Monthly Archives: July 2016

Lubrizol Acquires Diamond Dispersions Ltd.

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The Lubrizol Corporation has acquired Diamond Dispersions Ltd., a company exclusively focused on the production of water-based dye and pigment dispersions for inks used in digital printing.

Headquartered in Sheffield, UK, Diamond Dispersions has established itself as a high quality, responsive and innovative producer of dispersions, gaining a significant share in this growing niche market.

Lubrizol notes that Diamond Dispersions will advance Lubrizol Performance Coatings’ goal to grow its portfolio of products that enable digital printing.

According to Sanjay Kalhan, general manager of Lubrizol Performance Coatings, “The combined technologies, knowledge and expertise of both companies will drive further innovation across product lines and position Lubrizol as the preferred partner for ink makers seeking to develop new digital print systems for this growing market. In addition to our dispersant, specialty additive and resin product lines, ink manufacturers will now have the opportunity to source fully formulated dispersions through Lubrizol.”

Diamond Dispersions is now part of Lubrizol Advanced Materials, reporting into Lubrizol’s Performance Coatings business.

The transaction includes all intellectual property, trademarks and customer lists of Diamond Dispersions. Financial terms of the agreement were not disclosed.

© 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’s CEO Touts Dramatic Growth of Electric Vehicles in China

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The electric vehicle in China is on a quick path to move from a rarity to a substantial part of the transportation mix.

In a speech given at the World Economic Forum’s Annual Meeting of New Champions 2016 in the city of Tianjin, China, BYD’s CEO Wang Chuanfu stated that “the turning point for new energy vehicles has finally arrived.”

Wang noted that the production and sales of new energy vehicles exceeded 300,000 units in 2015, representing a three-fold growth year-on-year, and accounting for a 1.3% share of overall vehicle sales in China.

He pointed out that it took ten years to go from zero to the current 1%, but it may take only another five years to reach 10%.

Sales of new energy vehicles in China are projected to move up dramatically and are forecast to hit 30% by 2025.

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.

In April 2016, BYD achieved another major milestone, the production of its 10,000th pure electric bus.

BYD is thoroughly dominating the rapidly growing market for emissions free buses of all sizes.

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.

It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million is now 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.

Dairy Queen Returns to Knoxville, Tennessee

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Dairy Queen is bringing its Grill & Chill restaurants back to Knoxville, Tennessee.

Local franchisee Fourteen Foods is planning a DQ Grill & Chill in the former Farragut Krispy Kreme store that was located at 11208 Kingston Pike.

Currently, there are two new Dairy Queen stores under construction in the east Tennessee towns of Seymour and Morristown.

Fourteen Foods is a multi-unit owner and operator of 176 DQ Grill & Chill restaurants and Dairy Queen Braziers in Alabama, Florida, Indiana, Iowa, Kentucky, Minnesota, Nebraska, South Dakota, Tennessee, and Wisconsin.

© 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 to Benefit from Growth of Smart Coating Market

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A new report by Research and Markets, “Smart Coatings Markets 2016-2025,” highlights the growth prospects of smart coatings made by companies such as Berkshire Hathaway’s Lubrizol Corporation.

The report suggests that smart coatings have reached a stage of technological maturity where they can replace traditional anti-corrosion, anti-icing, anti-fouling, and other industrial protective coatings. These smart protective coatings will reach approximately $2 billion in sales by 2021, based on their ability reduce downtime and maintenance costs for vehicles, marine vessels, buildings and large pieces of industrial machinery.

The research also sees a new opportunity opening up for smart coatings in the consumer sector, where sales of these coatings to consumer electronics, furniture, textiles, etc., will be worth around $1 billion by 2021. Low-end self-cleaning and self-healing sprays have been available to the consumer market for many years. But durable smart consumer coatings are now reaching price points that will make them attractive to high-income consumer markets with strong use cases that can compete with anti-scratch coatings and other polishes.

In addition, the research sees the smart coatings business finding new commercial directions through the use of the latest nanomaterials and notes that developing smart coatings has become one focus for firms developing applications for carbon nanotubes and graphene.

