Month: May 2018

Categories
Kraft Heinz Stock Portfolio

Kraft Heinz’s Springboard Unveils Its First Incubator Class of Disruptive Brands

(BRK.A), (BRK.B)

Kraft Heinz’s Springboard, a recently launched platform to nurture, scale, and accelerate growth of disruptive brands, announced its inaugural Incubator Program class.

The program was created to help nurture and develop the next generation of food & beverage brands, nurturing and being close to entrepreneurs, new ideas and consumer trends.

“Hundreds of applications were carefully reviewed to select authentic propositions and inspired founders within one of the four pillars shaping the future of food: Natural & Organic, Specialty & Craft, Health & Performance, and Experiential brands,” said Sergio Eleuterio, General Manager, Springboard Brands. “We are excited to kick off our program with a group of great founders, amazing and purposeful products, that we wholeheartedly believe will succeed in the marketplace.”

Over the course of the next 16 weeks, the selected startups will participate in a dynamic program composed of learning, funding, infrastructure access, and mentorship in Chicago, Illinois.

The inaugural Springboard brands are:

Ayoba-Yo introduces a high quality, nutritious, and delicious alternative to traditional beef jerky and meat sticks, known as Biltong & Droewors. Founders and South-African native brothers, Wian and Emile van Blommestein, introduced their 400-year-old family recipe to the market in 2017. Their 14-day air-drying process, combined with high quality meat cuts and spices deliver incredibly tender, savory, and sugar-free products with no shortage of flavor.

Cleveland Kraut is perfectly positioned to grow within the fermented foods market. A bold brand, grounded in and proud of its Cleveland heritage, dedicated to serving the great tasting healthy fermented foods at a fair price. The team is led by Drew Anderson who, along with his brother Mac and brother-in-law Luke, aim to be the kings of fermented foods by expanding from their kraut roots.

Kumana, best known for its signature Venezuelan-inspired Avocado Sauce, is a Los Angeles-based company creating original sauces representing the diverse and delicious flavors from different regions of the worlds. Venezuelan native, Francisco Pavan, and his partner Todd Vine channeled their passion for pure discovery into the core values of this brand.

Poppilu, a Chicago-based antioxidant lemonade brand, gives consumers permission to love lemonade again. Melanie Kahn, Poppilu’s founder, has developed a truly irresistible, mouth puckering, high-antioxidant citrus refreshment. It features Midwest-grown aronia berries, one of the highest antioxidant fruits in the world, and is one of the many reasons this brand will soar.

Quevos, believes the days of sinful snacking are over– it’s time to munch on snacks made from real food that taste great and are even greater for you. Quevos are salty and crunchy egg-white chips that are low in carbs and fat, and packed with protein. The disruptive brand was founded by young, ambitious University of Chicago students-Nick Hamburger and Zach Schreier.

© 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.

Categories
Minority Stock Positions Stock Portfolio

BYD to Build Hydrogen Buses for Hawaii

(BRK.A), (BRK.B)

BYD (Build Your Dreams), the largest electric bus manufacturer in North America and the largest electric vehicle company in the world, has teamed with US Hybrid Corporation, a 20 year industry leader, to develop a hydrogen fuel cell battery-electric bus. This bus, the first of its kind, will serve Honolulu’s Daniel K. Inouye International Airport, one of the busiest airports in the United States with more than 21 million passengers per year.

The new bus is being developed as part of Hawaii’s Clean Energy Initiative (HCEI) to meet sustainable energy objectives of decreasing dependency on imported oil and reducing greenhouse gas emissions. The initiative is a central component of the state’s goal to be powered 100% by renewable energy by 2045.

Robert’s Hawaii, the state’s largest employee-owned tour and transportation company, will serve as the bus operator, shuttling passengers between the airport’s terminal and car rental facility. The bus will utilize BYD’s battery-electric platform, integrating hydrogen fuel cell technology to eliminate operational dependency on charging.

“We are ecstatic to partner with US Hybrid. Together, we can bring innovative ideas to the state of Hawaii and deliver clean, renewable transportation solutions,” stated Macy Neshati, Senior Vice President of BYD Heavy Industries.

