Berkshire News Briefs - 12/27/17

A Year In Berkshire Hathaway's Tech Stocks

Though he has since changed his mind, Buffett famously avoided tech stocks for more than the first 30 years of his investing career. In an interview from the mid-1980s, Buffett said that the technological revolution had “gone right past him,” and he hadn’t found any tech companies he understood.

“It’s OK with me. I don’t have to make money in every game,” he said.

In recent years, Berkshire has made room for some of the sector’s companies, making it the portfolio’s third biggest weighting. Buffett holds IBM, and one of his deputy investors he hired to manage portions of the portfolio bought VeriSign. Both Buffett and one of Berkshire’s mangers also own a stake in Apple.

As 2017 draws to a close, Berkshire has a net profit on tech, though IBM has floundered. [...]

A Year In Berkshire Hathaway's Financial Stocks

Warren Buffett achieved a significant feat in 2017 – each of his financial stocks looks to be ending the year in the green.

Wells Fargo & Co. gained 12.3%, Bank of America Corp. rose 35% and American Express Co. increased 35.6%. The behemoth institutions were outdone by several of their smaller peers in his portfolio, however. The best, Moody’s Corp., rose 60.9%, with MasterCard following, up 47%, and Visa Inc. up 44.6%.

Some of the weaker performers were Synchrony Financial, increasing 6.8%, US Bancorp, increasing 7.9%, and Goldman Sachs Corp., increasing 8.3%. [...]

Investment Advice From Berkshire's Todd Combs and Ted Weschler

Warren Buffett (Trades, Portfolio) is slowly winding down his management of Berkshire Hathaway’s investment operations. Even though he is still undoubtedly the leading of the group, his two investing lieutenants Todd Combs and Ted Weschler have gained more independence in recent years. [...]

So far, interviews given by these two managers have been limited but they have spoken in the past on their investment process. I thought it would be interesting to gather some of this insight from two of Buffett’s most trusted employees. [...]

State taking legal action to prevent railcar “dumping ground” in the Adirondacks

Gov. Andrew Cuomo said New York is taking legal action to halt a rail operator’s plan to store thousands of train cars indefinitely in the Adirondack Park.

The move represents what the governor calls “the first step in a series of aggressive actions” to stop Iowa Pacific Company’s from storing old oil tanker cars in the state’s protected wilderness. [...]

The state is also calling on Berkshire Hathaway — owners of the Union Tank Car Company, which owns the cars being stored — to immediately stop the storage plan.

Gov. Cuomo will announce these legal actions and the long-term plan to remove the railcars from the Adirondacks during his upcoming State of the State Address on January 3. [...]

Roseville-based toy company's stress on learning with fun pays off at Christmas time

Since 1990, MindWare has been creating brainy toys for kids of all ages, as its tag line says.

It has also become a reliable innovator for retailers with products like Qwirkle, Keva Structures building planks and Science Academy kits for making slime, lip balm and volcanoes, as well as hundreds of other toys and games. [...]

MindWare experienced double-digit growth this holiday season, consistent with most years past, the company said. That’s significantly higher than the 5 percent growth the toy industry as a whole is experiencing, according to the NPD Group. [...]

The company’s acquisition by Berkshire Hathaway’s Oriental Trading Company in 2013 jump-started its marketing, web development and customer service. [...]

Buffett's investment helped drive M&T's growth

[...] In the case of M&T Bank Corp., it was 1990, and the Buffalo-based bank had the opportunity of a lifetime: the two dominant financial institutions in Buffalo, Empire of America and Goldome, had been seized by federal regulators during the savings & loan crisis. Now the regulators were looking for someone to buy the failed banks.

M&T and KeyCorp, then based in Albany, decided to divide the spoils between them. But M&T "needed some capital in order to be able to be positioned to do the deal," bank spokesman C. Michael Zabel said.

So Buffalo News Publisher Stanford Lipsey introduced his friend M&T CEO Robert G. Wilmers, to his longtime patron: Warren Buffett. [...]

Today, Berkshire is M&T's sixth-largest shareholder, with 3.56 percent of the bank's stock as of Sept. 30. That's 5.382 million shares, worth nearly $920 million.

Shares of Warren Buffett's Berkshire Hathaway hit $300,000 — each — for the first time

One "A" share of Warren Buffett's Berkshire Hathaway will set you back about $300,000 as of Monday.

The conglomerate's most expensive share class touched that milestone for the first time in the morning before dipping back. It closed trading on Monday at $299,360, up 1.04 percent. It has outperformed the S&P 500 this year — rising more than 22 percent versus the index's 20 percent gain.

One share would get you roughly two of Tesla's most expensive car models available now.

If that lofty price makes you break out in hives, the company's B shares closed trading at $199.34, also up around 22 percent for the year. [...]

Berkshire News Briefs - 12/15/17

Buffett's About to Get $3 Billion Back From Burger King Owner

Burger King-owner Restaurant Brands International Inc. is scheduled to redeem $3 billion in preferred shares Tuesday from Buffett’s Berkshire Hathaway Inc. The money helped the fast-food chain finance its 2014 purchase of Tim Hortons.

The redemption will take away a lucrative investment for Berkshire and add to Buffett’s arsenal for investments and takeovers. At the end of the third quarter, Buffett’s Omaha, Nebraska-based holding company had a record $109 billion in cash. [...]

After Decades of Hints, Buffett’s Heir May Now Be More Apparent

Keeping the successor’s identity a secret also gives the board more flexibility. Circumstances can change, after all, and probably have during the long period Berkshire’s board has been weighing its options. These days, however, most arrows are pointing toward one man. [...]

Abel has steadily expanded a utility holding company in Iowa into a colossus in the energy industry. It runs several power companies throughout North America and the U.K., interstate natural gas pipelines, and giant wind and solar farms. It’s a big part of Berkshire that stands to get only bigger, Buffett said in May, adding that it’s “hard to imagine a better-run operation.” [...]

Buffett's Fruit of the Loom Tries on Subscription Underwear

Warren Buffett’s Fruit of the Loom is joining the subscription craze.

Guys can now get their boxer briefs from the Berkshire Hathaway Inc.-owned brand through a new subscription service called Fruit to Your Door. Shoppers can buy a six-pack of skivvies, among other products, and have them re-ordered every six months at a 30 percent discount. The program, available for men’s and women’s garments in the U.S., can also be gifted. [...]

What's Geico Really Worth to Berkshire Hathaway?

Few success stories are as important as Geico, which has grown by leaps and bounds since Berkshire acquired it 1996. But as Buffett wrote in his 2010 letter to shareholders, Geico has never been written up to reflect its success and is carried at a mere $1.4 billion premium to its book value.

What would Geico be worth if Berkshire were willing to sell it? We can use a method Buffett laid out in his 2010 letter to shareholders to estimate its value. [...]

Warrren Buffett urged to take old oil tankers out of Adirondacks

An Adirondack conservation group is urging billionaire investor Warren Buffett to remove obsolete oil tankers now being stored indefinitely on a rail line in the Adirondacks.

Adirondack Council Executive Director William Janeway wrote last week to the Nebraska-based investor asking that rail cars owned by subsidiaries of Buffett's sprawling Berkshire Hathaway company be removed from the line.

Owned by Union Tank Car Co. and North American Tank Co., the graffiti-scarred cars are being stored in Warren and Essex counties on a line owned by a Chicago-based company. [...]

Warren Buffett scores a quick $230 million with DaVita deal

UnitedHealth is paying $4.9 billion for a division of DaVita, the kidney dialysis center operator that counts Berkshire as its biggest shareholder, with a 20 percent stake. The one-day paper profit to Berkshire is more than $231 million.

The deal is for DaVita Medical Group, which operates 300 clinics and a handful of outpatient surgical centers in six states. [...] The rest of DaVita will be left to focus on the kidney care business. [...]

Berkshire began investing in DaVita in 2011. The stock has been a favorite of Berkshire portfolio manager Ted Weschler, who has a personal stake in the medical services company of 2.2 million shares, according to FactSet.

But it hasn't always been a slam dunk. At the end of 2011, DaVita shares traded at about $38, rising to $75 by the end of 2014. But they are down 20 percent since then, closing on Tuesday at $60.93. [...]

Duracell Appoints Thom Lachman to CEO of the Duracell Company

Duracell and its parent company Berkshire Hathaway announced today that Thom Lachman has been promoted to CEO of the Duracell Company, Inc., effective January 1, 2018. Roberto (Bobby) Mendez will take over Lachman’s former role, being promoted to President of Duracell North America. [...]

