Buffett’s Charitable Giving: Who Will Get the Rest?

The Berkshire shares that Warren Buffett hasn’t already pledged to charity could be valued at more than $200 billion in 10 years, the WSJ reports.

In 2010, Berkshire Hathaway  (BRK.B) – Get Berkshire Hathaway Inc. Report Chief Executive Warren Buffett, Microsoft  (MSFT) – Get Microsoft Corporation Report Co-Founder Bill Gates and his then-wife Melinda French Gates created the Giving Pledge.

Billionaires signing the pledge publicly commit to give the majority of their wealth to philanthropy either during their lifetimes or in their wills.

Buffett in 2006 promised that 85% of his Berkshire stock would go to charity, mostly to the Gates Foundation. That’s Bill and Melinda’s organization.

But it has been unclear what would happen to the rest of Buffett’s shares after he dies. The Gates Foundation made plans to receive it, The Wall Street Journal reports.

But now the Susan Thompson Buffett Foundation is preparing to receive it, too, possibly up to $100 billion, knowledgeable sources and documents indicated to the Journal. 

Named after Buffett’s deceased wife, the foundation works to guarantee abortion rights, among other activities.

So who will get the money is unclear. The Journal estimates that the Berkshire shares Buffett hasn’t already pledged to charity would be valued at more than $200 billion in 10 years, assuming the stock performs about the same as it has over the past 10 years.

Buffett’s only response to The Journal about its lengthy piece was that “there are a significant number of inaccuracies in your reporting.”

Morningstar’s Take on Berkshire Hathaway

As for Berkshire Hathaway, Morningstar analyst Greggory Warren assigns it a wide moat. He puts fair value for the B shares at $367. That’s 35% above the recently trade around $271.

“We continue to view Berkshire’s decentralized business model, broad business diversification, high cash-generation capabilities, and unmatched balance-sheet strength as true differentiators,” he wrote in an April commentary.

“While these advantages have been overshadowed by an ever-expanding cash balance, … we believe the company has finally hit a nexus where it is far more focused on reducing its cash hoard through stock and bond investments and share repurchases.”

As evidence of that, “during the past eight calendar quarters, the company has repurchased $52 billion worth of its common stock, eliminating around 9.1% of its total Class A equivalent shares outstanding,” Warren said.

“And the firm seems committed to matching our expectations for $6 billion to $8 billion in quarterly share repurchases during 2022-26.”

Berkshire has spent $11 billion combined buying Occidental Petroleum  (OXY) – Get Occidental Petroleum Corporation Report and HP  (HPQ) – Get HP Inc. Report stock this year and has committed another $11.6 billion to taking over Alleghany  (Y) – Get Alleghany Corporation Report, Warren notes. But “these moves still won’t deplete full-year free cash flow,” he said.

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