Berkshire News Briefs - 8/27/14

Buffett greases $11B Burger King-Tim Hortons deal (CNBC)

Burger King on Tuesday confirmed plans to acquire Ontario-based Tim Hortons for about $11 billion—creating a new company to be based in Canada with combined sales of $23 billion. Berkshire Hathaway Chairman and CEO Warren Buffett is helping to fund the deal by committing $3 billion of preferred equity financing. The news release on the deal did not disclose the terms for Berkshire, which is only a financing source and will not have any participation in the management and operation of the business.

Burger King, Warren Buffett under fire for Canadian inversion deal (LA Times)

Burger King's overall effective tax rate in 2013 was 27.5%, according to its annual report. Tim Hortons' effective tax rate for the same year was 26.8%. "We don’t expect there to be meaningful tax savings, nor do we expect there to be a meaningful change in our tax rate," Burger King Chief Executive Daniel Schwartz told reporters on a conference call. [...] Buffett said Tuesday that it made sense for the combined company's headquarters to be in Canada. “Tim Hortons earns more money than Burger King does,” he said told the Financial Times. “I just don’t know how the Canadians would feel about Tim Hortons moving to Florida. The main thing here is to make the Canadians happy.”

Buffett’s Berkshire to pay $896,000 over reporting violation charges (Fortune)

This story was just breaking when I included a short brief about it in last week's news briefs. Here's a better story about it.

Berkshire Hathaway has agreed to pay a $896,000 civil penalty in order to settle charges that it failed to give federal regulators advance notice before significantly increasing its stake in Chicago-based drywall maker USG last year. [...] The regulators said that Berkshire violated pre-merger reporting laws in December when it failed to provide advance notice before it exchanged $243.8 million of USG convertible notes for 21.39 million common shares, increasing Berkshire’s stake in USG to roughly 28% from about 15%. [...] What’s more, the FTC says the alleged violation came just a few months after Berkshire produced a similar violation when it increased its stake in financial services company Symetra Financial. The FTC chose not to punish Berkshire for that alleged violation, with the commission instead deciding to take Buffett’s firm on its word that it would comply with the Hart-Scott-Rodino Act’s filing requirements going forward.

Squeezed by consumers' focus on fresh foods, Heinz revamps frozen meals (Pittsburgh Tribune-Review)

Known primarily as a maker of ketchup and condiments, Heinz is a major player in the $50 billion frozen food industry, with brands such as Ore-Ida potatoes, Bagel Bites, Weight Watchers Smart Ones, T.G.I. Friday's and Nancy's. But the industry has lately experienced a slump in sales, as consumers give frozen fare a cold shoulder and increasingly choose fresh foods they perceive as healthier. That's put more pressure on Heinz and others in the industry to revamp products.

Heinz recalls four batches of infant food in China (Reuters)

Ketchup maker H.J. Heinz Co has recalled some infant food in eastern China after it was found to contain lead in excess of the allowable limit, the company said on Monday. The move by Heinz comes after food safety regulators in eastern Zhejiang province said on Friday that they had found "excessive amounts of lead" in the company's AD Calcium Hi-Protein Cereal. [...] "This relates to an isolated regional withdrawal in eastern China," company spokesman Michael Mullen said in e-mailed comments to Reuters. "Extensive testing confirmed that no other Heinz baby food varieties are affected."

Rise of discount retailers hits Heinz's Irish business (Irish Independent)

The Irish arm of food giant Heinz has blamed the increasing impact of discount retailers here for contributing to a 8.4% drop in its Irish business last year. [...] The principal activity of the firm is the manufacture of frozen food products for Heinz's manufacturing supply chain hub. The directors also state that revenues were impacted by "the meat integrity issues that received prominent media coverage in the first half of the current period". Part of the firm's business is to sell, market and distribute Heinz products in the Irish market and according to the directors "while in overall market terms the company's core categories have declined consistent with the softness in the Irish grocery trade, the company has grown relative market share".

