Category: Minority Stock Positions

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Berkshire Hathaway Reinsurance Group Insurance Minority Stock Positions

Berkshire Slashes Stake in Munich Re

(BRK.A), (BRK.B)

For the past four months, Berkshire Hathaway’s leadership has been expressing its displeasure with the state of the reinsurance market. Now, reinsurer Munich Re has reported that Berkshire has cut its stake in the company from roughly 12% down to 9%.

“It’s a business whose prospects have turned for the worse and there’s not much we can do about it,” Warren Buffett said at the 2015 Berkshire Hathaway annual meeting.

“The reinsurance business not as good as it once was and is unlikely to get better,” Charlie Munger added. “Money has come in, not because they want to be in reinsurance, but because it’s an uncorrelated asset class. We’re in it for the long haul.”

Buffett’s and Munger’s words were in line with those of Ajit Jain, who is the head of Berkshire Hathaway Reinsurance.

“What was a very lucrative business is no longer a very lucrative business going forward,” Jain said in July in The Wall Street Journal.

Berkshire originally disclosed a stake in Munich Re in January 2010, when it reported a 3.045% stake in the German reinsurer.

© 2015 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

Sudan First African Country for BYD

(BRK.A), (BRK.B)

BYD Co. Ltd., the Chinese battery and vehicle-maker that is 10% owned by Berkshire Hathaway, has reached a deal to sell 10,000 vehicles to Sudan’s state-run company GIAD Motor Co Ltd.

The cars will include both hybrid and traditional gasoline-powered vehicles, and the deal represents the company’s first major order in Africa.

The vehicles’ power systems and key components will be built in China and the cars will be assembled in Sudan. BYD has assembly plants for gas-powered cars in Sudan and Egypt.

BYD’s Sudanese partner, Giad Motor Co. Ltd., is a subsidiary of Sudan’s Giad Group, the only corporation with a license to produce vehicles in the country, as well as its largest state-owned company.

BYD’s Sale on the Rise

Despite recent turmoil in the China’s stock markets, BYD has had a strong year for global sales.

BYD’s revenues are up 21% to 30.4 billion yuan ($4.75 billion) for the first six months of 2015. Gross profits were up 21.4% for the same period at 4.6 billion yuan with car sales up 14% to 210,000 units.

Berkshire and BYD

In 2008, Berkshire Hathaway bet on BYD’s potential and purchased 225 million shares, and today owns roughly 9.1% of the company.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2015 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

Axalta to Build Global Innovation Center at The Navy Yard in Philadelphia

(BRK.A), (BRK.B)

Axalta Coating Systems (NYSE: AXTA), a leading global supplier of liquid and powder coatings, announced that it will build its new Global Innovation Center at The Navy Yard in Philadelphia.

The 175,000 square foot facility will house Axalta’s global research, product development, and technology initiatives and partner with the Company’s other technology centers in the Americas, Europe and Asia-Pacific.

The approximately $70 million project is being developed by Liberty Property Trust and Synterra Partners, and Axalta has entered into a long-term lease agreement for the building.

Project construction is expected to be complete in late 2017.

Upon reaching full operation in 2018, Axalta will bring at least 190 new jobs to Philadelphia with the possibility of additional positions in the future.

Axalta’s global corporate headquarters is already located in Center City Philadelphia, and its North America headquarters is located in Glen Mills, Pennsylvania with a customer training center in Exton, Pennsylvania.

Berkshire and Axalta

In April 2015, Berkshire purchased from The Carlyle Group 20 million of Axalta’s common shares for an aggregate purchase price of $560 million, or $28.00 per share.

Originally a unit of Dupont, Axalta is a leading global coatings company “dedicated solely to the development, manufacture and sale of liquid and powder coatings.”

Could the company be a potential acquisition target for Berkshire Hathaway’s Lubrizol Corporation? We will have to wait and see.

© 2015 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

BYD Scores Massive Bus Order from Washington State

(BRK.A), (BRK.B)

In what it is touting as “America’s Largest Electric Bus Order,” BYD Co. Ltd., the Chinese battery and vehicle-maker that is 10% owned by Berkshire Hathaway, has scored a massive order from the state of Washington.

BYD has won a contract from the Washington State Department of Transportation (WSDOT) for up to 800 heavy duty buses from all different propulsion types that includes 12 different categories for all-electric buses.

