> Warren Buffett Blog: September 2013

Saturday, September 28, 2013

Ten pieces of investment advice from America's greatest investor

1.'It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.'

Source: 1989 Letter to shareholders

This is one of Buffett's more famous quotes, and it reflects one of the basic tenets of his investment strategy: He sticks with companies he can fully comprehend, and ones for which the intrinsic value is self-evident, regardless of the current state of their finances. It's a philosophy that has served him well; if he weren't prone to giving vast amounts of his money to charity, Buffett might be the single richest man in the world (and he was, in fact, in 2008, according to Forbes' annual list).

Buffett's interest in moneymaking began early. As a boy growing up in Omaha, Neb., he would sell chewing gum and magazines door to door, and he filed his first tax return at age 14 (marking deductions for his bicycle and watch, used on a paper route). In high school, Buffett and a friend bought a pinball machine and put in a local barber shop; they quickly expanded that enterprise to include several pinball machines around town.

Today, Buffett's personal net worth hovers right around $55 billion and his investment firm, Berkshire Hathaway, owns a number of notable American companies outright, including: GEICO, Dairy Queen, Fruit of the Loom, Helzberg Diamonds, and half of Heinz.

2.'Rule No. 1: never lose money; rule No. 2: don't forget rule No. 1'

Source: "The Tao of Warren Buffett" (2006)

3.'Our approach is very much profiting from lack of change rather than from change. With Wrigley chewing gum, it's the lack of change that appeals to me. I don't think it is going to be hurt by the Internet. That's the kind of business I like.'

Source: Businessweek (1999)

A look at Berkshire Hathaway's portfolio bears out this bit of advice: The firm invests primarily in companies that have been around a long time and can be explained in a brief sentence: Dairy Queen sells ice cream, GEICO sells insurance, and so on.

Buffett's relationship with GEICO dates back to 1952, when he discovered that one of his investment idols, Benjamin Graham, sat on the company's board. During an attempt to meet Mr. Graham, Buffett had a chance meeting with then-GEICO vice president Lorimer Davidson, and the two became lifelong friends.

4.'I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.'

Source: At a panel discussion after the premier of the documentary "I.O.U.S.A" (2008)

5.'The stock market is a no-called-strike game. You don't have to swing at everything – you can wait for your pitch. The problem when you're a money manager is that your fans keep yelling, "Swing, you bum!" '

Source: "The Tao of Warren Buffett" (2006)

6.'Price is what you pay; value is what you get. Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down.'

Source: 2008 Letter to shareholders

Buffett's annual letters to Berkshire Hathaway shareholders are highly anticipated; his writings are widely lauded for their effective storytelling and clear, simple language.

7.'Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.'

Source: "Buffett: The Making of an American Capitalist" (1995)

8.'If you understood a business perfectly and the future of the business, you would need very little in the way of a margin of safety.'

Source: 1997 Berkshire Hathaway annual meeting

So, the more vulnerable the business is, assuming you still want to invest in it, the larger margin of safety you'd need. If you're driving a truck across a bridge that says it holds 10,000 pounds and you've got a 9,800 pound vehicle, if the bridge is 6 inches above the crevice it covers, you may feel okay, but if it's over the Grand Canyon, you may feel you want a little larger margin of safety.'

Berkshire Hathaway's annual meetings, commonly referred to as "Buffett Woodstock," have become can't-miss events in the financial world. Last May, 35,000 people descended on Omaha, Neb. for the weekend-long convention celebrating all things Buffett. The Oracle himself fields questions from investors and journalists, hobnobs with luminaries ranging from Bill Gates to NFL players, and sometimes plays a game or two of ping pong.

9.'We've long felt that the only value of stock forecasters isto make fortune tellers look good. Even now, Charlie [Munger] and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.'

Source: 1992 letter to shareholders

Charlie Munger is Buffett's longtime business partner and the vice chairman of Berkshire Hathaway, He's a fellow Omaha, Neb. native who also serves as the director of wholesaler Costco. The two have their differences: Mr. Munger is a known Republican, while Buffett has become known in recent years for supporting Democrats and democratic ideas.

10.'We don't get paid for activity, just for being right. As tohow long we'll wait, we'll wait indefinitely.'

Source: 1998 Berkshire Hathaway annual meeting

Friday, September 27, 2013

Warren Buffett Invites Good Deed Dairy Queen Teen to Shareholders Meeting

A Minnesota teen's act of kindness for a blind customer has gone viral and has prompted an outpouring of praise, including from billionaire Warren Buffett, who has invited the teen to his company shareholder's meeting next year.

