CNBC Special on Warren Buffett
June 2nd, 2009
CNBC will be airing a special on Warren Buffett at 10pm called Warren Buffett: The Billionaire Next Door.
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Posts Tagged ‘warren buffett’
It’s Time To Buy
February 7th, 2009
Great article from Fortune Magazine by Carol Loomis.
Is it time to buy U.S. stocks?
According to both this 85-year chart and famed investor Warren Buffett, it just might be. The point of the chart is that there should be a rational relationship between the total market value of U.S. stocks and the output of the U.S. economy - its GNP.
Fortune first ran a version of this chart in late 2001. Stocks had by that time retreated sharply from the manic levels of the Internet bubble. But they were still very high, with stock values at 133% of GNP. That level certainly did not suggest to Buffett that it was time to buy stocks.
But he visualized a moment when purchases might make sense, saying, “If the percentage relationship falls to the 70% to 80% area, buying stocks is likely to work very well for you.”
Well, that’s where stocks were in late January, when the ratio was 75%. Nothing about that reversion to sanity surprises Buffett, who told Fortune that the shift in the ratio reminds him of investor Ben Graham’s statement about the stock market: “In the short run it’s a voting machine, but in the long run it’s a weighing machine.”
Not just liking the chart’s message in theory, Buffett also put himself on record in an Oct. 17 New York Times op-ed piece, saying that he was personally buying U.S. stocks after a long period of owning nothing outside of Berkshire Hathaway stock but U.S. government bonds.
He said that if prices kept falling, he expected to soon have 100% of his net worth in U.S. equities. Prices did keep falling - the Dow Jones industrials have dropped by about 10% since Oct. 17 - so presumably Buffett kept buying. Alas for all curious investors, he isn’t saying what he bought.
Buffett Buys A Harley
February 3rd, 2009
Warren Buffett invested 300 million dollars in 5 year bonds of Harley Davidson. The investment came at a steep price for Harley which is in the form of 15% interest. The 5% increase over earlier deals with General Electric and Goldman Sachs illustrates just how difficult it is to obtain capital right now. Buffett’s investment in Harley could not have come at a better time for the company. Harley was facing a liquidity crisis as its cash position had dwindled to 600 million. Buffett’s vote of confidence in the company has sparked a 17.5% rise in Harley’s stock to $14. Harley Davidson is selling an additional 300 million in bonds to raise capital.
Buffett & Economic Pearl Harbor
January 20th, 2009
Below are excerpts from an interview with Warren Buffett on the US economy. I found this on Bloomberg. The link can be found at the bottom of the page.
The U.S. is facing an “economic Pearl Harbor” that has spread fear throughout the country, billionaire investor Warren Buffett told Tom Brokaw in an interview broadcast yesterday on Dateline NBC.
“We have a negative feedback cycle going on right now,” Buffett said, according to a transcript of the interview on CNBC’s Web site. “We have fear which leads to people not wanting to spend, and not wanting to make investments. And that leads to more fear.”
Buffett, the chairman of Berkshire Hathaway Inc., said Barack Obama is “the absolute right commander in chief” to guide the country through the financial crisis. Obama, 47, will be sworn in as the 44th U.S. president tomorrow in Washington.
He can “convey to the American people what needs to be done, not to expect miracles, that it’s going to take time,” Buffett, 78, said in the interview.
Buffett declined to predict how long the economy will remain under duress, except to say that he doesn’t expect a recovery to take five years. He contrasted the current economic crisis with the period “three or four years ago,” when “everybody lent you more and more on a house that kept going up, and you could keep spending money you didn’t have.”
Buffett said the economic slump is the worst since World War II, though not as severe as the Great Depression. He said “it’s never paid to bet against America,” and that the country would come through the crisis. “But it’s not always a smooth ride.”
Photo and Article by Bloomberg
Morningstar’s 2008 CEO of the Year
January 8th, 2009
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Morningstar has named Warren Buffett its 2008 CEO of the Year. Listed below are excerpts from the article.
Beyond creating a company that treats common shareholders with the utmost fairness and respect, one needs only to look at the long-term value created at Berkshire Hathaway to see why Buffett deserves the award. Since taking the helm of the sleepy textile business 44 years ago and turning it into arguably the strongest conglomerate on the planet, Buffett and his managers have grown the book value per A share from $19 to just over $77,500, as of Sept. 30. This translates to a 20.7% annualized increase in book value since 1965, versus a mere 9.6% annualized return in the S&P 500 (including dividends) over the same time period.
Investors can learn a lot from studying Buffett’s actions, but his decisions to stay on the sidelines are also notable. Indeed, he steered Berkshire Hathaway from many of the temptations that have caused competitors to crash and burn this past year. For instance, Buffett warned back in 2003 that derivatives were “financial weapons of mass destruction” that are “time bombs, both for the parties that deal in them and the economic system.” Given all that has transpired in 2008, these statements–and Berkshire’s actions–look especially prescient. While AIG and other competitors now wallow in bankruptcy or near-bankruptcy, Berkshire is as financially healthy as ever.
Beyond derivatives, Berkshire also avoided excessive leverage back when credit was flowing a little too easy and asset prices were too high. In mid-2007, the opening salvos of the credit crisis were being shot across the subprime mortgage market, and many financial firms were levered to the hilt. Yet Berkshire had $47 billion–over one third of its equity at the time–in cash and cash equivalents, most of it unencumbered. By practicing prudence and patience earlier in the decade, Berkshire was in a position to put large amounts of capital to work in 2008. In other words, rather than blowing its ammunition hunting squirrels a few years ago, Berkshire has been able to shoot the proverbial elephants now walking by.
Of course, we’ve always preferred managers who do not view the companies they run as their personal piggy banks. I think we as owners are getting one heck of a deal by paying Buffett a $100,000 salary. (He earns less than $200,000 in total compensation annually.) Buffett allows his significant ownership stake in Berkshire to act as motivation enough to perform well as a manager, which nearly perfectly aligns his interests with those of common shareholders.
While many corporate managers may say they are positive and careful stewards of owner capital, few overtly view common shareholders for what they really are–partners. For being a successful managing partner, both in principle as well as in practice, Warren Buffett is our 2008 CEO of the Year.
Is GE a buy?
November 17th, 2008
I have been watching General Electric’s stock for the past few months as it’s value has declined significantly. Warren Buffett recently bought 3 billion dollars of GE preferred stock yielding 10% and has the option to buy 3 billion dollars worth of more shares at $22.25 over the next five years. This plays right into Buffett’s philosophy of investing in companies with a wide economic moat. The GE name and its diverse array of industrial and financial businesses are a major competitive advantage. The stock is currently trading at about $15.50 a share. The stock has declined about 60% from its 52 week high of $38.67. I am not a huge fan of General Electric but at its current level it is an intriguing stock. GE currently pays a dividend of $1.24 which is a 7.7% yield. I have wondered if the dividend is safe. GE’s management made an announcement last week that they will pay the dividend through 2009. So I will take them at their word. Could GE decline below $15.50 in the near time? Yes. But I have a hard time believing that this industrial conglomerate will not be worth more than $15.50 a share in the future. I believe that the company is trading at a discount to its intrinsic value, So I purchased 250 shares of GE stock at below $16. In my opinion, any pullbacks below the current price are buying opportunities.
