Category Archives: Special Report

Special Report: BNSF On Track For 2020 Test of Lithium-Ion Locomotive

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Wabtec and BNSF Railway Company are on track for a late-2020 test of a lithium-ion battery-powered locomotive paired with diesel locomotives in a “consist” (railroad jargon for a sequence of connected locomotives) to power a freight train along a stretch of rail in California’s Central Valley between Stockton and Barstow.

If successful, the fuel savings could have a big impact on BNSF and other railroads. And the environmental benefits could also help BNSF advance one of its major capacity-building projects.

BNSF has been developing the pilot program with help from Wabtec (formerly GE Transportation), which is developing the locomotive.

Currently, Wabtec builds new locomotives up to 5,400 horsepower. In addition to locomotives, Wabtec also produces freight cars, passenger transit vehicles and power generation equipment, for both original equipment and aftermarket applications.

For BNSF, the fuel saving could be huge, as adding even one battery-powered locomotive to the train could reduce the consist’s total fuel consumption by up to 15 percent.

BNSF previously looked at liquefied natural gas as a possible alternative to diesel fuel, but ended the project, and has since moved on to battery power.

The leap to battery power is not as big of one as it may at first seem. Diesel-electric locomotives like the machines Wabtec builds are already essentially power plants on wheels. They use a powerful diesel engine to generate the electricity that drives the electric motors that spin the wheels.

Wabtec believes that a battery-powered locomotive is the perfect complement to its diesel-electric brethren. The battery will hold 2,400 kilowatt-hours of energy, meaning it’s able to maintain full horsepower for roughly 30 minutes on a given charge. Then the operator can decide how to use that power.

For example, the operator could slash emissions from the diesel-powered locomotives by drawing heavily on the battery to start up the train. This would be especially desirable if the train were pulling out of a city rail yard, close to populated areas.

Using the battery power also cuts down on noise. The train operator may also choose to “graze” on battery power — or even recharge the battery — when the train is cruising through open landscape, saving hundreds of gallons of diesel.

Each battery locomotive also has a brain, in the form of an onboard supervisory control system. The rail operator can input data about the train’s journey into the system — such as how much weight it’s hauling, the types of locomotives in the consist, and its rout — to allow the computer to make decisions about the best way to use the battery before the train even pulls away.

Imagine a battery-enhanced train making a 500-mile trip across sparsely populated terrain — meaning fuel economy is the name of the game. Software will calculate the optimum ratio of battery power to diesel usage for such a journey and decide on the most favorable balance for the hybrid locomotive consist. The software can then pinpoint the exact moments to draw on the battery, thus sparing diesel.

The new locomotive will use a battery cell similar to what you might find under the hood of an electric car. It is a lithium-ion energy storage unit with cells that contain a combination of nickel, manganese and cobalt only far larger.

A standard electric-car battery usually holds a few hundred storage cells — each around the size of a mini tablet computer. But the prototype of the new locomotive will have a battery with approximately 20,000 cells, and future versions may have as many as 50,000 cells. The cells also must be able to weather the heavy-going environment of a locomotive, with all its jolts and shocks.

To build the demonstration model, workers will strip out the engine and cooling systems from a diesel locomotive to make way for the battery under the hood. But from the outside, the battery-powered locomotive won’t look much different from its diesel counterparts.

The impact on BNSF could be huge, not only in fuel cost-savings, but if it could use battery-powered locomotives in urban areas, such as the Port of Long Beach, it might be able to overcome the opposition to its long-stalled Southern California International Gateway plan, which has been held up due to environmental concerns tied to diesel emissions.

© 2019 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

Special Report: Kevin Clayton Transforms Clayton Homes

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“Would you believe where we are after just three years,” Kevin Clayton, president and CEO of Clayton Homes, says about the company’s move into the site builder business.

It’s a business that Clayton is growing rapidly, and he just acquired Highland Homes in early May, a Florida home builder that is the ninth home builder acquired by Clayton in just three years.

It’s all part of an increasing emphasis on site built homes for the low and midprice market, notes Kevin Clayton.

“It’s a market that has an average price point of $318,000, Clayton says, “which is well under the national average of over $400,000.”

