Monthly Archives: May 2016

Berkshire Hathaway HomeServices Sets Sail for International Waters

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Berkshire Hathaway HomeServices, the United States-based real estate brokerage franchise network owned by Berkshire Hathaway Inc., has set its sights on international expansion beginning in 2017.

The initial focus of the international expansion is in major financial centers around the world, with countries such as China, Canada, Germany, and the United Kingdom being high on the list  Berkshire Hathaway HomeServices’ Chief Operating Officer and President, Stephen Phillips says.

Phillips said that the company is setting up regional offices that will cover Asia, Europe, and South America.

Also key to its expansion plans is the network launch of a powerful, new property-search platform on its popular www.BerkshireHathawayHS.com website; and a listing-syndication program now broadcasting Berkshire Hathaway HomeServices network listings to 70 real estate websites worldwide.

The platform, developed in conjunction with Aliso Viejo, CA-based Real Estate Digital, offers the industry’s most complete search experience for global shoppers of U.S. real estate. With two mouse clicks, consumers may choose to translate the website in any of 10 languages besides English including Chinese, French (European and Canadian), German, Italian, Japanese, Portuguese (Brazilian and European) and Spanish (European and Latin American). The site also seamlessly converts currency and measurements.

Consumers may then search for homes in any U.S. city or state serviced by Berkshire Hathaway HomeServices franchisees. What they find they can’t get on any other single site: full Multiple Listing Service data containing all listings in their search area. By registering on www.BerkshireHathawayHS.com, consumers also gain proprietary “Inside Access” features including the latest pending and sold information, market reports and property-price history.

“Until now, global shoppers of U.S. real estate see only a portion of homes for sale in their searches of states, cities and postal ZIP codes,” explained Gino Blefari, CEO of Berkshire Hathaway HomeServices. “When you register and search for U.S. real estate on our website, you see every property for sale in your search area, and then you can filter and sort those searches as you would on other sites. It’s a much more effective way to begin searches of homes in America.”

“Regardless of nationality, today’s home buyers want as much information as possible to make informed decisions on their real estate investments,” said Stephen Phillips, president of Berkshire Hathaway HomeServices. “Our website and property-search platform are an indispensable resource for any global buyer of U.S. real estate.”

To complement the home-search platform, Berkshire Hathaway HomeServices is now broadcasting its network listings abroad. Most of the residential listings priced at $200,000 (USD) and above are now displayed on 70 real estate websites serving consumers in 37 countries on five continents.

“A key priority in global expansion is to help our existing U.S. franchisees earn more business from beyond our borders,” said Peter Turtzo, senior vice president of International Operations for Berkshire Hathaway HomeServices. “Our investment in these resources will help our network capture international client leads and generate transaction opportunities. These resources will also help our existing franchisees win more domestic listings, and recruit and retain more top sales professionals.”

The international expansion will be growing source of revenue for the company, and Phillips says that he expects Asia to be 5%-10% of that revenue.

© 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.

Cornelius Ready to Showcase Concentrated Beer Dispenser Technology

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Cornelius, Inc., the world-leader in beverage dispensing systems, is preparing to showcase its beer dispensing technology that uses beer concentrates that are fully hydrated at the point of dispensing.

Cornelius and Sustainable Beverage Technologies (SBT), a Colorado based developer of concentrated beer technologies, will feature beer being dispensed from concentrate at the 2016 National Restaurant Association trade show in Chicago.

SBT has applied its unique BrewVo brewing technology toward developing a portfolio of beers with three craft brewers to create new beers that are concentrated until served from a Cornelius dispenser. The three craft breweries are New Belgium, Crazy Mountain, and Denali.

According to Cornelius, the combination of SBT’s BrewVo technology and Cornelius dispensers will allow these premium craft brewers to share their products with customers in a more efficient and sustainable manner.

Cornelius, Inc., the world-leader in beverage dispensing equipment, was acquired by Berkshire Hathaway’s Marmon Group in January 2014.

In November 2015, Cornelius and Sustainable Beverage Technologies announced a strategic partnership to market concentrated beer dispensing solutions to beverage brand owners and foodservice retailers across the globe.

