Month: March 2022

Categories
Dairy Queen

Dairy Queen’s New Menu Is Its Most Extensive Rollout in Two Decades

(BRK.A), (BRK.B)

Berkshire Hathaway’s American Dairy Queen Corporation (ADQ) has announced its new Signature Stackburgers™ menu. Centered on cheeseburgers that deliver on consumer demand for big flavor and variety, this new menu is the most significant product rollout for ADQ in the past 20 years.

“Our hot food menu, served at our DQ® Grill & Chill® restaurants, is key to our business goal to become a balanced leader in both food and treat items. We know that means innovating and expanding our everyday food offerings, and the new Signature Stackburgers go beyond typical cheeseburgers that you find at quick service restaurants,” said Troy Bader, president and chief executive officer at International Dairy Queen. “Offered in five flavor varieties, our new Signature Stackburgers deliver on everything fans want, and we are confident these new cheeseburgers will keep our fans coming back for more.”

Created as an everyday offering to defeat burger boredom, the Signature Stackburgers menu comes in five flavor varieties in the U.S. Offered as one-third pound doubles and one-half pound triples, each cheeseburger is made with 100-percent seasoned real beef and served on a soft and toasted bun with a wide array of delicious toppings.

The New Signature Stackburgers menu includes:

• FlameThrower® with fiery FlameThrower sauce, perfectly melted Pepper Jack*, jalapeno bacon, tomato and lettuce
• Loaded A.1.® with A.1. Thick & Hearty Steak Sauce, creamy peppercorn sauce, thick-cut Applewood smoked bacon, perfectly melted Sharp American* and crunchy onion rings
• Bacon Two Cheese Deluxe with perfectly melted Sharp American* and White Cheddar*, thick-cut Applewood smoked bacon, tomato, onion, lettuce, pickles, ketchup and mayo
• Two Cheese Deluxe with perfectly melted Sharp American* and White Cheddar*, tomato, onion, lettuce, pickles, ketchup and mayo
• Original Cheeseburger with perfectly melted Sharp American*, pickles, ketchup and mustard

“We know our fans are looking for cheeseburgers that offer big flavor and premium ingredients that keep them coming back for more, and the Signature Stackburgers menu was designed to meet that craving,” said Kelly Kenny, vice president of brand and product marketing at ADQ. “We now are offering five different cheeseburgers that bring flavor variety to our everyday menu, each made with perfectly melted cheese, seasoned beef and a host of creative toppings, all served on a perfectly soft and airy bun.”

The Signature Stackburgers menu is available at all DQ Grill & Chill restaurants across the U.S.

© 2022 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.

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Berkshire Hathaway Energy Special Report

Special Report: Berkshire Hathaway’s Natural Gas and LNG Investments Prove Timely

(BRK.A), (BRK.B)

Both natural gas and liquefied natural gas (LNG) are much in the news these past few weeks, as Europe looks for alternative sources of energy to replace natural gas supplied from Russia. However, Berkshire Hathaway has been making key natural gas and LNG acquisitions long before the latest headlines.

Already a major player in natural gas distribution, in 2020, Berkshire made a big strategic bet on natural gas and LNG when it paid $4 billion for the natural gas transmission and storage assets of Dominion Energy, and assumed $6 billion of its debt. The acquisition, rocketed Berkshire from roughly 8 percent of all U.S. natural gas transmission to 18 percent.

Berkshire Hathaway’s Expanding Natural Gas and LNG Operations

Berkshire’s natural gas pipelines consist of BHE GT&S, LLC, Northern Natural Gas Company and Kern River Gas Transmission Company.

Berkshire’s BHE GT&S, which was acquired in the Dominion Energy deal in November 2020, is an interstate natural gas transmission and storage company headquartered in Richmond, Virginia, that operates around 5,500 miles of transmission lines in the eastern U.S and 756 bcf of total natural gas storage — with 420 bcf of working gas capacity — as well as gathering, processing and field services businesses. It provides a variety of LNG solutions through Pivotal LNG, its 25% operating stake in Cove Point LNG — the import, export and liquefaction facility in Lusby, Maryland — and other LNG processing and storage initiatives.

One of BHE GT&S’s key LNG assets is currently undergoing rapid expansion. Located along the St. John’s River in Jacksonville, Florida, the JAX LNG facility began operations in 2018 as a joint venture between Pivotal LNG, a BHE GT&S company, and NorthStar Midstream. In May 2021, Pivotal LNG announced that it will be tripling liquefaction to 360,000 gallons a day and doubling its LNG storage to 4 million gallons by early 2022.

