Warren Buffett's 3 Favorite Books: A guide to The Intelligent Investor, Security Analysis, and The Wealth of Nations



Latest Buffett Headlines

Loading...

Wednesday, February 27, 2013

MSN MONEY: Warren Buffett sold these 2 companies. Should you?



Both stocks soared after the legendary investor dumped them. Did he make the right call?

By StreetAuthority 16 hours ago

Stock market report copyright CorbisBy David Goodboy                                                                         
Many investors believe Warren Buffett is the greatest long-term investor of all time. With a net worth of more than $60 billion, he is by any measure, an incredibly successful investor. 

Following the value-investing teachings of Benjamin Graham and Phil Fisher, Buffett purchases stocks with bright, long-term prospects that produce high returns while maintaining a conservative capital structure. 

His stock-picking methods have been so successful, his investment firm, Berkshire Hathaway (BRK.A -1.05%), is one of the most expensive stocks on the street -- and for good reason. Shares have skyrocketed from about $100,000 in September 2011 to more than $150,000 today. This is an astounding 50% return in just under a year and a half. 


Obviously, investors would be in good stead to follow Buffett's lead when it comes to stock picking and investment philosophy most of the time. And fortunately, by studying Buffett's quarterly 13F filings, investors can discover what Buffett has bought and sold during the previous quarter.

However, by the time 13F filings are published, they are old. This means you will likely not get as good a price for a stock as Buffett did when he bought or sold it. And this can make all the difference in the world when it comes to profit. In addition, just because a pro like Buffett buys or sells a stock, it in no way reflects the value of the company as an investment. 

I like using 13F filings as a guideline, not the end-all authority. For example, if I see Buffett is buying or selling a particular company, I'll make a note to dig deeper into the company to see whether it still makes sense to buy or sell. 

After reviewing Buffett's latest 13F filing, I've discovered two of the stocks he dumped during the third quarter of 2012 have continued to provide solid performance. This proves that just because a professional is selling doesn't mean the stock is no longer a good buy. 

Here's a closer look at two stocks Buffett recently sold, despite their solid fundamentals...

Johnson & Johnson (JNJ +0.24%)
Until recently, this pharmaceutical maker was one of Buffett's largest holdings. But in 2011, Johnson & Johnson acquired Swiss medical device maker Sythes in a two-third stock and one-third cash deal. Buffett didn't like the purchase, because it diluted the value of Johnson & Johnson's shares. 

Buffett waited for the right time, and in the third quarter of 2012, he dumped 95% of his holdings in Johnson & Johnson. This lowered his stake from a little more than 10 million shares to fewer than 500,000. Johnson & Johnson is now one of Buffett's smallest holdings. 

What has happened to the stock since then? Well, shares have soared higher from about $68 in November 2012 to more than $76 today. Obviously, Buffett's selling had practically zero negative effect on the stock. Investors who bought shares from Buffett are sitting on at least a 12% return in a very short time. 

Not to mention, Johnson & Johnson has a 50-year track record of paying dividends and its $3 billion in cash clearly makes future dividend payments easy to maintain. 


Procter & Gamble (PG +0.21%)
Back in October 2012, Buffett announced his concerned about the valuation of this giant consumer product company. He cut back on his holdings by nearly 7 million shares in the third quarter of 2012. However, he still holds nearly 53 million shares of Procter & Gamble, so he is clearly not completely bearish on the stock. 

Investors who bought shares of Procter & Gamble in November 2012 are up more than 15% to the present $77. 


Perhaps most interesting to this story is the fact that famed activist short-seller Bill Ackman's added more than 4 million shares of P&G during the third quarter of 2012, increasing his stake to more than 34 million shares through his Pershing Square Capital Management. 

Ackman has been pressuring the company to increase profitability, and in the fourth quarter of 2012, year-over-year earnings climbed 12% to $1.22 a share. In addition, the company increased 2013 earnings guidance from $3.97 a share to $4.07 a share, a 3% to 6% increase over 2012's earnings.

Risks to consider: Following or fading any professional investor is not a recipe for success. Always do your own due diligence when choosing investments, no matter who is buying or selling.

Action to take: Following the moves of professional investors like Buffett provides a good starting point for your next stock picks. Be sure to look at what the pros are buying and selling, and then add your own research to determine whether the stock makes sense to you. Remember, you shouldn't sell just because a pro does. In fact, it may be a signal for you to buy. 

