Berkshire News Briefs - 11/24/15

The quarterly 13F came out last week, detailing the changes in Berkshire Hathaway's portfolio last quarter. Dataroma has a convenient chart to visually show what changed.

Berkshire Hathaway Reduces Goldman Sachs, Wal-Mart Stakes (ABC)

Buffett told CNBC on Monday that the main reason he reduced Berkshire's stakes in Wal-Mart Stores Inc. and Goldman Sachs Group Inc. was to generate cash for his $32 billion acquisition of Precision Castparts Corp. that's expected to close next year. [...]

Warren Buffett is having an unusually bad year (CNBC)

Warren Buffett has seen shares of his Berkshire Hathaway fall more than 11 percent this year. Even worse, Berkshire shares have underperformed the S&P 500 by more than 10 percent.

What makes this highly unusual is that Berkshire famously tends to underperform when the S&P skyrockets and outperform when the stocks as a whole do less well, which makes sense given Buffett's long-term time frame. [...]

Buffett Doubles Down on Big Blue (Fool)

To me, and presumably Buffett, as well, there's a readily identifiable disconnect with IBM's very gradually declining core business and the huge discount the market has placed on the company's future outlook. For context, IBM stock currently trades at a remarkably low 9.5x its LTM earnings, and yields 3.9%. Wall Street analysts expect IBM's revenue to continue to fall into next year, but believe that Big Blue will actually return to EPS growth in 2016. That reversal alone could be enough to inject some much-needed optimism into IBM shares, even as its broader business realignment requires more time to fully materialize.

Is Warren Buffett Still a Bargain Hunter? (CNN Money)

Consider Axalta Coating Systems, which makes automobile finishes and other coatings. [...] Axalta sells for a whopping 130 times its past 12 months of earnings and sports a price/earnings ratio of 22 based on future estimated profits. [...]

On paper, this would hardly seem like a stock that a vaunted bargain hunter would gravitate to. Yet Axalta isn’t the only example.

Berkshire Hathaway [Travel Insurance] expanding again (Insurance Business)

Insurance giant Berkshire Hathaway Travel Protection (BHTP) teamed up with VacationGuard, a specialist provider of vacation rental insurance, this week to create customized travel insurance products for timeshares, travel clubs, resorts and vacationers.

Targeted at both property owners and vacation renters, the products protect against trip cancellation, delays, injuries and accidental damage to rental units.

Fire at Leetsdale chemical plant leads to 70 homes being evacuated (Pittsburgh Post-Gazette)

Residents were evacuated from more than 70 Leetsdale homes Tuesday after a fire at a chemical manufacturing plant filled the sky with black smoke and noxious fumes.

Four workers at the Lubrizol Corp. Oilfield Chemistry site in the Leetsdale Industrial Park were adding chemicals used in gas well fracturing to a production tank about 10 a.m. when the fire exploded to life, a company spokesman said. The workers — and about 36 other employees — escaped the buildings, though five of the workers were injured.

Buffett’s Grandson Seeks Own Investment Route: Social Change (NY Times)

At 32, Howard Warren Buffett, the grandson of the Berkshire Hathaway founder Warren E. Buffett, has already enjoyed a diverse career. He teaches at Columbia University, runs a farm in Nebraska, previously oversaw his family’s foundation and worked on economic redevelopment efforts in Afghanistan for the Defense Department. [...]

Now, that is changing. Mr. Buffett has co-founded a permanently capitalized operating company with big ambitions [...] The plan is for the new company, called i(x) Investments, to invest in early-stage and undervalued companies that are working on issues such as clean energy, sustainable agriculture and water scarcity. [...]

Berkshire gets flak from ClimateTruth, others for solar panel policy (Omaha World-Herald)

A climate activist group said Tuesday that Berkshire Hathaway Inc.’s utility division favors policies that would hinder the spread of rooftop solar energy panels.

Outside Omaha’s Kiewit Plaza, where Berkshire has its offices, representatives of ClimateTruth.org and other groups gave a security guard what they said was an electronic copy of an online petition with about 100,000 signatures. The petition, addressed to Berkshire Chairman Warren Buffett, said, “End your profit-driven challenges to net metering programs in Nevada and all over the country.”

