Berkshire News Briefs - 4/11/15

Berkshire takes 8.7 pct stake in Carlyle-controlled Axalta (Reuters)

Paint maker Axalta Coating Systems Ltd said Berkshire Hathaway Inc would buy an 8.7 percent stake in the company from controlling shareholder Carlyle Group for $560 million. [...] Warren Buffett's Berkshire is buying 20 million shares at $28 per share, a slight discount to the stock's Monday closing. [...] Axalta, the Dupont unit which Carlyle bought for $4.9 billion in February 2013, makes liquid and powder coatings for the automotive and transportation industries.

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One of the biggest news stories of the week was the Seattle Times investigation into Clayton Homes. It was included in last week's News Briefs post, but the story ran over into this week too.

Here's the back and forth:

• The mobile-home trap: How a Warren Buffett empire preys on the poor (Seattle Times)
• Clayton Homes statement on mobile-home buyer investigation (Omaha World Herald)
• A look at Berkshire Hathaway’s response to mobile-home investigation (Seattle Times)

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Brazilian investors help Buffett to big share of food industry pie (Omaha World Journal)

Jorge Paulo Lemann, Brazil’s richest man with a net worth estimated at $26 billion, built his business empire on beverages, using a series of mergers to create AB InBev. The company brews about 20 percent of the world’s beer, including global brands Stella Artois, Corona and Budweiser. [...] Lemann, 75, was born in Brazil to Swiss parents. He is a former Davis Cup tennis player and a graduate of Harvard University. In acquisitions, he and partners Marcel Telles and Alberto Sicupira deploy “cost killer” managers who eliminate non-productive spending so that savings can be reinvested in marketing and innovation, a 3G spokeswoman said.

We were taking a bet on what the global economy would do, but we weren’t lucky, we were right (Yahoo Finance UK)

Within seconds of climbing the short stairs into the gleaming Bombardier 6000, it’s clear why so many billionaires, Hollywood A-listers and sporting megastars choose to do their globe-trotting this way. [...] In fact, NetJets liked it so much that it was one of several new models on a list of 670 assorted jets that the company ordered in 2010 at a cost of $17.6bn, the largest single purchase ever made in private aviation. With the global economy in the throes of recession, it was a staggeringly bold move that stunned the industry, particularly as NetJets had only recently been saved from bankruptcy by its famous benefactor, Warren Buffett.

Buffett extends a hand to dealers -- 'If we shake hands, we've got a deal' (Automotive News)

With the deeper pockets of Berkshire Hathaway Inc. now backing it, the former Van Tuyl Group intends to add dealerships going forward. "In the next couple of years, we're likely to make a number of acquisitions," Berkshire Hathaway Chairman Warren Buffett told the NADA/J.D. Power Automotive Forum here last week. Buffett then made a pitch of sorts to the room full of dealers and other auto industry representatives: "We always do what we say. If we shake hands, we've got a deal. We've always got the money. We don't renegotiate ever in the last minute like some people do. Manufacturers are likely to approve us. So we will make more deals."

The Dairy Queen System Announces Jordan as the Latest Country Outside of North America that will expand the DQ brand (Marketwatch / BusinessWire)

The Dairy Queen® system, global retail treat category leader and international (quick-service restaurant) QSR fan favorite, part of Berkshire Hathaway , announced that SKM Franchise Co. Ltd., a subsidiary of El Rancho Group in Garland, Texas, has signed a multi-unit agreement to develop DQ Grill & Chill® and DQ® Treat locations throughout the country of Jordan. These will be the very first locations in Jordan for the Dairy Queen system. SKM Franchise Co. LTD plans to open a minimum of 10 DQ locations within the first five years of the long-term agreement. The company’s first of five DQ Grill & Chill restaurants will open later in 2015.

