Berkshire News Briefs - 12/31/14

Ocwen Would Do Well to Follow the Lessons of Berkshire’s Clayton Homes (NY Times)

On the surface, it's a story about Ocwen Financial Corp's struggles, but really it's an extensive story singing the praises of Berkshire subsidiary Clayton Homes's business practices.

Though Clayton also concentrates in subprime loans, it has had an entirely different track record, prospering throughout the financial crisis. It had no increase in customer foreclosure rates. It met all its obligations as a lender, borrower and servicer. And it even acquired several failed competitors to move to No. 1 in its segment from No. 4. [...] What distinguished Clayton Homes was that its financing division, unlike that of competitors, did not engage in predatory lending or exploit its customers’ naiveté. Mr. Clayton attributed the difference to his company’s maintenance of a “sacred wall” between sales and credit that competitors failed to maintain.

Buffett’s DQ bringing soft-serve treats back to Kuwait (Gulf Times)

International Dairy Queen, the fast-food and ice-cream seller owned by Warren Buffett’s Berkshire Hathaway Inc, is bringing its American-style meals and treats back to Kuwait after an absence of more than a decade. More than 20 locations will open in the country in the next five years, Minneapolis-based Dairy Queen said in a December 23 statement announcing a new franchise agreement. Four to five may begin operations in 2015, Brad Houser, vice president of international development, said in a phone interview. [...] Most food and treats offered in Kuwait will be the same as those on US menus, Houser said. One item unique to the Middle East is the beef kofta, a spicier, gyro-type sandwich. Of the chain’s more than 6,300 locations, about 22% are outside of the US and Canada, about 2 percentage points more than in January.

Railroads, unions to begin collective bargaining talks next month (Omaha World Herald)

Labor negotiations are set to begin between Union Pacific, BNSF Railway and unions that represent about 10,000 railroad workers in Nebraska and Iowa. Formal negotiations are scheduled for next month on a new collective bargaining agreement between the nation’s freight railroads and 13 unions representing about 143,000 workers. The most recent contracts were ratified in 2011 and 2012. Key to the talks will be compensation, health care costs and work rules that describe who is allowed to do what on trains and in rail yards, workshops and offices, according to bargaining notices sent to the unions by the railroads.

Zawawi Minerals' firms now part of Warren Buffett's investment (Zawya)

Not really a "Buffett" investment, but it makes a good headline overseas as businesses are eager to promote themselves as connected to Buffett.

USG Corporation, through its 50:50 joint venture USG-Boral Building Products, is a shareholder in Zawawi Gypsum LLC and USG -- Zawawi Drywall SFZ LLC, which are at the forefront of efforts to create In Country Value for the Sultanate's prodigious gypsum resources. Both firms are subsidiaries of Zawawi Minerals LLC , a prominent player in Oman's rapidly expanding mining sector," said Alawi Zawawi, Chairman of Zawawi Minerals LLC. [...] Berkshire Hathaway's 30.50 per cent stake in USG Corporation effectively gives the US investment conglomerate an indirect shareholding interest in the two Omani firms, amounting to 8.39 per cent in Zawawi Gypsum LLC and 7.63 per cent in USG-Zawawi Drywall SFZ LLC. In essence, the two companies are now part of Warren Buffett's holding company which today ranks as the fifth most valuable public enterprise in the United States, with a market cap of nearly $350 billion.

NetJets adds 10 Signature Series Phenom 300s to Embraer aircraft order (CNN / PRNewswire)

Embraer Executive Jets and NetJets® Inc., a Berkshire Hathaway company and the worldwide leader in private aviation, have signed an agreement to convert 10 Signature Series Phenom 300 purchase options into firm orders. At current list prices, this addition to the contract is worth US$ 89.55 million, which will be included in the backlog of the fourth quarter of 2014. In October 2010, a purchase agreement was signed for 50 firm and 75 options. The total value of the deal may exceed US$ 1 billion, if all options are exercised. [...] Embraer has now delivered 36 Signature Series Phenom 300s to NetJets. These aircraft operate in the NetJets fleet, with fractional owners in the U.S. and Europe. Deliveries of the 10 additional aircraft will begin as of January 2016.