Prominent film company focuses documentary lens on Buffett (Omaha World-Herald)

Kunhardt Films of Pleasantville, New York, is gathering information, photos and videos about the chairman and chief executive of Omaha-based Berkshire Hathaway Inc.

When the project airs, possibly within two years, Buffett would join a long list of prominent Americans profiled by the film company headed by Emmy winner Peter Kunhardt.

Berkshire News Briefs - 11/13/15

Berkshire Hathaway and the Billion-Dollar Acquisition No One Noticed (Fool)

Well, I wouldn't say no one noticed.

Through superior capital allocation and the resulting compounding of intrinsic value, Warren Buffett's conglomerate, Berkshire Hathaway, has become so large that its subsidiaries make billion-dollar acquisitions that go nearly unnoticed. [...]

On September 30, 2015, UTLX acquired approximately 25,000 tank cars from General Electric Company's leasing unit for a total purchase price of approximately $1.0 billion. This transaction and related transactions to be completed in the fourth quarter of 2015 are expected to further enhance the full-service capabilities of UTLX's repair, maintenance and inspection network and contribute to future revenue and earnings growth.

Here's the press release from Marmon, explaining that Union Tank Car (UTLX) and Procor will add the tank cars to their fleet which they lease out.

Kraft Heinz to close 7 North American plants, cut 2,600 jobs (Pittsburgh Post-Gazette)

Kraft Heinz Co. told about 2,600 employees at seven North American plants on Wednesday they wouldn’t have a future with the processed food company on a mission to streamline operations and meet goals set when investors created the bulked-up business earlier this year.

The cuts mark the second round of job trimming since the company was formed this summer in the merger of Pittsburgh’s H.J. Heinz Co. and Northfield, Ill.-based Kraft Foods Group. [...]

A plant in Pennsylvania’s Lehigh Valley that employs 400 people making A1 sauce, Grey Poupon mustard and single-serve coffee is among those slated to close in the next 12 to 24 months.

It and five other plants being closed had been part of Kraft. Those are in Fullerton, Calif.; San Leandro, Calif.; Federalsburg, Md.; Campbell, N.Y.; and Madison, Wis. The other plant being shuttered, in St. Marys, Ontario, Canada, was a Heinz plant. [...] In addition, Kraft Heinz will move its Oscar Mayer and U.S. meats business from Madison, Wis., to Chicago, taking about 250 jobs along.

Warren Buffett's Ice Cream Chain Dairy Queen Looks to Fix Its Winter Problem (Newsmax)

With a new menu of snacks and sandwiches, the 75-year-old fixture of American summers is looking beyond its signature soft-serve and diving deeper into fast-food fare, where even giants like McDonald’s Corp. have been struggling lately.

It’s a major bet — but one that DQ’s chief executive officer, John Gainor, says is already starting to pay off. After introducing a line of hot desserts and artisan-style sandwiches, part of the company’s biggest menu overhaul in its history, same-store sales grew in September and October. [...]

The bigger test will come when winter sets in next month. The hope is new warm fudge-stuffed cookies and chicken-bacon sandwiches will get customers to think of Dairy Queen when the weather turns cold. [...]

Jordan’s Furniture to open in New Haven (Yale Daily News)

Zip lines, a 45-foot fountain and the world’s largest indoor adventure rope course will all come to New Haven in time for Christmas, bundled inside a 200,000-square-foot furniture store.

Jordan’s Furniture — a family-run business that offers shoppers entertainment options including theaters in six locations across New England — opens on 40 Sargent Dr., the former New Haven Register building, on Dec. 11, President and CEO Eliot Tatelman announced Wednesday [...]

Though Jordan’s is owned by American conglomerate holding company Berkshire Hathaway, Tatelman said his family runs the day-to-day affairs of the company. He added that Warren Buffett, CEO of Berkshire Hathaway, will make an appearance at the private opening ceremony on Dec. 10.

Tianjin explosions cost Berkshire Hathaway $130 million in reinsurance losses (Canadian Underwriter)

Berkshire Hathaway Inc. reported Friday its estimated losses from the Tianjin, China explosions last August were $130 million, though the Q3 underwriting gain for the Berkshire Hathaway Primary Group increased 31% year over year. [...]

