When it comes to teaching investing, Warren Buffett is less than impressed with what business schools teach on the subject.
For Buffett, it is all about knowing how to value a business, and the more esoteric the financial theory, the more it seems to drift from the basic task of determining valuations.
“I think they’ve taught to students a lot of nonsense about investments,” Warren Buffett said at the 2012 Berkshire Hathaway Annual Meeting. “I mean, it is astounding to me how the schools have focused on sort of one fad after another in finance theory, and it’s usually been very mathematically based.”
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.
Competition in the fractional jet ownership business is getting fiercer, as the biggest players, Berkshire Hathaway’s NetJets, and its main competitor Flexjet, prepare to spend billions on the return of supersonic flight for the business jet market.
Supersonic flight will give these companies a substantial competitive advantage over commercial airlines in their competition for first class customers, especially for long distance overseas flights.
The new supersonic business jets will fall into an interesting category of jets that will have a decided advantage over other private jets, but will be too expensive for most people to own outright.
While the supersonic business jet market offers opportunity, it also comes at a high cost, with the price of each jet at over $100 million.
That’s the perfect opening for fractional ownership companies to plot their growth.
In 2015, Flexjet became the first fractional jet ownership company to place a firm order for the jets, when they ordered twenty of Aerion’s AS2 aircraft.
Now, Aerion has made an expansive collaboration with NetJets and FlightSafety International, two Berkshire Hathaway companies, which will be sure to impact the private jet market.
Underlining the long-term focus of the partnership, NetJets has also obtained purchase rights for 20 AS2 supersonic business jets.
Aerion will start production at Aerion Park in Melbourne, Florida in 2023.
With significant growth achieved through 2020 and 2021, Aerion’s global order backlog for the AS2 is now valued at more than USD $10 billion. The new AS2—the first supersonic aircraft to enter commercial service in 51 years and the world’s first supersonic business aircraft— continues to advance toward manufacturing start after concluding wind tunnel validation late last year.
“As the leader in private aviation, we constantly look for ways to be on the cutting-edge, and expanding our fleet to become the exclusive business jet operator for Aerion Connect is a thrilling next step,” said Adam Johnson, Chairman and CEO of NetJets Inc. “Together, we will be exploring the integration of the AS2 supersonic business jet into NetJets’ global network, and we are honored to be their chosen partner to enable the Aerion Connect vision.”
Aerion will explore NetJets’ becoming the exclusive business jet operator for the global mobility platform, Aerion Connect. A vision for a future global mobility ecosystem, Aerion Connect will integrate multiple, currently siloed urban and regional networks and provide a seamless point-to-point travel experience, optimized for speed and luxury across multiple modes of transportation.
In collaboration with FlightSafety International, the premier professional aviation training company, Aerion will also develop a supersonic flight training academy for civil, commercial, and military supersonic aircraft. The Aerion-branded facility will channel FSI’s comprehensive global training expertise to provide a center of excellence for supersonic flight training and education, shaping the flight crews of the future.
The supersonic planes will give corporate leaders and other high-end travelers a compelling reason to consider fractional ownership. Even cross-country travel, which draws additional concerns about sonic booms, will be faster.
Aerion claims that its Boomless Cruise flight is feasible at speeds up to Mach 1.2, depending on atmospheric conditions, principally temperature and wind.
The company hopes that the U.S. will adopt International Civil Aviation Organization (ICAO) standards, permitting supersonic speeds over the U.S. Supersonic flights are currently prohibited.
Aerion claims that at speeds around Mach 1.2 a “sonic boom would, essentially, dissipate before reaching the ground.”
The Aerion AS2
The Aerion AS2 is a three-engine jet and is larger than the originally conceived Aerion supersonic business jet. Fuselage length is 160 feet and maximum takeoff weight is 115,000 pounds. Minimum projected range is 4,750 nautical miles with the intention to achieve a range of more than 5,000 nautical miles.
The aircraft will have a 30-foot cabin in a two-lounge layout plus galley and both forward and aft lavatories, plus a baggage compartment that is accessible in-flight. Cabin dimensions widen from entryway to the aft seating area where height is six feet, two inches and cabin width is seven feet, three inches.
Carrying eight to 12 passengers, the AS2 has an intercontinental-capable range of 4,750 nautical miles at supersonic speed.
One thing that is clear, only the strongest of the fractional ownership companies will be able to compete in this market, giving them a clear advantage over smaller charter companies, and a major capability advantage over commercial airlines.