Berkshire News Briefs - 12/23/14

Merry Christmas, Happy Hanukkah, and Seasons Greetings!

Berkshire Hathaway’s Citizenship: Culture, Scale and the Future (Triple Pundit)

This is an excerpt from the book, "Berkshire Beyond Buffett: The Enduring Value of Values."

The companies owned by Berkshire Hathaway, the huge conglomerate that Warren Buffett built, follow their leader in embracing corporate social responsibility, stewardship and sustainability. But the breadth and scale of the sprawling conglomerate can hide both the commitments and periodic problems. [...] While Berkshire has won plaudits for good corporate citizenship, critics complain about the absence of conglomerate-wide reporting on items such as social responsibility and sustainability. Many Berkshire subsidiaries — including Brooks, Johns Manville, Lubrizol and Shaw — are in the vanguard of such corporate stewardship. They join elite global companies in the practice of issuing formal responsibility and sustainability statements and audited reports on the corporate treatment of stakeholders, especially employees at home and abroad, and of the environment.

All of Buffett's bad bets add up to a big year (CNBC)

Some of Warren Buffett's big stocks bets have tanked in 2014, and the market hasn't let it pass unnoticed. In fact, anytime a stock Buffett owns declines, the "billions being lost" by Warren makes it into the headlines. With all the fuss over Warren Buffett's stock-picking prowess, or lack thereof, you might think Berkshire Hathaway has suffered mightily. You'd be wrong, though—way wrong. In fact, Buffett has plenty of reason to smile: Berkshire Hathaway is crushing the S&P 500. [...] While the headlines may not overstate the actual size of potential losses on individual stocks, they do overstate the importance of those losses to Berkshire Hathaway as a corporation. "Most investors overestimate the significance of Berkshire's equity portfolio," said Meyer Shields, Stifel analyst.

Buffett’s Backup Stock Pickers Stumble as GM Declines (Bloomberg)

At least half a dozen stocks that Ted Weschler and Todd Combs probably picked for Berkshire Hathaway Inc.’s portfolio are poised to end the year lower than where they started. They include energy companies that have slumped with oil prices; automaker General Motors Co., which has struggled with recalls; and Chicago Bridge & Iron Co., an engineering and construction firm that’s down more than 50 percent since Dec. 31. “It appears, on first glance, that Todd and Ted have underperformed the S&P 500 this year,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business who has studied Berkshire’s portfolio.

Buffett Reminds His Top Managers: Reputation Is Everything (WSJ MoneyBeat)

Warren Buffett‘s “All-Stars” are getting their biennial reminder this month that they need to guard Berkshire Hathaway Inc.'s reputation–and plan for the future. Mr. Buffett, who’s run Berkshire for the past five decades, sends a memo every other year to the managers of each of Berkshire’s 80-plus subsidiaries that emphasizes those two points. [...] The latest memo also reminds the managers–who he’s dubbed “The All-Stars”–to keep him in the loop about “who should take over tomorrow if you should become incapacitated overnight.” Generally, the managers operate with a large degree of autonomy, and Mr. Buffett says elsewhere in the letter that they can “talk to me about what is going on as little or as much as you wish.” But Mr. Buffett himself takes responsibility for keeping a roster of potential replacements for each of the leaders of Berkshire’s far-flung operations.

See’s Candies CEO eyes East Coast expansion (San Francisco Business Times)

See's Candies President and CEO Brad Kinstler, speaking after appearing on a Stanford University panel discussion this month, said he's eager to one day replicate the company's California success on the East Coast. But he's not saying when that will happen, noting that See's Candies shops can be found as far east as Pittsburgh. The South San Francisco-based company also operates temporary locations in East Coast cities during holidays when chocolates are in demand.

