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Lessons From Warren Buffett

Lessons From Warren Buffett: Avoid This Type of Business

It probably seems obvious that investors should avoid declining businesses, but sometimes the share prices can seem so low, as compared to the cash they are giving out in dividends, that it can lure in investors none the less. As a whole, trying to find some remaining life in a dying business is not a strategy Warren Buffett recommends, even though he began his career searching for “cigar butt” businesses. He notes that “the same amount of energy and intelligence brought to other types of businesses is just going to work out better.”

“Generally speaking, it pays to stay away from declining businesses,” Warren Buffett said at the 2012 Berkshire Hathaway Annual Meeting. “It’s very hard. You’d be amazed at the offerings of businesses we get where they say, you know, it’s — I don’t want to upset Charlie, but they say, you know, it’s only six times EBITDA, and then they project some future that doesn’t have any meaning whatsoever. If you really think a business is declining, most of the time you should avoid it. . . . The real money is going to be made by being in growing businesses, and that’s where the focus should be.”

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© 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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Berkshire Hathaway HomeServices

Berkshire Hathaway HomeServices Expands in Michigan

(BRK.A), (BRK.B)

Berkshire Hathaway HomeServices, a global residential real estate brokerage franchise network, has announced its further expansion in the state of Michigan, with the addition of Berkshire Hathaway HomeServices Kee Realty. This addition marks the brand’s continued growth throughout the state with its 11th network location.

With offices throughout Michigan including Clinton Township, Rochester, Oxford, New Baltimore and more, Berkshire Hathaway HomeServices Kee Realty will add more than 400 network agents to the global brokerage under the leadership of industry veteran John Meesseman.

“Our company principles of family, teamwork, fun, agent experience and superior service to our clients support the Berkshire Hathaway principles of trust, integrity, stability and longevity,” said John Meesseman, president, Berkshire Hathaway HomeServices Kee Realty. “With this transition, our company will continue to uphold these values with the support of the global brand.”

“We’re thrilled to expand in Michigan with such an esteemed group of network agents,” said Christy Budnick, CEO, Berkshire Hathaway HomeServices. “These market-leading agents are known for their exceptional client service, and we can’t wait to advance their businesses with the brand’s top-of-the-line technology and programming. Our continued growth throughout the Midwest region will provide them with an expanding referral network.”

By joining the network, Berkshire Hathaway HomeServices Kee Realty agents gain access to Berkshire Hathaway HomeServices’ active referral and relocation networks, and its “FOREVER Cloud” technology suite, a powerful source for lead generation, marketing support, social media, video production/distribution and more.

The brand also provides an exclusive Luxury Collection marketing program for premier listings. Its Prestige Magazine showcases network members’ premium listings with a strong lineup of feature stories covering topics that appeal to high-end real estate clients.

“We are excited to welcome John and his talented group of agents to the network,” commented Gino Blefari, chairman of Berkshire Hathaway HomeServices. “And we are looking forward to supporting their growth as they assist home buyers and home sellers throughout the state of Michigan and beyond.”

Berkshire Hathaway HomeServices Kee Realty has 10 offices with plans for continued growth. The company is actively involved in the community with local charities such as Big Family of Michigan where John Meesseman sits on the Board of Directors.

© 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 Becomes Exclusive Supplier to Metro Offices

(BRK.A), (BRK.B)

Berkshire Hathaway’s CORT has been selected as an exclusive supplier by Metro Offices, a leading Flexible Workspace as a Service provider that is expanding its Metro Federal.

As a woman-owned and woman-operated private company, Metro has been operating business centers in the Washington Metropolitan area for the past 32 years. During those years, Metro has outsourced cumbersome office acquisition and administration functions to over 10,000 small and medium size companies.

“Metro has always been a company that seeks to be forward thinking on how we can assist our clients to be successful,” states Kathlene Buchanan, CEO and Founder of Metro. “With that in mind, over 10 years ago Metro sought to develop another solution to its future client base, in particular the federal government. Flexible Workspace as a Service solution provides an agency with a turnkey facility including furniture, utilities, communications, IT services and all related infrastructure, and full-time support staff under a services contract. Contracts are flexible, scalable, and applicable for 1-to-5-year terms.”

To achieve this nation-wide growth, Metro Federal has selected CORT’s Furniture-as-a-Service solution to contribute to the successful delivery of this solution.

“With the addition of CORT, our solution truly provides continuous flexibility to our government clients,” Ms. Buchanan said. “Metro and CORT will also modify the furniture configuration in our solution as the government agencies’ needs change during the contract.”