Clayton Homes, which runs its site builders under its Clayton Properties Group, a division of Clayton Home Building Group that is based in Maryville, Tennessee, is already ranked 18th on Builder Magazine’s Builder 100 list and rising fast.

Clayton Homes has been named “Builder of the year” for 2019. It’s an award that really pleases Kevin Clayton.

“To think we weren’t even in that business three years ago,” Clayton says proudly.

Clayton is looking to acquire more site builders, but notes they must meet four criteria.

“First, the owner must be willing to stay around and work,” Clayton says. “Second, they must have survived the last recession; third, they must focus on building low and midprice houses, and fourth, but not least, they must be customer focused and really care about the customer experience.”

Clayton Homes was founded in 1956, by Kevin Clayton’s father Jim Clayton, and Kevin Clayton has led the company since 1999, when he took over from his father.

Acquired by Berkshire Hathaway in 2003 for $1.7 billion, Clayton Homes has grown into a diverse builder offering traditional site built homes, modular homes, manufactured homes, tiny homes, college dormitories, military barracks and apartments.

Improvement in Manufactured Homes

Kevin Clayton is also positive about his manufactured homes business, which he emphasis use the same 30-year shingles as a traditional site built home.

“We don’t have metal roofs anymore,” Clayton says. “Our manufactured homes have a lifespan that’s the same as a site built home.”

Clayton is also building a new type of manufactured homes, for now dubbed New Class Homes, which meet Fannie Mae and Freddie Mac standards. By qualifying, borrowers have lower down payment requirements and lender fees. The homes qualify for a MH Advantage loan, and must be “designed to meet specific construction, architectural design and energy efficiency standards,” according to Fannie Mae.

The move dramatically reduces the amount of down payment borrowers have to come up with. MH Advantage loans require a 3 % down payment, down from 5% previously. In addition, Fannie Mae does not charge its 50-basis-point loan-level price adjustment for manufactured housing loans.

“New Class Homes represent only a couple of percent of our revenues right now,” Kevin Clayton says, but he sees lots of rooms for growth.

The overall manufactured home business is strong.

“The manufactured home business is up 6-7 percent this year,” Clayton says.

Clayton emphasized the environmental advantages manufactured homes, which produce far less waste than traditional site built homes.

“All our 42 facilities are ISO 14001 certified, which is all about environmental standards,” Clayton says.

ISO 14001 is the international standard that specifies requirements for an effective environmental management system.

Clayton has moved much of its supply chain in-house, building more of its own components.

“We build our own windows,” Clayton notes.

Why Consumers Buy Manufactured Homes

It’s a type of housing that opens home ownership to a broad range of consumers that are locked out of housing market as traditional home prices have skyrocketed.

“Fifty percent of people we help with a home would not qualify for Fannie Mae or Freddie Mac mortgages,” Clayton says.

A big part of that access to homes is the greatly lower price point. A manufactured home can be purchased for $69,000 and has an average cost of only $116,000 with land.

“In rural America there’s not a lot of apartment options,” Kevin Clayton notes. “Many of our customers have been living with family, and are looking for an affordable way to live on their own.”

Clayton especially notes the popularity of manufactured homes for five-acre ranches.

“Where there’s land, we shine!”

© 2019 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.

Kraft Heinz Updates Classic Brands for Millennials

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With Kraft Heinz facing a millennials generation of consumers focusing increasingly on products billed as healthy and organic, the processed food manufacturer is not only looking to launch news products, but also to update its classic brands.

On the new products front, the company recently launched Springboard, a platform dedicated to nurturing, scaling, and accelerating growth of disruptive US brands within the food and beverage space.

According to the company, the Springboard platform is seeking opportunities to develop brands with authentic propositions and inspired founders within one of four pillars that are shaping the future of the food and beverage space: Natural & Organic, Specialty & Craft, Health & Performance and Experiential brands.

“We are committed to support and partner with teams that will impact the future of our industry,” said Sergio Eleuterio, General Manager, Springboard Brands. “We are actively searching for emergent, authentic brands that can expand into new categories, and are looking to build a network of founders to help shape the future of foods and beverages.”

As for Kraft Heinz classic brands, it is increasingly reformulating its products to meet millennials’ shopping priorities.

