know, what what has made it successful, what the core priorities, the core the core values, the culture, you know, the things that they should be focusing on. You know, capital allocation decisions, you know, risk management, operational excellence, you know, a lot of things that you know, in a in way looking to sort of just placate investors and say, "Look, I I understand this business. I know what needs to be done." You know, and I think he needed to do that. Mhm. Um, but there were some areas where I was like, "Ah, I wish you hadn't committed yourself that one way or another." One of them is is, you know, basically saying we're not interested in buying, you know, another class one railroad, which, you know, I I think is, you know, boxing yourself in the corner a bit because in our view they need to. Mhm. You know, if Union Pacific and Norfolk Norfolk Southern get together and have one huge transcontinental railroad, they'll be able to bypass Chicago, they'll be able to bypass Houston, they'll be able to offer better service to customers shipping stuff out of the West Coast ports and and vice versa. Um, and and BNSF will be at a disadvantage. And and I and I think that, you know, they they should be looking harder at CSX. I mean, yeah, granted it's probably going to cost some $90 billion, you know, to acquire it, if not, you know, a little bit more. Um, but it it would A, reduce the cash Right. on the balance sheet. Would help them in every regard, and B, would ensure that they weren't going to fall behind significantly, you know, relative to to Union Pacific. So, I was a little bit little disappointed with that. And you know, the other thing is is the idea of a dividend. Yeah, I wanted to talk about that cuz, boy, wouldn't a dividend help reduce reduce the cash? And that was something, you know, that, you know, you and I have talked about in the past is is something that you you know, not just you, but like a lot of people thought would be more likely once Yeah. Buffett wasn't CEO, because he was always very opposed to paying a dividend. And Greg Abel came out in that shareholder letter and basically said, "Don't hold your breath. There won't be a dividend anytime soon." >> Yeah, I think my I think my comments were, you know, he just basically threw a dividend off the table. Uh um Yeah. But I I don't know. I mean, I think Warren's reason for not giving a dividend for for all those years was, "Look, we can earn more with the retained capital than our shareholders can." And for for a long time that was true. Yeah. But past 15-plus years, I wouldn't say that, you know? And and I and I think that what kept him from from ultimately changing his mind and and and and actually initiating one was that basically he wanted to leave that for the next guys. Yeah. He didn't want to take a tool out of the toolbox that that they could have if if they needed to, you know, basically keep shareholders in place. Mhm. Um, that said, you know, initiating dividend commits you. Yes. Yeah. You know, and and you you have to keep paying it on a regular basis, if that's what you do. Yes, you could do a special dividend. That that that is an option, but then you leave shareholders wondering, "Well, when's the next one? You gave me this because you said you had too much excess capital, and now you have more capital than you did before. You know, it just it it it creates a lot of other issues. So, you know, it's fair to say that he's going to sit on it for now, >> Mhm. but it it seemed a bit more dismissive than it needed to be. Got it. >> sort of in his verbage and and I you know, and that's why I said, I mean, you have it it it seemed like he was spent more time focusing on towing the company line. >> Mhm. You know, as far as what what Berkshire has done historically than maybe sort of carving out Yeah. this is what I would potentially look at down the road. And as you pointed out, maybe that's something that it's appropriate for him to be doing. And it's appropriate right now, but it's also easier. >> Yeah. Because Yeah, true. because Berkshire's not struggling. Right. And and you know, basically I I'm not sure you know, where David was when he was recommending earlier this year, but Berkshire's a safe haven stock. >> Yes. Yes. >> when when the markets go into the crappers, I mean, basically it's a it's a good defensive stock that people like to have and having 373 billion in cash Right. you know, really helps. So, >> Right. Right. so from those perspectives, I don't feel like he he felt the need to do anything dramatic, but but I I I would just be hopeful to hear things from him that would sort of indicate that look, you know, things are going to change. >> Yeah. Because Berkshire for for a while now we we've been saying has to evolve from being a Right. you know, reinvestment machine, which it was for a long time to being a returning cash shareholders machine because because basically it's kind of run its course. >> Yeah. Yeah. Now, talk a little bit about valuation in Berkshire today. You know, you mentioned you know, Dave recommended Berkshire. It was in January at some at some point. So, I think at that point it was slightly undervalued. Um how how does it look today when we're taking this up? >> slightly undervalued. I think, you know, based on today's prices, it's about 6% below our fair value estimate. I think we're 765 on the class A's and I think 510 on the B's. Okay. Um so, it is a little bit undervalued there. You know, if you look at, you know, price-to-book multiples, it's trading about 1.5 times last year's, which is about where it you know, has historically. So, it's not anything really to to to jump up and down about. Okay. >> mean, it's it's it's a slight discount, but it's not a huge discount. But, I think I think part of that, too, is just, you know, sort of where we are in the cycle. Right. And so, you know, sort of all things being equal, it's a little undervalued. I mean, do you think, you know, with Greg Abel at the helm, what we know today >> >> about Berkshire, I mean, do you still think it's a good defensive investment for people? Yeah, I think it's still a good I think it's still a good holding. And I and I think there's still things that can be improved. Mhm. You know, I I I can't remember the the the numbers he put out there, but I think it was like a 1% percentage point increase in the operating ratio of BNSF would increase earning or their their operating earnings by like 230 million or something like that. So, I mean, there's there's there's there's definitely ways for them to sort of improve different parts of the business and and everything else. And and again, it's it's it the way I look at it is he's now free to make changes that he might have been looking at when he was vice chairman overseeing, you know, a lot of the stuff. I think I think I think Ajit Jain was probably in a better position than than Abel was because he took over the the insurance operations at the same time in early 2018. But, but Jain basically went in there and started knocking some heads. Um, and and and started, you know, um, pushing for change within the a few of the insurance operations, but that's because he had Right. >> 30-plus years, you know, running it in Warren and he was Warren's, you know, trusted Yeah. you know, sort of insurance guru. So, so Warren was never going to contest. Nobody was ever going to go complain to Warren about something that that Ajit was doing. >> Right. You know, it was on the other side, even more. I mean, you know, the the the cornucopia of companies that that he was overseeing and the the the the amount of companies and >> Mhm. you know, the relationships that had been built, you know, Buffett buying these from family members and stuff like that. >> Right. Right. >> I I think that posed a different sort of scenario for for Abel. But, I think now, I mean, he's he's the guy. He's in charge. And you know, Buffett's already said, you know, look, you you need something, you got to talk to him. Right. Well, Greg, thank you so much for your time. We could talk all day about Berkshire. Really appreciate seeing you. And we'll have you back sometime soon to talk about Berkshire. Thanks. Um so, for those of you who'd like more information about Berkshire Hathaway, you can find links to some related content in our show notes. And of course, you can read Greg's full analysis of the company on morningstar.com. I hope you'll join Dave Sekera and I every Monday for the Morningstar podcast at 9:00 a.m. Eastern, 8:00 a.m. Central. Happy investing.