Following the completion of the JAX LNG expansion, Pivotal’s full network of LNG assets will reach a production capacity of over 470,000 gallons per day and a storage capacity of approximately 9 million gallons at its three facilities in Alabama, Florida, and Pennsylvania.

This LNG will mostly serve customers in the eastern U.S. and Puerto Rico, with some of the JAX LNG committed to reducing international maritime emissions through a long-term LNG supply agreement with a major maritime company for its dual-fueled ships.

As for other Berkshire natural gas and LNG assets, Northern Natural, which is based in Nebraska, not only operates the largest interstate natural gas pipeline system in the United States, as measured by pipeline miles, but also has three underground natural gas storage facilities and two LNG storage peaking units.

And Kern River, which is based in Utah, operates a 1,400 miles interstate natural gas pipeline system travels from supply areas in the Rocky Mountains to consuming markets in Utah, Nevada and California. Kern River transports natural gas for electric and natural gas distribution utilities, major oil and natural gas companies or affiliates of such companies, electric generating companies, energy marketing and trading companies, and financial institutions.

Just a couple of years ago, some analysts were saying that a push towards electrification of homes in order to meet climate change goals would reduce worldwide demand for natural gas and LNG.

Shell, a major LNG producer, thinks otherwise. The company notes that pre-COVID worldwide demand for LNG was at 358 million metric tons in 2019, and according to Shell’s LNG Outlook 2021, “Global LNG demand is expected to reach 700 million tonnes by 2040, according to forecasts, as demand for natural gas continues to grow strongly in Asia and gains further traction in powering hard-to-electrify sectors.”

Once again Berkshire Hathaway finds itself in the right place at the right time, as its natural gas and LNG distribution investments proved prescient.

© 2022 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.

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Forest River

Forest River and Lightning eMotors Expand Strategic Partnership

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Berkshire Hathaway’s Forest River is expanding its strategic partnership with Lightning eMotors, a leading provider of medium-duty and specialty commercial electric vehicles for fleets. The partnership will offer a factory-certified all-electric repower program for shuttle buses and passenger vans.

Repowering gas and diesel-powered commercial vehicles has been common practice for many years since the chassis and body often outlast the powertrains, while repowering vehicles with electric powertrains remains a largely untapped opportunity for many fleet operators.

Forest River is the dominant manufacturer of shuttle buses across US and Canada. There are currently more than 50,000 Forest River shuttle buses and passenger vans across the U.S. and Canada that are eligible for this program. Many of those buses have been highly customized with wheel-chair lifts, roof-top air conditioners and other equipment. Repowering these vehicles not only reduces emissions, it also preserves the prior investment and extends the life of the vehicle all while reducing costs for the customer.

“There have been attempts by smaller and early-stage EV technology companies to repower gasoline and diesel buses to electric, but fleets have been hesitant to invest in these third-party, unauthorized and unproven solutions,” Lightning eMotors CEO Tim Reeser said. “With the Forest River and Lightning eMotors’ factory-certified repower program fleets can be assured they will get a proven and reliable solution backed by two established companies that will stand behind the offering and support the vehicles through their second life.”

The Forest River factory-certified powertrains and installation will be backed by a five-year, 100,000-mile warranty. Additionally, Lightning Energy will provide Forest River dealers and customers with customized charging and microgrid energy solutions, including Lightning’s Mobile Battery Vehicle Charging solutions to ensure customers have the necessary infrastructure to support fast ramp-up of their zero-emission fleets.

This expanded agreement comes after Lightning and Forest River announced in 2021 an $850 million, multi-year strategic partnership to build up to 7,500 zero-emission Class 4 and Class 5 buses.

“We expect that our new repower program with Lightning will be welcomed by our dealers because it is being introduced as the commercial bus industry continues to grapple with a production shortage caused by supply chain issues in the broader automotive market,” said Forest River Bus president David Wright. “Lightning’s zero-emission powertrain provides our customers with an updated powertrain that is not only more sustainable and more efficient than the gasoline engine that is being replaced, but also provides the latest safety and driver technology on a platform that is serviceable and highly customized for their needs.”

© 2022 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.

