Berkshire News Briefs - 9/21/16

Warren Buffett: I won't comment on the Wells Fargo scandal until November (Business Insider)

Warren Buffett is waiting until after the election to weigh in on Wells Fargo.

Buffett told Fox Business' Liz Claman that he will not comment on the bank's scandal until November. Buffett is the largest shareholder of Wells Fargo and recently petitioned the Federal Reserve to increase his ownership stake above 10%. [...]

Wells Fargo recently settled with regulators for $185 million after it came to light that employees had opened around 2 million accounts without the knowledge of customers. About 5,300 of the bank's employees were fired as a result of the scandal. [...]

Buffett Now Phillips 66's Top Owner (Investopedia)

Shares of Phillips 66 rose after the news this week that billionaire Warren Buffett had increased Berkshire Hathaway Inc.'s holdings of the energy company by 1,019,974 shares, making Berkshire the largest holder. Berkshire now owns about 15.4% of the stock outstanding, or a total of 80,671,982 shares. [...]

Nevada Approves SolarCity’s Deal With Berkshire’s NV Energy

Nevada regulators have approved a deal between Berkshire Hathaway Inc.’s NV Energy utility and SolarCity Corp. that will roll back rate hikes for existing rooftop solar customers. The Nevada Public Utilities Commission voted 3-0 on Friday in favor of a settlement that will shield more than 32,000 rooftop solar customers in the state from increased fees that took effect in January. Earlier this week, NV Energy and SolarCity had asked the commission to approve an agreement that would grandfather those who signed up to use home solar prior to January under more favorable rates for 20 years. [...]

Berkshire Hathaway Will Do Just Fine After Buffett (Fortune)

Investment research firm Morningstar released a note on Sept. 2 that eased a widespread fear that without the now 86-year-old Oracle of Omaha and his partner, 92-year-old Charlie Munger, Berkshire Hathaway would collapse.

“The key to Berkshire’s success over the years has been Buffett’s ability to not only find fruitful ways to put the firm’s excess capital to work but in paying close attention to culture and fit when acquiring companies,” wrote Greggory Warren, senior equity analyst at Morningstar. “Berkshire’s culture of management autonomy and entrepreneurship has to a large degree become institutionalized.” [...]

Berkshire Hathaway firm CTB to buy 80% stake in Cabinplant (Packaging Business Review)

Berkshire Hathaway company CTB has agreed to purchase 80% stake in Danish company Cabinplant for an undisclosed sum. Based in Haarby, Cabinplant provides processing and weighing / packing solutions for the food industry. [...] The company, which has around 300 employees, carries out operations in about 30 countries. CTB said that the Cabinplant’s poultry processing equipment complements its Meyn poultry processing subsidiary.

Pasta Equipment Maker Dominioni Joins Marmon (BusinessWire)

Marmon Food, Beverage & Water Technologies Company, part of Berkshire Hathaway Inc., today announced the acquisition of the assets of Dominioni Punto & Pasta S.r.l., a leading Italian supplier of commercial pasta equipment, by Marmon Pasta Solutions S.r.l. Terms were not disclosed.

Founded in 1968 by Pietro Dominioni, the family-run business designs and produces professional pasta equipment for the restaurant, hospitality, and catering markets, as well as high-volume pasta manufacturers. The business will continue to operate under the Dominioni brand name and its operations will remain based in Lurate Caccivio (Como). Fabrizio Dominioni, son of the founder, will continue to manage the business. [...]

J.P. Morgan Names Berkshire Hathaway Investment Manager Combs to Board (NASDAQ)

J.P. Morgan Chase & Co. on Tuesday said it named Berkshire Hathaway Inc. investment manager Todd Combs to its board, bringing into the fold an heir-apparent of billionaire investor Warren Buffett's enterprise.

Mr. Combs, 45 years old, is a former hedge-fund manager who began working at Berkshire in 2011. He and a counterpart, Ted Weschler, manage portfolios of about $9 billion each, but they will take over all stock-picking duties when Mr. Buffett is no longer running the firm.

Mr. Combs has served as a director at Precision Castparts since late January, according to a regulatory filing. [...]

Berkshire Hathaway and underwriting unit sued for running ‘reverse Ponzi scheme’ (MarketWatch)

A New York City-based courier service has sued Berkshire Hathaway Inc. and one of its companies, saying they’ve been running a “fradulent scheme” by misusing premiums that were supposed to be used for funding its workers’ compensation coverage.

