Why Warren Buffett Just Bought Duracell
time.com
time.com
1) >Interbrand estimated that the brand value of Duracell stood at $4.9 billion
2) >Duracell maintains over 25% of the global battery market share.
Duracell has both brand and volume advantage over competitors in battery business. Warren Buffett coined the term economic moat to describe the advantages companies like Duracell have.
>INVESTOPEDIA EXPLAINS 'Economic Moat'
>The wider the moat, the larger and more sustainable the competitive advantage. By having a well-known brand name, pricing power and a large portion of market demand, a company with a wide moat possesses characteristics that act as barriers against other companies wanting to enter into the industry.
Whenever a lock fails, step one or two or three is replace the batteries. That's 4-6 batteries per lock.
As a maintenance/security procedure, once every couple of years, every battery in every lock in the entire building is replaced. Doesn't matter if they are dead, weak or brand new. That's hundreds/thousands of batteries.
That's a lot of batteries. And Duracell has multiple levels of "pro"/"industrial grade" batteries. We buy them by the case.
I'm sure the markup on consumer batteries are huge, but I'd also think the commercial use of double-As must dwarf the consumer market. Smart buy by Warren is my guess.
What's needed in this space is a door lock that winds itself much like a "perpetual" watch. Something that takes the mechanical energy used to turn the door handle and turns it into stored energy that can be used to read the card and unbolt the door.
And there you go. Make this thing :)
In the case you mentioned, I do wonder if you could get a bit more energy from the door itself rather than just the handle. For example, if the spring-loaded self-closing mechanisms weren't just mechanical, but used that energy to generate electricity, you might get a bit more out of it.
Reminds me of the telephones where you had to wind them before using them..
What are the differences between those and the retail cells, in your experience?
I've seen people quoting P&G reps that the only difference is the glossiness of the labels and the cardinality of the package, but I haven't found any definitive statement online one way or the other.
Even more, the R&D side of a battery company could be incredibly lucrative with all the electric vehicles, portable electronic devices, and so on.
Buying a battery company in this day and age is a smart investment in tech, even for a non tech investor like Buffet. After all, every electronic device needs power right?
The manufacturing technology too. There's a reasonable chance that batteries of the future will still require handling and dispensing of chemicals, making and sealing the cells, etc.
From my perspective, I haven't bought an alkaline battery in years. Low self-discharge batteries (especially newer Eneloops) are so much better for most tasks that disposable batteries seem crazy.
It'd be nice if there were a voltage regulator product that could fit into a standard battery compartment.
One option I've considered is to replace 2AA/2AAA with Li-Ion plus a dummy cell. But Li-Ion is around 4.2 volts fully charged, which might be too much.
So in my experience generics are actually better; Golden Sunrise or whatever, I don't care so long as they are on spec and don't ruin my gadgets.
If you bought the cheapest battery on the shelf, then it probably wasn't an alkaline battery. A heavy-duty battery (carbon-zinc) has half the capacity of an alkaline.
If you buy Duracell, you know you will get at least an alkaline battery. Duracell simply does not sell heavy-duty batteries, hence the brand name: the durable cell. It's mostly a matter of brand positioning, rather than technology.
Rayovac uses one brand for both alkaline and heavy-duty batteries, which cheapens their brand when a consumer buys the wrong type and all the batteries die a quick death. Energizer addresses this problem by selling heavy-duty batteries under the Everready brand.
The carbon-chloride battery is labeled as "heavy-duty," because it has greater capacity than the carbon-zinc battery ("general-purpose").
When alkaline batteries were invented, the older chemistry continued to be sold as heavy-duty. This leads to the strange situation where the heavy-duty battery has less capacity than the other batteries you find on the shelf.
As someone who uses a lot of batteries I disagree. I do a lot of field recording work using powered microphones and that can mean going through 20+ batteries a day. Rechargeables would be ideal but that means a bunch of extra gear to cart around and extra things to go wrong or be overlooked by an assistant. Doing location work for film it's common to have 12+18 hour workdays where you're on your feet all the time, and working in a different location every day or ever multiple locations in the same day.
Long story short I've had terrible experiences with generic batteries. I haven't done exhaustive comparisons with the various leading brands, but I've come to strongly prefer Duracells. I have no idea what the watt/$ ratio is because I just expense that; what I care about is reliability in a high power drain situation.
