No. of Recommendations: 3
"Also, distributed energy (solar + battery) could cut into utility sales if large customers choose to self-generate. If AI firms start bypassing utilities, BHE's growth could be more moderate in the long term than the bull case would assume."
These words from the previously quoted article are the ones most likely be the case going forward. As you may know, there is presently a multi-year lead time for jet engine turbine type natural gas fueled electricity power generation equipment. There are also other alternatives like Bloom Energy using natural gas in fuel cell types of systems to produce on-site power for AI sites. Then there is modular nuclear. We keep hearing it is coming one day.
Buffett made the case clearly in recent annual meetings for states and federal governments to work together to allow new transmission lines and the upgrading of existing transmission lines. My view is this will not happen because of political polarization. As a result, on-site power generation will be the methodology with North American AI sites located in natural gas rich areas like Texas and Canada.
BHE is a valued business unit and provides steady cash flow and modest growth. It may get some tailwind through energy sales to AI centers. In this case the word "some" means a modest bump in electricity sales but not the whole enchilada as AI sites increasingly make on-site power generation part of their build-out. AI sites will become more energy efficient as better chips inevitably come to market. Exorbitant profit breeds ruinous competition and cheaper and more efficient chips are sure to be coming.
I still love Berkshire while knowing its best value growth days are in the past. I'm settling for modest growth, avoiding paying taxes on multiple decades of gains and having a PFD safety factor(personal flotation device) as the debt cycle eventually tips the boat over a bit too far.
A financially oriented podcast recommended Barton Biggs' book "Wealth, War and Wisdom". Turns out it is more of an in-depth history book than an investment guide. Basically, Biggs goes through the major events of the 20th century which were mostly wars. Some stunning information was learned I had not previously contemplated. For example, the German stock market experienced rapid value escalation from 1938 to 1941. Only a few Germans moved a portion of their gains into UK, Swiss or USA holdings with the great majority holding on to what they had because they felt valuations would continue to soar. The war front in the east (Russia) ended the optimism in 1941 and stocks fell to being worth only a small fraction of their 1941 value by 1946. As bad as it was for long term holders of German equities, the long-term holders of equities in Poland's and Hungary's companies did not even have small fractions of ownership in their pre-war holdings as there was no stock exchange, no private ownership and thus no value after the Soviet's implemented communism in those countries. It is sobering to see how history played out. I've been steadily buying non-US companies with reasonable moats at MOS valuations and plan to do more as investable cash accumulates. The big difference they will not be ADRs and instead will be held in the currency of the country where these companies are headquartered. If it can be done without triggering a tax event, I plan to change our existing ADR holdings to that format.
Nobel Laureate Harry Markowitz famously called diversification “the only true free lunch in investing.” Eventually having a portfolio with, say, 20% in quality non-USD companies located in multiple countries is my version of a PFD, especially when periodic opportunities to buy these companies for less than Buffett's 10X EBIT to market capitalization happen.
Reading and Researching,
Uwharrie