Berkshire's Probable Q3 Strategy For Chicago Bridge & Iron (Seeking Alpha)

Chicago Bridge & Iron has become a battleground stock in the last several months, following a short thesis issued by Prescience Point in mid-June, which has resulted in declining share prices, including questions about the quality of CBI's accounting statements. It appears the market was and continues to hold Berkshire Hathaway as the final arbiter for this conflict, as CBI's largest shareholder, and the most recent data indicates Berkshire continues to see value in the company. [...] According to the [13F] filing, Berkshire's position increased by about 12 percent, to 9.89 percent of CBI equity during the second quarter. Bloomberg also reported on August 21st that, according to a report to state insurance regulators, Berkshire bought those shares acquired during the second quarter "at an average price of $70.34 over a stretch that ended June 20." This appears to indicate that Berkshire acquired these new shares immediately following the initial decline that followed the Prescience Point report.

China's BYD shares slide 9 pct in Hong Kong after H1 earnings drop (Reuters)

Berkshire Hathaway owns 10% of BYD.

Shares of BYD Co Ltd were set to open 8.7 percent lower in Hong Kong on Monday after it posted a drop in first-half net profit as sluggish sales of gasoline cars offset a surge in its electric vehicle business. [...] BYD saw its first half net profit fell 15.5 percent to 360.7 million yuan ($58.64 million) from 426.9 million yuan a year earlier, dragged down by a 27 percent fall in vehicle sales volume.

Berkshire News Briefs - 8/20/14

The biggest story of the week was Berkshire Hathaway's 2nd Quarter 13F filing, detailing the changes to the company's stock holdings for the period ending June 30. Here's a easy-to-read chart of the portfolio as it stands now.

This story has a run-down of all the changes in the largest holdings:

Tracking Warren Buffett's Berkshire Hathaway Portfolio - Q2 2014 Update (Seeking Alpha)

The only two entirely new positions this quarter were Now Inc. (DNOW), the National Oilwell Varco spin-off, and Charter Communications:

Warren Buffett buying into cable (RBR-TVBR)

Warren Buffet’s Berkshire Hathaway Inc. is again putting money on cable TV consolidation bets made by Liberty Media Corp. Chairman John Malone. The Oracle of Omaha’s investment company has taken a new, $366 million position in Charter Communications Inc., the Stamford, Connecticut-based cable TV company in which Malone’s Liberty Media is the largest shareholder.

A look at three portfolio moves in particular:

What’s Buffett Doing With His Money? (Wall St. Cheat Sheet)

First, Berkshire added about $340 million worth of IBM. This is not a huge transaction for Buffett, but he is adding this to an already substantial stake now valued at over $13 billion. [...] Second, Buffett has been buying Wal-Mart. While he only bought a small position in the second-quarter, I suspect that he has been buying more recently as the stock has been weak. [...] Finally, Buffett has been adding shares of Suncor — a Canadian oil company — while selling shares in ConocoPhillips and its recent spinoff Phillips 66. This is an interesting move and it probably reflects Suncor’s higher growth and the fact that Canada has a lower — 15 percent — corporate tax rate than we have in the U.S.

Berkshire Hathaway stock tops $200,000 (Yahoo/AP)

Berkshire Hathaway Class A stock, which first topped $1,000 in 1983, on Thursday surpassed $200,000. [...] The stock has had its ups and downs. The Class A shares first hit six figures in October 2006 and peaked at $151,650 in December 2007, when the Great Recession began. They fell as low as $70,050 in March 2009. On Thursday, they reached an all-time high of $202,454.99. Berkshire Hathaway has come a long way since Buffett's investment partnership started buying shares for $7 and $8 apiece in 1962. At that point, Berkshire was a New England textile company.

