Warren Buffett has one of the most respected names in business. Now he's trying to turn that respect into cash.+ READ ARTICLE
Even those with only a passing interest in business affairs are familiar with the grandfatherly visage and folksy wisdom of investing sage Warren Buffett. And his long-time investing vehicle, Berkshire Hathaway, is almost a household name as well. Yet, for the most part, the Berkshire brand has remained behind the scenes.
But as new report from the Financial Times highlights, that may be changing. A range of Berkshire subsidiaries and acquisitions are rebranding to emphasize their affiliation with Buffett and his golden reputation. Soon, consumers will be increasingly likely to think of the Oracle of Omaha when they shop for homes, cars, and even when they look at their electric bill.
Earlier this month, Berkshire announced it was buying Van Tuyl Group, the nation’s fifth-largest auto retailer, and renaming it Berkshire Hathaway Automotive. The new business will include 78 locations in 10 states. And that number is set to grow: Buffett says he plans to buy even more dealerships in the future, adding them to the Berkshire fold.
Prudential Real Estate, meanwhile, has already placed more than a thousand real estate agencies under the Berkshire Hathaway HomeServices brand after striking a franchising deal with the conglomerate in 2011. That number is still expanding, both in the United States and internationally. The company plans to pursue further licensing deals in Europe and Asia, in addition to other American markets.
Depending on where you live, Berkshire’s trademark could even be coming inside your house. MidAmerican Energy and PacifiCorp, two utility companies serving Western and Midwestern markets, were recently renamed Berkshire Hathaway Energy and now share a logo.
Why the sudden marketing push for the Berkshire name? Analysts say his celebrity holds value, and could bring in additional business if successfully monetized. “Like Virgin reflects Sir Richard Branson’s rebelliousness and Apple reflects the genius of Steve Jobs, Berkshire Hathaway has brand equity around trust, stability and integrity,” Oscar Yuan, a partner at consultancy Millward Brown Vermeer, explained to CNBC.
The irony of Buffett’s new branding effort is that virtually all consumers already have a deep attachment to Birkshire’s brands. It is, after all, the corporate parent of Heinz ketchup, Benjamin Moore paints, Fruit of the Loom underwear, Brooks running shoes, Spalding basketballs, and the Geico gecko, to name a few. The company’s catalogue even extends to military uniforms (Fechheimer), sweets (See’s Candy) and engagement rings (Ben Bridge Jewelers).
In one way or another, we’re all Buffett customers. Now, it seems, he just wants us to know it.
Are you starting to panic? Heed the advice of the Oracle of Omaha.
Warren Buffett has never been shy about packing lessons for successful investing into his annual letter to shareholders. That letter is a treasure-trove of insight, presented in a folksy manner that is not only easy to read but incredibly entertaining.
With the market tumbling we’re all likely in need of a few doses of Warren’s unpretentious advice, so I dug through his past shareholder letters to find some gems that may help us navigate the current market drop and build a bigger nest egg for retirement.
1. “It’s better to have a partial interest in the Hope diamond than to own all of a rhinestone,” wrote Buffett in 2013.
Buffett is always hunting for great companies that he can buy for Berkshire Hathaway shareholders, but if he can’t buy the whole company, he’s OK with owning a smaller piece of it instead. Applying this advice to our own investments means spending less time considering how many shares of a company we can buy and more time figuring out where we believe the company will be in ten years. Doing that will help us avoid the pitfall of foregoing investments in great companies like Amazon AMAZON.COM INC. AMZN 1.9998% ) or Priceline THE PRICELINE GROUP INC. PCLN 0.5601% when they’re on sale to buy lower quality companies with smaller share prices.
2. “A ‘normal year,’ of course, is not something that either Charlie Munger, Vice Chairman of Berkshire and my partner, or I can define with anything like precision,” wrote Buffet in 2010.
Sure, the average annual return for the S&P 500 has been 8.14% over the past decade, but assuming that will be our return this year, next year, or any year is folly. Returns are volatile and will continue to be volatile, so we should focus less on the returns for any one period of time and instead focus on buying great companies and socking them away. Consider this point: While the S&P 500 has experienced plenty of fits-and-starts over the past 10 years, those who have owned it all along are up 103%.
3. “Long ago, Charlie laid out his strongest ambition: ‘All I want to know is where I’m going to die, so I’ll never go there,'” wrote Buffett in 2009.