David Goodboy does not personally hold positions in any securities mentioned in this article.

<!-- AddThis Button E

MARKET INTELLIGENCE CENTRE: Which five 'Buffett stocks' are company insiders buying?


 Tuesday, February 26, 2013 1:48 PM 


"The Oracle of Omaha," Warren Buffet is one of the most-famous investors of all time. He has one of the strongest track records of any investor in history, resulting in everyone wanting to "trade like Warren".
Of course, it is impossible to trade like Buffett. He can pick up the phone and dial CEOs directly. He can get special preferred stock deals. He also has the capital to make purchases few of us can.
One thing we can do, is find out what stocks he likes, and try to mimic his investments as best as possible.
A recent video from Wall Street Journal highlights five stocks that Buffett owns that have seen large insider buying during the last 90 days. With Buffett behind these stocks, and insiders expressing optimism, they are worth a look.
Here are the five stocks, and how they have been performing.
1. American Express (AXP): Buffett has been a long-term believer in credit-card issuer American Express. Jan Leschly, one of the company's directors has recently bought a sizable stake in the company. The stock is up 17.9% over the last 52 weeks and is currently in a strong upward trend. With a P/E of 15.9, we believe there is still value left in the stock. With the economy continuing to rebound, and consumer spending remaining positive, we like American Express.
2. General Motors (GM): Buffett has been a long-time believer in auto-maker General Motors. In November there was a $100,000 purchase made by one of the company's directors. After a strong second half of the year in 2012, the stock got off to a rocky stock in 2013, and has traded down 7.9% since the start of the year. Earlier this month the company missed its fourth-quarter earnings forecast, which has accelerated its recent selling. With ongoing weakness in Europe, this is probably a stock we would not buy into at the current time.
3. General Dynamics (GD): The military defense contractor General Dynamics is Buffett's 24th largest holding, and recently there was a $330,000 purchase made by one of the company's directors, William Osborn. The stock has recently seen selling pressure, as investors worry about the impact of scheduled budget cuts, or sequestration, on the entire defense industry. Another reason for recent selling was a large earnings miss in January for its fourth quarter. Over the past twelve months, the stock has traded down 5%. Due to the uncertainty surrounding the defense sector, we would not be interested in setting up a new position on the stock at the current time.
4. DaVita HealthCare Partners (DVA): DaVita is a recent buy for Buffett. He first got into the company in 2011. Buffett has been adding to his holdings through February, and currently owns in excess of 14 million shares. Buffett is a director of the company, and owns over 10% of its stock. The stock has been in a strong upward trend since the latter part of 2011, and is currently just shy of its 52-week high. The stock is getting a little expensive with a P/E of 21.1, and while we like the future of the company, we would prefer to wait for the stock to sell off a bit before jumping into a new position.
5. Liberty Media (LMCA): Buffett first got into Liberty Media in late 2011. The company's chairman, John Malone, recently took a bullish stance on the stock, purchasing 490,000 shares of the company. The company recently spun off its Starz cable network, which is expected to accelerate the company's growth. The stock is in the middle of selling pressure, which is creating a nice buying opportunity. It currently has a P/E of just 7.4 , and we like the stock at its current level.


Discuss this topic @ Share Investor Forum - Register free



US NEWS & MONEY: How to Get Rich Slowly



February 26, 2013Print
Warren Buffett is one of the richest people on earth. But even he didn't make his millions overnight. He started his investment firm in 1956 with a little over $10,000, and now, over half a century later, he's worth about $45 billion.