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BNSF

After Court Setback, Unions Turn to Arbitration in BNSF Employee Attendance Dispute

(BRK.A), (BRK.B)

BNSF Railway Company’s dispute with its two largest unions will head to arbitration to resolve a conflict over BNSF’s new attendance policy.

The unions, BLET (Brotherhood of Locomotive Engineers and Trainmen) and the SMART Transportation Division, represent 17,000 BNSF workers and were prevented from striking by a court decision.

U.S. District Court Judge Mark Pittman ruled on February 22, 2022, that the unions’ dispute over the policy constituted a “minor dispute” under the terms and conditions of the Railway Labor Act.

In a joint statement issued by the two unions, they said that “The court’s use of ‘minor’ does not signify the importance of the issue, but is only a legal term which provides that resolution of the matter must be by arbitration. In considering a potential appeal of the District Court’s ruling, it was determined that an appeal could take another one to two years, and likely not result in a different decision. An appeal would not be the quickest, or most effective way, to stop the BNSF policy. The quickest and most direct way to challenge this policy is through a Public Law Board or Special Board of Adjustment, properly constituted under Section 3 of the Railway Labor Act. That board will have the authority to strike down either the entire policy or the most egregious parts of the policy much more quickly. The time frame will be months as opposed to years.”

BNSF’s unions maintain that the BNSF Hi-Viz attendance policy is “forcing its employees to work even when they or their families are sick, and when they are fatigued beyond the point of being able to work safely.”

© 2022 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.

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Lessons From Warren Buffett

Lessons From Warren Buffett: There’s More Than One Way to Get Into Heaven

Warren Buffett’s such a legendary investor that you might think that he has found the ultimate way to get rich, but that’s not what Buffett himself believes. His comment on the differences between his approach and Peter Lynch’s shows just that.

“I’ve said in investing, in the past, that there’s more than one way to get to heaven,” Warren Buffett said at the 1994 Berkshire Hathaway Annual Meeting. “And there isn’t a true religion in this, but there’s some very useful religions.”

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2022 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.

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Minority Stock Positions Stock Portfolio

First North American Public Transit System to Go Fully Electric Uses BYD Buses

(BRK.A), (BRK.B)

In the high desert just 69 miles from Los Angeles, the Antelope Valley Transit Authority has become the first public transportation system in North America to go fully electric.

Some 57 of AVTA’s 87 battery electric coaches and buses were built by BYD at its Lancaster Coach & Bus Manufacturing facility. And many BYD’s employees and their families are served by the agency in the Antelope Valley.

In order to achieve its fully electric fleet, R. Rex Parris, the visionary mayor of Lancaster, initially flew to China in 2010 to recruit BYD, and the company then established its first assembly plant in North America in the city.

Formed in 1992 by a Joint Powers Agreement between the cities of Lancaster, Palmdale and Los Angeles County, the AVTA serves that Lancaster-Palmdale area. In 2014, AVTA agreed to purchase up to 85 new all-electric zero emission buses from BYD, officially becoming the first transit agency in the nation to commit to a 100% electric fleet.

“This is an important and wonderful accomplishment,” said Stella Li, President BYD Americas. “We’re proud to have worked closely with AVTA to make this happen and know it’s the beginning of great things for all Californians.”

Portions of the fleet were purchased with the help of state funding, including $28.5 million from the Transit and Intercity Rail Capital Program (TIRCP) administered by Caltrans and the California State Transportation Agency.

Every American-built, zero-emission BYD bus eliminates approximately 1,690 tons of CO2 over its 12-year lifespan, according to the U.S. Transportation Department. This is equivalent to taking 27 cars off the road. Each bus also eliminates 10 tons of nitrogen oxides and 350 pounds of diesel particulate matter, improving air quality in the communities that they serve.

BYD is America’s 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.

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 had grown in value to $7.69 billion as of December 31, 2021.

© 2022 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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Appointments Berkshire Hathaway Specialty Insurance

Berkshire Hathaway Specialty Insurance Promotes Two to Key Leadership Roles

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Berkshire Hathaway Specialty Insurance has promoted Sanjay Godhwani to President, North America Region, and David Bresnahan has been promoted to Global Chief Operating Officer.

“Sanjay and Dave have been pivotal in the building of BHSI since our launch in 2013, helping to build our product lines, our talented team and our positive culture,” said Peter Eastwood, President and CEO, BHSI. “In their new roles, they will have a continued positive impact on our team and our ability to bring certainty and service excellence to our customers and distribution partners around the globe.”

