Berkshire News Briefs - 12/24/15

Merry Christmas and Happy Holidays everyone! See you in 2016, unless Warren Buffett goes and buys another Fortune 500 company next week...

Warren Buffett has a year to forget (CNN Money)

Warren Buffett's Berkshire Hathaway is on track for its worst year since 2008. Shares of Berkshire's A and B shares are each down about 13% so far in 2015. [...] The last time the Oracle of Omaha's company did so poorly was in 2008, when both classes of Berkshire's stock fell 32%. [...]

This year, Buffett is lagging the market. The S&P 500 is down ... but only by 2%. The last time that Berkshire had a down year and underperformed the S&P 500 was all the way back in 1999. That year, the S&P 500 gained 19.5% while Berkshire's A shares fell 20% and the B shares were down 22%. [...]

A Fresh Peek at Berkshire Hathaway's Hot Portfolio and Valuations (Market Realist) A seven part series... just keep scrolling down the page for other installments. Lots of good analysis of the various business units.

Berkshire Hathaway, with a market capitalization of more than $335 billion, is a holding company whose subsidiaries engage in diverse business activities across sectors. The following are the major businesses where its subsidiaries operate: insurance and reinsurance, freight rail transportation, utilities and energy, finance, manufacturing, service and retail [...]

Buffett's NetJets Wins Agreement From Pilots Union on Contract (Newsmax Finance)

NetJets, the luxury aviation business at Warren Buffett’s Berkshire Hathaway Inc., just won over its pilots union, ending a dispute that’s stretched on for years.

Members of the NetJets Association of Shared Aircraft Pilots, which represents more than 2,700 pilots who fly for the business, voted to ratify a new contract with the company, the union said Sunday in a statement. Of the pilots who voted, more than 75 percent endorsed the agreement, the union said.

The deal included a double-digit increase in average wages, a signing bonus and a continuation of company-funded health care, among other benefits. Negotiations had been a sore spot over the past few years for Buffett, Berkshire’s billionaire chairman and chief executive officer. [...]

How Buffett Turned Around A $23.5 Billion Insurance Bet (Fool)

Berkshire Hathaway's insurance companies are worthy of envy. Large, profitable, and responsible for generating billions of dollars for Buffett to invest, the insurance group at Berkshire Hathaway underlies much of its recent and historical success. [...]

In fact, in the last 10 years, three of four of its insurance units have been profitable in every single year. One, Berkshire Hathaway Reinsurance, lost money in just one of the last 10 years.

This result is simply phenomenal. When investment income earned from Berkshire's float is included, the insurance companies have been profitable in 17 out of the last 18 years. [...]

Why Wall Street is Wrong and Warren Buffett Is Right About Beaten-Down IBM (The Street)

For confirmation, look no further than Warren Buffett, who seems to understand IBM's hidden potential. Buffett's Berkshire Hathaway boosted its stake in IBM by roughly 2% in the third quarter to 81 million shares from 79.6 million, for a value of about $11.7 billion. That makes IBM Berkshire Hathaway's fourth biggest holding. [...]

But here's what most investors are missing and what Warren Buffett understands: IBM is in the midst of a profound corporate reinvention that will soon bear fruit. The company is shedding its declining hardware businesses to emphasize the higher-margin areas of cloud computing, analytics and big data. [...]

Buffett endorses Clinton, likens Republican debate to vaudeville (Chicago Tribune)

He also singled out Republican front-runner Donald Trump for bragging "every five minutes" about how smart he is.

"Incidentally, I went to Wharton, too," Buffett said, referring to the University of Pennsylvania's business school, which Trump attended. "And I left after two years to go to the University of Nebraska." [...]

Berkshire Subsidiary Briefs - 12/14/15

What It’s Like to Be Owned by Berkshire Hathaway (Harvard Business Review)

Berkshire Hathaway is known for its extreme decentralization. The company’s more than 80 operating subsidiaries have complete independence and minimal oversight from headquarters, which requires little else besides regular financial statements and the return of excess cash that is not needed to sustain and grow the business. The company does not ask for budgets, financial forecasts, or strategy documents. It has no central marketing, procurement, sales, HR, IT, or legal department. It does not even have a General Counsel. This is for a corporation greater in size than General Electric, General Motors, IBM, or Chevron.

How exactly does such a structure work, given that it defies almost every major tenet taught in business school regarding management and governance?

