Monthly Archives: April 2017

ISCAR to Benefit from Robust Growth in Boring Tools Market

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ISCAR, the largest of the 15 companies comprising Berkshire Hathaway’s IMC (International Metalworking Companies) will benefit from a projected robust market for boring tools over the next five years.

IMC’s companies produce a wide range of carbide inserts, carbide endmills and cutting tools, covering most metal cutting applications.

In a new TechNavio report, “Global Boring Tools Market 2017-2021,” Technavio’s analysts forecast the global boring tools market to grow at a CAGR of 7.27% during the period 2017-2021.

The report notes that a key driver of the demand for boring tools is the demand for fabricated metal in the automotive sector.

The report notes that “the major growth in the boring tools will be seen in key APAC countries such as China and India. South Korea and other emerging economies are growing at a higher rate when compared with the matured markets in the Americas and EMEA.”

The total metal cutting tools market, which includes boring tools, was valued at $36.04 billion in 2016.

© 2017 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.

BNSF Continues Layoffs Due to Soft Coal and Oil Demand

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BNSF Railway continues to trim its workforce, which continues a process that was particularly heavy in 2016.

In 2016, BNSF furloughed about 4,600 workers.

The most recent to face layoffs were 55 workers at the Glendive diesel shop in Glendive, Montana. The layoffs are classified as permanent, and the shop will continue to employ roughly 60 workers.

A spokesman for BNSF cited lower demand for coal and oil shipments as the reason for the layoffs.

System-wide, BNSF’s 2016 carloads were down significantly from 2015 levels. There were a total of 480,000 fewer unit trains than in the prior year.

Things have been looking up in 2017, with total carloads including intermodal up a robust 7.25% system-wide. However, the freight hauler has been working actively on making itself more efficient, which enables it to do the same work with fewer employees.

© 2017 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.

Grandscape to Add 100-Acre Lifestyle Center

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Grandscape, Berkshire Hathaway’s giant mixed-use real estate development in The Colony, Texas, has broken ground on 1.5 million square feet of residential and office space that is billed as the lifestyle center for the development.

The lifestyle center will feature a luxury high-rise apartment tower that will also have retail and office space.

Located in the Dallas/Fort Worth area, Grandscape is being developed by Berkshire’s Nebraska Furniture Mart, and is home to its 1.86 million square foot store, which opened in 2015.

Berkshire is on a ten-year-plan to fill out the Grandscape property, with anchor retail and entertainment all on a Texas-sized scale.

In January, Galaxy Theatres agreed to build and operate an 85,000+ sf, 16-screen movie venue in the lifestyle center. The opening is scheduled for 2019.

Another anchor retailer that is already signed is Scheels All Sports, which is certainly familiar with the mega-sized nature of Grandscape.

Scheels currently operates the “World’s Largest All Sports Store,” which is located in Reno/Sparks, Nevada. No word yet whether the Grandscape store will eclipse it.

© 2017 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 Goes Inter-Galactic with Guardians of the Galaxy 2 Movie Tie-In

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The Dairy Queen® brand is teaming up with Marvel Studios’ highly anticipated movie release, Guardians of the Galaxy Vol. 2, to launch the Guardians Awesome Mix Blizzard Treat and #MissionMixtape, a Fan journey to claim an exclusive mixtape.

The promotion then has fans search the galaxy for a cassette player to hear their celestial reward.

“The Marvel collaboration allows us to bring our Fan Food philosophy to life in our new summer blockbuster Guardians Awesome Mix Blizzard treat,” says Barry Westrum, executive vice president of Marketing for American Dairy Queen Corporation (ADQ). “In the movie, the Guardians are stronger as a team. Likewise, we teamed up with Marvel to create a Fan favorite summer Blizzard treat flavor, mixing brownie and cookie pieces to create ‘Brookie’ pieces and combining them with caramel, choco chunks and DQ vanilla soft-serve.”

Starting April 26 at 12 p.m. CDT, Fans can claim one of 1,000 Mission Mixtapes at MissionMixtape.com. Once claimed, Fans must search the galaxy for a cassette player to play the tape and get a special code for prizes ranging from limited edition, cast-signed Marvel Studios’ Guardians of the Galaxy Vol. 2 movie posters to DQ gift cards. Each cassette tape also includes original, unofficial ‘bonus’ tracks. Fans can share their missions or follow along with #MissionMixtape.

Additionally, customers can upgrade the small sundae in the $5 Buck Lunch meal to a small Blizzard treat for an additional $1.

The promotion is only the second time that Dairy Queen has done a movie tie-in in the past twenty years. In 2015, Dairy Queen tied-in with Jurassic World, which went on to be the biggest film of the summer and the second highest grossing film of the year.