Sanjay will be responsible for all North America Region underwriting and underwriting support groups, customer & broker engagement, and BHSI’s Global Catastrophe Engineering & Analytics group. Sanjay has more than 25 years of industry experience and is a fellow of the Casualty Actuarial Society. He continues to be based in Boston.

Dave has more than three decades of insurance industry experience. In his new role he will oversee real estate and administration, finance, audit, information technology and operations throughout BHSI’s global platform. He continues to be based in Boston.

© 2022 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
Acquisitions

Berkshire Hathaway Offers $11.6 Billion for Alleghany Corporation

(BRK.A), (BRK.B)

In its first major acquisition of 2022, Berkshire Hathaway has agreed to pay $11.6 Billion for insurance conglomerate Alleghany Corporation.

Berkshire and Alleghany jointly announced they have entered into a definitive agreement under which Berkshire Hathaway will acquire all outstanding Alleghany shares for $848.02 per share in cash.

The transaction, which was unanimously approved by both Boards of Directors, represents a total equity value of approximately $11.6 billion. The acquisition price represents a multiple of 1.26 times Alleghany’s book value at December 31, 2021, a 29% premium to Alleghany’s average stock price over the last 30 days and a 16% premium to Alleghany’s 52-week high closing price.

Founded in 1929 by Oris and Mantis Van Sweringen as five railroad systems, the company eventually evolved into a holding company that owns and supports certain operating subsidiaries and investments, anchored by a core position in property and casualty reinsurance and insurance. The company’s primary sources of revenues and earnings are from reinsurance and insurance operations and investments. The insurers include: Transatlantic Holdings, Inc., RSUI Group, Inc., a leading underwriter of wholesale specialty insurance based in Atlanta, Georgia, and CapSpecialty, Inc., an underwriter of a full inventory of specialty lines, including commercial property, casualty, fidelity, surety and professional lines with a focus on small business on both an admitted and non-admitted basis.

Alleghany also generates revenues and earnings from a diverse portfolio of non-financial businesses that are owned and managed through its wholly-owned subsidiary Alleghany Capital.

Alleghany Capital’s investments are categorized as either industrial businesses or non-industrial businesses. The industrial businesses are: (i) Precision Cutting Technologies, a holding company focused on the machine tool and consumable cutting tools sectors; (ii) R.C. Tway Company, LLC (dba Kentucky Trailer), a manufacturer of custom trailers and truck bodies for several niche end markets; (iii) WWSC Holdings, LLC, a structural steel fabricator and erector for commercial, industrial, and transportation infrastructure projects; (iv) Wilbert Funeral Services, Inc., a provider of products and services for the funeral and cemetery industries and precast concrete markets; and (v) Piedmont Manufacturing Group, LLC, a provider of injection molded and thermoformed parts and multi-component assemblies for OEM customers in the industrial, commercial, transportation, recreational, and medical end-markets. The non-industrial businesses are (i) IPS-Integrated Project Services, LLC, a global provider of design, engineering, and related services to the biopharmaceutical and life sciences markets and, through its subsidiary Linesight, cost and project management services for clients in the data center, technology, and other sectors; (ii) Jazwares, LLC, a global toy and musical instrument company; and (iii) Concord Hospitality Enterprises Company, LLC, a hotel management and development company.

“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years. Throughout 85 years the Kirby family has created a business that has many similarities to Berkshire Hathaway. I am particularly delighted that I will once again work together with my long-time friend, Joe Brandon,” said Warren E. Buffett, Berkshire Hathaway’s Chairman and Chief Executive Officer.

“My family and I have been significant shareholders of Alleghany for over 85 years and are proud that our ownership will culminate through this compelling transaction with Berkshire Hathaway. Not only does this deal provide substantial and certain value to stockholders, but it provides a rare opportunity to join forces with a like-minded and highly respected investor and business leader,” said Jefferson W. Kirby, Chair of the Alleghany Board of Directors. “Berkshire Hathaway’s support, resources, and expertise will provide added benefits and opportunities for Alleghany and its operating businesses for many years to come.”

“This is a terrific transaction for Alleghany’s owners, businesses, customers, and employees,” said Joseph P. Brandon, Alleghany’s President and Chief Executive Officer. “The value of this transaction reflects the quality of our franchises and is the product of the hard work, persistence, and determination of the Alleghany team over decades. As part of Berkshire Hathaway, which epitomizes our long-term management philosophy, each of Alleghany’s businesses will be exceptionally well positioned to serve its clients and achieve its full potential.”

