121: Weekly Roundup
Links, videos, and commentary from the week.
BiBERK Experience
This is going to sound like a commercial…I just saved over 50% by switching my professional liability insurance to BiBERK, Berkshire Hathaway’s homegrown direct SMB offering. Interestingly I was with Markel, but I suspect a good portion of the savings comes from going direct vs. working with a broker. Not only that, I increased my coverage and added $100K cyber insurance to the policy.
I thought the cyber coverage was interesting given Ajit Jain’s comment at the annual meeting about not writing cyber coverage. My guess is this is de minimus coverage compared to the exposures he was talking about. He’d want to avoid Berkshire being in a position to face unlimited exposure.
Still, I can’t help but think what if Google or Microsoft had a breach that left a huge number of small businesses exposed? Maybe there’d be primary coverage through those service providers first? If you have insight into this, I’d love to know.
Waste Management Acquires Stericycle
Watchlist company Waste Management (WM) announced it would acquire Stericycle for $7.2 billion including debt. The waste management industry is mature and continues to consolidate. Key to the business is route density so it makes sense for the larger players to scoop up the smaller ones. It’s a one-way street, meaning a larger player can afford to pay more for a smaller one, but the smaller company can’t just throw capital at a market and gain scale. Stericycle is a bit different in that it’s in the healthcare/medical waste market but the company is still banking on synergies to bring down the headline multiple.
BNSF Derailment
A train derailed in Whatcom County, Washington yesterday. Luckily no one was hurt nor was there any spillage of the liquid sulphur the train was carrying. This short article describes some interesting characteristics of sulfur. It’s used in oil refining and paper milling and transported in liquid form at about 290 degrees Fahrenheit. During a spill, it quickly cools back into a solid making it less hazardous than other types of spills, but it’s nonetheless considered a hazardous material.
Rocky Mountain Power Denied Changes
In more bad news for Berkshire, Rocky Mountain Power, a subsidiary of PacifiCorp (a subsidiary of Berkshire Hathaway Energy, a subsidiary of Berkshire Hathaway …. phew!) was denied by the Idaho Public Utilities Commission changes to its agreements with customers to limit damages to actual damages, not punitive charges and other non-economic damage claims. The latter are important because they can be almost unlimited. It’s this type of open-ended liability that BHE is seeking to get under control if it’s going to continue investing in assets in certain jurisdictions, as Buffett wrote about in his recent annual letter.
Deja Vu? BRK Energy / Occidental Joint Venture
BHE Renewables and Occidental are forming a JV to extract lithium from BRK’s geothermal mines in California. Back in 2004, MidAmerican took a big write-off related to a zinc recovery operation after six years of effort. I can’t help but wonder if this is a deja vu scenario but I certainly wish them the best! If it works this would be a real win/win for the companies and society. Here’s some background on the zinc project from my book:
Old Dominion Operating Metrics for May
ODFL reported in an 8K filing that revenue per day increased 5.6% for the month of May compared to 2023. That increase came from a 2.3% increase in shipments/day offset by a 0.7% decline in weight/shipment and an undisclosed increase in revenue per hundredweight (though doing the rough math it comes out to 4% YoY).
It does get me thinking: How much is too much disclosure? On the one hand, these are simple metrics and provide a more real-time view of the business. On the other hand, what use are they to the long-term owner? Are they just pleasing Wall Street, who can now update their models and provide better estimates?
I’m torn. Certain industries report more frequently, such as Progressive reporting its monthly results, or credit card companies reporting on delinquencies. What is next, weekly updates? Daily? Where does it end?
Boston Cannabis?
I am SAM. SAM I am … high? The WSJ reported that Green Thumb Industries (GTBIF), a grower/distributor of cannabis sent a letter to Boston Beer Chairman Jim Koch looking to discuss a merger. I’m not so sure this will go anywhere. Koch founded Boston Beer and appears committed to keeping the company independent. Just a week ago there was speculation that spirits maker Suntory would buy the company.
Stay rational! —Adam
