Monthly Archives: January 2016

BYD’s 300 Electric Buses Just the Start for Chinese City of Shanwei

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With air pollution in China making headlines almost daily, BYD Co. Ltd., the Chinese battery and vehicle-maker that is 9% owned by Berkshire Hathaway, is providing 300 pure electric buses to the Chinese city of Shanwei, in Guangdong Province. The electric buses are the first of what could be thousands for the city in the next three years.

BYD will be gradually adding the buses to the city’s public transportation fleet as the city sets ambitious goals for electric bus transportation for the city’s 409,000 population.

According to BYD, the city is purchasing the BYD K7, an 8-meter, 23-seat pure electric bus running on BYD’s proprietary Iron-Phosphate batteries, which give it a driving range of up to 240km on a single charge.

The battery packs are placed on the roof and floor, making it quite spacious inside. It also features in-wheel motors, which saves a lot in terms of maintenance costs, as well as one-button-start system and continuously variable transmission. The company touts the model as ideal for urban transit or as an airport shuttle.

Not Hundreds of Buses, Thousands

The city of Shanwei plans to have 1,810 pure electric buses in service by the end of 2017. Additionally, 1,200 units of 6-to-8-meter new energy buses will be used as short-distance transit buses in urban areas and shuttle buses in suburban areas between 2017 and 2019.

By 2019, the city of Shanwei will have a total of 3,010 pure electric buses in operation. It is the first city in China to make large-scale use of the BYD K7.

Berkshire and BYD

In 2008, Berkshire Hathaway bet on BYD’s potential and purchased 225 million shares, and today owns roughly 9.1% of the company.

At the time, Warren Buffett said: “”We are thrilled to be partners with BYD and the people of China. Mr. Wang Chuanfu has an extraordinary managerial record, and we welcome the opportunity to work with him.”

The move has certainly worked out well for Berkshire, as BYD’s electric buses have been hot sellers not only in China, but around the world.

In September 2015, BYD scored a massive order in the U. S. from the state of Washington. BYD won a contract from the Washington State Department of Transportation (WSDOT) for up to 800 pure electric buses.

BYD’s electric car business is booming as well, and it is now the number one seller of electric cars worldwide.

Berkshire’s stake in BYD is worth roughly $1.77 billion.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Offers Professional Liability Insurance in Canada

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Berkshire Hathaway Specialty Insurance (BHSI) has begun offering its Professional First Miscellaneous Professional Liability (MPL) Insurance in Canada.

The new MPL policy provides claims-made coverage for professionals and professional services firms facing allegations of negligent acts, errors or omissions, misstatements, misleading statements, neglect, breach of duty and unintentional breach of contract.

“Our new Professional First MPL form provides coverage that maximizes protection and results in peace of mind for Canadian professionals,” said Michael Densham, Vice President of Executive and Professional Lines, Canada, BHSI. “With our coverage and our experienced professional liability team, policyholders are assured of expert, responsive service to help them avoid claims and successfully navigate those that arise.”

The MPL policy includes the following supplemental payment coverages with no retention: coverage for pre-claim assistance, reimbursement of loss of earnings and reimbursement of expenses for policyholder attendance at litigation and disciplinary proceedings.

“Bringing to market this comprehensive MPL form with the financial strength of BHSI underscores our commitment to the professional liability market in Canada,” said Paula Lansky, Assistant Vice President, Professional Liability, Canada, BHSI.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Increases Stake in Phillips 66

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Berkshire Hathaway is using the weakness in the energy market to increase its stake in refiner Phillips 66 (PSX), which has been mostly immune to the downward pressure on oil prices, as the demand for refined products, including gasoline, diesel and aviation fuel remains strong.

Berkshire picked up 35,781 shares of Phillips 66 stock on Monday, January 4, 2016, in three transactions. Berkshire bought 612,095 shares at $78.1247 per share, 126,390 shares at $79.1632 per share, and 20,810 shares at $79.6654 per share.

In August, Berkshire revealed that it owned more than ten-percent of Phillips 66, and the new purchases brings its stake to 62,294,493 shares, which is roughly 12-percent.

About Phillips 66

Phillips 66 was spun-off of ConocoPhillips in May 2012, and in addition to its refining and petrochemical business, the company also transports crude oil, refined products, natural gas and natural gas liquids (NGL). It gathers, processes and markets natural gas and NGL to power businesses, heat homes and provide feedstock to the petrochemical industry.

The company’s 52-week share price high was $94.12, and it currently pays an annual dividend of 56 cents, yielding 2.98%.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Senators Fight Railroad Consolidation

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The U.S. railroad consolidation that is slowly chugging down the track with Canadian Pacific’s $28 billion bid to acquire Norfolk Southern will be derailed if two senior Democratic senators have their way.