For consumer stuff sure, most batteries are quite good. I wish it was a business on the decline, I'd be thrilled to have efficient short-range wireless power even if it only had a range of a meter or two.
The current requirements are not that high so it's just a matter of a small step-up transformer for the preamp. Some older pro microphones also use T-power, which requires only 12v but delivers a somewhat less good signal/noise ratio than the 48v phantom standard.
Note: All Rayovac batteries used were confirmed to be alkaline batteries and the Sunbeam batteries it appears are not alkaline. This may have been the reason for the subpar results I experienced yet I question why the Rayovac alkalines I used produced very similar results to the allegedly non-alkaline Sunbeams.
Xbox 360 controller: I've used Sunbeam and Rayovac AA batteries from the dollar store and CVS, respectively. They barely last a week and when I hit the dashboard button to check the state of charge it still shows 2 and sometimes 3 bars but the controller kept disconnecting. Tried 3 other controllers and 3 other battery packs to verify it wasn't a controller/battery holder problem. Same results. Switched to Duracell and not only do they last almost a month but they go all the way until the battery icon is empty and then they cut out. I now use Energizer rechargeable NiMH batteries and they last almost as long as the duracells but I can swap them out quickly.
Paintball marker: I have a relatively high end (it was top of the line back in 2007) paintball marker that I'd been experiencing problems with where it would turn off in the middle of games. At the time I was, again, using either Sunbeam or Rayovac 9V batteries from the dollar store or CVS. I found an old duracell 9V and tested it. It had about half a charge left, perhaps a little more. I put that in and it went strong for a few months and many games before finally crapping out.
Ditto same results for my paintball loader which takes 6 AA batteries or 2 9V batteries. Sunbeam and Rayovac barely worked for a little while but Duracells kept on trucking for a long time.
Ham radio: I have an AA adapter pack for my handheld ham radio but this time it was a 3 way comparison with Sunbeam and Rayovac again taking a distant 3rd place, a rechargeable Maha battery taking 1st and Duracells nipping at the heels of the rechargeable battery for signal strength and general usability when I needed it most.
All that being said and taking into consideration those experiences, all the smoke detectors and carbon monoxide detectors in the house have Duracells in them as I'll be damned if I'm going to take a chance on the generic batteries again.
P.S. I still can't convince my mom to buy Duracells as she insists on getting the generic batteries and then keeps complaining to me that dad gets frustrated that the TV remote "doesn't work like it used to!" (Note: It had Duracells in it for a while before they finally died and were replaced with...Sunbeams!)
I get my alkaline AA's from Harbor Freight! $4 for 24. Never had a problem with them.
Duracell is for suckers. Their slogan is "Duracell is the #1 trusted brand of parents, pharmacists and first responders." Huh?
I tested name brands and the drug store house brand. Within experimental errors, they all had the same lifetime.
As for the deal it´s classic Buffett - almost a sure win, little downside risk, perfect timing. If you didn't read his biography yet (The snowball: Warren Buffett and the business of life) I highly recommend ! One of the wisest man alive.
http://www.batteryshowdown.com/
> Buy commodities, sell brands
> Consistent cash flow
This is a very Buffet style company acquired in a very Buffet kind of way.
It was a sick joke in Snow Crash in the 90s, and it hasn't changed.
The above poster believes that the phrase
> maximize shareholder value
originated as a joke in the writing of Neal Stephenson and is not simply the financial terminology it appears to be.
[0] It was Cryptonomicon, not Snow Crash.
"Enough power to shoot a pound of bacon into the asteroid belt." How can you not like that!?
I'm well aware that it's standard financial terminology, but I was referring to how Stephenson satirized it and showed how it provided perverse and destructive incentives.
To quote:
"Would your reply possibly be this? “Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist."
He was saying that raising top marginal tax rates would not result in rational investors withholding their capital. This is entirely consistent with the Duracell acquisition, which was tax efficient for both sides involved.
Your interpretation is completely wrong. The correct comparison would be if Buffett did not do the Duracell acquisition because he didn't want to pay capital gains on the increased value of his BRK-A holdings (which would be idiotic, and further reinforces the point he made)
It definitely does enter into the equation... do I really want to take all that personal risk when a silent partner actually owns half the company?
