Month: June 2024

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Lessons From Warren Buffett

Lessons from Warren Buffett: The Perils of Short Selling

Warren Buffett, the legendary investor, has a well-known aversion to shorting stocks, stemming from a traumatic experience in 1954. During this period, Buffett’s short position led to a rapid depletion of his net worth and a decline in his liquid assets, teaching him a hard lesson about the perils of short selling.

At the 2002 Berkshire Hathaway Annual Meeting, Buffett elaborated on the risks, stating, “It just takes one to kill you. And you need more and more money as the stock goes up. You don’t need more and more money when a stock goes down, if you paid for it originally and didn’t buy it on margin. You just sit and find out whether you were right or not. But you can’t necessarily sit and find out whether you’re right on being short a stock.”

This cautionary tale underscores Buffett’s preference for long-term investments and his wariness of the potentially devastating consequences of shorting.

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2024 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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BNSF

BNSF Railway Unveils Major Logistics Hub Near Phoenix

(BRK.A), (BRK.B)

BNSF Railway, a subsidiary of Berkshire Hathaway, has unveiled plans for a new regional rail-served facility near Phoenix, Arizona. Spanning approximately 4,321 acres in northwest Maricopa County, this master-planned logistics hub aims to transform the transportation, storage, and distribution of goods across the Phoenix metro area and the greater southwest.

The facility will feature three interconnected components:

1. Intermodal Facility (1,770 acres): A central hub for rail shipments, utilizing standardized containers and trailers for efficient transfer.

2. Logistics Park (1,420 acres): State-of-the-art sites for warehouse and distribution operations.

3. Logistics Center (1,131 acres): Direct-rail-served sites to support local industry needs.

By integrating into the existing rail network, the facility is set to optimize supply chain operations, enhance efficiency, and minimize environmental impacts. This development is expected to generate significant job opportunities and foster economic growth by encouraging businesses to co-locate.

Jon Gabriel, BNSF’s Vice President of Service Design, emphasized the project’s importance: “As BNSF and our customers adapt to changing market demands and technological advancements, expanding rail capacity in the Phoenix area is crucial. This long-term investment underscores our commitment to our customers and the broader community in Arizona and beyond.”

The new facility will help reduce trucking distances in the region, decreasing air emissions, lowering road maintenance costs, and enhancing road safety.

© 2024 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

BNSF Railway Ordered to Pay $400 Million to Swinomish Tribe for Unauthorized Land Use

(BRK.A), (BRK.B)

BNSF Railway, a subsidiary of Berkshire Hathaway, has been ordered to pay $400 million to the Swinomish Tribal Community for the railroad’s continued unauthorized crossing of the tribe’s land in order to reach an oil refinery.

The lawsuit in question was initially filed back in March 2015, asserting that BNSF had breached the terms of a right-of-way easement granted to them by the railroad.

BNSF had offered a settlement sum of $21.7 million, only to have it dismissed by the tribe.

According to the Swinomish Tribe, BNSF had exceeded the agreed limits on train and car crossings outlined in the agreement. The violation was deemed to be conscious and deliberate by U.S. District Court Judge Robert Lasnik, who issued a ruling on March 27. Judge Lasnik also pointed out that this transgression was motivated by the pursuit of profits.

The primary concern of the Swinomish Tribe revolves around the potential risks posed to their waterways by the transportation of oil via trains passing over the Swinomish Channel. This channel acts as a crucial link between Skagit Bay in the south and Padilla Bay in the north. The tribe’s historical treaty rights safeguard their fishing activities, and they are apprehensive that BNSF’s transportation of Bakken crude oil, in a manner and quantity that contravenes the explicit terms of the easement agreement, may jeopardize their way of life. Furthermore, the tribe asserted that BNSF had operated these trains without obtaining their consent or permission.

