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Acquisitions Clayton Homes Special Report

Special Report: Kevin Clayton Transforms Clayton Homes

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“Would you believe where we are after just three years,” Kevin Clayton, president and CEO of Clayton Homes, says about the company’s move into the site builder business.

It’s a business that Clayton is growing rapidly, and he just acquired Highland Homes in early May, a Florida home builder that is the ninth home builder acquired by Clayton in just three years.

It’s all part of an increasing emphasis on site built homes for the low and midprice market, notes Kevin Clayton.

“It’s a market that has an average price point of $318,000, Clayton says, “which is well under the national average of over $400,000.”

Clayton Homes, which runs its site builders under its Clayton Properties Group, a division of Clayton Home Building Group that is based in Maryville, Tennessee, is already ranked 18th on Builder Magazine’s Builder 100 list and rising fast.

Clayton Homes has been named “Builder of the year” for 2019. It’s an award that really pleases Kevin Clayton.

“To think we weren’t even in that business three years ago,” Clayton says proudly.

Clayton is looking to acquire more site builders, but notes they must meet four criteria.

“First, the owner must be willing to stay around and work,” Clayton says. “Second, they must have survived the last recession; third, they must focus on building low and midprice houses, and fourth, but not least, they must be customer focused and really care about the customer experience.”

Clayton Homes was founded in 1956, by Kevin Clayton’s father Jim Clayton, and Kevin Clayton has led the company since 1999, when he took over from his father.

Acquired by Berkshire Hathaway in 2003 for $1.7 billion, Clayton Homes has grown into a diverse builder offering traditional site built homes, modular homes, manufactured homes, tiny homes, college dormitories, military barracks and apartments.

Improvement in Manufactured Homes

Kevin Clayton is also positive about his manufactured homes business, which he emphasis use the same 30-year shingles as a traditional site built home.

“We don’t have metal roofs anymore,” Clayton says. “Our manufactured homes have a lifespan that’s the same as a site built home.”

Clayton is also building a new type of manufactured homes, for now dubbed New Class Homes, which meet Fannie Mae and Freddie Mac standards. By qualifying, borrowers have lower down payment requirements and lender fees. The homes qualify for a MH Advantage loan, and must be “designed to meet specific construction, architectural design and energy efficiency standards,” according to Fannie Mae.

The move dramatically reduces the amount of down payment borrowers have to come up with. MH Advantage loans require a 3 % down payment, down from 5% previously. In addition, Fannie Mae does not charge its 50-basis-point loan-level price adjustment for manufactured housing loans.

“New Class Homes represent only a couple of percent of our revenues right now,” Kevin Clayton says, but he sees lots of rooms for growth.

The overall manufactured home business is strong.

“The manufactured home business is up 6-7 percent this year,” Clayton says.

Clayton emphasized the environmental advantages manufactured homes, which produce far less waste than traditional site built homes.

“All our 42 facilities are ISO 14001 certified, which is all about environmental standards,” Clayton says.

ISO 14001 is the international standard that specifies requirements for an effective environmental management system.

Clayton has moved much of its supply chain in-house, building more of its own components.

“We build our own windows,” Clayton notes.

Why Consumers Buy Manufactured Homes

It’s a type of housing that opens home ownership to a broad range of consumers that are locked out of housing market as traditional home prices have skyrocketed.

“Fifty percent of people we help with a home would not qualify for Fannie Mae or Freddie Mac mortgages,” Clayton says.

A big part of that access to homes is the greatly lower price point. A manufactured home can be purchased for $69,000 and has an average cost of only $116,000 with land.

“In rural America there’s not a lot of apartment options,” Kevin Clayton notes. “Many of our customers have been living with family, and are looking for an affordable way to live on their own.”

Clayton especially notes the popularity of manufactured homes for five-acre ranches.

“Where there’s land, we shine!”