How Buffett Is Changing The Future Of Berkshire's Float - From Insurance To Uncle Sam (Seeking Alpha)

Insurance float is a concept that Warren Buffett has clearly explained as a source of enduring value for Berkshire Hathaway Inc. However, there are other sources of float that are becoming more important to Berkshire over time, but are not well understood by investors. Deferred tax liabilities (DTLs) are one area worthy of focus, and while I know that tax is boring, you will realize Buffett is truly a genius when it comes to float, so bear with me as I try my best to explain how it works, as it is complex. The first idea that might spring to mind for many people on deferred taxes is unrealised capital gains - to be clear, the focus of this article extends deeper than just this. Read on...

Berkshire Unit Said to Hires Two AIG Executives in Asia (Bloomberg)

Warren Buffett’s Berkshire Hathaway Inc. hired two Asia-based executives from American International Group Inc. as part of a push to expand its presence in the region, a person familiar with the matter said. Marc Breuil, AIG’s head of country operations in Hong Kong and Taiwan, and Marcus Portbury, the regional head of casualty insurance, are joining Omaha, Nebraska-based Berkshire’s specialty insurance business, said the person, who requested anonymity because there was no public announcement. Breuil will lead the company’s efforts across Asia and Portbury will be head of casualty in the region, according to the person.

Berkshire to pay U.S. civil fine for violating reporting rules (Yahoo / Reuters)

Warren Buffett's Berkshire Hathaway Inc has agreed to pay an $896,000 civil penalty to the U.S. government for having failed to timely report that it had boosted its voting stake in building products company USG Corp . [...] The government said Berkshire failed to made the necessary filing before swapping some USG convertible notes into common stock last Dec. 9. Berkshire made a corrective filing on Jan. 3, 2014, the complaint said.

Buffett Reveals Dow Chemical Position! (From 2009! It Was Old News!) (WSJ)

On a day when big hedge-fund managers were disclosing their latest positions, Warren Buffett’s Berkshire Hathaway Inc. alerted regulators Thursday to a big investment in Dow Chemical Co. It’s a position the company has held since 2009. The holding was hardly a secret: It was trumpeted by Dow at the time as one of the reasons it was able to complete a big acquisition, and Berkshire and Dow have discussed it in securities filings and public statements since. But Mr. Buffett’s firm, a sprawling conglomerate that famously employs just 25 people in its home office, admitted Thursday that a required “13G” form “was not timely filed” back when it should have been in 2009.

Vacant plant in Harrisburg has a new owner (KMTR 16)

The Monaco Coach plant has sat empty for months, but that will soon come to an end. According to Harrisburg [Oregon] City Administrator Brian Latta, RV maker Forest River Inc. has purchased the plant. Paul Eskritt with Forest River said the plant will start work in September with about 30 employees, most of whom they hope to hire locally. They plan to expand employment this winter with a second production line.

BNSF, CP improve rail service as harvest test nears (Journal of Commerce)

BNSF Railway and Canadian Pacific Railway say they are steadily reducing a backlog of grain shipments, but agricultural shippers warn the true test of whether they can handle the upcoming harvest will come quickly, in a week or two. Meanwhile, pressure from Washington, D.C., is mounting on the two railroads to make greater progress in reducing a backlog of shipments caused by the harsh 2013-2014 winter and a surge of freight. Following the U.S. Surface Transportation Board directing in late July that BNSF and CP post weekly updates on backlogged grain shipments, the U.S. regulatory agency said it will hold a public hearing on the issue in early September in Fargo, North Dakota.

Warren Buffett tips Heinz Australia into red (Australia Financial Review)

Warren Buffett, the second richest person in the United States, has inadvertently triggered a tumble into the red by the Australian operations of baked beans, baby food and soup maker Heinz. A heavy restructuring of the balance sheet at Heinz’s Australian operations and a recalibration of tax losses caused the Australian business known as Heinz Wattie’s to tumble to a loss of $12.3 million in its latest financial year.

