Berkshire News Briefs - 3/18/17

7 Enlightening Lessons From Berkshire Hathaway’s 2016 Annual Report

Just the lesson headings:

Lesson #1 - Book Value is an Imperfect Measure of Intrinsic Value
Lesson #2 – Dilution Destroys Shareholder Value
Lesson #3 – Buffett is Bullish on the American Economy
Lesson #4 – Bargain Hunting Combined with Long Holding Periods Create Substantial Value
Lesson #5 – Share Repurchases Build Value, Regardless of What the Skeptics Say
Lesson #6 – Cheap Leverage is an Incredible Advantage
Lesson #7 – Berkshire Has an Invisible Stake in Bank of America

BNSF agrees to clean up coal, petcoke emitted from rail cars

BNSF Railway Co. will clean up coal and petroleum coke in waterways, fund a study of rail-car covers and pay $1 million for environmental projects in Washington state, according to consent decree filed in U.S. District Court. [...]

Under the decree, BNSF will pay for the cleanup of Pacific Northwest waterways that were polluted by coal or petroleum coke that spilled from open-topped rail cars.

In addition, BNSF will pay $1 million for environmental projects in the Bellingham, Puget Sound, Columbia River and Spokane River areas. The Class I also will clean up areas of the Columbia River and its tributaries that have been littered with coal and petroleum coke from BNSF trains.

Moreover, the decree requires the railroad to fund a study about covers for rail cars carrying coal and petroleum coke. [...]

Additionally, BNSF denies any violations of the Clean Water Act, and the U.S. District Court judge did not find any specific violations. [...]

NV Energy seeks approval for rooftop solar alternative with Apple ties

Recall Berkshire Hathaway Energy subsidiary NV Energy's feud with Solar City over net metering in Nevada from last year...

NV Energy is seeking approval from state regulators for a renewable energy program that is aimed at providing an alternative to rooftop solar via energy sources based in the state, including one in conjunction with Apple. [...]

The Subscription Solar program allows NV Energy customers to subscribe each month to at least 100-kilowatt hour blocks of solar energy generated from within the state. The energy will be provided by the company’s Boulder Solar I facility, which has set aside 10 megawatts for the program, as well as the Techren II facility, which is a joint venture with Apple. The latter has set aside 5 megawatts for the program and will be online by 2019. [...]

The program will allow residential customers and, eventually, small to mid-size businesses to meet as much as 100 percent of their energy needs with renewable energy. NV Energy cited rooftop solar as a key factor in the creation of the program. [...]

KITCO Fiber Optics Joins Marmon Aerospace & Defense LLC

Marmon Aerospace & Defense LLC, a Marmon/Berkshire Hathaway company, today announced the acquisition of KITCO Fiber Optics of Virginia Beach, VA, a highly-respected leader in the specialty, military, and aerospace fiber optic industries. Terms were not disclosed.

While KITCO will continue to operate as an independent business, its products complement those of Marmon Aerospace & Defense. Together, the two businesses will offer defense industry customers unique, focused product and service capabilities for electrical, electronic, fiber optic, and communication solutions. Their collective resources will enable continued growth and innovation for both Marmon and KITCO in service to the U.S. defense industry. [...]

Dairy Queen Celebrates First Day of Spring With Free Cone Day on March 20

Drones have delivered products and pizzas. Now drones are delivering cones – for a good cause. To kick off Free Cone Day on March 20th, which is also the first day of Spring, DQ® enlisted the help of a drone to deliver cones to a few lucky fans. It was the first time the Berkshire Hathaway company has delivered cones by drone. For the rest of us, we can get our free cone at DQ all day on Monday, March 20th. Participating locations also will be collecting donations for Children’s Miracle Network Hospitals, which raises funds to help save and improve the lives of kids treated at 170 children’s hospitals across the U.S. and Canada. [...]

Buffett's pay rises; Berkshire urges rejection of shareholder proposals

Warren Buffett's compensation for running Berkshire Hathaway Inc. edged up 4.0 percent last year to $487,881 reflecting the higher cost of keeping the world's second-richest person safe. [...]

Berkshire said Buffett's salary in 2016 was $100,000, the same amount he has received for more than a quarter century, while the cost of providing him with home and personal security services rose to $387,881 last year from $370,244. [...]

Barack Obama Grabs Lunch with Billionaire Warren Buffett at Omaha Country Club

Former president Barack Obama made a quick stop in Omaha, Nebraska, Sunday afternoon to grab lunch with billionaire investor Warren Buffett, the Omaha World-Herald reported. The two were joined by Buffett’s daughter Susie Buffett for lunch in a private room at the Happy Hollow country club, where Warren Buffett is a member. [...]

While Susie Buffett remained quiet about the topics of conversation at the lunch meeting, some sources speculated the Obama visit was an effort to raise funds from the elder Buffett for his presidential library or other charities. [...]

Berkshire News Briefs - Annual Report Edition - 3/2/17

The 2016 Berkshire Hathaway Annual Report came out last Saturday, so naturally most of the news this week is about it.

