Monthly Archives: February 2021

Highlights of Warren Buffett’s Annual Letter to Shareholders

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On February 27, 2021, Berkshire Hathaway released Warren Buffett’s annual Letter to the Shareholders of Berkshire Hathaway. The 13 page letter detailed the current state of the company with a particular emphasis on its growing stake in Apple.

Here a few of the letters highlights:

Berkshire’s Performance in 2020

Despite operating earnings dropping 9%, Berkshire’s per-share intrinsic value increased by both retaining earnings and repurchasing about 5% of outstanding shares.

Portfolio of Marketable Securities

Berkshire’s holdings of marketable stocks at yearend was worth $281 billion.

A Huge Swing and a Miss

Berkshire took a $11 billion write-down on its 2016 purchase of Precision Castparts, which Buffett blamed on his being “simply too optimistic about PCC’s normalized profit potential.”

On Bonds

“…bonds are not the place to be these days. Can you believe that the income recently available from a 10-year U.S. Treasury bond – the yield was 0.93% at yearend – had fallen 94% from the 15.8% yield available in September 1981? In certain large and important countries, such as Germany and Japan, investors earn a negative return on trillions of dollars of sovereign debt. Fixed-income investors worldwide – whether pension funds, insurance companies or retirees – face a bleak future.”

Last Year’s Share Buybacks

In 2020, Berkshire repurchased the equivalent of 80,998 “A” shares, spending $24.7 billion.

The Buybacks Have Continued

“Berkshire has repurchased more shares since yearend and is likely to further reduce its share count in the future.”

Berkshire’s Stake in Apple

At the beginning of 2020, Berkshire owned 5.2% of Apple stock at a cost basis of $36 billion. Regular dividends have averaged about $775 million annually, and in 2020 the company pocketed an additional $11 billion by selling a small portion of its position.

Buffett wrote that thanks to Apple’s own share buybacks that “Despite that sale – voila! – Berkshire now owns 5.4% of Apple.”

Buffett notes that the increased ownership stake was costless to Berkshire. He also notes that Berkshire shareholders increased their Apple stake even more. “Because we also repurchased Berkshire shares during the 2 1⁄2 years, you now indirectly own a full 10% more of Apple’s assets and future earnings than you did in July 2018.”

“The math of repurchases grinds away slowly, but can be powerful over time. The process offers a simple way for investors to own an ever-expanding portion of exceptional businesses.

And as a sultry Mae West assured us: ‘Too much of a good thing can be . . . wonderful.'”

Fixed Assets

“Berkshire owns American-based property, plant and equipment – the sort of assets that make up the ‘business infrastructure’ of our country – with a GAAP valuation exceeding the amount owned by any other U.S. company. Berkshire’s depreciated cost of these domestic “fixed assets” is $154 billion. Next in line on this list is AT&T, with property, plant and equipment of $127 billion.”

BNSF Railway

Since its acquisition in 2010, Berkshire has earned $41.8 billion in total dividends from BNSF.

Berkshire Hathaway Energy

BHE’s “$18 billion commitment to rework and expand a substantial portion of the outdated grid that now transmits electricity throughout the West. BHE began this project in 2006 and expects it to be completed by 2030…”

On the Prospects for the United States

“…there has been no incubator for unleashing human potential like America. Despite some severe interruptions, our country’s economic progress has been breathtaking. Beyond that, we retain our constitutional aspiration of becoming ‘a more perfect union.’ Progress on that front has been slow, uneven and often discouraging. We have, however, moved forward and will continue to do so. Our unwavering conclusion: Never bet against America.”

© 2021 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 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.

Berkshire Hathaway-Backed BYD Offers Federal Grant Application Help to Transit Systems

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Berkshire Hathaway-backed BYD is offering help to transit systems in accessing the Low or No Emission (Low-No) Program.

The Federal Transit Administration recently announced $180 million will be available through its competitive Low or No Emission (Low-No) Program.

The Low-No program exists to support the nation’s transition to energy-efficient vehicles such as those manufactured in BYD’s Lancaster, California plant. And Low-No funding can be used to purchase and/or lease BYD’s full line of zero-emission transit buses, including acquisition, construction, and leasing of supporting charging facilities.

“We’re proud to have helped secure over $10 million for our customers through last year’s Low-No grant program,” said BYD North America Senior Vice President Patrick Duan. “Having experts with a successful track record to assist transit agencies can make all the difference with these competitive grants.”

