Tag: Warren Buffett

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Warren Buffett

Berkshire’s Per Share Book Value Soared 23% in 2017

(BRK.A), (BRK.B)

Despite losses from three mega-catastrophe hurricanes that hit the U.S. in the fall of 2017, Berkshire Hathaway’s per share book value still rose by 23% in 2017, Warren Buffett noted in his annual letter to shareholders.

Of the total gain of $63 billion, $36 billion were generated by Berkshire’s operations, and $29 billion resulted from the impact of the recently passed tax bill.

Buffett wrote that Berkshire’s disaster-related reinsurance losses, which ran to $3 billion, reduced the company’s GAAP net worth by less than 1%.

Among the company’s ongoing operations, the 2017 earnings from BNSF Railway rose 11% over 2016 levels to roughly $4 billion, and Clayton Homes’ revenues grew to $5.0 billion in 2017, up $780 million (18%) from 2016.

© 2018 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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Kraft Heinz Warren Buffett

Warren Buffett Steps Down from Kraft Heinz Board of Directors

(BRK.A), (BRK.B)

The Kraft Heinz Company has announced that Warren Buffett will retire from the Company’s Board of Directors following the end of his term at the upcoming Kraft Heinz 2018 Annual Meeting of Stockholders.

Mr. Buffett decided to retire from the Board as he decreases his travel commitments. The Company also announced that the Board of Directors intends to nominate Alexandre Van Damme to stand for election at the 2018 Annual Meeting to fill Mr. Buffett’s vacancy.

“It has been an honor to work with Warren for the past five years,” said Alex Behring, Chairman of the Board of Directors. “His many invaluable contributions to Kraft Heinz will have a lasting impact on the Company for years to come. The Board of Directors looks forward to his continued partnership as Chairman of our largest shareholder, Berkshire Hathaway. We are thrilled to add Alexandre’s expertise and perspective to Kraft Heinz, and believe that his executive experience and leadership will be extremely valuable to the Board, our leadership and company as a whole.”

© 2018 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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Warren Buffett

Warren Buffett’s Annual Letter to Shareholders to be Released Saturday

(BRK.A), (BRK.B)

Tomorrow is the big day for Warren Buffett’s annual letter to shareholders.

Berkshire Hathaway’s 2017 Annual Report to the shareholders will be posted on the Internet on Saturday, February 24, 2018, at approximately 8:00 a.m. eastern time where it can be accessed at www.berkshirehathaway.com.

The Annual Report will include Warren Buffett’s annual letter to shareholders as well as information about Berkshire’s financial position and results of operations.

Concurrent with the posting of the Annual Report, Berkshire will also issue an earnings release.

© 2018 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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Warren Buffett

Amazon, Berkshire Hathaway and JPMorgan Chase Team Up on U.S. Employee Healthcare

(BRK.A), (BRK.B)

Amazon, Berkshire Hathaway and JPMorgan Chase & Co. are partnering on ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs.

The three companies, which bring their scale and complementary expertise to this long-term effort, will pursue this objective through an independent company that is free from profit-making incentives and constraints. The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.

Tackling the enormous challenges of healthcare and harnessing its full benefits are among the greatest issues facing society today. By bringing together three of the world’s leading organizations into this new and innovative construct, the group hopes to draw on its combined capabilities and resources to take a fresh approach to these critical matters.

“The ballooning costs of healthcare act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable. Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes,” said Berkshire Hathaway Chairman and CEO, Warren Buffett.

“The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” said Jeff Bezos, Amazon founder and CEO. “Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”

“Our people want transparency, knowledge and control when it comes to managing their healthcare,” said Jamie Dimon, Chairman and CEO of JPMorgan Chase. “The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans,” he added.

The effort is in its early planning stages, with the initial formation of the company jointly spearheaded by Todd Combs, an investment officer of Berkshire Hathaway; Marvelle Sullivan Berchtold, a Managing Director of JPMorgan Chase; and Beth Galetti, a Senior Vice President at Amazon. The longer-term management team, headquarters location and key operational details will be announced at a later date.

© 2018 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 Buffett Successors Charlie Munger Warren Buffett

Major Changes Coming With Abel’s and Jain’s New Roles as Vice Chairmen

(BRK.A), (BRK.B)

With Gregory Abel elevated to Berkshire Hathaway’s Vice Chairman – Non-Insurance Business Operations, and Ajit Jain appointed Vice Chairman – Insurance Operations, Warren Buffett has made clear that major changes are in store in the command structure of Berkshire’s operations.

