Berkshire News Briefs - 1/31/14

Berkshire Is Said to Face Start of U.S. Systemic-Risk Scrutiny (Bloomberg)

Regulators are starting to scrutinize Warren Buffett’s Berkshire Hathaway Inc. to determine whether it is important enough to the financial system to require Federal Reserve supervision, according to two people with knowledge of the matter. The U.S. Financial Stability Oversight Council staff’s study of Berkshire doesn’t mean the panel is inclined to designate the Omaha, Nebraska-based company, said the people, who requested anonymity because the work isn’t public. Any decision could be months away, they said. The company’s reinsurance operation is the world’s fourth-largest.

Buffett Leans on 29-Year-Old Cool to Oversee Problems (Bloomberg)

Now 29, [Tracy Britt] Cool is one of Buffett’s most-trusted advisers, traveling the country to assist a constellation of companies too small to command her boss’s direct attention. The billionaire said his confidence in Cool is one reason he agreed to buy party-supply seller Oriental Trading. In 2012, she was named chairman of that business and three other units, including paint company Benjamin Moore. [...] “If you have 60 or 70 children, you’re going to have one or two that are going to be problems from time to time,” said Buffett, who focuses on acquisitions, large stock bets, insurance and the railroad. “Part of her job is to make sure that, where there is some area where the companies can benefit from some interaction, they actually do benefit. I’ve never done anything along those lines.”

4 things to know about Warren Buffett adviser (USA Today)

One of the rising stars — perhaps the rising star — at Berkshire right now is a 29-year-old woman named Tracy Britt Cool. Buffett hired her right out of Harvard Business School, and over the course of five years, she has become one of the most interesting and increasingly important people in the business world. Here are a few things to know about Cool.

The Dairy Queen® System Expands Global Footprint (MarketWatch/Business Wire)

The Dairy Queen® system, the international retail treat category leader and part of Berkshire Hathaway , has recently re-entered Taiwan, and also plans to open the first DQ® locations in Vietnam and Guyana during 2014, which will bring the number of countries outside the U.S. where the Dairy Queen system has a presence to 24.

Berkshire Hathaway Specialty Insurance To Acquire Noel Group's MyAssist Inc. and Insure America LLC (Business Wire)

Berkshire Hathaway Specialty Insurance today announced that it has signed an agreement to purchase from Noel Group the assets of MyAssist Inc., a live-agent personal-assistance and telematics service provider, and Insure America LLC, a niche program administrator which provides insurance products to the travel industry.

Buffett's Berkshire acquires MyAssist in-car concierge service used by Mercedes, Ford (Auto News)

Warren Buffett's Berkshire Hathaway Inc. is betting on a service that helps companies including Ford Motor Co. and Daimler AG's Mercedes-Benz provide live, in-car support to drivers. [...] For Mercedes-Benz, MyAssist provides personalized trip assistance from human attendants using "location-aware technology" from Verizon Communications Inc.

BNSF Wins Appeal of U.S. Rule Lowering Coal Rail Rates (Bloomberg)

BNSF Railroad Co., the carrier owned by Warren Buffett’s Berkshire Hathaway Inc., won an appeal of a U.S. Surface Transportation Board ruling that its rates for shipping Western coal were too high. [...] The board, which regulates railroad rates,originally ordered BNSF to repay $345 million to shippers represented by the Western Fuels Association Inc. and Basin Electric Power Cooperative Inc. The court today directed the board to explain why its decisions were reasonable, in addition to weighing more data.

Berkshire Hathaway Specialty Expands into Builder’s Risk Segment (Insurance Journal)

Berkshire Hathaway Specialty Insurance (BHSI) is expanding its property capabilities to include builder’s risk insurance. [...] “These new capabilities enable us to round out our construction offering, bringing large-scale capacity and technical underwriting experience to large projects” [...]

Buffett's $1 Billion Safe Bet on NCAA (Bloomberg)

Berkshire Hathaway has insured a $1 billion prize by Quicken Loans Inc. that would pay the winner $25 million a year over the next 40 years, or one lump sum of $500 million. It’s by far the largest payout offered for predicting the National Collegiate Athletic Association's tournament -- Fox Sports recently put up $1 million for the same feat, and Yahoo’s contest would have paid $5 million. With the odds of filling out a flawless, 64-team bracket about 1 in 9 quintillion, Buffett’s money appears to be safe. For reference, you’d have a better chance at hitting four straight holes-in-one or winning three consecutive Powerball lotteries.