BYD Says Berkshire Hathaway Has No Intention to Cut Stake (Morningstar)

Chinese electric-car maker BYD Co. Ltd. (1211.HK), which is backed by investor Warren Buffett, Friday said Mr. Buffett's Berkshire Hathaway Inc. (BRKA) has no present intention to cut its stake in the company. BYD also said it wasn't aware of a substantial share sale by Mr. Buffett, who holds 225 million H shares in the company. The car maker's statement comes a day after its Hong Kong-traded shares plunged as much as 47%. BYD said its business operations remain normal and that it hasn't incurred substantial foreign exchange losses despite the weaker Russian ruble.

Berkshire Energy Fined for Eagle Deaths at Wyoming Wind Farms (Bloomberg Businessweek)

PacifiCorp, one of the utilities owned by Berkshire Hathaway Inc.’s energy unit, agreed to pay $2.5 million to settle charges that its wind facilities in Wyoming killed eagles and other birds. The deaths near the Seven Mile Hill and Glenrock/Rolling Hills wind farms violated the Migratory Bird Treaty Act, according to a statement today from the utility. PacifiCorp said it will pay $400,000 in fines, $200,000 in restitution to the Wyoming Game and Fish Department and $1.9 million to the National Fish and Wildlife Foundation to help protect golden eagles near the facilities.

More information in their Press Release:

PacifiCorp Settles With Federal Government Over Migratory Birds (Press Release)

PacifiCorp has been cooperating with federal authorities to reduce migratory bird mortality, particularly eagles, at its wind facilities. Following guidelines issued by the U.S. Fish and Wildlife Service in 2012, PacifiCorp drafted migratory bird protection plans and hired qualified wildlife observers to monitor the wind sites for eagle activity. Operators were notified to shut down turbines to reduce risks when eagles were observed in the area. Other measures the company took included removing features from the project landscape that attract prey species. As part of the settlement, PacifiCorp will take measures at the company’s wind facilities in Wyoming to increase eagle populations.

Pacific Corp To Close Deer Creek Mine (Press Release)

Following an unsuccessful 18-month attempt to sell the Deer Creek coal mine, PacifiCorp announced today it will close the mine in Emery County, Utah, because it has become too costly to operate for customers. PacifiCorp also signed a long-term coal supply agreement with Bowie Resource Partners LLC to supply coal for the Huntington power plant. Energy West Mining Company, PacifiCorp’s subsidiary operator of the mine, notified the mine’s 182 workers of the pending closure. [...] The Deer Creek mine has an estimated five years or less of reserves, but much of the remaining coal has higher ash and sulfur content that has made mine production considerably more expensive and has made it more expensive to comply with air quality standards. Bowie Resource Partners LLC has signed a contract to provide the coal needed for the Huntington power plant, and will source the plant from its mines in Utah. Rapidly escalating pension liabilities for the mine’s represented workforce was a large factor in the economic viability of the mine.

Buffett’s Smart-Grid Idea Takes Over Your Washing Machine (Bloomberg)

Buffett’s Northern Powergrid Holdings Co. is working with Siemens AG to test a so-called smart grid that has the ability to control when consumer appliances will be used in the home. Being able to better manage when electricity flows allows utilities to lower consumer costs by reducing the need for new equipment, and to better handle surges and gaps from intermittent sources such as wind and solar. The pilot program, known as the Customer-Led Network Revolution, involves just 12,000 households in the U.K. and is one of only a few such projects being tested worldwide.

Warren Buffett said 'I loved it' when LeBron James rejoined the Cleveland Cavaliers (Cleveland Plain Dealer)

Buffett was seated on the baseline near the Cavaliers bench as a guest of James and, perhaps more so, of owner Dan Gilbert, who sat next to Buffett. He watched James score 27 points, dish out 13 assists, and grab seven rebounds, then chatted with James and Gilbert in the locker room afterwards. Buffett, 84, chief executive officer of Berkshire Hathaway, is the second-richest man in the United States with a net worth of $71.6 billion, according to Forbes.com. He was donning a white No. 23 Cavaliers jersey Monday night. On Sunday, he attended a Detroit Lions football game and wore a No. 90 jersey for the Lions' Ndamukong Suh.