Kraft Heinz’s CEO Bernardo Hees cites CapriSun, which millennials grew up with, as a brand that they will come back to now that it has an organic line. It advertises that its CapriSun Organic uses organic juice from organic farms.

In 2016, the company’s Kraft Mac & Cheese, which generations of children have eaten the bright orange noodles, successfully removed the artificial food colors, including yellow 5 and yellow 6, and replaced them with paprika, annatto and turmeric. Consumers didn’t notice the difference in the product’s look and feel.

Even the iconic hot dog, that most processed of foods, got reworked, In 2017, the Oscar Mayer brand changed its hot dogs to contain no added nitrates or nitrites, no artificial preservatives in their meat, and no by-products in every single one of their hot dogs. Oscar Mayer trumpets that it was the first national brand to do this across every single one of its hot dogs.

Kraft Heinz’s first-quarter net income rose to $993 million, 81 cents a share, up from $893 million, 73 cents a share, from the same period in 2017.

© 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.

Louisiana Goes for BYD’s Pure Electric Buses

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BYD, the largest battery-electric bus manufacturer in North America and the largest electric vehicle company in the world, today announced a new order that will see three American-made BYD K9S electric buses deployed in Baton Rouge, Louisiana, under the authority of the Capital Area Transit System (CATS) later this year. The purchase of these new buses reflects BYD’s continued dominance of the North American battery-electric bus market as well as the continuing growth of the sector across the continent.

“In every corner of the continent, we are witnessing rapid growth in the electrification of bus fleets,” stated Macy Neshati, BYD Senior Vice President. “Whether you are looking at the hot and humid climates of the Deep South, the wet weather of the Northwest or the frigid climates of the North, BYD buses are workhorses that can handle any condition.”

With a range of approximately 150 miles on a single charge and a capacity of up to 32 passengers, depending on configuration, the K9S is ideally suited for the needs of Baton Rouge. BYD buses are projected to cost roughly $1.00 less per mile to operate than the typical diesel-powered bus. The new buses produce zero emissions and make oil changes a thing of the past. The proprietary BYD Iron-Phosphate battery is nontoxic, 100% recyclable, fire-safe and incredibly long-cycled. In fact, BYD is the first and only electric bus manufacturer to offer a full 12-year warranty on batteries.

We are excited to incorporate electric buses into our planned Bus Rapid Transit projects in Baton Rouge,” said Bill Deville, CATS CEO. “These buses will allow us to see how we can use electric buses to reduce the impact of our fleet on our environment and also control costs.”

CATS provides bus service to residents of and visitors to Baton Rouge, Louisiana. They operate 29 bus lines and provides more than 2 million rides each year. To CATS leaders, the new buses constitute an important opportunity to innovate.

“Electric buses are a big step forward for CATS. They represent a chance to pilot new technology in Baton Rouge, and we are very excited about that,” said Jim Brandt, President of the CATS Board of Commissioners.

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.

Special Report: Opportunities Abound for Berkshire in the Growing EV Market

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Everyone can see it coming, petrol, gas, diesel, whatever you want to call it, will play a diminishing role in fueling cars of the future. It’s already playing a diminishing role right now.

Let’s look at a few numbers.

In 2016, 750,000 EV cars were sold worldwide, with Norway the highest in market share at 29%, and China the largest in total units sold. And, 2016 marked the first time that EVs passed more than 2 million vehicles on the road worldwide.

While those numbers are still tiny when compared to the 2 billion vehicles in service around the world, they confirm that the EV is not only here to stay, but will play an ever larger role in personal and commercial transportation.

Credit Tesla with making the EV fashionable in the U.S., and drawing in other car makers that are now debuting their own models. In fact, Tesla has made the EV so fashionable among high-end buyers that in Europe Tesla’s Model S outsold both the traditional petrol-fueled BMW 7 series and Mercedes-Benz S class.

It’s easy to go down the list of carmakers that are showing off their EV vehicles at this year’s auto shows. Volkswagen, which was committed to diesel cars before its huge emissions scandal, is now touting its EV retro-styled concept bus, the I.D. Buzz. And Jaguar’s heading to market in late-2018 with its I-Pace SUV.

