Monthly Archives: June 2018

Johns Manville Named Supplier of the Year

(BRK.A), (BRK.B)

Berkshire Hathaway’s Johns Manville has been named “Supplier of the Year” for 2017 by Insulate America Inc., the nation’s largest insulation contractor association.

JM received this same honor in 2013, 2014, 2015 and 2017 for each previous year’s performance. Insulate America’s “Supplier of the Year” award recognizes companies for the overall value they provide to the organization through technical expertise, customer support and lead referrals.

“At a time marked by heightened competitive pressure, JM has demonstrated an unparalleled level of dedication and commitment to Insulate America. We are proud to recognize them yet again with this award,” said Insulate America President and CEO David Beam. “With their top-notch service and innovative product solutions, we appreciate the support they provide to help us meet our customers’ needs.”

Insulate America is a cooperative group of locally owned, independent insulation contractors who provide and install quality insulation and other building products for residential and commercial construction. It is the largest independent insulation contracting organization in the U.S. with over 200 locations across the nation. Representatives from each of the locations vote on the “Supplier of the Year” award.

“2018 marks our 18th year of doing business with Insulate America, and it has been a productive and highly rewarding partnership,” said Bob Wamboldt, president of JM Insulation Systems. “We are humbled by this recognition, and we look forward to a future with Insulate America that will be every bit as positive as the experience we’ve had over the past 17 years.”

© 2018 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 Brokerage Superpower Created in Pittsburgh

(BRK.A), (BRK.B)

Northwood Realty Services has announced it will acquire Berkshire Hathaway HomeServices The Preferred Realty and join the Berkshire Hathaway HomeServices network in August operating as Berkshire Hathaway HomeServices The Preferred Realty.

The union creates a brokerage superpower of more than 1,800 agents and 50 offices serving 22 counties in Western Pennsylvania and Eastern Ohio.

The Preferred Realty and its family of companies would be the No. 1 residential real estate brokerage in greater Pittsburgh for sales volume, units and listings based on West-Penn MLS data through May. It would also be the No. 20 company across the entire industry for units based on REALTrends data; and No. 10 in the Berkshire Hathaway HomeServices network for gross commission income.

Tom Hosack, Northwood Realty Services president and CEO, will serve as co-president and CEO of The Preferred Realty. Jim Saxon of The Preferred Realty will be co-president and COO. Northwood Realty Services’ Wendy West remains chairwoman of the brokerage’s board of directors, while Ron Croushore, CEO of The Preferred Realty, becomes the board’s vice chairman.

“This union is a wonderful fit for all parties involved,” said Hosack. “We are both family-run companies that care deeply about the success of our agents and employees. We are passionate about helping consumers with their real estate needs and aspirations. Our new brokerage is grounded in a shared philosophy and supported by Berkshire Hathaway HomeServices, one of the fastest-growing brands in real estate.”

Croushore said the transaction brings even more opportunities for the expanded brokerage. “We thoroughly cover Western Pennsylvania and Eastern Ohio with top agents and a complete line of real estate services,” he explained. “Our economies of scale will help us innovate, market and grow our services. As part of my legacy I want to see The Preferred Realty grow for generations to come. We are certainly on that track.”

Saxon added that timing of the transaction is ideal. “Our markets are growing and changing, just like our competitors,” he explained. “It’s more important than ever for our agents to be supported with the most effective technology, tools, education and leadership to help them succeed. Combined, we will build on our best practices, processes and products, and compete in unprecedented ways.”

Founded in 1956, Northwood Realty Services is owned and operated by Everest Consulting Group, LP. The brokerage’s sister companies include mortgage lenders West Penn Financial Service Center and People First Financial, plus Everest Insurance, LLC, and Everest Settlement. It established a commercial real estate division in 2017.

The Preferred Realty family includes Preferred Insurance, Preferred Settlement Services, RE Educators, Preferred Property Management Company and Referral Associates of PA.

Gino Blefari, president and CEO of Berkshire Hathaway HomeServices, applauded the union. “This is a great move for both companies,” he said. “Tom Hosack, Ron Croushore and Jim Saxon have built dream team that should dominate the landscape for years to come.”

© 2018 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.

Brazil Latest Country for BYD’s SkyRail

(BRK.A), (BRK.B)

BYD has signed an agreement to construct its SkyRail monorail in the Brazilian city of Salvador. the project will be the first of its kind for BYD in Latin America.

The 20 kilometers seaside route will be partially built above the sea to connect to an offshore island, with another portion traversing above a 19th century railway track that is set to be converted into a pedestrian zone.