Is the 2015 a typo, or has the financial industry operated in this quarter-ahead method for awhile?
Why? Its got stacks of research & history behind it so you'll have to provide something a bit more substantial than "it's hard to understand why it's taken seriously".
In fact I'm struggling to see anything of substance in that post.
I mean it's a question of degrees. Were the pre-1972 adjustments in the core CPI fraud ? No, not really. Then with oil you start to have this nagging feeling, and what they did last year ... well sorry to say, but that's cheating. That's fraud, no question about it.
And EBITDA, sure. People used to use profit, for 50+ years. Then EBITDA. Why ? Because if you loan money for paying dividends or doing share buybacks profit will drop like a stone, EBITDA will be unaffected. But hell, if they had stopped there, that would have been reasonable. But they started cheating. Then came GAAP. This was modified 10 times over the last 2 decades or so, never to the advantage of investors of course, every single time it was to make companies look better than they did. And now most companies report non-GAAP EBITDA ... Differences are such things as that in non-GAAP future obligations (like a loan that's payment-free for a year) doesn't get counted until the payments start. Non-money agreements (e.g. we're going to build machines for X, they already paid 40% of the price, but we will only start delivery next quarter), the 40% is counted, the future obligation is not.
I mean again there is a spectrum here. Profit vs EBITDA ... probably not fraud. GAAP "adjustments" ... I think we can all agree that this is very dangerous territory. Non-GAAP reporting, for me at least that crosses the line.
As for the issues with GAAP, I can't understand why the holes in off-balance-sheet accounting haven't been closed given the number of disasters that have occurred. Government accounting, of course, is basically indistinguishable from bald-faced lying.
It's only half of the strategy. ZIRP is the other half. Not only is inflation being under-reported, the savings that "the old people" have can't keep up with inflation because the Fed is artificially holding interest rates at zero.
Its simply not intended for use as a "type" of profit number in its raw form...its an input for a valuation technique. The valuation technique factors in things like you loaning money for dividends as a further input (if you're doing it right anyway)
As for the GAAP issue - thankfully I operate on IFRS turf which seems to have less scary stuff than US GAAP from what I can tell.
But if you do that, most companies come out wildly negative. I wonder if that has something to do with it.
Of course there are thousand different loan types and various obligations companies may have that make this a subtle and very involved calculation. But it's certainly not impossible to value them, just hard. And ever since this was provided as an accepted loophole, I hope you can agree with me that it's been exploited a LOT by lots of companies.
If you look at a graph that shows both numbers, you see that they are on about the same level on average, just with more volatility in the all-items graph. Which is why economists like to use it for some things, they don't want the noise that comes from commodity price volatility and they want to see the "sticky" prices that show the direction where the inertia of inflation is headed.
Graph: http://www.investing.com/analysis/is-us-inflation-headed-hig...
Further explanation: http://krugman.blogs.nytimes.com/2013/04/30/still-coring-aft...
if you're evaluating a business and they tout ebitda as the only thing you should care about, you should look at net income in relation to it. for example, a mountain of debt or stupid financing terms would lead to high, maybe unsustainable, interest charges and ebitda would obscure the businesses' true circumstances. otherwise, it's reasonable to consider ebitda.
edit: works in an incognito window, so it seems like some extension is blocking it, but i can't think of anything an extension could block that should be required to simply scroll down in a block of text.
Complaining that a site doesn't work because you purposely disabled part of the code is akin to complaining your car doesn't work because you pulled the alternator.
To me, "trying" would involve not writing your pages in a way that means people can't read them. If for you trying involves deliberately doing the opposite of that, I also wonder why you try, and wish you would stop.
I'm fully against people creating a frustrating user experience by people using tools, but I don't blame the tools, I blame the people.
Breaking scrolling, javascript on or off, is inexcusable. The UI is the most important thing, far more important than all the other slow-loading javascript chrome that decreases this article's usability and stickiness.
You know what else I can't do? Get smooth scrolling when I page up and page down. Further, I can't use the top 100 pixels because it's occupied by a worthless black bar.