© 2024 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

Berkshire Hathaway’s NV Energy to Power Google with Geothermal Energy

(BRK.A), (BRK.B)

Berkshire Hathaway’s NV Energy is set to supply geothermal energy to Google’s data centers and office campuses in Nevada. This groundbreaking collaboration aims to set a new benchmark for clean energy integration in the US.

Central to this partnership is the introduction of the ‘Clean Transition Tariff’ (CTT), a new clean energy rate currently under review by the Public Utilities Commission of Nevada. If approved, the CTT will enable Google and other large energy consumers to meet their power needs with clean, reliable energy. This model could inspire similar initiatives across other states.

NV Energy, a subsidiary of Berkshire Hathaway Energy, has formed a unique energy supply agreement with Google, featuring enhanced geothermal power developed in collaboration with Fervo Energy. This initiative will provide 115 MW of new geothermal capacity specifically for Google. This effort supports Google’s ambition to achieve 24/7 carbon-free energy by 2030 and enhances the resilience of Nevada’s power grid.

Doug Cannon, President and CEO of NV Energy, highlighted the importance of this partnership: “Our collaboration with Google to bring enhanced geothermal energy to Nevada’s grid is significant. This proposal not only supports Google’s clean energy goals but also benefits our other customers by introducing greener energy resources to Nevada.”

The partnership builds on Google’s successful pilot project with Fervo Energy in Nevada, which proved the commercial viability of enhanced geothermal power. Following the pilot, Fervo has significantly improved its drilling processes, leading to a nearly 25-fold increase in geothermal capacity. This capacity will now support Google’s operations in Nevada.

Cannon added, “If approved, this proposal provides a blueprint for other utilities and large customers in Nevada to accelerate their clean energy goals. We are excited to advance this regulatory process and share these advancements, enhancing economic opportunities for our state.”

© 2024 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

Lessons from Warren Buffett: Rebalancing Your Portfolio – Marketing Gimmick or Investment Necessity?

Rebalancing your portfolio is a mantra often touted by the financial industry. If you don’t manage it yourself, they’ll gladly offer you an account or fund that does it automatically. Yet, Warren Buffett dismisses this concept, viewing it more as a marketing ploy than a sound investment strategy.

At the 2004 Berkshire Hathaway Annual Meeting, Buffett remarked, “The idea that you have, you know, you say, ‘I’ve got 60 percent in stocks and 40 percent in bonds,’ and then have a big announcement, now we’re moving it to 65/35, as some strategists or whatever they call them in Wall Street do. I mean, that has to be pure nonsense.”

Buffett advocates for a more opportunistic approach to investing. He suggests that your default position should always be in short-term instruments. “Whenever you see anything intelligent to do, you should do it. And you shouldn’t be trying to match up with some goal like that,” he advised.

For Buffett, asset allocation is often more about merchandising than genuine investment acumen. It’s a tactic designed to make investors feel they need expert help to decide between allocations like 60/40 or 65/35.

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2024 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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BYD

Berkshire-Backed BYD’s EXPLORER NO.1 Makes Landmark Docking in Brazil

(BRK.A), (BRK.B)

BYD, the Chinese automaker backed by Berkshire Hathaway, has achieved a significant milestone with the docking of its roll-on/roll-off (ro-ro) carrier, the EXPLORER NO.1, in the Americas for the first time. The vessel arrived at Brazil’s Port of Suape after being delivered in January at Yantai Port, China, reinforcing BYD’s commitment to eco-friendly global logistics.

The state-of-the-art EXPLORER NO.1, equipped with advanced navigation technology, completed a 27-day transcontinental journey from China to Brazil. At 199.9 meters in length, it can carry up to 7,000 vehicles, boosting BYD’s capacity to meet international demand.

The historic docking saw the largest car shipment ever received by Suape Port, bringing 5,459 vehicles as demand grows for BYD’s new energy vehicle models. BYD has already recorded over 25,500 registrations in just the first five months of the year, marking a remarkable 43% increase compared to all of 2023’s 17,900 registrations.

