Warren Buffett appeared on CNBC's Squawk Box Wednesday morning to answer the biggest questions regarding the global economy, stocks, Election 2012, and more.
The CEO of Berkshire Hathaway (NYSE: BRK.A, BRK.B) remains confident that the U.S. is in better shape than other regions and he still believes the stock market is the best place for your money.
But with so much global uncertainty still swirling around, Buffett isn't ready to go on a buying spree.
Asked what investors should do, here's what Buffett had to say.
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Warren Buffett on Stocks, QE3 and the Deciding Factor in Election 2012
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Warren Buffett Stocks: Where the Oracle of Omaha Puts his Money
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Last Wednesday the conglomerate released its stock holdings. Mutual funds and retail investors closely watch the picks to dissect the selections for hints about the company's tactics. Other simply want to mimic Buffett's moves.
This quarter Berkshire disclosed new stakes in General Motors (NYSE: GM) and Viacom (Nasdaq: VIAB), larger positions in Wells Fargo (NYSE: WFC) and Wal-Mart Stores (NYSE: WMT), and a small increased position in International Business Machines (NYSE: IBM).
Declining stakes were noted in Kraft Foods (NYSE: KFT) and Procter & Gamble (NYSE: PG).
The Berkshire portfolio ballooned to $89.1 billion on March 31 from $77 billion at the end of 2011. The firm is the largest shareholder in Coca-Cola (NYSE: KO), Wells Fargo and American Express (NYSE: AXP).
The additions come as Buffett and Berkshire Vice Chairman Charlie Munger have tasked former hedge fund managers Todd Combs and Ted Weschler with more investing duties. The two were brought into Berkshire to help oversee investments, as Buffett, Berkshire's CEO and chairman, transitions the company for his ultimate departure.
The 81-year-old sage acknowledged that he makes Berkshire's larger bets, while his team of stock pickers is responsible for smaller wagers.
In his widely read shareholder letter in February, Buffett penned, "When our quarterly filings report relatively small holdings, these are not likely to be buys I made but rather holdings denoting purchases by Todd or Ted. They have the brains, judgments and character" to do the job.
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Warren Buffett Stocks: The Oracle of Omaha Sees Something in Avon
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On Thursday, privately held Coty came courting Avon once more with a beautified bid of $10.7 billion and the backing of none other than iconic investment guru Warren Buffett.
In a letter to Avon's board, Coty listed Buffett's Berkshire Hathaway (NYSE: BRK.A, BRK.B) as a new equity financing provider, along with German conglomerate Joh A. Benckiser and other anonymous clients of BDT Capital Partners.
Buffett and other financiers helped push up Coty's newest offer from $23.25 a share to $24.75 a share, a 36% premium to Avon's share price before the original offer was publicly disclosed.
Coty has made it quite clear how much it wants Avon, and adding Buffett to sweeten the deal could be what finally works.
"I don't think there's any better way to get Avon's attention than to say, "I've got the smartest investor in the world, with the deepest pockets in the world behind me, listen up,'" Jeff Matthews, author of "Secrets in Plain Sight: Business & Investing Secrets of Warren Buffett," told Bloomberg News.
Buffett's Rare Move
The Buffett move is a rare change for the deal maker who customarily shies away from hostile bids, and who is usually an outright buyer instead of financier.But Buffett was won over by BDT's founder, Byron D. Trott, Berkshire's favorite banker.
"He understands Berkshire far better than any investment banker with whom we have talked and - it hurts me to say this - earns his fee," Mr. Buffett wrote in his 2003 letter to shareholders.
Buffett's previous financing ventures include helping Mars Inc.'s $23 billion takeover of the Wm. Wrigley Jr. Company in 2008, and providing about $3 billion in equity financing to Dow Chemical Co.'s (NYSE: DOW) $15.4 billion takeover of fellow chemical maker Rohm & Haas.
The Coty letter said the new deal would "provide compelling value to Avon's shareholders" compared with Avon's other option, "a difficult and uncertain multi-year turnaround on a stand-alone basis."
"Given the challenges facing your business, we believe the premium is even higher when considering your potential stock price in the absence of a possible transaction," Coty chairman Bart Becht wrote to Avon.
Avon appeared not to be threatened, and said it would consider the letter in due course.
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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.
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.To continue reading, please click here...
Congress Wastes Time on Buffett Rule, Keystone Pipeline to Beef Up Attack Ads
They are at it again...
With a cynical eye cast toward the November election, members of Congress forced votes on the "Buffett Rule" and the Keystone pipeline knowing both would ultimately fail.
The real purpose for voting on the Buffett Rule and the Keystone pipeline was to embarrass the opposition and produce material for campaign attack ads.
Election 2012: The Real Reason President Obama Wants the Buffett Rule
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The tax proposal is dubbed the Buffett Rule, named for its main backer, billionaire Warren Buffett, who says it is unfair that he pays a lower effective tax rate than his secretary. The Buffett Rule ensures millionaires and billionaires do not pay lower percentages of their income than middle-class citizens.
U.S. President Barack Obama, on a campaign fund raising trip, spoke in favor of the Buffett Rule yesterday (Tuesday) in Florida. Democrats are now working on a bill that would incorporate the Buffett Rule into the current tax code, with support from the White House.
