Categories
Kraft Heinz Minority Stock Positions Special Report

Kraft Heinz Updates Classic Brands for Millennials

(BRK.A), (BRK.B)

With Kraft Heinz facing a millennials generation of consumers focusing increasingly on products billed as healthy and organic, the processed food manufacturer is not only looking to launch news products, but also to update its classic brands.

On the new products front, the company recently launched Springboard, a platform dedicated to nurturing, scaling, and accelerating growth of disruptive US brands within the food and beverage space.

According to the company, the Springboard platform is seeking opportunities to develop brands with authentic propositions and inspired founders within one of four pillars that are shaping the future of the food and beverage space: Natural & Organic, Specialty & Craft, Health & Performance and Experiential brands.

“We are committed to support and partner with teams that will impact the future of our industry,” said Sergio Eleuterio, General Manager, Springboard Brands. “We are actively searching for emergent, authentic brands that can expand into new categories, and are looking to build a network of founders to help shape the future of foods and beverages.”

As for Kraft Heinz classic brands, it is increasingly reformulating its products to meet millennials’ shopping priorities.

Kraft Heinz’s CEO Bernardo Hees cites CapriSun, which millennials grew up with, as a brand that they will come back to now that it has an organic line. It advertises that its CapriSun Organic uses organic juice from organic farms.

In 2016, the company’s Kraft Mac & Cheese, which generations of children have eaten the bright orange noodles, successfully removed the artificial food colors, including yellow 5 and yellow 6, and replaced them with paprika, annatto and turmeric. Consumers didn’t notice the difference in the product’s look and feel.

Even the iconic hot dog, that most processed of foods, got reworked, In 2017, the Oscar Mayer brand changed its hot dogs to contain no added nitrates or nitrites, no artificial preservatives in their meat, and no by-products in every single one of their hot dogs. Oscar Mayer trumpets that it was the first national brand to do this across every single one of its hot dogs.

Kraft Heinz’s first-quarter net income rose to $993 million, 81 cents a share, up from $893 million, 73 cents a share, from the same period in 2017.

© 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

After 2016 Slump, BNSF Has the Trains Rolling

(BRK.A), (BRK.B)

Back in 2016, BNSF Railway had a shipping slump that saw it idling over a thousand locomotives,

Now, as shipping numbers continue to climb for the second year, the freight railroad is not only back on track, but the locomotives are back on the track.

At the nadir, BNSF had some 1,200 locomotives in storage. It was a highly visible sign of a lower shipping volumes for coal, petroleum, and metals.

In Gillette, Wyoming alone there were 150 locomotives and rail engines sitting idle.

Now, the 1,200 locomotives in storage has been halved to 600, as combined intermodal and carloads numbers are up a solid 4.87% in the aggregate from the same period in 2017.

Of particular note are higher grain shipments, which as of the week ending April 28, 2018, are up 7.78% over the same period last year.

Back in 2016, BNSF also furloughed roughly ten-percent of its workforce. Now, it is offering bonuses up to $25,000 for new hires.

Just another sign that this is shaping up to be a very good year for BNSF.

© 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
Expansion

Thanks to Berkshire, Business is Booming at One of Its Newest Companies

(BRK.A), (BRK.B)

In the summer of 2017, Berkshire Hathaway made a little publicized acquisition when it acquired Warren, Michigan-based MRO distributor Production Tool Supply, and created a new wholesale division, Berkshire eSupply.

At the time, the company was ranked 34th on Industrial Distribution’s 2017 Big 50 List, but just the new Berkshire name has attracted a lot of new business.

“As soon as the new name was announced it was the best thing that ever happened to us,” John Beaudoin, president of Berkshire eSupply, says.

Such is the power of the Berkshire Hathaway name.

Now with Berkshire’s ability to finance capital expenditures to power growth, the company is in a major expansion phase.

With more than 1,000 suppliers, Berkshire eSupply has more than 1 million industrial/MROP products available online, dispersed from three strategically located distribution centers in Detroit, Los Angeles and Houston.