BMW, Hyundai, Nissan, Porsche, Toyota, and Volvo, to name a few, are all announcing new EV models or EV versions of existing models. Even Bentley has an all-electric four-door coupe in the works for 2019, and a goal to have an electric version of each of its models by 2025.

For drivers in China that purchased 600,000 EVs in 2017 at the lower-end of the market, it’s China’s BYD that led the way, with Chery, SAIC Wuling, Hawtai, and BAIC all moving more than 3,000 units in December 2017 alone.

The new energy company BYD, which Berkshire Hathaway has a roughly $1.9 billion stake in, sold almost 14,000 ev cars in February 2018, and is the global sales leader despite not being in the U.S. market except for its pure-electric buses.

Back in the U.S., Tesla’s Model 3 is aimed at bringing the company’s cars to a whole new set of consumers, and it’s not the only one making inroads at making an EV with true extended driving range affordable.

GM’s more mainstream price point Chevy Bolt, which boasts a 238-mile range, is now heading towards the company’s goal of moving 30,000 units a year.

All this EV progress bring up the question of what’s Berkshire Hathaway’s role in it?

It’s likely not as a manufacturer.

Berkshire’s roughly 8 percent stake in BYD, and its stake in GM, which was actually down 10 million shares (-16.7%) as of its most recent 13-F filing, doesn’t indicate Warren Buffett wants to be anything but a passive investor in making cars.

Berkshire will certainly play a role in new and used EV sales, as its Berkshire Hathaway Automotive Group of 78 independently operated dealerships with over 100 franchises in 10 states, gives the company a slice of that market.

However, fueling EVs is also right up Berkshire’s alley.

Not the Cars, the Fuel

Berkshire’s in a number of interesting spaces when it comes to fueling EVs. As the EV market-share grows, so do the number of consumers that will be charging their vehicles at home.

When it comes to home charging, its utilities, including PacifiCorp, MidAmerican Energy and NV Energy generate and supply power in twelve states. And overseas, Berkshire’s Northern Powergrid delivers electricity to 3.9 million homes and businesses in England.

Berkshire also is a big player in the electricity transmission business. Its BHE U.S. Transmission owns over a thousand miles of transmission lines in the southern U.S. and California. In Canada, Berkshire’s AltaLink is the largest regulated transmission company in Alberta, supplying electricity to more than 85% of the population.

Taking the EV on the Road

Even though much of the EV market will be charging its cars overnight at home, there is still a big need to be able to quickly charge your vehicle while traveling.

Out of necessity, Tesla has made a substantial investment in this space, to-date building 1,191 Supercharger Stations with 9,184 Superchargers.

These superchargers already benefit Berkshire in areas that get their power from Berkshire-owned utilities.

And a recent Berkshire acquisition has the potential to greatly boost their own capability in this space.

The New King of the Travel Center

In October 2017, Berkshire took a 38.6 percent equity stake in Pilot Flying J, the largest operator of travel centers in North America. That stake will grow in 2023 when Berkshire will become the majority shareholder by acquiring an additional 41.4 percent equity.

With 750 locations across the U.S. and Canada, and more than $20 billion in revenues, Pilot Flying J already plays a substantial role in fueling cars and commercial trucks. It’s also a natural fit for EV charging stations. And while EV ranges continue to grow, the need to charge your vehicle away from home is also growing.

That’s Not All

The charging station space is so new that there are likely to be multiple opportunities for Berkshire, as the lack of a need for storage tanks, which kept traditional petrol fueling stations centralized, means that charging stations can fit into public parking lots, mall and office building parking, and other spaces that were inconceivable for a gas station.

For example, in Oregon, PacifiCorp just received the greenlight to build seven charging stations as part of a $4.64 million transportation electrification plan.

PacifiCorp plans to install seven “pods” that would include multiple dual-standard direct current fast chargers, which can provide up to 80 miles of driving range in 20 minutes of charging, and at least one level 2 port, which offers up to 20 miles of range in an hour of charging.

Whether utilities will ultimately be allowed to own large networks of charging stations remains to be seen, as some environmental groups and potential competitors in the space are already objecting to that concept.

However, the future looks bright for Berkshire. It’s got the electric power, it’s got the transmission, and it’s even got the car dealerships and travel centers that clearly will make it a player in the growing EV market.