At the time, Dairy Queen’s CEO, John Gainor, noted that he was delighted to see how the branding tie-in boosted sales across the board, and especially for their Blizzard dessert that came in a Jurassic World-themed cup.

Hopefully, Guardians of the Galaxy Vol. 2 will have a similar effect.

For more information on Dairy Queen’s world-wide plans, read a Mazor’sEdge special report on Dairy Queen.

© 2017 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.

2016 Was the Year Dairy Queen Was Chillin

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Berkshire Hathaway’s Dairy Queen, the venerable food and frozen treat purveyor, rolled out more of its DQ Grill & Chill franchises in 2016 than in any year prior.

Dairy Queen opened 318 locations worldwide, including 82 new stores in the United States.

Phoenix, upstate New York, Southern California, and South Carolina are all areas where Dairy Queen has major expansion plans, and internationally, South Korea plans to open 50 DQ Grill & Chill locations within the next five years.

The South Korea agreement is with the privately held M2G USA Investment, Inc., whose diversified business portfolio includes ownership of restaurants, hotels, public storage businesses, household appliance manufacturing, shoes and an extensive global real estate portfolio.

“The DQ® brand continues to expand in new international markets,” said John Gainor, President and CEO of International Dairy Queen, Inc., said at the time of the announcement. “We are looking forward to working with M2G USA Investment to bring our renowned menu, signature treats and quality service to the Republic of Korea.”

Closer to the U.S., Dairy Queen’s plans call for the development of DQ Grill & Chill locations in Trinidad and Tobago, DQ Grill & Chill and DQ Treat locations in Jamaica, and DQ Treat locations in St. Lucia, Grenada and St. Maarten.

The DQ system has more than 6,700 locations with more than 2,200 of those units operating outside of the United States.

For more information on Dairy Queen’s world-wide plans, read a Mazor’sEdge special report on Dairy Queen.

© 2017 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: Did the KCC Open the Door for Berkshire to Make a Bid for Westar Energy?

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On April 19, the Kansas Corporation Commission torpedoed the planned acquisition of Westar Energy by Great Plains Energy.

Westar is the largest electric utility in Kansas and the combined companies would have served approximately 950,000 Kansas customers.

The KCC rejected the merger as bad for consumers, and noted what they called an excessive purchase price, requiring GPE to take on significant debt. They noted that the $4.9 billion acquisition premium exceeded GPE’s $4.8 billion market capitalization by $100 million.

With the merger dead, the big question is whether it opens the door for Berkshire Hathaway Energy to make another run at Westar Energy. BHE was in the running the last time around.

Westar Energy is a Natural Fit for Berkshire

With a market cap of roughly $7 billion, Westar is in the same price range as NV Energy, which Berkshire acquired in December 2013 for $5.6 billion.

In addition to just adding to Berkshire’s energy assets, the acquisition makes sense geographically. BHE has already partnered with Westar on Prairie Wind Transmission, LLC, a 108-mile, 345-kilovolt high-capacity electrical transmission line in south-central Kansas that was completed in 2014.

If BHE proves to be interested, it may face competing bids from Ameren Corporation, as well as an investor consortium that includes Borealis Infrastructure Management Inc. and the Canada Pension Plan Investment Board.

Both Ameren and the CPPIB were interested in Westar before the Great Plains merger was signed, and they may again return to the bidding.

Like BHE, Ameren’s service area in neighboring Missouri also fits well with Westar, which provides power for approximately 687,000 customers in much of east and east-central Kansas.

Unlike Great Plains Energy, BHE’s financial strength may enable it to overcome the KCC’s concerns, and add another valuable energy asset to Berkshire’s portfolio.

© 2017 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 Job Cuts Less Than First Reported

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The newspaper business continues to slide and Berkshire’s BH Media Group, which owns 31 daily newspapers,47 paid weekly newspapers and 32 print and on-line products. , has trimmed its workforce by 289 positions across its publications.

While the number most have reports have focused is 289, the number is actually far less, as 108 are vacant positions that will not be filled.

“While more readers than ever turn to our digital products, our digital revenue is not growing fast enough yet to offset print revenue losses from both advertising and circulation,” Terry Kroeger, president and chief executive of BH Media, wrote in a memo to employees.

Kroeger emphasised the cuts were need to preserve profitability.

“It is imperative that we take this action. Otherwise some of our operations will become unprofitable. And, like it or not, profitable news organizations are necessary to practice exceptional journalism.”

The company will also reduce the number of pages it will print in some publications.

BH Media cites slumping regional advertising, as one of the sources of its problems.

Just last week, HHGregg, a regional retailer of consumer electronics and home appliances with a strong presence in the Midwest, went belly up, and as retailers shutter brick and mortar stores, newspapers lose one of their major sources of display advertising.