The company has already announced that 57 acres of currently vacant property in Novi, Michigan will be converted into a 193,230-square-foot warehouse with mezzanines and an 18,380-square-foot office building.

Also coming is a new facility that will open in Houston in four months, and another facility in California is in the planning stage.

The goal is to provide nationwide 1-2 day shipping of over one million SKUs for thousands of independent suppliers that have not had the money to provide the logistics and scope to compete with companies such as Grainger.

Berkshire eSupply gives independent distributors the custom website and logistics that make ordering seamless. The company provides retailers with a one-stop, private label, e-commerce platform.

“They already have the customer relationships, and we level the playing field in their competition with catalog suppliers such as Grainger,” John Beaudoin, president of Berkshire eSupply, says.

Just as importantly, retailers gain the punchout system that enables purchasing agents to buy from their website from within the buyer’s own procurement application or hosted eprocurement system. This opens major new customer opportunities.

With the cost of fulfillment centers being one of Berkshire eSupply’s major capital expenses, Beaudoin notes that there is huge potential for growth now that Berkshire is providing the financing.

“The entire MROP products market is around $360 billion,” Beaudoin notes. “Grainger has only $10 billion of it.”

It’s clear that Beaudoin has his eye on the other $350 billion of that business, and with Berkshire’s financing, he’s out to get it.

© 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
Charlie Munger Minority Stock Positions Stock Portfolio Warren Buffett

Commentary: Buffett Unlikely to Abandon BYD

(BRK.A), (BRK.B)

With Chinese new energy company BYD seeing a major slump in its share price, its important to remember that Warren Buffett’s belief in the company’s founder and CEO Wang Chuanfu makes it more likely that Buffett will buy more shares, or at least maintain Berkshire’s current position than abandon the investment.

BYD’s share price peaked at 83.70HKD in October 2017 and as of May 2 has slumped to 54.00HKD.

Berkshire’s still way ahead, as its cost basis per share was 8.00 HKD. Berkshire took its position in 2008 when it purchased 225 million shares at roughly 8.00KHD.

Whose idea was it to purchase a stake in the company? It wasn’t Buffett’s, but he has since become a big fan.

“Charlie (Munger) called me one day and says, ‘We’ve got to buy BYD. This guy that runs it is better than Thomas Edison,’ Warren Buffett explained while appearing on CNBC’s Squawk Box on Feb 26, 2018. “And I said, ‘That isn’t good enough.’ And then he called a little later and said, ‘He’s a combination of Edison and Bill Gates.’ And I said, ‘Well, you’re warming up but it still isn’t good enough.’ Anyway, Charlie wanted to do it. Now, it’s worked out so well that I’m actually starting to remember that it was my idea. As it’s coming back to me. I think I persuaded Charlie. But unfortunately I’m on the record that it’s his deal. But BYD, Charlie’s in love with the company, and it’s done very well. And the fellow that runs it, you know who’s autos and batteries, but he’s got big, big ideas and he’s very good at executing. So, but I leave it to Charlie.”

Stock prices go up and down, but Buffett has always been the most patient of investors.

With BYD having sold 13,000 of its plug-in electric cars in March alone, and aiming to sell between 15,000 and 20,000 cars per month when its new model year debuts, it continues to be the leader in EV cars.

The sales marked an increase of 116% year-over-year and were 31% of the total BYD car sales for the month.

BYD was number one worldwide in plug-in electric vehicle sales in 2017, its third consecutive year.

Additionally, its dominance in the Pure electric bus market continues to grow. The company sold over 14,000 pure electric buses globally in 2017.

It’s unlikely that Buffett’s or Munger’s respect for the company will change due to short-term price fluctuations and investors should be reminded that BYD’s stock price had a similar plunge in 2014 that saw no selling by Berkshire.

I’m not calling this one of Buffett’s forever stocks, but it would seem to fit one of his classic buy-and-hold investments, and it is unlikely to leave Berkshire’s portfolio anytime soon.

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.

