Posts Tagged ‘warren-buffett’

Can This Stock Market Rally Last For Ever?

November 26th, 2014 Shoop:  It’s age-old wisdom. Wisdom that I’ve heard from my parents, grandparents, scholars and investment advisors. “Invest in stocks and you will receive 10% a year in return” — as if it is bulletproof.

Sure, it sounds fantastic. Receive 10% a year by investing in an index. You can’t beat that!

If you believe in this 10% a year return on average, then I have some information you need to hear …  Read more…

Earnings, Stocks, Technical Trading, Today's Top News, Inc. (AMZN): Why There Is A Better Way…

April 26th, 2013 Yes I just said that.  And you can quote me!  If you want to get rich, do not buy Google Inc (NASDAQ:GOOG),, Inc. (NASDAQ:AMZN) or even Apple Inc. (NASDAQ:AAPL) stock. Instead buy stocks Read more…

Billionaire's Portfolio, Investing Guide, Markets, Technical Trading

What Warren Buffett’s Shareholder Letter Tells Us: Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B)

March 6th, 2013

warren buffetDiane Alter: Warren Buffett’s shareholder letter to Berkshire Hathaway Inc. (NYSE:BRK.A),(NYSE:BRK.B) investors was full of the Oracle of Omaha’s market wisdom and one-liners, plus some hints about what Berkshire will pursue in 2013. Read more…


The Secrets of the Masters

March 6th, 2013

yodamasterSometimes I almost feel sorry for the market timers. There’s a reason famed money manager Ken Fisher calls the stock market “The Great Humiliator.” Nobody can know with any certainty what the stock market will do next week, next month, or Read more…


Warren Buffett Is Overrated and Billionaire David Tepper Is The Greatest Investor In The World: Berkshire Hathaway Inc.

March 5th, 2013

warren I don’t have to remind you again that Billionaire Hedge Fund Manager David Tepper has the greatest track record of any investor over the last 20 years, he makes Warren Buffett look foolish. Buffett who couldn’t even beat the S&P 500 last year Read more…

Billionaire's Portfolio, Markets

Does The H.J. Heinz Company (HNZ) Deal Mean Warren Buffett Has Become A Doomsday Prepper?

February 26th, 2013

warren buffetMartin Hutchinson: At first sight, Warren Buffett’s deal with the Brazilian-led private equity firm 3G Capital to purchase H.J. Heinz Company (NYSE:HNZ) looks strange. Read more…

Economy, Markets

How To Play The Bakken Oil Boom Like Warren Buffett (TSO, PSX, CP, BRK.B, CNI)

January 15th, 2013

warren buffetTony Daltorio: Many investors have heard of the Bakken oil field in North Dakota and Montana, but most are unaware of how important this formation is becoming to the U.S. economy. Read more…

Commodities, Crude Oil, Energy

Warren Buffett’s Minimum Tax Rate Proposal (JNJ, PM, CSCO)

November 27th, 2012

Jeff Uscher: In his op-ed in today’s The New York Times, billionaire investor Warren Buffett reiterated his case for higher taxes on the wealthiest Americans, calling for a minimum tax rate Read more…

Government, Markets

Why Changes In Tax Law Will Devastate Our Economy

November 20th, 2012

Michael Snyder: If you have a farm or a small business, would you like to pass it on to your children when you die?  Well, unless Congress does something, it is going to become much, Read more…

Economy, Government, Markets

Warren Buffett On Stocks, QE3 and The Deciding Factor In Election 2012 (BRK.A, WFC, IBM)

October 26th, 2012

Ben Gersten: Legendary investor Warren Buffett appeared on CNBC’s Squawk Box Wednesday morning to answer the biggest questions regarding the global economy, stocks, Election 2012, and more.  Read more…

Government, Markets

Is Warren Buffett Wrong About this Well-Known Stock?

June 6th, 2011

Is Warren Buffett Wrong About this Well-Known Stock?

Back in February, I took a close look at Warren Buffett's $12 billion stake in Wells Fargo (NYSE: WFC).

Well, it's now more like a $10 billion position. He hasn't sold shares, but the bank's stock has been steadily dropping, giving the Oracle of Omaha a rare black eye. To understand Buffett's next move with this massive banking concern, you need to understand why shares are marching backward.

