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Minority Stock Positions Stock Portfolio

First North American Public Transit System to Go Fully Electric Uses BYD Buses

(BRK.A), (BRK.B)

In the high desert just 69 miles from Los Angeles, the Antelope Valley Transit Authority has become the first public transportation system in North America to go fully electric.

Some 57 of AVTA’s 87 battery electric coaches and buses were built by BYD at its Lancaster Coach & Bus Manufacturing facility. And many BYD’s employees and their families are served by the agency in the Antelope Valley.

In order to achieve its fully electric fleet, R. Rex Parris, the visionary mayor of Lancaster, initially flew to China in 2010 to recruit BYD, and the company then established its first assembly plant in North America in the city.

Formed in 1992 by a Joint Powers Agreement between the cities of Lancaster, Palmdale and Los Angeles County, the AVTA serves that Lancaster-Palmdale area. In 2014, AVTA agreed to purchase up to 85 new all-electric zero emission buses from BYD, officially becoming the first transit agency in the nation to commit to a 100% electric fleet.

“This is an important and wonderful accomplishment,” said Stella Li, President BYD Americas. “We’re proud to have worked closely with AVTA to make this happen and know it’s the beginning of great things for all Californians.”

Portions of the fleet were purchased with the help of state funding, including $28.5 million from the Transit and Intercity Rail Capital Program (TIRCP) administered by Caltrans and the California State Transportation Agency.

Every American-built, zero-emission BYD bus eliminates approximately 1,690 tons of CO2 over its 12-year lifespan, according to the U.S. Transportation Department. This is equivalent to taking 27 cars off the road. Each bus also eliminates 10 tons of nitrogen oxides and 350 pounds of diesel particulate matter, improving air quality in the communities that they serve.

BYD is America’s first battery-electric bus manufacturer that has both a unionized workforce and a Community Benefits Agreement, which sets goals for hiring veterans, single parents, second chance citizens, and others facing hurdles in obtaining manufacturing employment.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares for $232 million. It’s an investment that has paid off handsomely. Berkshire’s original investment of $232 million had grown in value to $7.69 billion as of December 31, 2021.

© 2022 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 a 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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Appointments Berkshire Hathaway Specialty Insurance

Berkshire Hathaway Specialty Insurance Promotes Two to Key Leadership Roles

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Berkshire Hathaway Specialty Insurance has promoted Sanjay Godhwani to President, North America Region, and David Bresnahan has been promoted to Global Chief Operating Officer.

“Sanjay and Dave have been pivotal in the building of BHSI since our launch in 2013, helping to build our product lines, our talented team and our positive culture,” said Peter Eastwood, President and CEO, BHSI. “In their new roles, they will have a continued positive impact on our team and our ability to bring certainty and service excellence to our customers and distribution partners around the globe.”

Sanjay will be responsible for all North America Region underwriting and underwriting support groups, customer & broker engagement, and BHSI’s Global Catastrophe Engineering & Analytics group. Sanjay has more than 25 years of industry experience and is a fellow of the Casualty Actuarial Society. He continues to be based in Boston.

Dave has more than three decades of insurance industry experience. In his new role he will oversee real estate and administration, finance, audit, information technology and operations throughout BHSI’s global platform. He continues to be based in Boston.

© 2022 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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Acquisitions

Berkshire Hathaway Offers $11.6 Billion for Alleghany Corporation

(BRK.A), (BRK.B)

In its first major acquisition of 2022, Berkshire Hathaway has agreed to pay $11.6 Billion for insurance conglomerate Alleghany Corporation.

Berkshire and Alleghany jointly announced they have entered into a definitive agreement under which Berkshire Hathaway will acquire all outstanding Alleghany shares for $848.02 per share in cash.

The transaction, which was unanimously approved by both Boards of Directors, represents a total equity value of approximately $11.6 billion. The acquisition price represents a multiple of 1.26 times Alleghany’s book value at December 31, 2021, a 29% premium to Alleghany’s average stock price over the last 30 days and a 16% premium to Alleghany’s 52-week high closing price.

Founded in 1929 by Oris and Mantis Van Sweringen as five railroad systems, the company eventually evolved into a holding company that owns and supports certain operating subsidiaries and investments, anchored by a core position in property and casualty reinsurance and insurance. The company’s primary sources of revenues and earnings are from reinsurance and insurance operations and investments. The insurers include: Transatlantic Holdings, Inc., RSUI Group, Inc., a leading underwriter of wholesale specialty insurance based in Atlanta, Georgia, and CapSpecialty, Inc., an underwriter of a full inventory of specialty lines, including commercial property, casualty, fidelity, surety and professional lines with a focus on small business on both an admitted and non-admitted basis.

