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Minority Stock Positions Stock Portfolio

BYD Tackles Lithium Battery Fires With Its Breakthrough Blade Battery

(BRK.A), (BRK.B)

BYD has announced the launch of the Blade Battery, a development set to mitigate concerns about battery safety in electric vehicles.

At an online launch event themed “The Blade Battery – Unsheathed to Safeguard the World”, Wang Chuanfu, BYD Chairman and President, said that the Blade Battery reflects BYD’s determination to resolve issues in battery safety while also redefining safety standards for the entire industry.

BYD highlighted a video of the Blade Battery successfully passing a nail penetration test, which is seen as the most rigorous way to test the thermal runaway of batteries due to its sheer difficulty. “In terms of battery safety and energy density, BYD’s Blade Battery has obvious advantages,” said Professor Ouyang Minggao, Member of the Chinese Academy of Sciences and Professor at Tsinghua University.

The Blade Battery has been developed by BYD over the past several years. The singular cells are arranged together in an array and then inserted into a battery pack. Due to its optimized battery pack structure, the space utilization of the battery pack is increased by over 50% compared to conventional lithium iron phosphate block batteries.

While undergoing nail penetration tests, the Blade Battery emitted neither smoke nor fire after being penetrated, and its surface temperature only reached 30 to 60°C. Under the same conditions, a ternary lithium battery exceeded 500°C and violently burned, and while a conventional lithium iron phosphate block battery did not openly emit flames or smoke, its surface temperature reached dangerous temperatures of 200 to 400°C. This implies that EVs equipped with the Blade Battery would be far less susceptible to catching fire – even when they are severely damaged.

The Blade Battery also passed other extreme test conditions, such as being crushed, bent, being heated in a furnace to 300°C and overcharged by 260%. None of these resulted in a fire or explosion.

He Long, Vice President of BYD and Chairman of FinDreams Battery Co., Ltd., covered four distinct advantages of the Blade Battery including a high starting temperature for exothermic reactions, slow heat release and low heat generation, as well as its ability to not release oxygen during breakdowns or easily catch fire.

In the past few years, many EV manufacturers have fallen into a competition for ever-greater cruising range. When the range becomes the prime factor to consider, this focus is then transferred to power battery makers, leading to unreasonable pursuits of “energy density” in the battery industry. It is due to this unpractical focus on “energy density” that safety has been sidelined from power battery development. BYD’s Blade Battery aims to bring battery safety back to the forefront, a redirection from the industry’s tenuous focus on this crucial aspect.

“Today, many vehicle brands are in discussion with us about partnerships based on the technology of the Blade Battery,” said He Long. He added that BYD will gladly share and work with global partners to achieve mutually beneficial outcomes for all industry players.

The Han EV, BYD’s flagship sedan model slated for launch this June, will come equipped with the Blade Battery. The new model will lead the brand’s Dynasty Family, boasting a cruising range of 605 kilometers and an acceleration of 0 to 100km/h in just 3.9 seconds.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million has grown in value almost ten-fold, and is now worth roughly $1.96 billion.

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

© 2020 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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Charlie Munger Value Investing Warren Buffett

Value Investing: Overcome Your Fear, Don’t Be Doomed to Mediocre Returns

Part of an occasional series on Value Investing

Fear. It’s the one word that summarizes the emotion that grips investors when times are bad, really bad. Fear is the emotion that takes rational, prudent decision-making out of the investing process. It’s the whipsaw to the euphoria and overconfidence that comes when times are good, portfolios are fat, and almost every investment opportunity looks like a good one.

Warren Buffett famously said that his investment strategy was founded on seeing fear in the marketplace as a tremendous buying opportunity.

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful,” Buffett wrote in his 1986 Letter to Shareholders.

Berkshire Hathaway’s vice chairman, and noted investor, Charlie Munger, has long expounded that periodic steep market declines are inevitable, and that unwillingness to withstand them is the road to poor performance.

In a 2009 interview with the BBC, Munger said:

“This is the third time that Warren (Buffett) and I have seen our holdings of Berkshire go down, top tick to bottom tick, by 50%. I think it’s in the nature of long-term shareholding, of the normal vicissitudes in worldly outcomes and markets that the long-term holder has his quoted value of his stock go down by say 50%. In fact you could argue that if you are not willing to react with equanimity to a market price decline of 50% 2-3 times a century, you are not fit to be a common shareholder and you deserve the mediocre result that you are going to get, compared to the people who do have the temperament who can be more philosophical about these market fluctuations.”