Berkshire Hathaway-backed BYD Co. has debuted its first autonomous driving bus.
The bus is being tested in actual scenarios for All Nippon Airways at the Haneda Airport in Japan, and the airport becomes the country’s first international airport to conduct a pilot operation for an autonomous bus.
The test uses BYD’s K9 bus, which can carry up to 57 people.
During this trial operation, the airport staff will do near to Level 3 autonomous driving tests on the bus in a specific area of the airport to collect essential data to help the developers better improve the autonomous driving functions and improve the vehicle’s operating efficiency in the future.
Jointly carried out by BYD, ANA, BOLDLY, and Advanced Smart Mobility, the project has been conducted three rounds of tests from 2018 to 2020.
ANA plans to put the bus into trial operation in 2021 and implement the autonomous driving bus into a daily operation to fully achieve its goal to build a “Simple & Smart” airport by 2025.
“BYD is very honored to join hands with ANA to carry out this comprehensive autonomous driving test trial at the Haneda Airport,” Liu Xueliang, General Manager of BYD Asia-Pacific Auto Sales Division, said. “I firmly believe that this four-party cooperation will set an excellent example for a smart and environmentally friendly airport of Japan to give people a smarter, safer, and cleaner travel experience in the future.”
“At ANA, we are constantly looking for ways to harness the latest technology to enhance operations and efficiency,” said Masaki Yokai, Senior Vice President of ANA. “In addition to marking a significant step forward for airports, fully electric autonomous buses will result in fewer emissions and decreased carbon footprints at airports. We are optimistic that these trials will give us the information we need to continue improving these technologies and will allow ANA to maintain its leadership in autonomous innovation.”
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 has grown in value to $5.897 billion as of December 31, 2020.
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.
Berkshire Hathaway’s Clayton Homes will build 300 to 350 site-built homes on a former estate in Pfafftown, North Carolina.
The 184-acre former estate of Eldridge “Redge” and Jane Hanes was sold to Clayton Homes for $4.5 million and will be developed by Clayton’s Mungo Homes division, and marketed under the Shugart Homes brand.
Mungo Homes was acquired by Clayton Homes in 2018, and Shugart Homes was acquired by Clayton in 2019.
The manor house will be demolished, however, a guest/boat house that sits at the 22-acre lake on the property will be refurbished.
Berkshire’s Clayton Homes, which is the largest producer of manufactured homes, has been moving aggressively into the site-built market, and is already among the top-ten site-builders in the U.S.
Clayton Homes has acquired ten site-built companies since it first started adding site-builders in 2016.
Acquired by Berkshire Hathaway in 2003 for $1.7 billion, Clayton Homes has grown into a diverse builder offering traditional site-built homes, modular homes, manufactured homes, tiny homes, college dormitories, military barracks and apartments.
Read a Special Report on how Kevin Clayton has transformed Clayton Homes.
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.
In 2017, Berkshire Hathaway took a 38.6% stake in the largest operator of truck stops and rest stops in North America, Pilot Company. The company has 750 locations under the Pilot and Flying J brands.
Berkshire is purchasing its equity position from the Haslam family, the company’s founders, and is progressing towards a majority ownership of Pilot by 2024.
Jimmy Haslam, the son of the company’s founder Haslam, will remain in charge when the acquisition is completed.
In acquiring companies, Berkshire is always looking for dedicated management that will bring the same passion and drive to a company even after they no longer own a majority interest. That certainly is happening at Pilot, as the company looks to innovate the customer experience in a rapidly changing marketplace with its “Welcome to Pilot” initiative.
Recently, key marketing personnel at Pilot detailed how they are evolving Pilot’s stores with an emphasis on cashless and contactless transactions, and the overall enhancement of the customer experience.
You can hear all about Pilot’s prototype stores and innovations in “How Pilot is Changing Its Store Experience” on the At Your Convenience podcast that brings you the inside scoop on the convenience store business.
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.
On February 27, 2021, Berkshire Hathaway released Warren Buffett’s annual Letter to the Shareholders of Berkshire Hathaway. The 13 page letter detailed the current state of the company with a particular emphasis on its growing stake in Apple.
Here a few of the letters highlights:
Berkshire’s Performance in 2020
Despite operating earnings dropping 9%, Berkshire’s per-share intrinsic value increased by both retaining earnings and repurchasing about 5% of outstanding shares.
Portfolio of Marketable Securities
Berkshire’s holdings of marketable stocks at yearend was worth $281 billion.
