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Dairy Queen

Funnel Cakes to Be Dairy Queen’s New Summer Treat

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After extensive product testing, Dairy Queen has decided to roll out a funnel cake dessert at its U.S. locations. A funnel cake is a fried batter staple of carnivals and fairs that is especially popular throughout the Midwest. Usually topped with powdered sugar, Dairy Queen sees it as the perfect base for its soft-serve ice cream.

Dairy Queen has test marketed its funnel cake desserts as part of its DQ Bakes!® Institute, and even flew in food bloggers to its Minneapolis headquarters to get their reactions.

“We do a lot of consumer research and test markets,” notes Dairy Queen’s president and CEO John Gainor.

The 76-year-old company has been aggressively adding to its menu, and in 2015 the company introduced its DQ Bakes! menu with nine products across three categories: Hot Desserts à la Mode, Artisan-style Sandwiches and Snack Melts. DQ locations across the U.S (excluding Texas) installed ovens to make the new menu items.

Gainor also points out that the funnel cakes fit right in with the “fan food” customer experience that Dairy Queen is known for. It’s a loyalty that has brought the company 10,472,082 likes on Facebook.

“A lot of our consumer research focuses on the emotional connection that you take out of the store,” Gainor says.

The new Funnel Cake a la Mode is planned as a year-round, permanent addition to the menu.

For more information read a Mazor’sEdge special report on Dairy Queen.

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

Commentary: Will BYD Be Berkshire’s Alibaba?

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No article on Yahoo these days fails to mention the company’s 15% stake in Alibaba. It’s a stock position that has grown so valuable that it’s the tail that literally wags the dog on the valuation of the high-tech company.

Is there an Alibaba in the making for Berkshire Hathaway with Chinese auto and battery maker BYD Company Ltd.?

By that I mean will the value of Berkshire’s share of BYD eclipse the rest of the company?

Well, no, because unlike Yahoo, Berkshire owns assets including insurance companies, railroads, and energy companies that have enormous value.

But, yes, if you are looking for a minority stock position that over time could rival or surpass Berkshire’s huge minority shareholder stakes in Coca-Cola, IBM, or American Express.

How We Got Here

In 2008, at the urging of Berkshire’s Vice-Chairman Charlie Munger, Warren Buffett bet on BYD’s potential, purchasing 225 million shares for $230 million, and today Berkshire owns roughly 9.1% of the company.

It’s a bet that looks better and better every year.

In 2015, BYD became the number one seller of electric cars in the world. It was a dramatic rise for a company that only ranked seventh in 2014.

That’s not all, in April 2016, BYD achieved another major milestone, the production of its 10,000th pure electric bus. The company is thoroughly dominating the rapidly growing market for emissions free buses of all sizes.

An Investment That Eclipses All Others

With a market capitalization of roughly $19.5 billion, that makes Berkshire’s original investment of $230 million worth roughly $1.77 billion.

It’s a phenomenal return in just five years, and BYD’s best days are clearly ahead of it.

Unlike Tesla, which is burning through money, and is in a race to reach ambitious sales goals before it runs out of money, BYD is already profitable.

What’s more, its profits are growing dramatically, despite China’s slowing economy.

BYD is predicting that its first-quarter profit will jump more than 50 percent from the first-quarter 2015. We’re talking profit not just revenue.

Berkshire’s Alibaba-Like Asset

Berkshire’s got some amazing assets, but most of them won’t grow dramatically in the future. GEICO is the second largest auto insurer in the U.S., but its growth at this point will be incremental not logarithmic. Some even question the future of auto insurance with the coming era of self-driving cars. The same goes for BNSF Railway, which as a Class 1 railroad is in a highly regulated industry with only modest growth potential unless anti-trust regulators approve another round of consolidations.

Even the recently completed $37.2 billion acquisition of Precision Castparts, which gives Berkshire an aerospace company poised to take advantage of the growing demand for passenger jets in India and China, has the growth potential of BYD. Precision Castparts will grow based on the estimated need for new aircraft with a total value of $5.6 trillion over the next two decades, but it won’t grow ten-fold.

Unlike these companies, BYD is operating in lightly regulated market sectors. It dominates the pure electric bus market (a market that Tesla isn’t even in), and while it has already sold its 10,000th electric bus, that is still just a drop in the bucket for a total bus market that is expected to reach eight million units by 2018.

In 2018, only a fraction of those buses will be electric, but in another decade or two they all may be, and for good reasons.