Alleghany also generates revenues and earnings from a diverse portfolio of non-financial businesses that are owned and managed through its wholly-owned subsidiary Alleghany Capital.

Alleghany Capital’s investments are categorized as either industrial businesses or non-industrial businesses. The industrial businesses are: (i) Precision Cutting Technologies, a holding company focused on the machine tool and consumable cutting tools sectors; (ii) R.C. Tway Company, LLC (dba Kentucky Trailer), a manufacturer of custom trailers and truck bodies for several niche end markets; (iii) WWSC Holdings, LLC, a structural steel fabricator and erector for commercial, industrial, and transportation infrastructure projects; (iv) Wilbert Funeral Services, Inc., a provider of products and services for the funeral and cemetery industries and precast concrete markets; and (v) Piedmont Manufacturing Group, LLC, a provider of injection molded and thermoformed parts and multi-component assemblies for OEM customers in the industrial, commercial, transportation, recreational, and medical end-markets. The non-industrial businesses are (i) IPS-Integrated Project Services, LLC, a global provider of design, engineering, and related services to the biopharmaceutical and life sciences markets and, through its subsidiary Linesight, cost and project management services for clients in the data center, technology, and other sectors; (ii) Jazwares, LLC, a global toy and musical instrument company; and (iii) Concord Hospitality Enterprises Company, LLC, a hotel management and development company.

“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years. Throughout 85 years the Kirby family has created a business that has many similarities to Berkshire Hathaway. I am particularly delighted that I will once again work together with my long-time friend, Joe Brandon,” said Warren E. Buffett, Berkshire Hathaway’s Chairman and Chief Executive Officer.

“My family and I have been significant shareholders of Alleghany for over 85 years and are proud that our ownership will culminate through this compelling transaction with Berkshire Hathaway. Not only does this deal provide substantial and certain value to stockholders, but it provides a rare opportunity to join forces with a like-minded and highly respected investor and business leader,” said Jefferson W. Kirby, Chair of the Alleghany Board of Directors. “Berkshire Hathaway’s support, resources, and expertise will provide added benefits and opportunities for Alleghany and its operating businesses for many years to come.”

“This is a terrific transaction for Alleghany’s owners, businesses, customers, and employees,” said Joseph P. Brandon, Alleghany’s President and Chief Executive Officer. “The value of this transaction reflects the quality of our franchises and is the product of the hard work, persistence, and determination of the Alleghany team over decades. As part of Berkshire Hathaway, which epitomizes our long-term management philosophy, each of Alleghany’s businesses will be exceptionally well positioned to serve its clients and achieve its full potential.”

The transaction is expected to close in the fourth quarter of 2022, subject to customary closing conditions, including approval by Alleghany stockholders and receipt of regulatory approvals. Alleghany will continue to operate as an independent subsidiary of Berkshire Hathaway after closing. Mr. Kirby, who controls 2.5% of Alleghany common shares, intends to vote his shares for the transaction.

Under the terms of the definitive merger agreement, Alleghany may actively solicit and consider alternative acquisition proposals during a 25-day “go-shop” period. Alleghany has the right to terminate the merger agreement to accept a superior proposal during the go-shop period, subject to the terms and conditions of the merger agreement. There can be no assurances that the “go-shop” process will result in a superior proposal, and Alleghany does not intend to communicate developments regarding the process unless and until Alleghany’s Board of Directors makes a determination requiring further disclosure.

Goldman Sachs & Co. LLC is serving as financial advisor and Willkie Farr & Gallagher LLP is serving as legal advisor to Alleghany. Munger, Tolles & Olson LLP is serving as legal advisor to Berkshire Hathaway.

Warren Buffett’s Interest in Alleghany

At the Berkshire Hathaway annual meeting on April 30, 2022, Warren Buffett noted that he had been following Alleghany for more than sixty years.

© 2022 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 a 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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Lessons From Warren Buffett Value Investing Warren Buffett

Lessons From Warren Buffett: What Adversity Tells you About the Underlying Strength of a Business

How a company weathers adversity tells you interesting things about a business, according to Warren Buffett. Among the things it shows you is not only the resiliency of a company, but also how wide its moat truly is.

“If you see a business take a lot of adversity and still do well, that tells you something about the underlying strength of the business,” Warren Buffett said at the 2000 Berkshire Hathaway Annual Meeting. “So, occasionally, you will find that an interesting test of the strength of a business. Coca-Cola had some problems, you know, in Europe. But it comes back stronger than ever. They certainly had problems with New Coke, and they came back stronger than ever. So you do see that underlying strength. And that’s very impressive as a way of evaluating the depth and impenetrability of the moat that we talked about earlier.”