A Huge Swing and a Miss
Berkshire took a $11 billion write-down on its 2016 purchase of Precision Castparts, which Buffett blamed on his being “simply too optimistic about PCC’s normalized profit potential.”
On Bonds
“…bonds are not the place to be these days. Can you believe that the income recently available from a 10-year U.S. Treasury bond – the yield was 0.93% at yearend – had fallen 94% from the 15.8% yield available in September 1981? In certain large and important countries, such as Germany and Japan, investors earn a negative return on trillions of dollars of sovereign debt. Fixed-income investors worldwide – whether pension funds, insurance companies or retirees – face a bleak future.”
Last Year’s Share Buybacks
In 2020, Berkshire repurchased the equivalent of 80,998 “A” shares, spending $24.7 billion.
The Buybacks Have Continued
“Berkshire has repurchased more shares since yearend and is likely to further reduce its share count in the future.”
Berkshire’s Stake in Apple
At the beginning of 2020, Berkshire owned 5.2% of Apple stock at a cost basis of $36 billion. Regular dividends have averaged about $775 million annually, and in 2020 the company pocketed an additional $11 billion by selling a small portion of its position.
Buffett wrote that thanks to Apple’s own share buybacks that “Despite that sale – voila! – Berkshire now owns 5.4% of Apple.”
Buffett notes that the increased ownership stake was costless to Berkshire. He also notes that Berkshire shareholders increased their Apple stake even more. “Because we also repurchased Berkshire shares during the 2 1⁄2 years, you now indirectly own a full 10% more of Apple’s assets and future earnings than you did in July 2018.”
“The math of repurchases grinds away slowly, but can be powerful over time. The process offers a simple way for investors to own an ever-expanding portion of exceptional businesses.
And as a sultry Mae West assured us: ‘Too much of a good thing can be . . . wonderful.'”
Fixed Assets
“Berkshire owns American-based property, plant and equipment – the sort of assets that make up the ‘business infrastructure’ of our country – with a GAAP valuation exceeding the amount owned by any other U.S. company. Berkshire’s depreciated cost of these domestic “fixed assets” is $154 billion. Next in line on this list is AT&T, with property, plant and equipment of $127 billion.”
BNSF Railway
Since its acquisition in 2010, Berkshire has earned $41.8 billion in total dividends from BNSF.
Berkshire Hathaway Energy
BHE’s “$18 billion commitment to rework and expand a substantial portion of the outdated grid that now transmits electricity throughout the West. BHE began this project in 2006 and expects it to be completed by 2030…”
On the Prospects for the United States
“…there has been no incubator for unleashing human potential like America. Despite some severe interruptions, our country’s economic progress has been breathtaking. Beyond that, we retain our constitutional aspiration of becoming ‘a more perfect union.’ Progress on that front has been slow, uneven and often discouraging. We have, however, moved forward and will continue to do so. Our unwavering conclusion: Never bet against America.”
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.
Berkshire Hathaway-backed BYD is offering help to transit systems in accessing the Low or No Emission (Low-No) Program.
The Federal Transit Administration recently announced $180 million will be available through its competitive Low or No Emission (Low-No) Program.
The Low-No program exists to support the nation’s transition to energy-efficient vehicles such as those manufactured in BYD’s Lancaster, California plant. And Low-No funding can be used to purchase and/or lease BYD’s full line of zero-emission transit buses, including acquisition, construction, and leasing of supporting charging facilities.
“We’re proud to have helped secure over $10 million for our customers through last year’s Low-No grant program,” said BYD North America Senior Vice President Patrick Duan. “Having experts with a successful track record to assist transit agencies can make all the difference with these competitive grants.”
BYD can provide various electric bus models, infrastructure, and technology to help communities transition to zero-emission buses.
BYD bus and motor coach models meet all Buy America and FMVSS Rolling Stock requirements. BYD’s bus and motor coach models range from 23 feet to 60 feet in length including our two double-decker options.
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 has grown in value to $5.897 billion as of December 31, 2020.
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.
Berkshire Hathaway’s McLane Company, Inc., a leading supply chain services company providing grocery and foodservice solutions, has launched McLane EDGE, a digital platform that offers marketing and merchandising insights, the latest sales-building programs, services, promotions, category trends, and new products, plus valuable information to help retail businesses grow in a fast-paced, ever-changing environment.
The new digital platform combines McLane’s Strategic Merchandising Portal (SMP) and Strategic Merchandising Solutions Magazine (SMS) into one entity that is engaging and easy to navigate. The retailer can also order special offers and featured items directly from the McLane EDGE site.