Berkshire Hathaway's Operating Earnings Slip 6%

Berkshire Hathaway reported that its fourth-quarter net income grew about 15% compared with the year-ago period, helped by gains on its investments and derivatives portfolio. However, operating earnings, the metric Warren Buffett has long explained is the most important for understanding the company's true earnings power, declined about 6% to $4.4 billion, from $4.7 billion in the fourth quarter last year. [...]

Highlights From Warren Buffett’s 2016 Annual Letter

What we can take away from this brief discussion is that the gap between Berkshire’s book value and intrinsic value has grown over time and, with additional successful acquisitions, should continue to grow in the future. To be clear, important aspects of Berkshire’s results will show up in book value in the future. Berkshire’s retained earnings are fully reflected in book value. Additionally, changes in the value of marketable securities (with few exceptions) are also reflected in book value, net of deferred taxes. However, to the extent that the economic goodwill of Berkshire’s wholly owned subsidiaries continue to increase, the gap between book value and intrinsic value will continue to grow. [...]

Mixed Year at Berkshire Doesn’t Change Our View

There was little in wide-moat-rated Berkshire Hathaway's fourth-quarter and full-year results that would alter our long-term view of the firm. We do not expect to make any changes to our $255,000 ($170) per Class A (B) share fair value estimate or to our wide-moat rating. [...]

We remain impressed with Berkshire's ability to increase its book value per Class A equivalent share, which rose 10.7% year over year to $172,108 (higher than our own estimate of $167,878). This was aided by much stronger performance from its investment portfolio during 2016. The company closed out the year with $86.4 billion in cash on its books, up from $84.8 billion at the end of September and $71.7 billion at the end of 2015. [...]

Full transcript of billionaire investor Warren Buffett's interview with CNBC

"I absolutely look at individual stocks. It has nothing to do what the Federal Reserve, it has nothing to do with the election. As it does have, it would have something to do with interest rates if they did something extraordinary. It hasn't had, because they haven't been, they haven't changed that much. But there just were a couple of things I wanted 'em to do and we had the money. And I like investing. And I would much rather have that $20 billion in these companies that I don't look at it as being in stocks, I look at it as being in businesses. It's just small pieces of businesses. [...]"

Warren Buffett's Shareholder Letter: 5 Lessons for All Investors

There are few things more valuable for serious investors to read each year than Warren Buffett's annual letter to the shareholders of Berkshire Hathaway.

His letter for 2016, released early Saturday morning, is no exception. In it, Buffett covers his usual range of subjects, from the performance of Berkshire Hathaway and its operating units, to the future prospects of the United States, to advice for corporate executives and individual investors.

The whole letter is worth reading -- it is, after all, less than 30 pages long. But for those of you who want to view the highlight reel, here are my five favorite takeaways from Buffett's latest shareholder letter. [...]

Warren Buffett’s Berkshire Hathaway Bought 72 Million Shares of Apple in One Month

On Monday, Buffett told CNBC his insurance and investing conglomerate had bought 72 million of Apple's shares in the first month of January alone. He also owned up to the fact that Apple is one of the legendary investor's own stock picks, and not one chosen by his lieutenants. [...]

Berkshire started buying shares of Apple in mid-2016, and had 61 million shares by the end of the year. Buffett said Berkshire's Apple stake is now more than double that, and worth about $17 billion and amounts to 133 million shares. Buffett bought his most recent stake between Jan. 1 and Jan. 31—the day Apple reported that its sales rose $2.5 billion, or 3%, in the last three months of 2016, which was higher than expected. [...]

Berkshire Hathaway's Lubrizol takes $365 million loss on oilfield business

The company disclosed in its annual report Saturday that results at its chemical unit, Wickliffe-based Lubrizol, included pretax losses of $365 million last year related to the “disposition in the fourth quarter of an underperforming business.” No other details were provided in the document.

The business? Lubrizol’s Oilfield Solutions unit, according to Julie Young, a spokeswoman for the company. The division was created in late 2014 to house businesses purchased from Weatherford International Plc and Phillips 66, as well as some legacy operations. [...]

Proudly Permabullish

Buffett’s the Permabull-in-Chief. This is not the same as saying that he always believes it’s a great time to buy every stock or that he believes he has some edge on where stock prices will be this year or next. Because neither is true.

One of the hallmarks of Berkshire’s success has been its willingness to raise or lower its formidable cash hoard in response to the presence (or lack thereof) of viable investing opportunities. One of the other hallmarks of Buffett’s approach has been to tune out forecasts and de-emphasize the importance of them in general. [...]

Charlie Munger on Getting Rich, Wisdom, Focus, Fake Knowledge and More

"In the chronicles of American financial history," writes David Clark [...] "Charlie Munger will be seen as the proverbial enigma wrapped in a paradox— he is both a mystery and a contradiction at the same time."

On one hand, Munger received an elite education and it shows: He went to Cal Tech to train as a meteorologist for the Second World War and then attended Harvard Law School and eventually opened his own law firm. That part of his success makes sense.

Yet here's a man who never took a single course in economics, business, marketing, finance, psychology or accounting, and managed to become one of the greatest, most admired, and most honorable businessmen of our age, noted by essentially all observers for the originality of his thoughts, especially about business and human behavior. [...]