© 2019 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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Berkshire Hathaway Energy

NV Energy CEO Lauds New Nevada Bill Increasing Renewable Portfolio Standard to 50 Percent

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NV Energy officials were on hand last week as the Governor of Nevada signed into law Senate Bill 358, which increases Nevada’s renewable portfolio standard to 50 percent by 2030.

“NV Energy has been vocal about our aspirational goal of providing our customers with 100 percent renewable energy, and this is an important next step in accomplishing that,” said Doug Cannon, NV Energy president and CEO. “We announced our support of the renewable standard increase in 2018 and are honored to have worked closely with Governor Sisolak, Senator Chris Brooks, who was instrumental in leading this effort; and other stakeholders to accomplish this so early in the legislative session.”

The company’s 2018 announcement that it planned to add six more large-scale solar projects, three of which will include battery storage for the first time, reinforced its commitment to add more low-cost solar to its energy mix.

NV Energy also recently submitted its annually-required renewable portfolio standard (RPS) compliance filing to the Public Utilities Commission of Nevada, which stated that the company had exceeded the current RPS requirement for the ninth-straight year. Instead of the 20 percent required today, 24 percent of the energy the company provides is generated from renewable resources.

Nevada is a leader in renewable energy, ranking fourth in solar and second in geothermal.

NV Energy has fostered renewable development since before a renewable standard was put into place, having signed its first geothermal contract in 1986. Thanks to expanding renewable energy serving its customers and the retirement of coal-fueled generation in Nevada, Nevada experienced an 85 percent reduction in coal-fueled carbon emissions from 2005 to 2015.

During that same period, Nevada reduced carbon emissions from the electric industry by 44 percent.

“Our company has made great strides over the last decade to increase our use of clean energy resources and reduce our carbon footprint, all while keeping costs low for our customers. Today signifies another step in building Nevada’s a clean energy economy and we’re proud to be one of the leaders in that effort,” added Cannon.

© 2019 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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Johns Manville

Johns Manville Names John Vasuta President of Engineered Products business

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Berkshire Hathaway’s Johns Manville, a leading manufacturer and marketer of premium-quality building and specialty products has announced John Vasuta is the new President of the company’s Engineered Products business.

“John is an accomplished leader and a welcome addition to JM’s leadership team,” said Mary Rhinehart, JM’s President and CEO. “He brings to JM a proven track record of successfully growing businesses and global commercial leadership.”

Vasuta will lead a global business that manufactures premium-quality glass fiber nonwovens, polyester spunbonds and glass fibers for the building and construction industry, as well as for automotive, industrial and residential applications.

JM products cover an extensive range of applications such as waterproofing membranes, flooring, building and technical insulation, air and liquid filtration, energy storage, composites and gypsum boards. The business operates manufacturing plants in the United States, Germany, Slovakia and China.

“Johns Manville is built on a rich history and has a well-earned reputation as a global market leader,” Vasuta said. “I am excited to join the company and to lead the Engineered Products business.”

Vasuta most recently worked at Bridgestone Corp. as President and Managing Director, Firestone Building Products International as well as Global Senior Vice President, Firestone Building Products. He joined Bridgestone as Deputy General Counsel and later held a variety of executive-level jobs, including President of Bridgestone’s 250 commercial store division and VP of International Sales and Operations for building products.

Vasuta earned a bachelor’s degree in engineering, an MBA and a Juris Doctorate, all from the University of Akron, and he worked earlier in his career in private law practices and the semi-conductor industry.

© 2019 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

Lubrizol to Build Plant in Chiba, Japan

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The Lubrizol Corporation will build a new plant within the Ichihara Works (Ichihara City, Chiba, Japan) to manufacture LUCANT(TM) hydrocarbon-based synthetic fluid.