BYD can provide various electric bus models, infrastructure, and technology to help communities transition to zero-emission buses.

BYD bus and motor coach models meet all Buy America and FMVSS Rolling Stock requirements. BYD’s bus and motor coach models range from 23 feet to 60 feet in length including our two double-decker options.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares for $232 million. It’s an investment that has paid off handsomely. Berkshire’s original investment of $232 million has grown in value to $5.897 billion as of December 31, 2020.

© 2021 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.

McLane Company Debuts “McLane EDGE” Digital Platform

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Berkshire Hathaway’s McLane Company, Inc., a leading supply chain services company providing grocery and foodservice solutions, has launched McLane EDGE, a digital platform that offers marketing and merchandising insights, the latest sales-building programs, services, promotions, category trends, and new products, plus valuable information to help retail businesses grow in a fast-paced, ever-changing environment.

The new digital platform combines McLane’s Strategic Merchandising Portal (SMP) and Strategic Merchandising Solutions Magazine (SMS) into one entity that is engaging and easy to navigate. The retailer can also order special offers and featured items directly from the McLane EDGE site.

McLane EDGE offers valuable, real-time information, such as:
• Featured items
• Special offers
• Category information
• Planograms
• Programs and services (Choice Chicken Program, Ready Pac Salads/Snacks, Fly Guys Pizza, etc.)
• News and Resources
• Videos and blogs (coming soon!)

McLane EDGE is a value add to current McLane customers. Current users of McLane’s Strategic Merchandising Portal (SMP) and Virtual Trade Show (VTS) can login to McLane EDGE with their existing credentials. New users can gain access to McLane EDGE by contacting their account manager or sales representative.

“McLane EDGE is now the place to turn for quick, up-to-the-minute information retailers need on marketing and merchandising, along with special offers that can be ordered right through the platform as well as news, planograms, and category info,” said Cassandra Matos, director of merchandising at McLane. “The digital age continues to revolutionize how strategic merchandising information is disseminated and acted on, and McLane is excited to be in the forefront.”

© 2021 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 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.

World’s Largest Car Carrier Powered by Liquefied Natural Gas Refuels at Berkshire Hathaway’s JAX LNG

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Berkshire Hathaway’s JAX LNG and TOTE Services recently completed their first ship-to-ship liquefied natural gas (LNG) bunkering of a foreign-flagged vessel at the Jacksonville Port Authority (JAXPORT).

Crews loaded 1,800 m3 (~450,000 gallons) of LNG from North America’s first LNG bunker barge, the Clean Jacksonville, to the LNG-powered vehicle carrier, Siem Confucius, at JAXPORT’s Blount Island Marine Terminal.

In preparation for the bunkering, JAX LNG worked closely with TOTE Services to utilize the Clean Jacksonville while also gaining acceptance from the U.S. Coast Guard to perform the bunkering during all potential cargo loading conditions.

After loading at the JAX LNG facility, the Clean Jacksonville maneuvered alongside Siem Confucius to perform the milestone fuel transfer.

The 7,500-car-capacity Siem Confucius and its sister ship, Siem Aristotle, are Liberian-Registered and regularly call on JAXPORT to unload factory-new Volkswagen Group of America cars and SUVs.

“Our modern and eco-friendly fleet helps reduce emissions while maximizing efficiency,” said Siem Car Carriers President Jeffrey Campbell. “We are thrilled to partner with other pioneers in the environmental conservation movement, including Volkswagen, JAX LNG, TOTE Services, and JAXPORT, to reduce emissions while providing world-class service to the industry.”

TOTE Services operates the Clean Jacksonville and has successfully performed more than 150 bunkering events for TOTE’s Marlin class vessels, the world’s first LNG-powered container ships.

“This commercial bunkering is a major milestone for TOTE Services and a significant step toward supporting clean fueled vessels operating around the world,” said TOTE Services President Jeff Dixon. “TOTE Services’ significant experience with LNG – combined with our technical expertise and commitment to safety – allows us to assist other customers adopting use of the cleanest, most readily available fuel for shipping today and into the future.”

“Some of the world’s most eco-friendly ships call JAXPORT thanks to the innovation and vision of our customers and port partners,” said JAXPORT CEO Eric Green. “Jacksonville is a global leader in the use of LNG and we are proud to support the continued growth of LNG in the maritime industry and beyond.”

