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I have been a loyal shareholder of Berkshire for almost four decades. Not long ago I stated on this board that I thought Berkshire was the best company in the world. (Although Warren stated that Apple was a better company than Berkshire and that BHE and BNSF were good businesses, but not great businesses.) I think that Berkshire is in decline, and that that decline will accelerate with Warren stepping back. Kraft-Heinz is definitely not what it started out to be. PacifiCorp may go bankrupt if, or rather when, there is another fire. GEICO has declined in quality, and OxyChem is a minor player in a mediocre industry.

Berkshire still has some wonderful businesses and investments, but the direction is not good.

Where wpuld BRK be today if it wasn't for the Apple investment?

Just thinking outloud, that if that investment had not been made at scale the result would be mediocre.

Repeatable going forward?

Any portfolio looks pretty darned good if you ignore the results of the few big losers (something Berkshire has always been very good at), and looks really bad if you ignore the few big winners. Evaluating Berkshire either way doesn't make much sense...after all, it's the overall result, the weighted average, that matters. It's not meaningful or useful to say "it would have been better without dud XXX" or "it would have been worse without success YYY". Results have been very good overall, far better than shareholders had any reason to expect of this era seen from 10-15 years ago, and seen as a whole it wasn't luck.

To my thinking, any decline is concentrated in two areas worth considering. Weakness in the rail earnings, and problems at BHE. Those are entire segments of the firm important at the top level, not single stock picks.

For the rails, I think the problem is primarily cyclical. Things are a lot less profitable than they were a few years ago, but with hindsight we can see that there was a bit of a windfall period for coal loadings. The trend line of observable earning power may be at a lower slope than we previously estimated, but ultimately the very long run earning power remains intact, so I wouldn't lose too much sleep over that. BNSF will still be making a decent buck from people moving things by rail 100 years from now.

BHE is a bigger issue. Utilities are great investments only so long as the regulators let you make a decent buck, and in that sense they've always relied on the kindness of strangers. The kindness has been lacking. BHE is itself an entire portfolio, much of which is just fine, but it does seem to have a serious problem with the intersection of fires and regulators that may be a material and lasting impairment. That being said, it's survivable. There is a whole lot more to BHE than the west coast of the US, and there is a lot more to Berkshire than BHE. What would constitute a really bad outcome? If the ultimate outcome were a one-time permanent loss of 15% of the value of a Berkshire share, but continuing the long run growth in value of (say) inflation + 7-8%/year before and after that drop, it's the equivalent of losing two years of growth, not the equivalent of Berkshire no longer being a viable investment choice.

The overall strategy is to buy into businesses that appear to have an unusually long runway of owner earnings, and not overpaying too much for them. Those attempts will inevitably have a range of outcomes, if only because almost all economic moats have a finite lifespan, but it's such a good strategy (and so rarely attempted) that a satisfactory outcome is still pretty much guaranteed. Assuming you think something in the range of "inflation + 7%/year without any risk of blowup" counts as satisfactory.

Jim

I was just watching a talk about stock market trend of US vs Global stocks. Recorded Feb 20, 2026, so before the Iran hoo-hah.
What he said is that US market spills over to non-US market.

So I went to yahoo and pulled up the chart of VTI & VEA -- Vanguard Total Stock Market ETF (VTI) and Vanguard FTSE Developed Markets ETF (VEA).
Then added BRK-B to the chart. Oof.


Then did some googling, and came up with "The correlation between VEA and VTI is 0.83, which is considered to be high. That indicates a strong relationship between their price movements."

https://portfolioslab.com/tools/stock-comparison/V...

When it rains, it doesn't matter what tree in the forest you stand under to get out of the rain.

To add, I meant replicate a trade like Apple again without WEB / CM at the helm goimg forward.

Don't understand the handwringing about "bagging an elephant".
PCP, Lubrizol, KHC, and Pilot were all disasters.
Clearly history has shown that INSURANCE and PUBLICLY TRADED SECURITIES are Berkshire's true circle of competence.

The investment in the Japanese conglomerates looks like it may be pretty lucrative as well.

To add, I meant replicate a trade like Apple again without WEB / CM at the helm goimg forward.


I definitely think big successful trades like that will be hard to duplicate.

Hopefully new management can overcome that somewhat by increasing efficiency in operations, but if they get too aggressive and go all Jack Welch style they could do more harm than good.