Buffett avoids businesses whose future he can’t evaluate. Instead, he focuses on finding businesses that offer a predictable profit for decades to come. Taking the long-haul approach to finding great companies goes far beyond identifying the next big thing — after all, during the Internet boom there were plenty of Internet companies that soared on expectations rather than profit, and many of those companies have since gone bankrupt. Instead, we should be investing in companies we can understand that are likely to remain winners.
4. “We will never become dependent on the kindness of strangers. Too-big-to-fail is not a fallback,” wrote Buffett in 2009.
Warren’s cash stockpile is a thing of legend, and while that cash hoard holds back his returns in periods of growth, it also protects him when markets turn sour. Importantly, it also gives him the financial flexibility to take action and buy when prices are right. That plan-ahead mentality is something every investor can embrace by making sure there’s always some dry-powder around to deploy during the market’s inevitable declines.
5. “We would rather suffer the visible costs of a few bad decisions than incur the many invisible costs that come from decisions made too slowly — or not at all — because of a stifling bureaucracy,” wrote Buffett in 2009.
Buffett doesn’t hesitant when he’s presented with an idea that hits the mark. He recognizes that he won’t be right every time, but he also believes that taking action is critical to realizing the potential of an opportunity. As investors, we can emulate Buffett’s approach by making sure that once we’ve done our due diligence and picked our favorite investments we take action and buy, regardless of the market’s short-term machinations.
6. “Unlike many business buyers, Berkshire has no ‘exit strategy.’ We buy to keep. We do, though, have an entrance strategy, looking for businesses in this country or abroad…available at a price that will produce a reasonable return. If you have a business that fits, give me a call. Like a hopeful teenage girl, I’ll be waiting by the phone,” wrote Buffett in 2005.
Buffett keeps strictly to his investment discipline, but he also keeps an open mind to great ideas that fit into his strategy. Those ideas can come from various places. His acquisition of Clayton Homes, for example, was sparked by an autobiography of Clayton’s founder Jim Clayton which had been given to him as a gift by some University of Tennessee students. Keeping open to opportunities, regardless of their origin, may help us find worthwhile investments for the long term, too.
7. “Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful,” wrote Buffett in 2004.
Buffett knows that emotion is a dangerous weapon that, if used incorrectly, can result in significant loss — and, if used correctly, can result in significant gain. Emotional reactions to surging or descending markets can make people buy when they should sell and sell when they should buy. Buffett often compares taking advantage of market slides to shopping for groceries. Last week on CNBC he summed it up by saying, “If you’re buying groceries, you like it when prices go down next week. And you like it if they go down further the next week.” Just as we like getting a good deal on the items at the grocery store we would be buying anyway, we should also be fans of getting a good deal on our favorite companies.
Following in Buffett’s footsteps
Buffett has no idea whether he’ll outperform the S&P 500 over the next year, but he does know that Berkshire Hathaway’s book value has grown a compounded annual 19.7% over the past 49 years. Similarly, we don’t know if our investments will outperform the market daily, weekly, or yearly, either. What we can feel pretty good about is the knowledge that investing in great companies like Coca Cola THE COCA COLA CO. KO 0.0466% and Wells Fargo WELLS FARGO & CO. WFC -0.1084% — two companies that are long-standing Buffett holdings — may help put us on a path to a less-worrisome retirement.
The Oracle of Omaha has a history of winning bets. Here's a look at some of his past wagers.
Earlier this week, investing sage Warren Buffett made headlines by predicting Hillary Clinton would win the 2016 presidential election. In fact, he added, he’s willing to put some coin behind it. “Hillary’s going to win,” said Buffett, speaking at Fortune’s Most Powerful Women Summit. “I will bet money on it. I will. I don’t do that easily.”
But that’s not quite accurate.
Sure, the Oracle of Omaha has publicly denigrated gambling, including comments to his Berkshire Hathaway shareholders in which he called it a “tax on ignorance” and “socially revolting.” And he even bought a 10-cent slot machine in his home to teach his offspring the evils of casinos. “I… put it on the 3rd floor of my house,” Buffett explained. “I could then give my children any allowance they wanted, as long as it was in dimes, and I’d have it all back by nightfall. I wanted to teach them a good lesson. My slot machine had a terrible payout ratio, by the way.”
But in fact Buffett has a long history of making very public wagers — and a pretty good track record of winning them. Here are a few of his most famous bets.
$550 on College Football
Earlier this year, Buffett placed his first-ever Las Vegas stake, betting $550 that Nebraska would beat Fresno State by more than 12 1/2 points. The Cornhuskers went on to destroy Fresno, 55 to 19, making Buffett (and other gamblers who rushed to copy him) a healthy return.
