Today’s market update featuring the Motley Fool’s report on Berkshire – with several details on Clayton Homes and its sister firms – will likely follow that pattern.
If you’re new, already hooked on our new spotlight feature – or are ready to get the MH professional fever – our headline reports are found further below, just beyond the Manufactured Housing Composite Value for today.
The evolving Daily Business News market report sets the manufactured home industry’s stocks in the broader context of the overall market stocks.
Part of this unique feature spotlights headlines – from both sides of the left-right media divide – that saves readers time, while underscoring topics that may be moving investors, which in turn move the markets.
Readers say this is also a useful quick-review tool that saves researchers time in getting a handle of the manufactured housing industry, through the lens of publicly-traded stocks.
MH “Industry News, Tips and Views, Pros Can Use.” ©
Selected headlines and bullets from CNN Money:
- Google fights in court over how it pays women
- Streaming wars: Here’s why Disney won’t kill Netflix Trending
- Disney paying at least $177M to settle ‘pink slime’ lawsuit
- The best ways to borrow money for college, if you have to
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- Defense stocks pop as broader market wavers
- Europe is running out of butter
- S. sanctions 8 more Venezuelan leaders tied to Maduro
- Get Ready. NAFTA talks are coming soon
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- Free speech on the job, and what that means
Selected headlines and bullets from Fox Business:
- Tesla developing self-driving tech for semi-truck, wants to test in Nevada
- Wall St ends off lows as traders buy N. Korea dip
- Oil inches higher after data points to declining U.S. inventories
- Twenty-First Century Fox posts 1.5 percent rise in quarterly revenue
- Trump hits back at McConnell over ObamaCare ‘excessive expectations’ comment
- Operator of big Montana coal plant will keep on running it
- Disney shares on track for worst day since May 2016 amid ESPN issues
- Nuclear weapons: These companies manage America’s stockpile
- Illinois government is fleecing its citizens: Fmr. McDonald’s USA CEO Rensi
- Elvis Presley’s former Beverly Hills estate for rent
- Why Axon Enterprise’s Shares Fell 14% Today
ICYMI – for those not familiar with the “Full Measure,” ‘left-right’ media chart, please click here.
Today’s markets and stocks, at the closing bell…
S&P 500 2,474.02 -0.90 (-0.04%)
Dow 30 22,048.70 -36.64 (-0.17%)
Nasdaq 6,352.33 -18.13 (-0.28%)
Crude Oil 49.56 +0.39 (+0.79%)
Gold 1,281.20 +18.60 (+1.47%)
Silver 16.88 +0.49 (+3.00%)
EUR/USD 1.1755 +0.0006 (+0.05%)
10-Yr Bond 2.241 -0.042 (-1.84%)
Russell 2000 1,397.20 -12.96 (-0.92%)
Manufactured Housing Composite Value
Today’s Big Movers
Berkshire Hathaway and BAM lead risers.
Cavco Industries and Patrick lead sliders.
For all the scores and highlights on tracked stocks today, see the Bloomberg graphic, posted below.
Today’s MH Market Spotlight Report –
Motley Fool-Buffett’s Berkshire Hathaway Losses Drag Conglomerate’s 2Q, Clayton Homes, Market Updates
Seasoned MH Industry professionals already know that Berkshire Hathaway (BH) owns Clayton Homes, which in turn has about 50% of the industry’s HUD Code manufactured home production. BH also owns 21st and Clayton’s captive lender, Vanderbilt Mortgage and Finance (VMF). They further own a sizable stake in Wells Fargo and others that are connected to manufactured home lending, the supply chain, etc.
Warren Buffett’s brand’s also hold two of the four seats on the Manufactured Housing Institute’s (MHI) board. Cavco Industries Chair and CEO – Joe Stegmayer – an ex-Clayton man. Those are three of the four seats on the committee that is widely acknowledged to makes all the big decisions as to what MHI’s direction will be.
Media and organization’s that share Buffett’s beliefs, such as the Huffington Post, describe his control over MHI this way: “Buffett uses the Manufactured Housing Institute to lobby for his perks.”
So much for MHI’s claim of representing all segments of the manufactured housing industry? But we digress…
…the Daily Business News signaled the looming buyout by Clayton of yet another manufactured housing operation, with word that more will come in housing, given Buffett’s $100 billion dollar cash pile.
It is against that backdrop that we present the meat of the investment advisory site, the Motley Fool’s, recent report on the quarter results of Clayton and their parent company.
To really understand Berkshire Hathaway, you have to understand the many business units that flow into its income statement. Below, I’ll break the company down into five pieces that flow into its operating earnings line.