Tyler Li, President of BYD Brazil, highlighted the company’s dedication to sustainability, stating, “We believe it’s possible to maintain sustainability and technology in all our green mobility solutions, and we are increasingly committed to contributing to strengthening ecological and intelligent international logistics. Brazil is undoubtedly one of our biggest bets, in every sense.”

In April, BYD achieved another milestone by climbing to the ninth position among automotive manufacturers in Brazil, according to Fenabrave (National Federation of Motor Vehicle Distribution). This underscores the brand’s rapid growth in the Brazilian automotive market.

The arrival of the EXPLORER NO.1 not only strengthens BYD’s presence in Brazil but also advances the vision for a cleaner, greener future in transportation. BYD’s new energy initiatives now span over 80 countries and regions worldwide, continuously driving the global development of the NEV industry.

© 2024 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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Clayton Homes

Berkshire’s Clayton Breaks Ground on Energy-Efficient Housing Community

(BRK.A), (BRK.B)

Berkshire Hathaway’s Clayton, a national builder of off-site and site-built homes, recently broke ground on Redbud Estates, a new neighborhood in London, Kentucky. The development will feature 51 properties with Clayton CrossMod homes, known for their energy efficiency and modern design.

CrossMod homes, built to HUD code, blend site-built features such as elevated roof pitches, garages, porches, and permanent foundations. These homes appraise comparably to traditional site-built homes, offering homeowners wealth-building opportunities and eligibility for conventional financing programs.

At the groundbreaking ceremony, Governor Andy Beshear expressed hope for the project, emphasizing the importance of affordable, energy-efficient homes for families. All homes in Redbud Estates will be eBuilt, adhering to the U.S. Department of Energy’s Zero Energy Ready Home™ standards, potentially saving homeowners up to 50% on annual energy costs, approximately $862 annually in Eastern Kentucky.

Mayor Randall Weddle highlighted the development’s role in promoting growth and innovative housing solutions in London and Laurel County. CrossMod homes, constructed efficiently in off-site facilities, address restrictive zoning hurdles and increase the supply of attainable housing.

Kevin Clayton, CEO of Clayton, stressed the significance of modern manufactured homes in tackling outdated zoning codes and providing long-term savings through energy efficiency. Four Clayton-owned home centers, including Clayton Homes of London and Oakwood Homes of London, are collaborating with local contractors on the development of Redbud Estates.

© 2024 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

Lessons From Warren Buffett: Steering Clear of Gambling-Type Behavior in Investing

In a world where speculative opportunities seem ever more enticing, legendary investor Warren Buffett has a clear message: gambling-type behavior, whether in the stock market or purchasing a lottery ticket, will ultimately lead investors astray.

Buffett’s wisdom, shared at the 2016 Berkshire Hathaway Annual Meeting, underscores the importance of maintaining a rational investment approach. He highlights that while people may win lotteries occasionally, it’s crucial not to let such occurrences influence one’s investment decisions.

“People win lotteries every day, but there’s no reason to have that effect you at all. You shouldn’t be jealous about it,” Buffett remarked. “If they want to do mathematically unsound things, and one of them occasionally gets lucky… don’t get on, it’s nothing to worry about.”

Buffett’s advice emphasizes the need for investors to focus on long-term strategies and view stocks as ownership in businesses rather than mere ticker symbols. He suggests adopting a mindset where buying a stock is akin to purchasing a business, and therefore, fluctuations in stock prices should not prompt constant monitoring or emotional reactions.

“When you buy a stock, you get yourself in the mental frame of mind that you’re buying a business, and if you don’t look at a quote on it for five years, that’s fine,” Buffett advised. “You want to look at your stocks as businesses, and think about their performance as businesses.”

Ultimately, Buffett urges investors to avoid succumbing to the allure of speculative games and instead focus on sound investment principles. As opportunities to gamble may abound, it’s essential to remain steadfast in making decisions based on logic and long-term value rather than short-term fluctuations or trends.