Berkshire News Briefs - 12/14/14

Berkshire Hathaway buys Charter Brokerage (Fortune)

Warren Buffett’s Berkshire Hathaway Inc on Friday said it was buying oil industry logistics provider Charter Brokerage from private equity firm Arsenal Capital Partners. [...] Charter is a U.S. petroleum and chemical drawback services provider. A drawback is the refund of import duties and taxes on a product when a form of that same product is exported. Charter Brokerage connects importers and exporters in the petroleum and petrochemical industries to arrange such refunds. Earlier this year, a source familiar with Arsenal’s potential sale of Charter valued the company at up to $500 million.

Warren Buffett Looks Ahead to Berkshire’s Next 50 Years (WSJ MoneyBeat)

Warren Buffett says that lately he’s been pondering the future of Berkshire Hathaway Inc. more than usual. Like in years past, he has been busy composing his annual letter to shareholders reviewing Berkshire’s performance in 2014. However, because 2015 will mark the golden anniversary of Berkshire Hathaway under “current management,” Mr. Buffett has also been laying out, on paper, his vision for Berkshire for the next 50 years. [...] Berkshire shareholders and those who follow the conglomerate’s activities will get a bonus next year: Mr. Munger is also writing down his vision for Berkshire for the next 50 years. Shareholders love Mr. Munger’s sometimes bruising wit and deadpan delivery, often in response to questions posed at Berkshire’s annual meeting.

Berkshire Hathaway Director Susan Decker Offers Rare Peek Into How The Berkshire Board Functions (Silicon Valley Business Journal)

Berkshire Hathaway's unusual operating style extends deep into the boardroom, according to Susan Decker, the former Yahoo! CFO who became a director in 2007. [...] "The board is not involved in the valuation decision for acquisitions. Warren will often discuss large deals with the board in advance, but usually at the conceptual level, rather than asking for approval of valuation and structuring," Decker said. "It's the opposite with other boards I'm on, in which approval is required by the board for the funds used for large acquisitions and for structuring considerations of the deal."

NetJets infiltrated private website, pilots say (Columbus Dispatch)

The NetJets pilots union is accusing company officials of impersonating a member of the union on Twitter and infiltrating a password-protected message board. [...] The union has a website for its members. Parts are public, but much of the site is private and password-protected. The lawsuit alleges that in September a NetJets official had several printouts of pages of “ confidential communications” from the message board. This created a “chilling effect on the ability of union members to communicate with one another and their union leadership and interferes with the union’s ability to fairly represent (the pilots),” the lawsuit states, adding that such surveillance is a violation of the Railway Labor and Stored Communication acts. [...] The lawsuit also charges that tweets from someone with the Twitter handle TwinkieTheKid tried to interfere with union elections, threatened to blacklist union pilots from other employment and posted photos of union members “conducting lawful picketing, thereby documenting the identities of union members who engaged in protected activities under the Railway Labor Act.”

Pilots picket NetJets at Art Basel (NY Post)

Pilots for private jet firm NetJets are picketing outside Art Basel Thursday against their own company, which is owned by Warren Buffet‘s Berkshire Hathaway, for a plan that would reduce their paycheck by 5 percent over five years, and have them work more hours. [...] Explaining, that the reason CEO Jordan Hansell “is telling us we have to take pay cuts is because Berkshire Hathaway is demanding a greater return, they want more profits to be sent up to Berkshire … our owners are some of the wealthiest people on the planet, really.”