$1 Million on Index Funds Beating Hedge Funds
Buffett has consistently recommended index funds as the best investment vehicle for most investors, specifically endorsing Vanguard’s funds in a March letter to shareholders. He’s so sure indexes are the way to go that he bet $1 million that the S&P would outperform a “fund of funds” portfolio of hedge funds over 10 years, after fees, costs, and expenses are taken into account. An asset management firm called Protege Partners took the other side of the bet. So far, Buffett is on track for a payday: Fortune reports that, after six years, Buffett’s horse—Vanguard’s Admiral shares—was beating the firm’s five funds by more than 30% at the end of 2013.
$30 Million on World Cup Soccer
In a way, gambling of a kind is actually a routine part of Buffett’s business—and I’m not talking about his equity investments. One of Berkshire Hathaway’s many revenue streams is selling insurance that protects companies in the event that they have to pay out large cash prizes. For example, Bloomberg reports that in 2010 Berkshire insured an Omaha-based business that agreed to pay one of its clients if the French soccer team won the World Cup. If France wins, Buffett explained at the time, “I think we’re going to lose 30 million bucks or something like that.” But once again the Oracle of Omaha came out on top: Les Bleu were knocked out by South Africa in the group stage.
$1 Billion on March Madness
Thanks to Buffett, NCAA basketball got a lot more interesting this year. In January, the investor teamed up with Quicken Loans to offer a $1 billion prize to anyone who submitted a perfect March Madness bracket. The odds of Buffet losing? According to math site Orgtheory.net, the likelihood of correctly filling out a 64 team bracket randomly is less than 1 in 9 quintillion. But, because March Madness predictions do involve some level of skill, the true odds are difficult to determine. “There is no perfect math…There are no true odds, no one really knows,” Buffett told CNN. That said, he still liked his chances. “I don’t want to say it’s impossible, but it’s basically impossible,” admitted Buffett.
Buffett ultimately won his bet, collecting an undisclosed insurance premium from Quicken chairman Dan Gilbert (“Dan says it is too much and I say it’s too little,” he joked), but it was a close one. In March, ABC News reported that one man, Brad Binder, had in fact filled out a perfect NCAA bracket—he just hadn’t entered it into Buffett’s contest. “I wish I could give you a better reason why I didn’t enter other than I was rushed and heading to work,” Binder told ABC. “Obviously, I didn’t think I’d be where I am now.”
So is Buffett really a gambler after all? Not so much. Other than the Vegas wager, all of Buffett’s other bets gave the Berkshire chairman hugely favorable odds, or involved an industry where his expertise is unmatched. Buffett would probably agree that gambling isn’t really so bad — if you’re the house.
Paul Anka and Warren Buffett give Carol Loomis a musical sendoff at Fortune’s Most Powerful Women summit+ READ ARTICLE
The burger chain is moving to Canada, by way of Omaha
This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.
By Dan Primack
Warren Buffett is finally getting into the burger business.
The deal, first reported by The Wall Street Journal, was officially announced Tuesday morning. The two companies said they have agreed to merge, bringing together Burger King, which is majority-owned by Brazilian private equity firm 3G Capital, and Tim Hortons, creating an $18 billion quick-serve restaurant behemoth.
The two companies said that Tim Hortons shareholders will receive C$65.50 in cash and 0.8025 shares of the new, combined company for each Tim Horton share they currently own. When the deal is closed, 3G Capital will own about 51% of the combined company.
For the rest of the story, please go to Fortune.com.
Lessons from a guy who sold his stock in Warren Buffett's company for just $4000
The A shares of Berkshire Hathaway, the company run by superinvestor Warren Buffett, closed above $200,000 a share yesterday. But all I could think of was another number—$400,000—which is roughly the amount I’d be ahead today if I hadn’t foolishly sold Berkshire many years ago. Clearly, I screwed up. But maybe you can profit from my blunder in your own investing.
Here’s how it happened.
After the stock market crashed in October 1987, I noticed that Berkshire Hathaway shares, which had been selling for more than $4,000 in the months leading up to the crash, had dipped to around $3,000 a share. I’d long admired Buffett as an investor, and especially liked his views about long-term investing. He once said in one of his famous annual letters to Berkshire shareholders that his “favorite holding period is forever.”
So I decided to buy two shares for $3,000 apiece in November of 1987. At first, they dropped even more. But, like Buffett, I was in for the long term. So I held on. And before long, Berkshire’s share price began to climb, passing $3,900 a share by April, 1988.