LUCANT is a high performance, hydrocarbon-based, specialty synthetic fluid used primarily as a viscosity modifier. It is used in the most demanding applications including automotive driveline, industrial lubricants and greases, and is the approved choice for leading OEMs and global oil marketers. Mitsui Chemicals was the first manufacturer to offer this unique synthetic fluid which boasts industry leading efficiency and durability.

“This investment in additional LUCANT capacity will allow the Lubrizol Additives business to further optimize its strategic relationship with Mitsui Chemicals to meet the evolving and demanding needs of lubricant market, while ensuring we remain a trusted, reliable and secure supply partner,” said Barrie Masters, global business director for the viscosity modifier business at Lubrizol.

Commercial operation at the new plant is planned for 2021 and Mitsui Chemicals, Inc. and The Lubrizol Corporation are excited to further invest in their partnership.

In 2014, Lubrizol entered into an exclusory agreement with Mitsui Chemicals, Inc. to become the exclusive worldwide seller and marketer of the LUCANT polymer products in the lubricant industry.

© 2019 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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Berkshire Hathaway Energy

Rocky Mountain Power Considers Early Coal Plant Closures

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Berkshire Hathaway’s PacifiCorp is looking at early closures of some of its coal-fired generating stations.

The potential PacifiCorp coal unit closures are operated by its Rocky Mountain Power subsidiary in Wyoming, Utah and Idaho.

Most of PacifiCorp’s coal units will reach the end of their depreciable lives at different points over the next 20 years.

While no resource decision will be made ahead of completion of the 2019 IRP, a PacifiCorp study identified potential benefits for customers through early retirement of some coal units.

“We continuously examine the costs and benefits of how the company generates electricity to ensure we are making the best decisions for customers,” said Rick Link, PacifiCorp vice president of resource planning and acquisitions. “The study reflects the ongoing changing economics for coal driven by market forces.”

For purposes of the study, the company examined whether customers would benefit if units are retired as early as 2022 and replaced with other resources. The timing and sequencing of any actual coal unit closures will ultimately be determined by a range of factors that also include workforce and community transition considerations.

The units the study identifies as being less economic to operate beyond 2022 than alternatives and are candidates for early retirement are:

• Naughton Units 1 and 2 in Wyoming.
• Jim Bridger Units 1 and 2 in Wyoming.

PacifiCorp is a majority owner and the operator of these units.

The company anticipates issuing a preferred portfolio for input from regulators and stakeholders before submitting a final plan to state regulators in August.

© 2019 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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Commentary

Commentary: Race Between Tesla and BYD Not Going Well for Tesla

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If there ever were two companies on a collision course for investors dollars it’s Tesla and China’s BYD (Build Your Dreams), a world leader and pioneer in battery and zero-emission vehicles.

Both companies have staked their claim as the leaders in the electrification of everything from cars to forklifts, and both companies have intrigued investors looking for explosive growth on the manufacturing side of investing.

Unfortunately, for Tesla, which lost $702 million in its first quarter and is already looking towards another capital raise in the $2.5 billion range to keep the battery-powered lights on, its overseas competitor is making money.

Lots of money.

BYD has announced that its first quarter profit skyrocketed 632 percent to 749.73 million yuan (US$111.4 million).

In the race to become number one in electric cars, BYD’s already firmly in the lead.

While US investors may pay more attention to Tesla’s US sale figures (increasingly nervously), BYD is number one in the biggest electric vehicle market in the world, China.

“New energy vehicles are expected to continue to sell well in the second quarter, and new energy vehicle sales and revenues continue to maintain strong growth,” noted BYD in its stock exchange filing.

BYD is looking even further down the road, and just signed an agreement with the city government of Changzhou city government for its fourth car factory, which will produce some 400,000 electric cars annually.

Not Just Cars, Buses

While you don’t see any BYD cars on US highways, you do see an increasing number of BYD pure electric buses. The company has made huge headway since it opened an assembly plant in Lancaster, California in 2013, and recently produced its 300th bus.

Worldwide, BYD dominates the market and has produced over 50,000 pure electric buses in just nine years.