Berkshire Hathaway insurance unit to enter Singapore (Omaha World Herald)

Berkshire Hathaway Specialty Insurance, a 2013 startup at Warren Buffett’s Berkshire Hathaway, has expanded to Singapore, where it plans to sell business coverage. The Boston-based unit of Omaha’s Berkshire said in a statement Monday it had received a license to sell insurance in Singapore, a city-state in Southeast Asia with a population of 5.5 million that is the world’s second-largest port and fourth-largest financial center. BHSI, started at Berkshire Hathaway with the defection last year of many top executives at New York-based American International Group, plans to sell coverage in Singapore for commercial property, business liabilities, energy and construction projects, and marine and financial risks.

Understanding The True Value of Warren Buffett's Berkshire Hathaway Inc. (Fool)

So what is the actual intrinsic value of Berkshire Hathaway and the litany of businesses it owns? Well, that's an easier question to ask than to answer. [...] Buffett is right in saying neither he nor Charlie -- nor anyone else for that matter -- can definitively calculate the true intrinsic value of Berkshire. But we can be certain it is worth a whole lot more than the $8.2 billion (or just 2.2% of its total value) the market currently suggests it is.

Berkshire Hathaway Owns 4.18% of Restaurant Brands International and Controls 14.37% of its Voting Shares (Valuewalk)

Upon the closing of the Burger King acquisition of Tim Horton’s on December 12, 2014, Berkshire purchased, for a total of $3 billion, a 9% perpetual voting preferred stock and exercised a warrant to purchase 8,438,225 common shares at the exercise price of $0.01 per share [...] However, Berkshire’s press release indicates that it now owns 4.18% of the outstanding common shares of QSR. [...] The 4.18% stake translates into approximately 20.2 million shares which, at BKW’s closing price on December 12 of $35.50 per share, are currently valued at about $715 million.

Buffett's wealth balloons as Berkshire hits high (CNBC)

Warren Buffett is now the world's second-richest person as Berkshire Hathaway's stock rallied to an all-time high. Forbes said its real-time ranking of the world's billionaires now estimates Buffett's wealth at $74.4 billion, about $1.5 billion more than Carlos Slim's $72.9 billion. Slim is now in third place.

Berkshire News Briefs - 12/2/14

Berkshire to Buy Weatherford Units for at Least $750M (Bloomberg)

Lubrizol, the chemical-additives business at Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), agreed to buy two units from Weatherford International Plc for at least $750 million after the seller was squeezed by lower oil prices. The deal includes the Integrity Industries drilling-fluids business and Engineered Chemistry, which provides additives used in fracking. The price can climb to $825 million depending on performance, Geneva-based Weatherford said today in a statement.

Duracell To be Part of Berkshire’s Marmon and Get New Chief (WSJ MoneyBeat)

Duracell will get a Berkshire Hathaway Inc. executive as its new boss once current owner Procter & Gamble Co. closes the sale to Warren Buffett’s company. The executive, Angelo Pantaleo, currently works at Berkshire subsidiary Marmon Group, helping run its water business. Instead of becoming a full-fledged company at Berkshire, Duracell will be overseen by Marmon, people familiar with the matter said.

Berkshire's BNSF To Continue Ramping Up Investment (Investors Business Daily)

Berkshire Hathaway's BNSF Railway plans to spend $6 billion in 2015 to upgrade and expand its facilities to meet rising demand for rail transportation services. It would be a 9% increase for the Fort Worth, Texas-based company from its planned $5.5 billion capital spending this year. The bulk of the 2015 expenditures will go to replacing and upgrading rails, ties and other track components, the company said. BNSF, which operates 32,500 route miles of track in the U.S. and Canada, will also spend nearly $1.5 billion on expansion projects, including $500 million in the Northern region, where it's growing fastest.

