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Commentary Nebraska Furniture Mart

Commentary: Berkshire Hathaway Shows How to Do Retailing Right

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Nobody seems to have told Berkshire Hathaway about the “death of retailing,” which is ever present in the headlines.

With Sears having filed for bankruptcy in October, and Toys R Us, Mattress Firm, hhgregg, Bon-Ton Stores, and Gymboree among the bankruptcy filers in 2018, it’s easy to think that no one can succeed at retailing these days.

On the contrary, Berkshire Hathaway’s retailing division, which includes selling home goods, furniture electronics, and appliances through Nebraska Furniture Mart, RC Willey, Star Furniture and Jordan’s Furniture, is showing robust growth.

In the first nine months of 2018, Berkshire had a 3.8% increase in retailing business revenues to $11.404 billion as compared to $10.986 billion in the same period of 2017, with gains at its home furnishings businesses.

Berkshire reported an increase in pre-tax earnings from retailing to $572 million from $513 million.

In its recently released quarterly report, Berkshire’s revenues from its home furnishing business increased 5.4% in the first nine months.

Berkshire credited its rise in retail revenues to “higher volumes in certain geographic markets and the effect of a new store, which opened in 2018.”

Berkshire’s Utah-based RC Willey, opened a second location in Sacramento, California, in January 2018.

Over all, Berkshire Hathaway’s furniture and home good business is ranked 7th on Furniture Today’s Top 100, and had estimated 2017 furniture, bedding and accessory sales of $2.01 billion.

What is the secret to Berkshire’s success in midst of all the retailer struggles? It’s simple. They invest in retailing.

In the spring of 2015, as other retailers were closing stores and slashing investments, Berkshire opened its largest Nebraska Furniture Mart ever at The Colony in Dallas-Fort Worth, Texas.

The store boasts a 1.9 million-square-foot facility featuring a 560,000-square-foot showroom. And the whole Nebraska Furniture Mart chain, which consists of only four stores, generates almost $2 billion in annual sales.

With its newest Nebraska Furniture Mart, Berkshire was out to prove that going into a retail store could be an experience still worth doing, even in the era of Amazon.

Berkshire situated its Dallas-Fort Worth Nebraska Furniture Mart in its own Texas-sized development called Grandscape.

The Berkshire development is a 400+ acres “a city within a city,” featuring more than 3 million square feet of retail, entertainment, dining, residential, office and attractions.

By going bigger and bolder, Berkshire Hathaway is taking the online retail challenge head on, and is showing that there is still customer interest in the in-store experience.

© 2018 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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Berkadia

Berkadia Secures $45 Million in Financing for Industrial Properties in Connecticut

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Berkadia, Berkshire Hathaway’s joint venture with Leucadia National Corporation, has announced the $45 million financing for Powers Industrial Portfolio, an industrial property in Danbury, Connecticut.

Managing Director Yuri Kletsman of the New York office secured the permanent refinancing through Citigroup on behalf of Delaware Commerce Park, LLC. The deal closed on October 26.

The 10-year loan features a 6.40 percent fixed interest rate blended between a senior and mezzanine loan structure. It also features an 80 percent loan-to-value ratio
.
The portfolio is a mix of industrial and warehouse buildings.

About Berkadia

Founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation, Berkadia is a third-party commercial mortgage servicer, as well as an approved lender for Fannie Mae, Freddie Mac, and HUD/FHA.

The company is among the top Freddie Mac and Fannie Mae multifamily lenders.

Berkadia owes its origins to GMAC Commercial Mortgage Corporation, which was acquired in 2009 by Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners. Christened Capmark Financial, the company had $10 billion of originations in 2008 and a servicing portfolio of more than $360 billion before running into bankruptcy in October 2009.

In a deal approved by the bankruptcy court, Capmark sold its mortgage loan and servicing to the newly formed Berkadia in a deal worth $515 million.

The deal brought Berkshire into the heart of the commercial loan serving business, and the company has one of the largest commercial real estate servicing portfolios.

© 2018 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
See's Candies

See’s Candies Turns to Electric Utility Executive as New CEO

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Everyone knows that candy gives you energy. Apparently, it literally works that way at the highest levels of confectioner See’s Candies, as the company has picked an electric utility executive to energize sales as its new CEO.

Berkshire Hathaway’s See’s Candies has announced that CEO Brad Kinstler will be retiring in the Spring of 2019, and has selected Pat Egan, currently Sr. Vice President of NV Energy, another Berkshire Hathaway company, as his successor.

Mr. Egan will begin his involvement with See’s on November 12, 2018, working with Mr. Kinstler to transition into the role of President and CEO.

Mr. Kinstler has been President and CEO of See’s since January 2006, and will retire the end of April 2019, having worked in various roles with Berkshire Hathaway for 32 years.