Lachman joined Berkshire Hathaway as a member of Berkshire Hathaway’s Duracell Transition Team on November 1, 2015, and has served as Duracell’s President of North America since March 1, 2016. Before coming to Berkshire Hathaway, Thom gained over 30 years of experience with Procter & Gamble (P&G). His last role as President of P&G Canada was preceded by a role leading the North America integration of the Gillette acquisition. [...]

Chairman of Berkshire Hathaway’s Marmon to Retire in 2018

Frank Ptak, a longtime executive at one of the largest units of Warren Buffett’s Berkshire Hathaway Inc., said in an interview that he plans to retire at the end of 2018.

Mr. Ptak has overseen industrial conglomerate Marmon Holdings Inc. since 2006. He said his preferred successor is Angelo Pantaleo, the current chief executive of Duracell, another Berkshire business.

Earlier Thursday, Duracell said Mr. Pantaleo will become president and chief operating officer of Marmon on Jan. 1. He will also become Duracell’s chairman. [...]

Munich Re to take majority stake in aviation insurer

Munich Reinsurance Co. will hold a majority stake in Global Aerospace Underwriting Managers Ltd. after agreeing to buy an additional 11% of shares in the London-based aviation insurance provider.

Following the purchase from National Indemnity Co., a unit of Berkshire Hathaway Inc., Munich Re will own 51% and National Indemnity will own 49%

Katy Perry drops in on Warren Buffett

Warren Buffett met another celebrity when Katy Perry came to town last week for a concert — or was it the other way around?

Her Instagram account showed the two chatting in Buffett’s office and noted that they talked about cryptocurrency. [...]

Our musicologist, Kevin Coffey, reports that at the concert, Perry told the Omaha crowd that she had had lunch with “your governor, Warren Buffett.” [...]

Berkshire News Briefs - 11/20/17

What Warren Buffett's Berkshire Hathaway has been buying and selling lately

Adding to one of its largest positions, Berkshire bought another 3.9 million shares of Apple, bringing the company's total stake to 134.1 million shares, which represents a 2.6% stake in the tech giant. Buffett and company have been accumulating Apple shares over the past two years or so and are sitting on a nice gain, especially with the stock recently reaching a new record high.

Synchrony Financial was one of Berkshire's most recent stock investments, with the position initiated during the second quarter. In the third quarter, Berkshire purchased another 3.3 million shares of the credit card issuer.

Berkshire also bought another 832,000 shares of Monsanto, which increases that stake by about 10%. [...]

Stock sales included IBM, Wells Fargo, Charter Communications, and WABCO. For a complete look at the changes in Berkshire Hathaway's 13F filing of stock holdings, visit Dataroma for updated holdings and activity.

Taking a longer view:

Here's How Warren Buffett's Stock Portfolio Has Changed Over the Past 2 Years

Berkshire's stock portfolio consists of more than 45 positions but is heavily weighted toward its largest holdings. So here's a look at how Berkshire's "top 10" stocks have changed since the third quarter of 2015. [...]

NV Energy seeks OK for 3 new power purchase agreements

NV Energy is requesting that three new long-term power purchase agreements totaling 100 megawatts — enough energy to serve about 60,000 average customer homes — be approved by the Public Utilities Commission of Nevada. [...]

The largest of the three new projects is the 50-megawatt Turquoise Nevada solar project, to be built in the Reno Technology Park in Washoe County. The project will benefit from a 25-year power purchase agreement with NV Energy and is expected to be operational by the end of 2020.

The other two new proposed 25-year power purchase agreements are the result of a request for proposals issued June 14 by NV Energy. The 25-megawatt Techren Solar 3 project will benefit NV Energy customers in Southern Nevada and the 25-megawatt Techren Solar 4 project will benefit customers in Northern Nevada. If approved, the new solar energy projects will be operational on or before Sept. 1, 2020. [...]

The 25 year purchase agreement for the Reno project is a deal with Apple.

Berkshire Hathaway's 14-Year Winning Streak Is Coming to an End

A 14-year winning streak at Berkshire Hathaway will likely come to an end this year, as its insurance companies are set to post their first full-year underwriting loss since 2002. It's an unfortunate end to an incredible run, but insurance remains one of Berkshire's best businesses, regardless of recent losses. [...]

Here's How Berkshire Hathaway Crushed It in 2017

We're not at the end of 2017 quite yet, but it's safe to say that Berkshire Hathaway has had a solid year. Warren Buffett's investment vehicle made a number of splashy, value-enhancing moves, and strengthened its already formidable portfolio, this year.

Of course, not every play Buffett and company made was a win, but for the most part Berkshire did very well. Here's a look at the more impressive highlights of its 2017. [...]

Electronics distributor is hiring to staff massive Fort Worth warehouse

TTI, a global distributor of electronic components, is moving into a new 641,000-square-foot distribution center in north Fort Worth with plans to expand its workforce.

The new building [...] will consolidate and replace TTI’s current warehouse operations. When construction began in 2016, the estimated price tag was $40 million.

TTI, which is owned by Warren Buffett’s Berkshire Hathaway, already “is actively hiring for the new location” along with transferring employees from other facilities [...] The company employs 1,020 workers locally, up from about 870 in 2014.

The company, founded in 1971, is a major distributor of electronic components for industrial, military, aerospace and consumer electronics manufacturers worldwide. [...] TTI and its subsidiaries, Mouser Electronics, Sager Electronics and Symmetry Electronics, employ more than 4,700 workers at more than 100 locations in North America, Europe and Asia.

Warren Buffett announces changes at Berkshire Hathaway's Ben Bridge Jeweler

Ben Bridge Jeweler, the distinguished family-run fine jeweler with over 90 retail stores in 11 states and one province, announced today that Co-CEO and General Counsel Jonathan (Jon) Bridge is retiring, and current President and Co-CEO, Edward (Ed) Bridge will become Chairman and CEO. As of November 1, 2017, Lisa Bridge C.G., the company's Vice President of Education and the creator of the Lisa Bridge Collection, has been appointed as the company's President and Chief Operating Officer.

8 Warren Buffett Deals That Won Big

Warren Buffett is widely considered to be the best investor of all time, and for good reason. Since he took control of Berkshire Hathaway, the company has generated annualized returns of nearly double those of the S&P 500, mainly on Buffett's sound ability to make great investment deals.

With that in mind, here are eight examples of investments, acquisitions, and other deals that Warren Buffett has made over the years that have worked out especially well. [...]

Berkshire Subsidiary Briefs - 11/6/17

Brooks Running sees double-digit sales growth despite unpredictability of sports retail

For the latest quarter, Brooks reported double-digit revenue growth, boosted by sales of the company's shoes for avid runners, including Brooks' Ghost and Adrenaline footwear models.

Brooks' third-quarter sales climbed 11 percent, while global footwear revenue was up 14 percent during the period, the company reported Monday. The retailer is also gaining traction in the "$100 and above" segment for adult running footwear, NPD data show. [...]

Brooks Running CEO Reveals the Secrets to Winning In the Digital Retail World

(VIDEO) Considering the competition from Nike, Under Armour and Adidas the results aren't too shabby. Brooks Running CEO James Weber said the brand is winning with running enthusiasts. It also doesn't hurt to be under the Berkshire umbrella, Weber said, as he and his team could think longer term.

Shaw Industries creating 75 jobs in Decatur

A Georgia carpet-maker plans to put $42 million into its existing plant in Decatur, Tennessee, creating 75 jobs, company and state officials announced Friday.

Shaw Industries Group Inc., a Berkshire Hathaway subsidiary based in Dalton, Georgia, makes synthetic yarn at the Decatur factory for use at its other carpet plants. It plans to expand, using both nylon and polyester fiber in its product, according to a news release from the Tennessee Department of Economic and Community Development. [...]

Stuart plant closing due to declining sales, Shaw officials say

There aren't as many people buying hardwood flooring right now. That fact was part of the reason Shaw Industries decided to close their plant in Stuart, company officials said Friday. [...]

Farris said despite the downturn in sales, the company is not getting out of the hardwood business. It will continue to operate the three other solid hardwood manufacturing facilities it owns in other states. The decision to close the Stuart plant, however, means that 160 employees are out of work. Farris said that each of them will be given an offer to work in one of the company's other facilities. The Stuart plant is the only one that operated in southern Virginia, so that would require relocating if the offers are accepted. Farris said that a final closing date hasn't been set for the Stuart plant. It will continue to operate through December or at the latest, early January of 2018. Shaw bought the factory in 2010, before being itself bought out by Berkshire Hathaway. [...]