The company won contracts in 10 of the 12 available vehicle categories of WSDOT’s RFP, and says it has the ability to deliver any of their buses within six months.

The contract includes buses from 30 – 60 feet in length for both highway and transit applications, as well as long-range and shorter range on-route charging configurations.

BYD is the only company world-wide that manufactures 7 different all-electric buses capable of long range as well as in-route charging configurations.

The company notes that its buses can drive for more than 155 miles even in heavy city traffic on a single charge, and BYD will also supply wireless on route charging as an option approved by WSDOT.

The buses use BYD’s Iron-Phosphate battery which has a 12-year-battery warranty, and use the company’s proprietary in-wheel hub motors and regenerative braking system.

Single RFP Process Speeds Procurement

The single WSDOT RFP speeds procurement, and the buses will serve public transportation systems in the states of Washington and Oregon without their having to go through a separate RFP.

Any transit agency or public institution in the states of Washington and Oregon is now able to procure electric buses using the RFP.

“Our staff has spent the past few years researching every electric bus on the market,” said WSDOT’s David Chenaur, Capital Programs Manager, “and after rigorous evaluations of each manufacturer and their products we believe we have given our transit authorities the very best electric buses in each vehicle category to build their fleet with.”

BYD’s subsidiary BYD Motors will build the buses at its plant in Lancaster, California.

In 2008, Berkshire Hathaway bet on BYD’s potential and purchased 225 million shares, and today owns roughly 9.1% of the company.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2015 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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Lubrizol Minority Stock Positions

Berkshire Reveals Major Stake in Phillips 66

(BRK.A), (BRK.B)

Berkshire Hathaway has revealed that it now owns more than ten-percent of refiner Phillips 66 (PSX).

In early 2014, Berkshire swapped a large portion of its previous Phillips 66 position for the Houston-based company’s chemical business unit, which was added to Berkshire’s specialty chemical maker Lubrizol.

“We were able to do that on a tax-advantage basis. We didn’t trade them because we didn’t like the stock,” Warren Buffett said on CNBC’s Squawk Alley.

“I had always intended on coming back in, assuming that the price was right.”

A Surprise Revealed

In its SEC Form 13F filing on July 31, 2015, Berkshire stated that “confidential information has been omitted from the public Form 13F report and filed separately with the U.S. Securities and Exchange Commission,” which implied that the company was amassing shares in a company that it would reveal at a later date.

Berkshire, in its SEC Form 3 filing on August 25, stated it had accumulated 54,800,415 shares of Phillips 66 common stock. The position is worth aproximately $4.5 billion, and including shares owned prior to July 31, Berkshire owns 58 million shares.

51,873,456 of the total reported securities are owned by National Indemnity Company, a subsidiary of Berkshire Hathaway, and no price for those shares was reported.

However, 6,102,000 of the total reported securities are owned by the following pension plans of Berkshire’s subsidiaries: FlightSafety International Inc. Retirement Income Plan (350,000), Fruit of the Loom Pension Trust (921,300), GEICO Corporation Pension Plan Trust (2,499,700), Johns Manville Corporation Master Pension Trust (2,187,000), and General Re Corp. Employee Retirement Trust (144,000). The purchase price of those shares ranged from $71.56-$77.26.

About Phillips 66

Phillips 66 was spun-off of ConocoPhillips in May 2012, and its refining and petrochemical business has been mostly immune to the downward pressure on oil prices, as the demand for refined products, including gasoline, diesel and aviation fuel remains strong. Phillips 66 also transports crude oil, refined products, natural gas and natural gas liquids (NGL). It gathers, processes and markets natural gas and NGL to power businesses, heat homes and provide feedstock to the petrochemical industry.

The company’s 52-week share price high was $87.98, and it currently pays an annual dividend of 56 cents, yielding 2.9%.

Buffett, Combs or Weschler

Berkshire does not normally announce which transactions are the work of Warren Buffett, and which transactions are the work of his two portfolio managers Todd Combs and Ted Weschler. While Warren Buffett has acquired most of Berkshire’s portfolio, Todd Combs and Ted Weschler each manage a portfolio that is roughly $9 billion in assets. The two investment managers are widely assumed to be the future managers of the entire portfolio.

The total portfolio slipped to a market value of $107.182 Billion at the end of second quarter from $110.776 billion at the end of the 1st quarter 2015.

(This article contains updated information from when it was first published.)