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.

Special Report: Russell Athletic Gets Out of the Athletic Uniform Business

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In a major move, Fruit of the Loom’s Russell Athletic brand will cease making athletic uniforms. The move marks the end of a long history in a product line that in the last decade has seen skyrocketing marketing costs.

“For over 115 years, Russell Athletic has provided quality apparel for athletes both on and off the field of play,” Scott Greene, Russell Athletic and Activewear Senior Vice-President for Brand Management, said in a statement. “We are proud of our heritage, but to build lasting relationships with a new generation of athletes, we will need to focus our efforts and play to our strengths.

“Today, we will begin to transition away from the team uniform business to allow greater emphasis on the consumer retail market. With this shift, we will continue to offer high quality athletic lifestyle and performance apparel for distribution through multiple retail and wholesale channels, including continued distribution of collegiate licensed products along with non-uniform apparel through the team dealer network.”

The Big Money Business of Uniform Deals

The move by the shoe companies Nike and Adidas to expand their product lines into the team apparel market eroded Russell Athletic’s share of the market. Major universities, including Alabama and Auburn, switched their contracts to the shoe companies, or to brands such as Under Armour.

Georgia Tech, which was one of the last major universities to have a contract with Russell Athletic, announced this summer that it would be changing companies to Adidas.

In the case of Georgia Tech, Russell Athletic signed a ten-year deal in 2008 that had it paying the university $8.4 million to be the exclusive uniform provider for all its teams. It also provided over $1 million a year in uniforms for players, and $100,000 a year in branded apparel per year for coaches and administrators. The company also paid additional money based on incentives tied to conference and national championships.

In exchange, Russell Athletic got a host of marketing opportunities, including signage in stadiums, announcements during games, and coaches participating in promotions.

No End in Sight

As large as those number are, they pale before sponsorships that are truly astronomical. In 2017, the University of Louisville signed a 10-year $160 million sponsorship with extension with Adidas.

In 2016, Business Journal found that the cost of signing a university had increased approximately 33 percent over the past five years, and that Nike, Adidas and Under Armour combined were paying over $300 million a year to university athletic departments.

Russell Athletic’s new strategy is to grow its direct to consumer business.

“Our new business strategy focuses on the growing athletic and lifestyle apparel market and developing products that will open new doors for retail distribution of our iconic brand,” Greene said in his statement. “An example of this will be the introduction of a new heritage-inspired product line available in spring of 2018. The new line will feature carefully crafted fleece, tees and other apparel. We are confident you’ll be seeing Russell Athletic on more and more consumers soon.”

Russell Corporation was acquired by Berkshire Hathaway in 2006 for $600 million and became a division of Fruit of the Loom. Its business had peaked a decade earlier when in 1992 it landed a five-year contract with Major League Baseball as the exclusive provider of uniforms. By 1995, the company was generating $1.25 billion in annual sales, and had 18,000 employees.

For Berkshire, which likes to acquire companies that have a strong moat protecting their market share, the athletic uniform business was increasingly an alligator filled moat with no castle behind 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.

Special Report: Berkshire Still Sitting on 4 trillion Cubic Feet of Natural Gas

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

The gas field, which is located below the Whicher Range, is estimated to contain four trillion cubic feet of gas-in-place.

CalEnergy is the sole titleholder and operator of the exploration permit EP 408 located approximately 280 kilometers south of Perth, and covers both the Whicher Range and Wonnerup gas fields.

The Long, Very Slow History of the Whicher Range Gas Fields

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

The big problem since its discovery has been how to get the gas and not lose your shirt doing it.

According to CalEnergy, the field is a candidate for traditional drilling methods, and hydraulic fracking is not considered a viable option.

In 2016, Peter Youngs, the Managing Director of CalEnergy Resources Group, discussed with MazorsEdge the progress on the development of the gas field, noting that “the field represents a large in place gas resource, its characteristics are challenging and there is much work still remaining to move this resource to a commercially developable status.”

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

Youngs also doubted that the field could be commercialized by 2017, and that has proven true.

