Berkshire News Briefs - 3/31/16

Buffett's Wells Fargo Stake Hits Level Requiring Fed Review (Bloomberg)

Warren Buffett’s holding in Wells Fargo & Co. reached 10 percent, a level that triggers a Federal Reserve review and could prevent him from buying more shares until he receives regulatory approval.

The billionaire investor’s stake reached that threshold because Wells Fargo has been buying back stock, according to a regulatory filing Monday. The document said the holding is about 506 million shares, the same as on Dec. 31 when it accounted for 9.9 percent. [...]

BNSF furloughs have hit 4,600 employees nationwide (Fort Worth Star-Telegram)

In another sign of the fallout of low energy prices, BNSF Railway says it has furloughed about about 4,600 of its employees nationwide over the past several months.

The furloughs amount to about 10 percent of the Fort Worth-based company’s workforce, matching the layoffs made by the railroad in 2007 and 2008, according to statements made by Matthew Rose, executive chairman of BNSF at an energy conference in Billings, Montana. [...]

Berkshire Hathaway Is 35% Undervalued (Fool)

If I sum up $107 per B-share in investments and $82 per B-share for the operating businesses, that gives me a grand total of $189 per B-share. That's 35% more than the current trading price of $140 per B-share.

Increasing Costs And Premiums At Berkshire Hathaway’s Geico (Valuewalk)

All told, both the severity and frequency of claims have been on the rise at Geico, said David Kass, a business professor at the University of Maryland and a Berkshire Hathaway shareholder.

“This resulted from lower prices for gasoline and an improving economy, which led to more miles being driven by policyholders,” Kass said. “These increases in costs to auto insurers reduces their profitability in the short run until appropriate premium increases can be implemented.” [...]

McLane Co. executive advises students on success in business (Richmond Dispatch)

“If you can accept being inconvenienced, then the rewards will be there, because it is noticed,” said W. Grady Rosier, president and chief executive officer of Temple, Texas-based distributor McLane Co., which he noted supplies groceries and other products to retailers and restaurants in every ZIP code in the nation. [...]

McLane grew from a one-man retail shop opened by Robert McLane in 1894 in Cameron, Texas, to become a $48 billion-a-year supply-chain behemoth, mostly by hitching its own trucking business to the rise of convenience stores such as 7-Eleven starting in the 1950s, then the explosion of big-box chain stores such as Walmart starting in the 1970s.

Rosier, 67, grew up in Florida and was the first in his family to attend college. He joined McLane in 1984 and became CEO in 1995, five years after it had been acquired by Walmart.

In 2000, the company was acquired by Berkshire Hathaway Inc., the holding company managed by billionaire investor Warren Buffett. [...]

International Dairy Queen, Inc. Opens First DQ Grill & Chill® Restaurant in Jordan (BusinessWire)

The Dairy Queen® system, part of Berkshire Hathaway, has opened a new DQ Grill & Chill® restaurant at Abdoun Circle in Amman, Jordan. The opening of this location in Jordan represents the latest country outside of the United States with a DQ brand presence.

SKM Franchise Co. Ltd. has entered into a long-term franchise agreement with American Dairy Queen, Corp. (ADQ) and plans to develop a minimum of 10 locations, including five DQ Grill & Chill® restaurants throughout Jordan over the next five years. [...]

Berkshire News Briefs - 3/22/16

Warren Buffett’s Compensation in 2015 (BRK Rumors)

Warren Buffett and Charlie Munger both made $100k in salary last year, but Buffett's personal security detail counts as compensation too, bringing him up to $470k. CFO Marc Hamburg made $1.36 million; Berkshire Hathaway Energy CEO Greg Abel made $41 million. Berkshire only pays its board of directors between $2700-$7000.

Warren Buffet’s salary for remained unchanged at $100,000, the same level it has been at for more than a quarter century.

However total compensation has crept up 1% from the previous year due to increased costs associated with keeping Buffett safe. [...]