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2024 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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NetJets

NetJets and Pilots’ Union Clash Over Safety Concerns Amid New Lawsuit

(BRK.A), (BRK.B)

Just weeks after ratifying their labor agreement, Berkshire Hathaway’s NetJets and its pilots’ union are in a new dispute. On June 3, the NetJets Association of Shared Aircraft Pilots (NJASAP) reported that NetJets filed a surprise lawsuit in the Franklin County Court of Common Pleas.

The lawsuit alleges that the union defamed the company with statements about safety, maintenance, and pilot training concerns over the past year. NJASAP, representing over 3,400 NetJets pilots, asserts that these concerns have intensified recently.

NJASAP President Capt. Pedro Leroux emphasized the union’s stance, stating, “We view the lawsuit as an attempt to silence us. However, NJASAP has a federally protected right and an organizational and moral responsibility to our members – the NetJets pilots – and to our customers to raise safety issues, and we will continue to do just that.”

The union has been vocal about its commitment to addressing safety, training, and maintenance issues with management. Despite their efforts to collaborate, Leroux noted that management has chosen legal action over dialogue. “Management’s retaliatory course of action will not compel us to abandon our mission: NJASAP will not be intimidated into silence by anyone or anything, including a lawsuit,” he said.

This legal battle highlights ongoing tensions between NetJets and its pilots that despite increased pay have yet to be resolved.

© 2024 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

Berkshire Hathaway and Occidental Partner to Revolutionize Lithium Extraction

(BRK.A), (BRK.B)

Berkshire Hathaway-backed Occidental and BHE Renewables, a subsidiary of Berkshire Hathaway Energy, have joined forces to demonstrate and deploy TerraLithium’s Direct Lithium Extraction (DLE) technologies. This partnership aims to extract and commercially produce high-purity lithium compounds from geothermal brine, and will lead to Berkshire owning and operating commercial lithium production facilities in California.

TerraLithium, a subsidiary of Occidental, holds patents for DLE technologies capable of converting any lithium-containing brine into a high-purity, responsibly sourced lithium supply. BHE Renewables operates 10 geothermal power plants in California’s Imperial Valley, which handle 50,000 gallons of lithium-rich brine per minute, producing 345 megawatts of clean energy. The joint venture has initiated a project at BHE Renewables’ Imperial Valley facility to demonstrate TerraLithium’s DLE technology’s feasibility for environmentally safe lithium production.

“This joint venture with TerraLithium signifies a major step forward in BHE Renewables’ goal to produce lithium in an environmentally responsible and commercially viable way, benefiting the Imperial Valley community,” said Alicia Knapp, President and CEO of BHE Renewables. “We are thrilled to collaborate with Occidental on this opportunity to position the Imperial Valley as a global leader in lithium production.”

Upon successful demonstration, BHE Renewables plans to construct, own, and operate commercial lithium production facilities in the Imperial Valley and potentially license the technology for projects elsewhere.

“By integrating Occidental’s brine management expertise with BHE Renewables’ geothermal operations knowledge, we can advance a more sustainable form of lithium production,” said Richard Jackson, President of U.S. Onshore Resources and Carbon Management Operations at Occidental. “We are eager to work with BHE Renewables to showcase how DLE technology can produce a critical mineral essential for achieving net-zero goals.”

Lithium is crucial for batteries in electric vehicles, consumer electronics, and energy storage, as well as in the production of glass, ceramics, and pharmaceuticals. The International Renewable Energy Agency projects a tenfold increase in battery lithium demand from 2020 to 2030, driven by battery demand growth.

“Securing a reliable and domestic high-purity lithium supply is vital for the energy transition,” said Jeff Alvarez, President and General Manager of TerraLithium. “The partnership with BHE Renewables will accelerate the development and commercial deployment of our Direct Lithium Extraction technologies to meet the growing global lithium demand.”

© 2024 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.