Could This Company Be Berkshire Hathaway's Largest "Bolt-On" Acquisition to Date? (Fool)

The Financial Times reported this morning that Warren Buffett's Berkshire Hathaway Inc. is one of the companies exploring a bid for ITC. [...]

As of today, ITC Holdings has a market capitalization of $5.8 billion (enterprise value: $10.2 billion), which would make it the largest "bolt-on" acquisition in Berkshire Hathaway's history by a large margin.

However, the setup for this deal would be highly atypical for Berkshire, which generally announces agreed deals after conversations in which it is the sole potential acquirer.

Buffett's BNSF May 'Participate' In CP-Norfolk Battle (Investors Business Daily)

Shares of Norfolk Southern rose Friday on a report that BNSF Railway Chairman Matt Rose said his company may enter the bidding for the struggling railroad.

BNSF, which is controlled by Warren Buffett's Berkshire Hathaway (NYSE:BRKB), might step in to provide a competitive bid to Canadian Pacific Railway's $28 billion hostile offer for Norfolk Southern, Rose told Bloomberg in an interview.

How Berkshire Hathaway Travel Protection Is Targeting Millennials (Travel Agent Central)

From claims sent via smartphone to claim payments that can be made directly into the consumer’s bank or PayPal accounts, the company's technology-focused innovations are being used to attract a younger customer, says Sivley.

“In 2013, when we were looking at the market and what we wanted to do, it was all geared around the fact that we wanted to do something totally different and it was actually aimed at or targeted at the Millennials,” Sivley tells Travel Agent. [...]

NetJets' Profits Take Hit with Aircraft Cancellations (Aviation International News)

While its aircraft share sales have increased this year, NetJets' earnings suffered in the third quarter as the company continued to streamline its fleet with the cancellations of some older orders and the realignment with new models. In the quarter, NetJets reported a 37-percent drop in earnings from “increased nonfuel flight operation costs and increased general and administrative expenses, including fees to cancel certain aircraft purchases,” parent company Berkshire Hathaway reported.

Berkshire Hathaway often does not break out specifics on revenues and earnings for NetJets and its sister company FlightSafety International, and did not specify which aircraft cancellations eroded earnings in the third quarter. But French airframer Dassault in July reported the cancellation of a NetJets order for 20 Falcon 2000s that dated back to 2006. [...]

Warren Buffett And Berkshire Hathaway's Collection Of Privately Held Companies (Seeking Alpha)

Buffett has built up his wealth over the years through his conglomerate Berkshire Hathaway. The company started out as a textile business but over time transformed into a holding company for his many equity investments. Most of Berkshire's largest holdings are minority positions he's taken in large companies like Coca Cola and Wells Fargo.

But some may not know about the privately held companies that Buffett also owns. Buffett has been known to purchase some companies in entirety if he's a fan of its business model. Buffett and Berkshire Hathaway now fully own over 50 different companies including several well known names. [...]

How Warren Buffett Helps Start-Ups Without Spending a Dime (The Street)

Buffett, the CEO of Berkshire Hathaway, "has never allocated capital to a start-up and wouldn't, because he's way too conservative," said Lawrence Cunningham, corporate law professor at George Washington University and author of Berkshire After Buffett. "On the other hand, the operating companies are allowed to do whatever they want pretty much."

Those companies include a variety of household names, from fast-food chain Dairy Queen to auto-insurer Geico and Burlington Northern railroad. And some of them, like furniture business CORT, are dipping their toes into the start-up realm. [...]

Berkshire News Briefs - 12/14/15

Buffett's Investment Managers Posting More Gains Than Losses in 2015 (Forbes)

The two investors Warren Buffett hired several years ago to help manage and eventually take over Berkshire Hathaway portfolio had a fantastic start, with returns reminiscent of their boss’ virtuosity. But recent results have been more mixed, including so far in 2015.

For Warren Buffett, a house divided on climate change (Las Vegas Sun)

Buffet is a study in contrasts. Berkshire Hathaway owns power companies, natural gas pipelines, coal plants and large chunks of oil companies. Buffett’s electricity providers are fighting across the country in courts, legislatures and utility commissions against policies that mandate utility companies pay rooftop solar customers for the energy that they provide.

Conversely, Buffett and his company have invested $15 billion into renewable energy since 2000. He is a dominant wind provider in the Midwest. His Nevada utility has a portfolio that’s one-fifth renewables. In July, Buffett promised the White House he would double what he’s already spent to build more wind farms and solar arrays, close coal plants and reform the nation’s power grid.