“We are delighted to have earned the trust and confidence of Siem Car Carriers to offer our LNG bunker service during the Siem Confucius recent call on JAXPORT,” said Roger Williams of BHE GT&S, a Berkshire Hathaway Energy Company and joint partner and operator of JAX LNG. “By using the Clean Jacksonville, JAX LNG is leveraging the investment and expertise of our extraordinary partner- TOTE Services.”

Berkshire hathaway and JAX LNG

JAX LNG, LLC is a joint venture between Berkshire Hathaway’s Pivotal LNG, a subsidiary of BHE GT&S, and NorthStar Midstream, operating a 120,000 gallon per day LNG plant with 2 million gallons of storage in Jacksonville, Florida.

The LNG facility was constructed to bring liquefied natural gas to the southeast U.S. and Puerto Rico.

Berkshire Hathaway acquired its stake in the facility as part of its $9.7 billion acquisition of Dominion Energy’s natural gas transmission and storage business in 2020.

© 2021 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.

Lessons From Warren Buffett: We Like Haystacks Not Needles

When it comes to finding companies to invest in, Warren Buffett likes opportunities that are so clear and obvious that they practically jump right out and grab you. He doesn’t want to have to dive deep into analyzing a company before it becomes clear that it is a good investment.

“We’re not looking for needles in haystacks or anything of the sort,” Warren Buffett said at the 1994 Berkshire Hathaway Annual Meeting. “You know, we like haystacks, not needles, basically, and we want it to shout at us.”

Buffett’s full explanation on finding companies worth investing in

See the complete Lessons From Warren Buffett series

© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

New Mexico officials Choose Berkshire Hathaway-backed BYD to Participate in a Statewide Purchase Agreement

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New Mexico officials have chosen Berkshire Hathaway-backed BYD Co. to participate in a statewide purchase agreement that gives transit agencies throughout New Mexico and the United States the ability to buy American-made BYD coaches and buses.

The vehicles, which comply with strict Buy America standards, are manufactured in ISO 9001-certified American factory, guaranteeing quality, safety, and efficiency in every aspect of design, production, and customer care.

“This contract is a big win for transit agencies looking for reliable zero-emission technology that will help them meet their sustainability goals while reducing maintenance,” said Patrick Duan, BYD North America Senior Vice President. “BYD is the first battery-electric bus manufacturer that has both a unionized workforce and a Community Benefits Agreement, which sets goals for hiring veterans, single parents, second chance citizens, and others facing hurdles in obtaining manufacturing employment.”

Buses included in the agreement are the 30-foot K7M, the 35-foot K8M, the 40-foot K9M, and the 60-foot K11M, the first articulated bus to successfully complete the new “Pass/Fail” protocol at the Federal Transit Administration Model Bus Testing Program in Altoona, Pa. Motor coaches included in the agreement are the 23-foot C6M, 40-foot C9M, and 45-foot C10M.

BYD buses have achieved more than 15 million emission-free miles in revenue service throughout the United States. There are more than 1,000 BYD battery-electric buses built or ordered for U.S. customers. Every American-built zero-emission BYD bus eliminates approximately 1,690 tons of CO2 over its 12-year lifespan, according to the U.S. Department of Transportation.

This purchasing agreement is available to any recipient or sub-recipient of Federal Transit Administration funding, regardless of geographic location. The contract is for one year with three one-year options.

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 over thirty-five-fold.

© 2021 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.

Commentary: Is Berkshire Hathaway Moving Closer to Acquiring DaVita?

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Is DaVita Inc. (DVA) an acquisition target for Berkshire Hathaway? It is no secret that the Berkshire has long held a stake in the kidney dialysis provider.

Berkshire’s stake in DaVita goes back to 2012, when it began buying a million shares a month.

Why DaVita?

DaVita, which has over 200,000 daily dialysis clients in the U.S. and ten other countries, is the kind of predictable, steady business that Warren Buffett covets.

What is New?

Back in 2013, Berkshire Hathaway agreed to standstill agreement whereby it would not increase its stake in DaVita beyond 25%. However, in recent years its stake has crossed the 30% threshold, with Berkshire revealing on February 16, 2021, that it had boosted its position to a 33% stake.

Could Berkshire’s increased stake in DaVita be the prelude to an acquisition? That’s the question that both Berkshire and DaVita investors may start asking.

© 2021 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.