While Buffett has no interest in stepping down as chairman, he is shifting the responsibility for both the bolt-on acquisitions and the setting of salaries and compensation for Berkshire’s managers to his new vice chairmen.

“They’ll decide the compensation of the people underneath,” Buffett explained in a January 10 interview on CNBC. “I mean, certain people we have compensation arrangements with that we will have in force for their lifetime because we made up at the time of acquisition, but aside from the ones that are fixed, those decisions will be theirs. And smaller bolt on acquisitions will probably be theirs if there’s a large bolt on acquisition, then Charlie and I will get involved.”

Berkshire shareholders apparently should have no fear that Buffett’s famed “elephant gun,” the term he uses for hunting for giant-sized acquisitions, will be silenced any time soon.

2018 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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Buffett Successors Charlie Munger Warren Buffett

Only One CEO in Berkshire’s Future Says Warren Buffett

(BRK.A), (BRK.B)

With both Greg Abel and Ajit Jain recently promoted to the positions of vice chairman, the obvious question is will they one day be co-CEOs of Berkshire.

“No” say’s Warren Buffett, who in a January 10 interview on CNBC made it clear that there will only be one CEO.

“When I’m not CEO, there will be another CEO, Buffett explained. “There will be a CEO. And how that CEO will organize things will be up to him in this case. And he will figure out the best way to do it. And it won’t change very much. It will change a little, but it won’t change very much.”

So, will the CEO be Abel or Jain? From Buffett’s remarks it seems clear it will be Abel.

“There’s no horse race at all in these two fellows,” Buffett noted in answer to a question of whether the two are jockeying for position. “They know each other well. They like each other well. They both have their areas of specialty. I mean, Greg would not want to be running insurance and Ajit would not be running the other operations.They are extremely good at what they do. Those are two pretty different businesses. And they’re roughly equal businesses. There are more people on one side, but the insurance business generates over $100 billion of float in addition to having well over $100 billion invested in it in terms of net worth. So, there’s more or less parity of earning power and importance.”

Since according to Buffett “Ajit would not be running the other operations,” and Buffett has expanded Abel’s purview to all of Berkshire’s non-insurance businesses (a new CEO has been appointed to head Berkshire Hathaway Energy), everything points to Abel, 55, being the heir apparent for CEO.

As for other potential CEOs, Mathew Rose, executive chairman of BNSF Railway, no longer seems to be a candidate to take over the helm of Berkshire. Nor does Mark Donegan, CEO of Precision Castparts. The two executives lead two of Berkshire’s largest companies.

Buffett also revealed that Charlie Munger, who already had the title of vice chairman, would not be getting a new title, and was completely on board with sharing the title.

“It was his idea, actually, in terms of the title,” Buffett said. “I got about halfway through the first sentence, which is more than i usually get through with Charlie before he comes up with a better idea, and he just says, let’s just have three vice chairmen.”

2018 David Mazor

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

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Berkshire Hathaway Energy Charlie Munger Insurance Kraft Heinz Warren Buffett

Greg Abel and Ajit Jain Join Berkshire Board

(BRK.A), (BRK.B)

In a move that clearly foreshadows the next generation of Berkshire Hathaway leadership, Berkshire’s Board of Directors voted to increase the number of directors comprising the entire Board of Directors from twelve to fourteen. After making that move, Gregory E. Abel and Ajit Jain were then elected to serve as Directors to fill the resulting vacancies on the Board of Directors.

In connection with their election to the Board of Directors, Warren Buffett, Berkshire Hathaway’s Chairman and CEO, appointed Mr. Abel to be Berkshire Hathaway’s Vice Chairman – Non-Insurance Business Operations and Mr. Jain to be its Vice Chairman – Insurance Operations.

Mr. Abel joined Berkshire Hathaway Energy Company in 1992 and currently serves as its Chairman and CEO. Mr. Jain joined the Berkshire Hathaway Insurance Group in 1986 and currently serves as Executive Vice President of National Indemnity Company with overall responsibility for leading Berkshire’s reinsurance operations.

In March 2016, Buffett appointed Abel to the Board of Kraft Heinz, a move that showed his confidence in the 55-year-old manager.

For the time being, Buffett and Munger will continue in their existing positions, including being responsible for significant capital allocation decisions and investment activities.

© 2018 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 Warren Buffett

Berkshire Hathaway Takes Major Stake in Pilot Flying J Travel Centers

(BRK.A), (BRK.B)

Berkshire Hathaway has made a $2.76 billion investment in Pilot Travel Centers.