CORT’s workplace furniture offerings enable Metro Offices’ customers to increase flexibility as the fully furnished amenity brings customers one step closer to a turnkey facility. In addition to furnishings, clients are supported with expertise to locate and design their space, build out and equip an office as needed, all under one contract.

“We are very excited at CORT to be selected by Metro for this new offering to federal government customers,” said Todd Simpson, CORT Strategic Business Development Managing Director. “CORT and Metro Offices have partnered a number of times in recent years, and we’ve always been impressed with Metro’s ability to execute turnkey workspace solutions quickly and ahead of schedule, and then tailor them over time as their client’s needs change.”

© 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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Announcements

Tom Murphy Resigns From Berkshire Board

(BRK.A), (BRK.B)

Tom Murphy, a member of Berkshire Hathaway’s Board of Directors since 2003, has resigned from Berkshire’s Board effective February 15, 2022.

Warren Buffett, Berkshire’s Chairman and CEO, issued the following statement. “Tom Murphy has taught me more about running a business than any other person. We have been friends and mental partners for more than 50 years. My only regret is that I didn’t meet him earlier. Tom phoned me today and said that recovering from a recent bout with Covid convinced him that he would feel more comfortable ending his activities at Berkshire. I accepted his wish. He will continue as a major shareholder and friend.”

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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Minority Stock Positions Stock Portfolio

BYD is Fastest Rising Automaker in Brand Value

(BRK.A), (BRK.B)

Berkshire Hathaway-backed BYD Co., Ltd. is the fast rising automaker in brand value according to Brand Finance.

“BYD (brand value US$6.4 billion) is the fastest-growing brand in the sector with a 100% brand value increase,” Brand Finance reported as part of its Global 500 Annual Report 2022.

Brand Finance evaluates the strength and value of more than 5000 global brands across various sectors every year.

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 $5.897 billion as of December 31, 2020.

© 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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Lessons From Warren Buffett

Lessons From Warren Buffett: Growth is Value

With so much talk about growth stocks versus values stocks, Warren Buffett notes that growth is a form of value. Using insurer GEICO as an example, he believes that you can add projected growth to a company’s assets, and in the case of an insurance company, to its float. That is provided that you know a company is going to grow.

“I think it’s quite rational to assume a significant underwriting profit at GEICO over the next decade or two decades, and I think it’s likely that it will have significant growth, Warren Buffett said at the 2012 Berkshire Hathaway Annual Meeting. “And both of those are value, items of enormous value. So that adds to the present float value. . . .”

Hear Buffett’s full explanation

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© 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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Commentary

Commentary: Don’t Count on Berkshire Hathaway to Buy Peloton

(BRK.A), (BRK.B)

With everyone from Apple to Google being talked about as a possible suitor for exercise equipment and media company Peloton Interactive, one name that should probably be struck from the list is Berkshire Hathaway.

This week, Blackwells Capital LLC, an alternative investment management firm that is a significant shareholder of Peloton sent the Peloton Board of Directors a comprehensive presentation outlining the need for immediate change in leadership and demand for the Board of Directors to initiate a strategic alternatives process to maximize value for the benefit of all shareholders.

In its presentation, Blackwells Capital called for the company to immediately put itself up for sale, and listed 18 companies as Potential Strategic Acquirers. Of the companies on that list, only seven checked all the boxes that Blackwells identified as making Peloton attractive as a strong strategic fit.

One of those seven companies was Berkshire Hathaway, which owns a number of leading athletics brands, including Spalding, Russell Athletics, and Brooks Running.

Blackwells states that “At a $75 per share purchase price, an acquisition of Peloton would be accretive to many strategic buyers with very modest cross-selling and penetration assumptions.”

With Berkshire sitting on $146.2 billion in cash as of September 30, 2021, an acquisition of Peloton’s size would barely put a dent in Berkshire’s cash hoard. However, Blackwells own presentation shows why they should not count on Berkshire riding to the rescue. The presentation state that “Peloton is worth significantly more to a strategic acquiror than as a standalone business, especially given the difficult turnaround ahead.”

It’s that “difficult turnaround” that most likely dooms any prospect of a Berkshire acquisition, as Berkshire doesn’t do turnarounds.

Don’t take my word for it, Warren Buffett stated in Berkshire Hathaway’s 2017 Annual Report that his acquisition criteria includes:

Demonstrated consistent earning power (future projections are of no interest to us, nor are “turnaround” situations)

With Peloton in dire need of a turnaround, as Blackwells itself has stated, and the company’s appointment of a new CEO and layoff of nearly 3,000 employees demonstrates, this is exactly what Buffett is not looking for.