Warren Buffett’s Bet on Japan’s Trading Companies Pays Off

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Warren Buffett’s bet on Japan’s leading trading companies is paying off handsomely as the Nikkei 225 surpassed 30,000 on Monday for the first time in almost 31 years.

Berkshire Hathaway’s purchase of just over 5% of Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co., and Sumitomo Corp., were bought on the open market in 2020, and were first revealed in August 2020.

All the companies have moved up sharply over the past six months, with shares of Itochu Corp. up 27%, Marubeni Corp. up 29%, Mitsubishi Corp. up 25%, Mitsui & Co. 16%, and Sumitomo Corp. up 20%.

The combined stake was worth roughly $6.5 billion when it was announced on August 31, 2020.

The shares were purchased by Berkshire Hathaway’s wholly-owned National Indemnity Company, and the company said at the time that the intention was to hold its Japanese investments for the long term. Berkshire also disclosed that it may increase its holdings up to a maximum of 9.9% in any of the five investments.

The investment is not vulnerable to currency fluctuations, as Berkshire Hathaway has 625.5 billion of yen-denominated bonds outstanding, maturing at various dates beginning in 2023 and ending in 2060. Consequently, the company has only minor exposure to yen/dollar movements.

© 2021 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.

Forest River Goes Electric With GreenPower’s Electric Cab and Chassis

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Berkshire Hathaway’s recreational vehicle manufacturer, Forest River, Inc., has signed a deal with GreenPower Motor Company Inc. in order to launch a new line of Forest River zero-emission product offerings.

GreenPower entered into an exclusive purchase agreement, related to Cutaway minibuses and Type B and C Recreational Vehicles, with Forest River to deliver up to 150 GreenPower EV Star Cab and Chassis.

It is anticipated that the initial deliveries of GreenPower’s EV Star CC units to Forest River will be directed at the cutaway shuttle bus, commercial truck and recreational vehicle markets.

Greenpower expects to deliver the first six units of the purpose-built all-electric EV Star CC this quarter, with the remainder expected to be delivered over the next 36 months at a run rate that will be determined by the third quarter of 2021.

Brendan Riley, President of GreenPower, commented, “Forest River is a forward-thinking company that is looking to solidify their market position long into the future by adding a purpose-built, zero-emission offering to many of their product lines.” Riley added, “The EV Star Cab and Chassis meets the demands of many of their addressable markets and allows Forest River to focus on what they are experts at: building bodies.”

David Wright, President of Forest River’s bus divisions added, “Forest River has been looking for a purpose-built all-electric chassis that has the range and the carrying capacity that our customers and dealers demand. Zero-emission vehicles are where the markets are going, and the GreenPower EV Star CC gives us the flexibility to address a variety of unmet needs in the commercial market.”

Wholly-owned by Berkshire Hathaway, Forest River has over 10,000 employees and annual revenues in excess of $5 Billion.

© 2021 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.

Lessons From Warren Buffett: Why Index Funds Are Good for a Certain Type of Investor

Investing is not just about return, it is also about peace of mind, and Warren Buffett sees the value of index funds, such as those tracking the S&P 500, in accomplishing that goal, especially for inexperienced investors that might be prone to worry, or easily convinced by others to take on risky investments.

“What is the best investment, meaning one that there would be less worry of any kind connected with and less people coming around and saying, ‘Why don’t you sell this and do something else?’ and all those things,” Buffett explained at the 2017 Berkshire Hathaway Annual Meeting. It is even an investment he would recommend for his wife after she inherits his assets, not that she would be selling her Berkshire Hathaway stock. “The object is not to maximize. It doesn’t make any difference whether the amount she gets doubles or triples or anything of the sort. The important thing is that she never worries about money the rest of her life.”

Speaking of money and worry, Buffett tells the story of his elderly aunt.

“I had an Aunt Katie here in Omaha, who Charlie knew well, and worked for her husband, as did I. And she worked very hard all her life. And had lived in a house she’d paid, I think, I don’t know, $8,000 for at 45th and Hickory all her life. And because she was in Berkshire, she ended up, she lived to 97, she ended up with, you know, a few hundred million. And she would write me a letter every four or five months. And she said, ‘Dear Warren, you know, I hate to bother you. But am I going to run out of money?’ I would write her back. And I’d say, ‘Dear Katie, it’s a good question because, if you live 986 years, you’re going to run out of money.’”

Buffett’s full explanation on index funds

See the complete Lessons From Warren Buffett series

© 2021 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.