> Warren Buffett Blog: August 2017

Monday, August 28, 2017

BYD to construct monorail in Philippines

BYD the electric car, battery company and is partially owned by Berkshire Hathaway Inc. won its first overseas contract to build a monorail as BYD pushes further into municipal public transportation.

The Shenzhen, China based company will construct a monorail in Iloilo, the Philippines, and expects the first phase of the 20kms (12-mile) system to start operations in 2019, it said in a statement on Wednesday. The company didn’t provide an investment amount.

BYD—already China’s biggest electric-car manufacturer—has supplied battery-powered buses for cities overseas, in markets including the US and Europe. Monorail will represent the next major growth area for BYD given the prospects for light-rail systems as a solution to urban gridlock in China’s smaller cities, which can’t afford to build and maintain expensive underground subways, Chairman Wang Chuanfu said in June last year.

Wednesday, August 23, 2017

Berkshire sells all its GE holdings

According to recent SEC filings, Berkshire Hathaway, has sold off its remaining 10.6 million shares of General Electric in the second quarter of 2017. As of June, Buffett's investment had been worth $315 million.

The timing of the sale was good as those 10.6 million shares would have been worth $46 million less today than three months ago.

2017 has been particularly rough on GE. The stock has cratered 20% since January. In June, CEO Jeff Immelt resigned after 16 years on the job. And the company continues to offload struggling legacy businesses as it tries to stay relevant in the digital age.

Still, Buffett made hay off the investment. He poured $3 billion into GE in 2008 when the company was hit hard by the financial crisis. GE's stock grew about 40% during the time Berkshire held stock in the company. Even better: GE pays a huge dividend, helping pad Buffett's profit.

Monday, August 21, 2017

Berkshire may have lost Oncor acquisition to Sempra

Warren Buffett had made a bid for Oncor last month. rarely gets knocked off by competing bidders. But this time Oncor Electric Delivery Co., the takeover target that Berkshire was pursuing, got away. 

Sempra, a San Diego-based utility owner, made a $9.45 billion bid for the bankrupt parent of the Texas power distributor, topping Berkshire's $9 billion offer that had been agreed to just six weeks ago. It's a win for another billionaire, Paul Singer, whose Elliott Management Corp. had been fighting the Berkshire deal. 

Energy Future’s board decided to make the switch on Sunday after Sempra also offered assurances it could get its acquisition of Oncor approved by Public Utility Commission of Texas, as well as a US bankruptcy judge, the sources told Reuters.

Berkshire offered to allow Energy Future to keep an Oncor dividend, but that proposal was not enough to bridge the gap in price, the sources added.

Monday, August 14, 2017

Global warming is a major problem to Earth

Warren Buffett called global warming a “major problem” and has invested Berkshire's money in renewable energy industry, spending billions to develop solar and wind power. 

But renewable energy proponents claim the utility arm of Berkshire Hathaway has been trying to undermine an almost 40-year-old law intended in part to promote the growth of cleaner energy. Berkshire, they say, is effectively stifling solar projects to protect utilities it owns, such as PacifiCorp, based in Portland, Ore.

Thursday, August 10, 2017

Berkshire Hathaway holding almost $100 Billion in Cash and Cash like investments

Berkshire Hathaway Inc. just reported that it was holding close to $100 billion in cash at the end of the second quarter.

While that figure highlights the staggering money-making ability of the businesses he’s collected over the years, it’s also a burden. Because Berkshire doesn’t pay a dividend and rarely buys back its own stock, Buffett is on the hook to find ways to invest those funds.

Buffett, said at Berkshire’s annual meeting in May 2017, saying he hadn’t put his “foot to the floor” on an acquisition for a while and shouldn’t keep so much money earning next to nothing for long periods. The war chest includes some cash-like securities, such as Treasuries.
“The question is, ‘Are we going to be able to deploy it?’” 
“I would say that history is on our side, but it’d be more fun if the phone would ring.”

Tuesday, August 8, 2017

Apple earnings bonanza for Warren Buffett

Warren Buffett’s ownership of Apple has yielded unrealized gains to the tune of $1 billion in a single day for Berkshire Hathaway.  

Apple Inc, the American multinational technology company had released it’s quarterly earnings report for the third quarter last week. Buffett’s company, Berkshire holds 135 Million shares in Apple Inc. On the back of strong quarterly earnings posted by Apple Inc, its shares rose by 5.11% to $157.72 on Wednesday. In absolute terms the shares rose by $7.67. The math amounts to a gain of $1,035,319,579.

Buffett will have to sell sell his company’s shares at the current stock price in order to realize the gains. 

Thursday, August 3, 2017

Home Capital pays back Warren Buffett

Home Capital Group Inc. said it repaid the balance on a US $1.6 billion credit line from Warren Buffett’s Berkshire Hathaway Inc. after the Canadian mortgage lender sold assets.

Home Capital received C$662 million from its previously announced agreement to sell some commercial mortgages, the Toronto-based firm said. The company has received about C$1.13 billion in total on the sale and discharges of commercial mortgages tied to its initiatives to increase liquidity.

Home Capital said it will continue to pay a 1 percent standby fee on undrawn funds until the Berkshire facility matures one year from the initial funding date. Buffett last month agreed to buy C$400 million in shares and provide the credit line after the alternative mortgage lender faced a run on deposits.

Tuesday, August 1, 2017

Clayton Homes acquiring home builders

Berkshire Hathaway’s Clayton Homes division, known for its factory-built houses, is expanding into the site-built, $250,000-and-under housing market.

Since October 2015 Clayton has acquired homebuilders in Atlanta; Nashville, Tennessee; Kansas City; Denver; and, earlier this month, Birmingham, Alabama, and is building homes on-site at a rate of 2,500 to 3,000 a year.

Clayton isn’t choosing cities and then looking for homebuilders to buy, said Mike Rutherford, president of Clayton’s properties group, and Tom Walsh, vice president of Clayton’s properties group.

Rather, they said in an interview, the idea is to identify builders with the right management and culture, and then check out their growth potential. The acquired builders keep their managements and names.

Walsh said Berkshire’s financial strength and Clayton’s buying power — imagine the lumber needed for 45,000 factory-built homes each year — are advantages that can give the acquired companies an edge over the competition.