Category Archives: Minority Stock Positions

Kraft Heinz Likely Bidder for GlaxoSmithKline’s Horlicks

(BRK.A), (BRK.B)

GlaxoSmithKline is looking to find a buyer for its malted-milk brand Horlicks, as it raises funds for its $13 billion buyout of its consumer healthcare joint venture with Novartis.

Reportedly in the bidding for Horlicks is Kraft Heinz, as the drink is popular in the United Kingdom, Australia, New Zealand, Hong Kong, Bangladesh, India, and Jamaica.

Made from wheat, malt barley, sugar, milk and vitamins, the beverage dates back to 1873 when Horlicks was invented by two British-born men, William Horlick and his brother James Horlick from Gloucestershire, England. James was a chemist, working for a company that made dried baby food. William, the younger brother, had emigrated to the United States in 1869 and James decided to join him in Chicago in 1873. That same year, they started their own company, J&W Horlicks, to make a malted milk drink. They called their product ‘Diastoid’ and their advertising slogan read: ‘Horlick’s Infant and Invalids Food’.

The company that acquires Horlicks will have to cope with a decline in the popularity of malted-milk sector. In India, negative volume growth in the health food drinks segment was -6.8% in 2016-17, according to India’s The Economic Times.

“Horlicks is a terrific brand with a long history, especially in India,” GSK Chief Executive Officer Emma Walmsley noted at a recent investors’ meeting. “But in the context of funding for this (Novartis) transaction and our desire to increase focus on our over-the-counter and oral health portfolios, as well as other group capital allocation priorities, it makes sense for us to review it.”

© 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.

Portugal Latest Country for BYD’s Pure Electric Ebuses

(BRK.A), (BRK.B)

New energy company BYD has entered the Portugal market for its pure electric ebuses.

Portugal joins Spain as an operator of the proven BYD ebus.

The Coimbra Municipal Public Transportation Service, SMTUC, has placed an order for eight pure electric 12 metre BYD buses. The contract for this order was signed today by Manuel Augusto Soares Machado, President of the Coimbra Municipality, and Isbrand Ho, Managing Director of BYD Europe, in Coimbra — a city north of the Portuguese capital Lisbon.

It is the first purchase order in Portugal for BYD’s pure electric buses and follows a successful test by SMTUC of a BYD 12 metre ebus last year. With the confirmation of this order for Portugal, BYD is expanding its European presence to 10 countries and now has more than over 400 orders for its electric buses in Europe.

The ebuses will service several routes in the city centre of Coimbra, becoming the city’s first fleet of 12 metre pure electric buses. Delivery of the eight vehicles is planned in the beginning of 2019.

Manuel Augusto Soares Machado, President of the Coimbra Municipality: “I am honoured to announce that these BYD buses are the first full size 12 metre pure electric buses in the one hundred year history of SMTUC. I am also happy to announce that new tenders are being prepared to reinforce electric public transportation in Coimbra.”

Isbrand Ho, Managing Director at BYD Europe: “We are delighted to be able to add this important market, Portugal, to our client portfolio. From north to south Europe, we have become a competitive player across the Continent covering all the climatic conditions from the cold north of Scandinavia to the heat of Italy, Spain and now Portugal, not forgetting the more moderate conditions of Benelux and the UK. The results of the tests with our ebus here were promising and we are confident that our ebuses can deliver reliable and safe services and help to improve air quality – whatever the weather!”

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.

Commentary: Is the Time at Hand for Berkshire to Cash Out of USG?

(BRK.A), (BRK.B)

Gypsum rock and plaster manufacturer United States Gypsum Company soared today as news that Warren Buffett had offered Berkshire Hathaway’s 30% stake in the company to USG’s other major minority stakeholder, Knauf Entities.

Knauf has long been a potential suitor of USG, and was interested in acquiring the company as far back as 2000, when Berkshire first took a 14% stake.

Berkshire reportedly offered its shares to Knauf at $42 per share, which was roughly 19% above the stock’s closing price on Friday, March 23.