Warren Buffett remains in control of 19% of all of Berkshire Hathaway’s outstanding stocks and wields 33% of its voting power. Forbes reported on March 15, 2016 that Buffett is worth $66 billion. [...]

Warren Buffett On Investing, Bubbles, Crashes, And Everything In Between (Fool Singapore)

"[T]he only way you get a bubble is when basically a very high percentage of the population buys into some originally sound premise and –- it’s quite interesting how that develops –- originally sound premise that becomes distorted as time passes and people forget the original sound premise and start focusing solely on the price action."

Lots of local stories, which put together, point to a big expansion coming this year for Dairy Queen:

Dairy Queen franchise seeks to add nearly 100 locations this year, with up to 10 new locations in NH

Dairy Queen plans to expand in Spartanburg [SC] County

Dairy Queen plans Vermont expansion for 2016

Dairy Queen targets Amherst, Worcester in major 60-store Massachusetts expansion

Unhappy Teamsters talk strike again at NetJets (Columbus Dispatch)

Two months after NetJets pilots got a generous five-year deal after months of picketing and creating bad publicity for the private jet firm, labor unrest is starting to brew on a new front.

Teamsters members who work in areas such as fueling, catering and dispatching for NetJets are threatening "another serious labor dispute" for the company. [...]

MidAmerican Energy announces grants (Messenger News)

Sixty-five Iowa cities and community organizations are receiving grants totaling $205,000 through MidAmerican Energy's Trees Please! energy efficiency program. [...]

The program provides grants to communities to fund tree planting projects in public areas such as parks and roadways. Since 1998, MidAmerican Energy has awarded more than $3.6 million in funding.

Mobile app purchase propels GEICO to 14 million policies in force (Business Wire)

With the touch of a screen on his smartphone, Christopher Stevens made GEICO history, propelling the company to the 14 million policies-in-force milestone. The Hixson, Tenn., native purchased the record-breaking policy after buying a new car the day before Valentine's Day. [...]

Meet the winners of Warren Buffett's March Madness contest (Yahoo Finance)

"It’s been a heck of a weekend," says Kevin Wills, who works at insurance company USLI in Wayne, Pa., and found out Friday that he was a co-winner of the Berkshire Hathaway (BRK-A) March Madness contest for employees.

Wills and Robert Keller, who works at Berkshire-owned Geico, will split $100,000. Both men had perfect brackets through the first 15 games of this year’s NCAA men’s basketball tournament, until Middle Tennessee State University, a 15-seed, toppled Michigan State, a 2-seed, on Friday night. In other words: Warren Buffett’s big contest didn’t even last two full days. [...]

Berkshire Subsidiary Briefs - 3/13/16

This week's post got really long, so I broke it in two. News about Berkshire Hathaway itself was in the prior post, news about subsidiaries is in this one.

Berkshire's Specialty-Insurance Unit Opens Europe Operation (Bloomberg)

Berkshire Hathaway Inc. will begin offering coverage in Europe through a specialty-insurance unit that Chairman Warren Buffett has been building over the past three years.

Tom Bolt was named president of U.K. and Southern Europe operations, starting June 1, and will be based in London, the Berkshire unit said in a statement Thursday. Gregor Koehler will be president of Northern Europe, effective immediately, and work from Dusseldorf, Germany. [...]

Gen Re to close six offices in restructuring (Business Insurance)

Berkshire Hathaway Inc.'s General Reinsurance Corp. unit will close six of its smaller offices as part of a reorganization of its direct global property/casualty operations, Stamford, Connecticut-based Gen Re announced Friday. [...]

In addition, Gen Re will reorganize its European treaty underwriting resources into five line-of-business teams to support the entire region, Gen Re said in the announcement. [...]