© 2017 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.

Fruit of the Loom Chooses New PR Agency

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Fruit of the Loom has selected Cohen & Wolfe as its new North America public relations agency. The 160-year-old underwear manufacturer switched from Ketchum.

Cohen & Wolfe has previously done branding for Barclays, ExxonMobil, GlaxoSmithKline, Hennessy, Mandarin Oriental Hotel Group, Mattel, Panasonic and Smucker’s. The company is a subsidiary of WPP, the world’s largest communications services group.

“We were impressed with the Cohn & Wolfe team and their spot-on consumer insights, uniquely creative ideas and enthusiasm for our brand,” Bryse Yonts, manager of brand communications for Fruit of the Loom, said.

© 2017 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 Hathaway HomeServices Courts Chinese Buyers with Juwai.com Deal

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Berkshire Hathaway HomeServices has signed a marketing agreement with Juwai.com to syndicate all of its franchisees’ residential listings to the China-based international property portal that attracts roughly two million visitors monthly.

In addition, Berkshire Hathaway HomeServices also launched a banner advertising campaign on Juwai.com to promote its brand, home page and listings to Juwai.com’s audience.

The alliance makes Berkshire Hathaway HomeServices a dominant brand on one of the world’s most popular real estate search sites.

“The Chinese have overtaken all nationalities besides Americans as the leading buyers of property in the U.S.,” said Gino Blefari, CEO of Berkshire Hathaway HomeServices. “Our efforts through Juwai.com, and through existing marketing agreements with The Wall Street Journal/Asia and Mansion Global Wechat Channel, make it much easier for Chinese real estate buyers to find and shop our property listings.”

Juwai.com and Juwai.com/luxe attract high-net-worth consumers who are ready to buy homes in the U.S. Site traffic comes from more than 400 cities in China and from 165 countries around the world. Juwai.com hosts its sites and services on both sides of China’s “great firewall,” enabling Chinese consumers access no matter where they live and buy.

“Our listings and banner ads are on display inside and outside of China,” said Kerry Donovan, vice president of Marketing for Berkshire Hathaway HomeServices. “This is a huge differentiator for us.”

Berkshire Hathaway HomeServices’ home page on Juwai.com offers a network introduction and statement about the brand’s values and heritage. The site includes Berkshire Hathaway HomeServices’ real estate market perspectives and it provides access to the network’s listings – lots of them. Listings are in click-to-translate mode for consumers and a dedicated “concierge” team based in China stands by to help home buyers with translation, questions and referrals to Berkshire Hathaway HomeServices listing agents.

“We will continue refining our global listing-syndication program to bring the most value to our domestic franchisees based on international buying activity and search patterns,” said Donovan. “Juwai.com is an important step toward our overall strategy.”

© 2017 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: Could Pepsi become a Berkshire Brand?

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It‘s no secret that Warren Buffett is partial to Coca-Cola, after all he not only drinks 5 Cokes a day, but Berkshire Hathaway owns 400 million shares of Coca-Cola stock valued at roughly $16.5 billion.

“I’m one quarter Coca-Cola,” Warren Buffett has joked.

However, with Berkshire and 3G Capital having been rebuffed in their $143 billion bid for Unilever Plc, one important analyst thinks PepsiCo, Inc. might be a logical target for the expansion of Kraft Heinz.

Pablo Zuanic, the Senior Analyst covering the Food, Beverage, and Household/Personal Care sectors for Susquehanna Financial Group, thinks Pepsi might quench Berkshire and 3G’s thirst for acquisitions.

Zuanic’s bona fides as an analyst have seen him recognized by Institutional Investor as the #1 Latin American Food & Beverage analyst for two consecutive years, the #4 US Food Analyst, and the #3 US Food Analyst in their Alpha Poll of Hedge Funds.

PepsiCo, Inc., which has a market capitalization of almost $161 billion, not only has one of the most popular soft drink brands in the world, but also owns snack-maker Frito-Lay and juice company Tropicana.

Zuanic recently raised his Pepsi price target from $118 to $132 on speculation that Kraft Heinz could team with Anheuser-Busch for the bid. The stock is currently just over $112 a share.

It seems logical that a bid for PepsiCo would see the beverages added to Anheuser-Busch, and the snack foods added to Kraft Heinz.

Zuanic notes that in his opinion Pepsi shares trade at a substantial discount when compared to Coca-Cola.

“PEP shares have lost visibility and now trade at a 25% discount to KO on apples-to-apples comps.” writes Zuanic.

While a Berkshire and 3G Capital bid for Pepsi might be a possibility, don’t expect to hear Buffett say “I’m one quarter Pepsi,” anytime soon.

© 2017 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.