There are fewer than 80 words on the screen in a "full" page of text at normal window sizes.
This entire design is amateurish, thoughtless, and user-hostile, all because some set of web developers are trying something and end up making the page much worse than if they had tried less.
I've never done any of those things you've mentioned above and my first aim is always user experience across all devices. Don't portray all developers who are creating good experiences on the web as bad guys. Show HN itself contains numerous examples of Javascript doing amazing things in the browser and your attitude craps all over the hard work of those people.
About Buffet: He seems to be a counterexample to current economic dogmas
As a web developer you can help by:
- not pulling JS from a dozen different sites. Host whatever you want me to run in your own domain, as much as possible.
- detect that JS is disabled and put up some warning, like "site requires JavasScript".
- Say which Javascript (from which domains) are used for what: which are must haves for even basic functionality, and what doesn't work if the others are not enabled. For instance, I've never seen anything break (from my end) if I blocked JS from Google Ad Services or Google Analytics.
It's more like complaining that my car isn't allowed drive on a particular road unless I allow them to install a special additional windshield. It serves no practical purpose, and is just duplicating effort. Sure, it may work, but there's no reason to do it.
Javascript is designed to be an addon to HTML / CSS. An alternator is not designed to be an addon to a car. (Well, to be pedantic an alternator is an addon, but some means of electrical generation isn't - some means of electrical generation is integral to a (non-diesel) motor)
A better analogy might be your car refusing to start because your OnStar subscription expired - and things like that are actually starting to happen. And no, I don't like it there either.
Here's the thing with JS: I fail to see what it adds. And yet at the same time I can see rather drastic examples of what it loses. Namely security.
I will start enabling JS by default when JS-based exploits stop being a routine thing. However, I doubt that will happen anytime soon. Because, oddly enough, when you have a complex language, and everyone demands every last drop of performance, security suffers. At least assuming dev time is constant. Oh, and enabling JS also enables an absurd amount of tracking. And performance problems. Oh, and website bloat. So those are the downsides.
As such, what are the upsides? Give me a justification for why I should enable JS globally. I have yet to see a good reason. And no, badly reimplementing parts of HTML / CSS is not an answer. AJAX? There are some things that are better with AJAX, for certain definitions of better. In which case I enable it for the page / website and go from there. Still not a justification for globally enabling JS. And most of the time I'd prefer proper pages anyways. AJAX tends to break things - URLs actually being uniform resource locators and opening links in new tabs in particular. About the only thing I actually find myself wanting AJAX for is webmail clients, and it's iffy even then. Most other things are, again, bad reimplementations of HTML / CSS. (Case in point: infinite scrolling)
And as for your comment about CSS - yes, in fact. Or rather, there are a number of websites that I override the CSS on. And if/when there starts to be a steady stream of exploits for features in CSS, I'll consider blocking those by default. But currently there doesn't seem to be. Largely, I suspect, because CSS parsing isn't Turing-complete (as far as I know at least). (I know that CSS + repeated "dumb" input is Turing-complete, but that's not the same thing.)
In parting: I don't mind when disabling JS disables JS-only features. What I mind is when disabling JS means that the things that HTML / CSS are designed for no longer work because devs tried too hard to reinvent the wheel. Case in point: those websites that require JS just to display a static page because they're parsing markdown on the client or some such absurdity, and they don't even display the raw pre-markdowned text if you load it without JS because instead of doing the (relatively) sane thing of putting the text into the HTML and parsing it and replacing it, they store the entire thing as a JS string. I mean, really, if your solution is "make every client that ever visits your static website duplicate the same work (and load in massive libraries to do so, to boot) that you could do easily server-side once", you're asking the wrong question.
Your analogy fails because you think the original design intent matters, it does not. What matters is how people use things, not how they were intended to be used. His analogy was correct, developers do build their sites with js capabilities assumed and if you remove those abilities you break much of the web today and you know it.
Select the bounding rectangle that surrounds the entire article. Then use the "Delete Except" button/menu at the top and invoke "Delete Except: Without Float". This does the trick; the occluding white space is gone and you can read everything.
Print Edit:
Works fine when the plugin is disabled.
I've noticed this before with several other sites - sometimes even the video won't load on local tv news sites.
It's tax evasion that you gotta look out for