Categories
Berkshire Hathaway HomeServices

Berkshire Hathaway HomeServices Expands in California’s Wine Country

(BRK.A), (BRK.B)

Berkshire Hathaway HomeServices Drysdale Properties, one of the nation’s fastest-growing, 100% woman-owned real estate brokerages, has opened three new Sonoma County offices focused on the luxury market.

The offices, located in Santa Rosa, Sebastopol and Windsor, extend Drysdale Properties’ northern reach and provide further exposure to the upscale real estate market of California’s Wine Country.

“We are thrilled to add these terrific offices and agents to the Drysdale Properties family,” said Gretchen Pearson, brokerage president and CEO. “Each office is well established in its market and staffed by skilled and experienced real estate professionals. The acquisition will help us grow our luxury business as we’re now positioned in the hotbed of popular Sonoma County.”

The bustling Santa Rosa office includes 80 agents, while Sebastopol opens the fertile, west county market to the brokerage. Windsor serves a community drawing thousands of people each year with shows, festivals and a charming, small-town lifestyle.

Drysdale Properties’ move is the second this spring to advance its luxury real estate operations. In April, the brokerage named industry veteran Paula Gold-Nocella, a highly regarded production leader and luxury-property authority in Northern California, as broker of Drysdale Properties and Regional Partner for its San Francisco and North Bay operations. Immediately following Gold-Nocella’s appointment, she relaunched the San Francisco office and will be opening a second San Francisco office in Pacific Heights this summer.

Gold-Nocella will oversee operations in the North Bay. “Our Berkshire Hathaway HomeServices brand is a natural fit for Santa Rosa, Sebastopol and Windsor and their respective lifestyles,” said Gold-Nocella, a board director of the San Francisco Association of REALTORS® for the past seven years. “The region is affluent and highly desirable to a global audience, and we look forward serving its real estate needs for years to come.”

Pearson added that many of the clients her brokerage serves in the Bay Area want to buy second and vacation homes in Sonoma County. “This is a natural step for us,” she said. “The possibilities are endless.”

Gino Blefari, president and CEO of Berkshire Hathaway HomeServices, applauded Drysdale Properties’ expansion. “This is a terrific achievement for Gretchen and her team and their strategy to develop their luxury business,” he said. “Drysdale Properties is well positioned for growth in Sonoma County, and throughout its Northern California and Nevada markets. We’re proud to support them every step of the way.”

Drysdale Properties now counts 46 offices and more than 1,200 agents throughout Northern California and Nevada. The brokerage, which is completely woman-owned, ranks No. 13 in the Berkshire Hathaway HomeServices network for gross commission income.

© 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

Berkshire Hathaway’s Utilities Saved $14.68 Million in Q1 2018 Thanks to EIM

(BRK.A), (BRK.B)

Two of Berkshire Hathaway’s utilities, PacifiCorp and NV Energy, saved a combined $14.68 million so far this year through the western Energy Imbalance Market (EIM).

The California Independent System Operator (ISO) has released its western Energy Imbalance Market (EIM) 2018 first-quarter benefits report that shows total savings have reached $330.52 million since the market’s launch in November 2014.

The benefits for January, February and March 2018 were $42.08 million for the six participating members, and the gross benefits for Berkshire’s NV Energy was $4.17 million and PacifiCorp was $10.51 million.

The western EIM platform automatically finds and delivers low-cost energy to serve consumers in Arizona, California, Idaho, Nevada, Oregon, Utah, Washington and Wyoming. Optimizing diverse resources from a large geographic area enables more effective use of carbon-free generation besides reducing costs.

In 2014, Berkshire Hathaway Energy’s PacifiCorp agreed to become the first participant in the Energy Imbalance Market, and NV Energy joined in December 2015.

The market will continue to grow in the coming years, with the Balancing Authority of Northern California/Sacramento Municipal Utility District set to begin participating in April 2019. Salt River Project of Phoenix, Seattle City Light and the Los Angeles Department of Water and Power are slated to enter the market in April 2020.

© 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

BNSF Offering Large Hiring Bonuses

(BRK.A), (BRK.B)

These are good times to be working on the railroad.