As for the battle of the lithium-ion battery, Tesla’s Gigafactories are going head-to-head with BYD’s factories for the production crown, and for now BYD has the world’s largest.

Located in the western province of Qinghai, BYD’s 24GWh power battery factory is aiming to increase total production capacity to 60GWh by 2020. And it has the advantage that Qinghai province is a major source of lithium.

The Qinghai plant is BYD’s third battery factory in China after Shenzhen and Huizhou, and the company is constructing a fourth plant in Chongqing, which will have an annual capacity of 20 GWh.

“Electrification is a done deal as several countries have announced a deadline for the sale of internal combustion engine cars to end. Electric vehicles are on the cusp of another boom,” said BYD President and Chairman Wang Chuanfu, at the time of the Qinghai plant’s opening.

The question is whether BYD’s race with Tesla is a “done deal” as well.

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 almost ten-fold, and is now worth roughly $1.96 billion.

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

© 2019 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 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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Pilot Flying J

Pilot Flying J Out to Hire 5,000 Workers

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Pilot Flying J, the largest travel center network in North America, has announced its first-ever National Hiring Day on May 2 – the largest in-person and virtual hiring event in the company’s history.

Gearing up for the influx of travelers this summer, the company aims to hire more than 5,000 new team members across its network of more than 750 travel centers in the U.S. and Canada. Pilot Flying J invites job seekers to experience and explore what it means to be part of the Pilot Flying J team with on-the-spot in-person and virtual interviews.

“Making the decision to start a career at Pilot Flying J provides the opportunity to work hard, have fun and live up to one’s full potential, while also advancing professionally,” said Paul Shore, chief people officer of Pilot Flying J. “Hiring 5,000 enthusiastic team members to join our company in a wide array of positions across North America is an exciting challenge, especially during a time of low unemployment. To help candidates get a feel for our values and culture, learn about the great benefits we offer and find the right job opportunity, we can’t rely on standard outreach. That’s why we’re inviting everyone to join us on National Hiring Day.”

Berkshire Hathaway and Pilot Flying J

In October 2017, Berkshire Hathaway made a $2.76 billion investment in Pilot Travel Centers. Under the terms of the agreement, Berkshire will become the majority owner in five years.

© 2019 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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Berkshire Hathaway Specialty Insurance Insurance

Feeling Adventurous? Berkshire Hathaway Has Insurance For You

If you’ve got the adrenaline, Berkshire Hathaway has the insurance for your adventures.

Berkshire Hathaway Travel Protection (BHTP), a leading provider of travel insurance, has announced the launch of AdrenalineCare, a new comprehensive travel insurance that is specifically tailored for adventure travelers, with features such as enhanced baggage protection, coverage for extreme activities and higher medical limits
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“Our annual State of Travel Insurance study found that adventure travel continues to be one of the most popular and fastest-growing travel types,” said Dean Sivley, president of BHTP. “Adventure travelers are eager to explore the world but also know that their adrenaline-packed trips warrant more protection. We created AdrenalineCare so they can fully enjoy their adventures without worrying about equipment delays or insufficient medical coverage if traveling in a remote location.”

AdrenalineCare coverage includes:

• Up to $750,000 in medical evacuation coverage, BHTP’s highest limits
• Up to $50,000 in emergency travel medical insurance
• Up to $500 in equipment delay coverage if the traveler’s sports equipment such as skis, scuba gear, mountain climbing equipment or other gear is delayed 6 hours or longer
• Up to $1,500 in baggage coverage to cover lost, stolen or damaged luggage
• A $150 fixed benefit for the inconvenience if baggage is delayed 12 or more hours; if eligible, travelers are awarded the full $150 to use as they wish for simply enduring the delay
• Up to $200 to reimburse the fee paid for a hunting or fishing license if the insured must cancel
• Comprehensive trip cancellation, interruption, delay, and missed connection protection
• 24/7 global travel assistance available via phone or email for travel and medical emergencies.