Mr. Egan becomes only the third CEO of See’s since it was acquired by Berkshire Hathaway in 1972.

© 2018 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
Berkshire Hathaway Energy

NV Energy and Blockchains, LLC Sign Agreement To Develop Blockchain-Powered Collaborative Energy Projects

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The CEOs of Blockchains, LLC and NV Energy have agreed to work on energy projects powered by blockchain technology. Blockchains and NV Energy’s shared vision will pilot concepts that place the customer in control of energy creation, consumption, storage and transactions.

“The goal of this collaboration is to create technology solutions that will produce customer-centric energy platforms powered by public blockchain, all with the intent of integrating approved incubations into Nevada’s energy framework,” said Jeffrey Berns, CEO of Blockchains, LLC. “These types of collaborative efforts, which return the power and control in transactions to the customer, are the very essence of blockchain technology. This partnership is only the beginning of what we have planned for Innovation Park.”

“We are thrilled to have access to Nevada-based experts in this cutting edge technology, and to be able to grow solutions that empower our customers,” said Paul Caudill, CEO of NV Energy. “We will explore a variety of out-of-the-box energy concepts to identify ways to improve the customer experience, including applications that further the use of energy storage, renewable energy and collaborative energy conservation. We are, in addition, excited about the many other undiscovered applications that public blockchain technology has the potential to make possible.”

Projects developed at Innovation Park, the home of Blockchains, LLC in Northern Nevada, could be utilized to serve NV Energy’s 1.3 million customers. Any projects incubated and ready for implementation will first be presented to, and approved by, the Public Utilities Commission of Nevada (PUCN).

© 2018 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
Minority Stock Positions Stock Portfolio

BYD’s Tang is Number One in Hottest Market

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BYD’s hot-selling Tang is ranked number one in sales in the hottest market in the world for electric cars, China.

China’s plug-in electric vehicle (PEV) sales reached a new high in September. Some 104,900 plug-in vehicles were registered that month with BYD’s Tang taking the top spot.

The BYD Tang is a plug-in hybrid Crossover sport utility vehicle (CUV) developed by BYD Auto based on its BYD S6.

BYD’s other EVs had strong sales, with BYD’s Yuan EV in third place, the BYD e5 in sixth place, the BYD Qin PHEV in ninth place, and the BYD Song PHEV in thirteenth place.

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.

© 2018 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 HomeServices

Berkshire Hathaway HomeServices Western Colorado Properties Adding Offices

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Berkshire Hathaway HomeServices Western Colorado Properties has opened an office in Telluride to boost its resort sales and leverage the strength of its brand among a broader range of clients frequenting the region.

Broker/Owner Jeff Keehfuss will lead the office, his third along the Western Slope including Montrose and Durango.

Additionally, Keehfuss said he will open an office in Grand Junction in 2019 followed by several additional locations by 2022.

“We are thrilled to open for business in Telluride,” said Keehfuss, who changed the name of his brokerage from Berkshire Hathaway HomeServices Montrose Real Estate to better reflect its growing regional presence. “Telluride is a wonderful resort destination attracting people from across the United States and all over the world. We believe these people will appreciate our Berkshire Hathaway HomeServices brand as a symbol of skill, expertise and business success.”

Western Colorado Properties’ office is well positioned at 120 Mountain Village Blvd. 120 D, along the walking path between the Peaks Resort & Spa and the Mountain Village Gondola. “There is a ton of foot traffic on this path, which provides breathtaking views of the town and the mountains,” said Keehfuss. “Just about the time people gather in these views they’ll be near our office and, hopefully, ready to own their piece of Telluride.”

Western Colorado Properties is a sales volume leader in the tri-county region of Delta, Montrose and Ouray, with extensive experience in residential, commercial, farm and ranch, investment and foreclosure property. The brokerage is known for progressive, agent-centric leadership focused on helping agents grow their businesses and better service consumers.

Lark Keehfuss, brokerage co-owner, said she is recruiting top sales professionals for Telluride and the other offices.

“Those professionals who want to move their careers to the next level should consider Berkshire Hathaway HomeServices Western Colorado Properties,” she said. “Our brokerage’s culture is positive, supportive and always focused on our agents’ success.”

© 2018 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 HomeServices

Berkshire Hathaway HomeServices PenFed Realty Texas Acquires CEDA Realty

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Berkshire Hathaway HomeServices PenFed Realty Texas today announced the acquisition of CEDA Realty, a 90-agent brokerage serving the Dallas-Ft. Worth Metroplex from Plano. The transaction gives PenFed Realty Texas broader coverage of the region, a skilled agent team and a powerful training division.