Berkshire is looking to acquire companies that are churning out money, not losing it hand over fist.

While Blackwells may have identified companies that would be eager to get into a bidding war for Peloton (something that Berkshire also doesn’t do), it would be well advised to heed Buffett’s other aphorism about acquisitions:

“We’ve found that if you advertise an interest in buying collies, a lot of people will call hoping to sell you their cocker spaniels.”

© 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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Minority Stock Positions Stock Portfolio

BYD Auto Sales Off to Red Hot Start in January

(BRK.A), (BRK.B)

Berkshire Hathaway-backed BYD announced that its New Energy Vehicles (NEV) sales totaled 92,926, soaring 367.6% of sales in January 2021.

Overall, BYD sold 95,180 passenger cars in January, up 126.1% year-over-year.

The strong sales start for 2022 comes on the heels of annual sales of nearly 600,000 vehicles in 2021.

BYD sold 46,386 pure electric vehicles in January, up 220.7% year-over-year. Meanwhile, BYD Dual Mode models sold 46,540 units, rocketing 760.6% year-over-year, thanks to its advanced DM-i super hybrid technology.

The flagship BYD Han model, a mid to large sedan, sold 12,780 units in January, marking the fifth consecutive month with a sales volume exceeding 10,000 units. Along with the Han, the Tang SUV achieved a sales volume of 9,060 units.

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 $5.897 billion as of December 31, 2020.

© 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 Kraft Heinz

Berkshire Hathaway to Swap Board Member on Kraft Heinz Board of Directors

(BRK.A), (BRK.B)

The Kraft Heinz Company has announced that Alexandre Van Damme, director nominee of Berkshire Hathaway, will retire from the Company’s Board of Directors following the end of his term.

Berkshire Hathaway has indicated that it plans to nominate Alicia Knapp, President and CEO of BHE Renewables, to fill Mr. Van Damme’s vacancy at the Kraft Heinz 2022 Annual Meeting of Stockholders.

“Berkshire Hathaway is delighted to nominate Alicia to the Board of Kraft Heinz – she has shown tremendous leadership during her 20-plus years at Berkshire Hathaway Energy,” said Greg Abel, member of the Kraft Heinz Board of Directors and Vice Chair, Non-Insurance Operations of Berkshire Hathaway. “We are thrilled to add Alicia’s perspective to Kraft Heinz and believe that her experience will be especially relevant and valuable to the Board and the Company’s environmental, social and governance strategy. Additionally, I would like to thank Alexandre for his many important contributions to the Board over the past four years.”

In her role at BHE Renewables, Ms. Knapp, 43, leads Berkshire Hathaway Energy’s unregulated development and commercial management of renewable projects. BHE Renewables owns solar, wind, geothermal, natural gas and hydroelectric projects that produce energy for both the wholesale market and for customers under long-term power purchase agreements.

Ms. Knapp has earned a reputation as a strategic leader with significant operational, risk management and financial acumen. Before her current role, she served as Vice President of Renewable Generation for MidAmerican Energy, where she was responsible for renewable generation operations and electric trading. Prior to this role, Ms. Knapp served as Vice President of Gas Delivery at MidAmerican Energy, where she managed a natural gas business serving more than 750,000 customers, and also General Manager of Project Development at BHE Renewables, where she managed the development and construction of wind and solar farms. She has been with the Berkshire Hathaway Energy family of businesses since 2001 and held roles in risk management, gas trading, and nuclear and renewable project management earlier in her career.

“It is an honor to be nominated by Berkshire Hathaway to the Kraft Heinz Board of Directors,” said Knapp. “I look forward to the opportunity to add value through this position on the Board and support the Company in its impressive transformation.”

© 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: Start Young, If You Want a Big Snowball

As the world’s most successful investor, Warren Buffett often gets asked his advice on building a fortune. He credits Charlie Munger with the metaphor of a snowball.

“Start young. Charlie’s always said that the big thing about it is we started building this little snowball on top of a very long hill. So we started at a very early age in rolling the snowball down,” Buffett explained at the 1999 Berkshire Hathaway Annual Meeting. “And, of course, the snowball, the nature of compound interest is it behaves like a snowball of sticky snow. And the trick is to have a very long hill, which means either starting very young or living very, to be very old.”

Buffett’s full explanation about building your own fortune

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© 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.