Month: December 2020

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TTI

Berkshire Hathaway Subsidiary Denies Ties to Chinese Military

(BRK.A), (BRK.B)

A company owned by Berkshire hatchway is denying that it is connected to the Chinese military, and says it has erroneously been listed on a proposed U.S. Commerce Department list of Military End-Users.

A draft rule released by the U.S. Commerce Department’s Bureau of Industry and Security would add a new “Military End-User” List to its regulations on military-use and end-user export controls.

An initial list of entities identified by BIS as Military End-Users in the new rule includes TTI Electronics Asia PTE Hong Kong Ltd a subsidiary of Berkshire Hathaway’s US-based TTI, Inc.

In a statement, TTI strongly denied that TTI HK is a MEU or that it maintains any ties to Chinese military. They note that they intend to take all available steps to demonstrate to BIS that TTI HK should not be included on the MEU List.

The company says that TTI HK is an authorized distributor of various electronic components, none of which is a military or defense item, and that TTI HK is not an end user or a manufacturer of any items.

“TTI can assure our business partners that neither TTI HK nor any TTI affiliate engages in dealings with the Chinese military. In fact, TTI and all of its affiliates, specifically including TTI HK, take extraordinary measures to ensure full compliance with all laws and regulations, including all US export controls requirements. We firmly believe that BIS has wrongly included TTI HK on the newly proposed MEU List. We want to assure our customers, suppliers, and all business partners that TTI and all of our affiliates have been and will continue to be fully compliant with all applicable laws and regulations, and that we will take all appropriate and available steps to demonstrate to BIS that TTI HK should not be included on the new MEU List.”

© 2020 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

First BYD eCoach Running on the Streets of Greater Paris

(BRK.A), (BRK.B)

Berkshire Hathaway-backed Chinese battery and vehicle manufacturer BYD Co., Ltd. has announced that the first BYD pure-electric eCoach is running in Paris, France.

The City of Paris has introduced a Low Emission Zone (LEZ) to restrict greenhouse gas emissions in the French capital, and rhe LEZ will include the area’s first pure electric coach from BYD.

Manufactured at BYD France’s production facility in Beauvais in the Oise region, the pure-electric, zero-emission 13-metre coach has a 59-seat capacity and will be put into service in the coming days. The electric coach boasts an average single-charge range of 200 kilometres and can be recharged in a few hours. The vehicle will provide the same services as a diesel coach for school, extracurricular activities and occasional transport services for citizens generally.

The introduction of the BYD electric coach forms part of Île-de-France’s plan to protect the environment and to promote the use of the cleanest vehicles. The aim is also to deliver a rapid impact on improving air quality and so limit the local population’s exposure to pollution.

BYD ‘eCoach’ Passengers from the City of Drancy will be able to move around Paris with complete peace-of-mind and without contributing to CO2 emissions. The vehicle will provide access to an ever-increasing number of cultural and sporting activities for the people of Drancy: young people, old people, sportsmen and women and associations.

Mrs Lagarde, Mayor of Drancy, said, “The City of Drancy already has a significant number of clean cars – 95% electric. In order to continue our commitment to a more ecological transport infrastructure, and to continue to provide a transport service to the people of Drancy while respecting the environment, we wanted to invest in a high-performance electric coach. Our new BYD electric coach has sufficient autonomy for our needs and has accessibility for wheelchair users, too.”

Mrs Lagarde added, “I would like to thank our partners who helped to cover half of the cost of this investment, the Seine-Saint-Denis Prefecture in support of public investment with €100,000, but also La Métropole du Grand Paris, where Jean-Christophe Lagarde is based to represent the interests of our city, and which gave us a subsidy of €129,000.”

Mr Lagarde, Member of Parliament and Metropolitan Councillor, said, “The Greater Paris Metropolis and the City of Drancy are working together to improve air quality and to make sure that our citizens are not exposed to pollution. The LEZ is the tool to promote the use of the least polluting vehicles. The Greater Paris Metropolis encourages and helps families to change their vehicles for less polluting modes of transport. Our cities must set an example.”

Mr Isbrand Ho, Managing Director, BYD Europe added, “We are proud that our pure electric and zero-emission coach will be contributing to improving the quality of life for passengers – particularly the children – in Drancy and, more broadly, in Greater Paris. In the coming weeks, other municipalities in the Ile-de-France region will receive their first BYD electric coaches so that, along with the pioneering town of Drancy, they can continue to take their school and extra-curricular outings in the city of Paris.”

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 more than twenty-fold.

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway and BYD, and this article is not a recommendation on whether to buy or sell a 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.

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Lessons From Warren Buffett

Lessons From Warren Buffett: Don’t Pass Up a Good Investment Because of Negative External Factors

The trade deficit is up, unemployment is sky high, and Coronovirus is taking thousands of lives a day. Negative news with sweeping impact is coming out daily.

Should you integrate macroeconomic news into your investing strategy?

Warren Buffett says no.

“We don’t really pay attention to that sort of thing,” Buffett said at the 2004 Berkshire Hathaway Annual Meeting.

He went on to point out that “You could’ve sat down in 1974, when stocks were screaming bargains, and you could’ve written down all kinds of things that would have caused you to say, you know, the future is going to be terrible.”

As Buffett noted, the stock market has survived wars, pandemics, and all kinds of negative news.

“You know, the Dow went from 66 to 10,000-plus in the hundred years of the 20th century, Buffett explained. “And we had two world wars . . . . There‘s always problems in the future, there’s always opportunities in the future. And in this country the opportunities have always won out over the problems over time.”