Buffett’s full explanation on adversity and how it tests a business

See the complete Lessons From Warren Buffett series

© 2022 David Mazor

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BNSF

BNSF & Wabtec to Test Biofuels in California

(BRK.A), (BRK.B)

BNSF Railway Company and Wabtec have announced a new biofuel testing project that will quantifying the impact of alternative fuels on emissions, durability, and performance in Wabtec locomotives.

“The rail industry is intently focused on reducing its environmental footprint by exploring emerging technologies,” said Bob Bremmer, Group Vice President for Wabtec’s Fleet Innovation and Transformation division. “Biofuels provide a unique near-term opportunity to have a significant impact on reducing carbon intensity.”

BNSF and Wabtec will begin testing biofuel in the second quarter of this year. The two companies will demonstrate the performance of biodiesel (B20) and renewable diesel (R55) in revenue service on Wabtec Tier 3 and Tier 4 Evolution Series locomotives in California. BNSF will operate the locomotives between Barstow and Los Angeles, California.

“BNSF is pleased to partner with Wabtec to test higher percentage blends of biodiesel and renewable diesel,” said John Lovenburg, Vice President, Environment & Sustainability. “Rail is already the most carbon-efficient mode of land freight transport, and the use of these lower carbon fuels is another means for BNSF to reduce its emissions and help meet its carbon reduction goal. Wabtec continues to be a good innovation partner for us – last year, we piloted the first battery-electric freight locomotive in North America.”

Wabtec already has approved a 5-percent biodiesel (B5) and 30 percent renewable diesel (R30) blend for its locomotive engines. There currently are approximately 11,000 Evolutions Series engines in operations today with railroads around the world.

Biofuel is a domestically produced, clean-burning, renewable substitute for petroleum diesel. This renewable fuel increases energy security, improves air quality, and provides safety benefits.

Today’s announcement comes after BNSF conducted a pilot last year with a battery-electric locomotive developed by Wabtec in commercial service between Barstow and Stockton that showed an 11% reduction in fuel consumption and greenhouse gas emissions compared with standard diesel units operated on the same route.

Union Pacific has also announced that it will start testing B20 biodiesel and R55 renewable diesel on trains powered by Wabtec FDL locomotives operating in California.

© 2022 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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Lessons From Warren Buffett

Lessons From Warren Buffett: First, Don’t Go Broke

While Warren Buffett is always looking to buy stocks and whole businesses that are undervalued, he always keeps in mind that you need to maintain enough reserves to have adequate liquidity.

“We know we don’t want to go broke,” Warren Buffett said at the 2012 Berkshire Hathaway Annual Meeting. “I mean, we start with that. And we know you can’t go broke if you’ve got a fair amount of liquid reserves around and you don’t have any near-term debts and so on.”

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2022 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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Appointments Lubrizol

Chris Brown Out, Lubrizol Names Rinehart Interim President & CEO

(BRK.A), (BRK.B)

Berkshire Hathaway’s The Lubrizol Corporation has appointed Mary Rhinehart as president and CEO on an interim basis, effective immediately.

Rhinehart currently serves as the chair of Lubrizol’s board. She succeeds Chris Brown, who joined Lubrizol in 2021 to help the company with important work around safety and operational excellence.

Rhinehart also serves as board chair of Berkshire Hathaway’s Johns Manville, a global building and specialty products manufacturer. She became Johns Manville’s president and CEO in 2012 and assumed the additional role of chair in 2014. Prior to these roles, she was the company’s chief financial officer for eight years. During her more than 40 years with Johns Manville, she held leadership roles in treasury, supply chain, mergers and acquisitions, and human resources. She also managed several of the company’s business units.

Rhinehart will lead the search and selection process for a new CEO and will continue to serve as Lubrizol’s board chair.

“It is an honor to serve in this role for a company with such a rich heritage as a leader in the chemical industry,” Rhinehart said. “I look forward to working alongside Lubrizol’s dedicated employees to continue to deliver value for our customers and support our communities.”

© 2022 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 a 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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Dairy Queen

Dairy Queen to Add 600 Locations in China

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Berkshire Hathaway’s Dairy Queen will open 600 new locations in China by 2030, adding the first 100 by the end of 2022.

China is the fastest growing market for the DQ brand and is among the top three in size, alongside the U.S. and Canada. There are currently more than 1,100 DQ restaurants in China.

The quick serve locations will be owned by FountainVest Partners, a leading independent private equity firm with offices in Beijing, Shanghai and Hong Kong. The franchise development agreement, spearheaded by the FountainVest-acquired franchise ownership company CFB Group, expands its stronghold in China. FountainVest recently acquired CFB Group, a franchise ownership group in mainland China with more than 900 DQ restaurants.