Is Berkshire Hathaway Becoming More Private Equity Than Conglomerate Under Buffett? (24/7 Wall St)

Warren Buffett and his team may be gradually making changes to how they operate Berkshire Hathaway Inc. (NYSE: BRK-A). The changes have been subtle in recent years, but the way in which Berkshire Hathaway makes acquisitions and takes stakes being taken is becoming rather unique, compared to other conglomerates. It might be easier to argue that Berkshire Hathaway is becoming more like a public private equity shop, rather than being a conglomerate. The good news here is that Berkshire Hathaway is unlikely to lose its conglomerate status. Still, the influence and dealings with private equity are becoming easier to see.

Buffett Answers Student Questions (Ben Graham Investing)

Q: What are some common traits of good investors?

A: A firmly held philosophy and not subject to emotional flow. Good investors are data driven and enjoy the game. These are people doing what they love doing. It really is a game, a game they love. They are driven more by being right than making money, the money is a consequence of being right. Toughness is important. There is a lot of temptation to cave in or follow others but it is important to stick to your own convictions. I have seen so many smart people do dumb things because of what everyone else is doing. Finally good investors are forward looking and don’t dwell on either past successes or failures but rather look toward the future. Just look at history to see how bad things have been. We had World War 2 and a Civil War. This Country works!

Warren Buffett, strumming his ukulele, is star attraction at Nebraska Furniture Mart’s charity gala in Texas (Omaha World Herald)

There's a 22 minute video of the Q&A session, but sadly it doesn't include the ukulele number.

Warren Buffett treated Texans to investment advice — and a ukulele rendition of “Deep in the Heart of Texas” — in support of a Dallas-area charity Wednesday at Berkshire Hathaway’s new Nebraska Furniture Mart-Texas store. Gala guests expected a speech from the Berkshire chairman and chief executive officer but applauded when Buffett said he would take their questions instead.

Warren Buffett-themed Brooks running shoes: A sneak peek (CNN Money)

The latest version of the Warren Buffett commemorative sneakers are about to be unveiled, and Brooks, the running shoe company that is owned by Berkshire Hathaway, has just given us a sneak peek. The shoe will be introduced on May 2, in conjunction with the conglomerate's annual investor meeting held in Omaha, Nebraska.

Berkshire News Briefs - 4/3/15

Buffett: Tesla doesn't threaten me (CNBC)

Warren Buffett and Larry Van Tuyl appeared on CNBC this week, with lots to say about the auto business. Buffett went on to talk about a number of other topics (Kraft, the Euro, Iran, interest rates, etc.), far more than I could squeeze into this excerpt.

Warren Buffett's new auto dealership business isn't under any threat from Elon Musk or his Tesla distribution model, the billionaire said Tuesday. [...] Buffett said he did not anticipate much of a threat from the electric car company's direct-to-consumer model because of Tesla's relatively small market. [...] Buffett also dismissed the notion of an near-term takeover of self-driving cars, saying "I think it's a long way off and I don't think everybody will adopt it." The billionaire said that he would bet there is less than a 10 percent penetration rate for self-driving cars by 2030. He did admit, however, that "if it's a safer way of driving, it's good for society and it's bad for our insurance business." Buffett also revealed Tuesday that he has big plans for his newly acquired unit, and that it is already on the prowl for new deals. "I'd be very surprised if five years from now we aren't a whole lot bigger," he said.

Full transcript of the interview here.

Berkshire Hathaway Automotive targets growth, possibly abroad (Automotive News)

Another perspective on the news from a different source.

Its chairman, Larry Van Tuyl, and Berkshire Hathaway Inc. CEO Warren Buffett spoke today on CNBC’s “Power Lunch.” Van Tuyl said the company is interested in buying dealerships “in the U.S. primarily,” leaving open the option for some foreign investments. Van Tuyl went on to list what he is looking for in future acquisitions: “We look for throughput and volume, high-volume dealerships that are reasonably priced and owned by somebody who wants to put it in good hands.” The company wants to buy the real estate, too, where available, he added.