Why They Will All Be Electric Buses

Why will they be electric buses? Because they will have to be. In order for cities to meet ambitious carbon emission reduction goals, existing diesel and even hybrid buses will have to be phased out. The pollution numbers tell the tale. In countries like China and India, buses make up a huge percentage of their air pollution.

In China alone, diesel buses make up just 10% of the vehicles on the road but contribute over 30% of city air pollution and GHG emissions.

Visionary Leadership That’s Making BYD Number One

As for leadership, Tesla’s Elon Musk is clearly already one of the most fascinating corporate visionaries of the 21st century, but don’t forget that Charlie Munger hailed BYD’s CEO Wang Chuanfu as “a combination of Henry Ford, Thomas Edison and Bill Gates.”

He’s already one of China’s richest men.

While Elon Musk has lots of amazing ideas, including hyperloops, and trips to Mars, many of them don’t have a clear path to profitability. Wang Chuanfu has a goal of being number one, and he’s already there.

BYD’s number one in globally in electric car sales, number one in electric bus sales, and they are the world’s largest manufacturer of rechargeable batteries.

BYD is electrifying forklifts, trucks, and a host of other fossil fuel burning vehicles and devices.

They are also building and home scale eclectic battery storage that’s already on the market in Europe and Africa. Tesla gets a lot of attention for their Powerwall, but BYD is in the same market with their B-Box technology.

Berkshire’s $230 million bet on BYD may prove to be its best bet of all-time, as BYD grows into a a global leader that is mentioned in the same breath as Volkswagen and Toyota.

And, since unlike those auto companies it is also involved in IT, photovoltaics, and commercial and residential battery storage, it may just end up being the biggest one of all, which would be very good for Berkshire Hathaway.

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

© 2016 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

Idled Locomotives in Fargo Highlight BNSF’s Continued Shipping Woes

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The 45 locomotives now sitting idle in a Fargo, North Dakota trainyard highlight the continued slump in BNSF Railway shipping volumes.

BNSF also has 150 locomotives and rail engines sitting idle near Gillette, Wyoming, and dozens more in temporary storage in Oklahoma City.

The locomotives, which are lined up in an almost endless train, are just one physical manifestation of a dramatic drop in demand for coal, petroleum, and metals.

For the year to date, total carloads are down a precipitous 18.49%.

Coal shipments, which last year at this time had reached 826,353 carloads, are only at 520,742 carloads through May 9, 2016. The change represents a 36.98% decrease.

BNSF’s carload reports show that the drop in carloads was not just due to coal, but cut across a number of sectors.

Shipments of metal ores are down 36.76%. And with global oil prices still low, shipments of petroleum from the Bakken Formation are down a dramatic 26.89%.

Profits for the first quarter of 2016 were down 25%.

© 2016 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

BYD Achieves 10,000 Pure Electric Buses Milestone

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While Tesla continues to target the mainstream passenger vehicle market as its path to success, Chinese vehicle and battery manufacturer BYD Company Ltd. is making dramatic progress not only in the passenger vehicle market, but also in the electric bus market. It’s a huge market that the company has practically to itself.

BYD’s recently marked the production of its 10,000th pure-electric bus. The milestone was six years in the making.

BYD’s Changsha electric bus factory gives the company the manufacturing capability to meet the needs of China’s growing electric mass transit needs. Air pollution and carbon emissions are the key drivers of the move to pure electric buses. In China, diesel buses make up just 10% of the vehicles on the road but contribute over 30% of city air pollution and GHG emissions.

The market in China alone is huge, and BYD in January 2016 delivered the first of 300 of its BYD K7 buses to the Chinese city of Shanwei, in Guangdong Province. The city plans to have 3,010 pure electric buses in service by 2019.

BYD’s pure electric buses and taxis are currently operating in over 200 cities in 48 countries worldwide, including the U.S., Mexico, Colombia, Brazil, the UK, Germany, Austria, Denmark, Holland, Belgium, Japan, Thailand, and China.

BYD and Berkshire Hathaway

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

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

© 2016 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
Marmon Group

Marmon Water Introduces System To Filter Lead From School Drinking Fountains

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With the Flint water crisis making lead in drinking water front page news, schools across the country are testing their water. They are also looking for measures that can lower drinking water lead contamination for their students.

Berkshire Hathaway’s Marmon Water, Inc. has debuted its Safe Fountain System to remove lead and other contaminants from drinking fountains in schools and public/industrial buildings.

The new product line from EcoWater Systems ensures clean, safe, and good tasting water, even in the case of boil water alerts.