Warren Buffett Offering $1 Billion For Perfect NCAA Bracket (The Onion)

“The winner at my office gets a Chili’s gift card. So it’d be pretty sweet if I could win this one too.”

Berkshire News Briefs - 1/19/14

Upstart Managers School Sage of Omaha (Wall Street Journal)

Two investment managers, hired by the 83-year-old billionaire in recent years as part of his succession plan, each posted returns last year that outdid both Mr. Buffett's performance as Berkshire's top stock picker and the Standard & Poor's 500-stock index, according to people familiar with the matter. The 2013 returns mark the second year in a row that the two men beat the broader market gauge, which gained 32% including dividends last year, as well as their boss. [...] The younger managers' strong performance is further proof that Mr. Buffett "hit the jackpot" with their hires, as he said in his last letter. The 83-year-old billionaire investor hired Todd Combs and Ted Weschler to eventually manage all of Berkshire's investments once he is no longer at the helm, although he has no plans to step down.

The Tiny Companies Making Warren Buffett Billions (Fool Video)

Berkshire Hathaway and Warren Buffett have purchased droves of smaller businesses over the years and brought them under the Berkshire-umbrella. As Berkshire Hathaway continues to transform into a collection of operating businesses, how should investors view this "Other" segment?

Speaking of those tiny companies making billions... Berkshire Hathaway acquired Utah-based R.C. Willey Home Furnishings in 1995.

Bill Child built a company that Warren Buffett wanted to buy (4-Traders)

Just like many of Utah's successful businesses, R.C. Willey Home Furnishings started as a part-time sideline. Rufus Call Willey, a lineman for Utah Power, began selling Hotpoint brand appliances door-to-door in 1932 in rural Syracuse, a tiny town in Davis County. [...] In 1950, Willey built his first tiny store next door to his house in Syracuse, having operated out of the back of his little red pickup truck until then. When he died unexpectedly in 1954, son-in-law Bill Child, recently graduated from college with a degree in education, was asked to take over the business. Based on a loyal customer base and a good reputation, Child said, "OK."

Cannon Equipment acquired by Berkshire Hathaway's Marmon (Cannon Falls Beacon)

This was one small part of the bigger IMI acquisition that was announced in December.

Cannon Equipment [...] officially became part of billionaire Warren Buffetts's empire on January 1. The Marmon Group, headquartered in Chicago, a division of Buffett's Berkshire Hathaway company, officially acquired Cannon Equipment as of the start of 2014. [...] Cannon Equipment traces its roots to Point-of-Sales, founded in Cannon Falls by Howard "Speed" Fredrickson in 1966. IMI Corp., out of the United Kingdom, bought the company in 1981. It sold Cannon Equipment and some other similar companies it owned to Marmon for $1.1 billion in cash. Cannon Equipment specializes in design and manufacture of material handling carts, cages, racks and automation equipment used in retail dairy and newspaper sales.

Marmon Highway Technologies Introduces Fontaine Intermodal (Trucking Info)

Fontaine Engineered Products, Inc., a Marmon Highway Technologies/Berkshire Hathaway company, recently established a stand-alone division – Fontaine Intermodal – to design and produce innovative products for the growing intermodal transportation market. Fontaine Intermodal operates a dedicated facility in Jasper, Ala., where it produces the Fontaine Evolution Intermodal Flat Deck product.

Mass. mill that started Buffett's empire razed (Yahoo/AP)

The Massachusetts textile mill that helped billionaire Warren Buffett launch his investment empire, but which he also called one of his biggest blunders, is being torn down. Roland Letendre, the current owner of the Berkshire Hathaway mill in New Bedford, started demolishing the structure on Monday after efforts to sell the property failed. The mill, built in 1927, had been on the market with an asking price of $500,000, but it needs about $1 million in repairs, Letendre said. [...] Buffett, then an ambitious 34-year-old investor, acquired control of the textile manufacturer in 1965. Overwhelmed by foreign competition, Buffett closed the mill in 1985 and sold the complex in 2000 to Letendre for $215,000.

NextEra Energy Fires Up 20 MW Solar Farm (Fool)

NextEra Energy announced today that it has begun commercial operation of its 20 MW Mountain View Solar Energy Project located in North Las Vegas. The latest addition to NextEra Energy's renewable energy portfolio, Mountain View's 84,000 photovoltaic solar panels will push power to Berkshire Hathaway-owned NV Energy.