According to SBT, using only traditional brewing ingredients (water, malt, hops, and yeast), SBT’s patented BrewVo technology utilizes a unique process called “Nested Fermentation”, in which brewers manage the fermentation environment where a highly concentrated beer is produced. When the beer concentrate is later mixed with carbonated water, the result says SBT compares to any premium beer on the market.

Pat Tatera, CEO and founder of SBT, said: “It’s exciting to work with world class breweries that provide exceptional craft beers, and also have such strong values towards the environment and sustainability.”

Drinking beer make you environmentally responsible. Now, that’s a message that millions of beer drinker will raise a glass to.

And, if you are too young to drink beer, Cornelius has a concentrated milk dispenser technology as well. In 2015 the company partnered with Dairyvative Technologies, a Wisconsin-based developer of a patented process that allows pasteurized milk to be concentrated to a liquid that has one seventh of its original volume.

To learn more about Dairyvative’s breakthrough concentrated milk technology, read the MazorsEdge Special Report: Breakthrough Aims to Change the Way You Drink Milk.

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.

Richline Group Acquires Second Company in 30 Days

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Things are really hopping at Berkshire Hathaway’s jewelry retailing and manufacturing companies.

Less than a month after it announced the purchase of online jewelry retailer Gemvara, Berkshire Hathaway’s Richline Group has announced it will acquire John C. Nordt, a leading manufacturer and supplier of precious metal products to the jewelry industry.

The acquisition will be completed on June 1, 2016.

Nordt has what it calls a unique and proprietary process of hot extrusion for precious metals. Known as FusionForged®, the technology creates metals of extreme ductility and sound micro structure which permit the creation of products of extreme precision and adaptability to many types of finished products including the setting of diamonds.

Joe Esposito, Richline’s EVP of Manufacturing said that, “Nordt is another important and strategic addition to our brands. The firm’s unique and successful business model is a tribute to the leadership of the Nordt family. The synergies between Nordt and our LeachGarner and Nobilis business units will accelerate our growth into the PGM industrial markets. Nordt has a great product line, talented people and long term relationships with its clients.”

Joe White, President of LeachGarner, A Richline Group Company stated, “The combination of Nordt’s proprietary process technology and LeachGarner’s scale is unique in the precious metal industry. We look forward to integrating our businesses to deliver enhanced value to our existing customer base and leveraging our new synergies outside our traditional channels.”

Founded in 1872 in New York City, Nordt has operated in Roanoke Virginia since 1984, where it has a 45,000 sq. ft. manufacturing plant has been specifically designed to fabricate precious metals products including wedding bands, diamond rings, bracelets and tubing of highest quality under precise control guided by the certification of ISO 9001:2008.

Among the company’s services is private label manufacturing using its FusionForged metals.

Five generations of the Nordt family have led the firm over 140 years. Paul Nordt III, Rob Nordt, Sr. and Rob Nordt, Jr. will continue to lead the company along with a highly experienced professional management team.

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.

Fruit of the Loom Cuts Ribbon on Major South Carolina Expansion

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Berkshire Hathaway’s underwear manufacture Fruit of the Loom has cut the ribbon for the opening of its major expansion of its Palmetto Distribution Center in Summerville, South Carolina.

The facility has added 402,000-square-foot to the center’s existing 350,000-square-foot space.

Fruit of the Loom points to increased e-commerce as the main reason for the expansion.

“We’re gearing up and getting ready to do that,” notes Rick Medlin, Fruit of the Loom’s president and CEO. “We’re building platforms and digital capabilities, as is everybody.”

The expanded facility will mean the addition of as many as 50 new employees to the current 225 employees.

The expanded facility will be able to ship up to 60 million packages of underwear a year, using an automated packaging system that designates that shipments for big box retailers such as Walmart.

That’s a lot of boxers and briefs.

© 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.

Funnel Cakes to Be Dairy Queen’s New Summer Treat

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After extensive product testing, Dairy Queen has decided to roll out a funnel cake dessert at its U.S. locations. A funnel cake is a fried batter staple of carnivals and fairs that is especially popular throughout the Midwest. Usually topped with powdered sugar, Dairy Queen sees it as the perfect base for its soft-serve ice cream.