Construction for the 2.5 billion Brazilian real (689 million US dollars) project will be divided into two phases, and is scheduled to begin in the fourth quarter of 2018 and be operational in 2021.

BYD’s monorail project will connect with the existing subway, providing seamless transportation for the city of 3.8 million residents.

“Air pollution and traffic congestion are the twin evils of urban living. The SkyRail will provide the residents of Salvador with a low-carbon and more convenient way of travelling,” said BYD senior vice president Stella Li. “This project is an important milestone in our global revolution. BYD is willing to work together with our partners to electrify transport and make it smarter.”

Among the features highlighted for SkyRail are its strong climbing capacity makes the vehicle capable of negotiating the difficult local terrain where a distance of 400 meters requires an increase of 80 meters. In addition, the SkyRail is quiet and carbon-free. Its elevated construction does not affect normal pedestrian and traffic flow, providing a non-disruptive addition to Salvador’s urban landscape.

The local government has plans to boost tourism in the area where the SkyRail will be constructed with the help of domestic companies.

SkyRail was first launched in October 2016 after five years of research and development worth 5 billion RMB. It is currently operational in the western Chinese city of Yinchuan. Outside of China, BYD has won strategic partnerships with countries such as the Philippines, Egypt, Morocco and Cambodia.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million has grown in value almost ten-fold, and is now worth roughly $1.96 billion.

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

2018 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 Finally Cashes Out of USG

(BRK.A), (BRK.B)

After 17 years riding USG’s stock up and down, Warren Buffett is finally going to cash out with a profit.

Gebr. Knauf KG and USG Corporation have entered into a definitive agreement pursuant to which Knauf will acquire all of the outstanding shares of USG in a transaction valued at approximately $7.0 billion.

Under the terms of the agreement, USG shareholders will receive $44.00 per share, which consists of $43.50 per share in cash payable upon closing of the transaction and a $0.50 per share special dividend that would be paid following shareholder approval of the transaction.

The price represents a premium of 31% to USG’s unaffected closing price of $33.51 and a 36% premium to the $32.36 average closing price for the preceding 12-month period, both as of March 23, 2018, and a multiple of approximately 11.6x USG’s adjusted EBITDA for the 12 months ended March 31, 2018.

The transaction was unanimously approved by USG’s Board of Directors.

Berkshire Hathaway has agreed to vote its shares in favor of the transaction. As of June 11, 2018, Berkshire Hathaway and its subsidiaries owns approximately 31% of the issued and outstanding shares of USG.

While Berkshire will exit its position with a profit, Warren Buffett had previously expressed his disappointment with the fortunes of the company.

“So just put that one down as not one of our brilliant ideas,” Buffett said. “Not a disaster,” he added.

© 2018 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’s Jurassic Chomp Blizzard Means Another T-Rex-Sized Summer

(BRK.A), (BRK.B)

Dairy Queen is looking for another T-Rex-sized summer tied to the theatrical release of Jurassic World: Fallen Kingdom.

Dairy Queen is featuring the Jurassic Chomp Blizzard — vanilla soft serve blended with chocolate-dipped peanut butter bites and fudge topping—as a tie-in with the blockbuster film.

This is the third go around for Dairy Queen with a major summer movie tie-in. In 2015, DQ had a tie-in with the first Jurassic World, and in 2017 they tied into Guardians of the Galaxy Vol. 2.

At the time, then CEO John Gainor noted the strong boost that sales received just from putting a Blizzard dessert in a movie-themed cup.

Gainor’s successor at CEO, Troy Bader, agrees and says there is a positive change as well.

“These days movie studios aren’t looking for millions in sponsorship fees,” Bader says. “They are looking for the connection to your advertising.”

For Dairy Queen, it’s an opportunity to link to a massive promotional campaign.

The Jurassic World: Fallen Kingdom $185 million media value global campaign is double in size of the campaign that ran for Jurassic World. In addition to Dairy Queen, JEEP, Dr. Pepper, Doritos, Kellogg’s and Mars Candy are just some of the heavyweight players that are tied-in with the film.

Dairy Queen is running Jurassic World: Fallen Kingdom-themed TV ads that began 30 days before the theatrical release date and will continue all summer.

Jurassic World: Fallen Kingdom opens in U.S. theaters on June 22.

2018 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: Remember Charlie Munger’s Advice Before Loosening Banking Regulations

(BRK.A), (BRK.B)

“I don’t think you can trust bankers to control themselves. They’re like heroin addicts,” Charlie Munger famously said.