Manufacturing, service, and retailing — $1.7 billion
This bucket is something like Berkshire’s hall closet — stuffed to the brim with items (companies), some of which are pure gold, and some of which are merely collecting dust. Taken as a whole, earnings from this segment tallied to $1.66 billion, an increase of 11% over the year-ago period.
The major needle-moving businesses in this group are industrial manufacturers, which include Precision Castparts, Lubrizol, and IMC International. The industrial manufacturing businesses saw their pre-tax earnings increase approximately 12% from the year-ago period on a 2% increase in revenue.
The retailing category stole the show with pre-tax earnings growth of 27% compared to the year-ago period. Berkshire noted that its auto dealerships and home-furnishing stores, as well as Pampered Chef and See’s Candies, were all meaningful contributors to an increase in pre-tax profit in its retail segment.
Railroad — $958 million
Berkshire’s BNSF Railway has generally seen its earnings dip in recent years as lower commodity prices have resulted in less demand for oil, gas, coal, and related shipments. The decline isn’t BNSF-specific — the entire industry suffers from lower demand, and, as a consequence, lower revenue per carload.
BNSF’s profitability jumped 24% in the second quarter, contributing $958 million to operating earnings this quarter. Major drivers included a 15% increase in revenue, offset slightly by higher fuel costs, which jumped 34% year over year.
The quarterly filing reveals a notable increase in revenue from coal shipments, which grew by more than 39% this quarter. It saw a smaller 8% increase in revenue from consumer products, which are by far its largest contributor to freight revenue, and thus have an outsize impact on revenue on a nominal basis.
Insurance — $943 million
Insurers earn money from their underwriting profits and from investment income earned on their stock and bond portfolios. Underwriting profits are earned when premiums exceed insurance losses and expenses. Investment income is earned from interest and dividends.
This quarter brought about a rare loss for Berkshire’s insurance companies, which collectively generated an underwriting loss of $22 million. Blame that loss on Berkshire Hathaway Reinsurance, which reported a quarterly underwriting loss of $400 million before tax; most of this was related to foreign currency fluctuations, and an accounting charge related to the company’s recent reinsurance deal with AIG.
GEICO’s underwriting profit was also lower, due to a 1.5-percentage-point increase in losses as a percentage of premiums earned in the second quarter. GEICO hasn’t taken its foot off the growth pedal, however, as voluntary auto new business sales increased 17.8% in the second quarter compared to the same period a year ago.
Investment income easily papered over the small underwriting loss. Collectively, Berkshire’s insurance companies generated investment income of $965 million during the quarter, a 1% decline from the same period last year.
Utilities and energy — $516 million
Berkshire Hathaway Energy rarely surprises, as most of its profit comes from regulated utilities that have local monopolies as sole energy suppliers. Second-quarter earnings increased 7% to $516 million compared to the year-ago period, which was largely driven by a lower tax rate and lower interest expense. Earnings before interest and taxes declined about 1% compared to the year-ago period.
This segment could soon grow if Berkshire Hathaway is successful in its bid for Oncor, one of the largest energy-delivery utilities in the United States. We’ll know later this month if Berkshire will fold the $9 billion utility under its umbrella.
Finance and financial products — $332 million
Berkshire Hathaway’s financial businesses include Clayton Homes, which sells and finances manufactured homes; leasing businesses, primarily railcars and furniture; and Berkadia, a commercial mortgage-servicing company.
Clayton Homes has been a big beneficiary of rising home sales. Revenue increased by 13% compared to the year-ago period, helped by a 14% increase in home sales during the first half of the year. The company generated pre-tax earnings of $197 million, compared to $179 million in the first quarter of 2016.
Across the total finance and financial products segment, earnings declined to $332 million from $396 million last year, driven by a decline in interest and dividend income from investments, and lower earnings from CORT, a furniture-leasing business.
About that cash pile…
Berkshire ended the quarter with just under $100 billion of cash at the holding company and across its varied subsidiaries. With so much cash already, one wonders just how much longer Berkshire will continue to let the cash keep piling up. Buffett hinted at the most recent annual meeting that the company may have to reverse course and institute a regular dividend, so as to avoid the cash drag on its balance sheet.”
See Recent Exclusive 1 Year Snapshot of All Tracked Stocks
NOTE: the chart below covers a number of stocks NOT reflected in the Yahoo MHCV, shown above.
NOTE: Drew changed its name and trading symbol at the end of 2016 to Lippert (LCII).
Manufactured Home Industry Connected Stock Markets Data
Berkshire Hathaway is the parent company to Clayton Homes, 21st Mortgage, Vanderbilt Mortgage and other factory built housing industry suppliers. LCI Industries, Patrick, UFPI and LP all supply manufactured housing, while AMG, CG and TAVFX have investments in manufactured housing related businesses.
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