Huge Geico Insurance Banner Falls on Fremont Home (NBC Bay Area)

One Bay Area couple can now say for certain their house is covered by insurance. A 4,000-square-foot Geico insurance banner being towed by a plane came loose and fell directly on their house Friday in Fremont.

Berkshire News Briefs - 8/12/14

3 Berkshire companies among national group's 'hot 100' retailers (Omaha World-Herald)

Yet three Berkshire Hathaway Inc. companies made the list of “hot 100” U.S. retailers, measured by increases in sales from 2012 to 2013, according to the National Retail Federation. And they didn’t add any stores or acquire competitors. The three:

• Helzberg’s Diamond Shops of North Kansas City, Missouri, No. 20 with a 15.7 percent increase in sales to $766 million at its 234 stores.
• Jordan’s Furniture, a five-store group from Taunton, Massachusetts, No. 24 with a 15.4 percent increase to $499 million.
• Nebraska Furniture Mart of Omaha, also with a 15.4 percent sales increase to $1.039 billion at its three stores.

Good 2Q for BNSF (Railway Age)

BNSF Railway, wholly owned by Omaha-based Berkshire Hathaway, Inc., has reported second-quarter net income of $916 million, up 4% from $884 million in the comparable quarter of 2013. [...] The Class I railroad noted coal volume rose 6% during the second quarter, while consumer product volume advanced 4% "primarily due to higher international intermodal traffic."

Buffett’s BNSF Losing Freight to Rival as Service Slows (Bloomberg)

BNSF Railway Co., the only U.S. railroad ordered by the regulator to provide weekly service updates, is losing market share to Union Pacific Corp., its main competitor, as train speeds slow and on-time deliveries drop. The shift in market share had shown up in carload statistics, Union Pacific Chief Executive Officer Jack Koraleski said today. During the second quarter, the Union Pacific’s loads rose 8.2 percent while those of BNSF, owned by Warren Buffett’s Berkshire Hathaway Inc., gained 4.9 percent. [...] Railroad service operations across the U.S. have suffered after harsh winter weather earlier this year coupled with a surge in cargo to create a freight knot that’s still being untangled. BNSF, based in Fort Worth, Texas, was affected most among U.S. rails because its network bore the brunt of a bumper grain crop and the exponential growth of crude oil from the Bakken oil fields in North Dakota.

Related:
Cold Train cites BNSF congestion, suspends service (Railway Age)
Big harvest adds to railroad woes (Farm & Ranch Guide)

Lubrizol Corp. buys medical extruder Vesta Inc. (Plastics News)

Lubrizol Corp. has ventured into the medical device market by acquiring Vesta Inc., a maker of catheters and tubing based on silicone and thermoplastics. [...] The 42-year-old firm has a long history of medical design engineering experience with clinical device applications in cardiology, urology, wound care and bariatrics, officials said. Vesta was acquired by RoundTable in 2007 and grew by acquiring thermoplastic medical tubing maker ExtruMed LLC in 2009 and silicone products maker SiMatrix in 2011. It has about 450 employees.

Buffett Stocks: Investing Essentials (Fool)

Generally speaking, there are about 50 companies held in the Berkshire Hathaway portfolio ranging from one position worth less than half a million at the time of writing, to the Wells Fargo holding which is worth a staggering $25.4 billion. Buffett has what he affectionately calls his "Big Four" -- which as you would suspect include Wells Fargo, American Express, Coca-Cola, and recently purchased IBM. At last count, they had a value of nearly $70 billion, which represented roughly 60% of the portfolio. And in total, the 15 biggest positions represented nearly 90% of what Berkshire Hathaway held. All of this is to say, the stocks Buffett really clings to are relatively small in number.