What's the Difference Between Berkshire Hathaway Class A and B Shares? (Fool Video)

Berkshire Hathaway is known for a lot of things. Its Chairman and CEO, Warren Buffett, its successful track record, and of course, its expensive Class A share price. In this segment of The Motley Fool's financials-focused show, Where the Money Is , banking analysts Matt Koppenheffer and David Hanson take a question from their mailbag regarding the the Class A and Class B shares for Berkshire Hathaway.

8 Hilarious Warren Buffett Insights From the Ronald Reagan Era (Fool)

A lot has changed since 1984: Ronald Reagan isn't president, gas costs well more than a dollar per gallon, and Apple personal computers look considerably different. But, if just one thing hasn't changed in 30 years, it's Warren Buffett's letter to Berkshire Hathaway's shareholders. Every year, the letter is chock-full of investing insight and witty commentary. Here are eight of Buffett's best lines from 30 years ago. [...] "Our experience has been [big ideas] pop up occasionally. (How's that for a strategic plan?)"

Berkshire Energy & Subsidiary News - 1/7/14

Berkshire Stakes Name on Realty Business Buffett Barely Noticed (Bloomberg)

Berkshire Hathaway Inc.’s foray into the home-brokerage arena 14 years ago was almost an afterthought. Today, Warren Buffett’s company is staking its name on the business. [...] While Buffett has invested for decades in companies with strong consumer brands -- from Geico to Dairy Queen -- few of his subsidiaries have adopted the name of his holding company. The brokerage will test whether the “Berkshire” brand has broad appeal and can be used without tarnishing a reputation for financial strength and integrity. “It’s always been used as an investment brand,” said Stefan Swanepoel, a consultant and author on real estate trends. “The question is: Can you position it as a consumer brand?”

Candy Cash Flow: The Secrets to See’s Candy (Guru Focus)

Charles A. See, a salesman from Ontario, opened the first See’s Candy shop in Pasadena, Calif. in 1921, with his mother Mary See. Exactly 50 years later Warren Buffett picked up his first See’s candy and gave it a try. After hearing about See's from his West Coast colleague Charlie Munger (in 1971), an eternal synergy blossomed with a blue chip buy-out of See’s Candy the following year. [...] See’s Candy is a textbook example of a magnificent business with a continually widening moat, characterized as above average return on assets, incredible return on invested capital, pricing power and a negative operating cycle. These effects are due to superb management (See’s family, Chuck Huggins and now Brad Kinstler), high customer captivity, low to non-existent capex (and maintenance capex) and proficiencies in industry jousting (game theory/prisoners dilemma).

MiTek Acquires Truss Industry Production Systems, Inc. (Business Wire)

MiTek Industries, a Berkshire Hathaway company, and the world’s leading supplier of advanced engineered structural connector systems, equipment, software and services for the building components industry, announced today that it has acquired Truss Industry Production Systems, Inc. (TIPS), the maker of the Wizard PDS system. The Wizard PDS system is a leading automated jigging system sold to component fabricators across North America.

NetJets loses IntelliJet trademark spat with Florida aircraft leasing company (Columbus Business Report)

NetJets sued another company over the using the name "IntelliJet", and the judge ended up invalidating NetJets's trademark. Oops.

NetJets Inc. has to surrender a trademark for its IntelliJet software after losing a dispute with a Florida aircraft brokerage and leasing company using the same name. U.S. District Court Judge Gregory Frost ruled Columbus-based NetJets must abandon the trademark for its aircraft-management software because the Columbus private jet company’s use does not meet the standards required of a trademark. Namely, the IntelliJet software is used internally, as a vehicle through which NetJets provides services. [...] Joe Dreitler of Dreitler True LLC in Columbus, who represented Jacksonville, Fla.-based IntelliJet Group LLC, said NetJets and parent company Berkshire Hathaway Inc. were trying to throw their weight around by suing IntelliJet for trademark infringement in January 2012. IntelliJet has operated under that name since 2005.

Berkshire Hathaway Specialty Insurance Adds Primary Casualty Construction Capabilities (Business Wire)

Berkshire Hathaway Specialty Insurance (BHSI) today announced that it is expanding its construction casualty capabilities to include primary casualty insurance. The company now offers primary general liability, excess and umbrella coverage for wrap-ups, project-specific and practice policies. [...] Recently underwritten accounts range from new bridge, high speed rail and stadium projects, to a rolling wrap-up for a general contractor and a practice policy for a pipeline contractor.