Buffett’s ‘gem’ in Stamford weathers competition (Stamford Advocate)

Years after disastrous claims results buffeted Stamford-based General Reinsurance following its $21.7 billion sale in 1998 to Berkshire Hathaway, the reinsurance carrier is following through on its CEO’s vow last year to maintain underwriting discipline — despite a depressing effect on premiums that insurance companies reinvest to make money.

Gen Re revenue dropped slightly below $6 billion in 2015, off 4 percent from the previous year and roughly flat from its revenue in 2013. Gen Re’s Stamford-based sibling carrier Berkshire Hathaway Reinsurance Group saw a more precipitous decline in revenues, dropping 29 percent to $7.2 billion; combined, the two entities rank among the top five reinsurance underwriters in the world. [...]

Geronimo Energy Expands Partnership with BHE Renewables (PR Newswire)

Geronimo Energy, LLC ("Geronimo") is pleased to announce the sale of its second portfolio of Minnesota Community Solar Garden developments ("the Portfolio") to BHE Renewables, LLC ("BHE Renewables"), one of the most recognized names in the renewable energy industry, and a subsidiary of Berkshire Hathaway Energy.

Included in the Portfolio is a total of 66 megawatts ("MW") of solar garden projects spread across 21 locations and 16 Minnesota counties, which will be constructed by the end of 2017.

This acquisition is in addition to a previously purchased portfolio of Geronimo-developed community solar gardens by BHE Renewables, bringing the total combined portfolio size to nearly 100 MW. [...]

Berkadia Commercial Mortgage, part of Warren Buffett's empire, buys Cleveland firm (Cleveland Plain Dealer)

Berkadia Commercial Mortgage LLC, part of the Berkshire Hathaway family of companies led by Warren Buffett, has entered Ohio by buying a Cleveland-based mortgage-banking firm.

Berkadia snapped up RiverCore Capital, a small firm that has arranged financing for major downtown properties including the Flats East Bank project and The 9 complex on East Ninth Street. Neither party would discuss terms of the deal, which closed March 4. [...]

Will Duracell Be the Next Big Company to Leave Connecticut? (Patch)

Duracell, previously owned by Procter & Gamble and based in Bethel, Conn., recently advertised a job opening for an IT Specialist in Chicago, IL. The Simply Hired posting stated that Berkshire Hathaway has "announced its intent to acquire Duracell by the end of 2015 and Duracell will relocate its corporate headquarters to Chicago."

The News Times reported on Wednesday that the battery maker and Berkshire Hathaway not made an official announcement designating Chicago as Duracell’s new headquarters, however, the online job posting says otherwise. [...]

Richline Group a Proud Member of Jewelry Industry Initiative to Combat Wildlife Trafficking (BusinessWire)

As announced by the U.S. Wildlife Trafficking Alliance, Richline Group—alongside jewelry industry leaders Signet Jewelers and Tiffany & Co.—is celebrating World Wildlife Day by announcing its commitments to support broad jewelry industry efforts in the fight against wildlife trafficking. [...]

Richline Group’s commitments include keeping the elimination of wildlife trafficking part of best practice discussion, and to assist companies that want to update their codes of conduct through the newly introduced IvoryFreeJewelry.com. [...]

The Dairy Queen System Proclaims the End of Winter Five Days Early With Free Cone Day on March 15 (BusinessWire)

In the Dairy Queen® system, a Berkshire Hathaway company, winter is over and spring has officially begun on Tuesday, March 15 with a Free Cone Day benefiting Children’s Miracle Network Hospitals®. [...]

Throughout the day, participating non-mall Dairy Queen and DQ Grill & Chill® locations across the U.S. will serve fans a FREE small vanilla soft-serve cone with the signature curl on top (limit one per customer while supplies last).

“Last year’s success of Free Cone Day surpassed all expectations and we have our fans to thank for that,” added Westrum. “Together we raised $140,000 in one day for Children’s Miracle Network Hospitals and we averaged serving more than 1,330 cones per store. We are looking to surpass those numbers this year. We can’t wait.” [...]