CEDA’s Managing Broker and owner Steve Goff will remain with PenFed Realty Texas as vice president of Career Development, overseeing professional advancement for the entire enterprise. Goff, with 46 years of real estate experience, is one of the region’s foremost real estate trainers and a productive agent recruiter.

“We are delighted to welcome Steve Goff and the CEDA Realty team to PenFed Realty Texas,” said Russell Rhodes, president of the brokerage. “Steve is so well respected in our industry and his agents are talented and prepared. They are an ideal fit for our company and will help us grow in the Metroplex.”

Goff is eager to start the next chapter in his storied real estate career. “My team couldn’t be in a better place than with PenFed Realty Texas,” he explained. “As for me, the greatest joy in my professional career is to share the experience, knowledge and skills that I developed over 46 years with younger agents, so they can be their best in a short period of time. I get to train professionals and I couldn’t be happier about it.”

Rhodes is a world-class production leader and founder of The Russell Rhodes Team, which set sales standards for years through relentless client service and abundant referral business. As head of PenFed Realty Texas, Rhodes is an agent-centric leader with a simple goal: “We want to help our agents grow their business by 20% per year,” he said. “To do so you have to have really good training and the right procedures and mindset.”

The combination of Rhodes and his sales managers, with Goff and his training vision, spells more growth for PenFed Realty Texas. Beyond training, the brokerage added a group in its marketing department to oversee new media, including video production and social media outreach. The overall objective is to provide agents with the support they need, which allows them to focus on what they do best: serve home buyers and sellers.

“We are fully invested in the success of our agents,” Rhodes said. “Our management mindset is roll up your sleeves and help the sales team be their best for their clients.”

PenFed Realty Texas is currently home to 430 agents working from eight offices. Rhodes said his goal is to add as many as 100 agents over the next year. “We are proud and excited for the future,” he explained. “We have a growing team that loves the real estate business and is passionate about helping people reach their homeownership dreams. As important, we have the resources and systems in place to help our agents continually develop and achieve.”

Gino Blefari, CEO of Berkshire Hathaway HomeServices, congratulated Rhodes and Goff on the union. “These fine companies are well suited, and their merger brings many benefits for PenFed Realty Texas and real estate consumers in the Dallas-Ft. Worth Metroplex,” he said. “We’re excited to continue supporting the brokerage and its growth for years to come.”

© 2018 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
Warren Buffett

Berkshire Hathaway Powers Ahead with Rising Profits, Stock Buy-Back

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Berkshire Hathaway’s operating profits soared in the third quarter of 2018, as quarterly operating profit was almost double from 2017.

For the 9 months of 2018 the net earnings attributable to Berkshire shareholders reached $29.413 as compared to $12.389 billion for the first 9 months of 2017.

Insurance underwriting income was one of the drivers of the growth, generating $441 million in the third quarter, versus a loss of $1.4 billion in the year-ago period.

The company also posted strong revenues in its railroad, utilities and energy, and its other businesses.

Berkshire’s enormous minority positions in a slew of leading corporations, including Apple, Southwest Airlines, General Motors, Bank of America, American Express, and Wells Fargo, grew by almost $12 billion.

Berkshire also reported that its insurance float had grown to $118 billion, an increase of $2 billion over the end of the second quarter.

The conglomerate also revealed that Warren Buffett had Berkshire repurchase over $928 Million in Berkshire Stock.

The move was the first buy-back since 2012 and confirms Buffett’s position that the shares are undervalued.

© 2018 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
Richline Group

Richline Group Brings its Lab-Grown Diamond to JCPenney

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Berkshire Hathaway’s Richline Group, a wholly-owned subsidiary of Berkshire Hathaway, today announced its new jewelry brand, Grown with Love, is now available inside select JCPenney fine jewelry departments and at JCPenney.com.

Richline Group is touting the product as conflict-free lab-grown diamonds, Grown with Love is aimed at ethically-minded shoppers that still want diamond jewelry or an engagement ring.

“By partnering with JCPenney, a leading retailer with one of the most renowned fine jewelry departments in the industry, we’ll be able to introduce Grown with Love to shoppers across the country,” said Michael Milgrom, Senior Vice President, Product of Richline Group. “By choosing a lab-grown diamond, future bridal and fashion customers now have a new, conscious choice, and can get a larger or higher quality stone for the same price. And with the most popular season for proposals – and shopping – just around the corner, this partnership is destined to shine.”

As the name implies, these diamonds are grown in a lab and are chemically, physically and optically identical to mined diamonds. The stones are, by nature, conflict-free and made with clean technology. Lab-grown diamonds follow the same grading standards as mined diamonds and are evaluated based on cut, color, carat and clarity. Now, customers have a fifth “c” to consider when purchasing a diamond – choice.