Hawaii is positioned as a global powerhouse for the advancement of hydrogen and other alternative fuels. The Federal Highway Administration has designated multiple alternative fuel corridors with electric vehicle chargers or hydrogen fuel stations. Additionally, as part of an agreement between the Air Force Research Laboratory and the Hawaii Center for Advanced Transportation Technologies, the U.S. Air Force has been demonstrating hydrogen as an alternative fuel at Joint Base Pearl Harbor-Hickam.

“With the state aggressively pursuing clean power, we have an ideal backdrop to showcase the most efficient zero emission technology in the industry. The fusion of US Hybrid’s fuel cell technology and BYD’s electric bus platform will shape the future of Hawaii and ultimately, change the world,” said US Hybrid founder, Dr. Abas Goodarzi, Ph.D., P.E.

The bus is manufactured in Lancaster, California and fuel cell made in South Windsor, Connecticut.

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.

Categories
Richline Group

Dave Meleski Promoted to CEO of Richline Group

(BRK.A), (BRK.B)

Richline Group is announcing the retirement of Dennis Ulrich after almost 11 years as CEO of the Berkshire Hathaway subsidiary.

Dave Meleski, current President of the Richline Group, will assume the role of CEO.

From Dennis’s letter to employees and friends, “It is with both pride and excitement, I wanted to let you know that I will be retiring this year. It has been a wonderful 45 years for me in the jewelry industry, sharing all the experiences, with my wife Liz, both my kids and all my associates. I am leaving Richline in the very capable hands of Dave Meleski. Dave and I have worked very closely, in all aspects of the business, and I am confident his leadership will bring Richline to many new and exciting successes in the future.”

In 2007, Ulrich’s Bel-Oro and Meleski’s Aurafin, were sold to Warren Buffett’s Berkshire Hathaway. Under the leadership of Dennis (CEO) and Dave Meleski (President), the company expanded the Richline brand from gold jewelry business into the diamond, gemstone, and pearl categories. Richline has also grown to include business units that manufacture raw materials, findings, and supply packaging, and tools to over 150,000 customers. This also includes patented products used to pierce over 250 million earlobes around the world.

All Richline business units are supported by vertical, global sourcing, manufacturing and sales facilities, each fully compliant to the highest world standards. The Richline family today is over 3,000 valued associates around the globe.

Dave Meleski stated, “I have enjoyed the past 11 years working in partnership with Dennis to create a business that we, our employees, and Berkshire shareholders can be proud of every day. The path that Dennis has forged will be one that I look forward to continue.”

© 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.

Categories
Charlie Munger Commentary Warren Buffett

Commentary: Warren Buffett is Right About Cryptocurrencies

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“Bitcoin is like rat poison squared,” Warren Buffett said during the 2018 Berkshire Hathaway annual meeting. The comment got a positive response from the tens of thousands that packed the CenturyLink Center’s arena.

That Buffett, and Berkshire’s vice-chairman Charlie Munger, are down on cryptocurrencies is no surprise. As the world’s leading value investors, speculative assets are exactly the things they avoid.

While the “rat poison,” comment did not come with a detailed explanation, it easily ties in with a major point that Buffett hammered home at the beginning of the meeting.

After showing the audience the front page of a newspaper from 1942, Buffett talked about the first three shares of stock that he ever bought when he was age 12, which was a company called Cities Service. He showed how his impatience and quickness to denied the far greater amount he would have made if he had been patient and held the shares long term.

Buffett again returned to the 1942 date to make a completely different point.

Buffett detailed what would have happened to an investment of $10,000 in gold on that date, as compared to $10,000 in what would have been an index of the S&P 500, if it had existed at that date. While 300 ounces of gold would have grown to a worth of $400,000 today, the shares of the S&P 500 stocks would have grown to a vastly greater sum of $51 million.

That’s the difference been a nonproductive asset and a productive asset, Buffett explained. Even after all the decades went by, the gold would still be only 300 ounces. It wouldn’t have grown. But the productive assets of the S&P 500 stocks have the capacity to grow because they represent businesses that produce goods and provide services.

“For every dollar you could have made in American business, you’d have less than a penny of gain by buying into a store of value which people tell you to run to every time you get scared by the headlines,” Buffett explained.

It’s all about nonproductive assets versus productive assets.

“While the businesses were reinvesting in more plants and new inventions came along, you would look into your safety deposit box, and you’ve have your 300 ounces of gold,” Buffett mused, “And you would look at it, and you could fondle it, I mean, whatever you wanted to do with it. But it didn’t produce anything. It was never going to produce anything. And what would you have today? You would have 300 ounces of gold just like you had in March of 1942, and it would be worth approximately $400,000.”