But be honest. Do you really think you're a better investor than Warren Buffett? Do you think you can get rich quicker than the Oracle of Omaha?
A few people have done that and made their fortunes virtually overnight. Think of Bill Gates, who founded Microsoft. Or Mark Zuckerberg, whose start-up of Facebook was dramatically chronicled in the movie The Social Network. He’s now 28 years old and worth some $14 billion.
But Mark Zuckerberg was programming computers at the age of 12 and developing his "killer app" while a sophomore at Harvard. If you're prowling the hallways of Harvard, developing the next big "killer app," you have a good shot at getting rich quickly. But for the rest of us, steady wins the race. Here are six guideposts to help you chart your way:
Start saving and investing early. Warren Buffett had a paper route as a child, and in high school he ran a pinball-machine business. He started investing in stocks at the age of 11. Now, you're probably not going to start investing at age 11. But there's no reason you can't forego a few cafe lattes when you're in your 20s, and start socking away some funds in a discount investment firm like Vanguard or Fidelity.
Sign up for your employer's retirement plan. No matter how good or bad your employer's retirement plan is, it's better than nothing, whether it's a cash-balance plan, a defined-benefit plan, or a 401(k) plan. Start right away, with your first paycheck, or as soon as you're allowed, and try to contribute the maximum amount. If your company does not offer any savings plan, open your own IRA account as soon as you start working. For most people a Roth IRA is the better choice, since you can later take your money out tax free.
Get somebody else to match your contributions. If your company matches your 401(k) deposits, do the smart thing and contribute at least as much as the company match. If the company offers an employee discount for buying company stock, take the deal. It's better than what everyone else is getting. If anyone else offers to supplement your accounts—whether it's your employer, the government, or a rich uncle—take them up on it, because it's the best return on an investment you're ever likely to get.
Reinvest your dividends. When you sign up for a plan, you have a choice to take the dividends and distributions in cash, or to reinvest them. Check the reinvestment box. That way you take advantage of compounding your investments, meaning you'll be making more money from the money you just got. Don't believe me? Ask Warren Buffett.
Do not give up. There will be times when you get a statementshowing that instead of making money for the last quarter, or even the last year, you actually lost money. A lot of us went through this crucible in 2008 and 2009. But do not despair. Now in 2013, those losses from 2008 and 2009 have been made up, and then some. Warren Buffett's first investment was three shares of Cities Service Preferred which he bought at $38 per share. The stock soon dropped to $27. But Buffett held on until the shares went back up to $40 and ended up selling for a small profit. Still, he confesses he made a bad decision. He should have held on longer, as Cities Service eventually bubbled up to nearly $200 a share.
Wait a long time. Remember, you're not supposed to use yourretirement funds for 20 or 30 years. So be patient, and do not worry about short-term swings in your account. And whatever you do, do not raid your retirement fund for any daily needs. Do not use that money to take a trip to Europe or buy a new car (one exception might be for a down payment on a house). The whole idea is to let this money accumulate and grow over time.

Discuss this topic @ Share Investor Forum - Register free


ASIA TIMES: Buffett as a leading indicator


By Martin Hutchinson 


Feb 26, '13

Warren Buffett's political pronouncements are intellectually vacuous hot air, yet I suspect he retains excellent investor's instincts about the future trajectory of the US economy. So when he manifestly overpays in a US$28 billion acquisition of the food producer H J Heinz, we should listen and ponder what the deal tells us about where we are going. On cool reflection, the answer to that question is manifestly a survivalist one. For Warren Buffett it's clear: when Cash is Trash, Beans are Queens! 

As in many of his transactions, Buffett has negotiated a favorable structure in the Heinz purchase: $8 billion of his $12.5 billion commitment takes the form of 9% preferred stock, which will pay

him a fixed dividend of more than four times the current 10-year Treasury bond rate. Nevertheless, his preferred stock will be junior to $12 billion of Heinz debt; if Heinz, including its debt, becomes worth only $15 billion, as it was in 2009, then the value of Buffett's preferred stock, his common stock and his partner 3G Capital's common stock will be only $3 billion between them. 

In addition, Buffett will have little control over the investment; he is to leave the operating management to 3G Capital. One can understand the rationale for this. His saintly reputation in left-of-center circles would be severely dented if he were personally responsible for firing tens of thousands of unsuspecting US Heinz workers while relocating the entire operation to some low-wage hellhole. 

Still, the theory is that any asset is worth more if Buffett buys it, even though the justification for Berkshire Hathaway's (NYSE:BRK-A and BRK-B) astronomical share price (which, however, has underperformed the S&P 500 Index over the past five years) looks a little bedraggled as a result of this transaction. 

At first sight, it might seem that Buffett merely expects a burst of inflation, unaccompanied by a rise in interest rates. That is a reasonable supposition - one can imagine that even if inflation appeared, Ben Bernanke at the Fed or his probable successor, Janet Yellen, would be extremely reluctant to raise interest rates. 