Diversification: Your Tool For Overcoming Fear

So, how can you overcome fear? It’s wired into us. It’s not intellectual, it’s emotional. It’s the flight part of fight-or-flight response. Overcoming fear is easier said than done, but here is a suggestion.

Trust the power of diversification. If you are buying index funds, such as S&P 500 index funds, know that the entire U.S. economy is not going away. It’s already survived the Great Depression, Great Recession, and a host of lesser known financial crises that run all the way back to the Credit Crisis of 1772. As, Charlie Munger pointed out, you have to expect that steep price declines will happen a number of times during your lifetime.

Warren Buffett has always believed in the power and resilience of the U.S. economy. He points out that in his own lifetime it has survived World War II and a host of other challenges, including over a decade of inflation in the 1970s and early-1980s, when mortgage rates peaked at over 18%, and has come back stronger.

“Anything can happen to stock prices tomorrow. Occasionally, there will be major drops in the market, perhaps of 50% magnitude or even greater,” Buffett said in an interview on CNBC in February. He urged investors, even small investors to see price declines for the opportunity that they are.

Remember it’s buy low and sell high, not the other way around.

The resiliency and long term strength of the U.S. economy, in other words the power of businesses as a whole to meet needs and solve problems, enabled the Dow Jones Industrial Average to not only survive a loss of 90%, but to rise from its Great Depression doldrums of a low of 41.22 to the record high 29,551.42 set on Feb. 12, 2020.

As shocking as a DJIA number in the 40s seems to us today, it’s not the Dow’s all-time low, which was 28.48 on August 8, 1896. Thus, you don’t need a century of lifespan to prosper investing in the stock market. An investor that prudently bought at 28.48 in 1896 was still up roughly 45% when the DJIA hit its depression era low.

Given enough time, the strength of the economy has proven time and time again the value of investing in equities.

“Most people are savers, they should want the market to go down. They should want to buy at a lower price,” Buffet notes.

So, get a hold of your fear and turn it into the courage to see the opportunity that is right in front of you.

© 2020 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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Insurance National indemnity

Berkshire Hathaway’s MLMIC Offers Medical Professional Liability Coverage for Physicians Returning as Volunteers During the COVID-19 Pandemic – No New Premium Required

(BRK.A), (BRK.B)

As part of ongoing efforts to support our dedicated physicians throughout New York, Berkshire Hathaway’s MLMIC Insurance Company is extending medical professional liability coverage – without requiring any new premium – to retired physicians who were last insured with MLMIC and are coming back as volunteers to provide care during the COVID-19 pandemic.

MLMIC defines “volunteer,” in this case, as a retired physician providing professional services for no fee, salary or other compensation with the exception of reimbursement for expenses incurred delivering those services. Qualifying physicians may apply online.

The coverage limits of the medical professional liability offered to these volunteers will be the same as what they held when actively practicing prior to retirement and when last insured by MLMIC. Coverage also includes defense costs if a claim is filed against them while volunteering.

In addition, if the returning physician previously held regulatory defense coverage, it will be provided for actions resulting from volunteer professional services. There is no new premium for this coverage, which is included through physicians’ expired policies without impact upon any presently existing tail policies.

New York physicians can access this information at https://www.mlmic.com/covid-19/returning-physicians. To request coverage, interested volunteers can apply online or call (800) ASK-MLMIC (1-800-275-6564) and ask for Underwriting.

© 2020 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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Marmon Group

Volvo North America Teams with Berkshire’s Fontaine Modification

(BRK.A), (BRK.B)

Volvo North America has partnered with Berkshire Hathaway’s Fontaine Modification to develop the Volvo Auto Hauler (VAH) 300, Volvo Trucks’ signature day cab in the North American market. This reduced-height cab option is currently the lowest in the industry by 1.5 inches, offering auto haulers best-in-class versatility for local and regional automobile transport applications. The 300 is now available for order at an unladen 94.5-inch height.

“At Volvo Trucks, we pride ourselves on building strong partnerships to solve our customers’ business needs,” said John Felder, product marketing manager at Volvo Trucks North America. “Through extensive research, testing and engineering in collaboration with Fontaine Modification, the new VAH 300 model with a 94.5-inch height represents a new standard of excellence for trucks in the highly specialized auto hauler market.”