In the end, gold versus stocks, over a great length of time, is not even close.

“In other words, for every dollar you could have made in American business, you’d have less than a penny of gain by buying into a store of value which people tell you to run to every time you get scared by the headlines,” Buffett said.

While Buffett’s nonproductive asset versus productive asset lecture was using gold as the example, it could have just as easily been about Bitcoin and other cryptocurrencies.

Here’s where you get my commentary

People that tout Bitcoin and other cryptocurrencies are really believers in the rise of a nonproductive asset that is no different than gold, silver, or the alligator infested swamp land offered during the Florida land speculation of the 1920s. Cryptocurrencies are an asset that is moving up or down daily based on what Benjamin Graham would have called speculation, and what can also be called gambling.

Naysayers will talk about the unique properties of blockchain, supposed anonymity of cryptocurrencies, and other virtues of virtual currencies that show its utility, but to do that is to ignore that these assets are not being bought and used as currency, which after all is a medium of exchange between two parties.

Let’s pretend that a significant number of people were converting their dollars or euros, or other currencies into Bitcoin and then going out and buying houses, or cars, or diamonds with it. The last thing a recipient of a Bitcoin transaction would want to do is sell their house today and find that the value of the medium of exchange had dropped 5%, 10%, or more the day after their real estate transaction.

Let’s look at another key aspect of Bitcoin. It’s inflated in value at an astronomical rate. This is what has everyone so excited about it. You can become a cryptocurrency millionaire or billionaire overnight without doing anything.

This extreme bidding upward in the marketplace is not a feature of currencies. It is a feature of speculative fevers reminiscent of the Dutch Tulip Mania of the 1500s.

While historically currencies have periodically plunged in value due to hyper-inflation. We need just look at Weimar Republic Germany, 1980s Argentina, or Venezuela today to see that phenomenon, the same process does not happen in reverse.

There’s a simple explanation for that. Plunging values for currencies reflect a lack of faith in a currency as a method of exchange. The more extreme that pessimism, the more currency it takes to overcome it.

But, currencies of the more sound variety, which in essence have more faith placed in them by creditors, do not get bouts of extreme faith that shoot them up astronomically. They increase or decrease in a much narrower range.

Accepting Bitcoin as a currency is no different than asking to get paid in casino chips or lottery tickets. You are hoping for a second transaction to determine its value. At the casino it’s spinning the roulette wheel, and with cryptocurrencies it is betting that in the marketplace someone will pay you more for your Bitcoins than the valuation you got them at.

All speculative bubbles are full of enablers. They are so-called experts that tell you why this time is different, hucksters telling the masses not to be left out, and true believers that have adopted the asset as a religion.

It’s best to remember that speculative fevers are not just a remnant of the distant past. In the late-1990s, a plush toy called a Beanie Baby became the focal point of a speculative fever. Suddenly, an asset that’s main utility was as an occupant of a child’s toy box, was being hoarded by everyone and their brother. Prices soared, certain $5 Beanie Babies were going for $5,000, and one obsessed man planned to pay his children’s college education based on the anticipated rise in value of his plush portfolio. The strategy did not work out well.

As for Bitcoin, while players such as Goldman Sachs are actively looking to make money off of people trading cryptocurrencies, Warren Buffet rightly expressed his skepticism that such a move represented any kind of endorsement of the soundness of the strategy.

“I would be very surprised if the top partners of Goldman are selling their Goldman stock and putting it into Bitcoin,” Buffett said on CNBC’s Squawk Box.

It’s a familiar tale that always has a sad ending for all but a few. Just ask the man who lost $100,000 hoarding Beanie Babies.

Buffett’s rat poison comment is true. However, rat poison kills rats. Speculative fevers kill the hopes, dreams, and lives of investors.

© 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.

Categories
Mouser Electronics

Mouser Electronics Opens Canada Location

(BRK.A), (BRK.B)

Berkshire Hathaway’s Mouser Electronics has opened its first Canadian Customer Service Center, located in Kitchener-Waterloo in the Ontario technology corridor.

The new customer service center will support local electronic design engineers, buyers and hardware innovators, helping them to locate the newest products for their designs.

