Graham Holdings CEO: Berkshire's focus on strong cash balance was fascinating

Alright. Joining us right now is Tim O’Shaughnessy. He’s the CEO of Graham Holdings, whose operations include educational services, television broadcasting, auto dealerships and hospitality companies. And Tim, it’s great to see you today. Wonderful to be here. I know you’ve been coming for over a decade. I think it’s even longer than that. It’s been a very long time that you’ve been a regular visitor here and you’re somebody who is thinking of Graham Holdings as you’re trying to model it as a baby Berkshire. You like to find interesting companies that maybe other people haven’t found yet. I know you take all kinds of trips to out off the beaten class places to to to find those companies. What did you hear today as somebody who’s been here for a long time and as somebody who is trying to take that same sort of investing approach? Well, I thought there was a lot of focus on cash and the importance of making sure that the cash balance at Berkshire continues to be strong. I thought that being part of the reason for selling down some of Apple was was pretty fascinating 21% tax rate versus 35% working into that. And if you look at the opportunities from the equity markets and what else is happening in the world wanting to be more comfortable with a cash balance. I mean that was something that that stuck in pretty hard when it’s already at 180 billion and going to 200 billion, you know that’s not necessarily where you would think to start. And we were, we were having a conversation about that right at the beginning of this, this half hour or whatever we’re doing this hour right now. To me, I thought holy cow, does he see a really big potential problem coming where he can be opportunistic or does he think stocks are overvalued here? I was kind of running through those scenarios in my head. What were you thinking? Those are the same scenarios that were going through my my head. It really seemed like there was an emphasis on, you know, it’s not really attractive right now and there’s a lot going on in the world that could be kind of problematic and and the opportunities that could change in a hurry and I want to have a lot of cash to do it. Perennial theme of course of his remarks and for that of Charlie’s remarks. It’s sort of like knowing where your confidence lies and staying within it. And multiple times he he sort of let’s let’s things go by and says the whole parts of the world maybe are not a place where Berkshire has a particular advantage. Took about India in particular, why Japan was an exception to that, why China maybe isn’t a place that’s that fruitful right now. But just more broadly in terms of that idea of like having some kind of a narrow expertise and then you know, kind of parlaying that into what comes next, how does that apply to what you do in your various verticals? Yeah, it’s it’s you know Warren has this idea of a too hard box and and that’s one that I that I steal as well. There’s a lot of things that just don’t make any sense. And and you know there are many people much smarter than than the people like me that work at Graham Holdings and so we put a lot in the too hard box. But you know you look at Warren’s framework of you know insurance is is narrow as a vertical but you have to understand a lot about the world and that that building up that framework that can exist. So when you do see something that comes across and it makes sense because it goes into your pre-existing framework, you know we are we’re the one of our businesses is the largest producer of fire retardant wood in the United States. Fire retardant wood, it’s about Hoover treated wood products. It’s one of those companies that’s off the beaten path that you never would have thought of. But it’s really important societally. And you, you kind of realize, well, the world isn’t going to want buildings to be more combustible in the future. So that wasn’t a real hard one to figure out. If you could, if you could understand the business dynamics pretty well. All right. Tell us about another big fat pitch, something that you felt was really in your field of expertise. Yeah. Well, it it’s it we we we’ve really gone and built some large businesses in in in home health care. And and once again you really had to think about, well, what does society want? Hospitals want to have post acute care occur at home. He would rather recover at home. Payers would rather have, you know lower cost treatments happen at home. So if you think about those, what are those societal trends and then how can you go build off of it. So, so we have a company at this point in time that is all about providing in home health care services, whether it’s with nurses, physicians, assistants, etcetera and that’s the type of thing that you can see. Well, that trend probably isn’t going to change and you don’t have to be. You know you have to be a genius to figure out that that’s something that the world is going to want more of 10 years from now than today. What’s the company and do you own it outright? Yeah. So we have, it’s called Graham Healthcare Group and and it’s in home health, hospitality, infusion services, actually even things like in home Botox, esthetician services and there’s a lot of things people will will be willing to do at home at this point in time. And at this point, I mean the big opportunities are usually also though not a secret, right. So everyone knows kind of the demographics and you know, even the employment trends, you look at the jobs report every single time it’s, you know, healthcare, a big, a big hiring area. So how do you cut it, I guess play an advantage or maybe it’s just scale? Well, I think it’s thinking a little bit about the things that aren’t going to change as well. You know, Healthcare is 1718% of USGDP. It’s probably going to remain that for a while. And and so really just kind of figuring out where are the niches that you can understand within those big sectors is something that I, I I think can be pretty important overall.