Warren Buffett goes for the basics, like food, furniture and Fords.
Now he’s aiming for the roof over your head.
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.
In the lingo of Berkshire Chairman and CEO Warren Buffett, that’s a “moat.”
Builders can grow more rapidly if they don’t have to personally guarantee construction loans, Walsh said. The first acquired company has boosted its volume from 160 to 180 homes a year to nearly 400.
Starting from scratch less than two years ago, the new Clayton division has a staff of about 800, which doesn’t count construction crews.
Friday will be Berkshire’s turn to report second-quarter financial results, with operating earnings projected to rise by 2 percent to $4.7 billion, or $1.91 per Class B share, compared with a year ago, according to analysts surveyed by Wall Street data provider FactSet.
Operating earnings are closely watched for Berkshire because investment results can skew net income, the number commonly cited in reports from publicly traded companies.
Buffett has said Berkshire’s operating earnings reflect how its businesses are doing, from the big drivers of insurance, railroads, energy and industrial companies to lesser contributors such as candy, clothing and charm bracelets.
Net income can vary widely from quarterly report to report, such as bumping up sharply if Berkshire sells one of its investments at a gain, even though that investment may have been growing steadily for decades.
Berkshire’s net income in the second quarter of 2016 was $5 billion, or $2.03 per Class B share, with $380 million of that from investments.
In recent years, investments have become a smaller share of Berkshire’s business as ownership of whole companies has taken the lead.
Last week Union Pacific Corp. said rising shipping volumes pushed its quarterly profit up 19 percent for the three months that ended June 30. Berkshire’s BNSF Railway is usually subject to the same trends.
Of Berkshire’s operating profit, the railroad and the energy divisions account for one-fourth, insurance for one-fourth and other businesses the remaining one-half.
Insurance unit adds London office
Berkshire Hathaway Specialty Insurance, based in Boston, is adding an office in London focused on professional, cyber and financial institution insurance in southern Europe.
Joining the company will be Vanessa Maxwell, formerly with American International Group’s United Kingdom office, and Tom Dilley, former head of financial institutions coverage in the U.K. and Ireland for Ace Ltd., formerly the Chubb Group.
Berkshire Specialty began in 2013 when several top executives from American International switched to Berkshire, allowing entry into the business insurance market to complement Berkshire’s property insurance operations.
Specialty Insurance sells coverage in commercial property, marine, casualty, health care professional liability, executive and professional lines, surety, travel, programs, medical stop loss and homeowners insurance.
Since it began about four years ago the division has opened offices in 13 U.S. cities (not including Omaha, by the way) and in New Zealand, Australia, Canada, China, Germany, Malaysia, New Zealand and Singapore.
Munger makes donation to Los Angeles prep school
Berkshire Vice Chairman Charlie Munger made his semi-regular donation to the Harvard-Westlake School, a Los Angeles prep school he supports, donating $5 million worth of Berkshire shares.
He has donated more than two-thirds of his Berkshire holdings to charity since 2000, but the value of his remaining stock keeps growing.
Four years ago it was worth about $980 million. Share prices have outstripped donations, and now the dollar value is $1.26 billion.
The Omaha World-Herald is owned by Berkshire Hathaway Inc.
Correction: Tom Walsh, vice president of Clayton’s properties group, was misidentified in a previous version of this column.