Peter DeFazio (D-Ore.), the House Transportation and Infrastructure Committee’s ranking member, and Mike Capuano (D-Mass.), the ranking member of the Railroads, Pipelines, and Hazardous Materials Subcommittee, have written a letter to the Surface Transportation Board (STB) asking for the STB to nix any railroad mergers on the ground that it would reduce competition.

In their view, a Canadian Pacific merger with Norfolk Southern would upset the balance of power that currently exists between the seven Class 1 railroads, and would likely lead to another round of consolidations.

If Canadian Pacific and Norfolk Souther tie-up, another possible merger would be BNSF Railway with CSX to create a second railroad that stretches coast-to-coast.

BNSF Railway chairman Matt Rose recently indicated that BNSF is interested in either Norfolk Southern or CSX depending on the outcome of Norfolk Southern’s status.

“I’ve had general conversations with both of them and told them that we’re going to watch this with interest,” Rose recently told Bloomberg News.

However, in their letter to the STB, DeFazio and Capuano stated that they “have significant concerns with CP’s proven track record of boosting profits at the expense of its workforce” and “further consolidation of an already healthy industry is unwarranted.”

It’s an opinion that Norfolk Southern anticipated thanks to Norfolk Southern’s white paper by former Surface Transportation Board commissioners Francis Mulvey and Charles Nottingham, which concluded that, “As simple background, rail carriers cannot assume control of another carrier without prior STB approval. The STB’s approval process can last between 19 and 22 months. Current STB regulations, adopted in 2001, set a high bar for approval of a proposed major merger and related voting trust based on an untested public interest standard. In our expert opinions, the STB is not likely to approve CP’s proposed voting trust or the CP+NS merger.”

Now, as Congress starts to weigh in, it looks all the more doubtful that truly national railroads are in the offing.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Oregon Environmental Groups Hail Berkshire Energy’s Plan to Eliminate Coal

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Two west coast utilities have pledged to eliminate coal-powered electricity generation from their energy production. The utilities are Berkshire Hathaway’s Pacific Power and Portland General Electric Company.

Pacific Power serves customers in Oregon and Washington, Idaho, Wyoming, Montana and Northern California. Portland General Electric serves Portland, Salem and a total of 52 Oregon cities.

The two utilities pledged to eliminate their use of coal by 2035, and the move drew strong praise from a coalition of environmental groups that had pushed for the move. In return, the environmental groups that include the Oregon Environmental Council, Climate Solutions, and the Sierra Club, among others, agreed shelve a proposed Oregon ballot measure that would have required the utilities to get fifty-percent of their energy from renewable sources by 2040. The move for the ballot measure will be halted provided  the Oregon legislature passes similar legislation.

The two utilities have been heavily reliant on coal, with Pacific Power getting nearly 60-percent of its power from coal in 2014, and Portland General Electric Company got roughly 24-percent of its power from coal over the same period.

The proposed legislation, which would be a renewal of the Renewable Portfolio Standard that became law in 2007, would require utilities to meet renewable energy goals of 27-percent renewables by 2025, 35-percent by 2035, and 50-percent renewables by 2040.

Pacific Power is already hard at work on that goal, with the recent construction of the Black Cap Solar Facility, located on 20 acres a few miles west of Lakeview, Oregon. The 2-megawatt photovoltaic solar panel facility is equipped with a sophisticated tracking system that optimizes the sun’s power. It is also buying power from the Old Mill solar plant near Bly, Oregon, which is the state’s largest solar facility. It was built by Obsidian Renewables in 2015 on the site of a long-closed former Weyerhaeuser sawmill 50 miles east of Klamath Falls. Combined, the two facilities provide 7-megawatts of solar power.

Berkshire Hathaway and Renewable Energy

Berkshire Hathaway Energy has one of the largest renewable energy portfolios in the U.S. The company gets approximately a quarter of its generating capacity from renewable and noncarbon sources such as wind, water, solar and geothermal.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

MiTek Acquires Sales Simplicity

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Berkshire Hathaway’s MiTek Industries, Inc. has acquired Sales Simplicity Software, a leader in CRM, sales automation, dynamic content management, and reporting for the home building and real-estate sectors. The company is headquartered in Chandler, Arizona, and no terms were disclosed.

“The acquisition of Sales Simplicity Software is yet another step that MiTek is taking to enrich its offering of operations workflow solutions for residential production builders,” stated Tom Manenti, Chairman and CEO of MiTek. “With this acquisition of Sales Simplicity Software, along with our 2015 acquisition of BuilderMT, and previous acquisitions of Simpad and Kova, we offer a truly unique and expansive selection of software for production builders. Sales Simplicity Software has an excellent user-base among production builders and integration into BuilderMT, which MiTek will further strengthen. MiTek will continue to offer solutions and resources to our customers that are second to none.”

As part of this acquisition, Tom Gebes, the current president of BuilderMT, will also become president of Sales Simplicity and work to tighten the integration between the two companies, as they move toward working together as one system. Customers will still be able to purchase BuilderMT or Sales Simplicity as stand-alone solutions. Sales Simplicity will remain in Chandler, Arizona, with no changes to employee base, and Barry Forbes, the founder of Sales Simplicity, will retire in early 2016.