The mobile-home trap: How a Warren Buffett empire preys on the poor (Seattle Times)

But until informed recently by a reporter, they didn’t realize that the homebuilder (Golden West), the dealer (Oakwood Homes) and the lender (21st Mortgage) were all part of a single company: Clayton Homes, the nation’s biggest homebuilder, which is controlled by its second-richest man — Warren Buffett. Buffett’s mobile-home empire promises low-income Americans the dream of homeownership. But Clayton relies on predatory sales practices, exorbitant fees, and interest rates that can exceed 15 percent, trapping many buyers in loans they can’t afford and in homes that are almost impossible to sell or refinance, an investigation by The Seattle Times and Center for Public Integrity has found.

Berkshire Hathaway's media business buys two Virginia newspapers (Chicago Tribune)

Berkshire Hathaway Inc. has purchased two Virginia newspapers as the company run by billionaire Warren Buffett adds to its stable of publications. Berkshire's BH Media Group acquired a daily, the Martinsville Bulletin, and the tri-weekly Franklin News-Post from closely held Haskell Newspapers, according to a statement issued Tuesday. The papers have a combined circulation of 17,350. Terms weren't disclosed.

BNSF Slows Oil Trains Up to 30% to Boost Safety After Accidents (Bloomberg)

BNSF Railway Co. is cutting the speed of oil-carrying trains in some urban areas to as slow as 35 miles per hour, a 30 percent reduction, to improve safety following crude-by-rail accidents this month. BNSF, owned by Warren Buffett’s Berkshire Hathaway Inc., implemented the slower train speeds and measures to inspect tracks and rail cars more closely on March 25, Mike Trevino, a spokesman, said on Monday. The reduction trims the speed from the 40 mph (64 kilometers per hour) in high-risk areas that railroads, including BNSF, last year voluntarily installed in 46 urban areas. In some cases, the cut is from 50 mph for cities with populations of at least 100,000, the Fort Worth, Texas-based rail company said.

POSCO shares drop following media reports on Warren Buffet's stake sale (Korea Herald)

POSCO shares fell sharply on Wednesday following media reports that Berkshire Hathaway Inc., led by U.S. billionaire investor Warren Buffet, has sold its entire stake in the steelmaking giant, raising speculation that the sell-off might have been prompted by concerns over the South Korean steelmaker's cloudy business outlook. [...] The drop comes after Maeil Business Newspaper and other local media reports showed that Berkshire Hathaway unloaded 4.5 percent, or nearly 4 million shares, of POSCO during the second quarter of last year, citing an analysis by a global financial information provider.

Kraft Deal Boosts Buffett (Barrons)

The merger deal announced last week between Kraft Foods Group and H.J. Heinz is a good deal for Kraft shareholders, who will get a nice premium, but it’s a far better one for 3G Capital and Berkshire Hathaway, which took Heinz private nearly two years ago in a leveraged buyout. [...] By our calculation, 3G and Berkshire have more than tripled their original $8.5 billion equity investment in Heinz in less than two years, which amounts to a private-equity type score on a deal that originally looked like it was fully priced. Heinz was taken private at about 20 times forward earnings. We estimate that Berkshire and 3G are each sitting on more than $10 billion in profits from their investments in Heinz.

Regulator accuses Iowa governor of appeasing MidAmerican (Lincoln Journal Star / AP)

An outgoing member of the Iowa Utilities Board bluntly told Gov. Terry Branstad in a letter that his decision to remove her is improper and is being done to placate a powerful energy subsidiary of Warren Buffett's Berkshire Hathaway. Sheila Tipton told the governor in the March 18 letter that his move to replace her and demote board chair Elizabeth Jacobs is an inappropriate attempt to influence future decisions to favor utilities and "appease MidAmerican Energy." The company had complained about a ruling requiring the company to use some proceeds from a $280 million wind energy investment to reduce customers' rates.

Warren Buffett sees no weakness in economy, but too many 'are left behind' (Omaha World Herald)

Investor Warren Buffett says the economy continues to grow steadily, but too many people continue to miss out on the American dream. Buffett told CNN Thursday that he doesn't see any real sign of weakness in the economy. Buffett looks at reports from the more than 80 businesses his Berkshire Hathaway conglomerate owns for insight. But Buffett reiterated his concerns about income inequality in this country while the super-rich continue to thrive. He said that America should be able to do more to help people who are struggling do better.