Not so far back in 2016, BNSF Railway was battling lower coal shipping volumes by mothballing hundreds of locomotives and laying off workers. That year it furloughed roughly ten-percent of its workforce.

Lines of idled BNSF locomotives that were in storage on tracks in rail yards near Oklahoma City and Wichita, Kansas, were a visual reminder that 2016 car loads slumped down dramatically from 2015 levels.

Now, with carload volumes surging 10.6 percent year-over-year, BNSF is hiring and finds itself competing for workers in a tight labor market. As a result, BNSF is offering hiring bonuses of as much as $25,000.

Union Pacific is offering similar bonuses.

The railroads are hiring during a time of very low unemployment. Nationally, the rate is 4.1 percent, but in Nebraska, where BNSF is offering $20,000 for hiring of diesel mechanics and for railcar repair, the unemployment rate is only 2.8 percent.

The incentives come with a 3 year hold-down and are forfeited if the employee leaves the location or job for any reason.

Among the locations where BNSF is offering $25,000 for certain types of jobs include Chicago, Denver, Kansas City, Topeka, Denver, and Chicago.

“We are constantly evaluating the market and will use this approach when it makes sense to recruit talented individuals for hard to fill positions or locations,” BNSF spokeswoman Amy Casas was quoted in the Wall Street Journal.

© 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

Two Berkshire Companies in Consortium of Jewelry Industry Leaders’ Global Blockchain Initiative

(BRK.A), (BRK.B)

Two Berkshire Hathaway companies, Helzberg Diamonds and Richline Group, Inc., have joined a consortium of gold and diamond industry leaders for the first cross-industry initiative to use blockchain to trace the provenance of finished pieces of jewelry across the supply chain for increased transparency.

Helzberg Diamonds (U.S. jewelry retailer), LeachGarner (precious metals supplier), The Richline Group (global jewelry manufacturer), Asahi Refining (precious metals refiner), and UL (independent, third party verification) are launching the TrustChainTM Initiative, powered by the IBM Blockchain Platform, delivered via the IBM Cloud.

“This initiative is important for our industry as we seek to raise the collective responsibility and provenance practices to new heights. TrustChain is the first blockchain of its kind within our industry, designed as a solution that marries IBM’s leading blockchain technology with responsible sourcing, verification and governance by third party organizations, led by UL as the administrator,” said Mark Hanna, Richline Group’s Chief Marketing Officer.

TrustChain is initially tracking six styles of diamond and gold engagement rings on the blockchain network. As the program continues to develop, TrustChain jewelry is expected to be accessible to consumers in participating retail stores by the end of 2018.

“Consumers care deeply about the quality and source of the jewelry they purchase,” said Bridget van Kralingen, IBM Senior Vice President, Global Industries, Platforms and Blockchain. “This is evidenced by the fact that 66 percent of consumers globally are willing to spend more to support sustainable brands. TrustChain is an example of how blockchain is transforming industries through transparency and viable new business models that specifically benefit the consumer.”

The TrustChain Initiative tracks and authenticates diamonds and precious metals through every stage of the supply chain as it becomes a piece of finished jewelry. It provides digital verification, physical product and process verification, and third-party oversight.

The collaboration’s goal is to instill trust in the origin and ethical sourcing of jewelry by bringing together a community of responsible and ethical organizations across the complex and multi-tiered jewelry supply chain.

Built by IBM Services on open source technology and based on the IBM Blockchain Platform and the Hyperledger Project, TrustChain uses distributed ledger technology that establishes a shared, immutable record of transactions that take place within a network and then enables permissioned parties access to trusted data in real time.

By applying the technology to digitize processes, a new form of command and consent is introduced into the flow of information, empowering those in the blockchain network to collaborate and establish a single shared view of information without compromising details, privacy or confidentiality.

For consumers, TrustChain establishes a trusted product with documented provenance and brings together quality assurance, social and environmental responsibility, and authenticity spanning the entire jewelry ecosystem – from miners, manufacturers, wholesale suppliers and retailers – on a single digital platform.