So, don’t let the size of the federal deficit scare you out of making a well-researched investment in an individual stock.

Buffett’s full explanation of macroeconomic factors and investing

See the complete Lessons From Warren Buffett series

© 2020 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
Precision Castparts

Special Report: Precision Castparts’ Troubles Deeper Than Previously Reported

(BRK.A), (BRK.B)

The restart of the 737 Max assembly line this past summer has yet to alter the trajectory of Berkshire Hathaway’s swooning aerospace manufacturer, Precision Castparts. The company’s profits have crashed landed, and are leading to much wider layoffs than previously disclosed.

Precision Castparts is a worldwide manufacturer of complex metal components and products, provides high-quality investment castings, forgings, fasteners/fastener systems and aerostructures for critical aerospace and power generation applications.

According to The Oregonian, forty percent of Precision Castparts’ workforce will have been laid off by the end of 2020, and its total worldwide layoffs are expected to exceed 13,000 employees.

The number is far larger than the hundreds that it disclosed were laid off in its home state of Oregon in the second quarter.

In June 2020, the company turned its previously announced furloughs in Oregon into layoffs, and added additional layoffs at its Clackamas small structures business operations facility. The company cited the COVID-19 pandemic for the 717 layoffs in Oregon, which represented roughly 24 percent of its workforce in the state.

Plunging Revenues, Dwindling Profits

Falling revenue led to a disastrous third quarter. Precision Castparts’ reported third-quarter revenues of $1.5 billion, down 41.4% from the same quarter of 2019, and third quarter profits were down a stunning 80%.

“The COVID-19 pandemic contributed to material declines in commercial air travel and aircraft production,” Berkshire Hathaway disclosed in its most recent quarterly filing. “Airlines responded to the pandemic by delaying delivery of aircraft orders or, in some cases, cancelling aircraft orders, resulting in significant reductions in build rates by aircraft manufacturers and significant inventory reduction initiatives being implemented by customers.”

When Berkshire Hathaway acquired the company for roughly $37 billion in January 2016, it believed it had found one of Warren Buffett’s famed “elephants”—a company that had durable advantages that created a wide moat. At the time, the acquisition was Berkshire’s biggest ever, topping its $26 billion purchase of BNSF Railway in 2009.

While manufacturing for aerospace doesn’t have the same moat as a regulated utility or a railroad, it still has a huge barriers to entry due to the high cost of manufacturing specialized parts, and the unlikelihood that a customer will switch suppliers once a plane begins its production run.

Before Berkshire Hathaway acquired the company, Precision Castparts had an alluring annual growth rate of 23% over the previous ten years. Almost five years later, growth has evaporated, and the company has already taken $300 million in charges in 2020 to cover the costs of restructuring and inventory write-downs.

A Turbulent Future

Despite the good news that the F.A.A. is finally allowing Boeing’s 737 Max to return to commercial service after being grounded for twenty months, long term Precision Castparts is facing headwinds due to reduced demand over the next decade for aerospace parts.

Boeing, one of the company’s biggest customers, is revising downward the number of commercial airliners it will be building over the next ten years. The 2020 Boeing Market Outlook projected an overall demand for 18,350 commercial airplanes in the next decade — 11% lower than Boeing’s 2019 forecast.

© 2020 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
Warren Buffett

Berkshire Hathaway Cancels “Woodstock for Capitalists” for 2021

(BRK.A), (BRK.B)

The 2021 Berkshire Hathaway Inc. Annual Meeting of Shareholders will be held on May 1, 2021. Unfortunately, we do not currently believe it will be safe at that time to hold a meeting with nearly 40,000 attendees as we last did in 2019. Therefore, the format for the 2021 meeting will be very similar to the virtual meeting that we held earlier this year including worldwide streaming provided by Yahoo.

Additional information regarding the 2021 meeting will be included in Berkshire’s 2020 Annual Report currently scheduled to be posted to the Internet on February 27, 2021 and in its proxy statement which will be posted on the internet in mid-March 2021.

We hope that the 2021 meeting will be the last time that shareholders are unable to attend in person. We look forward to 2022 when we expect to again host shareholders in Omaha at our usual large gala aka “Woodstock for Capitalists”.

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
Appointments Berkshire Hathaway Specialty Insurance

Berkshire Hathaway Specialty Insurance Appoints Tom Macfarlane to Lead Downstream Energy Property Business in Europe

(BRK.A), (BRK.B)

Berkshire Hathaway Specialty Insurance is expanding its capabilities in Europe to underwrite Downstream Energy Property Insurance and has named Tom Macfarlane to lead this business segment.

“We are delighted that Tom is joining BHSI to develop our Downstream Energy business in Europe. He is a well-respected leader in the market and has a wealth of experience in the energy sector,” said Chris Colahan, Head of UK and Europe, BHSI.

“This is a significant step in continued build-out of our overall Property business. With Tom and his extensive expertise and knowledge at the helm, we look forward to building strong relationships with our customers and brokers in the energy sector,” said Sean Mannion, UK Head of Property, BHSI.

Tom comes to BHSI with over 40 years of insurance experience spanning both the underwriting and broking sides of the business. He has held various leadership roles in Energy Property at AIG, including Global Head of Energy. He was also previously Energy Broker and Managing Director at Marsh & McLennan Companies.

Tom is based in BHSI’s London office.

© 2020 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.