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

CalEnergy recently requested and received, a variation to the permit work program from the Department of Mines and Petroleum (DMP) to undertake reservoir pressure monitoring – this involves data gauges being placed in the Whicher Range 1 (WR-1) and Whicher Range 4 (WR-4) wells.

The company is continuing with reservoir pressure monitoring, and is focused on enhancing their understanding of reservoir behavior.

In the interim, CalEnergy has launched a Care and Maintenance Environment Plan (CMEP) to maintain the current well sites and drilling pads.

Tantalizing Fruit, Just Out of Reach?

For fifty years, the gas fields of the Whicher Range have both held out the promise of enormous economic benefit, and the frustration of inaccessibility.

CalEnergy notes that in the past, “feasibility studies have failed to identify an economic technical strategy for the development of commercial gas production.”

The good news is that as a result of its tests, the company now believes that gas recovery is feasible, and it’s just a matter of when.

© 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.

Nebraska Furniture Mart Celebrates 80th Birthday

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These days when a company lasts a decade everyone pops champagne, but for Berkshire Hathaway’s Nebraska Furniture Mart this August marks the 80th anniversary of the company’s founding in 1937.

Founded in Omaha by Rose Blumkin (affectionately known as Mrs. B.) the company started in the basement of her husband’s pawn shop with $500 borrowed from relatives.

Mrs. B., despite being only 4 feet 10 inches tall, was legendary for her toughness and work ethic.

Her escape from Russian persecution at the dawn of WWI, when as a passport-less, 23-year-old, store clerk from Minsk she crossed the Chinese-Siberian border by promising the guard she would bring back a bottle of fruit brandy, and her six-week voyage on a peanut boat could in itself be a movie.

Unable to speak English, and as an immigrant unable to get a bank loan, she prided herself as over the years she toppled Omaha’s “Big boys.”

As NFM grew to dominate the Omaha furniture market, Warren Buffett took notice and in 1983 Berkshire Hathaway bought the store for $60 million without even doing any formal due diligence. It didn’t stop Mrs. B. from working seven days a week, and she continued to oversee the store until age 103.

Along with NFM, Berkshire owns three other furniture retailers, including Jordan’s Furniture, R. C. Willey Home Furnishings, and the Star Furniture Company.

Today, NFM is the largest home furnishing store in North America selling furniture, flooring, appliances and electronics, doing volumes with only four mega-stores that put furniture retailers to shame. Make that every other furniture retailer to shame.

The chain has four stores in Omaha, Kansas City, Des Moines, and Dallas, and a valuation of well over $1 billion.

Day-to-day operations are overseen by Tony Boldt as the president and chief operating officer, with Ron Blumkin and his brother Irv Blumkin as chairman and CEO respectively.

While all the stores are large, none is larger than the store in the Dallas area, which opened its doors in March 2015.

The newest Nebraska Furniture Mart in The Colony in Dallas, Texas, was an immediate success and adds roughly $600 million a year to the furniture chain’s revenues, which already had the highest per-store volume of any furniture retailer in the United States.

Boasting a 1.9 million-square-foot facility, and featuring a 560,000-square-foot showroom, the new Dallas NFM dwarfs even the chains other megastores.

The Dallas store is the anchor to Berkshire’s $1.5 billion Grandscape development, the first of its kind for Berkshire. The development is a 400+ acres, 3.9 million square-feet mix of retail, entertainment, dining and attractions that won’t be fully built-out for another decade.

The elaborate Grandscape complex will feature a $45 million boardwalk-themed restaurant district, a hotel and spa, a recently announced 16-screen luxury movie theater, and 1.5 million square feet of residential and office space that is billed as the lifestyle center.

It’s all a long way from Mrs. B.’s basement, and the fact that Grandscape will be another decade before its completed just means that it will be done in time for NFM’s 90th anniversary.

© 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.

BYD Supplies More Pure Electric Buses to Brisbane Airport

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Making further inroads in its sale of pure electric buses in Australia, Chinese battery and vehicle maker BYD has announced an expansion of its pure electric buses to Brisbane airport. The sale comes just eight months after making its commercial debut at the country’s busiest airport in Sydney.