The long-term view
Buffett didn't simply start acquiring shares in recent quarters. He's been doing so for a number of years. But you could argue that his long-term bullishness has been a bit misplaced, or at least a bit premature. He steadily bought Wells Fargo shares in the middle of the last decade, despite signs the housing sector was starting to overheat. More recently, he bought a lot of stock last fall and winter on hopes the U.S. economy was on the cusp of a broad-based upturn. As a result, his buying binges in 2007 and again in late 2010 took place in the low $30s, above the current price.


Buffett Just Bought Over $50 Million of This Stock

May 18th, 2011

Buffett Just Bought Over $50 Million of This Stock

Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) released its latest 13-F filing with the Securities and Exchange Commission (SEC) on Monday, May 16, to detail its stock portfolio holdings as of the end of the first quarter. The release is highly-anticipated each quarter and, though the first quarter ended more than six weeks ago, it offers the timeliest way to see which stocks Warren Buffett bought, sold or held during the 12-week period.

The latest twist at Berkshire is that Warren Buffett hired 39 year-old Todd Combs from CastlePoint Capital Management back in October 2010 to help him manage Berkshire's $53.6 billion portfolio. As such, this represented the first full quarter in which Combs' picks will be commingled with Buffett's. Previously, Lou Simpson from Berkshire insurance subsidiary Geico had picks that showed up in Berkshire's quarterly filing, but Simpson retired in August 2010 at the age of 73.

Only three stock trades took place during Berkshire's first quarter. The first consisted of a sale of integrated energy firm ConocoPhillips (NYSE: COP), which Buffett has been steadily selling off over since an admitted bad call on his part when he started acquiring shares in 2008, when oil hit all-time highs of more than $140 a barrel. Oil declined rapidly along with the explosion of the financial crisis, and many oil firms remain well off their 2008 highs. Conoco traded at more than $90 per share in June 2008 and can be had currently for close to $70 a share.

The second transaction could be significant, but there is simply no way for investors to find out. This is because the recent filing states that “confidential information has been omitted from the Form 13F and filed separately with the Commission.” Given Buffett's market-moving abilities, he has a unique and special arrangement with the SEC to keep certain positions close to his chest while he is building them.

The only purchase during the quarter consisted of credit card firm MasterCard (NYSE: MA). Berkshire acquired 216,000 shares at some point between January and March and ended the first quarter with a total position size of $54.4 million and average cost of close to $252 per share. The call has already proven a winner — the stock is up close to 11% from Berkshire's average purchase price.

The first thing that stands out is the position is quite a small, 0.1% of Berkshire's overall portfolio. This makes it likely that this represents what is likely Combs' first purchase for Berkshire, and is further supported by the fact that he held the stock in the portfolio he was managing while at CastlePoint. Investors are obviously in the early stages of getting comfortable with Comb's recommendations, but it's reasonable to conclude that the MasterCard purchase was approved by Buffett and discussed in detail while the position was being purchased. [My colleague David Sterman recently discussed Buffett's investment approach and what he has learned from the Oracle of Omaha's annual letter]

The MasterCard purchase was indeed timely, as industry uncertainty was high because the Dodd-Frank financial reform legislation that was enacted on July 21 contains a provision to regulate transaction fees that credit card companies charge retailers for the right to use their cards. MasterCard is the second-largest credit card brand in the world, with an estimated 31% of the market. This is behind archrival Visa (NYSE: V), at about 63%. Given they both control more than 90% of the market, they are the most likely to be adversely affected by restrictions on what credit card firms can charge their customers.

Government price control concerns have subsided for the time being, which explains a good part of the strong stock performance MasterCard has had so far this year. Based on sales of $5.7 billion during the past year, MasterCard can grow much faster than Visa, which reported sales of $8.6 billion during the same period. MasterCard's returns on invested capital (ROIC), an important metric that Buffett tracks, is more than 40% during the past 12 months, well above Visa's 13%.


The Sinking of QE2

May 5th, 2011

You’ll recall that QE2 — the fancy name for the Fed’s market manipulations — ends June 30. There is no particular reason why that date should be anything special. It’s the official end of QE2. But the market will likely anticipate the end of QE2 before it actually ends.

As Barron’s put it recently:

“Just as risk markets began to rally months ahead of the actual start last November of the Federal Reserve’s program to purchase an additional $600 billion of Treasury securities, these same markets may be beginning to anticipate the end of the central bank’s buying.”

If this holds true, then the market ought to fall as QE peters out, all other things being equal (which they never are).