Iowa wind turbines power all of utility's customers for 2 days

MidAmerican Energy officials said winds blew hard enough on Monday and Tuesday for wind turbines to provide all of the power needed to meet its customers’ needs for the state.

MidAmerican spokeswoman Tina Hoffman said the utility’s experts noted the wind was strong enough to produce the energy needed to power 670,000 electric customers in the state.

MidAmerican’s goal is to eventually produce 100 percent of its power with renewable resources. The company is upgrading its old wind turbines and building new ones to help reach that goal. MidAmerican is owned by Omaha-based Berkshire Hathaway.

CEO of NV Energy highlights great role of geothermal for State of Nevada

In a passionate interview, Paul Caudill, the CEO of NV Energy, Nevada’s largest utility owned by Berkshire Hathaway Energy, talks about his company’s stand and commitment on renewable energy in the state of Nevada. [...]

"I see a brighter future for geothermal energy than we have for the last five, six years here. In the early days — go back 30 years — some of our longest power purchase agreements were with geothermal plants. It was a resource that was number one in those days because of the cost of solar and the fact that wind is not a great resource here. Geothermal was the place to go if you wanted renewable energy here. And then what happened is solar costs came down." [...]

"But as you go to higher penetrations of renewable energy displacing thermal plants, geothermal has a significant value. And that is you can dispatch it. 24/7. We can use geothermal plants at night when we can’t use a solar facility. I think there is a significant value there. And as you start pushing to increase [solar] penetration on the grid, geothermal is going to become more valued." [...]

Dozens of Dairy Queens are closing

About 29 Dairy Queen locations are shuttering, after a franchisee files for bankruptcy.

Vasari LLC, which operates about 70 Dairy Queen locations in Texas, New Mexico, and Oklahoma, filed for Chapter 11 bankruptcy on Monday. In the filing, the company announced plans to close approximately 29 Dairy Queen locations. [...]

Berkshire Hathaway Guard Insurance closes deal to buy WB building; new jobs on the way

[Berkshire Hathaway GUARD Insurance] ended months of speculation Wednesday, announcing it closed a deal to buy the Wilkes-Barre Center at 39 Public Square. A sales price was not disclosed.

The move means an additional 170 or so jobs will be coming to the downtown over the next two years. [...]

GUARD, a subsidiary of billionaire investor Warren Buffett’s Berkshire Hathaway Inc., had increased six-fold to more than $1.2 billion in annual sales and doubled its workforce to more than 675 over the past five years. It’s already added about 114 of the 285 new hires to be filled by August 2019. [...]

Worker Killed at Berkshire Hathaway Manufacturing Subsidiary in Georgia

Authorities in Georgia say a man is dead after being caught in a piece of machinery at a plant in north Georgia.

Whitfield County Coroner Greg Bates told The Atlanta Journal-Constitution that 51-year-old Jesus Pimentel was caught between a moving part of a machine and a stationary steel I-beam Monday. Pimentel, an employee of Shaw Industries in Dalton, died on the scene. [...]

Berkshire News Briefs - 11/6/17

Berkshire Hathaway's 3rd Quarter Earnings release: PDF

Hurricanes Drag Down Berkshire's Quarterly Earnings

Bad weather weighed on results at Warren Buffett's Berkshire Hathaway Inc, as losses from insurance claims tied to Hurricanes Harvey, Irma and Maria and an earthquake in Mexico contributed to a 43 percent drop in third-quarter profit.

Berkshire on Friday said net income fell to $4.07 billion, or $2,473 per Class A share, from $7.2 billion, or $4,379 per share, a year earlier.

Operating profit, which excludes investment and derivative gains and losses and which Buffett says better reflects company performance, fell 29 percent to $3.44 billion, or $2,094 per Class A share, from $4.85 billion, or $2,951 per share.

Berkshire said it incurred $1.95 billion of after-tax underwriting losses attributable to the hurricanes and earthquake. [...]

Berkshire Hathaway’s Third-Quarter Operating Profit Falls 29%

Berkshire Hathaway's (NYSE:BRK-A)(NYSE:BRK-B) third-quarter operating earnings declined to $3.44 billion, down from $4.85 billion in the year-ago period, due primarily to large insurance underwriting losses from natural disasters. Third-quarter weather events were particularly troublesome for Berkshire Hathaway Reinsurance, which posted a massive $1.3 billion pre-tax underwriting loss in the third quarter.[...]

• Insurance -- $395 million net loss
• Manufacturing, service, and retailing -- $1.7 billion profit
• BNSF railroad hauls it in -- $1 billion profit
• Utilities and energy -- $963 million profit
• Finance and financial products -- $341 million profit
• Berkshire cash pile -- $109 billion

Under the Hood of Berkshire Hathaway’s Pilot/Flying J

Pilot was founded in 1958 when Jim Haslam purchased a single gas station for $6,000. It dramatically increased in size when it purchased competitor Flying J out of bankruptcy. Because the bankruptcy proceedings are public, there’s valuable information within the filings made at the time, 2009. A value of $3.3 billion was placed on Pilot and Flying J was to be acquired for $300 million – $500 million in cash plus equity in the new company, valuing it in total at $1.8 billion. Post-merger, the combined entity had revenue in excess of $30 billion and would reasonably have an enterprise value of about $5.1 billion. [...]

The segment of the North American gas station industry has three main competitors: Pilot/Flying J, Love’s, and TravelCenters of America. Pilot/Flying J is the largest with $20 billion in revenue and 750 locations, while family-owned Love’s is not far behind at 430 locations and $16 billion in revenue. Travel Centers of America is the only one of the three that’s publicly traded and has 250 locations and $6 billion in annual revenue. [...]

That still leaves the question of how much Pilot is earning and what it’s worth. Margins are slim in this business – operating income is probably no more than 2% of sales, or maybe $500 million a year in total. Using a multiple of 12x operating income (a discount of about a third to the higher margin consumer gas stations of Couche-Tard and Casey’s) gives an enterprise value of $6 billion. That is roughly consistent with the value placed on the company in the Flying J bankruptcy filings in 2009. Subtracting $2.5 billion in estimated remaining debt would value the equity at about $3.5 billion. [...]

PacifiCorp facing regulatory blowback on wind power plans

Staff advisers at Oregon's utility regulator threw cold water on PacifiCorp's plan to spend $3.5 billion, one of its biggest upgrades ever, on wind turbines and a new transmission line.

The Public Utility Commission staff say the utility had failed to justify the need for the massive capital investments, whether to meet its capacity, energy or reliability needs. [...]

"There is no need for the proposed resources at all," said the staff recommendation. "PacifiCorp's existing resources are able to meet its resource needs."

That's not a universally held opinion. Some environmentalists support the wind investments, if not the transmission. And PacifiCorp insists it needs it all. But if commissioners agree with its advisory staff, it would be a big setback for the company. [...]

Carpet maker Shaw acquires Chattanooga-based digital sample provider

Shaw Industries, the country's biggest carpet maker, is buying a Tennessee-based producer of digital carpet samples and design tools.

Shaw, a subsidiary of Warren Buffett's Berkshire Hathaway, acquired Tricycle Inc. for an undisclosed sum.

Tricycle was founded in Chattanooga in 2002 and works with commercial manufacturers, interior designers and architects to visualize carpet designs and colors digitally. The company says its three-dimensional, color corrected digital images reduce waste by removing the need to produce physical samples. [...]

Warren Buffett – Mistakes of the First Twenty-Five Years

One of the best resources available to investors are the Berkshire Hathaway shareholder letters. One of my personal favorites is the 1989 letter in which Warren Buffett wrote a piece called – Mistakes of the First Twenty-five Years (A Condensed Version). It’s a great insight into how even the greatest investors can make mistakes. The lesson of course is not to make the same mistake twice. But it seems even Buffett did make the same mistake over and over in buying some of his cigar-butt companies simply because they were cheap. This of course changing when he met Charlie Munger and he coined the phrase, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

Let’s take a look at some of the mistakes that Buffett highlighted from his first 25 years of investing [...]