The Haslam family will continue to own a majority of Pilot Flying J and Jimmy Haslam will remain as chief executive officer. Pilot Flying J President Ken Parent and the Company’s management team will also remain in place. The Company will continue to be headquartered in Knoxville, Tennessee.

Under the terms of the agreement, Berkshire will become the majority owner in five years.

Pilot Flying J is the largest operator of travel centers in North America, with more than 27,000 team members, 750 locations across the U.S. and Canada, and more than $20 billion in revenues.

The investment will expand Pilot Flying J’s opportunities for growth, as the Company remains committed to delivering outstanding service for the trucking industry, professional drivers, local communities and interstate travelers across North America.

Berkshire will initially acquire a 38.6 percent equity stake in Pilot Flying J. The Haslam family will continue to hold a majority interest with 50.1 percent ownership in the Company and FJ Management, Inc., owned by the Maggelet family, will retain 11.3 percent ownership until 2023.

In 2023, Berkshire will become the majority shareholder by acquiring an additional 41.4 percent equity stake and the Haslam family will retain 20 percent ownership in the Company and remain involved with Pilot Flying J.

“Pilot Flying J is built on a longstanding tradition of excellence and an unrivaled commitment to serving North America’s drivers,” said Warren Buffett, chairman, president and CEO of Berkshire Hathaway. “Jimmy Haslam and his team have created an industry leader and a key enabler of the nation’s economy. The Company has a smart growth strategy in place and we look forward to a partnership that supports the trucking industry for years to come.”

“Given the impeccable reputation of Warren Buffett’s Berkshire Hathaway, and our shared vision and values, we decided this was an ideal opportunity,” said Jimmy Haslam, CEO of Pilot Flying J. “As a family business that has evolved and prospered over the last six decades, we knew that any potential partner would need to share our commitment and have a proven track record as a long-term investor. We have that in Berkshire Hathaway – they believe in our strategy, support our team and are excited to see Pilot Flying J grow. We are honored and humbled to partner with them.”

In an interview on CNBC, Jimmy Haslam cited Warren Buffett’s focus on being “long term investors,” and its “hands-off approach,” as the reason they were attracted to doing the deal with Berkshire.

© 2017 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 Warren Buffett

Shareholders Put the Kibosh on Berkshire Hathaway’s Additional Home Capital Investment

(BRK.A), (BRK.B)

Berkshire Hathaway’s plan to make an additional investment in Canadian lender Home Capital Group in exchange for shares priced well-below the market price has been soundly rejected by Home Capital’s shareholders.

The investment would have increased Berkshire’s stake from 20% to 38.4% in exchange for shares priced at C$10.30 per share.

Home Capital’s Chairwoman Brenda Eprile announced the results of a special meeting of shareholders had 88.79% of the votes cast rejected the proposal with only 11.21% voting for it.

In June, Berkshire through its wholly-owned subsidiary, Columbia Insurance Company, made an initial investment of C$153,225,739 to acquire 16,044,580 common shares on a private placement basis, representing an approximate 19.99% equity stake in Home Capital on a post-issuance basis (25% on a pre-issuance basis).

The shareholders rejection does not effect a C$2 billion credit facility that Berkshire supplied to shore up the lender after a run on deposits in may left it on the verge of collapse.

© 2017 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 Warren Buffett

Stock Swap Gives Berkshire Dividend Increase from Bank of America

(BRK.A), (BRK.B)

An additional $8 million a year in income may not mean much in the scheme of things for Berkshire Hathaway, but it proves once again that Warren Buffett know how to make money, even as he struggles to find ways to spend Berkshire’s over $100 billion in surplus.

With an almost $12 billion paper profit from its conversion of its preferred Bank of America stock to common stock, Berkshire Hathaway is reaping the rewards from bailing out the bank in 2011 during the Great Recession.

The move was one of Buffett’s most astute moves of the past decade.

It’s always nice to triple your investment, especially when the preferred shares had also been earning Berkshire $300 million a year in dividends.

But wait, there’s more, as they say on TV infomercials

In swapping the Bank of America preferred stock for a $11.5 billion common stock profit, Berkshire had to give up the $300 million in annual dividends the preferred stock paid. However, Bank of America just raised its quarterly dividend so the amount that Berkshire now gets annually in dividends will be $308 million.

The 66% increase in the common stock dividend came after the Federal Reserve allowed Bank of America and 33 other large banks to increase their dividends and buy back more stock after passing the most recent stress test in June that was required under the Dodd-Frank Act.

Also benefitting Berkshire, which now owns 6% of Bank of America, is the bank’s decision to increase to $12 billion to its share repurchase authorization.

© 2017 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.