The company notes that over the last 10 years, the height of vehicles hauled has significantly increased as the demand for more SUVs versus sedans rises. As a result, auto haulers are now in need of a solution that maximizes freight capacity, while also delivering optimal efficiency. The lower overall height of the VAH 300 offers the flexibility to position a larger vehicle over the truck’s cab to maximize payload. A clean top-of-frame behind the cab also allows for easier body mounting and trailer hookup.

“At Fontaine, we are proud of our recent changes that will provide about three more critical inches of room for hauling larger vehicles above the VAH 300 day cab,” said Paul Kokalis, president of Fontaine Modification Company. “We’re pleased to help Volvo Trucks deliver this best-in-class, reduced-height cab option to meet the demands of the North American auto hauler market.”

In addition to this new model, Fontaine also modifies a full range of Volvo Trucks models to service the needs of all customers for any auto hauling application or load size.

© 2020 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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Berkadia

Berkshire’s Berkadia Partner Loses CFO to Coronavirus

(BRK.A), (BRK.B)

Jefferies Financial Group, Berkshire Hathaway’s joint-venture partner in Berkadia, has announced the death of it CFO due to Coronavirus.

In a statement issued by Jefferies, they noted “with profound sadness that Peg Broadbent, the CFO of Jefferies Group LLC, has passed away from coronavirus complications. The entire Jefferies family mourns Peg’s loss. On behalf of our Board of Directors, management team and all our global employees, we extend our deepest sympathies to Peg’s family.

Rich Handler, our CEO, and Brian Friedman, our President, expressed their most heartfelt condolences and stated: ‘We are heartbroken and grieve that our friend and colleague, Peg Broadbent, has passed away from coronavirus complications. Our thoughts, prayers and love go out to Peg’s dear wife, Hayley, and their young children, Sebastian and Peg, as well as Peg’s older children, Anna, Sophie and Charlie, and all of Peg’s extended family here and in the United Kingdom.

The loss of Peg is incredibly personal for us as he was a member of our own extended family. For over a dozen years, Peg has been our CFO and partner, and helped us build Jefferies from less than half its current size, and navigate through hard times and good times. He has also been a much-loved and respected leader to the incredible global team that provides the support, foundation and glue across our firm. But Peg was so much more. Part of what made Peg the great partner he was to all of us was his core humanity. No matter what the occasion, his decency, calmness and dry wit were always there, always making things better. We will miss him terribly.

We know Peg would want his passing to serve as a reminder to all of us of how much he cared for all of his friends at Jefferies and that our priority must be the health and happiness of our loved ones. May Peg’s memory be for a blessing for his family, for us and for all who loved him.’”

Teri Gendron, CFO of Jefferies Financial Group, has been appointed as the interim CFO and Chief Accounting Officer of Jefferies Group LLC.

About Berkadia

Founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation (now known as Jefferies Financial Group), Berkadia is a third-party commercial mortgage servicer, as well as an approved lender for Fannie Mae, Freddie Mac, and HUD/FHA.

The company is among the top Freddie Mac and Fannie Mae multifamily lenders.

Berkadia owes its origins to GMAC Commercial Mortgage Corporation, which was acquired in 2009 by Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners. Christened Capmark Financial, the company had $10 billion of originations in 2008 and a servicing portfolio of more than $360 billion before running into bankruptcy in October 2009.

In a deal approved by the bankruptcy court, Capmark sold its mortgage loan and servicing to the newly formed Berkadia in a deal worth $515 million.

The deal brought Berkshire into the heart of the commercial loan serving business, and the company has one of the largest commercial real estate servicing portfolios.

© 2019 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
Commentary Precision Castparts

Commentary: Buffett’s Cash Pile Not a Source of Ridicule Anymore

(BRK.A), (BRK.B)

Up until a few weeks ago, Berkshire Hathaway’s enormous pile of cash, which had reached $125 billion, and was growing $1.5 billion a month, was taken by many as a sign of failure on the part of Warren Buffett.

Increasing cries for a dividend, or increased buybacks (despite the stock sitting at or near record highs) was just some of the popular chatter.

What a difference a few weeks makes.

With the markets experiencing extreme volatility, and many businesses forced to close or facing plummeting demand, Buffett’s patience finally looks like it has met conditions where his value investing strategies can excel.