“The market for frozen treats is booming in China and we predict the industry will continue a rapid growth trajectory during the next ten years,” said Andrew Huang, managing director at FountainVest Partners. “FountainVest is committed to fully supporting CFB Group’s growth of both its existing DQ restaurants and opening 600 new DQ restaurants by 2030.”

CFB Group has worked with IDQ to develop and launch products unique to the Chinese market, including hard pack ice cream, specialty novelties, light meals and artfully designed DQ Cakes. Across a more than 20-year relationship, CFB Group has outperformed China’s industrial average for frozen treats, making the DQ brand one of the best performing QSR brands in China.

“China remains an important growth market to us, and this expansion with FountainVest provides the opportunity to widen our footprint in one of the fastest-growing countries for QSR,” said Jean Champagne, chief operating officer, international, at International Dairy Queen. “The continued success of our investment in China, which includes several unique-to-China food and treat offerings, showcases the strength of the DQ brand to fans throughout the country.”

© 2022 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 a 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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CORT

CORT Increases Sales With Vertebrae 3D Technology

(BRK.A), (BRK.B)

Berkshire Hathaway’s CORT, the nation’s leading provider of furniture rental and transition services, has seen its conversion rates increase 111% since the launch of an immersive shopping experience allowing customers to have real-time interaction with products while remaining in their own home.

In January, CORT and Vertebrae, the technology leader in 3D & augmented reality (AR) solutions for retail, rolled out an immersive shopping experience allowing customers to have real-time interaction with products. Through its partnership with Vertebrae, CORT is able to utilize 3D and AR technology to bridge the gap between physical stores and online retail to give customers a hybrid shopping experience.

Customers can now view over 150 furniture and home accessory products from every angle, and virtually assess how a piece of furniture will look and fit in their own space.

In its first full month since launching in mid-January, CORT has seen conversion rates increase 111% with beds and sofas receiving the most interaction. In addition to doubling conversion rates from customers engaging with 3D products versus those not engaging, CORT has seen an 122% increase in revenue per visit for desktop users and 78% for mobile users.

“More consumers are shopping online than ever before, which makes this an exciting time to explore ways to enhance our online experience with the use of virtual technology,” said Ben Clark, senior manager of online business development at CORT. “Being able to provide our customers with the tools necessary to make educated rental decisions is a top priority for CORT.”

© 2022 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 a 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 Enters Australian Passenger Vehicle Market With ATTO 3

(BRK.A), (BRK.B)

BYD Yuan Plus, dubbed the ATTO 3 in Australia, the first A-class SUV built upon BYD’s e-platform 3.0, was jointly launched in China and Australia and began pre-sales in Australia.

Two models of ATTO 3 would enter the Australian market with the official guide prices ranging from 44,990 to 47,990 AUD (approximately $32,350 to $34,500).

In the Australian market, Yuan Plus is named ATTO 3. ATTO is inspired by the Attosecond, the smallest time scale unit in physics, which means ATTO 3 is speedy, energetic, and dynamic.

ATTO 3 is the first SUV built on BYD’s e-platform 3.0, specially designed for high-performance electric vehicles with four significant advantages: intelligence, efficiency, safety, and aesthetics.

The e-platform 3.0 improves EV safety and battery performance as well as optimizes the driving experience. It creates a new generation of smart electric vehicles that are more efficient and safer. Concurrently, ATTO 3 is also specially configured with the BYD auto applications for the Australian market.

Embodying BYD’s new design language, ATTO 3 is the first SUV featuring the sporty-themed interior designed by BYD Global Interior Design Director, Michele Jauch-Paganetti, exhibiting the senses of passion and energy for the customers.

BYD’s revolutionary Blade Battery technology comes as a standard in ATTO 3, offering drivers industry-leading safety levels as well as an extended single-charge range capability. Launched by BYD in 2020, Blade Battery is the only battery that successfully passes the nail penetration test, the most rigorous way to test the thermal runaway of batteries. Also, the space utilization of the Blade Battery pack increases by over 50%, compared with that of conventional lithium iron phosphate block batteries, resulting in significant improvements in energy efficiency and range.

Wang Chuanfu, Chairman and President of BYD Company Limited, said, “2022 will see the accelerated evolution of new energy vehicles and a new start for BYD’s development in the Australian market. This year, BYD will introduce several new energy passenger vehicles to the Australian market.”

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares for $232 million. It’s an investment that has paid off handsomely. Berkshire’s original investment of $232 million had grown in value to $7.69 billion as of December 31, 2021.

© 2022 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 a 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.