At age 94, Berkshire Hathaway’s vice chairman has seen enough business cycles to know that when things go bad, banks fail.

Yet, now that the Great Recession is far enough in the rearview mirror you get the inevitable push to loosen the proprietary trading regulations and bank debt to equity financial requirements that were put in place to prevent the very excesses that brought on the most devastating financial crisis since the Great Depression of the 1930s.

Among the changes, thanks to bank and financial institution lobbying, U.S. regulators are proposing changes to the “Volker Rule” introduced after the 2007-2009 financial crisis that bans banks from trading on their own account in order to make compliance easier for many firms.

The 2010 Dodd-Frank financial reform law banned banks that held U.S. taxpayer-insured deposits from engaging in proprietary trading.

Former Federal Reserve chairman Paul Volker, whom the rule is named after, supports simplification, as long as the new rules meet the intent of the the current regulations.

“What is critical is that simplification not undermine the core principle at stake — that taxpayer-supported banking groups, of any size, not participate in proprietary trading at odds with the basic public and customers’ interests,” Volcker notes.

The proposed changes are now undergoing a 60 day public comment period.

President Trump has already signed into law changes in regulations impacting small and medium-sized lenders. Among the changes, the bill raised to $250 billion from $50 billion the threshold under which banks are deemed too big to fail, and eliminated the requirement for stress tests for the banks below that threshold as well.

Loosening some regulations may in fact bring some needed relief and improved efficiency for banks, but the fact that a number of democrats have signed on to this effort in addition to republicans says as much about the power of the banking lobby as it does about bipartisanship.

Berkshire Hathaway shareholders have a direct interest in the solvency of some of the largest financial institutions because Berkshire owns sizeable stakes in Wells Fargo, American Express, and Bank of America, not to mention Goldman Sachs.

While loosening of financial regulations may boost share prices and increase dividends in the short term, the question is whether it increases the likelihood of catastrophic financial institution failures in the future.

The Great Depression and the Great Recession are certainly the two most memorable periods of mass bank failures, but investors should keep in mind that there have been many more, including the Panic of 1819, the Panic of 1837, the Panic of 1873, and the Panic of 1907.

And don’t forget the Savings and Loan Crisis of the 1980s and 1990s, which saw 1,043 failures, accounting for roughly one third of all Savings and Loan associations.

Over the years, Charlie Munger has astutely noted that free market objectives are different than letting the fox have unfettered access to the henhouse, and he hasn’t been afraid to say so.

“People really thought that giving a predatory class of people the ability to do whatever they wanted was free-market enterprise, Munger wryly observed at the WESCO annual meeting in 2009. “It wasn’t. It was legalized armed robbery. And it was incredibly stupid.”

As for the push for tight regulations, “Banks will not rein themselves in voluntarily. You need adult supervision,” Munger wisely pointed out.

© 2018 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.

New Dairy Queen CEO Excited About China

(BRK.A), (BRK.B)

Dairy Queen’s recently appointed President and CEO Troy Bader is excited about the company’s growth in China.

“We added 150 locations in China last year alone,” Bader says.

Dairy Queen has more than 800 locations in China, which is its largest overseas market.

In China, Dairy Queen’s primary emphasis is on its treats business, as compared to its Grill & Chill locations that are popular in the U.S. and Canada.

“We don’t have a particular target number of locations,” Bader says. “We face lots of competition.”

That competition is more of a concern to Bader than the current trade war and tariffs that are playing out between the U.S. and China.

One of the highlights for Dairy Queen in the China market is coming from its emphasis on its beverages, especially its tea beverages.

The company has tailored its products to Chinese tastes, with fruit flavors such as apricot, peach and durian proving popular.

Tea is also used in its frozen desserts, with Ceylon black tea blended in with ice cream as one of its Blizzard menu items.

Locations that carry its light food fare also have specially designed products for Chinese tastes, including the Chinese spicy chicken roll and crispy curry puff.

The closest the company comes to the familiar American hamburger is its German beef sandwich. It also sells three variations on the popular American hot dog.

© 2018 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.

HomeServices of America Acquires Largest Private Residential Real Estate Company in Texas

(BRK.A), (BRK.B)

Berkshire Hathaway’s HomeServices of America, Inc. has acquired the Ebby Halliday Companies, the largest private residential real estate company in Texas by sales volume.