Dairy Queen has test marketed its funnel cake desserts as part of its DQ Bakes!® Institute, and even flew in food bloggers to its Minneapolis headquarters to get their reactions.

“We do a lot of consumer research and test markets,” notes Dairy Queen’s president and CEO John Gainor.

The 76-year-old company has been aggressively adding to its menu, and in 2015 the company introduced its DQ Bakes! menu with nine products across three categories: Hot Desserts à la Mode, Artisan-style Sandwiches and Snack Melts. DQ locations across the U.S (excluding Texas) installed ovens to make the new menu items.

Gainor also points out that the funnel cakes fit right in with the “fan food” customer experience that Dairy Queen is known for. It’s a loyalty that has brought the company 10,472,082 likes on Facebook.

“A lot of our consumer research focuses on the emotional connection that you take out of the store,” Gainor says.

The new Funnel Cake a la Mode is planned as a year-round, permanent addition to the menu.

For more information read a Mazor’sEdge special report on Dairy Queen.

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.

Commentary: Will BYD Be Berkshire’s Alibaba?

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No article on Yahoo these days fails to mention the company’s 15% stake in Alibaba. It’s a stock position that has grown so valuable that it’s the tail that literally wags the dog on the valuation of the high-tech company.

Is there an Alibaba in the making for Berkshire Hathaway with Chinese auto and battery maker BYD Company Ltd.?

By that I mean will the value of Berkshire’s share of BYD eclipse the rest of the company?

Well, no, because unlike Yahoo, Berkshire owns assets including insurance companies, railroads, and energy companies that have enormous value.

But, yes, if you are looking for a minority stock position that over time could rival or surpass Berkshire’s huge minority shareholder stakes in Coca-Cola, IBM, or American Express.

How We Got Here

In 2008, at the urging of Berkshire’s Vice-Chairman Charlie Munger, Warren Buffett bet on BYD’s potential, purchasing 225 million shares for $230 million, and today Berkshire owns roughly 9.1% of the company.

It’s a bet that looks better and better every year.

In 2015, BYD became the number one seller of electric cars in the world. It was a dramatic rise for a company that only ranked seventh in 2014.

That’s not all, in April 2016, BYD achieved another major milestone, the production of its 10,000th pure electric bus. The company is thoroughly dominating the rapidly growing market for emissions free buses of all sizes.

An Investment That Eclipses All Others

With a market capitalization of roughly $19.5 billion, that makes Berkshire’s original investment of $230 million worth roughly $1.77 billion.

It’s a phenomenal return in just five years, and BYD’s best days are clearly ahead of it.

Unlike Tesla, which is burning through money, and is in a race to reach ambitious sales goals before it runs out of money, BYD is already profitable.

What’s more, its profits are growing dramatically, despite China’s slowing economy.

BYD is predicting that its first-quarter profit will jump more than 50 percent from the first-quarter 2015. We’re talking profit not just revenue.

Berkshire’s Alibaba-Like Asset

Berkshire’s got some amazing assets, but most of them won’t grow dramatically in the future. GEICO is the second largest auto insurer in the U.S., but its growth at this point will be incremental not logarithmic. Some even question the future of auto insurance with the coming era of self-driving cars. The same goes for BNSF Railway, which as a Class 1 railroad is in a highly regulated industry with only modest growth potential unless anti-trust regulators approve another round of consolidations.

Even the recently completed $37.2 billion acquisition of Precision Castparts, which gives Berkshire an aerospace company poised to take advantage of the growing demand for passenger jets in India and China, has the growth potential of BYD. Precision Castparts will grow based on the estimated need for new aircraft with a total value of $5.6 trillion over the next two decades, but it won’t grow ten-fold.

Unlike these companies, BYD is operating in lightly regulated market sectors. It dominates the pure electric bus market (a market that Tesla isn’t even in), and while it has already sold its 10,000th electric bus, that is still just a drop in the bucket for a total bus market that is expected to reach eight million units by 2018.