Warren Buffett's $1.4 Billion Arbitrage on Phillips 66 (Fool)

Berkshire Hathaway CEO Warren Buffett likes to cultivate the image of a down-to-earth businessman, but when it comes to deal-making, he can get pretty creative. In a deal announced after the market close on Monday, Berkshire is acquiring Phillips Specialty Products, or PSPI, from downstream energy company Phillips 66 for roughly $1.4 billion. But here's the kicker: Buffett will be paying for the acquisition with shares of Phillips 66 from Berkshire's stock portfolio! Why structure the deal that way?

Warren Buffett's Energy Companies Stand Out Among the Crowd (Fool)

These kinds of moves are what separate Warren Buffet from the rest of us, and it isn't the only move he's made in the energy space. In the slideshow below, we go over all of Berkshire Hathaway's energy investments and why they fit the Warren Buffet style of investing.

Did Warren Buffett Just Tip His Hand About His Next Elephant Hunt? (Fool)

Given his fondness for the company, it is possible that Buffett might want to buy more of Phillips 66's energy transportation portfolio. However, Buffett typically looks for elephant-sized acquisitions. A company, say, about the size of Phillips 66, which at more than $45 billion in market capitalization would be quite the elephant. However, it's a company that would fit in well with Buffett's other capital-intensive holdings, including MidAmerican Energy Holdings and BNSF.

Will Berkshire's Bets on Wind Power Pay Off? (Fool)

Berkshire Hathaway's MidAmerican Energy subsidiary just bought over 1 gigawatt (GW) of wind turbine capacity from Siemens. Construction sites across Iowa are linked to MidAmerican's expansion and reconductoring of its transmission system. MidAmerican Energy bought 448 turbines for an undisclosed price. Current installed capacity cost for wind turbines is about $2,000 per kilowatt (kW.) The total price tag could exceed $2 billion, and this is reputedly the largest wind turbine order to date. [...] Everyone seems to gain from this deal. Iowans can get enough power to service the equivalent of over 300,000 households at about $0.05 per kilowatt-hour (kWh.) New York City residents pay over $0.20 per kWh.

Berkshire News Briefs - 1/7/14

(Also see Berkshire Energy & Subsidiary News for 1/7/14.)

WEB on Stocks in the 20th Century (Fool Boards)

This post from the Fool's public BRK board is a transcript of Buffett talking about the history of the stock market in the 20th century.

The country will do very well over time, but you will see these huge waves and if you can stay objective throughout that—if you can detach yourself temperamentally from the crowd—you get very rich. And you won’t have to be very bright…It doesn’t take brains, it takes temperament. It takes the ability to sit there and look at something—when I started out in 1950, I would go through and find things at 2x earnings. And they were perfectly decent businesses and people wanted jobs at those companies and everybody knew they were going to be around and they wouldn’t buy them at 2x earnings. And that’s when interest rates were 2.5%.

Berkshire Seen Failing Buffett 5-Year Test for First Time (Bloomberg Businessweek)

Berkshire Hathaway Inc. [...] is poised to report that it failed to increase net worth more rapidly than the Standard & Poor’s 500 Index during the past five years, according to analyst estimates. It would be the first time the billionaire investor fell short of the goal since he took over the Omaha, Nebraska-based company in 1965. Buffett, 83, highlights the comparison as a way for shareholders to evaluate his performance against a low-cost fund that tracks the index. The S&P 500 returned 128 percent including dividends since the end of 2008, fueled by the Federal Reserve’s stimulus efforts and higher corporate profits. Berkshire’s book value per Class A share, Buffett’s yardstick, rose 80 percent to $126,766 starting at the same point until Sept. 30, the latest data available.

Berkshire Jacks Up USG Corp Holdings To 30.5 Percent (ValueWalk)

Berkshire Hathaway Inc. increased its holdings in USG Corporation to 30.5% following the issuance of shares upon conversion of USG’s 10% Contingent Convertible Senior Notes due 2018. Berkshire now holds 43.43M shares in USG, a building materials company, according to its 13D/A filing. [...] USG Corporation is the biggest manufacturer of gypsum-based building products such as gypsum wallboard in the United States. Warren Buffett has had an interest in the company since 2000 when he had purchased a 15% stake. [...] Buffett is known to have a keen interest in the building industry, though one motive ascribed to this is slightly uncharitable, and, according to investment manager Richar Losch’s blog is “hurricane synergy”: “This is the idea that, if Berkshire Hathaway Inc. can buy enough companies in the building materials, construction, and manufactured housing industries, then, when its insurance companies are paying insurance claims for catastrophic damage due to hurricanes and earthquakes, Berkshire Hathaway, as a company, will just be transferring money from one pocket to another.”