© 2015 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

Denver the Latest City for BYD’s Pure-Electric Buses

(BRK.A), (BRK.B)

There was a time when cities were very pleased with adding hybrid buses to reduce emissions from smoky diesel buses. These days, the mantra is zero-emissions, as cities work to meet tougher pollution and climate change goals. These goals benefit BYD Co. Ltd, the Chinese company that is a world-leader in rechargeable batteries, and maker of pure-electric and traditional fuel vehicles.

The company, which is partially-owned by Berkshire Hathaway, continues to make inroads in the U.S. market with its all-electric buses.

In Denver, Colorado, the Regional Transportation District (RTD) has approved the purchase of 36 of BYD’s 45-foot pure-electric buses for its 16th Street Mall shuttle, which is the RTD’s busiest bus route.

The buses replace a more than decade-old fleet of hybrid buses, which are aging out of service. The new buses will eliminate emissions on the heavily travelled route.

The RTS is spending $27.1 million to purchase the buses, which will have a 12-year lifespan.

BYD has been begun assembling its buses for the U.S. market in a plant it opened in Long Beach, California. The company is already making pure-electric buses for Long Beach’s transportation system.

In 2008, Berkshire Hathaway bet on BYD’s potential and purchased 225 million shares, and today owns roughly 10% of the company.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2015 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

BYD Beats Nissan and Tesla in June/July Car Sales

(BRK.A), (BRK.B)

It’s summer and BYD Company Limited’s car sales are heating up, even as some major car companies have wilted.

While everyone watches Tesla and Nissan to get the pulse of EV car sales, Chinese car-maker BYD has quietly topped their world-wide sales figures for June and July.

BYD, which Berkshire Hathaway holds a minority stake in of nearly 10%, reported selling 5,037 EVs and PHEVs in June 2015.

Nissan’s U.S. sales have been particularly soft, reporting selling only 1,174 of its Nissan LEAF EVs in July, a number that is roughly a third of the 3,019 it sold in July 2014.

Tesla, which reports its sales on a quarterly basis, reported that 11,507 of its Model S were delivered worldwide in April-June. The figure was up 52% for the same period in 2014.

Why the Lack of Attention?

BYD, which is the world-leader in rechargeable batteries, has yet to enter the U.S. car market with either its all-electric or hybrid vehicles. In the U.S., the company has focused on the battery-powered zero emission bus market, winning contracts in San Diego and Long Beach, California. The company has built a factory to build the buses in Long Beach.

However, BYD is inching toward car sales. In the spring of 2015 it began a pilot program with Uber in Chicago that used BYDs E6 sedan. The car is a cross between a sedan and SUV, and currently gets roughly 186 miles (300 km) of driving range per charge. The 2016 E6 will reportedly get a range increase to 250 miles (400 km).

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2015 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

Berkshire’s 13F Filing Hints at Surprise in the Wings

(BRK.A), (BRK.B)

Berkshire Hathaway’s Form 13F filing, which is required to be filed quarterly with the Securities and Exchange Commission, always give plenty to chew on for Berkshire watchers.

On the surface it has been a relatively quiet 2nd quarter 2015 for much of its minority-share stock holdings, with its purchase of a large number of shares in Charter Communications one of the few major increases.

Steady as She Goes

Berkshire’s four biggest holdings all remained unchanged, with Wells Fargo making up 24.68% of the total portfolio, Coca-Cola 14.64%, IBM 12.07%, and American Express 10.99%.

In the case of Coca-Cola, the $518 million in dividends it received in 2014, on a very low cost basis, meant an effective yield of 40%, so no wonder Warren Buffett calls Coca-Cola one of his “forever stocks.” You would drink five Cokes a day too if it got you a 40% return.

A Surprise Coming Soon?

The company did note that “confidential information has been omitted from the public Form 13F report and filed separately with the U.S. Securities and Exchange Commission,” which likely implies that the company is amassing shares in a company, and in such a case it is not required to reveal the company publicly. Berkshire used the same strategy when it took a position in IBM that made it the company’s largest minority-owner with just over 8% of the company. We will have to wait and see if there is another surprise minority-ownership company bombshell, however we do know that the purchase was in the $3 billion range.

Stocks on the Increase

Berkshire bought 2,535,542 shares of the cable TV operator Charter Communications, increasing its position by 42% to 8,514,678 shares. The position is 7.6009% of Berkshire’s total portfolio.