Mouser now has 23 offices worldwide, including five locations in North America.

Mouser’s first customer service center in Canada will be housed at Catalyst137, the world’s largest IoT manufacturing space.

Located in the heart of Canada’s technology triangle, Catalyst137 provides the facilities and services to help innovators improve their products’ launch-to-market time. Mouser’s Canadian team members will be onsite to personally assist with orders, answer technical questions and field local and regional customer calls from across Canada.

“We are very excited about the Catalyst137 development and see our local presence here as an important contribution to this vibrant ecosystem for innovation, design and manufacturing,” states Coby Kleinjan, Mouser’s Vice President of Americas Customer Service and Sales. “We look forward to the opportunity to serve our Canadian customers with best-in-class local service and fast delivery of the newest products and leading technologies from over 700 manufacturers. Our new center will provide easy, one-stop shopping to give them a time-to-market advantage.

© 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.

Categories
BNSF

After 2016 Slump, BNSF Has the Trains Rolling

(BRK.A), (BRK.B)

Back in 2016, BNSF Railway had a shipping slump that saw it idling over a thousand locomotives,

Now, as shipping numbers continue to climb for the second year, the freight railroad is not only back on track, but the locomotives are back on the track.

At the nadir, BNSF had some 1,200 locomotives in storage. It was a highly visible sign of a lower shipping volumes for coal, petroleum, and metals.

In Gillette, Wyoming alone there were 150 locomotives and rail engines sitting idle.

Now, the 1,200 locomotives in storage has been halved to 600, as combined intermodal and carloads numbers are up a solid 4.87% in the aggregate from the same period in 2017.

Of particular note are higher grain shipments, which as of the week ending April 28, 2018, are up 7.78% over the same period last year.

Back in 2016, BNSF also furloughed roughly ten-percent of its workforce. Now, it is offering bonuses up to $25,000 for new hires.

Just another sign that this is shaping up to be a very good year for BNSF.

© 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.

Categories
Expansion

Thanks to Berkshire, Business is Booming at One of Its Newest Companies

(BRK.A), (BRK.B)

In the summer of 2017, Berkshire Hathaway made a little publicized acquisition when it acquired Warren, Michigan-based MRO distributor Production Tool Supply, and created a new wholesale division, Berkshire eSupply.

At the time, the company was ranked 34th on Industrial Distribution’s 2017 Big 50 List, but just the new Berkshire name has attracted a lot of new business.

“As soon as the new name was announced it was the best thing that ever happened to us,” John Beaudoin, president of Berkshire eSupply, says.

Such is the power of the Berkshire Hathaway name.

Now with Berkshire’s ability to finance capital expenditures to power growth, the company is in a major expansion phase.

With more than 1,000 suppliers, Berkshire eSupply has more than 1 million industrial/MROP products available online, dispersed from three strategically located distribution centers in Detroit, Los Angeles and Houston.

The company has already announced that 57 acres of currently vacant property in Novi, Michigan will be converted into a 193,230-square-foot warehouse with mezzanines and an 18,380-square-foot office building.

Also coming is a new facility that will open in Houston in four months, and another facility in California is in the planning stage.

The goal is to provide nationwide 1-2 day shipping of over one million SKUs for thousands of independent suppliers that have not had the money to provide the logistics and scope to compete with companies such as Grainger.

Berkshire eSupply gives independent distributors the custom website and logistics that make ordering seamless. The company provides retailers with a one-stop, private label, e-commerce platform.

“They already have the customer relationships, and we level the playing field in their competition with catalog suppliers such as Grainger,” John Beaudoin, president of Berkshire eSupply, says.

Just as importantly, retailers gain the punchout system that enables purchasing agents to buy from their website from within the buyer’s own procurement application or hosted eprocurement system. This opens major new customer opportunities.

With the cost of fulfillment centers being one of Berkshire eSupply’s major capital expenses, Beaudoin notes that there is huge potential for growth now that Berkshire is providing the financing.

“The entire MROP products market is around $360 billion,” Beaudoin notes. “Grainger has only $10 billion of it.”

It’s clear that Beaudoin has his eye on the other $350 billion of that business, and with Berkshire’s financing, he’s out to get 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.