Joey Prusak, 19, has been hailed as a Good Samaritan after he gave $20 out of his own wallet to a blind customer who dropped $20 and the money was taken by a woman who refused to return it.

"I was just doing what I thought was right," Prusak told the Associated Press. "I did it without even really thinking about it. ... Ninety-nine out of 100 people would've done the same thing as me."

The teen's good deed went viral after a customer who witnessed the incident wrote an email about it to Dairy Queen and the store printed it out and posted it. A customer took a photo of the email and it spread through Facebook and Reddit.

Since then, supporters have flooded the Dairy Queen where Prusak is a manager with visits and phone calls. People have offered him jobs and given him money for college.

He even got a very special phone call from billionaire Warren Buffett, whose company owns Dairy Queen, as well was Dairy Queen president and CEO John Gainor.

Buffett requested that Prusak attend the Berkshire Hathaway shareholders meeting in May 2014 in Omaha, Neb., so that he can meet him, Dairy Queen spokesman Dean Peters told ABCNews.com today. Buffett is chairman, president and CEO of the famed multinational holding company.

Prusak will be Gainor's special guest at the meeting.

"We're thrilled that Joey, one of our young managers in Hopkins, would do something like that, to go above and beyond to help out a customer like he did," Peters said. "We couldn't be more proud."

Peters said the company is "absolutely" working on a way to reward Prusak but aren't ready to make a public announcement yet.

"Here's somebody that did something good for someone else and no one asked him to do it," he said. "It strikes a chord in a lot of people."

Prusak was working at the Hopkins, Minn., Dairy Queen where he is a manager when he noticed a blind man drop a $20 bill on the ground and was unaware of it. An older woman in the line picked up the bill and put it in her purse instead of returning it to the man, Prusak said.

Prusak asked the woman to give the man his money back, but she said it was her money that she had dropped. He asked her again to return the money, but she refused. He then asked her to leave the store, as he would not serve someone so disrespectful.

"She got extremely angry and began to swear at your employee," the witnessing customer wrote in the email to Dairy Queen. "He stayed calm and never gave her any attitude."

The woman left the store and the customer who wrote the email told Prusak that he had done the right thing and then went and sat in the lobby near the blind man.

"What happened next I would have never expected," the email said.

Prusak approached the man, opened his own wallet and gave the man $20.

"I was in shock by the generosity that your employee had, taking his own money out of his own wallet to give to the customer because some other lady decided to steal something that wasn't hers," the email said.

Then Prusak went back to work.

Thursday, September 26, 2013

Buffett's top 'picks': Wedding licenses, investor 'bible' - USA TODAY

Warren Buffett, 83-year-old billionaire, met a roomful of twenty-something Georgetown University students Thursday,and gave them simple investment advice: You can get wealthy with just a few good investment choices.

Buffett was speaking at a question-and-answer session hosted by Bank of America CEO Brian Moynihan. The event was part of a partnership between Georgetown's Global Social Enterprise Initiative at the University's McDonough School of Business and Bank of America.

When one student asked for a stock tip, Buffett, widely considered the most successful investor of the 20th century, gave him a simple answer: Buy a copy of The Intelligent Investor, the investing bible written by Benjamin Graham, father of value investing. That and two wedding licenses, Buffett said, were his best investments.

But, the chairman and CEO of Berkshire-Hathaway said, you don't need to make hundreds of investments -- just a few, made at the right time. "Most stocks at some point sell at very silly prices," Buffett said.

One of the most recent times: Five years ago, during the financial meltdown. "Whatever you think about it [the meltdown], it was worse," Buffett said, saying Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson and Timothy Geithner, then president of the New York Federal Reserve Bank deserved credit for saving the economy. He also gave special credit to President George W. Bush, although he didn't vote for him.

"Bush came out with the economic insight for all times, and in 10 words," Buffett, said. "He said, 'If money isn't loose enough, this sucker could go down.'"

Buffett also advised students to stick with companies and industries that they know. "The most important thing is deciding what industries you can be right about," he said. Bill Gates couldn't convince him about computers, he said, but he did understand that people would continue to chew gum and drink soft drinks. "I'll stick with chewing gum," he said. "It's a terrible mistake to think you have to have an opinion on everything."