The fleet of eleven 12-meter BYD electric buses will be fully operational in February 2018 as a shuttle service between the airport’s domestic and international terminals. The vehicles will be run by Carbridge, an Australian based world leader in aviation passenger ground transportation who operates BYD electric buses, the Electric Blu, in the Sydney Airport.

“This signifies a milestone for us in Australia, and we are heartened to have more people in Australia support the state-of-the-art electric public transport that we provide,” said Liu Xueliang, General Manager of BYD Asia Pacific Auto Sales Division.

The 12-meter BYD electric bus has a carrying capacity of 70 passengers; features purpose-designed luggage storage racks, and three full size double doors making boarding and alighting more efficient. In addition the buses have GPS next stop announcements, driver monitoring and real time tracking data, meaning issues can be immediately identified and responded to in real time.

Replacing the current fleet for electric buses will result in a reduction of 250 tons of carbon emissions each year, equivalent to taking 100 cars off the road.

Brisbane airport is the closest airport to Queensland’s Gold Coast, a popular holiday destination for visitors to Australia. Around 22.5 million passengers travelled through the airport in 2016, making the airport the third busiest in Australia by passenger traffic.

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.

© 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.

Special Report: Berkshire’s Acquisition of Auto Group Sparks Soaring Dealership Valuations

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In March of 2015, Berkshire Hathaway acquired the 80-dealership The Van Tuyl Group for $4.1 billion, moving the conglomerate into the auto retailing market. The move also set off a dramatic rise in auto dealership valuations that has rippled throughout the industry.

According to the Kerrigan Advisors’ Blue Sky Report, U.S. dealership buy/sell activity soared to record highs in 2015. The Report also identifies the types of players involved with “activity by new entrants outpacing public company acquisitions by over four to one.”

Kerrigan Advisors is a national dealership buy/sell advisory firm that publishes a quarterly report that tracks the multiples and analysis for each franchise in the luxury and non-luxury segments.

When Berkshire acquired Van Tuyl, Warren Buffett trumpeted the growth potential of the newly renamed Berkshire Hathaway Automotive.

“This is the beginning of a journey that will have no end,” Buffett noted upon completion of the acquisition of The Van Tuyl Group. “Cecil and Larry have given us the ideal platform with which to build an auto dealership business that will be thriving and growing 50 and 100 years from now. The fun has just started.”

The fun may have just started, but since then Berkshire has been relatively quiet in the acquisition market, with the April 2015 purchase of Frank Kent Honda in Fort Worth, Texas, one of the few additions.

The Blue Sky Report reveals that while the competition for auto dealerships was fierce in 2015, it did not favor the public companies, which in addition to Berkshire also includes CarMax and Penske Automotive Group.

“A number of iconic multi-dealership groups came to market in 2015 and were acquired by both established consolidators and new entrants. Faced with this stiffer competition, the publics found it more difficult to compete for larger group transactions, and represented just 7% of the buy/sell market in 2015. Meanwhile new dealership buyers, including family offices, private equity firms, and public conglomerates, acquired 29% of the franchises sold, a stunning accomplishment,” said Erin Kerrigan, Managing Director of Kerrigan Advisors. “We believe new entrants will increasingly shape dealership consolidation and meaningfully impact the future of auto retail.”

The Blue Sky Report goes on to note that while the market for auto dealerships is still very active, the market may be peaking.

“In 2015, dealership valuations rose to historically high levels, new entrants made sizable acquisitions, manufacturers approved numerous multi-dealership transactions, and real estate prices returned to pre-recession levels,” continued Kerrigan. “In summary, it was a year that is hard to beat. While the 2016 buy/sell market is expected to be as active as 2015, we anticipate the proportion of sellers completing a successful sale could decline as industry growth plateaus and dealership earnings come under pressure.”

Buffett Says Subtract a Billion

At Berkshire Hathaway’s 2016 annual meeting, Warren Buffett noted that the price for his Van Tuyl Group acquisition also included a billion dollars in securities. Van Tuyl also had a large extended warranty program that was acquired by Berkshire.

Buffett noted that people should “take a billion off the purchase price,” as the reported price has given other dealership groups an inflated sense of their market value.

Is there still a major auto dealership that’s just ripe for a Berkshire acquisition? Read this Mazor’s Edge Special Report.

(This article has been updated since it was first published.)

© 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.