Berkshire Hathaway and Lubrizol

Founded in 1928, and acquired by Berkshire Hathaway in 2011, the Lubrizol Corporation is a leading supplier to manufacturers in various industries, including paints and coatings, printing inks, plastics, engineered paper, textiles and packaging.

Lubrizol’s Performance Coating division focusses on surface coating innovation. Solsperse®, Lanco™ and Hycar® are well-known Lubrizol trade names within the Performance Coatings product line.

© 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 Enters Monorail Business

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While Elon Musk touts the future prospects of hyperloops in dealing with future transportation needs, Chinese competitor BYD Co. LTD. is looking towards an existing mass transit technology, the monorail, as part of its answer to urban congestion issues.

According to BYD’s CEO Wang Chuanfu, the BYD’s green mobility platform is not just about cars; the company also plans to promote the implementation of what it calls “three-dimensional green traffic,” and is expanding its reach by entering the monorail industry.

Dramatic Cost Savings Compared to Subways

The electric monorail is a kind of traffic network which interconnects multiple transit backbones in the city at one sixth of the cost of a subway system.

According to Wang, the total market for monorails just in China are in the range of 3 trillion yuan ($450 billion).

BYD is unveiling its first electric monorail with a 4.4 kilometer line at its Shenzhen Headquarters as of September 2016.

The goal is to alleviate the traffic problems of 50,000 factory and management employees.

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.

It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million is now 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.

Richline Group Makes Third Acquisition This Year

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One of the most active of Berkshire Hathaway’s companies this year in regards to acquisitions is one of its lesser known. The Richline Group, a fine jewelry manufacturer and marketer, has acquired its third company in the last three months.

Richline has announced the acquisition of Viawear, an innovative wearables provider for jewelry brands.

In April, Richline acquired Gemvara, a leading online provider of customizable fine jewelry, In June, Richline announced the acquisition of John C. Nordt, a leading manufacturer and supplier of precious metal products to the jewelry industry.

The acquisition of Viawear continues Richline’s focus on wearable tech, which included launching the Wearable Style News Website, and partnering with Omate on the distribution of Omate’s Ungaro smart ring.

“The world has embraced wearables, and we intend to provide our customers with the right jewelry products that blend seamlessly with the latest technology. Viawear’s technology and designs compliment everything we’ve set out to achieve in the smart jewelry space,” said Joel Schechter of the Richline Group.

According to Richline, Viawear has developed a unique approach to filtering mobile notifications and delivering the most contextual wearable alerts. With Viawear, wearers can stay connected to their most important alerts, and eliminate the need to constantly checking to see if they missed something important.

“Our objective has always been to develop smart accessories that truly complements our wearer’s lifestyle. Blending Richline’s tremendous jewelry acumen with Viawear’s technology platform allows us to make this vision into a reality that can help drive the world of fine jewelry into the world of wearable technology,” said Ben Isaacson, Founder and CEO of Viawear.

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.

Gen Re Acquires Mortality Assessment Technology and Synthesis Analysis Patent License

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Gen Re, the Berkshire Hathaway-owned global life/health reinsurer, has acquired from BioSignia the Mortality Assessment Technology (MAT) and an exclusive worldwide license for “Synthesis Analysis,” a patented statistical methodology to build prediction models. By obtaining this cutting-edge technology, Gen Re seeks to deliver highly competitive reinsurance programs for the life and health insurance markets.

MAT has been available to the individual life insurance market since 2011 and has been used by carriers to support their underwriting processes. Within the reinsurance market these technologies will be first of their kind offerings.

Gen Re’s Vice President, Chief of Decision Analytics, Guizhou Hu, M.D., Ph.D., developed MAT and was the inventor of “Synthesis Analysis” in his prior role at BioSignia. He forecasts exciting possibilities for using these proprietary tools in the life and health insurance markets. “Using the unique statistical approach – Synthesis Analysis – MAT serves to better differentiate an individual’s mortality and more confidently classify the customer’s risk profile,” says Hu.