"PacifiCorp may go bankrupt if, or rather when, there is another fire."

PacifiCorp may go bankrupt without another fire. They're still facing $46B in claims related to the 2020 fires, far more than PacifiCorp's net assets. PacifiCorp is scrambling to meet the possible claims by (1) selling assets in Washington (Feb 2026) and Oregon (March 2026), (2) delaying capital projects, (3) asking the PUCs to increase allowable ROE from 10% to 10.5%, (4) asking courts to spread out the overlapping cases and (5) proposing restructure, possibly to single-state entities. While plaintiffs are unhappy with the delays, I don't see PacifiCorp's actions as cheating, but rather as efforts to stay afloat. Plaintiffs would not be better off with bankruptcy.

"PacifiCorp may go bankrupt without another fire."

Don't blame regulators for everything. Higher rates alone will not solve PacifiCorp's solvency problems. The biggest factor is how much the courts will award in claims.

PacifiCorp may go bankrupt without another fire...

Good summary, thanks. Not cheery, but good to know.

Let's imagine that Pacificorp goes bankrupt, with optimistically no further liabilities to BHE or its other units, and no recovery value from equity in BHE.

Back of the envelope impact for a share of Berkshire:

I looked up what fraction of BHE is accounted for by Pacificorp's six states. Not counting any recent disposals, I come up with 33% of revenue by adding up the descriptions in their corporate profile docs*. Let's assume that share of revenue is a good enough proxy for share of value.

On my figures BHE's share of total non-investment-related net income (net profits on util+rail+MS&R+ cyclically adjusted underwriting profit) has not exceeded about 15-17% in recent years, so if Pacificorp were a zero but other units not impaired, that would wipe 5-6% off the value of the operating side of Berkshire.

On my figures, operating subs have been sufficiently weak lately that their share of total share value (i.e., everything but investments per share) has fallen from maybe ~60% of total value to nearer 40% lately, though that may recover somewhat. Let's pencil in 50%?

So, overall impact to Berkshire (before second order effects) of a total loss on Pacificorp would be a loss of around 2.5 - 2.8% of the value of a share of Berkshire??

Jim


* utah 14%
oregon 7%
whyoming 5%
nor cal 3%
washington 2%
idaho 2%

This is why we have Buffett and Able saying the electric companies cannot be an insurer of last resort. In determining rates, Public utility commissions do not take the assessed replacement value of real estate into account at all.

The original thesis in this investment was Berkshire would have the ability to invest massive amount of capital for reasonable returns set by the PUCs. But that hasn’t borne out either due to lack of appetite from governments to resolve energy issues. Berkshire even had a solution to Texas’ power grid problem, but was met with “no thanks”.

"This is why we have Buffett and Able saying the electric companies cannot be an insurer of last resort. In determining rates, Public utility commissions do not take the assessed replacement value of real estate into account at all.

The original thesis in this investment was Berkshire would have the ability to invest massive amount of capital for reasonable returns set by the PUCs. But that hasn’t borne out either due to lack of appetite from governments to resolve energy issues. Berkshire even had a solution to Texas’ power grid problem, but was met with “no thanks”."

The above comment by ValueOrGoHome taken together with Mungofitch's earlier comment about future rate increases are beholden to the "kindness of strangers" thinking are why we may see Berkshire's Energy companies spun out of the Berkshire mother ship one day. Take those state and federal regulated entities out of Berkshire so the mental aspect of short-term elected officials who pick state energy commissioners can move away from seeing the utility companies as not having the association with a deep pocketed mother ship that is Berkshire Hathaway. The same mental model applies to those pursuing lawsuits. I would think it is psychologically more difficult to award a big sum to a local company that has limited resources than to tack on a big sum to the same company that is affiliated with a whopping cash rich mother ship like Berkshire.

Spin out these utility companies to Berkshire shareholders and we will likely eventually benefit from these entities getting favorable rates, relaxed restrictions and maybe some legislation that reduces their future fire related liabilities. Who knows, maybe these energy companies in time increase in value and throw off cash to those of us who elect to hold these companies in our portfolios?

Of course, I may be entirely wrong with this line of thinking. Thoughts?