USG’s Board of Directors’ weighed in with their own statement, as they moved to squash the deal.

“The board carefully evaluated it and determined that it substantially undervalues the company and is not in the best interests of all of USG’s shareholders.”

Instead, they suggested that its own plans would be the best way to boost shareholder value.

One thing seems clear, after 17 years riding this stock up and down, Buffett is finally ready to move on.

If it does complete the deal with Knauf, not only would Berkshire make money on its investment, but it’s already made a lot of money even though the stock does not pay a dividend.

The Great Recession, USG and Berkshire

Berkshire played a key role in saving USG during the nadir of the Great Recession.

In 2008, with the housing market imploding and lending all but frozen, Berkshire came to USG’s rescue with $300 million of convertible notes that paid Berkshire 10-percent interest.

At the time, the boost in confidence the company received from Warren Buffett’s financing helped the company avoid another bankruptcy. The day of transaction the stock soared 22% to $6.89 a share.

Today, the stock is hovering around $40 per share.

Berkshire has not only profited from the healthy interest payments, but the stock’s appreciation as well.

In December 2013, Berkshire exchanged $243.8 million of the convertible notes for common stock, and with additional purchases its stake in USG now sits at roughly 30.8%.

Back in 2015 and again in 2016, I wrote that perhaps it was time for Berkshire to buy the rest of USG, as the housing market had revived from its Great Recession doldrums.

However, at Berkshire’s 2017 Annual Shareholders’ Meeting, Buffett was less than enthusiastic about USG.

Buffett commented in answer to a shareholder’s question that buying into USG wasn’t one of his “brilliant ideas,” stating:

“On USG we owned a very significant percentage like 30%. USG overall has been disappointing because the gypsum business has been disappointing. I think they went bankrupt twice because they had too much debt. It has not been a brilliant investment. If gypsum went up to what it was some years on the past, we would have done a lot better. Gypsum has taken a real dive several times and there has been too much gypsum capacity, and when it comes back the management have been not only of use but have gotten more optimistic than they should have. It’s a business where the supply has been significantly greater than the demand in a lot of years. You’ve seen housing starts since 2008-9 not come back anywhere near where people anticipated, so gypsum prices have not moved up dramatically. So just put that one down as not one of our brilliant ideas. Not a disaster.”

Perhaps with USG again in play, it just got brilliant again.

© 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 Lauded as One of the Most Innovative Companies

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New energy technology company BYD has been named one of the year’s Most Innovative Companies by Fast Company for the fifth time since 2009.

This year, Fast Company is honoring BYD as one of its Top 10 Most Innovative Companies in Energy.

BYD was selected from a list of fifteen hundred companies.

The Fast Company accolade continues a legacy of recognition for the most-awarded electric bus manufacturer in the world. BYD has now been honored more than a dozen times by international media outlets, government agencies, nonprofits and trade associations for its work in clean air, energy, transportation and technological innovation.

“At BYD, we never stop working to transform the world. We strive to create innovative ways to power and move the world with safe and sustainable technology,” says Stella Li, President of BYD North America. “We are honored to be recognized for our contribution worldwide.”

In addition to being a global leader in rechargeable-battery manufacturing, BYD is the world’s largest manufacturer of battery-electric vehicles for the third year in a row. BYD is also the largest manufacturer of battery-electric buses in North America.

All of these industries are built on BYD’s proprietary Iron-Phosphate battery -— a fire-safe, completely recyclable and incredibly long- cycle technology.

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.

Warren Buffett on a stock buy so good, “that I’m actually starting to remember that it was my idea.”

(BRK.A), (BRK.B)

Berkshire Hathaway’s investment in Chinese new energy company BYD has worked out so well that it’s now among the company’s top fifteen stock holdings.

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has grown almost ten-fold in just a decade.

Berkshire’s original investment of $230 million is now worth roughly $1.96 billion.

Whose idea was it to purchase a stake in the company?