© 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
Kraft Heinz Minority Stock Positions Stock Portfolio

Kraft Heinz Partners with the Food Network for Product Line

(BRK.A), (BRK.B)

Kraft Heinz has launched Food Network Kitchen Inspirations, a new line of globally inspired Salad Dressings, Cooking Sauces and Meal Kits.

Food Network Kitchen Inspirations is billed as the first-ever grocery product line from Food Network that allows fans to bring home the flavors of the Food Network.

Food Network Kitchen Inspirations gives people the tools they need to make dishes they’re proud of. Every product in the new line either inspires people to try global flavors at home with meal kits like Chicken Tikka Masala, or takes classics up a notch with an inspired take on Creamy Parmesan Caesar Dressing. Each category incorporates authentic flavors and is made with high-quality ingredients, free from artificial flavors, colors or dyes.

“At Kraft Heinz, we are known for our iconic brands that have been staples at dinner tables for decades. This opportunity is especially exciting for us because the new Food Network Kitchen Inspirations products make it easy for people to expand beyond their culinary comfort zones and try new flavors,” said Liz Rubin, senior associate brand manager for Meals at Kraft Heinz. “We are thrilled to partner with Food Network to help consumers spice up their meals and inspire them to get creative in their own kitchens.”

“Food Network has always been a source of culinary inspiration and education, but until now has never offered food products people can bring into their homes,” said Ron Feinbaum, senior vice president and general manager of home promotions and consumer products for Discovery, Inc., parent company of Food Network. “With busy schedules, we know that weeknights can be the hardest time to try new recipes, but with Food Network Kitchen Inspirations Salad Dressings, Cooking Sauces and Meal Kits, people can now make convenient meals without sacrificing flavor.”

“The inspiration for this new product line grew out of a successful marketing partnership we’ve had for many years with The Kraft Heinz Company,” added Karen Grinthal, senior vice president of national ad sales for Food Network. “Kraft Heinz is a key partner with Food Network, and we couldn’t be more pleased with this exciting evolution.”

© 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 Special Report

Louisiana Goes for BYD’s Pure Electric Buses

(BRK.A), (BRK.B)

BYD, the largest battery-electric bus manufacturer in North America and the largest electric vehicle company in the world, today announced a new order that will see three American-made BYD K9S electric buses deployed in Baton Rouge, Louisiana, under the authority of the Capital Area Transit System (CATS) later this year. The purchase of these new buses reflects BYD’s continued dominance of the North American battery-electric bus market as well as the continuing growth of the sector across the continent.

“In every corner of the continent, we are witnessing rapid growth in the electrification of bus fleets,” stated Macy Neshati, BYD Senior Vice President. “Whether you are looking at the hot and humid climates of the Deep South, the wet weather of the Northwest or the frigid climates of the North, BYD buses are workhorses that can handle any condition.”

With a range of approximately 150 miles on a single charge and a capacity of up to 32 passengers, depending on configuration, the K9S is ideally suited for the needs of Baton Rouge. BYD buses are projected to cost roughly $1.00 less per mile to operate than the typical diesel-powered bus. The new buses produce zero emissions and make oil changes a thing of the past. The proprietary BYD Iron-Phosphate battery is nontoxic, 100% recyclable, fire-safe and incredibly long-cycled. In fact, BYD is the first and only electric bus manufacturer to offer a full 12-year warranty on batteries.

We are excited to incorporate electric buses into our planned Bus Rapid Transit projects in Baton Rouge,” said Bill Deville, CATS CEO. “These buses will allow us to see how we can use electric buses to reduce the impact of our fleet on our environment and also control costs.”

CATS provides bus service to residents of and visitors to Baton Rouge, Louisiana. They operate 29 bus lines and provides more than 2 million rides each year. To CATS leaders, the new buses constitute an important opportunity to innovate.

“Electric buses are a big step forward for CATS. They represent a chance to pilot new technology in Baton Rouge, and we are very excited about that,” said Jim Brandt, President of the CATS Board of Commissioners.

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.