Breakaway Courier Systems in a lawsuit filed Friday said Berkshire and its Applied Underwriters company have engaged in what was “essentially a reverse Ponzi scheme.” [...]

Berkshire Agrees to Stop Selling EquityComp Policies in California (Insurance Journal)

California Insurance Commissioner Dave Jones on Tuesday approved an order agreed to by California Insurance Co. and Applied Underwriters Captive Risk Assurance Company Inc. under which they will stop selling workers’ compensation policies that the two Berkshire Hathaway companies used without filing key addendums to the policies. [...]

Jones’ action stemmed from his decision that a complex insurance scheme in a case involving a company called Shasta Linen. [...] Jones found that the insurance companies issued the policies and rates without his approval. He also ruled that the companies designed the program with the intent of avoiding the review of insurance regulators.

World’s Smartest Investor Outperforms With Boring Utilities (Oil Price)

[...] But several years ago, Buffet began steering Berkshire into investments unusual for a financial concern. He purchased a number of regulated electric utilities and a railroad, the Burlington Northern. These investments have much in common. They provide essential services in slow growing markets. They generate steady albeit modest returns. They require ongoing, large capital investments to maintain current levels of service and, as long as investment takes place, they generate substantial income tax deferrals that can also be invested profitably. Since these businesses are growing, at least in term of their assets--and some level of profitability is virtually assured--the owner or investor can still reinvest their capital at a reasonable return. They don’t have to worry about the vagaries of public markets equity or fixed income. They can invest in themselves so to speak. [...]

A psychologist reveals the persuasive tactic Warren Buffett uses to make his shareholders trust him (Business Insider)

[...] This unabashed recounting of Berkshire Hathaway's setbacks isn't unique to the 2012 letter; in fact, Buffett frequently opens his letters this way.

According to psychologist Robert Cialdini, this strategy is brilliant. Cialdini is a professor emeritus of psychology and marketing at Arizona State University, the CEO and president of Influence at Work, and the author of the new book "Pre-Suasion," in which he highlights the invisible interpersonal forces behind our behavior.

In the book, he highlights Buffett's letter-writing strategy as a prime example of a "pre-suasive" tactic, or a way to influence people to behave a certain way in the moments before they make their decision. In this case, the decision might be whether to start or continue investing in Berkshire Hathaway. [...]

Berkshire News Briefs - 2/9/16

As Berkshire Hathaway meeting set to be streamed online, will fewer make Omaha pilgrimage? (Omaha World-Herald)

Berkshire Hathaway’s annual meeting, which draws nearly 40,000 people to Omaha each year in a pilgrimage to see investor Warren Buffett, will be streamed over the Internet this year for the first time, the company’s chief financial officer told The World-Herald.

That could have implications for the city’s tourism industry: People from around the globe descend on Omaha each year, filling hotels and restaurants. They also shop at Berkshire-owned stores, which offer discounts to shareholders during the annual meeting weekend. Will it keep people away from fair Omaha, which once a year is dubbed Woodstock for Capitalists?

Meeting Ted Weschler (Yaniv's Blog)

Many value investors, at some point of their careers, get to “see the light” and move away from investing in what’s called “cigar butt investing” (bad business at a great price) to investing in companies that trade at richer valuations but have great underlying businesses (great businesses at a reasonable price). The fortunate few, manage through this transition without a negative impact on performance. I asked Ted about this transition process and how he sees the two approaches. He said that when you try to map the risks that inherent to a “cigar butt” investing you end up with a much longer list than when you carry out the same exercise with a high quality business. Of course, many investors manage to achieve great performance over time with the bad-business-at-a-great-price approach so that is not to say that there is anything wrong with this approach–these are just two different styles. [...]

Berkshire purchases Castparts for $37B (Lincoln JournalStar)

Berkshire Hathaway completed its $37.2 billion acquisition of Precision Castparts on Friday.

Berkshire Hathaway’s acquisition of the manufacturer of components for aircraft, power plants and other industries reportedly is its biggest deal ever.

Warren Buffett agreed to purchase Precision Castparts in August.

Berkshire Hathaway names new board of directors for Precision Castparts (Omaha World-Herald)

In a securities filing Thursday, Berkshire said the directors are Warren Buffett, chairman and chief executive of Berkshire; Todd Combs, a Berkshire investment officer; Marc Hamburg, chief financial officer of Berkshire; and three Precision Castparts executives: CEO Mark Donegan, corporate counsel Ruth Beyer and Shawn Hagel, chief financial officer.