Berkshire Hathaway News Briefs - 10/7/17

Buffett bets on truck stops, to buy majority of Pilot Flying J

Warren Buffett's Berkshire Hathaway Inc bought a major stake in Pilot Flying J, the largest U.S. truck stop operator, and said it will become the majority owner in six years, deepening its commitment to the American economy.

Pilot Flying J has more than 750 locations in 44 U.S. states and Canada selling gas, diesel fuel, and convenience goods, and offering trucks more than 70,000 parking spaces and 5,000 diesel lanes.

While terms for Tuesday's transaction were not disclosed, Pilot Flying J is 15th-largest private company in the United States, with annual sales of $19.6 billion, Forbes magazine said. The family-run company employs more than 27,000 people.

Berkshire bought 38.6 percent of Pilot Flying J from several investors and plans to boost ownership to 80 percent in 2023.

The controlling Haslam family retained a 50.1-percent stake, and will own the remaining 20 percent once Buffett takes over. [...]

Why Autonomous Trucks Aren't A Threat To Buffett's Investment In Pilot Flying J

As fast charging of EVs takes greater hold across the U.S., places like Pilot Flying J will become even better revenue machines than they are now. When truckers and car travelers stop at one of their places now for gas and diesel, they are apt to shop as well during the 15-20 minute stay they have now. Fast charging of batteries, which takes up to 45 minutes, will extend the time a customer has to spend money on goods, as well as the changing service itself.

The point of Buffett’s investment is not just to take advantage of the strong business of Pilot Flying J now as a well branded, preferred network of truck stops serving today’s long-haul diesel truck driver, but as a growing network of places to serve the needs of gas, diesel and EV vehicles. [...]

Berkshire Hathaway's New Moat? Helping America's Family-Run Businesses Protect Their Legacy

[...] Buffett’s held out Berkshire as a safe place for family-owned businesses to turn to when they want to sell and he's beginning to pile up a major trove of deals.

In 2006, Buffett took control of Israeli billionaire Stef Wertheimer’s precision tool company ISCAR, ponying up $4 billion for 80% of the business and taking full control a handful of years later. The Pritzker family turned to Berkshire in 2007, selling a 60% stake in their industrial conglomerate Marmon Holdings, then the world’s 36th largest privately-held company. Seven years later, Berkshire bought the remaining 40% of Marmon and that year it also bought Van Tuyl Auto Group, America’s largest private-held car dealership operator with $8 billion in annual revenues. For Larry Van Tuyl, son of company founder Cecil Van Tuyl, the deal was a 'no-brainer' way to protect a proud legacy; he took a role as chairman of Berkshire Hathaway Automotive when it closed in early 2015.

Now Buffett is at again. On Tuesday morning, Berkshire Hathaway announced it will take a 38.6% investment in travel center operator Pilot Flying J , buying shares from the Haslam family of Tennessee. [...]

Nine years ago Warren Buffett bet on an unknown Chinese battery maker, and it’s sort of paying off

Nine years ago this week, as stocks were tanking in the global financial recession, Warren Buffett put money into a little-known mobile phone battery maker in Shenzhen. This year, with China making it clearer than ever that fossil-fuel cars aren’t going to be welcome for long, that bet is doing better than it’s done in a while.

On Sept. 27, 2008, MidAmerican Energy, controlled by Buffett’s holding company Berkshire Hathaway, announced it was putting $230 million (paywall) into China’s BYD, paying about HK$8 a share (a little over US$1). Back then, BYD, which started out in 1995, was just on the verge of getting into selling electric vehicles. It’s now China’s biggest seller of electric vehicles and saw its stock price increase nearly 60% this year, sending the value of MidAmerican Energy’s stake to about $1.9 billion as of Monday’s closing price. [...]

Russell to cease production of athletic uniforms

Fruit of the Loom, the parent company to Russell Athletic & Activewear, announced Thursday it was getting out of the team uniform business. [...]

“Today, we will begin to transition away from the team uniform business to allow greater emphasis on the consumer retail market. With this shift, we will continue to offer high quality athletic lifestyle and performance apparel for distribution through multiple retail and wholesale channels, including continued distribution of collegiate licensed products along with non-uniform apparel through the team dealer network.” [...]

Dairy Queen, getting a new CEO, looks to freshen brand

International Dairy Queen Inc. will be getting a new chief as the company continues an effort to modernize its  77-year-old brand.

The Edina-based company said Thursday that President and CEO John Gainor will retire at the end of the year and current Chief Operating Officer Troy Bader will take his place, effective Jan 1. [...]

Dairy Queen, a subsidiary of Berkshire Hathaway Inc., has been replacing its old-style restaurants in recent years to compete in the cutthroat quick-service restaurant category. Through its DQ Grill and Chill remodels, the company has updated its seating, beefed up its menu with more food items and tried to offer more specials and creative ice cream treats. It also has made a deliberate push to expand internationally. [...]

Berkshire Weathers the Storms

Given the storm damage and flooding created by hurricanes Harvey, Irma, and Maria during the third quarter, we find it unlikely that wide-moat Berkshire Hathaway will come away unscathed. [...] While we expect the company to experience material losses, it is more than adequately reserved to deal with this year’s hurricane season. [...]

All in, we’re probably looking at $1.5 billion-$3.0 billion in total insured losses for Berkshire’s insurance operations from hurricanes Harvey, Irma, and Maria (based on the dispersion of insured losses from other periods of heavier hurricane activity), with our expectations being somewhere in the middle of that range.

For some perspective, Berkshire recorded $3.4 billion in hurricane-related losses in 2005 when hurricanes Katrina ($2.5 billion), Rita, and Wilma ($900 million) struck the Gulf Coast, with Geico reporting $200 million in pretax losses, General Re posting $685 million in insured losses, and BHRG seeing $2.5 billion in pretax losses. With Hurricane Sandy in 2012, Berkshire’s total insured losses were $1.1 billion on a pretax basis, with $490 million coming from Geico, another $266 million tied to General Re, and $364 million from BHRG. [...]

Consolidation of BH Media Group newspaper printing begins at Journal plant

The consolidation of newspaper printing by BH Media Group’s North Carolina affiliates has begun at a $10 million expansion of the Winston-Salem Journal’s production plant. [...]

The consolidation involves the News & Record of Greensboro, as well as newspapers in Morganton, Marion, Hickory, Statesville and Mooresville printed at the Hickory Daily Record. The plant eventually will take over printing for newspapers in Concord and in Rockingham County. [...]

Berkshire Hathaway's Gen Re Targets Indian Market

General Re, a unit of Warren Buffett’s Berkshire Hathaway Inc. which won a license to open an Indian office in May, is seeking a larger slice of the world’s fastest-growing reinsurance market.

The unit plans to expand in health and life insurance, as well as explore opportunities in property and casualty cover, said Venkatesh Chakravarty, chief executive officer of General Reinsurance AG India Branch. [...]

Building a business in India could help Gen Re’s turnaround. A glut of capital in the global reinsurance industry in recent years has caused prices for some kinds of coverage to sag. Rather than take on policies at those lower rates, Gen Re has said it’s turning away some business.

By contrast, India’s reinsurance market, grew at a compound annual rate of 26 percent from 2012 to 2016, according to Reports Monitor, luring in global reinsurers. [...]

Buffett's Berkshire Expands Bet on Italy With Stake in Cattolica

Berkshire Hathaway Inc. said Thursday it agreed to buy about 9 percent of Italian insurer Societa Cattolica di Assicurazioni Scrl from Banca Popolare di Vicenza SpA, one of two failed banks in the northern region of Veneto. [...]

The purchase follows the December acquisition by Berkshire unit Marmon Holdings Inc. of Modena, Italy-based Zephir SpA, a manufacturer of industrial tractors and vehicles that move train cars in rail yards. Earlier last year, Marmon announced it would buy Italian pasta-equipment maker Dominioni Punto & Pasta Srl and catering-equipment firm Angelo Po.

While Italy, Europe’s third-largest economy, has been struggling with slow growth, Buffett has long said he’s willing to endure sluggish periods at businesses with attractive long-term prospects. [...]

Berkshire Hathaway starts building 212-MW wind farm

BHE Renewables LLC, a unit of Warren Buffett's Berkshire Hathaway Energy, has commenced construction on a 212-MW wind farm in Illinois, the Putnam County Record said Tuesday. [...]

BHE Renewables bought the Walnut Ridge project from renewables developer Geronimo Energy LLC in 2015. The scheme has a power purchase agreement (PPA) for 140 MW with the General Services Administration (GSA) of the US government. [...]

