Jim Wright
Premier Miton Global Infrastructure Income Fund Manager
For information purposes only. The views and opinions expressed here are those of the author at the time of writing and can change; they may not represent the views of Premier Miton and should not be taken as statements of fact, nor should they be relied upon for making investment decisions.
The world’s greatest investor?
Warren Buffett, through his investment company Berkshire Hathaway, is one of the world’s most respected investors. Many fund managers have used his investment style as a template and have followed his strategies in order to try and replicate his success. With listed infrastructure strategies having struggled over the last 12 months, we believe that it is instructive to look at the portfolio of the man who would have good claim to be called the world’s greatest investor.
Berkshire Hathaway and listed infrastructure
Berkshire Hathaway is an insurance and reinsurance business, backed by a huge investment portfolio. When commentators look at Berkshire Hathaway, the focus is often on its investments in publicly-traded stocks, where the company invests in shares based on its long-term expectations for returns from the investee companies. However, Berkshire Hathaway also invests in businesses it controls, usually owning 100% of each. And this is where the crossover with listed infrastructure becomes apparent, as the two biggest directly-held businesses by earnings are the holding company Berkshire Hathaway Energy (92%-owned), which owns a group of regulated utility and energy generation and distribution businesses, and Burlington National Santa Fe (BNSF), a US railroad which is 100% owned.
Investment crossover
A closer look at these businesses reveals a significant correlation between the assets owned by Berkshire Hathaway and the assets we invest in in the Premier Miton Global Infrastructure Income Fund. Berkshire Hathaway Energy owns businesses including the regulated US utility companies PacifiCorp, MidAmerican Energy, and NV Energy. In addition, it owns natural gas pipeline and storage assets in the USA, an electricity distribution grid company in the UK, Northern Powergrid, and the electricity grid utility in Alberta, Canada.
Furthermore, Berkshire Hathaway Energy owns interests in independent power producers with approximately 6,000 Megawatts of generation capacity from renewable energy sources including wind, solar, hydro, and geothermal. In July 2023 Berkshire Hathaway Energy announced that it had agreed to buy Dominion Energy’s 50% stake in Cove Point LNG Terminal, a liquified natural gas export facility on the Northeast coast of the USA, taking its ownership stake up to 75%.
Hating on railroad stocks?
In the 2022 Berkshire Hathaway Investment Letter, Warren Buffett’s long-time partner, Charlie Munger, wrote “Warren and I hated railroad stocks for decades, but the world changed, and finally the country had four huge railroads of vital importance to the American economy.” In 2010 Berkshire Hathaway completed its acquisition of BNSF. The railroad connects major cities and ports in the Midwest, Pacific Northwest, Western, Southwestern, and Southeastern regions of the USA and alongside the three other Class One US railroads, plus the two Canadian-based railroads with significant US networks, it provides core connectivity for consumer, industrial, agricultural, and other bulk products.
Followers of our fund, and of the listed infrastructure sector, will appreciate that there is a very significant overlap between the assets which form a significant part of Berkshire Hathaway’s directly owned portfolio of businesses and the assets owned by the companies where we invest.
On the utilities side we also own US regulated utilities, renewable generation, gas pipelines, LNG export terminals and UK electricity networks through stocks such as Xcel Energy, Clearway Energy, Enbridge, Sempra Energy and National Grid. And in the railroad sector we own the US railroad Union Pacific, along with Canadian National and Canadian Pacific, where both companies have networks across Canada and the USA.
The final word
As long-term investors we are deeply reassured that there is a significant correlation between the assets that Berkshire Hathaway chooses to own for the long-term and the assets which we own in our fund. Through the stocks we own we invest in core infrastructure assets with a significant element of long-term visibility, and we believe that exposure to these assets should be core to our clients’ sector allocation – as they are to Warren Buffett’s.