Categories
Charlie Munger Minority Stock Positions Stock Portfolio Warren Buffett

Commentary: Buffett Unlikely to Abandon BYD

(BRK.A), (BRK.B)

With Chinese new energy company BYD seeing a major slump in its share price, its important to remember that Warren Buffett’s belief in the company’s founder and CEO Wang Chuanfu makes it more likely that Buffett will buy more shares, or at least maintain Berkshire’s current position than abandon the investment.

BYD’s share price peaked at 83.70HKD in October 2017 and as of May 2 has slumped to 54.00HKD.

Berkshire’s still way ahead, as its cost basis per share was 8.00 HKD. Berkshire took its position in 2008 when it purchased 225 million shares at roughly 8.00KHD.

Whose idea was it to purchase a stake in the company? It wasn’t Buffett’s, but he has since become a big fan.

“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 on Feb 26, 2018. “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.”

Stock prices go up and down, but Buffett has always been the most patient of investors.

With BYD having sold 13,000 of its plug-in electric cars in March alone, and aiming to sell between 15,000 and 20,000 cars per month when its new model year debuts, it continues to be the leader in EV cars.

The sales marked an increase of 116% year-over-year and were 31% of the total BYD car sales for the month.

BYD was number one worldwide in plug-in electric vehicle sales in 2017, its third consecutive year.

Additionally, its dominance in the Pure electric bus market continues to grow. The company sold over 14,000 pure electric buses globally in 2017.

It’s unlikely that Buffett’s or Munger’s respect for the company will change due to short-term price fluctuations and investors should be reminded that BYD’s stock price had a similar plunge in 2014 that saw no selling by Berkshire.

I’m not calling this one of Buffett’s forever stocks, but it would seem to fit one of his classic buy-and-hold investments, and it is unlikely to leave Berkshire’s portfolio anytime soon.

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.

Categories
Berkshire Hathaway HomeServices

Berkshire Hathaway HomeServices Expands in California’s Wine Country

(BRK.A), (BRK.B)

Berkshire Hathaway HomeServices Drysdale Properties, one of the nation’s fastest-growing, 100% woman-owned real estate brokerages, has opened three new Sonoma County offices focused on the luxury market.

The offices, located in Santa Rosa, Sebastopol and Windsor, extend Drysdale Properties’ northern reach and provide further exposure to the upscale real estate market of California’s Wine Country.

“We are thrilled to add these terrific offices and agents to the Drysdale Properties family,” said Gretchen Pearson, brokerage president and CEO. “Each office is well established in its market and staffed by skilled and experienced real estate professionals. The acquisition will help us grow our luxury business as we’re now positioned in the hotbed of popular Sonoma County.”

The bustling Santa Rosa office includes 80 agents, while Sebastopol opens the fertile, west county market to the brokerage. Windsor serves a community drawing thousands of people each year with shows, festivals and a charming, small-town lifestyle.

Drysdale Properties’ move is the second this spring to advance its luxury real estate operations. In April, the brokerage named industry veteran Paula Gold-Nocella, a highly regarded production leader and luxury-property authority in Northern California, as broker of Drysdale Properties and Regional Partner for its San Francisco and North Bay operations. Immediately following Gold-Nocella’s appointment, she relaunched the San Francisco office and will be opening a second San Francisco office in Pacific Heights this summer.

Gold-Nocella will oversee operations in the North Bay. “Our Berkshire Hathaway HomeServices brand is a natural fit for Santa Rosa, Sebastopol and Windsor and their respective lifestyles,” said Gold-Nocella, a board director of the San Francisco Association of REALTORS® for the past seven years. “The region is affluent and highly desirable to a global audience, and we look forward serving its real estate needs for years to come.”

Pearson added that many of the clients her brokerage serves in the Bay Area want to buy second and vacation homes in Sonoma County. “This is a natural step for us,” she said. “The possibilities are endless.”

Gino Blefari, president and CEO of Berkshire Hathaway HomeServices, applauded Drysdale Properties’ expansion. “This is a terrific achievement for Gretchen and her team and their strategy to develop their luxury business,” he said. “Drysdale Properties is well positioned for growth in Sonoma County, and throughout its Northern California and Nevada markets. We’re proud to support them every step of the way.”

Drysdale Properties now counts 46 offices and more than 1,200 agents throughout Northern California and Nevada. The brokerage, which is completely woman-owned, ranks No. 13 in the Berkshire Hathaway HomeServices network for gross commission income.

© 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.