Warren Buffett's Secret Key to Building an Money-Making Empire (Fool)

At Berkshire it's not as simple as, "Well, who should become the chief executive?" You've got to think about that role, the role of the investment officer, the role of the Chairman of the Board of Directors, the role of the controlling shareholder; so it's a much more complicated question. It's not just a personality. It's institution and culture. [...] I did a shareholder survey -- that The Motley Fool helped me do, actually -- and elicited suggestions from shareholders about who they would like to see in an executive role with Berkshire after Warren, and I got a dozen names that were identified scores of times. That's testimony to the deep bench, so that's relatively easy. There's at least a dozen people who could step in and become Chief Executive Officer.

Berkshire News Briefs - 8/6/14

The biggest news of the week was the quarterly earnings report, covered in my earlier post. So I'll skip over most of the earnings-related news here.

What Warren Buffett Will Do With $55 Billion in Cash (Fool)

Of course, a large chunk of the cash on hand at Berkshire Hathaway is likely earmarked for acquisitions, but the reinvestment efforts within Berkshire may end up being equally as important to the long-term success of the company. While it may grab less attention and be less fun than imagining Buffett's next huge buyout, reinvesting in a consistently profitable business appears to be exactly what is needed to sustain the company's impressive returns.

Why Buffett's Berkshire Hathaway Is Clearly a Buy (Barron's)

A flush Berkshire Hathaway is humming along as a patient Warren Buffett awaits an opportunity to deploy some of the company's huge cash hoard of $49 billion. Berkshire's class A shares are up 2.7% today, or just over $5,000, to $194,300, leaving them just shy of their record $194,670 set in May. [...] The shares, up 8% this year, still look appealing trading for about 1.35 times the company's June 30 book value of $142,483. [...] CEO Buffett's willingness to repurchase stock at 1.2 times book backed by Berkshire's cash-rich balance sheet may help keep a floor under the stock. That floor is now around $171,000 per class A share, but it typically rises every quarter as book grows.

Berkshire Hathaway Has Raised Its VeriSign Stake Yet Again (24/7 Wall St.)

VeriSign Inc. has had two key things going for it of late. Its directory listing dominance of the .com and other domain extensions has been a dominant part of its business. It has also been at the forefront of Internet security. Now a third issue has arisen — Warren Buffett and Berkshire Hathaway Inc. have increased their VeriSign stake yet again. An SEC filing from the weekend showed that Buffett, Berkshire Hathaway and its entities now control some 12,985,000 shares of common stock. This represents a 10.4% stake of the outstanding shares of VeriSign.

Brooks Sports Moves New Home Closer to Trails (New York Times)

In August, nearly 300 employees of the running shoe and apparel company Brooks Sports Inc. will head to work at the company’s new global headquarters, three miles north of downtown Seattle. Instead of nondescript buildings in an office park, they will cross the George Washington Memorial Bridge to encounter a sculpted troll underneath, a 16-foot statue of Vladimir Lenin, art walks and running trails. The neighborhood’s motto is De Libertas Quirkas, or freedom to be quirky. [...] “You can access some of the best running trails in the city from right here,” said Jim Weber, the chief executive of Brooks, pointing across the street to the Burke-Gilman Trail, a 27-mile thoroughfare for runners and cyclists. “The opportunity to be right here, so close to our customers, is amazing.”

Which utilities are doing the most in clean energy? (Portland Business Journal)

Berkshire Hathaway actually owns two of the top 6: NV Energy and PacifiCorp.

The top is utilities for renewable energy were NV Energy (21.08 percent), Xcel Energy (18.11 percent), PG&E (16.87 percent) Sempra Energy (16.86 percent), Edison International (16.67 percent) and PacifiCorp parent Berkshire Hathaway Energy (12.71 percent).

JM Re-Aligning Engineered Products Business to Drive Growth (MarketWatch / BusinessWire)

Johns Manville (JM) today announced they would merge their American, European and Asian activities for Engineered Products into one global business unit. JM’s Engineered Products business manufactures and markets premium-quality glass and polyester nonwoven products for the building and construction industry, filtration and battery separation media, reinforcement glass fibers for composites and specialty industrial glass products.