Inside Buffett’s Precision Castparts, a Union Scores a Foothold

On Friday, a group of about 100 welders at the company’s manufacturing operations in Portland, Oregon, voted 54-38 in favor of joining a union. Among the reasons they cited: a lucrative employee stock incentive program that went away after Buffett’s Berkshire Hathaway Inc. bought Precision early last year.

Unionizing is something to watch closely at Precision Castparts, where Chief Executive Officer Mark Donegan is known for a relentless focus on costs. [...]

Precision Castparts -- now one of Berkshire’s largest companies -- has said the welders’ vote might ultimately have a broad effect on its highly integrated manufacturing operations in Portland, where the company is based. A push to unionize thousands of workers in that region failed in 2013. [...]

Berkshire News Briefs - 9/20/17

JPMorgan becomes just seventh bank to cover Buffett's Berkshire Hathaway, calling it a screaming buy

Despite Berkshire being the sixth-largest company in the S&P 500 by market cap, there are just seven analysts covering the company, according to FactSet. This compares to the No. 5 most valuable company in the index, Amazon, which has 41 analyst ratings. Wall Street doesn't really bother to cover Buffett because of Berkshire's low relative trading volumes as Street research often gets paid from trading commissions. [...]

The analyst established a year-end 2018 price target of $210 for Berkshire Hathaway B shares, representing 17 percent upside from Wednesday's close. [...]

The analyst also mentioned Berkshire utility executive Greg Abel is currently the "most likely" successor to replace Warren Buffett as CEO of the company. [...]

Buffett Fails in Bid to Boost Stake in Canada's Home Capital

Warren Buffett’s bid to double his stake in Home Capital Group Inc. was rejected by shareholders of the Canadian mortgage lender in a vote Tuesday.

About 89 percent of investors voted against the offer, which would have boosted Berkshire Hathaway Inc.’s stake to 38 percent from about 20 percent. Stockholders including CIBC Asset Management had objected to the deal, arguing it would dilute the stock by selling shares to Berkshire at an almost 30 percent discount. [...]

Rocky Mountain Power Invests $3.5 Billion for Wyoming Energy

A long-term view of electrical generation -- not politics or fads -- drives Rocky Mountain Power's decision to invest $3.5 billion in transmission capability, wind power and other infrastructure in Wyoming by 2020, company officials said Friday. [...]

The Salt Lake City-based Rocky Mountain Power is a part of the Portland, Ore.-based PacifiCorp, a subsidiary of Berkshire Hathaway. Rocky Mountain Power has nearly 1.1 million customers in Wyoming, Utah and Idaho [...]

Rocky Mountain Power's energy-generating capacity is about 55 percent coal, 25 percent natural gas, 10 percent hydroelectric, and 10 percent wind and other sources [...]

Irma's Impact on Insurers

[...] Because of the limited presence of national primary carriers in the homeowners market in Florida, we think the biggest industry impact of large privately insured losses would probably be in reinsurance. Reinsurers have faced weak pricing in recent years due to an overabundance of capital and the rise of the catastrophe bond market. In our view, major catastrophe losses could be a catalyst for an industry shakeup and a return to more normalized pricing conditions. For disciplined and well-capitalized reinsurers such as Berkshire Hathaway, the positive impact on pricing should provide a material long-term offset to the near-term losses.

Oriental Trading’s MindWare buys Peaceable Kingdom, game maker that aims to 'inspire cooperation and cultivate kindness'

MindWare, a division of Oriental Trading Co. of La Vista, has acquired Peaceable Kingdom, a company that develops cooperative games and related products, for an undisclosed amount.

Peaceable Kingdom, based in Berkeley, California, was founded in 1983 by the family of Clement Hurd, illustrator of the “Good Night Moon” children’s book. [...]

The company makes games with the goal to “inspire cooperation and cultivate kindness,” including Bunny Bedtime, Mole Rats in Space, Friends and Neighbors, You Guessed It, Say the Word and What’s It? [...]

Warren Buffett's son Howard to become Illinois county sheriff

Howard Buffett, son of billionaire investor Warren Buffett, is adding to his job titles that of interim sheriff of Macon County in central Illinois.

Macon County Sheriff Thomas Schneider said Friday that he is retiring early ahead of an election next fall for his replacement. He has chosen Buffett, whose charitable foundation has contributed more than $55 million in the region over the past two decades, to serve in the meantime.

Howard Buffett has been a Macon County undersheriff since September 2014 and has completed more than 3,300 hours of patrol and training. [...]

Billionaire Warren Buffett sings a duet with Stevie Wonder at star-studded Forbes 100th anniversary party

The Berkshire Hathaway CEO joined pop music legend Stevie Wonder for a duet at a star-studded gala honoring Forbes magazine at Manhattan's Chelsea Piers on Tuesday.

Wonder and Buffett sang a duet of the classic hit The Glory of Love, a single written by Billy Hill and first recorded by Benny Goodman in 1936. [...]

Berkshire News Briefs - 9/8/17

Billionaire Warren Buffett says hurricane damage will linger

Billionaire Warren Buffett says the storm damage in Texas is staggering, but he isn't sure yet how much insurance companies will have to pay in claims. [...]

The investor expects that 50,000 of the roughly 500,000 vehicles Geico insures in the area will be total losses. But Buffett predicted there will also be large uninsured losses after this storm.

Buffett said Berkshire hasn't written much catastrophe insurance in recent years because prices were too low, so that will limit the Omaha, Nebraska-based company's exposure. By contrast, Berkshire recorded $3.4 billion in hurricane-related losses in 2005 when Hurricanes Katrina, Rita and Wilma struck the Gulf Coast. [...]

Berkshire Hathaway leads Florida auto insurance

As Category 5 Hurricane Irma looks set to make landfall in Florida after wreaking havoc in the Caribbean, The Insurance Insider looked at the most exposed primary carriers in the Sunshine State's commercial multi-peril and auto insurance markets in 2016. [...]

Berkshire Hathaway was Florida's leader in auto with a market share of 20.7 percent - equivalent to $4.1bn of premiums written. [...]

Watch CNBC's full interview with investing icon Warren Buffett (24 min video)

Warren Buffett, Berkshire Hathaway, speaks with CNBC's Becky Quick about Hurricane Harvey, the U.S. economy and his stock holdings.

Market Folly has a page of notes and summaries if you don't have time to watch the video.

Buffett spins $5 billion BofA investment into $12 billion profit

Berkshire Hathaway made good on its plan to convert warrants into 700 million shares of Bank of America common stock, the bank announced on Tuesday. [...]

Berkshire's agreement was to convert the warrants to Bank of America shares at $7.14 each. The shares closed Tuesday at $23.58, meaning Berkshire's paper profit on the stake is about $12 billion. [...]

Thousands of rail workers back at Buffett's BNSF as volumes rise

BNSF, the top U.S. coal carrier, laid off roughly 5,000 employees from mid-2015 to early 2016. The Texas-based company and its peers faced cost pressures from plunging coal volumes as the strong U.S. dollar hurt exports of the fuel and utilities switched to burning cheaper natural gas.

BNSF brought back roughly 4,000 of those workers as coal volumes rose this year, along with high levels of grain and upticks in intermodal containers and trailers, and sand used in hydraulic fracturing, spokesman Zak Andersen said. [...]

NetJets re-ups with PGA Tour

NetJets has extended its contract as the official private-jet provider of the PGA Tour.

The agreement, originally signed in 2014, now extends through 2022. It calls for NetJets to provide flights, marketing support and charitable contributions to the tour, its tournaments and its players. [...]

Travelex Insurance Services and Berkshire Hathaway Travel Protection Form Partnership

Travelex Insurance Services (Travelex) and Berkshire Hathaway Specialty Insurance Company’s Berkshire Hathaway Travel Protection (BHTP) have formed a strategic relationship. This partnership brings together the financial strength, product underwriting, and claims handling of BHTP with the extensive sales and marketing and travel provider network of Travelex. [...]

Travelex Insurance Services, a leading travel insurance provider in the United States, develops and distributes a comprehensive suite of travel protection products for travel agencies, tour operators, cruise lines, vacation clubs and timeshare operators. [...]

Berkshire News Briefs - 8/30/17

Happy 87th Birthday, Warren Buffett! (August 30, 1930)

The 2nd Quarter 13-F statement is out, showing what stocks Berkshire Hathaway bought and sold last quarter. Dataroma has the best format for visualizing the changes.