Berkshire first took a position in Charter Communications during the 2nd quarter of 2014. The company has been on the rise since emerging from bankruptcy in 2009, and is in the process of merging with Time Warner Cable Inc. and acquiring Bright House Networks, a video service provider and cable internet provider. The merger is the work of Chairman John Malone whose Liberty Broadband is the largest Charter Communications shareholder. Berkshire has long been a buyer of shares in Malone’s companies, although in 2014 it sold its entire stake in premium cable channel Starz.

A Stock That’s Paying Dividends

Berkshire also increased its position in U.S. Bancorp by 1,289,777 shares, an increase of 1%, bringing its total to 85,063,167 shares. The position is 4.7538% of Berkshire’s total portfolio.

While Berkshire is famous for being the stock that doesn’t pay a dividend, it certainly loves to receive them, and U.S. Bancorp has been one of the stronger stocks in the banking sector for dividends. The company announced a 4.1% dividend increase in June, the 5th consecutive dividend increase since 2011.

A Potential Lubrizol Acquisition?

Also reported were the 20,000,000 shares of Axalta Coating Systems that it bought from the Carlyle Group for $28 per share. Berkshire first announced plans for the purchase in April, and the big question is whether the former DuPont unit is an acquisition target for Berkshire Hathaway’s Lubrizol Corporation. The $28 price was below the $31.30 share price that Axalta was trading at after the announcement. It now sits at $30.38 as of Friday’s closing bell.

Another Potential Takeover Candidate

DaVita Healthcare Partners, which also looks like a good fit with Berkshire, considering that an aging population and increased health care coverage under the Affordable Care Act benefits its kidney dialysis business, was unchanged at 38,565,570 shares.

Berkshire entered into a standstill agreement with Davita in May 2014, pledging not purchase more than 25% of the company. Its ownership stake currently sits at just under 17.95%.

And One That’s Not So Likely, Yet

The 13F filing does not yet reflect Berkshire’s 26% ownership of Kraft Heinz, which closed after the quarter ended. The filing does show that Berkshire owned 578,000 shares in snack maker Mondelēz International, Inc., which has recently been rumored as a possible merger candidate with Kraft Heinz. Warren Buffett just last week downplayed the possibility, noting that there was still much worked to be done in integrating Kraft and Heinz.

Stocks on the Decrease

Major decreases in holdings, included bailing on energy sector stocks Phillips 66 and National Oilwell Varco. Berkshire sold its entire 7,499,450 position in Phillips 66, and its entire 1,978,895 position in National Oilwell Varco. Both have been hit hard by low oil prices.

Berkshire had already liquidated most its Phillips 66 position in 2014 when it swapped it for ownership of Phillips Specialty Products Inc. and approximately $450 million in cash. The move brought tax saving to Berkshire and a new unit to Lubrizol.

Whither Viacom

Also going down were Berkshire’s shares in Viacom, Chicago Bridge & Iron Company, and WABCO Holdings Inc.

Its Viacom position decreased a whopping 31% as Berkshire sold 2,618,358 shares. Berkshire looks to be wise to get out of Viacom as fast as it can. The mass media company has seen its stock value plummet 42% year to date, as it struggles to hold on to viewers and carriers of its channels. Among its troubles, Viacom is in a battle with satellite TV provider Dish TV, which has dropped the company’s channels from its service.

Berkshire’s holdings in Chicago Bridge & Iron Company decreased 12% as it sold 1,374,189 shares. Berkshire first took a position in the engineering, procurement and construction company during the 1st quarter of 2013 only to watch the share price peak at $86.50 in April 2014 before crashing all the way down to $34.51 a year later. Year to date the stock has risen $23.25% but it appears that Berkshire has now cooled on it as an investment.

Buffett, Combs or Weschler

Berkshire does not normally announce which transactions are the work of Warren Buffett, and which transactions are the work of his two portfolio managers Todd Combs and Ted Weschler. However, Buffett recently revealed that Berkshire’s 2.9% position in aerospace manufacturer Precision Castparts was originally purchased by Todd Combs. It was Buffett that decided to make the bid to purchase the entire company for $37 billion.

While Warren Buffett has acquired most of Berkshire’s portfolio, Todd Combs and Ted Weschler each manage a portfolio that is roughly $9 billion in assets. The two investment managers are widely assumed to be the future managers of the entire portfolio.

The total portfolio slipped to a market value of $107.182 Billion from $110.776 billion at the end of the 1st quarter 2015.