Lead and other contaminants in drinking water is an issue nationwide. While much has been said about lead coming from municipal water systems due to old lead pipes in the streets, problems can also exist in homes and buildings built before the early 1990s that used high-content lead in copper piping and lead solder and, to an even greater extent, in pre-1960s homes and buildings where lead pipes were routinely used. Even if a municipality addresses lead problems related to old pipes in the streets, issues may still be present in the home.

Concerns are based on lead’s significant effect on the brain and central nervous system. High lead levels have the greatest impact on fetuses, infants, and children under six years old, potentially causing learning disabilities, hyperactivity, and other medical conditions. In addition, high levels of lead in adults may contribute to medical problems including high blood pressure and diabetes.

According to the company, EcoWater’s new Safe Fountain System uses National Science Foundation-certified lead, bacteria, virus, cyst, and chemical reduction cartridges to ensure the quality of water just before it is consumed from the fountain. Systems come equipped with a range of safety features including real-time Wi-Fi monitoring, automatic shutoff, tamper-proof stainless steel housings, and braided water line connectors, giving users peace of mind. EcoWater’s nationwide network of water treatment professionals monitor usage and perform routine maintenance and cartridge replacement as necessary.

At the 2016 Berkshire Hathaway annual meeting, EcoWater demonstrated its water fountain filtration system.

The company is ready to install the Safe Fountain System this summer in order to have them in place at schools before kids return in the fall.

EcoWater also makes filtration systems that can be installed in school cafeterias, and it has a filtration system that goes in five and ten gallon coolers used by sports teams. The cooler filters are made by EcoWater and sold under the Brita brand through a licensing agreement.

EcoWater also offers NSF-certified microbiological drinking water purification systems as well as a complete line of similarly certified reverse osmosis drinking water systems and a host of other filtration systems for home and/or business applications that also reduce lead and other contaminants from the water supply.

© 2016 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

Berkshire’s Giant Australian Natural Gas Field Still Years Away From Commercialization

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In mid-November 2015, Berkshire Hathaway Energy’s Australian subsidiary, CalEnergy Resources, drilled a test well in Western Australia for what could be what the company is calling modestly a “significant gas field.”

How Significant?

Four trillion cubic feet of gas-in-place significant.

Exploration permit EP 408 is located approximately 280 kilometers south of Perth, and covers both the Whicher Range and Wonnerup gas fields.

The gas fields were first discovered in 1968 and 1971, respectively, and are located in ancient sandstone reservoirs nearly four kilometers underground.

The fields contain an estimated four trillion cubic feet gas-in-place, and Berkshire’s share currently stands at approximately 84%. Other partners include Which Range Energy.

Peter Youngs, the Managing Director of CalEnergy Resources Group, recently discussed with MazorsEdge the progress on the development of the gas field, noting that “the field represents a large in place gas resource, its characteristics are challenging and there is much work still remaining to move this resource to a commercially developable status.”

As for the test well, Youngs said “we are encouraged by the flow rates, as seen during the test, but that the critical commercial assessment (of the flow rates) is subject to a period of substantial subsurface data integration work (which is ongoing).

“We are in the process of recovering down hole pressure gauges from an offset well, whose data will be an integral part of that subsurface data integration. We expect this work to continue over the coming months.”

As to when the gas field could start to produce meaningful amounts of natural gas, it still looks to be over a year away.

“We are working on the potential next steps in field commercialization.” Young says, “but it is unlikely that we will return to operational activity prior to end 2017 at the earliest.”

To read more about this natural gas field, read the MazorsEdge Special Report: Is Berkshire Hathaway About to Strike it Rich in Natural Gas?

© 2016 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
Clayton Homes

Clayton Home Acquires Site-Built Home Builder in Tennessee

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Berkshire Hathaway’s manufactured home builder, Clayton Homes, has done a bolt-on acquisition.

Clayton Homes, the number one builder of manufactured homes, has acquired Goodall Homes, a builder of new single-family homes, townhomes and condominiums since 1983.

The Gallatin, Tennessee-based company is headed by Bob Goodall Jr., a graduate of Lambuth University, and a licensed real estate broker, residential contractor and commercial contractor since 1983.

The move continues to expand the Clayton Homes presence in the site-built home business. The company acquired Atlanta-area builder Chafin Communities in the fall 0f 2015.

According to the company, Goodall Homes has built thousands of new Single Family Homes, Townhomes, Courtyard Cottages, Condominiums, and Villas in the Nashville area. They have developed many residential neighborhoods in many Middle Tennessee locations.

The acquisition of Goodall Homes includes approximately 3,600 lots and 180 homes under construction in a five-county area in Middle Tennessee.

Goodall Homes closed 436 homes in 2015.