About Sales Simplicity

Sales Simplicity is the creator and marketer of leading sales automation, content management, lead management, eMarketing and reporting management tools for new single-family, semi-custom and custom homes; condo, multi-family, realtor and senior living providers. Sales Simplicity’s highly intuitive CRM system offers features similar to SalesForce.com, but Sales Simplicity’s CRM is tightly integrated into Sales Simplicity’s award-winning, Cloud-based, sales-automation platform, and the entire system has been specifically envisioned for home builders. Since Sales Simplicity is already linked deeply into Facebook, Twitter, and other social media systems, users of Sales Simplicity’s new CRM features will immediately benefit from single-platform, dash-board-driven campaign management tools linked directly to web analysis, eMarketing, lead management, follow-ups, and new prospects.

About MiTek

MiTek is a diversified global supplier of software, engineered products, services, and equipment to the residential, commercial, and industrial, construction sectors.

Bolt-On Acquisitions Continue to Power Berkshire’s Growth

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Lubrizol Targets Wearable Tech with New TPU Line

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Lubrizol, a maker of specialty chemicals for a wide variety of applications, is launching a new series of thermoplastic polyurethane (TPU) products, Estane SMART TPU, for smart wearable devices.

The Estane SMART TPU product portfolio is specifically designed to address the rapidly growing wearable device market, particularly for soft touch bands in smartwatches and fitness tracker applications.

The Estane SMART TPU series includes both aromatic and aliphatic TPU grades with hardness levels ranging from 70A to 88A. Depending on OEM requirements, the product portfolio offers the wearable market a solution for soft materials having robust mechanical properties and a good chemical and UV resistance.

Junkers Wang, global market segment manager, Estane Engineered Polymers Industrial Consumer Electronics, says: “The new product series will further strengthen our intimacy with electronics OEMs along with other ongoing elastomer based projects that are already in production. Estane SMART TPU is off to an amazing start as some of the products have been adopted by premium OEMs for wristband applications.”

According to the company, its Estane TPU portfolio bridges the gap between flexible rubber and rigid plastics.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Kraft Heinz to Bring Davenport Facility into the 21st Century

Continuing to be the king of bologna is important not only for Oscar Meyer, it’s important for Iowa.

The Kraft Heinz Company’s planned $203 million Davenport, Iowa, facility will bring its Davenport facility into the 21st century. That’s a big leap from its antiquated downtown facility that was originally constructed in the late 19th century and is known as the “World’s Biggest Bologna Factory.”

The new facility will be built in the Eastern Iowa Industrial Center, and will receive a property tax exemption from the City of Davenport.

The project, which will be finished by 2017, will also receive financial assistance from the Iowa Economic Development Authority in the amount of a $1.75 million in tax credits and a $3 million forgivable loan.

On its end, Kraft Heinz has committed to preserving at least 475 full-time positions of the current 1,200 that exist at the old facility. Even with the workforce expected to be reduced by half, the construction of the new plant in Iowa is seen as a victory, as the state of Iowa defeated a competing offer from another unnamed state.

In a situation similar to the one in Davenport, the Oscar Mayer headquarters, which is also in a nearly century-old plant in Madison, Wisconsin, will not stay open, and its 1,000 jobs will be eliminated by 2017.

Under 3G Capital’s management of the recently combined companies, Kraft Heinz has committed to wringing out $1.5 billion in annual savings, and the company announced in November 2015 that it will close seven factories in the U.S. and Canada.

Warren Buffett Supports 3G’s Strategy

“3G has been buying businesses that have too many people,” Buffett explained at the 2015 Berkshire Hathaway annual meeting. “You will have never found a statement from Charlie or me saying that a business should have more people than needed.”

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

BH Media Group Adds Fredericksburg Newspaper to Virginia Print Media Outlets

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Berkshire Hathaway’s BH Media Group has acquired The Free Lance-Star, a newspaper serving Fredericksburg, Virginia. The paper was purchased from the investment firm Sandton Capital Partners, which picked up the paper through bankruptcy in June 2014.

BH Media Group acquired The Free Lance-Star daily newspaper, its website fredericksburg.com, the Star Weekly, and a commercial printing facility.

Published for more than 140 years, The Free Lance-Star has a Monday through Friday daily circulation of 36,991, Saturday circulation of 40,685, and Sunday circulation of 43,070. In addition, the Star Weekly newspaper has a total circulation of 79,400.

The acquisition gives BH Media Group a total of 37 newspapers, publications and websites serving Virginia.

In total, BH Media Group owns 73 newspapers and other titles located in 10 states, including: Alabama, Florida, Iowa, Nebraska, New Jersey, North Carolina, Oklahoma, South Carolina, Texas and Virginia. They also own and operate WPLG-TV, an ABC affiliate in Miami, Florida.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.