“Charlie (Munger) called me one day and says, ‘We’ve got to buy BYD. This guy that runs it is better than Thomas Edison,’ Warren Buffett explained while appearing on CNBC’s Squawk Box. “And I said, ‘That isn’t good enough.’ And then he called a little later and said, ‘He’s a combination of Edison and Bill Gates.’ And I said, ‘Well, you’re warming up but it still isn’t good enough.’ Anyway, Charlie wanted to do it. Now, it’s worked out so well that I’m actually starting to remember that it was my idea. As it’s coming back to me. I think I persuaded Charlie. But unfortunately I’m on the record that it’s his deal. But BYD, Charlie’s in love with the company, and it’s done very well. And the fellow that runs it, you know who’s autos and batteries, but he’s got big, big ideas and he’s very good at executing. So, but I leave it to Charlie.”

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.

Phillips 66 and Berkshire Hathaway in Share Repurchase Agreement

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Phillips 66 has agreed to repurchase 35 million shares of Phillips 66 common stock from a wholly-owned subsidiary of Berkshire Hathaway for $93.725 per share. This $3.3 billion repurchase is expected to close on Feb. 14, 2018.

The shares had been purchased at an average price of $78.31 a share, and Berkshire’s return on its investment, excluding dividends, was roughly 20%. Currently, Phillips 66 is paying an annual dividend of 2.99%.

“We are excited to have this opportunity to return capital to our shareholders in such a meaningful way,” said Greg Garland, Chairman and CEO of Phillips 66. “This transaction benefits all of our shareholders, as it is immediately accretive to earnings per share and positive for valuation. While this highlights our dedication to shareholder distributions, our strategy remains unchanged. We are committed to running our assets safely and reliably, growing our Midstream and Chemicals businesses, enhancing our Refining and Marketing returns, and rewarding our shareholders through a secure, competitive and growing dividend along with continued share repurchases.”

This is hardly the end of Berkshire’s investment in Phillips 66.

“Phillips 66 is a great company with a diversified downstream portfolio and a strong management team,” commented Warren Buffett. “This transaction was solely motivated by our desire to eliminate the regulatory requirements that come with ownership levels above 10 percent. We remain one of Phillips 66’s largest shareholders and plan to continue to hold the stock for the long term.”

At closing of this transaction, Phillips 66 will have 466.5 million shares outstanding of which Berkshire will have an equity ownership interest in 45.7 million shares.

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 Receives Prestigious Energy Storage Award

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German energy consultancy EuPD Research has awarded new energy technology company BYD with the “Top Brand PV Seal 2018” for energy storage manufacturers, the first for a Chinese company.

The honor was determined after German PV installers rated BYD highly across a range of categories including brand satisfaction, loyalty, quality and distribution strength.
BYD, headquartered in the Chinese innovation hub of Shenzhen, has won numerous international accolades for its advancement in the energy storage sector.

Last November, pv magazine named BYD as the winner of its global innovation award because of the company’s breakthrough technology in its residential and commercial battery energy storage system the B-Box (high voltage).

In the same year, two BYD energy storage products were jointly nominated at the ees (Electrical Energy Storage) awards, an unprecedented achievement for a company since the award began in 2014.

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 is now worth roughly $1.8 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.

BYD ADL Pure Electric Buses Continue to Conquer London

(BRK.A), (BRK.B)

On Saturday, February 3, a fleet of BYD ADL pure electric buses took over operation of a fourth London bus route.

Route 153, operated by Go-Ahead London on behalf of Transport for London (TfL), runs an intensive service from before 05.00 to after 23.00 six days a week (with a slightly later start on Sundays). The Route spans many of the City of London’s most congested streets between its termini at Finsbury Park in the north to Moorgate in the heart of the financial district.

The new fleet consists of 11 of the 10.8m BYD ADL Enviro200EV single deckers, similar to others operated by Go-Ahead and now a familiar sight on London roads. The well proven zero emission vehicles entered service successfully and operate from the Northumberland Park Garage in Tottenham, north London. The new buses marked the transfer of the route to Go-Ahead from CT Plus. BYD has supplied the depot with its own-designed and manufactured charging points.