McLane EDGE offers valuable, real-time information, such as:
• Featured items
• Special offers
• Category information
• Planograms
• Programs and services (Choice Chicken Program, Ready Pac Salads/Snacks, Fly Guys Pizza, etc.)
• News and Resources
• Videos and blogs (coming soon!)
McLane EDGE is a value add to current McLane customers. Current users of McLane’s Strategic Merchandising Portal (SMP) and Virtual Trade Show (VTS) can login to McLane EDGE with their existing credentials. New users can gain access to McLane EDGE by contacting their account manager or sales representative.
“McLane EDGE is now the place to turn for quick, up-to-the-minute information retailers need on marketing and merchandising, along with special offers that can be ordered right through the platform as well as news, planograms, and category info,” said Cassandra Matos, director of merchandising at McLane. “The digital age continues to revolutionize how strategic merchandising information is disseminated and acted on, and McLane is excited to be in the forefront.”
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.
Berkshire Hathaway’s JAX LNG and TOTE Services recently completed their first ship-to-ship liquefied natural gas (LNG) bunkering of a foreign-flagged vessel at the Jacksonville Port Authority (JAXPORT).
Crews loaded 1,800 m3 (~450,000 gallons) of LNG from North America’s first LNG bunker barge, the Clean Jacksonville, to the LNG-powered vehicle carrier, Siem Confucius, at JAXPORT’s Blount Island Marine Terminal.
In preparation for the bunkering, JAX LNG worked closely with TOTE Services to utilize the Clean Jacksonville while also gaining acceptance from the U.S. Coast Guard to perform the bunkering during all potential cargo loading conditions.
After loading at the JAX LNG facility, the Clean Jacksonville maneuvered alongside Siem Confucius to perform the milestone fuel transfer.
The 7,500-car-capacity Siem Confucius and its sister ship, Siem Aristotle, are Liberian-Registered and regularly call on JAXPORT to unload factory-new Volkswagen Group of America cars and SUVs.
“Our modern and eco-friendly fleet helps reduce emissions while maximizing efficiency,” said Siem Car Carriers President Jeffrey Campbell. “We are thrilled to partner with other pioneers in the environmental conservation movement, including Volkswagen, JAX LNG, TOTE Services, and JAXPORT, to reduce emissions while providing world-class service to the industry.”
TOTE Services operates the Clean Jacksonville and has successfully performed more than 150 bunkering events for TOTE’s Marlin class vessels, the world’s first LNG-powered container ships.
“This commercial bunkering is a major milestone for TOTE Services and a significant step toward supporting clean fueled vessels operating around the world,” said TOTE Services President Jeff Dixon. “TOTE Services’ significant experience with LNG – combined with our technical expertise and commitment to safety – allows us to assist other customers adopting use of the cleanest, most readily available fuel for shipping today and into the future.”
“Some of the world’s most eco-friendly ships call JAXPORT thanks to the innovation and vision of our customers and port partners,” said JAXPORT CEO Eric Green. “Jacksonville is a global leader in the use of LNG and we are proud to support the continued growth of LNG in the maritime industry and beyond.”
“We are delighted to have earned the trust and confidence of Siem Car Carriers to offer our LNG bunker service during the Siem Confucius recent call on JAXPORT,” said Roger Williams of BHE GT&S, a Berkshire Hathaway Energy Company and joint partner and operator of JAX LNG. “By using the Clean Jacksonville, JAX LNG is leveraging the investment and expertise of our extraordinary partner- TOTE Services.”
Berkshire hathaway and JAX LNG
JAX LNG, LLC is a joint venture between Berkshire Hathaway’s Pivotal LNG, a subsidiary of BHE GT&S, and NorthStar Midstream, operating a 120,000 gallon per day LNG plant with 2 million gallons of storage in Jacksonville, Florida.
The LNG facility was constructed to bring liquefied natural gas to the southeast U.S. and Puerto Rico.
Berkshire Hathaway acquired its stake in the facility as part of its $9.7 billion acquisition of Dominion Energy’s natural gas transmission and storage business in 2020.
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.
When it comes to finding companies to invest in, Warren Buffett likes opportunities that are so clear and obvious that they practically jump right out and grab you. He doesn’t want to have to dive deep into analyzing a company before it becomes clear that it is a good investment.
“We’re not looking for needles in haystacks or anything of the sort,” Warren Buffett said at the 1994 Berkshire Hathaway Annual Meeting. “You know, we like haystacks, not needles, basically, and we want it to shout at us.”
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.