AUC approves Altalink sale (Calgary Herald)

The Alberta Utilities Commission approved the $3.2-billion sale of electricity transmission firm Altalink to U.S. billionaire Warren Buffett’s Berkshire Hathaway Energy on Friday after it determined the transaction would create “no harm” for customer power rates or service. The AUC said it will continue to regulate AltaLink as it did before the change in ownership. [...] Over the next five years, Berkshire Hathaway Energy must re-invest 100 per cent of AltaLink’s earnings into the company or elsewhere in Alberta to support AltaLink’s three-year, $2.7-billion investment in Alberta’s energy infrastructure.

The Surprising Lessons Warren Buffett Learned from a Candy Company (Fool)

So what has made See's so successful? First, although it hasn't been a world-beater in growing its sales, it has been incredibly profitable and a cash-generating machine. From 1972-2011 it contributed a staggering $1.65 billion to the bottom line of Berkshire. Knowing it brings in roughly $85 million annually in pre-tax profits, there will soon come a day when the total contribution of See's to Berkshire will top $2 billion. And what has Berkshire done with all that cash? In 2007 Buffett answered that very question by revealing, "After paying corporate taxes on the profits, we have used the rest to buy other attractive businesses."

Berkshire Hathaway Energy: Economies of scale (WindPower)

Berkshire Hathaway Energy, part of billionaire Warren Buffet's empire, is one of America's largest developer and owner of wind energy. It has already committed about $15 billion to renewables, dwarfing most rivals' investments, and recently said it will invest $280 million more in Iowa wind farms. [...] With 719,000 customers in Iowa, Illinois, Nebraska and South Dakota, MidAmerican owns more wind capacity than any other rate-regulated utility in the US and has been instrumental in making Iowa the state with the highest proportion of wind on its grid. [...] When Wind VIII is complete, 3.35GW or about 39% of MidAmerican Energy's total owned generation capacity will come from the company's 1,715 wind turbines.

Warren Buffett’s favourite ice-cream chain Dairy Queen comes to the UAE (The National)

Berkshire Hathaway-owned Dairy Queen is coming to the UAE. The restaurant chain [...] has signed a franchise deal with Bajco Group to open as many as 20 outlets. The agreement covers DQ Grill & Chill restaurants and DQ Treat stores. The first outlet is due to open in the first quarter of next year, although the exact location is still to be decided. “The problem is that everybody wants to be in Dubai, which means locations are very hard to guarantee,” said Malik Bajwa, president of the Bajco Group. “We will likely open in the Northern Emirates such as Ras Al Khaimah, and we are also looking at Sharjah and Al Ain. Our flagship standalone store will most likely be in Dubai [...]”

Why Is Warren Buffett Obsessed With Consumer Goods Brands? (Bidness Etc)

Mr. Buffett’s Berkshire Hathaway Inc. has always opted to invest in companies with simple business models, as Warren Buffett firmly believes in them. Many of these companies are famous brands of consumer goods like ketchup, batteries, vehicle insurance, or fast food restaurants. Mr. Buffett’s interest in the consumer goods brands can be attributed to the fact that such brands have recurrent and foreseeable cash flows and earnings, with low risk associated to their business models.

Very busy Buffett makes time for Ndamukong Suh (Omaha World Herald)

Warren Buffett’s friendship with athlete Ndamukong Suh started when they were introduced to each other at a Nebraska football game by Tom Osborne, former head coach and athletic director. Since then, Buffett has become a regular financial adviser for Suh, part of a group that includes former TD Ameritrade CEO Joe Moglia, now a football coach, and athlete/businessmen Magic Johnson and Roger Staubach [...]

Warren Buffett On Investment Strategy - Full Interview Fortune MPW (YouTube)

The annual Fortune MPW interview with the world’s most successful investor - Warren Buffett, Chairman and CEO, Berkshire Hathaway. [38 minutes]

Or, if you don't have time for that video, here's this one...

Warren Buffett sings Sinatra to 400 women (YouTube)

Paul Anka and Warren Buffett give Carol Loomis a musical sendoff at Fortune’s Most Powerful Women summit. [5 1/2 minutes]