Published Sunday March 21, 2010
By Steve Jordon
WORLD-HERALD STAFF WRITER
Sure, you look to Warren Buffett for advice on investing, but what does he know about hammers and 2-by-4s?
Enough to end up on the cover of a magazine aimed at home builders.
Professional Builder editor David Barista says Berkshire Hathaway Inc., the investment company Buffett heads, has close ties to the home-building industry through Shaw carpeting, Acme Brick, Benjamin Moore paints, Johns Manville materials, MiTek building components and modular home builder Clayton Homes.
But Buffett is on the magazine cover because of MiTek’s acquisition of Simpad, a computer design company from Woburn, Mass., which sells software for 3C-CAD (three-dimensional computer-aided design) and BIM (building information modeling).
“Buffett views the automating of home building as one of the best bets going forward,” Barista wrote.
In a book on Simpad that the company distributed to top U.S. home builders late last year, Buffett advised, “The home-building industry, like others, will find ways to reduce costs through technology. I also see the current environment as an important opportunity for leading builders to retool their businesses and to prepare for the up-cycle ahead.”
With economic pressures high, Buffett says that it’s time for the industry to get serious about using the new technology, which offers cost savings, improved quality and accuracy and faster construction.
“We are making an investment in assisting a limited number of home-building companies to automate their CAD production and estimating processes,” Buffett wrote in the book. “They will quickly realize the cost savings. The quality and accuracy of their design and construction process will be better than ever before, and they’ll be delivered in a much shorter period of time.”
In the cover story, Peter Fabris wrote that building information modeling is commonly used in high-rise offices, bridges, power plants and other complex projects but offers the same advantages on homes.
For example, a builder can fit windows into a 3-D computer image of a house, placing them properly and varying the size, type of glass, frame and other factors. The system then estimates prices and prints out plans that builders and suppliers can follow.
“Thus everyone can work from the same set of plans and data without having to do any redrawing or transposing,” the story said.
He’s No. 1
Speaking of magazines, much was made last week about Mexican telecommunications magnate Carlos Slim Helu topping Forbes’ list of wealthiest people and pushing Bill Gates and Buffett into also-ran status.
But had the two Americans not collectively donated $37 billion to foundations they still would be on top, with Gates far ahead.
Forbes estimated Helu’s wealth at $53.5 billion, just ahead of Gates’ $53 billion and Buffett’s $47 billion.
But since 2006, Buffett has donated Berkshire stock that would be worth about $9 billion today to the Bill & Melinda Gates Foundation and to Buffett family foundations. Gates has donated $28 billion to the foundation that he and his wife and Buffett oversee.
Helu has pledged to increase the endowments of his companies’ foundations from $4 billion to $10 billion and to spend more of his money on education and health two of the same areas of focus for the Gates Foundation.
5 X $140,710.60
Yes, someone out there did buy five shares of Berkshire stock March 12 for $140,710.60 each, the same day that 2,099 other shares sold between $124,065 and $122,546.
The $140,000-plus was a bonus of as much as 15 percent for the sellers and the highest Berkshire price since September 2008.
The sales, which occurred around 10:41 a.m. that day, went like this, according to Bloomberg records:
… $123,037
$123,060
$140,710.60
$140,710.60
$140,710.60
$140,710.60
$140,710.60
$123,108
$124,560 …
The five shares were traded on the BATS Global Market, an electronic exchange based in Lenexa, Kan., next door to Kansas City, Mo., which offers low trading rates via what it touts as the latest technology.
BATS spokesman Randy Williams said the buyer specified that it/he/she would purchase only shares available on the BATS Exchange. The seller likewise offered the shares on the exchange.
Williams said he couldn’t give other specific details about the transaction and couldn’t explain why someone paid the above-market price.
Maybe the buyers didn’t want to deal with the New York Stock Exchange, where nearly all Berkshire shares are traded. Must be some good reason, you would think, but not an obvious one.
‘Bring you dollars’
BYD Inc., the Chinese auto and battery company that is 10 percent owned by Berkshire, saw its stock rise in Hong Kong after reporting a 271 percent increase in profits for 2009.
The company’s initials stand for the Chinese characters that are its name in that language, but the company also has said they stand for “build your dreams.”
Now the South China Morning Post said the letters should mean “bring you dollars” because of the rising price of its stock, up 400 percent in the past 12 months.
Behind the “Buffett-induced BYD frenzy,” the newspaper reported, are “some disquieting warning signals that potential buyers risk ignoring at their peril.”
Last year’s sales growth was mostly from the sale of conventional cars, not the electric cars that have attracted so much attention, the story said. And those sales were largely due to stimulus incentives from the Chinese government and easier credit standards.
BYD’s cars have quality problems but sell because they’re the cheapest. But with the stimulus measures ending and the possibility of tighter credit, BYD has little hope of repeating anything like 2009’s earnings growth this year, the story said.
Profits from the company’s telephone handsets are suffering from intense competition, and revenue from batteries was down 34 percent.
BYD has postponed mass production of some of its electric car models amid reports of battery problems and doubts about government subsidies. It plans to produce 100 E6 models as taxis.
The E6’s price is forecast at four times the cost of a conventional car, the Post said, and it weighs twice as much as a Toyota Corolla. (How do you save energy by moving twice as much metal down the road, considering that most electricity comes from coal?)
BYD has said it plans to sell electric and hybrid cars in Europe next year and in the United States late this year.
For sale
The New York Post says Berkshire may be a buyer for Residential Capital, the previously money-losing mortgage division of financing giant GMAC.
The Post reported a similar rumor in January, but now GMAC has hired Goldman Sachs, an investment banking company in which Berkshire is a big investor, to start the process of selling ResCap, as the mortgage unit is called. The U.S. Treasury owns a s56 percent stake in GMAC.
With Goldman hired, the newspaper said, it’s more likely that Berkshire may be a buyer. The Omaha company already owns part of ResCap’s debt, the Post noted.
Buffett, who hasn’t commented on the idea, has said in the past that he isn’t interested in buying troubled companies. But ResCap might be put into good financial shape for the sale and would at least fit Berkshire’s interest in finance-based businesses.
GMAC received $17 billion from the Troubled Asset Relief Program but might lose $6 billion to $10 billion by the time its restructuring is done, the Post said.
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