How Warren Buffett Led Berkshire Hathaway (NYSE: BRK.A, BRK.B) to Record Profit in 2013
Run by the iconic Warren Buffett since 1965, Berkshire has grown from a textile manufacturing company to now include 80-plus businesses that run the gamut from insurance to railroads to utilities to ice cream. The Omaha, Neb.-based conglomerate consists of some $117.5 billion of a variety of stocks.To continue reading, please click here...
The "Painful" Truth About Diversification
Portfolio diversification is one of the most widely advocated concepts in investing. Almost all financial planners recommend it.
But it's also one of the most misunderstood concepts.
Traditional diversification isn't a real-world way to create big wealth.
Warren Buffett certainly understands this, as you'll see.
So does Lynn...
The Winning Investment System That Gave Us Warren Buffett and Peter Lynch
So what do Warren Buffett and Peter Lynch have in common?
Aside from being legendary investors, neither one of them has ever used technical analysis to dig up a market-beating stock pick.
In a world bereft of charts, trend lines, and candlesticks, both of these heavy weights have relied entirely on fundamental analysis to earn their famous fortunes.
In fact, their disdain for technical analysis is so complete that Buffett once remarked, "I realized technical analysis didn't work when I turned the charts upside down and didn't get a different answer."
Meanwhile, Lynch once observed, "Charts are great for predicting the past."
Instead of focusing on market momentum, they simply concentrated on finding long-term value. It's called fundamental analysis.
And over time, that singular "system" made both men very wealthy.
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Three Stocks to Buy to Beat Warren Buffett's Gains
While many look to Warren Buffett's holdings to find the best stocks to buy, it turns out his holdings' rivals could be the better picks.
Buffett is known not only for value investing, but also buying shares only of companies that operate in prosaic, easy-to-understand businesses. That's why the holdings of Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) are spectacular.
But in this look at how to find more stocks to buy that deliver - and even beat - the gains of Buffett's most popular holdings, some of the best bets could be companies that share a market with Berkshire's big winners.
Take a look.Read More...
What Was the Real Motive Behind Warren Buffett's Goldman Deal?
Legendary investor Warren Buffett is set to become one Goldman Sachs Group Inc.'s (NYSE: GS) largest investors without shelling out one penny.
Impressive as that is, what's even more striking is how the guru investor brokered the Goldman deal to his distinct advantage.
The savvy CEO of Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) amended terms of warrants--a type of security that gives the holder the right to purchase securities from an issuer at a certain price within a certain time frame-issued to Berkshire during the 2008 financial meltdown.
At the time, Buffett's investment in Goldman was gutsy. It was viewed as a vote of confidence in the bank as the country faced economic crisis.
The warrants originally gave Berkshire the right to buy $5 billion worth of Goldman common shares at $115 each any time before Oct. 1. Thanks to the new $1.5 billion deal inked Tuesday, Buffett's company will receive 9.2 million shares.
According to data from Bloomberg News, that makes Berkshire the ninth-largest shareholder in Goldman.
The Oracle of Omaha said in a press release, "We intend to hold a significant investment in Goldman Sachs, a firm that I did my first transaction with more than 50 years ago. I have been privileged to have known and admired Goldman's executive leadership team since my first meeting with Sidney Weinberg in 1940."
Berkshire's windfall from the investment surpasses $3 billion, making it one of Buffett's most profitable wagers in recent history.
Goldman also benefits. The investment bank avoids a flood of sell-side shares that would have been dilutive. It also gets to include the revered name of Warren Buffett to its shareholder roster.
"We are pleased that Berkshire Hathaway intends to remain a long-term investor in Goldman Sachs," Goldman's CEO Lloyd Blankfein said in a statement.Read More...
How to Invest Like Warren Buffett
If you want to know how to invest like the best, a good place to start is with Warren Buffett.
He now ranks fourth on Forbes' Richest Billionaires list, with a new worth of $53.5 billion.
Part of the reason for his success: He was never swept up in the euphoria of Wall Street crowds.
Behind the small-town-boy-turned-mogul story is a keen mathematical mind that has been honed into a highly successful stock-picking machine. Buffett began under the mentorship of the late Benjamin Graham, the father of value investing. Buffett perfected his skill through countless hours of studying annual reports of virtually every American publicly traded company over the last five decades.
Now the Oracle of Omaha's Berkshire Hathaway empire consists of some of the most recognized U.S. brands.
Buffett's "Big Four" investments - American Express Co. (NYSE: AXP), The Coca-Cola Co. (NYSE: KO), International Business Machines Corp. (NYSE: IBM) and Wells Fargo & Co. (NYSE: WFC) - represent the kind of businesses Buffett trusts his money to.
"The four companies possess marvelous businesses and are run by managers who are both talented and shareholder-oriented," Buffett wrote in his 2012 Berkshire Hathaway shareholder letter. "We much prefer owning a non-controlling but substantial portion of a wonderful business to owning 100% of a so-so business."