In 2018, only a fraction of those buses will be electric, but in another decade or two they all may be, and for good reasons.

Why They Will All Be Electric Buses

Why will they be electric buses? Because they will have to be. In order for cities to meet ambitious carbon emission reduction goals, existing diesel and even hybrid buses will have to be phased out. The pollution numbers tell the tale. In countries like China and India, buses make up a huge percentage of their air pollution.

In China alone, diesel buses make up just 10% of the vehicles on the road but contribute over 30% of city air pollution and GHG emissions.

Visionary Leadership That’s Making BYD Number One

As for leadership, Tesla’s Elon Musk is clearly already one of the most fascinating corporate visionaries of the 21st century, but don’t forget that Charlie Munger hailed BYD’s CEO Wang Chuanfu as “a combination of Henry Ford, Thomas Edison and Bill Gates.”

He’s already one of China’s richest men.

While Elon Musk has lots of amazing ideas, including hyperloops, and trips to Mars, many of them don’t have a clear path to profitability. Wang Chuanfu has a goal of being number one, and he’s already there.

BYD’s number one in globally in electric car sales, number one in electric bus sales, and they are the world’s largest manufacturer of rechargeable batteries.

BYD is electrifying forklifts, trucks, and a host of other fossil fuel burning vehicles and devices.

They are also building and home scale eclectic battery storage that’s already on the market in Europe and Africa. Tesla gets a lot of attention for their Powerwall, but BYD is in the same market with their B-Box technology.

Berkshire’s $230 million bet on BYD may prove to be its best bet of all-time, as BYD grows into a a global leader that is mentioned in the same breath as Volkswagen and Toyota.

And, since unlike those auto companies it is also involved in IT, photovoltaics, and commercial and residential battery storage, it may just end up being the biggest one of all, which would be very good for Berkshire Hathaway.

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.

Idled Locomotives in Fargo Highlight BNSF’s Continued Shipping Woes

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The 45 locomotives now sitting idle in a Fargo, North Dakota trainyard highlight the continued slump in BNSF Railway shipping volumes.

BNSF also has 150 locomotives and rail engines sitting idle near Gillette, Wyoming, and dozens more in temporary storage in Oklahoma City.

The locomotives, which are lined up in an almost endless train, are just one physical manifestation of a dramatic drop in demand for coal, petroleum, and metals.

For the year to date, total carloads are down a precipitous 18.49%.

Coal shipments, which last year at this time had reached 826,353 carloads, are only at 520,742 carloads through May 9, 2016. The change represents a 36.98% decrease.

BNSF’s carload reports show that the drop in carloads was not just due to coal, but cut across a number of sectors.

Shipments of metal ores are down 36.76%. And with global oil prices still low, shipments of petroleum from the Bakken Formation are down a dramatic 26.89%.

Profits for the first quarter of 2016 were down 25%.

© 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.

BYD Achieves 10,000 Pure Electric Buses Milestone

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While Tesla continues to target the mainstream passenger vehicle market as its path to success, Chinese vehicle and battery manufacturer BYD Company Ltd. is making dramatic progress not only in the passenger vehicle market, but also in the electric bus market. It’s a huge market that the company has practically to itself.

BYD’s recently marked the production of its 10,000th pure-electric bus. The milestone was six years in the making.

BYD’s Changsha electric bus factory gives the company the manufacturing capability to meet the needs of China’s growing electric mass transit needs. Air pollution and carbon emissions are the key drivers of the move to pure electric buses. In China, diesel buses make up just 10% of the vehicles on the road but contribute over 30% of city air pollution and GHG emissions.

The market in China alone is huge, and BYD in January 2016 delivered the first of 300 of its BYD K7 buses to the Chinese city of Shanwei, in Guangdong Province. The city plans to have 3,010 pure electric buses in service by 2019.

BYD’s pure electric buses and taxis are currently operating in over 200 cities in 48 countries worldwide, including the U.S., Mexico, Colombia, Brazil, the UK, Germany, Austria, Denmark, Holland, Belgium, Japan, Thailand, and China.

BYD and Berkshire Hathaway

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

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.