Grown with Love features a curated collection of bridal jewelry including solitaire and halo engagement rings, wedding bands and bridal sets as well as a small selection of non-bridal items including diamond earrings and necklaces. All diamonds in the Grown with Love line are certified by the International Gemological Institute, which uses a scientific system to evaluate a diamond’s cut and then issues a certificate documenting the characteristics of the stone. The fine jewelry professionals at JCPenney will receive dedicated diamond training on the integrity, grading and analysis of these precious lab-grown stones. Sale prices for this collection range from $500 to $10,000.

“By bringing Grown with Love into the JCPenney fine jewelry department, we are filling a void in our assortment for lab-grown diamonds. These unique diamonds are growing in popularity and by offering her this option for bridal jewelry, we are appealing to a new customer base,” said Pam Mortensen, senior vice president of merchandising for JCPenney. “Grown with Love fits nicely within our larger Modern Bride concept that offers today’s bridal customer an expansive assortment of engagement jewelry for any budget.”

Shoppers will find Grown with Love displayed in all-new vignettes within the JCPenney fine jewelry department along with new signage and graphics to educate customers about the difference between lab-grown and mined diamonds. Grown with Love will be promoted via JCPenney direct mail, email, social and digital marketing channels.

© 2018 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
BNSF

Lithium-Ion Battery-Electric Locomotives in Development in BNSF/GE partnership

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GE and BNSF Railway Company are hoping to demonstrate a battery-powered locomotive paired with diesel locomotives in a “consist” (railroad jargon for a sequence of connected locomotives) to power a freight train along a stretch of rail in California’s Central Valley between Stockton and Barstow.

If successful, the fuel savings could have a big impact on BNSF and other railroads. And the environmental benefits could also help BNSF advance one of its major capacity-building projects.

BNSF will run the pilot program with help from GE Transportation, which is developing the locomotive. The railroad hopes to have the first locomotive running within two years.

GE notes that adding even one battery-powered locomotive to the train could reduce the consist’s total fuel consumption by up to 15 percent, according to Alan Hamilton, general manager of systems engineering at GE Transportation.

“It’s a big deal,” Hamilton says. “Fuel costs are typically the largest component in a rail operator’s costs.”

The leap to battery power is not as big of one as it may at first seem. Diesel-electric locomotives like the machines GE builds are already essentially power plants on wheels. They use a powerful diesel engine to generate the electricity that drives the electric motors that spin the wheels.

GE believes that a battery-powered locomotive is the perfect complement to its diesel-electric brethren. The battery will hold 2,400 kilowatt-hours of energy, meaning it’s able to maintain full horsepower for roughly 30 minutes on a given charge. Then the operator can decide how to use that power.

For example, the operator could slash emissions from the diesel-powered locomotives by drawing heavily on the battery to start up the train. This would be especially desirable if the train were pulling out of a city rail yard, close to populated areas. Using the battery power also cuts down on noise. The train operator may also choose to “graze” on battery power — or even recharge the battery — when the train is cruising through open landscape, saving hundreds of gallons of diesel.

Each battery locomotive also has a brain, in the form of an onboard supervisory control system. The rail operator can input data about the train’s journey into the system — such as how much weight it’s hauling, the types of locomotives in the consist, and its rout — to allow the computer to make decisions about the best way to use the battery before the train even pulls away. “The trip-optimizing software can look ahead and predict the most efficient way to generate and use that energy,” Hamilton says.

Imagine a battery-enhanced train making a 500-mile trip across sparsely populated terrain — meaning fuel economy is the name of the game. The software will calculate the optimum ratio of battery power to diesel usage for such a journey and decide on the most favorable balance for the hybrid locomotive consist. The software can then pinpoint the exact moments to draw on the battery, thus sparing diesel. GE’s flexible solution will give rail operators several new options for optimizing their network, says Dennis Peters, executive product manager at GE Transportation.

The new locomotive will use a battery cell similar to what you might find under the hood of an electric car. It is a lithium-ion energy storage unit with cells that contain a combination of nickel, manganese and cobalt. In terms of scale and packaging, however, “this train battery is a different animal,” Peters says.

A standard electric-car battery usually holds a few hundred storage cells — each around the size of a mini tablet computer. But the prototype of the new locomotive will have a battery with approximately 20,000 cells, and future versions may have as many as 50,000 cells. The cells also must be able to weather the heavy-going environment of a locomotive, with all its jolts and shocks.

To build the demonstration model, workers will strip out the engine and cooling systems from a diesel locomotive to make way for the battery under the hood. But from the outside, the battery-powered locomotive won’t look much different from its diesel counterparts.

The impact on BNSF could be huge, not only in fuel cost-savings, but if it could use battery-powered locomotives in urban areas, such as the Port of Long Beach, it might be able to overcome the opposition to its long-stalled Southern California International Gateway plan, which has been held up due to environmental concerns tied to diesel emissions.

© 2018 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.