On Aug. 12, explosions in Tianjin originated from a warehouse storing 700 tons of sodium cyanide, which can form a flammable gas on contact with water, the Associated Press reported at the time. As of Sept. 11, AP reported 173 were dead and eight persons were still unaccounted for. Guy Carpenter & Company LLC said at the time that the blast damaged shipping containers and vehicles, while windows several kilometres away were blown out. [...]

Former NetJets executive joining private equity firm (Washington Post)

Four months after Jordan Hansell resigned in the midst of NetJets’ contract dispute with its pilots’ union, he took a job as president of Rockbridge Holdings.

While at NetJets, Hansell had appeared alongside Buffett in interviews to discuss the cost-cutting turnaround he led from 2011 until June. But near the end of tenure, Hansell became the focus of the union’s ire over concessions the company sought in prolonged talks.

“Ultimately, it became a little bit about me as a leader, and I thought it was probably best if I got out of the way to see if they could come to a conclusion in those arrangements,” Hansell said about why he left NetJets. [...]

Howard Buffett Is Getting His Hands Dirty (Bloomberg)

To date, the Howard G. Buffett Foundation has given away $775 million to combat global hunger—efforts include teaching sustainable farming techniques and improving access to clean water—especially in the world’s conflict zones. The Democratic Republic of Congo and Rwanda top his list of countries where he intends to spend a total of more than $700 million during the next decade. They’re about as far away as you can get from Omaha, Nebraska, the site of Buffett’s quiet, humble upbringing. [...]

Berkshire Hathaway 3rd Quarter 2015 Earnings

Berkshire Hathaway's Quarterly Report for the 3rd Quarter of 2015: 10-Q PDF

Buffett’s Berkshire Hathaway reports record profit (Financial Times)

Warren Buffett’s Berkshire Hathaway recorded its best ever quarterly profit in the third quarter, as earnings were boosted by a one-off $4.4bn gain from the merger of Kraft and Heinz.

Net income climbed to a record $9.43bn from $4.62bn a year earlier, the Omaha, Nebraska-based conglomerate said on Friday. Operating earnings, which exclude some investment results, came to $4.55bn for the period, narrowly beating the $4.47bn average estimate of three analysts surveyed by Bloomberg. [...]

Kraft Heinz gain leads ‘mediocre’ Berkshire Hathaway earnings (Omaha World Herald)

“I was looking for sort of a mediocre quarter, and that’s kind of what we got,” said Cathy Seifert, an analyst with S&P Capital IQ. She had predicted operating earnings per share slightly lower than Friday’s report.

Seifert said Berkshire’s results from reinsurance — taking on risk from other insurance companies in return for payments — seem to have declined too sharply.

“I think an argument can be made that some of this may be them intentionally stepping away from the insurance business, but the top-line is a little disturbing,” she said. Revenue from Berkshire’s reinsurance division dropped 48 percent to $2.4 billion compared with a year ago.

She said the company’s energy, industrial and railroad operations were “a little better than I had thought,” with flat revenues even though other companies in the same businesses have been reporting declining revenue.

Consumer-oriented businesses were “OK,” she said.

Berkshire Hathaway Inks a Record Third Quarter (Fool)

Berkshire's quarterly results are notoriously volatile, the result of a 12-figure portfolio of publicly traded securities and stakes in insurance companies, which produce volatile earnings by their nature.

Its insurance companies produced underwriting profit of $414 million, compared to an underwriting loss of $38 million last quarter, and profit of $629 million a year ago. [...] The insurance companies earned $840 million from investments this quarter, up from $811 million in the same quarter last year. The insurance float grew to $86.2 billion, up from $83 billion during the year-ago period. [...]

The railroad produced net income of $1.16 billion, an improvement over last year's earnings of $1.04 billion. BNSF reported that lower oil and coal prices have negatively affected its volumes, which grew only 1% year to date, but were offset by lower fuel prices and an increase in agricultural car loads. [...]

Berkshire's utility businesses steamed ahead. The company reported quarterly net earnings of $786 million from energy, up from $697 million in the year ago period. [...]

An assortment of smaller businesses, from its real estate brokerage to Clayton Homes, made up 43% of Berkshire's operating income. There was a slight year-over-year decline in the other operating companies' profitability, with combined earnings falling to $1.48 billion this quarter from $1.5 billion last year.