According to BHTP’s State of Travel Insurance 2019 report, adventure travelers take more trips than regular road trippers (4.87 annually versus 3.45). Whether they are traveling to experience a sport like motor racing, or packing expensive equipment to ski or climb, they also face greater risk. AdrenalineCare is tailored specifically for these adventurous travelers.

Well-known for its revolutionary travel insurance products and services, BHTP also provides travelers with an easy “pic-and-a-click” claims process, flight tracking and expedited payments for travel disruptions via BHTP Burst.

© 2019 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

Lubrizol’s Diamond Dispersions Business Wins Queen’s Award for International Trade

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The Lubrizol Corporation has announced its Sheffield, UK-based Diamond Dispersions business has won the Queen’s Award for International Trade for outstanding short-term growth.

The award was presented for growth in overseas sales over the last three years.

Since 1966, the Queen’s Award for Enterprise recognizes British businesses that excel in four categories, including International Trade, Innovation, Sustainable Development and Promoting Opportunity. It is the highest official UK awards program.

Diamond Dispersions, which manufactures color concentrates used in the manufacture of inkjet inks, mainly for the digital printing of textiles, is no stranger to this accolade having previously won the Queen’s Award for International Trade in 2012. Overseas sales have more than doubled over the past three years, and the proportion of sales exported has increased to over 80% of total sales.

“We couldn’t be prouder to receive recognition for our continued efforts and commitment to grow the company in such a prestigious way”, says Keith Malone, commercial manager, Diamond Dispersions. “The Queen’s Award is an honor that is admired across the globe, not just in the UK – and it deeply matters to every one of us at Diamond Dispersions.”

“Over the last few years, our strategic planning has driven us to work more closely with print machine manufacturers (OEMS), enabling them to develop bespoke ink products,” shares Andrew Grantham, marketing manager, Diamond Dispersions. “The closer relationships we’ve built have been a key driver to our sales growth over the last three years.”

Diamond Dispersions has responded effectively to the rapidly growing digital print market by supporting customers as they seek to deliver customization, shorter print runs, just-in-time manufacturing and a desire for reduced stocks and wastage.

“We’ve also developed specific products for use in the pigmented digital textile printing market, which has huge potential for growth, “adds Grantham. “Pigment-based digital printing of cotton textiles, in particular, is much more environmentally friendly than dye-based printing as it requires less energy and water and eliminates waste-water effluent.”

“Ever since Diamond Dispersions was established in 2007, we have taken every opportunity to further improve and enhance our customer service,” concludes Grantham. “For example, to better serve customers locally and achieve the response times demanded by those customers, last year we made the decision to hold stock in several different countries including China, the US, India and Brazil.”

“The Queen’s Award is a great achievement and our whole team is justifiably very proud of the award,” shares Charles Nelson, general manager, Diamond Dispersions. “Lubrizol is planning further investments in the business to ensure we keep pace with growing demand.”

Diamond Dispersions will celebrate the award during a royal reception for Queen’s Awards’ winners in Summer 2019 and will host its own celebration in Sheffield in Autumn.

© 2019 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 Carloads Continue to Lag 2019 Levels

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BNSF Railway’s carloads for 2019 have continued their downward trend as compared to 2018. The decline is due in part to a major decrease in coal shipments.

Coal shipments as of the week ending April 13, 2019, are down 10.25% over the same period last year, and combined intermodal and carloads numbers are down 5.15% in the aggregate.

Also, showing weaker numbers are grain shipments, which are down 12.85%, and shipments of motor vehicles are down 5.51%.

2018 was a strong year for BNSF, with the combined carloads including intermodal up 4.03% over 2017, however 2019’s numbers have been hurt by weak global demand for coal and severe flooding in the Midwest that has closed some routes and slowed others.

© 2019 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.