The acquisition includes Ebby Halliday’s three real estate brands—Dallas-based Ebby Halliday, REALTORS® and Dave Perry-Miller Real Estate along with Fort Worth-based Williams Trew Real Estate—and their affiliated mortgage and title companies. Ebby Halliday’s portfolio of companies will continue to operate under their current brand names.

Financial terms of the transaction were not disclosed.

Headquartered in Dallas, Ebby Halliday Companies serves metropolitan Dallas-Fort Worth and surrounding communities with approximately 1,800 sales associates and staff operating in 35 offices across 12,000 square miles in North Texas. Ebby Halliday is the 12th largest residential real estate company in the United States by sales volume and the 17th largest by transaction sides, according to the 2017 REAL Trends 500 report. In 2017, the company closed $8.0 billion of sales volume.

Founded in 1945 as a one-woman, one-office firm by industry visionary Ebby Halliday, the firm has grown to become one of the nation’s foremost full-service real estate companies. The Ebby Halliday name is synonymous with providing clients the highest level of customer service, local expertise and resources, all delivered by a team of knowledgeable agents using the firm’s innovative technologies. Mary Frances Burleson, president and CEO and Ron Burgert, the company’s chief financial officer will continue to lead the firm’s strategic growth initiatives and manage day-to-day operations together with their sales management teams.

Also announced was the formation of the Ebby Halliday Foundation. Building on a lifetime of service by the foundation’s namesake and the simple saying she lived by, “Do something for someone every day,” the nonprofit organization will continue Ebby’s legacy of service to North Texas.

© 2018 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 Electric Buses No Longer a Rarity

(BRK.A), (BRK.B)

It wasn’t that long ago that the idea of an electric bus was a novelty. Questions about range, cold weather operation, and charging time still had to be answered.

Today, China’s BYD is the clear world leader in the electric bus market, with more than 35,000 of the company’s pure electric buses in service across the globe at the end of 2017.

The environmental benefits are already substantial and growing.

Worldwide, 279,000 barrels a day less of fossil fuel are consumed because of zero emission buses, according to Bloomberg New Energy Finance. They also note that in China 9,500 new electric buses are going into service every five weeks.

In the U.S., regional transportation systems are increasingly going electric, with BYD signing a contract at the end of May with the University of Georgia to provide 21 pure electric buses.

BYD has sold more than 700 battery-electric buses and trucks to customers in the U.S. and Canada, which is more than any other manufacturer.

Replacing smelly diesel buses is a priority for cities as studies have linked asthma and other lung ailments to diesel exhaust.

The Union for Concerned Scientists note that, “Diesel-powered vehicles and equipment account for nearly half of all nitrogen oxides (NOx) and more than two-thirds of all particulate matter (PM) emissions from US transportation sources.”

In addition to the important benefits in helping to create a cleaner environment, BYD’s growing impact as an employer is also drawing attention.

BYD’s Stella Li, president of BYD Motors, notes the company just received the inaugural Select LA Foreign Direct Investment Award, recognizing its impact on the regional economy and jobs in Southern California.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million has grown in value almost ten-fold, and is now worth roughly $1.96 billion.

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

© 2018 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.

Mouser Electronics Named Global High Service Distributor of the Year by TE Connectivity

(BRK.A), (BRK.B)

TE Connectivity recently honored Berkshire Hathaway’s Mouser Electronics with the 2017 Global High Service Distributor of the Year and the 2017 Customer Expansion Awards for Americas and EMEA regions.

The top distribution award, presented at the recent Electronics Distribution Show (EDS) in Las Vegas, recognized Mouser’s performance based on sales growth, market share growth, customer growth and business plan performance.

“I am proud to recognize Mouser Electronics for the impact they have on our mutual customers,” said Joan Wainwright, President of Channel and Customer Experience at TE. “Mouser has a long track record of achievement with TE, receiving TE’s Global High Service Distributor of the Year Award for five straight years. Mouser accomplished this through record sales in all regions and growing their TE customer base by 11 percent.”

“Mouser is greatly honored to receive this prestigious award, and we’d like to thank TE for recognizing the outstanding efforts of our teams around the world,” said Glenn Smith, Mouser Electronics’ President and CEO. “TE is an industry leader and a valued business partner. We look forward to our continued mutual success.”

Mouser also received TE’s 2017 AMER and EMEA Customer Expansion Awards at the recent TE Distribution Summit. Mouser successfully grew its TE business through continued strategic inventory investments, SKU count expansion, and global marketing initiatives that support the engineering needs of customers worldwide.

© 2018 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.