© 2016 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

Categories
Dairy Queen

Louisiana Among Key Target Markets for Dairy Queen

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Add Louisiana to the target markets for Dairy Queen’s U.S. expansion. The “fan food” and frozen treats franchiser is planning to open as many as 80 new Louisiana locations over the next ten years, including five in Baton Rouge.

The aggressive plans will nearly triple the number of Dairy Queens in The Pelican State from the current 36 stores.

All the stores will be the popular stand-alone “Grill and Chill” design, which Dairy Queen first unveiled in 2002, and now has over 1,000 across the U.S.

A Dozen Target Markets Nationwide

Recently Dairy Queen announced that it would be opening hundreds of new locations in Massachusetts and South Carolina, as well as several hundred in Northern California.

“We have about a dozen targeted markets throughout the United States. Louisiana is one of the primary ones because of the demand for the combination of the food menu and the treat menu items,” said Jim Kerr, International Dairy Queen Inc.’s VP of Franchise Development.

Louisiana’s existing stores are some of the chain’s most profitable, and Kerr notes that the South Sherwood Forest Boulevard “Grill and Chill” has some of the highest numbers of any Dairy Queen in the nation.

For more information read a Mazor’sEdge special report on Dairy Queen.

© 2016 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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Richline Group

Berkshire’s Richline Group Acquires Gemvara

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The Richline Group, Berkshire Hathaway’s marketer and distributor of jewelry to thousands of jewelry outlets across all key worldwide distribution channels, has acquired Gemvera. The Boston-based company is a leader in the area of custom-made, fine jewelry shopping online.

Founded in 2006 by two Babson College students, Gemvara had struggled as recently as 2014, but has finally become profitable in just the last year. Key to the turnaround was the introduction of a lower-priced line called Gemma Gray, and a gemstone resetting business called Sequel.

The company has been acquired to bring Richline Gemvera’s ecommerce and in-store digital technology that are needed for Richline’s brands.

“It’s back to the future,” said Gemvera CEO Matt Nichols in BostInno. Nichols came to Gemvara in 2011 from Highland Capital.

Gemvara’s revenues are growing, and currently are under $20 million a year.

© 2016 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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Benjamin Moore

Benjamin Moore Ranked Number 1 in Customer Satisfaction By J.D. Power

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Off to a terrific revenue jump in 2016, Berkshire Hathaway’s paint, color and coatings brand Benjamin Moore has something additional to crow about, as the company has been ranked highest in customer satisfaction with both interior paints and exterior stains by J.D. Power.

According to the 2016 Paint Satisfaction Study, Benjamin Moore achieved the highest numerical scores over all other brands among interior paints (836) and exterior stains (814) on a 1,000-point scale.

“Benjamin Moore is proud to be recognized as the highest-ranking in customer satisfaction for our paints and stains,” said Mike Searles, President and CEO of Benjamin Moore. “We are committed to developing the most innovative, best-performing coatings that meet the needs of customers, contractors and designers, and this honor not only indicates the superiority of our products in the marketplace, but also demonstrates that only Benjamin Moore can make the impossible possible.”

J.D. Power measures customer satisfaction in the interior and exterior paint and stain market across six factors: application, design guides, durability, price, product offerings and warranty/guarantee. Benjamin Moore scored highest in the application, durability and product offerings factors within the interior paint brand segment of the study. Additionally, the brand achieved the highest score in all six study factors within the exterior stain brand segment.

The study is based on 16,128 responses measuring experiences and perceptions of customers who purchased and applied interior paint and exterior stain in the previous 12 months. Customers were surveyed from January through February 2016.

Benjamin Moore’s Strong Growth

2015 was a good year for Benjamin Moore, with the company having its best results in a decade.

The company is off to a strong start for 2016, with its best first quarter in five years.

The key drivers of the growth is a commitment to new distribution outlets.

Benjamin Moore added 265 new outlets in 2015, with a net gain after store closing and changes in brands of 79 locations.

The growth is a combination of operating conversions as existing paint dealers switch to the Benjamin Moore brand, and dealers branching out and opening new outlets.

The company emphasizes that its network of independent dealers is at the heart of customer satisfaction, as people receive a high level of service.

At the 2016 Berkshire Hathaway annual meeting, Dan Calkins, Benjamin Moore’s Executive Vice-President of Sales, noted that Benjamin Moore dealers give excellent customer service “because their livelihoods depend on it.”

Benjamin Moore has made a conscious decision to not sell its products at big box stores, such as Home Depot and Lowe’s.

The company is constantly innovating its product line, and will have a new product launch in November.

© 2016 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.