As share prices fall, Buffett clearly has the chance to use his elephant gun to bag his elephant, as he likes to call the acquisition of a major company, which is something he hasn’t done since acquiring Precision Castparts in 2016.

The opportunities are many, as valuations have retreated so significantly that Berkshire now holds more cash than the market valuations of more than 450 companies in the S&P 500, over 80 in the Nasdaq 100, and 11 that make up the Dow 30.

In addition to acquiring his elephant or two, Buffett will certainly have opportunities to help companies shore up their balance sheets through his favorite method—receiving preferred stock that pays generous interest, and receiving warrants for common stock purchases.

The latter, as in the case of his rescue of Bank of America during the Great Recession, pays off handsomely once the economy and stock prices have recovered. As proof, Berkshire now owns just over 9.9% of the bank.

It will be interesting to see what strategies Buffett employs, and whether there are more opportunities in the purchase of whole companies, or in grabbing generous chunks of a wide range of companies. He might even increase his buyback of Berkshire stock, because owning more of one of the world’s healthiest and diversified conglomerates makes sense at these prices.

Perhaps investors big and small should do the same, as Berkshire’s P/E ratio of sat at only 5.38 as of Friday, March 27.

Let’s not forget that in addition to being poised for Berkshire’s expansion while others are contracting, Buffett has also insured the short term and long term health of Berkshire itself. He has always held $20-$25 billion in reserve for the conglomerates own needs during the worst of times.

These might be the worst of times for some, but for Buffett, who famously said in his 1986 Letter to Shareholders, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful,” these are the best of times to invest.

In a couple of months, Berkshire’s next 13F filing will reveal just how much stock he and his trust lieutenants Todd Combs and Ted Weschler have acquired, and we may know even sooner if an elephant comes within range.

It will be interesting to see how greedy Buffett gets.

© 2020 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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GEICO Insurance

Commentary: GEICO Right to Bet on Maintaining Policyholder Loyalty

(BRK.A), (BRK.B)

Berkshire Hathaway’s auto insurer GEICO is pausing cancellation of coverage due to non-payment and policy expiration, effectively immediately. This pause will remain in effect through April 30, 2020.

In addition, GEICO is prepared to offer maximum flexibility, including special payment plans, to those who need it once normal billing operations are scheduled to resume.

“This ongoing situation impacts everyone, and we want our policyholders to have some peace of mind knowing we’ll be there when they need us most,” said GEICO President and CEO Todd Combs.

In taking this step, GEICO is betting that maintaining policyholder loyalty is more important than trying to squeeze cash out of customers that are out of the blue in a severe cash crunch.

While they may have some policies in arrears, on the positive side for GEICO is that self-quarantining due to the Coronavirus will lead to a dramatic reduction in new claims filed due to reduced mileage.

GEICO, like other leading auto insurers, such as Progressive, Liberty Mutual, and State Farm, normally runs multiple media campaigns. The reason for this is that in recent years the battle for policyholders is primarily a branding battle, not one of service or policy features.

Capturing the wallet of the consumer through the GEICO gecko, wood chucking wildlife, and office wandering camels, is a far more effective than listing the dry insurance features that policyholders are actually purchasing.

GEICO’s doing the right thing, both for consumers and for its bottom line. After all, losing customers at a time when they are down may add to customer acquisition costs down the road when the economy revives.

If GEICO can maintain brand loyalty, it will have done more to cement itself in the heart of the consumer than all the geckos in the world ever could.

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
Minority Stock Positions Stock Portfolio

BYD Becomes Major Surgical Mask Producer

(BRK.A), (BRK.B)

BYD has jumped into the medical supplies business and almost overnight has already become one of the largest manufacturers of surgical masks.

BYD is growing its efforts to help alleviate severe shortages that have affected hospitals in the face of the COVID-19 global outbreak.

BYD’s manufacturing plant in Shenzen, China is mass-producing sanitary face masks, and is now running at full capacity.

The plant can produce 5 million masks and 300,000 bottles of disinfectant per day.

The supplies will “help alleviate severe shortages that have affected hospitals and agencies across China in the face of the global COVID-19 outbreak,” the company said in a statement.

BYD Chairman and President Wang Chuanfu has appointed a special task force consisting of leaders from different business divisions and more than 3,000 engineers involved in research and development, design, processing and other roles.