© 2015 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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Insurance Minority Stock Positions

Berkshire Gains Big from Life Insurance Merger

(BRK.A), (BRK.B)

In a consolidation in the insurance industry, Berkshire Hathaway’s minority position in Symetra Financial Corporation will be bought out as the insurance company merges with Sumitomo Life Insurance Company.

A Big Win for Berkshire

The merger will give Berkshire a 32% boost on its Symetra stake, as it receives an all cash offer for its shares. The tender offer will give Berkshire a windfall worth $144 million.

Berkshire and other Symetra shareholders will receive $32.00 per share in cash at closing, plus a previously announced special dividend of $0.50 per share in cash, which is payable on August 28, 2015 to Symetra shareholders of record as of August 10, 2015.

The total combined transaction consideration of $32.50 per share is approximately $3.8 billion in aggregate and represents a 32% premium over Symetra’s average stock price of $24.64 for the 30 days ending August 5, 2015.

Berkshire Hathaway currently owns 17% of Symetra and has agreed to vote in favor of the transaction.

White Mountains Insurance Group, Ltd., which owns 18% of Symetra, has also granted its approval for the merger.

Best Wishes, Warren

Warren Buffett in a statement said, “Tom and his management team have done a good job running the company and have executed a great deal for shareholders. I wish them the best for future success under their new owners.”

Founded in 1907, Sumitomo Life provides traditional mortality life insurance, nursing care, medical care and retirement plans through sales representatives, insurance outlets, the Internet and bancassurance. As of March 31, 2015, Sumitomo Life had $229 billion in assets, approximately 6.8 million customers and 42,000 employees.

Symetra was founded in 1957 and is based in Bellevue, Washington. The company provides employee benefits, annuities and life insurance through a national network of benefits consultants, financial institutions and independent agents and advisors. As of June 30, 2015, Symetra had $34 billion in assets, approximately 1.7 million customers, and 1,400 employees nationwide.

Symetra will become Sumitomo Life’s platform in the U.S., where Sumitomo Life does not currently have a material operational presence. Symetra’s President and Chief Executive Officer, Thomas M. Marra, and the current management team will continue to lead the business from Symetra’s headquarters in Bellevue. Symetra will maintain its current brand, employees, distribution channels and product mix.

© 2015 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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Kraft Heinz Minority Stock Positions

Kraft Experiences 3G’s Heinz Hatchet

(BRK.A), (BRK.B)

Now that Kraft is part of Kraft Heinz, the aggressive cost cutting that 3G Capital brought to Heinz has come to Kraft as well. Gone are the days of a host of perks, including a free supply of Kraft snack foods for employees, or even minifridges in the office.

It’s no surprise, as 3G is known for imposing cost controls big and small that include cuts to travel expenses, limits on the number of printer copies that can be made each month, the elimination of snacks in break rooms, and new mandates on cutting electricity usage.

The same goes for personnel, and 3G has already begun trimming and replacing employees, including the departure of Kraft’s Chief Financial Officer James Kehoe.

What Do Warren and Charlie Think?

While 3G’s ruthless cost-cutting has dismayed some Berkshire shareholders, it has not offended either Warren Buffett or Charlie Munger, who see it as necessary to keep complacent, century-old companies competitive in the modern world. After all, layoffs were in Berkshire Hathaway from the start, as Buffett fought to keep the failing textile company afloat.

At the 2015 Berkshire Hathaway annual meeting both Warren Buffett and Charlie Munger strongly supported 3G’s strategy.

“3G has been buying businesses that have too many people,” Buffett explained. “You will have never found a statement from Charlie or me saying that a business should have more people than needed,” Buffett added.

The cost cutting has also pleased Wall Street, as shares of Kraft Heinz (KHC) are already up roughly 9% since their trading debut on July 7.

Berkshire’s move to partner with 3G, which combined own 51% of Kraft Heinz, with Berkshire the largest single shareholder at 26%, has been a very profitable way for Berkshire to put its mountain of cash to use. Andrew Bary of Barron’s calculated that Berkshire’s $9.25 billion investment in Heinz and Kraft are now worth $16 billion. He called it “a stunning profit in just two years.”

With 3G also having turned to Berkshire for cash to finance its Burger King takeover of Tim Hortons, a move that has gave Berkshire 8% of the combined company, it looks like Buffett’s and Munger’s interest in 3G’s management style is growing not waning.

© 2015 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.