Berkshire News Briefs - 3/12/16

This week's post got really long, so I broke it in two. News about Berkshire Hathaway itself in this post, news about subsidiaries coming next in a second post...

Berkshire after Buffett: One thing may not change (CBS MoneyWatch)

Most interesting, more and more major shareholders are becoming convinced that they should stick with Berkshire. They've been increasingly assured that with Buffett's decentralized management style -- unit managers operate independently and make their own business decisions -- a solid structure has been put in place that would enable Berkshire to operate soundly even after his departure. [...]

Another wealth manager at a major Wall Street investment bank noted that there could be "initial rush selling" once Buffett announces the exact date of his retirement, but "that would definitely inspire us to jump in and buy more shares when the stock tumbles as a result."

Buffett’s Berkshire Plans $9 Billion Bond Sale to Repay Loan (Bloomberg)

Warren Buffett’s Berkshire Hathaway Inc. sold $9 billion in debt, the conglomerate’s biggest bond deal ever, in the latest offering from a blue-chip company tapping investor demand for the most creditworthy borrowers.

Berkshire sold the debt in seven parts, according to data compiled by Bloomberg. Proceeds will help pay down a $10 billion loan used to finance its purchase of Precision Castparts Corp. Buffett had said earlier that Berkshire used about $23 billion of its cash for the deal and would borrow the rest. [...]

Investor orders for Berkshire Hathaway bond sale hit $34bn (Financial Times)

Investor orders for a piece of a $9bn Berkshire Hathaway bond sale eclipsed $30bn on Tuesday, as the conglomerate headed by Warren Buffett sought to repay bank loans used to finance its $36bn takeover of Precision Castparts. [...]

Orders for the year’s fourth-largest transaction hit $34bn, climbing rapidly as banks closed their books, one person familiar with the situation added. [...]

Nebraska Peace Foundation calls for report on risks Berkshire Hathaway faces from climate change (Omaha World-Herald)

The Nebraska Peace Foundation is asking Berkshire Hathaway Inc. to issue a report describing the risks it faces from climate change and the “initiatives and goals relating to each risk issue identified.” [...]

In the letter and proxy draft, Buffett said it is “highly likely” that climate change “poses a major problem for the planet.” [...]

But although climate change may cause disasters, Buffett said, Berkshire’s property insurance operations do not risk significant losses from such disasters.

That’s because the companies would adjust their premiums and exposure to claims if climate change begins to cause more property damage, which hasn’t happened yet, he said. [...]

Comments on Mistakes and Buffett’s Original Berkshire Hathaway Purchase (ValueWalk)

I noticed a passage in last year's letter that is relevant to the topic—Buffett himself was attracted to buybacks on a dying business—Berkshire Hathaway in the early 1960's. Berkshire was a Ben Graham cigar butt—it was trading at around $7 and had net working capital of $10, and book value of $20. Berkshire was a classic “net net”—a stock trading for less than the value of its cash, receivables, and inventory less all liabilities. Buffett liked the fact that Berkshire was a) trading at a cheap price relative to liquidation value, and b) using proceeds from the sale of plants to buy back shares—effectively liquidating the company through share repurchases. [...]

Why Berkshire Hathaway Is Expected to Outperform SPY in 1Q16 (Market Realist)

7 parts, focusing on the different areas of Berkshire Hathaway (BNSF, Energy, Manufacturing, etc.)

Berkshire’s holdings have been performing on the back of insurance, financials, and manufacturing. Chairman and CEO Warren Buffett is deploying cash for buying stocks at attractive valuations. Berkshire’s recent investments include Precision Castparts (PCP) and Kinder Morgan (KMI). [...]

3 Big Competitive Advantages of Berkshire Hathaway (Fool)

Berkshire Hathaway is a unique business. It's primarily an insurance company, but it also sells furniture, energy, homes, underwear, and private jets. And the company has amassed a stock portfolio that would make most long-term investors jealous. One of Warren Buffett's biggest criteria when deciding what to buy is identifiable competitive advantages -- of which Berkshire has quite a few of its own. [...]