Study Accuses Moody's Of Ratings Bias Toward Corporate Owners (Forbes)

A new study concludes that Moody’s gave significantly higher ratings on bonds and derivatives issued by companies in the investment portfolios of its two largest shareholders, including Warren Buffett’s Berkshire Hathaway and took longer to downgrade them than its rival Standard & Poor’s.

Smarter Agent’s white-label real estate apps saw 4M+ downloads in 1 year (Technically Philly)

Smarter Agent, based in Collingswood, N.J., powers mobile apps for national real estate giants like Keller Williams, Sotheby’s and Berkshire Hathaway. The “white label” apps, which show homes for sale and rent and give you direct access to a realtor, have been downloaded more than four million times in the last year, said cofounder Brad Blumberg. [...] Its main competitors are online listings sites and mobile apps Zillow and Trulia, which recently became one company, when Zillow bought Trulia for $3.5 billion. Blumberg said that by covering 420 realtor markets around the country, Smarter Agent “exceeds the reach” of the newly merged company.

1 Thing Warren Buffett Wants You to Know About Berkshire Hathaway Inc. (Fool)

Buffett's second point was to highlight that Berkshire Hathaway also has a stable of noninsurance businesses, including Burlington Northern Santa Fe, Berkshire Hathaway Energy, Lubrizol, Marmon and many, many more. Even thought he mentioned the stocks first, those investment portfolio are clearly not his main focus [...] In fact, from 1990 to 2013, the per-share earnings from its noninsurance businesses have grown at an average annual rate of 21.5%, whereas its investments have grown at 13%. And as you can see, that staggering difference resulted in the earnings of the non-insurance businesses standing nearly 90 times higher today than in 1990, versus "just" a 16 times greater value in its investments.

Berkshire Hathaway 2nd Quarter Earnings

Berkshire Hathaway reported their 2014 2nd Quarter Earnings on Friday afternoon.

Key Points:

Revenues: $49.8 Billion, up 11% (vs. 2Q of 2013)
Earnings: $6.4 Billion ($3,889 per BRK-A share), up 41% (vs. 2Q of 2013)
Book Value: $142,483 per BRK-A Share, up 5.6% (from the end of 2013)

Berkshire Profit Jumps 41% to Record on Buffett’s Bets (Bloomberg)

Warren Buffett’s Berkshire Hathaway Inc. posted second-quarter profit that beat analysts’ estimates as results improved at operating businesses including auto insurer Geico, railroad BNSF and the energy unit.

Net income surged 41 percent to a record $6.4 billion on gains from an asset swap with the former Washington Post publisher, Buffett’s Omaha, Nebraska-based company said yesterday in a statement. Operating earnings, which exclude some investment results, were $2,634 a share, compared with the $2,482 estimate of three analysts surveyed by Bloomberg.

Berkshire profit soars 41 pct to a record on investment gains (Reuters)

Results included $1.96 billion of investment gains. Berkshire shed $2.86 billion of equities in the quarter, including a swap of a 40-year investment in former Washington Post publisher Graham Holdings Co. [...]

Profit grew 29 percent from manufacturing, service and retail operations, such as Berkshire's Lubrizol chemicals and Forest River recreational vehicle units.

Pre-tax profit doubled in apparel, helped by lower manufacturing and pension costs at Fruit of the Loom.

Profit also increased 34 percent in energy and utilities, largely reflecting a year-end purchase of Nevada's NV Energy.

BNSF Railway's profit grew 4 percent, but Berkshire expressed disappointment, saying, "Service levels continued to be well below our internal standards, as well as those expected by our customers."

Many insurance businesses also posted improved results, with larger underwriting gains from Geico auto insurance and General Re reinsurance, and in a business that provides commercial and worker's compensation insurance.

The insurance results were hurt by a small underwriting loss in a business that insures against major catastrophes, which Berkshire attributed mainly to currency fluctuations. [...]

Berkshire's cash stake surged to $55.46 billion from $48.95 billion at the end of March.