Warren Buffett's Berkshire Hathaway builds stake in Synchrony Financial, trims GE position

Billionaire investor Warren Buffett built a new position in consumer finance company Synchrony Financial and boosted his holdings of Bank of New York Mellon by more than 50% in the second quarter of 2017, according to a regulatory filing Monday from Berkshire Hathaway.

Buffett's financial moves are closely watched by Wall Street. In the April-thru-June quarter, Buffett's Berkshire Hathaway also dumped the rest of its stake in General Electric (GE), selling the rest of its roughly 10.6 million share position. [...]

Buffett Nears a Milestone He Doesn't Want: $100 Billion in Cash

It’s a milestone Warren Buffett probably wishes he weren’t approaching.

Berkshire Hathaway Inc., the conglomerate he’s run for more than five decades, reported Friday that it held just shy of $100 billion in cash at the end of the second quarter.

While that figure highlights the staggering money-making ability of the businesses he’s collected over the years, it’s also a burden. Because Berkshire doesn’t pay a dividend and rarely buys back its own stock, Buffett is on the hook to find ways to invest those funds.

Bankrupt utility company abandons $9 billion Warren Buffett deal

Bankrupt Texas utility Energy Future Holdings will abandon a deal to sell power transmission company Oncor to Warren Buffett's Berkshire Hathaway for $9 billion and will accept a $9.45 billion bid for Oncor by Sempra Energy instead, people familiar with the matter said.

The development represents a rare blow for Buffett, who avoids bidding wars for companies and had swooped in two months ago to buy Oncor after two previous attempts by Energy Future to sell it were blocked by Texas regulators. [...]

Buffett wouldn’t negotiate for Oncor. He lost the deal — and a $270 million termination fee

Warren Buffett got oohs and aahs when people thought he’d bagged a $270 million breakup fee after his Berkshire Hathaway Energy was outbid for Oncor by Sempra Energy, which won the company with a $9.45 billion offer. [...]

But, it seems, Berkshire didn’t get far enough along in its bid for Oncor to qualify for the fee.

Even if Berkshire could have claimed the full $270 million, some of that would have been offset by the costs — think lawyers, accountants, analysts, bankers — incurred by pursuing Oncor in the first place. [...]

Buffet's Oncor Failure Is No Failure at All

Reading headlines such as, "Buffett's Latest Dealmaking Flop," and "Buffett Encounters Rare Miss," might make some Berkshire investors wonder if the Oracle of Omaha has lost his touch. Adding insult to injury, the deal fell through too quickly for Berkshire to qualify for its $270 million breakup fee, so Buffett and Berkshire will walk away with nothing. [...]

While Berkshire shareholders (and, I'm sure, Buffett himself) may be disappointed, they should take comfort in Berkshire sticking to its principle of not getting involved in a bidding war. Bending on that principle this time could cause potential acquirees to negotiate harder in the future -- and those could be even larger deals. One wonders if 2015's $32 billion acquisition of Precision Castparts -- a deal 3.5 times bigger than Oncor -- would have happened on attractive terms had Buffett not stuck to his "one offer" policy.

As longtime Berkshire shareholder Steve Walman said in a recent Bloomberg article, "the minute he starts negotiating, he becomes everyone's favorite stalking horse and ends up as 'bid 'em up Buffett.'" Since Berkshire is built on acquisitions, cultivating a reputation for bending on price is not something Buffett wants to do. As he himself once said, "The smartest side to take in a bidding war is the losing side." [...]

Warren Buffett Likes Solar, but Not the Price Tag

Warren Buffett has called global warming a “major problem” and put his company’s money where his mouth is, spending billions to develop solar and wind power. Yet he’s no hero to some renewable energy proponents. Their beef: They say the utility arm of Berkshire Hathaway Inc., his conglomerate, has been trying to undermine an almost 40-year-old law intended in part to promote the growth of cleaner energy. Berkshire, they say, is effectively stifling solar projects to protect utilities it owns, such as PacifiCorp, based in Portland, Ore. [...]

Berkshire Hathaway Energy says it’s not so simple. The company, which owns several utilities using conventional and renewable power sources, is the second-largest owner of clean-energy assets in the U.S. But along with other utilities, it argues that the law is outdated, often raises costs for its customers, and forces utilities to buy more electricity than needed.

The law is called the Public Utility Regulatory Policies Act, or Purpa. Congress enacted it after the 1970s OPEC oil embargo to draw new players into the utility-dominated business of generating power. It required some utilities to buy power from certain power providers if doing so was less expensive than building new plants themselves. The idea was to boost the then-emerging natural gas industry—and perhaps spur renewables including solar.

The act worked—too well, from the standpoint of the utilities. As solar panel prices plunged in recent years, developers deluged utilities with projects to sell them power. Utilities complain the law is producing a surplus of power. Moreover, utilities say the contracts with developers, whose terms are generally set by state utilities regulators, often lock them in for years at high prices that don’t necessarily reflect the current market. [...]

Home Capital had two PE suitors but chose Buffett's bid to secure 'greatest acceptance' from markets

Alternative mortgage lender Home Capital Group Inc. fielded acquisition offers from two different private equity firms in June — one of which raised its bid even after the Toronto company decided to take Warren Buffett’s white-knight deal, according to a proxy circular released on Friday.

The two firms were not named in the document released ahead of a special meeting of shareholders next month, but sources familiar with the process say Home Capital’s two suitors were Onex Corp. and Brookfield Business Partners. [...]

After some consideration, Home Capital’s board rejected the sweetened offer, it said.

“The Board determined that the revised acquisition proposal was inferior to the (Berkshire) Transaction and that the Transaction was in the best interests of the Corporation and continued to provide Shareholders with the best combination of transaction certainty and the potential for enhanced Shareholder value, while meeting the need for strong sponsorship and lower cost standby debt financing,” it said. [...]

Larsen & Toubro sells unit to IMC International for Rs174 crore

(Larsen & Toubro is based in Mumbai, India. Rs174 crore is equivalent to around $27.2 million USD.)

Engineering major Larsen & Toubro Ltd (L&T) on Wednesday said it has agreed to sell its entire stake in its unlisted unit L&T Cutting Tools Ltd to IMC International Metalworking Companies BV, owned by Berkshire Hathaway Inc., for Rs174 crore.

L&T Cutting Tools, incorporated in 1952, manufactures fabricated metal products. [...]

Salton Sea geothermal plant canceled by Warren Buffett's Berkshire Hathaway Energy

It's been 14 years since California officials first approved the Black Rock power plant, which would have tapped a powerful geothermal reservoir along the shore of the Salton Sea and generated enough climate-friendly electricity to power about 200,000 homes. [...]

CalEnergy, which is owned by Warren Buffett's Berkshire Hathaway Energy, asked the California Energy Commission earlier this summer to terminate the license for Black Rock. The company had requested and received extensions of the construction start deadline in 2007, 2011 and 2014, but this time decided to move on rather than pay a $27,678 annual compliance fee that would have been due at the end of June. [...]

"Berkshire Hathaway is big. They've got a lot of wind, they've got solar, they've got other areas. (Geothermal is) a complicated thing to do," Kaspereit said.

Warren Buffett’s Best Advice...and Why He Doesn’t Own Gold

On what he looks for in businesses: "I want a very valuable castle, with a duke in charge of it who is very honest and hardworking and able. Then I want a moat around that castle."

On what he looks for in managers: "We look for three things: intelligence, energy, and integrity. If they don’t have the latter, then you should hope they don’t have the first two either. If someone doesn’t have integrity, then you want him to be dumb and lazy."

On why he doesn’t invest in gold: "You could take all the gold that’s ever been mined, and it would fill a cube 68 feet in each direction. For what that’s worth at current gold prices, you could buy all—not some—of the farmland in the U.S. Plus, you could buy 16 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?" [...]

Billionaire Warren Buffett serenades Gold Jacket Dinner

Warren Buffett and Paul Anka did it their way.

The billionaire investor and the crooner serenaded this year’s class of Pro Football Hall of Fame enshrinees with Anka’s song, “My Way,” at the Gold Jacket Dinner Friday night.

Anka sang a few lines of the song he wrote for Frank Sinatra before pausing to bring his friend, Buffett, to the Memorial Civic Center stage. [...]