It was about then that a little voice began whispering in my ear: “Maybe you should sell.” It continued: “You’re up $1,000 a share, two thousand bucks, in just seven months. That’s pretty damn good.” I resisted at first. But I began to weaken, inventing rationales about why Buffett’s long-term philosophy didn’t make sense in this instance. “Who in his right mind is going to pay almost $4,000 for one share in a company? The last time these shares sold at this level, look what happened: they dropped by 25%. Get out while the getting is good.”
When the share price hit $4,000 in June of 1988, I bailed, netting myself a nifty little profit of $2,000, before brokerage commissions. My initial trepidation at selling gave way to delusions of grandeur. I felt escstatic: a $2,000 profit on a $6,000 investment in just seven months. Look at the way I’ve navigated the stock market, I told myself. I’m displaying truly Buffett-esque qualities.
But air began leaking from my inflated sense of my investing abilities when I saw that Berkshire shares continued to rise. And rise, and rise. A year later, they were selling for more than $6,500 a share. A few years after that, they cracked the $10,000 mark. In 2006, they hit six-figure territory, more than $100,000 a share. Sure, there were ups and downs along the way. But it was pretty clear that my genius move wasn’t such a genius move after all. Had I held on, I would own two shares worth $405,700, giving me an annualized return of about 17% based on my intial $6,000 investment. The Standard & Poor’s 500 index gained roughly an annualized 11% over the same span.
So, what lesson can you take from my Berkshire experience and apply to your own investing, whether for retirement or any other purpose?
Well, first I want to be clear that I’m not suggesting that you invest a substantial sum in Berkshire Hathaway—whether through the A shares or, more likely, the B shares, which closed at a mere $135.30 yesterday—in hopes of extravagant gains. You can always find examples of great stocks that generated dazzling returns. But there are also plenty of stocks that people were sure would be winners that flamed out. So the mere fact that, looking back, we can all see that Berkshire did extraordinarily well doesn’t mean it would have been a wise move years ago or a smart move now to concentrate one’s money in it, or any other single stock or small group of stocks.
And, in fact, the money I invested in Berkshire back then was a small portion of my investable assets. I held the overwhelming majority of my savings in a well-rounded and broadly diversified portfolio. So as chagrined as I was and am that I didn’t hold on to those Berkshire shares, my financial future wasn’t riding on them.
Rather, the real lesson here is that many times you will be tempted to deviate from your core investing principles or your long-term strategy. When the market is soaring, you may be tempted to shift bond holdings into stocks. That’s where the returns are, no? Or after the market has cratered, you may come to see stocks as far too risky and feel a strong urge to dump your stock holdings and hunker down in the safety of cash or bonds. After all, who knows how much lower stocks can fall and how long it may take them to recover?
Similarly, while you know that plain-vanilla low-cost index investments are a proven way to reap the rewards of the financial markets over the long haul, you could still find yourself intrigued by a pitch for a high-cost investment that purports to offer outsize gains with little downside risk. The people who peddle such illusions can be mighty persuasive.
But if you abandon your long-term strategy every time the markets get rocky or a clever salesperson dangles a shimmering investment bauble before your eyes, you won’t have a strategy at all. You’ll be flying by the seat of your pants.
Which is why at such times it’s crucial that you take a moment to remind yourself of why you have a long-term strategy in the first place. It’s so you won’t end up simply winging it. And having done that, you’ll have a better chance of ignoring that voice whispering in your ear. I wish I had.
Billionaire hedge fund manager George Soros and billionaire investor Warren Buffett are both buying tech stocks—but decidedly different kinds. So who would you bet your portfolio on?
Both billionaire investor Warren Buffett and billionaire hedge fund manager George Soros have had somewhat troubled relationships with tech stocks over the years.
Buffett famously punted on tech throughout the 1990s, declaring that “we have no insights into which participants in the tech field possess a truly durable competitive advantage.” So his investment company Berkshire Hathaway severely lagged the S&P 500 in the late 1990s — but at least it missed the tech wreck in the early 2000s. For Soros, the opposite was the case: His fund stayed at the Internet party too long in 2000.
Recently, though, both octogenarians have been dabbling in this sector — but in decidedly different ways.
SEC filings released on Thursday indicate that while Buffett is looking to the past for time-tested but overlooked plays on this sector, Soros seems only to be interested in future trends.
Buffett and ‘Old Tech’
Buffett is taking the old school approach. Quite literally. His tech sector holdings — indeed, his entire portfolio — looks as if it was straight out of the early or mid 1990s.