Berkshire News Briefs - 3/1/16

CNBC transcript of Warren Buffett on 'Squawk Box' (CNBC)

I never know what markets are going to do. There's never been a time in my life when I know what markets are going to do over a long period of time. They're gonna go up. But in terms of what's going to happen in a day or a week or a month or a year, even, I never felt that I knew it then and I never felt it was important. I will say that in ten or 20 or 30 years, I think stocks will be a lot higher than they are now. [...]

Duracell leaves P&G fold (Cincinnati)

Duracell is no longer part of Procter & Gamble or one of its storied billion-dollar brands after the closing of the Cincinnati-based company's sale of the iconic battery brand.

P&G has closed on its previously announced sale of Duracell to Warren Buffett's Berkshire Hathaway. P&G invested $1.8 billion into the outgoing brand as it prepared to exit the business unit. In exchange, Berkshire Hathaway tendered 52 million P&G shares worth more than $4 billion back to the consumer products giant. [...]

California, Buffett-owned utilities promoting cooperation among western electrical grids (Chicago Tribune)

California has more renewable energy than it can handle.

Elsewhere in the United States, states with extra power hand it off to neighbors when they need it. That's not happening in the West, where cooperation among electrical grids has historically been an issue. The result: Individual providers can find themselves shutting down their extra power rather than sending it elsewhere. [...]

California and utilities owned by Warren Buffett's Berkshire Hathaway Inc., including PacifiCorp and NV Energy Inc., are now on a mission to end that thinking as quickly as possible.

Warren Buffett Is Paying This Executive $41 million (Fortune)

The energy unit of Warren Buffett‘s Berkshire Hathaway on Monday said Gregory Abel, its chairman and chief executive, saw his compensation jump 48% last year to nearly $41 million, reflecting a large incentive award. [...]

Abel, 53, has led Berkshire Hathaway Energy since 2008, and expanded it through a series of acquisitions. Many investors and analysts believe Abel, who has taken on a greater public role at Berkshire, is a top candidate to eventually replace Buffett as Berkshire Hathaway’s chief executive.

Railroads’ freight volume decline continues (Omaha World-Herald)

Rail freight volumes for Union Pacific and BNSF Railway have continued to slump so far in 2016, after a disappointing 2015 that has led to job furloughs and sliced capital spending. [...]

At Texas-based BNSF, owned by Omaha’s Berkshire Hathaway, volumes are down 3 percent in the same period. Top decliners have been metallic ores, coal and crude oil. [...]

Warren Buffett's Berkshire Hathaway has changed in S&P's eyes (CNBC)

Credit ratings agency Standard & Poor's is formally acknowledging what Warren Buffett watchers have known for years: Berkshire Hathaway has transformed itself from an insurance holding company to a full-fledged corporate conglomerate. [...]

Word of the shift accompanies S&P's announcement that it is no longer considering a possible one- or two-notch downgrade of Berkshire's credit rating.

Warren Buffett just announced a $1 million March Madness contest for Berkshire Hathaway employees (Business Insider)

Warren Buffett just announced a crazy new March Madness contest for Berkshire employees.

Speaking with CNBC's Becky Quick on Monday morning, Buffett announced that Berkshire Hathaway employees would be able to win $1 million a year for life if they could pick a perfect NCAA Tournament bracket up until the Sweet 16. [...]

12 humorous lines from Warren Buffett’s latest shareholder letter that will leave you chuckling (Bit-of-News)

“If you want to guarantee yourself a lifetime of misery, be sure to marry someone with the intent of changing their behavior.”

Here, Buffett is actually using a quote from his business partner Charlie Munger to demonstrate that he isn’t a micro-manager when it comes to subordinates. He puts capable managers in charge of his businesses and stays out of their way.