Donegan and Hagel were directors before Berkshire’s $32 billion purchase of Precision Castparts [...]

Musk vs. Buffett: The Billionaire Battle to Own the Sun (Bloomberg)

Buffett got into utilities in 1999. While many investors chased the latest Silicon Valley IPO, he bought a nice electric company in Des Moines. Building power plants and maintaining the grid offered almost endless opportunities to reinvest cash, which he had a lot of. And, as a monopoly providing an essential service, the local power company wasn’t going away anytime soon. Owning utilities isn’t “a way to get rich,” he later said. “It’s a way to stay rich.”

By 2013 the energy unit at Berkshire had expanded to include power companies serving parts of Oregon, Washington, Idaho, Wyoming, and Utah. It had also invested billions of dollars in wind farms in Iowa and giant solar arrays in California and Arizona. Two months after SolarCity got its love money from Nevada, Buffett offered $5.6 billion to buy NV Energy. Soon after Berkshire completed the purchase, NV Energy accounted for about a fifth of the company’s energy revenue. [...]

Buffett's BNSF to Cut Spending $1.5 Billion as Cargo Slumps (Bloomberg)

BNSF Railway Co., the railroad owned by Warren Buffett’s Berkshire Hathaway Inc., plans to reduce capital expenditures for the first time in six years as railroads seek to rein in costs amid a freight slump.

The rail carrier said Tuesday that it will spend $4.3 billion, down 26 percent from a record $5.8 billion in 2015, on locomotives, rail cars, track and maintenance. BNSF had increased investment since 2010, which marked a six-year low of $2.7 billion. [...]

Warren Buffett ups stake in Phillips 66 — again (Houston Business Journal)

Warren Buffett’s Nebraska-based Berkshire Hathaway Inc. has further increased its stake in Houston-based Phillips 66.

During the first three days of February, the company bought about 1.7 million Phillips 66 shares for nearly $132 million, according to CNBC. That means that over the past 30 days alone, the company has bought 12.5 million shares for $964 million.

The company now owns 73.98 million shares — or nearly 14 percent of Phillips 66 — worth about $5.9 billion, the Associated Press reports. [...]

What Happens After Warren Buffett Leaves Berkshire Hathaway? (Fool)

Warren Buffett has made it clear that the board of directors already knows who Berkshire's next CEO will be. And while the identity of that person remains a secret, we do have a couple of clues:

Berkshire's directors believe that future CEOs should come from internal candidates.

The new CEO will be relatively young -- Buffett wants the next CEO to stay on the job for decades and says that the company will operate best if its CEOs stay for 10 years or more. [...]

Warren Buffett will be advisor for 'Celebrity Apprentice' (CNBC)

Warren Buffett continues to raise his public profile with an upcoming appearance on the new season of NBC's "The Celebrity Apprentice."

In a news release, the network says that Buffett, "one of the most successful businessmen in the world," will be an advisor on the program, along with former Microsoft chief and Los Angeles Clippers owner Steve Ballmer, model and businesswoman Tyra Banks, actress and entrepreneur Jessica Alba, and entertainment attorney Patrick Knapp Schwarzenegger. [...]

Berkshire News Briefs - 5/13/14

Greg Abel: The Next Oracle of Omaha? (Bloomberg)

For years, Abel worked in the shadow of his business partner, David Sokol, who was widely thought to be in the race until he resigned in 2011 amid a stock trading scandal. Abel is not in the shadows now. He led Berkshire’s second-biggest acquisition last year, paying $5.6 billion for Nevada’s largest electric utility, NV Energy. And he was named to the board of ketchup maker H.J. Heinz, which Berkshire took private with partners in a $23.3 billion deal in 2013.

NRG Energy Inc. and MidAmerican Energy Announce Completion of World's Largest Solar Farm (Fool)

Clocking in at 290 MW, the NRG Energy, and MidAmerican Energy Agua Caliente joint venture is a new record -- the largest fully operational solar photovoltaic facility in the world. [...] The Arizona solar facility spans 2,400 acres between Yuma and Phoenix, and is capable of powering 230,000 homes at peak capacity. As is most often the case with utility-scale solar projects, all electricity has already been sold to PG&E under a 25-year power-purchase agreement.

Berkshire to Buy SNC’s AltaLink in Buffett Energy Wager (Bloomberg)

Berkshire Hathaway Inc.’s energy unit agreed to buy SNC-Lavalin Group Inc.’s AltaLink for about $C3.2 billion ($2.9 billion) in cash to expand in electricity transmission in western Canada. The deal adds 280 substations and about 12,000 kilometers (7,500 miles) of transmission lines, according to a statement yesterday from the power unit at Warren Buffett’s Berkshire. [...] Founded in 2002, AltaLink owns more than half the transmission grid in the Canadian province of Alberta and serves 85 percent of its population. Net income for the unit was C$161.6 million on revenue of C$534 million last year, according to a regulatory filing. AltaLink said in a separate statement that it will operate under its current name within the Berkshire business and continue to be based in Calgary.

1 Warren Buffet Business Just Revealed How Utilities Can Unlock the Power of SolarCity (Fool)

Even on a good day when utility executives are in a chipper mood, they will probably still describe SolarCity as a "nuisance". The company is the most visible representation of the distributed solar movement, and for many utilities it is a disruption of the business model they have become accustomed to over many years. Several utilities have taken up opposition to distributed solar, but one of Warren Buffets recent acquisitions, NV Energy, is welcoming SolarCity in to Nevada with open arms -- but not for the reason you may think. Let's take a look at what this Berkshire Hathaway subsidiary is doing to go against the grain and explore why this may be happening.

10 Great Buffett Quotes From Berkshire Hathaway Inc.'s Annual Meeting (Fool)

Habits are such a powerful force in everyone's life, including good financial habits. Digging yourself out of the holes that financial illiteracy can cause can take a lifetime. ... A big problem is adult financial literacy. It's harder to be smarter unless the schools intercede. A lot can be done on TV and the Internet, but it is really important to have good financial habits, and anything the school system can do will help.

It's Time to Break Up Buffett's Berkshire Hathaway: The Parts Are Worth More Than the Whole (Fool)

If Warren Buffett announced a program of spinning off and distributing most of his operating companies to shareholders, Berkshire stock would soar in value. As Buffett has noted, the fair value of Berkshire is much higher than it's book value. Spinning off the conglomerate's many subsidiaries would bring this value into the light of day.

1 Overlooked Secret to Warren Buffett's Phenomenal Success (Fool)

What's interesting when you study Buffett's portfolio is while he may not like paying dividends, he sure likes receiving them. Buffett's eight largest holdings all together pay Berkshire more than $1.8 Billion in dividends. [...] Scale matters in total returns, IBM's share price has not done all that much in the short time Berkshire has owned its stake, but I think $258 million (and growing) yearly dividend income gives at least some comfort back in Omaha. Berkshire earns over $1 Billion each year from Wells Fargo and Coca Cola alone. That is almost $3m each day. Dividends add life to your portfolio.

Heinz Factory Severance Cost Rises to $93 Million (Bloomberg)

HJ Heinz Co., the ketchup maker taken private by Berkshire Hathaway Inc. and 3G Capital, projected severance cost from factory closures will climb to $93 million as the company shutters two European plants. The new figure was disclosed in a first-quarter regulatory filing today and compares with the $63 million sum listed in the annual report for 2013. Heinz said in February that it was planning shutdowns in Seesen, Germany, and Turnhout, Belgium, after last year announcing closures in Florence, South Carolina; Pocatello, Idaho; and Leamington, Ontario.

EcoWater Systems expands green product portfolio (Water Technology)

EcoWater Systems®, a Marmon Water/Berkshire Hathaway Company, has announced the expansion of its commercial business product line through the acquisition of the Controlled Hydrodynamic Cavitation (CHC) technology and operations from VRTX Technologies of Schertz, Texas, according to a press release. CHC is a proven environmentally-friendly water treatment technology used in HVAC, process cooling and refrigeration systems to effectively control scale, biological growth and corrosion without the use of chemicals, the release reported. Adding CHC technology to a cooling tower saves energy, reduces water consumption and maintenance costs and minimizes or eliminates sewer discharge volume, noted the release.

Dairy Queen CEO: 'People Need To Be Paid A Fair Wage' (HuffPost)

“People need to be paid a fair wage,” Dairy Queen CEO John Gainor told CNN’s Poppy Harlow. [...] And in a clue to his own thinking about the controversy, Gainor told CNN that low wages made it hard to keep good employees. “It takes a lot of time to train people,” he said, speaking at a convention for Dairy Queen parent company Berkshire Hathaway, the conglomerate owned by Warren Buffett. “You want to make sure you’re paying a very good wage, otherwise you have a lot of turnover.”