This technology service provider — which has run into difficulties in the crowded cloud computing space lately — has seen its revenue growth decline for several quarters while its stock has been under fire.
No doubt, Buffett clearly sees IBM as a value, as the stock trades at a price/earnings ratio of around 9, which is about half what the broad market currently trades at. In his most recent letter to Berkshire shareholders, Buffett described IBM as one of his “Big Four” holdings, along with American Express, Coca-Cola, and Wells Fargo.
Beyond IBM, Buffett prefers lower-priced but slower growing internet backbone companies to fast-growing but pricey content providers. This is part of a tech investing trend that MONEY contributing writer Carla Fried recently addressed.
Other stocks he recently purchased or positions that he has been adding to include the Internet infrastructure company Verisign VERISIGN INC. VRSN 0.5148% and internet service providers Verizon VERIZON COMMUNICATIONS INC. VZ 0.3986% and Charter Communications CHARTER COMMUNICATIONS INC. CHTR 0.424% .
Soros’ ‘New Tech” Bets
By contrast, Soros seems to be trying to ride current and future trends — albeit with highly profitable names.
In the second quarter, Soros added to his stake in the social media giant Facebook FACEBOOK INC. FB 0.0062% . Last month, Facebook shares hit a record high after the company reported robust profits. Plus, Facebook has proven to Wall Street that it can conquer the mobile advertising market, as nearly two-thirds of its revenues now come from mobile ads.
Facebook isn’t the only mobile bet Soros is making. He has also been recently adding to his stake in Apple APPLE INC. AAPL 1.7677% , which along with Google dominates the mobile computing space. New data from IDC showed that Apple’s iOS operating system held about a 12% market share among phones shipped in the second quarter — even though demand for iPhones has fallen as consumers await the arrival of the new iPhone 6, which will be introduced in September.
For the moment, Soros’ bets on these new tech names seem to be in the lead.
But over the long-term, would you bet on Team Soros or Team Buffett?
T. Rowe Price Chairman Brian Rogers how to be like Warren Buffett and avoid information overload.+ READ ARTICLE
A new ETF seeks to mimic the best ideas of billionaires like Warren Buffett and Carl Icahn based on their public holdings. Trouble is, the fund can't copy them in real time.
Mom-and-pop investors hoping to emulate the investment savvy of Wall Street’s wealthiest like Warren Buffett and Carl Icahn will have a new option on Friday when the latest low-cost exchange-traded fund tracking the stock picks of big-name investors begins trading.
The Direxion iBillionaire ETF, set to trade under the ticker “IBLN,” is the latest in a handful of similar ETFs that have come to market in recent years, all packaging the holdings disclosed quarterly by top investment managers into instruments that are more accessible to Main Street investors.
“It democratizes a lot of the information that very wealthy institutional investors have had for a long time,” said Brian Jacobs, president of Direxion Investments, the ETF provider that has partnered with index creator iBillionaire.
At $65 for every $10,000 invested, fees for the new iBillionaire ETF are far lower than the $200 that would be charged by the typical billionaire-run hedge fund, which would also tack on performance fees.
To be sure, the iBillionaire ETF, like the similar Global X Guru ETF launched in 2012, focuses only on the long portion of these billionaire portfolios and does not include day-to-day active management or any shorting of stocks. Furthermore, the practicalities of pulling investment ideas from the quarterly reports filed by these large investors means that the investment ideas often lag by at least 45 days.
The new ETF is based on an index created in November by startup firm iBillionaire. The fund and its underlying index include the 30 top U.S. companies in which a pool of selected billionaire investors have invested the most assets, based on the so-called 13F disclosures the investors must file quarterly with the U.S. Securities and Exchange commission. Top holdings in the index right now include Apple, Micron Technology and Priceline, with about a third of its portfolio in technology stocks.
“Billionaires are more bullish on technology” right now, said Raul Moreno, chief executive officer and co-founder of iBillionaire. “You can see that by their allocation and their strategies.”
The ETF is similar to the GURU ETF and AlphaClone Alternative Alpha ETF, which both launched in 2012. While they had both beat the benchmark S&P 500 index with stellar performances in 2013, they have been more lackluster this year, with GURU up 0.6 percent and ALFA up 0.3%, compared to the S&P 500, up 4.5% through Thursday’s close.
So far, these funds have a niche following – The GURU ETF has amassed about $499 million in assets, while the ALFA ETF has amassed $79 million in assets. So the billionaires being copied need not worry about losing clients to them, said Ben Johnson, an analyst with research firm Morningstar.
For a related story, see: