This morning, I woke up at around 7:30 AM and drove to Omaha, NE. After showering at an Anytime Fitness, I decided to visit one of the previously-researched attractions: Bob Kerrey Pedestrian Bridge. The bridge is rated very highly on Trip Advisor for good reason. It spans about 3,000 feet across the Missouri River connecting Council Bluffs, IA and Omaha, NE.
After walking across to the Omaha side of the bridge, I stopped at a NPS visitor center, where a young lady suggested I visit the Lewis Clark Memorial and Hitchcock Nature Center. She explained that “there are hills created from sand deposits which only exist in Omaha and China, nowhere else in the world.” After walking back to the Council Bluffs side, I drove to Lewis and Clark Memorial which is a tribute that was created in 1935 to commemorate the Lewis and Clark Expedition. The memorial had a nice, distant view overlooking Downtown Omaha. While on the way to the Lewis and Clark Expedition, an older guy in a pickup truck began honking at me and I luckily realized why. Within a few seconds, I would be passing under a bridge with a clearance of under 10 feet. Passing under this bridge, would have destroyed the RV and caused thousands of dollars of damage. He was nice enough to show me another way of reaching the Lewis and Clark Memorial.
After visiting the Lewis and Clark Memorial, I continued driving north to the Hitchcock Nature Center. The Hitchcock Nature Center was a unique landscape with vegetated hills. As the lady at the NPS was saying, it’s almost as if I was walking on highly compacted, vegetated sand dunes. In Southern California, we don’t have wet enough weather to have the vibrant, varying greens that the Midwest has. The peace and solitude in the landscape was refreshing. For the first time in the trip, I was immersed in the sounds, views, smell, and touch of nature. After this brief experience with nature, I’m even more excited to visit Colorado, Utah, and Arizona.
On the way back from Hitchcock Nature Center, I decided to stop by the CenturyLink convention center to visit the BRK exhibition booths. At the convention center, there were display/information/entertainment booths from all BRK subsidiaries including IMC (new parent company of Iscar), See’s Candies, Heinz, Dairy Queen, Clayton Homes, BNSF Railway, etc.
The reasons for the exhibition seems to be a mixture of information/entertainment/ sales/ public relations/increasing passion of shareholders. It’s interesting to notice the wide variety of businesses that BRK is involved in, industries ranging from airplanes, industrial tools, railroads, condiments, beverages, home manufacturing, vacuums?, newspapers, shoes, and more.
The most important/unique of these items is Kirby Vacuum (a subsidiary of Scott Fetzer.) Apparently 500,000 of these vacuums are sold each year through door-to-door demonstrations. This is an interesting marketing method, especially nowadays with the prevalence of ecommerce, but I guess it makes sense with something that’s as expensive (upwards of $1,000) and performance-oriented such as a vacuum. Anyway, this company seems out of place but so do each and every one of Berkshire’s subsidiaries. Now that I think about it, the main component of Berkshire wasn’t at that meeting. Today, everyone at the convention center was looking at a few interesting companies. But as Warren Buffett has repeatedly explained, the true magic and secret of BRK lies in the huge amount of profitable float generated by its insurance powerhouses. The only one of these insurance companies present at the hall was Geico. Separated from its insurance subsidiaries, the non-insurance BRK companies displayed in the exhibition hall were simply a decent, impressive collection of companies. It would be interesting if someone analyzed/calculated BRK’s annual returns of companies excluding the effects of insurance-related profits and float. There’s a chance that there would be better-performing investors (Blackstone, Sam Zell, Carl Icahn) if solely non-insurance investments are considered.
After the exhibition hall, I drove to the legendary Nebraska Furniture Mart. NFK is a huge, scattered campus of buildings and warehouses located on 77 acres of land. The best way to describe it is a combination of Best Buy, Ikea (but higher quality) and Home Depot. It’s amazing how an immigrant woman was able to grow a small furniture store into an operation of this size through sheer discipline and determination. The prices didn’t seem to be bargain-basement low, but the products seem to be good quality and there is a huge selection.
This investment seems to fit into BRK’s strategy of having a large moat and a scalable business. The overhead for NFM’s Omaha location is probably negligible, which means that it’s rent/sales ratio is also negligible. It’s very hard for Ikea or a smaller furniture store to open up a location of any size, since they’ll be immediately disadvantaged by their smaller size or higher overhead. Businesses such as BRK can sell close to a billion dollars per year at each one of these Mega-sized locations and can also draw customers from hundreds of miles away, especially in rural areas. In a way, each one of these locations is like it’s own corporation and it’s not surprising that this business was and still remains attractive to Warren Buffett. In a way, the fundamentals and characteristics of NFM are perfectly aligned with those of BRK and Warren Buffet.