The other three ADL BYD serviced London routes, all with Go-Ahead, are the 521 and 507 from Waterloo and the 360 from Camberwell. Other routes and operators will receive fleets of BYD ADL electric buses in the coming months following tender wins by the partnership.

“We are delighted to make another significant step in the electrification of London’s bus routes and to be in the vanguard of the transformation. At Go-Ahead we have developed considerable practical knowledge of electric bus operation, gained over six years, and are well positioned to contribute further to the improvement of the capital’s air quality”, said Richard Harrington, Go-Ahead Group’s Engineering Director.

“The smooth switch on of our electric buses to operate another intensive London route is a testament to the strength of our overall offering – not just the proven and reliable buses themselves but of the back up and support of our partners in planning and installing the necessary equipment to make electric bus operation successful from day one”, said Frank Thorpe, UK Country Manager for BYD UK, speaking on behalf of the ADL BYD partnership.

BYD sold over 14,000 electric buses globally in 2017 and, in partnership with ADL, single deck market leader in the UK, its fleets in London, Liverpool and Nottingham have already accumulated well over a million miles of emissions free operation on UK roads.

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 is now worth roughly $1.8 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.

Egypt Chooses BYD’s Electric Buses

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Egypt’s first pure electric bus will begin plying the streets of its second largest city Alexandria in the first half of the year under a new deal signed with BYD. Under the agreement, BYD will deliver 15 units of K9 12-meter pure electric buses and 18 charging poles, to accelerate the transition of local public transportation electrification.

The company won a competitive tender to provide its K9 pure electric buses after a call for submissions was made in April 2017. Countries such as Australia, the USA, UK, Japan and Italy operate the K9 in various scenarios. Powered by BYD’s proprietary battery technology, the K9 has a range of 250 kilometers.

BYD is ramping up its expansion across global markets as cities around the world shift towards more sustainable practices. In the Egyptian capital of Cairo, BYD’s sedan accounts for 40 percent of the city’s taxi fleet; its sports utility vehicle S5 is scheduled for a local launch in March.

Also in the pipeline are plans to assemble electric buses and electric cars in Egypt, construct a BYD SkyRail monorail through Alexandria’s congested city center and possibly develop the country’s solar energy sector.

“The tide is turning towards a greener way of living. We need to give ourselves a fighting chance if we are to mitigate the effects of climate change,” said AD Huang, General Manager of BYD Middle East and Africa Auto Sales Division.

BYD’s new energy vehicles span private, public and industrial use. The footprint has landed in more than 200 cities across 50 countries and regions.

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 is now worth roughly $1.8 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.

13 BYD Pure Electric Midibuses for Italy

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Four city operators in the Piedmont Region of Italy have placed orders for a total of 13 BYD pure electric Midibuses, a new model which BYD only unveiled at the Busworld Show in October.

GTT, the Turin operator is ordering eight Midibuses (which will join its fleet of 20 12m BYD ebuses), AMAG in Alessandria is taking two as is BUSCOMPANY, the operator in nearby Saluzzo and CHIESA in Carmagnola is ordering one.

The buses, which will be built in BYD’s plants in China, are expected to be delivered in the second half of 2018.

“These orders are doubly significant for BYD: they further under line our growing position in the important Italian bus market where we are making progress in the face of strong competition and they also represent a vote of confidence in our latest model, the Midibus”, said Isbrand Ho, Managing Director, BYD Europe.

“In fact, in this month alone we are able to announce orders for our largest ever vehicles – two 18m articulated ebuses – from our most northerly customer, Nobina in Norway, as well as these 13 vehicles – our smallest model – for our most southerly mainland European customers in Piedmont.”

He added: “Whether its maximum capacity in a cold climate or manoeuvrable ebuses capable of servicing confined streets in historic southern cities, BYD has the right product!” Mr Ho added.

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 is now worth roughly $1.8 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.