Marmon Water Introduces System To Filter Lead From School Drinking Fountains

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With the Flint water crisis making lead in drinking water front page news, schools across the country are testing their water. They are also looking for measures that can lower drinking water lead contamination for their students.

Berkshire Hathaway’s Marmon Water, Inc. has debuted its Safe Fountain System to remove lead and other contaminants from drinking fountains in schools and public/industrial buildings.

The new product line from EcoWater Systems ensures clean, safe, and good tasting water, even in the case of boil water alerts.

Lead and other contaminants in drinking water is an issue nationwide. While much has been said about lead coming from municipal water systems due to old lead pipes in the streets, problems can also exist in homes and buildings built before the early 1990s that used high-content lead in copper piping and lead solder and, to an even greater extent, in pre-1960s homes and buildings where lead pipes were routinely used. Even if a municipality addresses lead problems related to old pipes in the streets, issues may still be present in the home.

Concerns are based on lead’s significant effect on the brain and central nervous system. High lead levels have the greatest impact on fetuses, infants, and children under six years old, potentially causing learning disabilities, hyperactivity, and other medical conditions. In addition, high levels of lead in adults may contribute to medical problems including high blood pressure and diabetes.

According to the company, EcoWater’s new Safe Fountain System uses National Science Foundation-certified lead, bacteria, virus, cyst, and chemical reduction cartridges to ensure the quality of water just before it is consumed from the fountain. Systems come equipped with a range of safety features including real-time Wi-Fi monitoring, automatic shutoff, tamper-proof stainless steel housings, and braided water line connectors, giving users peace of mind. EcoWater’s nationwide network of water treatment professionals monitor usage and perform routine maintenance and cartridge replacement as necessary.

At the 2016 Berkshire Hathaway annual meeting, EcoWater demonstrated its water fountain filtration system.

The company is ready to install the Safe Fountain System this summer in order to have them in place at schools before kids return in the fall.

EcoWater also makes filtration systems that can be installed in school cafeterias, and it has a filtration system that goes in five and ten gallon coolers used by sports teams. The cooler filters are made by EcoWater and sold under the Brita brand through a licensing agreement.

EcoWater also offers NSF-certified microbiological drinking water purification systems as well as a complete line of similarly certified reverse osmosis drinking water systems and a host of other filtration systems for home and/or business applications that also reduce lead and other contaminants from the water supply.

© 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’s Giant Australian Natural Gas Field Still Years Away From Commercialization

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In mid-November 2015, Berkshire Hathaway Energy’s Australian subsidiary, CalEnergy Resources, drilled a test well in Western Australia for what could be what the company is calling modestly a “significant gas field.”

How Significant?

Four trillion cubic feet of gas-in-place significant.

Exploration permit EP 408 is located approximately 280 kilometers south of Perth, and covers both the Whicher Range and Wonnerup gas fields.

The gas fields were first discovered in 1968 and 1971, respectively, and are located in ancient sandstone reservoirs nearly four kilometers underground.

The fields contain an estimated four trillion cubic feet gas-in-place, and Berkshire’s share currently stands at approximately 84%. Other partners include Which Range Energy.

Peter Youngs, the Managing Director of CalEnergy Resources Group, recently discussed with MazorsEdge the progress on the development of the gas field, noting that “the field represents a large in place gas resource, its characteristics are challenging and there is much work still remaining to move this resource to a commercially developable status.”

As for the test well, Youngs said “we are encouraged by the flow rates, as seen during the test, but that the critical commercial assessment (of the flow rates) is subject to a period of substantial subsurface data integration work (which is ongoing).

“We are in the process of recovering down hole pressure gauges from an offset well, whose data will be an integral part of that subsurface data integration. We expect this work to continue over the coming months.”

As to when the gas field could start to produce meaningful amounts of natural gas, it still looks to be over a year away.

“We are working on the potential next steps in field commercialization.” Young says, “but it is unlikely that we will return to operational activity prior to end 2017 at the earliest.”

To read more about this natural gas field, read the MazorsEdge Special Report: Is Berkshire Hathaway About to Strike it Rich in Natural Gas?

© 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.