At most they would cut back somewhat on the additional "stimulus" provided by their foolish bond purchases. Instead they would allow inflation to rise to an alarming level, meanwhile allowing investors in short-term or long-term bonds to be subjected to hugely negative real returns (and in the latter case, severely negative nominal returns as long-term rates rose in spite of Fed opposition). 

With over $40 billion of cash at the last balance sheet date (some of it tied up by insurance commitments) Berkshire Hathaway would be especially vulnerable to such an outcome. It would lose money in real terms on its short-term bonds and would be forced to recognize capital losses on its holdings of long-term bonds as interest rates rose. If it diversified its holdings into "inflation-proof" US equities, it would find their value eroded also, as corporate profits fell with rising debt costs and price-earnings ratios declined from their current high levels - as they did in the late 1970s. 

The most obvious hedge against this eventuality would be to buy gold and silver. However, Berkshire Hathaway suffers from the problem that its purchases would be large enough to distort the relatively thin gold and silver markets. With the world's annual gold mine production being only around $150 billion, any attempt to shift a substantial portion of Berkshire Hathaway's holdings into gold would push the metal's price into an upward spiral. 

There is however a simple alternative: the shares of gold and silver mining companies. These have wildly underperformed gold and silver prices in the past two years and are now heavily undervalued, unless you think precious metals prices are about to collapse. 

The largest gold miner, Barrick Gold (NYSE:ABX), for example is on a forward P/E ratio of 6.3 times, little more than a third the 17 P/E ratio of the S&P 500 Index - and unlike ordinary companies, Barrick's earnings are not vulnerable to an upsurge in inflation - they would benefit hugely from it. Barrick's market capitalization is around $30 billion, large enough to be worth a Buffett takeover, and indeed there are several other possible mining stocks, all very reasonably valued, on which Buffett could practice his takeover skills if he wished. 

A mining takeover is an equally good inflation hedge to a Heinz takeover, and much more reasonably priced. Thus Buffett, famously a value investor inspired by Graham and Dodd's 1940 masterpiece Security Analysis, must have some serious reason for not concentrating on the precious metals sector. I can think of two possibilities. 

The first is that the political effects of Buffett launching into a major campaign of buying precious metals, or making takeover bids for mining companies, would be from his point of view highly counterproductive. Such a campaign would confirm that the fiscal and monetary policies of the past five years had been highly damaging, so much so that a rational investor had been forced to protect himself from a bond and stock market collapse and the inflationary erosion of his capital. 

Needless to say, the sight of Buffett engaging in rational self-protection in this way would cause a stampede by other investors into hard assets, further damaging the confidence-trickster flim-flam on which current worldwide fiscal and monetary policies depend for their sustenance. 

To put no finer point on it: a precious metals or mining company purchase program by Buffett would be highly politically incorrect, something that appears to matter far more to Buffett than it did to his admirable Republican Congressman father Howard Buffett (R-Nebraska). 

You may argue that Buffett is above such considerations, that his calm investor rationality simply determines the optimal asset allocation strategy without regard to vulgar political considerations. Very well, in that case there is only one conclusion to be drawn about Buffett's investment outlook: he must fear not simply an inflationary upsurge, but a collapse, at least temporary, of the fabric of Western civilization. 

While either gold or silver has been the monetary instrument of choice for almost all major world civilizations, their value depends on the existence of an ordered civilization, with the rule of law and a substantial volume of monetary transactions. The exquisitely organized Song dynasty China was able to move to paper money for a century or so before the Mongol invasions, but China for most of history relied on silver as a means of exchange. Even when the country was suffering from hyperinflation in the 1940s, gold and silver were accepted as payment for the goods and services that were available. 

However, as you can read in Jung Chang's Wild Swans, during the Maoist famine years of the "Great Leap Forward" of 1958-61, when market mechanisms ceased to operate, gold and silver were no longer useful, because possession of them endangered your position in a society that was full of informants and imprisoned the bourgeois. 

Similarly during the Ukrainian famine of 1928-32, possession of gold and silver got you labeled as a "kulak" and subject to liquidation by Stalin's secret police. 