Berkshire Hathaway News Briefs - 8/8/17

Berkshire Hathaway: Insurance Losses Drag Down Second-Quarter Operating Earnings

Berkshire Hathaway reported that operating earnings, a figure which excludes volatile investment gains and derivative fluctuations, declined 11% to $4.1 billion in the second quarter compared to the year-ago period. Net income, which includes investment gains, fell 15% to $4.3 billion. A drop in insurance underwriting profit led the decline in operating earnings and net income.

Berkshire Posts Mixed Results as Expenses Rise

Wide-moat-rated Berkshire Hathaway released second-quarter results that were more mixed than we had expected, with the company reporting solid top-line but weaker bottom-line results. We do not expect to change our $290,000 ($193) per Class A (B) share fair value estimate.

Second-quarter (first-half) revenue increased 6.0% (15.3%) to $57.5 ($122.7) billion. Excluding the impact of investment and derivative gains (losses), second-quarter (and first-half) revenue increased 7.3% (and 16.5%). With expenses increasing at a higher rate than revenue during the second quarter, operating earnings declined 10.6% during the period, leaving first-half operating earnings down 8.0%. Net earnings, which includes the impact of investment and derivative gains (losses) were down 14.8% and 21.4% during the second quarter and first half of the year, respectively.

That said, we remain impressed with Berkshire's ability to increase its book value per Class A equivalent share--which rose 14.3% year over year to $182,816 (better than our own estimate of $182,525)--aided primarily by the strong performance of its equity investment portfolio during 2017. The company closed out the second quarter with $99.7 billion in cash on its books, up from $96.5 billion at the end of March and $86.4 billion at the end of 2016.

Berkshire Hathaway Energy Earnings Up on Solar Rebound

Berkshire Hathaway Energy reported a $38 million increase in earnings for the second quarter over a year earlier, largely because of improved performance of BHE Renewables.

The renewable unit saw net income increase $39 million due primarily to higher generation at the Solar Star projects, which were hobbled by transformer-related forced outages in 2016. It also benefited from earnings from tax equity investments reaching commercial operation and additional wind and solar capacity placed in service. [...]

Warren Buffett's Old Retail Businesses Are Oddly Doing Well as Amazon Runs Over Everyone

While bricks-and-mortar retail is largely a disaster, billionaire investor Warren Buffett seems to have struck gold again—in Berkshire Hathaway Inc.'s retail businesses. [...]

Berkshire, too, reported, within its retail segment, that revenue from its home-furnishing retailers [such as Star Furniture and Jordan's Furniture], online kitchen and cooking supplies seller Pampered Chef and candy maker See's Candies, rose in the second quarter. [...]

Berkshire's retailers are set up primarily as standalone stores or are online, and are not tied to malls, which makes the business less exposed to the downturn in the industry. [...]

With e-commerce hurting malls, See’s Candies seeks way forward

[...] Nearly half of See's 240 stores are located in malls, a format suffering from dwindling traffic and the financial stress of anchor tenants like department stores. [...]

The company does not release financial results, but CEO Brad Kinstler tells me See's annual sales typically grow in the mid-single digits. IBISWorld research firm estimates that See's generated about $485.3 million in revenue last year, representing 5 percent annualized growth rate over the past 5 years.

The synergies between making and selling chocolate, combined with low cocoa prices, affords See's with robust profit margins, IBISWorld says. The firm estimates that See's controls about 31.4 percent of the specialty chocolate retail market, far ahead of Godiva (18.4 percent) and Lindt & Sprungli (10 percent). [...]

Kinstler insists that See's draws its own traffic, independent of the mall anchors. But he does acknowledge that the struggles of malls pose potential problems for his company.

"It’s a tough time to operate a business inside a mall," Kinstler said. "It will take a while before we know what indoor malls look like in the future." [...]

Berkshire Hathaway sets up specialist insurer in Dublin

Berkshire Hathaway has established a speciality insurance business in Ireland aimed at winning a share of the commercial insurance market here . The company will target larger business clients in sectors such as commercial property, general commercial liability, healthcare liability and finance. [...]

BHSI [Berkshire Hathaway Specialty Insurance] is part of the global empire of Berkshire Hathaway, the giant US company led by Warren Buffett, which has stakes in major businesses worldwide. The move to Ireland is an expansion of its existing European speciality insurance business, run from London, which provides commercial property, casualty, executive and professional lines, including cyber and healthcare liability insurance. [...]

Paxton shoots down loophole for Buffett’s Texas dealerships

Texas Attorney General Ken Paxton is declining to come to the rescue of Warren Buffett’s automobile dealerships in the state.

In an opinion issued late Monday afternoon, Paxton essentially said that legal semantics are unlikely to be successful in helping Buffett’s Berkshire Hathaway conglomerate maneuver around a Texas law that appears to prohibit it from owning dealerships in Texas because it also owns an Indiana-based manufacturer of recreational vehicles. [...]

Buffett's Profit From This Paint Company Has Been Almost Wiped Out

Warren Buffett’s profits from a 2015 investment in Axalta Coating Systems Ltd. have been fading.

Axalta, the maker of paint for autos, plunged 7.9 percent Thursday in New York to $29.25. That compares with the $28 price that Buffett’s Berkshire Hathaway Inc. agreed to pay two years ago for 20 million shares, for a total of $560 million. His Omaha, Nebraska-based company acquired the stock from affiliates of Carlyle Group LP. [...]

Berkshire was the largest investor in the coatings company as of Dec. 31, with a stake of more than 9 percent, according to a filing from Philadelphia-based Axalta. [...]

Berkshire Hathaway Inc. Stock Is Increasingly Less About Buffett

Berkshire Hathaway was so big, and commanded so much capital, that many of his ideal picks might only end up as a rounding error on the book value of the stock. So he changed course. He hired two “young guns,” as he called them, and turned over two small portions of Berkshire Hathaway’s capital to manage.

Todd Combs and Ted Weschler continue to out-gun their boss, not by being particularly better, but rather by doing what Buffett used to do when Berkshire Hathaway was new and small. They bought stocks that were classic Buffett. And since their funds were relatively small — at a billion dollars or so — they could at least make an impact on their portion of Berkshire’s stock value. [...]

But now, Buffett as well as Combs and Weschler are changing course. The new course will be to de-emphasize stock selection and in turn run the company as a collection of its operating businesses. This will effectively make Berkshire Hathaway more of a traditional big conglomerate company rather than a stock-picking investment company. [...]

Berkshire News Briefs - 8/1/17

Berkshire and Blue Chip Stamps

Rick Guerin, an early partner of Buffett and Munger's, realized Blue Chip shares were quite attractive (at this time, the market cap was approximately $40 million). It is worth noting Blue Chip Stamps was already in decline by the late 1960s. From 1970 to 1980, revenues would decline by more than 85%. [...] Despite the significant drop-off in revenues mentioned above, float only declined by around 30% (cumulatively) from 1970 to 1980. Pabrai estimates the “permanent float” at Blue Chip was somewhere around $60 million.

But the float was of limited value in the wrong hands. Buffett, Guerin and Munger thought it was being mismanaged. One way to effect change was to effectively take control of the company: between 1967 and 1970, they invested $24 million in Blue Chip – good for 60% ownership [...]

Now they had roughly $60 million to work with. In 1972, they took $25 million and bought 99% of See’s Candies. In 1973, they took another $25 million and bought 80% of Wesco Financial. Finally, in 1977, they took another $35.5 million and bought the Buffalo Evening News (with roughly 70% of the purchase price funded with the retained earnings from See’s Candies). [...]

Warren Buffett is building up a 'recession resistant' energy powerhouse

From California to the Midwest, billionaire investor Warren Buffett is steadily building an energy powerhouse.

Buffett’s Berkshire Hathaway Energy subsidiary has gobbled up utilities and natural gas pipelines and tapped into clean energy production, including from Southern California’s abundant geothermal resources. [...]

Berkshire Hathaway appears to be doing all it can to counter a purported death spiral of economic harm that power companies face because of growing energy efficiency regulations, consumers generating their own power with rooftop solar panels and the advent of electricity storage options in homeowners’ garages. [...]

Berkshire Is in Talks to Buy a Stake in IRB Brasil Resseguros

Berkshire Hathaway Inc., the firm run by billionaire investor Warren Buffett, is in talks to buy a stake in Latin America’s biggest reinsurer, IRB Brasil Resseguros SA, after an initial public offering of stock, according to two people with direct knowledge of the matter.

