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Warren Buffett Stocks: How to Invest Like the Oracle of Omaha
For months, the Obama administration has been using Berkshire Hathaway Inc. (BRK.A, BRK.B) Chairman and CEO Warren Buffett's considerable name recognition to try to change how America's top earners are taxed.
The fate of the so-called "Buffett Rule," which would apply a minimum tax of 30% to individuals making more than $1 million a year, still has yet to be determined. Chalk it up to politics as usual.
There is, however, a list of other Buffett Rules that are far more useful to investors.
They're the tricks of the trade that have made Warren Buffett the most successful living investor, and one of the richest men in the world.
After all, the Oracle of Omaha hasn't earned his nickname by mistake. To many, it seems the billionaire has a sixth sense when it comes to investing, a supernatural ability to divine the good investments from bad.
But while his ability may be uncanny, there's really no magic at work. What Buffett has above all else is discipline. His philosophy is based on patience.
As a value investor, Buffett's goal is to identify companies the market has undervalued or companies that are trading cheaply compared to their intrinsic value.
Once he finds them, he buys them and holds on to them for the long term while their value steadily increases over decades.
Warren Buffett's Rules for Successful Investments
Beyond those simple tenets, there are a few rules - those other Buffett Rules - that guide Buffett's conscience as he makes investment decisions.
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Warren Buffett's Takeover Targets: Grab Shares Now…Get Rich When Berkshire Buys
Iconic investor and Chairman and Chief Executive Officer of Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) Warren Buffett announced that his company was eyeing acquisition targets, sending many "follow the guru" investors on a search for the next big takeover.
Berkshire's cash rose to a three-year high of $38.2 billion and Buffett said the firm was on the prowl for new buyouts.
"We will need more good performance from our current businesses and more major acquisitions," wrote Buffett. "We're prepared. Our elephant gun has been reloaded, and my trigger finger is itchy."
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Who is Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) Replacement?
Warren Buffett fans are buzzing with one burning question after the legendary investor released his annual shareholder letter on Saturday: Who is Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) replacement?
The Board is "enthusiastic about my successor as CEO, an individual to whom they have had a great deal of exposure and whose managerial and human qualities they admire," Buffett said in the letter, without identifying the person. "When a transfer of responsibility is required, it will be seamless, and Berkshire's prospects will remain bright."
Buffett noted there were two "superb" back-up candidates in place as well.
Even though Buffett didn't share the details with investors, this is the clearest signal he's given that a specific strategy has been outlined for a post-Buffett Berkshire.
"It's more of a commitment, clearly," Alice Schroeder, author of "The Snowball, Warren Buffett and the Business of Life," told The New York Times. "This is not the if-I-get-hit-by-a-bus plan. This is the succession plan."
Some of Buffett's big-name employees are already slated for other positions, leaving just a handful of big wigs left to take the CEO spot.
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The Stocks Warren Buffett is Buying
Warren Buffett has gotten a lot of headlines recently for his critical assessment of the U.S. tax code.
But don't forget that Buffett became one of the world's wealthiest men through his career as an investor - not a political pundit.
For that reason, Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) is one of the most successful and widely followed companies in the world.
In fact, a 2007 study by two university professors entitled "Imitation is the Sincerest Form of Flattery" showed that buying what Buffett buys - even a month after his purchases - is a pathway to superior returns.
"The market ... appears to under-react to the news of a Berkshire stock investment since a hypothetical portfolio that mimics Berkshire's investments created the month after they are publicly disclosed earns positive abnormal returns of 14.26% per year," the study said.
And right now Berkshire is making big moves.
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Why Warren Buffett Is Buying – And You Should Be Too
Legendary investor Warren Buffett recently made news with his purchase of International Business Machines Corp. (NYSE: IBM), though I can't say I'm surprised.
Despite criticism that he's buying into a top-heavy market, that IBM is at a premium, and that he's losing his touch, chances are Buffett knows exactly what he's doing.
And guess what, it's exactly what I've been counseling investors to do since this crisis began - bolster defenses by putting money to work in companies that are backed by trillions of dollars in tailwinds, and have solid defensible businesses (Buffett calls these "moats").
According to a Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) filing made Monday but dated Sept. 30, 2011, Buffett also waded into General Dynamics Corp. (NYSE: GD), DirecTV (Nasdaq: DTV), CVS Caremark Corp. (NYSE: CVS), Intel Corp. (Nasdaq: INTC) and Visa Inc. (NYSE: V).
In the third quarter, Buffett funneled $10 billion into Berkshire's IBM stake, which now stands at 5.5%. Of course, Berkshire maintains a $13.5 billion stake in The Coca-Cola Co. (NYSE: KO) that remains the firm's largest.
Buffett Pulls the Trigger
As a long time Buffett watcher, I am somewhat surprised that he picked up Intel and IBM, if only because the Oracle of Omaha has a well-documented aversion to tech.
Still, I can see the logic. Both companies are global giants poised to profit from the whirlwind of growth set to take place thousands of miles from our shores in the decades ahead.
There are technical similarities, too.
For instance, IBM's price has risen more than 29% this year. As a result, at least five analysts have removed their buy recommendations because they believe the stock may have run its course, according to Bloomberg News and YahooFinance . At the moment, less than 50% of the analysts who cover IBM recommend buying the stock.
Back in 1988, it was much the same situation. Coke had more than doubled in size and analysts had much the same reaction when it came to doubts about further growth. Many openly bashed the stock's prospects and completely ignored the global growth potential that today is Coke's mainstay.
Coke is up tenfold since then. Enough said.
Here's what I think Buffett sees:
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Warren Buffett is Taking Berkshire Hathaway Inc. (NYSE: BRK.A , BRK.B ) on the Hunt for Takeover Targets
Iconic investor and Chairman and Chief Executive Officer of Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) Warren Buffett announced on Feb. 26 in his annual shareholder letter that his company was eyeing acquisition targets in 2011, sending many "follow the guru" investors on a search for the next big takeover.
Berkshire's cash rose to a three-year high of $38.2 billion and Buffett said the firm was on the prowl for new buyouts.
"We will need more good performance from our current businesses and more major acquisitions," wrote Buffett. "We're prepared. Our elephant gun has been reloaded, and my trigger finger is itchy."
Berkshire Hathaway generated almost $1 billion a month in free cashflow last year. It also completed its biggest purchase, spending $26.5 billion for rail company Burlington Northern Santa Fe Corp.
Many analysts view the defense industry and agriculture sectors as the most appealing sectors.
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Warren Buffett Emphasizes Investment Risk Management With Successor Pick Todd Combs
Warren Buffett's announcement Monday that a little-known hedge fund manager, Todd Combs, will help oversee his $100 billion investment portfolio at Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) surprised investors and highlighted Buffett's emphasis on risk management for investment success.
Adding 39-year-old Combs to the Berkshire team makes him a top contender to take over Buffett's investment management duties whenever the Oracle of Omaha leaves his company.
"He is a 100% fit for our culture," said Buffett. "I can define the culture while I am here, but we want a culture that is so embedded that it doesn't get tested when the founder of it isn't around. Todd is perfect in that respect."
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Wednesday's "Earnings Beat" Makes This The Perfect "Bad-Market" Tech Stock
In last week’s Private Briefing report “Our Experts Show You the Stocks to Pick in a ‘Stock-Picker’s Market’,” Money Map Press Chief Investment Strategist Keith Fitz-Gerald identified SanDisk Corp.(NasdaqGS: SNDK) as one of three stocks to buy in the face of the stock market sell-off.
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