In both cases however, food itself remained a highly acceptable means of exchange and could obtain you any kind of services available, or indeed antique furniture and jewelry if your taste ran to that sort of thing and you were confident your political connections made you safe from liquidation. 

There is thus a more sinister potential implication of Buffett's Heinz purchase. He may believe that inflation will become extreme, that the monetary system will break down completely, that even gold and silver will become unacceptable stores of value in a period in which their value is after all itself a matter of fiat since gold at least has no practical use. 

In that event, a breakdown of the monetary system would presumably be accompanied by a breakdown of the distribution system, causing the entire 310 million population of the United States to revert to barter and subsistence farming. 

At that point, the most valuable commodities would become food staples and armaments. With baked beans piled in warehouses around Omaha, and a ketchup lake at an undisclosed location, Buffett could dominate the post-Apocalypse economy to an even greater extent than he dominates the present one. He would of course need a collection of bodyguards and a sophisticated means of self-defense, so maybe we should look for future Buffett purchases in the armaments sector. 

Alternatively, Buffett may believe that the chance of a truly Apocalyptic economic outcome is small, but that a temporary period of post-Apocalypse-like conditions is still possible, during which his Heinz investment (and that in any armaments manufacturers) could prove immensely valuable. 

The prospect of a breakdown of civilization may seem a remote one, but for five years we have suffered under monetary and fiscal policies more extreme than any previously attempted. Their eventual collapse is certain. Maybe Buffett's deep investment genius is telling us, in the face of his public political persona, his view on what form that collapse will take. 

Martin Hutchinson is the author of Great Conservatives(Academica Press, 2005) - details can be found on the website www.greatconservatives.com - and co-author with Professor Kevin Dowd of Alchemists of Loss (Wiley, 2010). Both are now available on Amazon.com, Great Conservatives only in a Kindle edition,Alchemists of Loss in both Kindle and print editions. 


Discuss this topic @ Share Investor Forum - Register free




THE GUARDIAN :Buffett buys his 28th daily newspaper


Warren Buffett, the acquisitive new press baron, has added another title to his stable - the Tulsa World, the second-largest newspaper in Oklahoma.
It sells 95,000 copies on weekdays and 133,000 on Sundays, while its online companion, Tulsaworld.com, is the best-read website in the Tulsa area.
Buffett (aka the Sage of Omaha) is buying the paper through his BH Media Group from the Lorton family, which has owned the paper for four generations since 1917.
The World becomes the group's 28th daily newspaper, which also owns 42 other titles plus monthly publications, magazines and related online publications in nine states.
The World will be BH Media Group's third largest paper behind the Omaha World-Herald in Nebraska and the Richmond Times-Dispatch in Virginia.
Last month BH acquired the North Carolina title, the Greensboro News & Record. Buffett's group has been on a newspaper-buying spree since May last year.
Discuss this topic @ Share Investor Forum - Register free


TULSA WORLD: Tulsa World to be sold to Warren Buffett's BH Media


Warren Buffett's BH Media Group is buying the Tulsa World for an undisclosed price.

World Publishing Co. Chairman Robert E. Lorton announced the sale in a meeting with newspaper employees Monday morning.

"This has not been an easy decision, as you can imagine, after more than 100 years for the Lortons, but for our employees - you all - for the Tulsa World and for the Tulsa community, we believe - and have decided - this is the best path to the future," Lorton said.

Robert E. Lorton III, the company's CEO and the newspaper's publisher, will leave the newspaper and will be succeeded as publisher by John R. Bair, previously the company's president and chief operating officer.

Bair said: "I sit here today with mixed emotions. For the past 12 years, I have worked for the Lorton family, and I will miss interacting with them daily. They are passionate about the newspaper industry and care deeply about this community.

"However, this is an exciting time in our industry, and I am confident that this announcement is in the best interest of our shareholders, employees and the communities we serve. BH Media has a top-notch management team, and I look forward to working with them to build upon the great legacy of this institution."

BH Media Group is a division of Buffett's Berkshire Hathaway Inc., which owns or is a major shareholder in companies such as Fruit of the Loom, BNSF railroad company, Helzberg Diamonds and See's Candies. FlightSafety International, which has a new $42 million, 375,000-square-foot flight simulator manufacturing facility in Broken Arrow, is also a unit of Berkshire Hathaway.

BH Media Group owns 28 daily newspapers and 42 weekly newspapers in Nebraska, Iowa, Texas, Oklahoma, Virginia, North Carolina, South Carolina, Alabama and Florida.

The World will be the third-largest newspaper in the BH Media Group chain, behind the Omaha World-Herald in Nebraska and the Richmond Times-Dispatch in Virginia.

Bair said Buffett is one of the smartest investors in the world, and his decision to buy the Tulsa World "speaks very highly of our employees and business in general. This change of ownership only strengthens our ability to serve this region."

Gov. Mary Fallin greeted the news with praise for the Lorton family, and she welcomed Buffett and Berkshire Hathaway.

"The Lortons have been living and writing Oklahoma history for over a century," Fallin said. "Under their leadership, the Tulsa World has become a successful business and a widely read paper. My thanks go out to a great Oklahoma family for their contributions to the state and to journalism. And to Berkshire Hathaway, welcome to Oklahoma! We wish the company great success."

The Tulsa World, with a daily circulation of 95,000 and a Sunday circulation of 133,000, is the leading provider of local news and information for the Tulsa area. Tulsaworld.com is the largest and best-read local website in Tulsa County and the surrounding area.

At the conclusion of Monday morning's meeting, Tulsa World employees gave the Lorton family a standing ovation.

Terry Kroeger, the CEO of BH Media Group, said: "The Tulsa World is a special newspaper in an outstanding market, and we are honored to have the opportunity to own it. This is a great fit for our company, and we look forward for this region. We welcome the Tulsa employees into the BH Media family and are delighted to have the opportunity to work with them."

Negotiations for the newspaper's sale have been taking place for a couple of months, said Kroeger, who added that the newspaper's name and downtown headquarters won't be changing.

"The Tulsa World (name) is a big piece of what we're buying," he said.

The newspaper's circulation and profitability and its strong connections to a thriving community all made the World an attractive purchase, Kroeger said.

Tulsa's low unemployment and the strengths of the education, medical and petroleum industries in the city make the market attractive, he added.

"It seems obvious to us that there are some very positive things going on in the market that bode well for the future of this marketplace," Kroeger said.

Community-oriented newspapers are key to the BH Media Group strategy, he said.

"Things that we find in an Omaha or a Tulsa or a Richmond or, for that matter, a College Station, tend to have something to rally around locally," he said. "I'm not picking on the Chicagos or the New Yorks of the world, but I just think it's harder to do that there."

Larry King, BH Media Group's vice president for news and content, told a gathering of Tulsa World editors that news decisions will continue to be made locally.

"When it comes to news, you're not going to hear from me," he said. "I just want to assure you that there's no one from Omaha looking down your throats and trying to tell you how to cover Tulsa."

Eventually, the chain could look at the editorial software used to produce the newspaper, the digital content the newspaper purchases from vendors, and efficiencies that are possible by combining efforts with other BH Media Group newspapers, but beyond that, the newspaper will be locally operated, he said.

"I want to assure you, ... you won't hear from me on anything having to do with local or regional coverage or how you cover the news - nothing," King said, inviting World editors to contact their counterparts at other BH Media Group newspapers for confirmation of that.

Rick Thornton, vice president for audience and content development at the Richmond Times-Dispatch, said local editors have been left in place there to guide the newspaper since its sale to BH Media Group about June 25.

"They haven't gotten in the middle of anything news-wise or editorial-wise," he said. "Those are all local decisions that are made by our editors."

The newspaper hasn't had big personnel shifts since the purchase other than the addition of four reporters to the staff in an effort to beef up local coverage, Thornton said.

"The publisher is still the publisher. The editor is still the editor. All the senior editors are still the senior editors. All the reporters are still the reporters," he said.

King said the Tulsa World's content-sharing agreement with The Oklahoman - which was recently sold to the Anschutz Corp. of Denver - will likely continue and that content-sharing options with other BH Media Group newspapers likely will develop.

Kroeger said the Tulsa World is and has been profitable, which made it an attractive buy.

"We don't have any newspapers that don't make money," he said.

King said BH Media Group remains bullish on the newspaper industry.

"I don't think I'm telling any secrets, but there'll be more (purchases) to come," he said.

The sale of the Tulsa World is expected to close in March.


Discuss this topic @ Share Investor Forum - Register free