Buffett's optimism was clear throughout. "If you look at the twentieth century, with two wars, the Spanish influenza, and the Great Depression, and the Dow went from 66 to 11,497. With all those terrible things happening, America works."

But, he said, income inequality is a growing problem and needs to be addressed by government. "The rich are doing extremely well, businesses are doing well, profit margins are terrific compared with historic levels, but the for the bottom 20%, 24 million people, the top income is $22,000. We haven't learned how to let everyone share the bounty that we have."

And Buffett reflected on his time in Washington as a student at Woodrow Wilson High School during World War II. His father, Howard Buffett, was a Congressman. "It was a window on an extraordinary time in American history," Buffett said. "We were more untied than any other time in my lifetime. People really did give up voluntarily a high percentage in terms of gas rationing, sugar and beef rationing -- we all bought savings bonds at school.

And, he said, as a paperboy, he delivered papers at the local hospital -- a favorite location because the patients tipped, in more ways than one. "The numbers racket was big in Washington," he said.

Wednesday, September 25, 2013

No, Warren Buffett didnt say Obamacare should be scrapped

Conservative bloggers have turned up three-year-old quotes from Warren Buffett and cast them as fresh evidence that American support is dwindling for President Barack Obama's health care law.

But the quotes are not properly identified as three years old and do not reflect Buffett's full thinking on the health care law.

As our full report shows, the comments came from an interview that Buffett, the chairman and CEO of Berkshire Hathaway Inc., gave to CNBC on March 1, 2010 -- three and a half years ago, before the bill was signed. Buffett's office told PolitiFact that the blog reports do not reflect his views. We rated the claim Pants on Fire.

Tuesday, September 24, 2013

Warren Buffet compares the Federal Reserve Bank to a hedge fund, calls it 'the ... - Daily Mail

One of the world’s richest men is comparing the Federal Reserve to a hedge fund, and heaping praise on a policy seen as misguided by some.

Warren Buffet, 82, made the comparison Thursday during an interview at Georgetown University, in Washington, D.C., while discussing the central bank’s quantitative easing policy – but another billionaire criticized the program, calling it a reverse-redistribution of wealth.

Quantitative easing saw the US government purchasing over $1.3trillion in securities at a clip of as much as $85billion per month.  The policy was enacted at the height of the recession to save the financial markets from total collapse.

‘The Fed is the greatest hedge fund in history,’ said Mr Buffet.

The ‘Oracle of Omaha’ made the comparison only one day after the Fed made public plans to push back the long wind-down of the program, said the Telegraph.

The policy has stabilized financial markets to the point they are reaching highs never before seen, even setting closing records several times in recent months.

The billionaire also said he would reappoint current Fed chairman Ben Bernanke to a second term, if it were up to him, the Telegraph reported.

‘Since the panic of five years ago, he's done a terrific job,’ Buffet said, adding when asked if he would reappoint the former Princeton University professor ‘that’s what I would do.’

Keep him!: Buffet also advocated for the reappointment of Fed chair Ben Bernanke at the end of his current term

Mr Buffet, head of Berkshire Hathaway, did warn that the government’s eventual exit from the securities business may not be as easy as its entry.

‘We are in an experiment which hasn't really been tried before,’ he said, according to the Telegraph, ‘buying securities is usually easier than selling securities.’

The Fed’s quantitative easing purchases have been a combination of Federal Treasury bonds and mortgage-backed securities.

Monday, September 23, 2013

Bill Gates, Warren Buffet top Forbes list of 400 richest Americans - GlobalPost

For the 20th year in a row, Microsoft co-founder Bill Gates has been named the richest person in the United States, according to the Forbes annual list released on Monday.

Gates is worth $72 billion, with Microsoft accounting for only one-fifth of his overall wealth. It turns out most of his money comes from his other investments — notably his firm Cascade, which owns large shares in Deere & Co., the Canadian National Railway and Mexican Coke bottler Femsa.

While the US economy is still battling slow growth, Gates made an additional $9.8 billion in 2013 alone, according to Bloomberg's Billionaire Index.

Warren Buffett, whose net worth is $58.5 billion, ranked number two on the Forbes list.

The 83-year-old CEO of Berkshire Hathaway also made big gains this year, adding another $12.5 billion to his wealth.

More from GlobalPost: Bill Gates gets real in Reddit chat (VIDEO)

Other big winners include Facebook’s Mark Zuckerberg, whose stock holdings made him $9.6 billion in 2013 and helped him rejoin the top 20 list of richest Americans after getting cut last year.


View the original article here