There are many ways to show how the Fed is turning the market into its own personal yo-yo. The easiest way to see how the market spins up and down with a jerk of the Fed’s massive balance sheet is to plot the two against each other. When the Fed expands its balance sheet (by buying stuff, thereby putting money out there), the market rises. When it contracts its balance sheet (by selling stuff, thereby taking in cash), the market sags. Here is a chart that shows the tight correlation since the March 2009 bottom:

Whatever happens, you can rely on the herd of investors to reliably do the wrong thing. Most investors sell near bottoms and buy near tops, though that is the exact opposite of what they should be doing.

The most arresting recent statistic on this front that I’ve seen comes from Thomson Reuters’ Lipper data, which tracks money flows into mutual funds. Many investors stayed away during 2009. Even in 2010, the trickle of money heading to stock mutual funds was hardly anything.

But this past February, after the market had doubled from its lows and gained 30% since August, investors finally decided it’s a good time to go back in the market. In one week in February, investors poured more money into funds than they had in all of 2010 — about $7 billion.

A recent issue of The Economist provided an excellent illustration of how most investors do exactly the wrong thing in their timing efforts. The financial magazine produced a chart showing how investors tend to chase after the mutual funds that have been doing well, and tend to sell the funds that have been doing poorly. In general, these mutual fund investors should have done the exact opposite.

As the Economist’s story details, the funds attracting the largest amounts of new investment tended to underperform after all the money arrived. By contrast, the funds that suffered the heaviest outflows tended to outperform after all the money left!

It’s a long-held fallacy that successful investors are great market timers. Many people think that successfully predicting where the market is going to go is an important part of doing well in markets. It isn’t.
As Warren Buffett says, “Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.” He isn’t the only one to have come to this conclusion. The most successful investors I know and have studied don’t bother trying to predict the market.

In “Becoming Rich,” Mark Tier studied the investment habits of three great investors: George Soros, Warren Buffett and Carl Icahn. Tier concludes, “Successful investors don’t rely on predicting the market’s next move. Indeed, both Buffett and Soros would be the first to admit that if they relied on their market predictions, they’d go broke. Prediction is the bread and butter of investment newsletter and mutual fund marketing — not of successful investing.”

That’s why you don’t see me drawing charts with lines on them guessing where the market is headed next. Of course, it’s fun to guess what might happen, but realize these are guesses. When it comes to actually putting money to work, you ought to rely on something sterner, like good old-fashioned research on what you own.
When that process of digging around for stuff turns up fewer ideas, then you have to be willing to let the cash accumulate for a while. In my personal account, I’m up to 25% in cash. It’s just the natural outcome of my own bottom-up research.

I’ve issued a lot of “sell” recommendations this year in my investment letter, Capital & Crisis. And I haven’t added many new ideas so far. This is not a market call, but the end result of a process of buying what’s cheap and selling (or avoiding) what I think is expensive or unattractive.

So QE2 is background noise, something we have to recognize is distorting markets. But we still have to do the spadework of investing — digging around, thinking and digging around some more. Add to that a lot of patience.
One of my favorite investors was Phil Carret, who died in 1998 at the age of 101 and who worked at his art until almost the very end. He witnessed more than 30 bull markets and more than 30 bear markets over a lifetime of investing. Warren Buffett admired him, often inviting him to Berkshire’s annual meeting and calling Carret the “Lou Gehrig of investing.” (Gehrig was the “Iron Horse” of baseball, before his consecutive games played record fell to Baltimore’s Cal Ripken Jr.).

When asked on the Louis Rukeyser show in 1995 what was the single most important thing he had learned about investing over his long career, Carret had a one-word answer: “Patience.”

The Sinking of QE2 originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Bill Bonner, the founder of the the Daily Reckoning released his latest book Dice Have No Memory: Big Bets & Bad Economics From Paris to the Pampas in April 2011.

Read more here:
The Sinking of QE2

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Mutual Fund, Uncategorized

3 Stocks in this Sector Could Easily Double

April 8th, 2011

3 Stocks in this Sector Could Easily Double

Between 1970 and 1975, a quarter of companies in the U.S. railroad industry were forced to file for bankruptcy protection. There were simply too many competitors and they could not handle the high levels of government regulation, volatile fuel costs and the billions of dollars it took to maintain thousands of miles of track, locomotives and freight cars.

Since that time, the remaining competitors have steadily merged and there are only seven leading players today. The leading players now have the size and scale to justify high capital expenditure costs and can effectively compete with the trucking industry. A government report stated that railroads have seen productivity gains that have far exceeded the gains seen in other industries and the economy as a whole.