“Our aim is to improve the profitability of our client’s business,” says Gen Re’s James Greenwood, Senior Vice President, Individual Products. “Gen Re has been long respected in the industry for our innovations in underwriting substandard and elderly risks and recently has focused much of our decision analytics work in developing our new facultative programs – PURFac and Second Look. MAT will further improve our offerings and help our customers become more competitive in the market through increased placement rates.”

© 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.

Commentary: Self-Driving Auto Fatality Highlights New Era’s Need for Old Fashioned Insurance

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The first death caused by a self-driving car not only showed the current limits of the new technology, and also highlighted the continued need for traditional liability insurance.

While some have questioned whether self-driving cars will need to carry the traditional package of coverages, the accident shows that while self-driving cars will likely make our roads much safer, they will probably never be accident free. There are just too many variables.

Tesla Motors has stated that the May 7 accident in Williston, Florida, occurred because the Tesla Model S’s autopilot sensors did not pick up a white tractor-trailer that drove across the highway perpendicular to the vehicle.

In a statement from Tesla the company stated that, “Neither Autopilot nor the driver noticed the white side of the tractor trailer against a brightly lit sky, so the brake was not applied.”

Killed in the accident was Joshua Brown, 40, of Canton, Ohio.

In addition to Tesla, a number of automobile manufacturers, including Mercedes, BMW, and Audi are moving ever closer to self-driving cars with a host of collision avoidance features that aim to respond quicker and more precisely than a human operator can.

However, Tesla’s statement stressed the limits of its current technology.

“It is important to note that Tesla disables Autopilot by default and requires explicit acknowledgement that the system is new technology and still in a public beta phase before it can be enabled. When drivers activate Autopilot, the acknowledgment box explains, among other things, that Autopilot ‘is an assist feature that requires you to keep your hands on the steering wheel at all times,’ and that ‘you need to maintain control and responsibility for your vehicle” while using it. Additionally, every time that Autopilot is engaged, the car reminds the driver to ‘Always keep your hands on the wheel. Be prepared to take over at any time.’ The system also makes frequent checks to ensure that the driver’s hands remain on the wheel and provides visual and audible alerts if hands-on is not detected. It then gradually slows down the car until hands-on is detected again.”

The End of the Driver as We Know It?

Bryan Reimer, a research scientist in the MIT AgeLab and the Associate Director of The New England University Transportation Center, doesn’t think the driver is headed for extinction just yet, or even in the near future.

“These technologies show a lot of promise, however, you are not going to get into a black box and say ‘take me somewhere’ at the consumer level,” Professor Reimer said in 2015. “New technologies will reduce fatalities and accidents, but it won’t eliminate them.”

There’s Still a Need for the Human Operator

“Higher levels of automation in the vehicle will still have humans in a supervisory role,” Reimer adds, noting that the sophisticated auto-pilot in planes still has human operators even with planes separated by thousands of feet of airspace. “The more automation, the more skill and training you need,” professor Reimer explains, pointing out the extensive training that pilots undergo. In the case of cars, “we have no equivalent educational structure in place.”

He also adds that with the close spacing of cars, which can be in fractions of a meter, and the variability of road conditions, it make roadways “a much more dynamic environment and harder to predict.” With the enormous number of cars on the road, often coming from different directions, it makes “the speed of decision-making much tougher.”

Accidents Happen

In addition, any self-driving technology will have to coexist with human drivers for a long time to come. “If everything was automated, it would be much easier,” Reimer adds, noting that we a tendency to both “over-trust and under-trust technology.”

A Wide Variety of Insurable Risks

Self-driving cars won’t mean the elimination of hazards. For example, there were 250,000 flood damaged cars from Superstorm Sandy in 2012, and in 2013 there were 699,594 cars reported stolen. Add to the mix everything from trees falling on cars, to vandalism, and there are not going to be many people that want to drive their new car without fire, theft and collision insurance.

There certainly will be changes in insurance needs, as changes in the ownership structures mean more car-sharing and ride-sharing scenarios.

The popularity of Uber and Lyft has already seen GEICO respond with ride-sharing insurance, and you can expect more policy innovations as insurers meet new consumer demands.