By taking a closer look at Buffett's career, and his favorite investments, we pinpointed three key factors to Buffett's investment formula that separate him from the common investor.
These factors, employed at key moments in Buffett's decision-making process, reveal a sophisticated formula for stock selection, as well as exploiting opportunities when other investors overreact.Read More...
What Warren Buffett's Shareholder Letter Tells Us
Warren Buffett's shareholder letter to Berkshire Hathaway Inc. (NYSE: BRK.A, 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.
Here's a look at what Buffett discussed in the March 1 letter.Read More...
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The Debt Ceiling Isn't What Worries Warren Buffett
Investment guru Warren Buffett isn't sweating the debt ceiling as much as he is some of the country's other issues.
Buffett this weekend said the $16.4 trillion in debt the country has collected is not the number on which everyone should be focused.
"It is not a good thing to have it going up in relation to GDP, that should be stabilized, but the debt itself is not a problem," the CEO of Berkshire Hathaway (NYSE: BRK.A) told CBS' "Sunday Morning" this weekend.
Buffett said the country's debt is a "lower percentage of GDP than it was when we came out of World War II. You've got to think about in relation to GDP."
Here's why debt-to-GDP is what Buffett watches.Read More...
Play the Bakken Oil Boom Like Buffett
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.
More germane to investors is the fact that there is still a lot of money to be made from Bakken oil in the months and years ahead.
Just ask Warren Buffett.
He spotted the potential of Bakken oil well ahead of most and bought a non-energy company that would benefit greatly from the boom. Three years ago he bought Burlington Northern Santa Fe (BNSF) Railway Co. for $26 billion.
That railroad is now one of the main beneficiaries of the Bakken oil boom. (And people thought he just had always wanted to own a train set!)
"We're the 1,000-pound gorilla in the oil markets," BNSF CEO Matt Rose told Bloomberg News. "Crude by rail is going to be really strong for us. It's been a real benefit to us to replace some of that lost coal business."
The Bakken oil formation isn't just an investing opportunity; it's transforming the U.S. energy landscape.Read More...
Why Warren Buffett is Wrong About U.S. Banks
Warren Buffett has made billions since the financial crisis by investing in U.S. banks, including Bank of America (NYSE: BAC),
The Oracle of Omaha has even guaranteed the safety of U.S. banks.
"The banks will not get this country in trouble, I guarantee it," Buffett told Bloomberg News. "Our banking system is in the best shape in recent memory."
Buffett, CEO of Berkshire Hathaway (NYSE: BRK.A, BRK.B), says U.S. banks are safe because they have increased capital ratios, sold risky assets, cut unnecessary jobs and bolstered their balance sheets.
But while the U.S. banking system might be in better shape than it was five years ago, it is nowhere near fixed. And banks could cause another crash.Here's why. Read More...
Why Warren Buffett Doesn't Fear the Fiscal Cliff, and How He'd Fix it
Warren Buffett, CEO of Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B), is doubtful that Congress can get its act together and compromise on the fiscal cliff before the Dec. 31 deadline.
However, Buffett expects a deal to be reached shortly after that deadline, and he is not concerned with going over the infamous fiscal cliff.
"The fiscal cliff does not enter into my long-term investment decisions... and it wouldn't surprise me if we go past January 1," Buffett said on CNBC's Squawk box Wednesday morning. "[If that happens] I don't think the world will come to an end."
Buffett is in the minority with that sentiment, as investors have been fretting over the fiscal cliff since the election and will continue to do so until Washington finalizes a deal.
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Warren Buffett's Minimum Tax Rate Proposal
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 of 30% on people making more than $1 million a year and 35% for those making more than $10 million a year.
After pointing out that no one, with the possible exception of Grover Norquist, ever turned down a good investment opportunity because the tax rate on the capital gain would be too high, Buffett argued, "So let's forget about the rich and ultrarich going on strike and stuffing their ample funds under their mattresses if - gasp - capital gains rates and ordinary income rates are increased. The ultrarich, including me, will forever pursue investment opportunities."
Imposing a minimum tax rate on high incomes, "...will block the efforts of lobbyists, lawyers and contribution-hungry legislators to keep the ultrarich paying rates well below those incurred by people with income just a tiny fraction of ours," Buffett said. "Only a minimum tax on very high incomes will prevent the stated tax rate from being eviscerated by these warriors for the wealthy."
While Buffett was unsparing in his criticism of those earning the highest incomes, he also suggested modifications to President Obama's plan to raise taxes on incomes over $250,000. "I support President Obama's proposal to eliminate the Bush tax cuts for high-income taxpayers," Buffett wrote. "However, I prefer a cutoff point somewhat above $250,000 - maybe $500,000 or so," recognizing that, in some parts of the country (not Omaha), $250,000 barely covers a middle-class lifestyle.
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