Here's How Warren Buffett Made $9.5 Billion in 3 Months (Fool)

Although we won't know until February what stocks Warren Buffett bought and sold in the fourth quarter, a quick analysis of his most recent investments shows that Berkshire Hathaway probably had one of its best quarters ... ever. Although the acquisition of ExxonMobil was the big news in the fourth quarter, perhaps the biggest news was just how well Berkshire Hathaway did. Provided no stocks were added or sold in the Berkshire Hathaway portfolio, Buffett probably made almost $9.5 billion in the fourth quarter, and the portfolio had a return of more than 10.3%.

Buffett Embarrasses Analysts Again in His Latest Big Win (Benzinga)

Remember when Warren Buffett bought all of those newspapers? In fact, he bought 63 in total for $142 million along with loans totaling $445 million. At the same time, he took his fair share of criticism from all of the “experts” [...] But once again, Buffett showed his experience while simultaneously proving to the “experts” that they still have a lot to learn. As part of the deal, Berkshire Hathaway negotiated the right to “penny warrants.” This gave Buffett the right to buy 4.65 million shares of Media General for a penny a piece. According to the Wall Street Journal, Berkshire exercised those rights in September of 2012, taking a 17 percent stake in the company. By the end of last year, that $4 stock when Buffett became involved had a sticker price of more than $22. That makes Buffett’s position worth about $105 million. Add to that the interest Media General is paying to Berkshire for the loan and what you have is profit for Berkshire. Turns out Buffett wasn’t as nutty as people said back in 2012.

The 2 Real Threats To The Future Of Berkshire Hathaway (And Its Defense Against Them) (Seeking Alpha)

There are two areas, however, which may be harder to sustain without the presence of Buffett himself. (1) Human excellence. This is the real Berkshire edge. Will it be maintained? (2) A unique model of decentralized management but centralized capital allocation. This is made possible in part by the excellence of the managers of the various parts and in part by the authority of Buffett himself, who has allocated capital both internally and externally with no formal help beyond the suggestions and inputs of Charlie Munger and a few of his lieutenants. Is this model sustainable without Buffett?

Here it is, your moment of zen...

My Wish for 2014 (Fool Boards)

Berkshire Energy Briefs - 1/6/14

A short update on a few energy stories... much more coming tomorrow.

Train Carrying Oil in North Dakota Ablaze After Derailing (Bloomberg Businessweek)

Thousands of North Dakota residents were urged to flee possibly toxic fumes from a fire that engulfed BNSF Railway Co. railcars carrying crude oil after it collided with another train, causing a series of explosions. Two to three railcars were still burning and 1,500 residents living within a five-mile radius of Casselton, North Dakota, heeded warnings to evacuate [...] No injuries to the train crews were reported in the accident that occurred at 2:10 p.m. local time yesterday about 25 miles (40 kilometers) west of Fargo, Berkshire Hathaway Inc.’s BNSF said in a statement.

Berkshire acquiring Phillips 66 flow business (WSJ MarketWatch)

Berkshire Hathaway Inc. said late Monday it was acquiring the flow improver business of Phillips 66 in exchange for Phillips stock Berkshire already owns. Berkshire owns 27.2 million shares of Phillips, or 4.5% of outstanding shares [...] The unit, Phillips Specialty Products Inc., makes polymers designed to reduce drag and increase the flow potential in pipelines.

Buffett’s year-end bet: Pipelines (WSJ MarketWatch)

Oil production in North Dakota is a relatively new phenomenon made possible by fracking its vast oil-bearing shale formations. Because it’s new, there are few pipelines serving the region, which means about 90% of the state’s crude is being sent to refiners by rail. [...] Buffett’s BNSF doesn’t lose money hauling crude, but pipelines are a far more efficient and safer way to move crude to market. And every train wreck makes it a little easier to get the permits necessary to build the pipelines already proposed, especially to West Coast refineries that historically have had little access to crude from east of the Rockies.

Warren Buffett's $6 Billion Energy Bet (Fool)

Berkshire has more than $6 billion invested in National Oilwell Varco, ExxonMobil, Phillips 66, and ConocoPhillips. Grouped together, these holdings make up almost 8% of Berkshire's portfolio, and would be the fifth-largest single investment, trailing only the "big four" of Wells Fargo, Coca-Cola, IBM, and American Express. What can individual investors take away from this? Should you follow Buffett into oil and gas?