Uwharrie

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We lose the ability to move capital where it’s best use is when we split it up. That’s something Berkshire wants to keep and something the governments should want us to keep, but if governments aren’t going to do what’s best for their people and provide the returns we need to harden the system, or advance warning of the rules we’re supposed to play by, then it just might be for the better.

I would think that spinning off the transmission lines would be a good option to mitigate the risk to the parent.

Jk

Who in their right mind would want to buy the transmission lines?

That would be akin to buying the Titanic as she was entering the ice field at dusk.

Who in their right mind would want to buy the transmission lines?

The existing owners, I guess?

If done as a spin-off, existing shareholders wouldn't have a choice. They could then decide to sell their shares in TransmissionCo, and the market would find some sort of clearing level. There's a price for everything.

The new bosses of TransmissionCo would presumably then put a huge fraction of cash flow into disaster insurance from Berkshire : )
Again, there is a price for everything.

Jim

Be fearful when others are eufforic and be aggressive when all others are fearful.....

I believe Berkshire now is very solid, excellent financial position to take advantage of the crisis if it happens, and if not we can optimize the operations....
If everything goes down the best advice will be to buy back shares as they are doing nowadays....

Why is everyone thinking that BRK/A BRK/B will go burst?

I know that Warren is not the captain, but the ship is in excellent shape, can you elaborate why are all of you so fearful?

"Why is everyone thinking that BRK/A BRK/B will go burst?"

No worries about Berkshire going bust. Just saying that there is a chance that PacifiCorp could with all the legal claims for the 2020 fires. A PacifiCorp bankruptcy wouldn't be all that big a hit to Berkshire, though. Here is PacifiCorp's latest financial filing (beginning on page 220.) Just $11.1B in stockholder equity, or 1.55% of Berkshire's total stockholder equity.

https://www.brkenergy.com/assets/upload/financial-...

PacifiCorp continues to try to avoid the worst, with court cases scheduled into 2028, sale of assets in Washington and Oregon and a proposal to split the west coast states, Washington, Oregon and California, from the mountain states, Utah, Wyoming and Idaho. Unfortunately the court cases are jury trials, which tend not to go well for deep pocket defendants. I once asked a successful lawyer what his record was in jury trials, and he responded, "About 50:50, with no correlation to the merits of the case."

No worries about Berkshire going bust. Just saying that there is a chance that PacifiCorp could with all the legal claims for the 2020 fires.

The more warmongers try to destroy the power plants of the countries they're invading, the more distributed solar down to the apartment block / house level looks sensible. I see more and more places are allowing people to buy solar panels with the right kind of converter and just plug them into their wall outlets to reduce load - it isn't anywhere near grid freedom, but every bit helps. On a regional / national level, distributed generation is just common sense hardening and national survival in the face of war crimes as practiced by Russia and threatened by the Former US; and in the face of power companies eager to just turn off the power to entire regions whenever the winds get too high for their accountants (*cough* PG&E).

Ideally centralized power generation will become largely a legacy within a few decades, for the benefit of "AI" farms and other power-intensive industry and/or financial fraud schemes.

Very glad to be in Portugal now, where MEO ships me 100% renewable power, primarily wind and solar.

The more warmongers try to destroy the power plants of the countries they're invading, the more distributed solar down to the apartment block / house level looks sensible. I see more and more places are allowing people to buy solar panels with the right kind of converter and just plug them into their wall outlets to reduce load - it isn't anywhere near grid freedom, but every bit helps. On a regional / national level, distributed generation is just common sense hardening and national survival in the face of war crimes as practiced by Russia and threatened by the Former US; and in the face of power companies eager to just turn off the power to entire regions whenever the winds get too high for their accountants (*cough* PG&E).

Ideally centralized power generation will become largely a legacy within a few decades, for the benefit of "AI" farms and other power-intensive industry and/or financial fraud schemes.

Very glad to be in Portugal now, where MEO ships me 100% renewable power, primarily wind and solar.


Unfortunately utility companies in the US have a strong enough lobby where they keep adding fees to make it nearly impossible to go off the grid. They also don't want people to use less power since they make money on people using electricity/gas. I live in Arizona which should be mostly solar with the extreme sun we get year round but with they regulations/fees/etc. it isn't. Some people were lucky enough to get it years ago when things were more generous and you could feed the extra power back to the utility and get payment for it. That has been greatly reduced.

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