A Safer World that Still Needs Insurance

We live in a lot safer world than we did a hundred years ago. Commercial buildings have automated sprinkler systems and fire alarms, and homes have smoke detectors and burglar alarms, yet they both still have fires and break-ins, and they still need insurance.

It’s likely that in 2030 your car will still need insurance too.

© 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.

Could Hawaiian Electric Be Back in Play for Berkshire?

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It may seem like a longshot, but ominous storm clouds forming over the planned acquisition of Hawaiian Electric Company by NextEra Energy may mean an opportunity for Berkshire Hathaway Energy if the deal falls through.

Key to NextEra’s purchase of the Honolulu-based utility is the approval of the Public Utility Commission, and that commission just had a major change in leadership.

Governor David Ige, who has opposed the merger, and has openly questioned NextEra Energy’s commitment to Hawaii’s goal of 100% renewable energy, just appointed a new PUC Commissioner.

On July 1, Thomas G. Gorak was sworn as a Commissioner to the Hawaii Public Utilities Commission after being appointed to the Commission by Governor Ige on June 29.

Berkshire’s Proven Commitment to Renewable Energy

Berkshire Hathaway not only believes in renewable energy, it already has one of the largest renewable energy portfolios in the world. Its subsidiary BHE Renewables encompasses BHE Solar, BHE Wind, BHE Geothermal, BHE Hydro as well as renewable project development and commercial management. BHE Renewables owns solar, wind, geothermal and hydroelectric projects in eight states that produce energy for both the wholesale market and for customers under long-term power agreements.

The company already has 3,877 megawatts of renewable energy capacity, including one of the world’s largest solar farms, the 579 MW Solar Star project in southern California.

Another example of Berkshire’s commitment to renewable energy is in Iowa, where it is aggressively working towards producing 100% of the state’s energy needs through wind power.

In April, Berkshire’s MidAmerican Energy Company announced plans for a $3.6 billion, 2,000 megawatt wind farm in Iowa that will feature 1,000 wind turbines.

Does Berkshire Have an Interest in Hawaiian Electric?

Berkshire already owns BHE Hydro’s Wailuku run-of-river 10 megawatt hydro project in Hawaii. The hydroelectric project consists of a massive 60-inch pipeline located 2,000 feet above sea level that carries water nearly three miles, transporting it from the Wailuku River diversion all the way to the powerhouse.

In addition, Berkshire recently registered MidAmerican Energy Services LLC as a new business in Hawaii.

It could just be possible that Warren Buffett will be saying “aloha” in Hawaii.

© 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.

GEICO Files RICO Lawsuit in Florida

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GEICO has sued five companies and six known individuals engaged in a complex scheme to submit hundreds of suspected fraudulent glass repair bills for payment.

In the case, Government Employees Insurance Company, et al. v. Jason Fry, et. al., filed June 9, 2016, in the US District Court for the Middle District of Florida, GEICO seeks to recover damages under the Civil RICO statutes and the Florida Consumer Protection Statutes. GEICO also seeks a declaration that any pending claims are not owed.

GEICO’s lawsuit alleges that customers’ information was taken or used without their knowledge or consent in order to create invoices for non-existent repairs, which were then submitted to GEICO. In addition to billing for services not provided, the suit alleges that GEICO was billed for services that had no repair value and were unnecessary.

The Racketeer Influenced and Corrupt Organizations Act, commonly referred to as the RICO Act, is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization.

The RICO Act focuses specifically on racketeering, and it allows the leaders of a syndicate to be tried for the crimes which they ordered others to do or assisted them in doing, closing a perceived loophole that allowed a person who instructed someone else to, for example, murder, to be exempt from the trial because he did not actually commit the crime personally.

“GEICO has a zero tolerance policy when it comes to insurance fraud. Fraud against insurance companies is not a victimless crime; it hurts consumers through increased premiums and can unfairly harm the reputation of legitimate companies,” said Ryan West, GEICO’s vice president of claims. “Legislative reform in this area is long overdue.“

West went on to say that GEICO will take decisive and immediate action against any individual seeking to commit fraud, and this litigation represents a preview of further lawsuits that GEICO intends to file to protect its customers and the public from the harm caused by those who engage in fraud.

© 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.