Berkshire Hathaway (NYSE:BRK.B) through is Mid American subsidiary is buying energy company NVE at a substantial premium. Dividend yield is slightly north of 3%. Revenues jumped smartly after cost cutting and some environmental factors such as cost of fuel and plant closures. After some hard work the positive cash flow should start to kick in and reward investors. Sounds like a good deal.
But energy costs are still high for consumer and commercial accounts. Everything is about energy savings. Solar power if it ever truly takes root will obsolete the classic power utility. Warren Buffett just bet that green energy will not negatively impact this investment.
In the very near future he is correct.
However if solar power is to work it will be in areas with high sunshine. Like where NVE operates. Solar Power will come around. It’s a question of time. Individual homes and businesses will buy more and more panels and go off grid.
Then what Warren? Then what? That’s quite the Black Swan waiting.
The financial metrics appeal to Buffett’s mind-set. Supposed wide moat. Sustainable cash flow. Few serious competitors.
But when the disruptor finally happens it will spread like wildfire. Imagine and American economy with each household having another hundred bucks a month as disposable income.
Warren Buffet claims not to understand technology. He does not understand Microsoft or Apple or Google. but he has made a time bet against Solar Power. Are you with it or against it?
George Gutowski writes from a caveat emptor perspective.