The transaction is expected to close in the fourth quarter of 2022, subject to customary closing conditions, including approval by Alleghany stockholders and receipt of regulatory approvals. Alleghany will continue to operate as an independent subsidiary of Berkshire Hathaway after closing. Mr. Kirby, who controls 2.5% of Alleghany common shares, intends to vote his shares for the transaction.

Under the terms of the definitive merger agreement, Alleghany may actively solicit and consider alternative acquisition proposals during a 25-day “go-shop” period. Alleghany has the right to terminate the merger agreement to accept a superior proposal during the go-shop period, subject to the terms and conditions of the merger agreement. There can be no assurances that the “go-shop” process will result in a superior proposal, and Alleghany does not intend to communicate developments regarding the process unless and until Alleghany’s Board of Directors makes a determination requiring further disclosure.

Goldman Sachs & Co. LLC is serving as financial advisor and Willkie Farr & Gallagher LLP is serving as legal advisor to Alleghany. Munger, Tolles & Olson LLP is serving as legal advisor to Berkshire Hathaway.

Warren Buffett’s Interest in Alleghany

At the Berkshire Hathaway annual meeting on April 30, 2022, Warren Buffett noted that he had been following Alleghany for more than sixty years.

© 2022 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.

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Lessons From Warren Buffett Value Investing Warren Buffett

Lessons From Warren Buffett: What Adversity Tells you About the Underlying Strength of a Business

How a company weathers adversity tells you interesting things about a business, according to Warren Buffett. Among the things it shows you is not only the resiliency of a company, but also how wide its moat truly is.

“If you see a business take a lot of adversity and still do well, that tells you something about the underlying strength of the business,” Warren Buffett said at the 2000 Berkshire Hathaway Annual Meeting. “So, occasionally, you will find that an interesting test of the strength of a business. Coca-Cola had some problems, you know, in Europe. But it comes back stronger than ever. They certainly had problems with New Coke, and they came back stronger than ever. So you do see that underlying strength. And that’s very impressive as a way of evaluating the depth and impenetrability of the moat that we talked about earlier.”

Buffett’s full explanation on adversity and how it tests a business

See the complete Lessons From Warren Buffett series

© 2022 David Mazor

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BNSF

BNSF & Wabtec to Test Biofuels in California

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BNSF Railway Company and Wabtec have announced a new biofuel testing project that will quantifying the impact of alternative fuels on emissions, durability, and performance in Wabtec locomotives.

“The rail industry is intently focused on reducing its environmental footprint by exploring emerging technologies,” said Bob Bremmer, Group Vice President for Wabtec’s Fleet Innovation and Transformation division. “Biofuels provide a unique near-term opportunity to have a significant impact on reducing carbon intensity.”

BNSF and Wabtec will begin testing biofuel in the second quarter of this year. The two companies will demonstrate the performance of biodiesel (B20) and renewable diesel (R55) in revenue service on Wabtec Tier 3 and Tier 4 Evolution Series locomotives in California. BNSF will operate the locomotives between Barstow and Los Angeles, California.

“BNSF is pleased to partner with Wabtec to test higher percentage blends of biodiesel and renewable diesel,” said John Lovenburg, Vice President, Environment & Sustainability. “Rail is already the most carbon-efficient mode of land freight transport, and the use of these lower carbon fuels is another means for BNSF to reduce its emissions and help meet its carbon reduction goal. Wabtec continues to be a good innovation partner for us – last year, we piloted the first battery-electric freight locomotive in North America.”

Wabtec already has approved a 5-percent biodiesel (B5) and 30 percent renewable diesel (R30) blend for its locomotive engines. There currently are approximately 11,000 Evolutions Series engines in operations today with railroads around the world.

Biofuel is a domestically produced, clean-burning, renewable substitute for petroleum diesel. This renewable fuel increases energy security, improves air quality, and provides safety benefits.

Today’s announcement comes after BNSF conducted a pilot last year with a battery-electric locomotive developed by Wabtec in commercial service between Barstow and Stockton that showed an 11% reduction in fuel consumption and greenhouse gas emissions compared with standard diesel units operated on the same route.

Union Pacific has also announced that it will start testing B20 biodiesel and R55 renewable diesel on trains powered by Wabtec FDL locomotives operating in California.

© 2022 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.