“A production line for high-quality face masks requires about 1,300 parts for various gears, chains, and rollers, 90% of which are BYD’s self-made parts,” Sherry Li, director general of BYD’s President Office, said in a statement.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million has grown in value almost ten-fold, and is now worth roughly $1.96 billion.

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

© 2020 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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Mouser Electronics

Mouser Electronics Named Global High Service Distributor of the Year by TE Connectivity

(BRK.A), (BRK.B)

Berkshire Hathaway’s Mouser Electronics, Inc., the authorized global distributor with the newest semiconductors and electronic components, has received the Global High Service Distributor of the Year Award for the sixth time from TE Connectivity (TE), a world leader in connectivity and sensors.

The top distribution award recognizes Mouser’s 2019 performance based on sales growth, market share growth, customer growth and business plan performance.

“Mouser delivers exceptional service to our mutual customers, and I am very pleased to recognize them with this award,” said Karen Leggio, Senior Vice President and General Manager, Channel, at TE. “Mouser’s track record of achievement with TE, including receiving the Global High Service Distributor of the Year Award six times, is a testament to our strong and successful partnership.”

“We are incredibly honored to receive this prestigious award, and thank TE for recognizing the outstanding efforts of our teams around the world,” said Glenn Smith, Mouser Electronics’ President and CEO. “TE is an industry leader and a valued business partner. We look forward to our continued mutual success.”

Last year, Mouser received TE’s APAC Customer Expansion Award, Japan Customer Expansion Award, and EMEA Customer Expansion Award, as well as the Americas Application Tooling Business Unit Distributor of the Year and Americas Data and Devices Business Unit Distributor of the Year Awards. Mouser received the TE Global High Service Distributor of the Year Award in 2013, 2014, 2015, 2016, 2017, and again in 2019.

© 2020 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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BH Media

Berkshire Hathaway Completes Sale of Newspaper Assets to Lee Enterprises

(BRK.A), (BRK.B)

Berkshire Hathaway’s portfolio of newspapers now officially have a new home, Lee Enterprises. The company is a local news provider and leading platform for advertising in 77 markets.

Lee Enterprises has completed its acquisition of BH Media Group’s publications and The Buffalo News.

The acquisition nearly doubled Lee’s audience size and added 30 daily newspapers, more than 49 paid weekly publications with digital sites, and 32 other print products from BHMG, as well as The Buffalo News, to Lee’s portfolio of high-quality local publications.

Lee’s portfolio is now comprised of 77 publications in 77 communities.

Additionally, after the elimination of the management agreement and adding operating expenses from the lease agreement, the transaction is expected to drive an 87% increase in revenue, a 40% increase in adjusted EBITDA, and immediately reduce Lee’s leverage to 3.5x, even before $20-25 million in anticipated annual revenue and cost synergies.

As previously announced, and in connection with the transaction, Berkshire Hathaway provided approximately $576 million in long-term financing to Lee at a 9% annual rate.

The proceeds from the financing were used to pay for the acquisition and refinance Lee’s existing debt, and also allowed Lee to terminate its revolving credit facility.

Berkshire Hathaway is now Lee’s sole lender.

Mary Junck, Chairman, said, “We are pleased to complete this compelling and transformative transaction, which enhances Lee’s position strategically, operationally and financially. This transaction reinforces our conviction in the value and power of local news, adding 31 publications with deep roots in their communities, enabling Lee to serve even more readers and advertisers. Further, this transaction allowed Lee to address our long-term debt on attractive terms while deepening our relationship with Berkshire Hathaway – now our sole lender – to enable more flexibility as we continue to invest in our business with a digital-first mindset. We join our shareholders, publishers, employees and audiences in their excitement about this transaction and the opportunities that lie ahead for Lee.”

Kevin Mowbray, President and Chief Executive Officer, said, “Lee today leads the industry in digital revenue growth and operating performance, and this transaction unlocks new opportunities to grow our top line and further accelerate our digital transformation. After over 18 months of managing the BH Media Group publications, Lee looks forward to leveraging our deep knowledge of this portfolio to drive further efficiencies across our expanded and integrated operation. This transition, which is already underway, is underpinned by shared values and an alignment around our mission to deliver high-quality local news. We are confident that we have the right strategy and operational expertise to realize the full benefits of this transaction for our readers, advertisers, shareholders and communities we serve.”

© 2020 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.