In perhaps the biggest vote of confidence the industry could ever receive, Warren Buffett announced he would spend $26 billion to acquire Burlington Northern Santa Fe, one of the largest companies in the space, in late 2009. Railroads have become great investments.

But I'm not interested in railroads as an investment. I'm more interested in the next sector to follow in their footsteps: the leading U.S. airlines.

This may seem strange, given the history of bankruptcy in the airline industry. Buffett himself once famously called airlines “lousy investments.” But the same could be said about the railroad companies at one time. I think some of the major airlines have turned over a new leaf, so contrarian investors who get in early before the crowd realizes it stand to make a lot of money.


Could this Man Replace Warren Buffett?

March 24th, 2011

Could this Man Replace Warren Buffett?

Warren Buffett takes a seemingly cavalier approach to leadership succession plans. The 80-year-old investing legend likes to insist that when it comes time for him to step down from Berkshire Hathaway (NYSE: BRK-B), very little will change. After all, the Berkshire has a deep bench of executives, all of whom are well-schooled in the firm's winning investment philosophy.

In reality, a change in leadership at Berkshire brings significant risk. First, Buffett's unique intellectual skills can be hard to replicate. Simply mimicking his approach is not the same as thinking creatively, as he does. Second, even if such a successor were a very solid candidate, it will be hard to follow Buffett's plain-spoken folksy style that really connects with investors. A successor that lacks Buffett's charisma may not be able to retain the key relationship between Berkshire and its investors, turning the firm into just another anonymous mega-sized investment organization.

Since Warren Buffett dropped hints at a March 21 conference in India that Berkshire insider Ajit Jain could easily assume the reins, investors need to take a close look at his background and style. Could he really fill those giant shoes?

A deeper look
The 59-year old Jain is well-versed in all-things Buffett. He's been with the firm for more than 20 years, most recently running Berkshire's reinsurance group (which provides back-up insurance to insurance companies when major claims arise). Buffett has said that the Jain-led reinsurance group has delivered out-sized profits to Berkshire. That tells us Jain is an expert in this industry, where the ability to price risk policies can be the difference between big losses and big profits. (Just ask AIG (NYSE: AIG)). The fact that Berkshire's insurance divisions generate consistently stable and robust returns is a clear feather in Jain's cap.

Here's what Buffett wrote about Jain in a 2010 letter to shareholders:

“Ajit (Jain) insures risks that no one else has the desire or the capital to take on. His operation combines capacity, speed, decisiveness and, most importantly, brains in a manner that is unique in the insurance business,” adding that “by his accomplishments, he has added a great many billions of dollars to the value of Berkshire. Even kryptonite bounces off Ajit.”

If I were looking to launch a reinsurance business from scratch, I would love to hire this guy. But if recent deal-making is any guide, Berkshire may be starting to diminish the role insurance plays in the Berkshire portfolio. In the past two years, the company has spent a collective $44 billion to acquire a railroad (Burlington Northern) and a specialty chemicals company (Lubrizol). Berkshire's investment team went “outside the box,” identifying a clear disconnect between current market value and the total value of future cash-flow streams. You need deep industry understanding of the transportation sector, for example, to know that railroads' cash flows won't be threatened by the trucking industry. Jain appears to know the insurance business well.

Of perhaps greater concern, Mr. Jain would be hard-pressed to be the inspiring face of the company. Admittedly, Berkshire is a deep, strong team and it's not just about Buffett. But he deserves major credit for establishing a loyal shareholder base though his strong track record and his folksy aphorisms.

Action to Take –> It's generally assumed that Berkshire Hathaway will continue to flourish long after Warren Buffett is gone. Is that really the case? Are his understudies just as savvy as he is? We can't know. Even if they are, some Berkshire investors are going to decide to move on when Buffett does, simply because he is the reason they hold shares.

So there is real risk in this transition. I'd be inclined to start selling into rallies as the Buffett era comes to a close. He may stick around for another five years or more, or may he look to retire very soon. When that happens, look for moderate shareholder churn as some investors book profits in what has been a great trade.

– David Sterman

P.S. — Few investors realize that a 20-year energy agreement between the United States and Russia is about to expire. This deal supplies 10% of America's electricity. As broke as our government is, the situation is so serious that President Obama is asking for $36 billion to avert this crisis. And Republicans support him. Here's what's going on…

Disclosure: Neither David Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: David Sterman
Could this Man Replace Warren Buffett?

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Could this Man Replace Warren Buffett?


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