No deal is likely to be completed before July 27, IRB’s IPO pricing date, the people said, asking not to be named because the discussions are private. The acquisition could be made through Berkshire’s General Re unit, they said. JPMorgan Chase & Co. is advising Rio de Janeiro-based IRB, according to the people. [...]

Home Capital repays $2 billion line of credit from Berkshire Hathaway

Home Capital Group, the Toronto-based alternative mortgage lender that was on the verge of collapse earlier this year, says it has repaid a $2-billion line of credit from Berkshire Hathaway.

The company was given the financial lifeline last month by Berkshire Hathaway, which is headed by Warren Buffett, as it was trying to regain investor confidence following a run on deposits from customers.

When it provided the line of credit, Berkshire Hathaway also bought a $400 million stake in Home Capital. [...]

Berkshire’s Clayton Homes division expanding into $250,000-and-under housing market

Berkshire Hathaway’s Clayton Homes division, known for its factory-built houses, is expanding into the site-built, $250,000-and-under housing market.

Since October 2015 Clayton has acquired homebuilders in Atlanta; Nashville, Tennessee; Kansas City; Denver; and, earlier this month, Birmingham, Alabama, and is building homes on-site at a rate of 2,500 to 3,000 a year.

Clayton isn’t choosing cities and then looking for homebuilders to buy [...] the idea is to identify builders with the right management and culture, and then check out their growth potential. The acquired builders keep their managements and names.

Walsh said Berkshire’s financial strength and Clayton’s buying power — imagine the lumber needed for 45,000 factory-built homes each year — are advantages that can give the acquired companies an edge over the competition. [...]

Elliott Tries a Texas Charm Offensive to Outdo Berkshire's Oncor Bid

While Elliott Management Corp. tries to cobble together enough money to beat Berkshire Hathaway Inc.’s $9 billion bid to buy one of America’s largest transmission operators, it has another problem to deal with: the state of Texas.

The New York hedge fund run by billionaire Paul Singer is trying to convince Texas stakeholders that its deal to buy their biggest power distributor, Oncor Electric Delivery Co., will be superior to Berkshire’s. [...]

Duracell to close South Carolina battery plant by end of 2018

Duracell has filed a notice with labor officials that it will close a South Carolina battery plant sooner than projected.

The shutdown of the Lancaster factory was announced one year ago, a few months after the company after being acquired by Warren Buffett’s Berkshire Hathaway conglomerate. [...]

The Lancaster factory manufactures AA batteries. Duracell is consolidating North American production of those to LaGrange, Ga. [...]

Keeping Tabs on the Billions and Billions That Warren Buffett Is Giving Away

In 2006, Warren Buffett famously pledged to give away most of his Berkshire Hathaway stock, saying that the bulk of those holdings would go to the Bill and Melinda Gates Foundation and the rest to the four foundations controlled by his three children.

Since then, Buffett has given away 40 percent of the Berkshire Hathaway shares that he held in 2006, gifts worth about $27 billion. Buffett’s annual gifts to the five foundations, announced this week, were worth a record-breaking $3.17 billion. [...]

[...] while many people are under the impression that all of Buffett’s fortune is earmarked for the Gates Foundation, the gifts to his children’s foundations have turned out to be enormous in their own right—and are bankrolling a wide array of grantmaking both in the United States and abroad. This year, according to Forbes, Buffett sent around $2.4 billion worth of stock to the Gates Foundation. The other $800 million or so went to the family foundations—the Susan Thompson Buffett, Sherwood, Novo, and Howard Buffett foundations. [...]

Also, a story about a different Buffett's charity work:

Howard Buffett's millions help jump-start Decatur's recovery

[...] Nevertheless, the Howard G. Buffett Foundation has given or pledged $55.1 million in the city and surrounding Macon County over the past two decades to help stanch the area's hemorrhaging population. Dozens of grants, including those paying for a new lakefront amphitheater and a law enforcement training facility, aim to help make the area a better place to live.

"The bottom line is, what can you do to make a community more attractive to younger people, and how do you make it attractive so the people that are here stay here?" Buffett said. "A lot of our contributions, if you cut down to the bottom of it, that's what they do." [...]

Berkshire News Briefs - 7/15/17

With Bank of America's dividend hike, Warren Buffett gets his chance at a $11 billion windfall

[...] Berkshire has warrants to buy 700 million common shares of Bank of America at $7.14 each, or about $5 billion. And Bank of America just did what Berkshire was waiting for: after passing the second of two annual stress tests by the Federal Reserve, it got the go-ahead to hike its annual dividend to 48 cents a share, or 12 cents a quarter, a 60 percent increase.

That is enough for Berkshire to consider exercising those warrants rather than waiting until just before their expiration in 2021. At Bank of America's current share price, the stake would hand Berkshire a tidy $11.7 billion profit, at least on paper. [...]

Berkshire Hathaway makes deal to win PUC approval of Oncor acquisition

Berkshire Hathaway has tentatively agreed with regulators and customer advocates to wall off Dallas-based utility Oncor from risks and debts of its parent company, a step that could help the conglomerate win approval for the $9 billion deal to acquire the largest utility in Texas and Oncor's bankrupt parent.

The move is aimed at protecting ratepayers from incurring costs not related to the distribution of electricity and ensuring that Oncor has the resources to maintain its transmission lines and the reliability of the system. Such concerns led the state Public Utility Commission to reject two earlier bids to buy Oncor and its parent, Energy Future Holdings, out of bankruptcy.

Late Thursday, Berkshire Hathaway Energy, a subsidiary of billionaire investor Warren Buffett's Berkshire Hathaway, said it would pay $9 billion to acquire Energy Future Holdings and Oncor, which provides electricity to 10 million Texans. Oncor owns and operates the grid for most of North Texas. Energy Future Holdings has been in bankruptcy for three years as it has worked to restructure its $40 billion debt.

Berkshire said it values Oncor at $11.25 billion. Another group may bid for Oncor, Bloomberg News reported Friday, citing unnamed sources. [...]

Berkshire Hathaway's Clayton Buys Oakwood Homes

Clayton Properties Group buys Oakwood Homes in a deal that closed Monday, July 3.

Oakwood is Clayton's 4th acquisition of a site-build home building operator, and the largest by far, of the deals, as well as the first one outside the Southeast region. [...]

Oakwood owns 3,000 to 4,000 lots, but has control of 18,000, which allows for continued accelerated growth with the capital access the Clayton deal will provide.

In Oakwood, and with Pat Hamill and his team continuing to run and grow the company, Clayton sees a strong cultural fit as well as a company that can help it on its strategic mission to expand its buyer universe with a price-range sweet spot between its $150,000 top price for its manufactured homes, and prevailing entry-level single-family price points, which tend to exceed $225,000. [...]

Clayton Buys Birmingham's Harris Doyle Homes

Clayton Properties Group will announce today the purchase of home building operator, Birmingham, Ala.-based Harris Doyle Homes.

The Clayton acquisition is the fifth site-build company added to the nation's largest manufactured home builder, whose market share is 50% of the category, which accounts for seven in 10 homes priced below $150,000.

Clayton's Harris Doyle announcement follows last week's closing of a deal to purchase Oakwood Homes, the Colorado-Utah home builder known as one of the most technologically progressed large enterprises. [...]

Sprint executives have engaged Warren Buffett about investment

Sprint Corp. Chairman Masayoshi Son has engaged Warren Buffett and cable mogul John Malone in discussions about participating in a deal with the wireless company, people familiar with the situation say.

The Japanese billionaire met separately with the Berkshire Hathaway Inc. boss and Mr. Malone, whose Liberty Broadband Corp. is one of Charter Communications Inc.'s biggest investors, this week at an annual gathering of CEOs in Sun Valley, Idaho, the people said.

The contours of the deal the parties are discussing are unclear. The talks are at an early stage and may not result in an agreement, the people said, but one possibility would see Berkshire put more than $10 billion into a transaction. [...]

Warren Buffett casts big shadow in banking world

Warren Buffett’s Berkshire Hathaway is now the largest single shareholder of Bank of America — but that’s not the only piece of Wall Street he owns.

Buffett, 86, is also the biggest shareholder of Wells Fargo, with a little under 10 percent of the San Francisco bank, and US Bancorp, a Minneapolis bank that’s among the largest in the country.

In addition to those holdings, he’s also the seventh biggest owner of Goldman Sachs and Bank of New York Mellon — and the eighth largest shareholder of M&T Bank, a Buffalo bank with $16.5 billion in assets. [...]