The proposal is set for a vote next week in the Senate, and the president has made it a principal element of his plan for deficit reduction.
The White House says the Buffett Rule would make it more difficult for the nation's wealthiest to lower their tax bills and would ultimately make the tax code fairer for everyone.
Critics, however, say it is nothing more than a political ploy in the months leading up to the 2012 presidential election.
The Buffett Rule: Key Campaign Tool in Election 2012
The Buffett Rule is a key theme in President Obama's re-election campaign.Republicans object to the Buffet Rule as a punitive tax hike on rich that will have little impact on the federal deficit. If the GOP succeeds in blocking passage of the Buffett Rule, the president can paint the Republicans as advocates of an unfair tax policy that benefits only the country's most prosperous citizens.
White House officials acknowledged Monday that the controversial Buffett Rule would yield just $47 billion in additional tax revenue over a decade. That amounts to a paltry 0.6% of the $7 trillion in federal deficits projected for that 10-year period.
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What Would Warren Buffett Do? The Hottest Trend for Savvy Investors
If Warren Buffett was going to invest in anything right now, where would he put his money?
At first, that question may be difficult to answer. But if you think about Buffett's classic investment approach - focusing on real assets with a reliable return and prizing valuation - it gets a little easier.
Stumped?
Try the housing market - single-family rental homes to be precise.
"If I had a way of buying a couple of hundred thousand single family homes and I had a way of managing them... I would load up on them and take mortgages out at very very low rates," Buffett said in an interview with CNBC. "It's a very attractive asset class right now."
It's a classic buy low, sell high opportunity - and one that more and more investors are taking advantage of.
In fact, sales of investment and vacation homes surged 65.4% last year to 1.2 million units, the highest level since 2005, according to the National Association of Realtors (NAR).
Naturally, low home prices were a major catalyst for that surge.
Last year, U.S. home prices were down 33.8% from their 2006 peak. But another factor was increased interest from investors - many of which boast six-figure salaries and desire a more consistent return than the stock market offers right now.
"I have doctors, lawyers, an engineer from Apple who told some of his buddies," Brian Hardie, who manages rental properties, told Forbes about his clients.
And with foreclosures on the rise this year, there will be an even greater opportunity for entrepreneurial investors, which means Hardie's client list at Regency Property Management will likely continue to grow.
Indeed, foreclosures that had previously been held up by litigation relating to robo-signing and other malfeasance on the part of banks are once again moving back through the system following a $26 billion settlement five major banks reached in January.
A February report from RealtyTrac showed new default notices - the first step in the foreclosure process - were up 1% from January. Furthermore, default notices increased dramatically in some states, such as Pennsylvania (35%), Florida (33%) and Indiana (37%).
As the NAR recently pointed out, 20% of February home sales were foreclosures. And if RealtyTrac's forecast for a 25% increase in foreclosures this year comes to fruition, the number of distressed sales will rise even further.
Meanwhile, the heightened rental property interest, dually helped by inflation, has given landlords more power - which means rents across the country are increasing.
This has created an optimal situation for investors that have the wherewithal to make it work for them.
At first, that question may be difficult to answer. But if you think about Buffett's classic investment approach - focusing on real assets with a reliable return and prizing valuation - it gets a little easier.
Stumped?
Try the housing market - single-family rental homes to be precise.
"If I had a way of buying a couple of hundred thousand single family homes and I had a way of managing them... I would load up on them and take mortgages out at very very low rates," Buffett said in an interview with CNBC. "It's a very attractive asset class right now."
It's a classic buy low, sell high opportunity - and one that more and more investors are taking advantage of.
In fact, sales of investment and vacation homes surged 65.4% last year to 1.2 million units, the highest level since 2005, according to the National Association of Realtors (NAR).
Naturally, low home prices were a major catalyst for that surge.
Last year, U.S. home prices were down 33.8% from their 2006 peak. But another factor was increased interest from investors - many of which boast six-figure salaries and desire a more consistent return than the stock market offers right now.
"I have doctors, lawyers, an engineer from Apple who told some of his buddies," Brian Hardie, who manages rental properties, told Forbes about his clients.
And with foreclosures on the rise this year, there will be an even greater opportunity for entrepreneurial investors, which means Hardie's client list at Regency Property Management will likely continue to grow.
Indeed, foreclosures that had previously been held up by litigation relating to robo-signing and other malfeasance on the part of banks are once again moving back through the system following a $26 billion settlement five major banks reached in January.
A February report from RealtyTrac showed new default notices - the first step in the foreclosure process - were up 1% from January. Furthermore, default notices increased dramatically in some states, such as Pennsylvania (35%), Florida (33%) and Indiana (37%).
As the NAR recently pointed out, 20% of February home sales were foreclosures. And if RealtyTrac's forecast for a 25% increase in foreclosures this year comes to fruition, the number of distressed sales will rise even further.
Meanwhile, the heightened rental property interest, dually helped by inflation, has given landlords more power - which means rents across the country are increasing.
This has created an optimal situation for investors that have the wherewithal to make it work for them.
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Warren Buffett's Takeover Targets: Grab Shares Now…Get Rich When Berkshire Buys
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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?
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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
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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.
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:
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.
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.
Warren Buffett Emphasizes Investment Risk Management With Successor Pick Todd Combs
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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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