Buffett May Get Dow Chemical Stock, But Regret It (WSJ MoneyBeat)

Warren Buffett could wind up with a hefty new stock position soon. But he may not want it.

Mr. Buffett’s Berkshire Hathaway Inc. owns a big slug of preferred shares in Dow Chemical Co., the industrial giant that the Journal reported last night is in advanced talks to combine with DuPont Co. Berkshire got the shares in 2009, when Mr. Buffett’s company gave Dow $3 billion to help finance its purchase of chemical maker Rohm & Haas Co. In return, Berkshire received preferred stock that pays an 8.5% annual dividend. [...]

From Mr. Buffett’s perspective, however, that may not be the best outcome. Berkshire has been collecting $255 million in interest on the preferred shares each year, and Mr. Buffett has long warned shareholders that he’d be hard-pressed to earn similar returns for his crisis-era investments as they roll off the books.

Buffett's Berkshire Hathaway Cuts Munich Re Holding to 4.6% (Bloomberg)

Warren Buffett’s Berkshire Hathaway Inc. further reduced its stake in Munich Re as the billionaire investor re-evaluates the attractiveness of the reinsurance market.

The holding was trimmed to 4.6 percent from 9.7 percent, Munich Re said in a filing Friday. Buffett’s firm once owned about 12 percent of the Munich-based reinsurer and has been lowering the stake this year. [...]

Where Could Berkshire Hathaway Be in 10 Years? (Fool)

A round-up of opinions from Fool writers...

I think there's a good chance the Berkshire Hathaway of 2025 will have a much larger presence in energy. In fact, the company's energy arm, Berkshire Hathaway Energy, already represents a substantial portion of the company's business, equal to about 9% of year-to-date sales and 15% of its assets. Berkshire Hathaway Energy focuses on the kinds of fixed-fee, long-term contracted revenue that results in the predictable cash flow that is the hallmark of the kind of business model Buffett likes. [...]

AIG, Berkshire Get $400 Million as Alleghany Deal Winds Down (Bloomberg)

Weston Hicks’s Alleghany Corp. will pay $400 million to wind down reinsurance deals with American International Group Inc. and Warren Buffett’s Berkshire Hathaway Inc. for policies that date back decades.

Transatlantic Reinsurance Co., owned by Hicks’s firm, will end contracts that covered asbestos-related illness and environmental liabilities, according to an Alleghany regulatory filing Tuesday. [...]

Has Warren Buffett Finally Found a Winning Big Oil Investment? (Fool)

[...] In the recent release of Berkshire's 13F filing with the SEC, the company disclosed that it had more than doubled its holdings in midstream and downstream integrated giant Phillips 66 in the third quarter.

According to the filing, Berkshire bought more than 31 million shares of the company, putting Berkshire's total holdings in Phillips 66 stock at 61.5 million shares. Add it all up, and Berkshire now owns more than 11.5% of the refining and petrochemicals giant.

Warren Buffett just bought this stock personally (CNN Money)

[...] Buffett rarely makes personal investments outside of Berkshire Hathaway. He disclosed one on Thursday.

Buffett personally bought 2 million shares of a company called Seritage Growth Properties (SRG). That works out to an 8% stake and makes him Seritage's second-largest shareholder. [...]

What the heck is Seritage? It's a real estate investment company that was spun off by struggling retailer Sears (SHLD) earlier this year. Seritage owns 262 retail locations. Most of them are Sears or Kmart stores. (Sears also owns Kmart.) Seritage then leases the properties back to the Sears and Kmart stores.

2016 Berkshire Hathaway Annual Meeting Dates Announced (Guru Focus)

Berkshire Hathaway just announced The 2016 Annual Shareholders Meeting information. The 2016 Berkshire Hathaway Annual Meeting will be held on Saturday, April 30, 2016 at the same location as last year [...]

The Billionaire and the Ukulele: Warren Buffett’s Lifetime Investment (Hear Nebraska)

More than 65 years have passed since Warren first picked up the ukulele. In that time, he’s worn many hats: husband, father, investor, Berkshire Hathaway CEO, billionaire, philanthropist. He’s been dubbed “The Oracle of Omaha” and, according to 2015 Forbes Magazine rankings, is the third richest person in the world.

And he still plays the ukulele.