stlplaceBerkshire B share (NYSE: BRK.B) traded heavily May 30 Friday.
(Full size picture here)
May be Bill Gates is selling on behalf of Gates foundation (USAToday article)? As you may know in 2006 Buffett donated large number of shares to Gates fundation (NYTimes article). I was wondering who is buying BRK.B on Friday? I know I could only afford 0.5 share at this time (hint: President Bush, could you speed up the tax rebate 🙂
Warren Buffett is visiting Europe these days, mainly looking for acqusition targets (family private owned business). Here is an interview at IMD (Switzerland). IMD is a premier business school in the Europe (thanks to investmentpostcards). There is a link to webcast at the end of the post. It covered a range of topics, and the title was “How to grow wealth in a responsible and sustainable manner”.
On a side note, one of Buffett’s holding, Moody (NYSE:MCO) took a big hit recently because of mistake in giving out ratings. Interestingly, Buffett did not sell MCO shares in Q1 2008. He did sell some Well Fargo shares in Q1, this seems contradicts with he said in his annual letter: Moody probably lost intrinsic value in sub prime crisis, Well Fargo did not.
I quoted some questions which are relevant for little guys (like me). The full transcript can be located at gurufocus. WB: Warren Buffett, CM: Charlie Munger, MX: yours truely.
BTW, I bought one more BRK.B yesterday, at $4130, not the lowest price of the day but about 5% off the price I bought for my first share. A few things happened since April 3 the day I bought it: the CEO of General Re resigned because of AIG scandal; Mars Wrigley deal; annual shareholder meeting (BRK.A and BRK.B both ran before the meeting); the Q1 earning result was not good because of paper loss of stock index derivatives. But I don’t think those things worsened the value of BRK in anyway.
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Q9: Melbourne Auz. Berkshire has bought a lot of shares in last twelve months in listed companies. Do you expect return to be between 7-10% pa over many years? Well below achievements in past.
WB: Yes. We would be very happy if we could buy pretax returns of 10%, dividends included. We would probably settle for a little less than that. Berkshire returns will be less, no question, in future than in past. We operate now in universe of marketable stocks with caps of 10bil, but really 50bil and up in order to have an impact. This universe is not as profitable. If we find 10bil, a 5% position is 500mil. If it doubles, we make 325m, this is less than 2/10ths of 1%. We have found things to do time to time to make money. They are nice, but don’t move needle much at Berkshire. Anyone who expects us to replicate past should sell their stock. We’ll get decent returns, but not indecent returns.
In the annual shareholder meeting of Berkshire Hathaway, Buffett and Munger took on a series of questions from audience as usual. Although I did not go, I found some of those Q&A both interesting and educational. Thanks to gurufocus, the full transcript is here (WB: Warren Buffett, CM: Charlie Munger).
Q5: Would you use stock options to enter a position in a public co?
WB: If you want to buy or sell a stock, you should buy or sell a stock. We sold puts on Coca-cola once, but usually it is best to just buy stock. Using option technique is an idea where you get to buy a stock cheap. 4 out of 5 times you get it right and one time you may miss the opportunity to buy. We virtually have never used options to enter or exit a position. We have sold long term equity put options described in press report. We don’t get involved in fancy techniques.
CM: If I remember right, a public authority was wondering if they should set up an option exchange market. Warren was alone in the opinion (against it). You wrote a letter saying it wouldn’t do any good to throw out margin rules in this fashion. It doesn’t serve the country. I always thought Warren was totally right. Turning financial markets into gambling markets to enrich the croupiers doesn’t make sense.
(Update) Meet the Buffetts (NBR Susie Gharib interview with 3 Buffett children, Howard, Susie, and Peter).
Working with Buffett (NBR Susie Charib interview 3 CEOs working for Berkshire subsidiaries).
Berkshire shareholder meeting at its early days
Quote from CNBC:
Buffett: It’s a gathering of partners. And, you know, we have a lot of partners, but I like the fact they feel part of the act. And to see it’s a real company, real products, real people. And, I get to see real stockholders, so it’s, it’s, it’s a gathering.
Becky: It started out as a very small event. When was the first, when was the first one?
Buffett: Well, if you go way back we used to hold ’em in New Bedford, Mass., where Berkshire Hathaway started. So I would go back there. And, and it was me and somebody taking the minutes… And we would have about anywhere between 8 and 12 people, for the next 10 or so years until about 1981. And my aunt Katie would come and my Uncle Fred. I always packed the audience with people that would be sure to nominate me.
A bit long. It was a talk Buffett gave to MBA students at the Business school at University of Florida, in 1998 (10 years ago). But I promise it’s both fun and educational 🙂
Chinese translation (中文)
English (PDF) (24 pages).
Google Video (88 minutes) original link here.
He talked about “chewing gum business” in the talk (address to question: What makes a company something that you like).
A Chinese version of the story can be read here (thanks to Shanzi for translation). You can read story (in English) from Buffett’s 2007 annual shareholder letter.
Why do I emphasize this story? Too many times I fall into some growth stories (hint: next Microsoft or Google), value traps (hint: Heelys and maybe Crocs), etc. This story serves as a reminder to myself: business is about making money. Less capital, more earings (not paper earning but the free cash flow), means great business. I think this story also implies not to take unnecessary risks or leverage: the recent down fall of financial firms exactly confirmed that.
Balance transfer
Also, I found this balance transfer (0% for 12 months, no fees) to be attactive.
http://www.fatwallet.com/t/52/810638/
The Turbo Tax online versions
I have used it since year 2001 (tax filing for year 2000), and I liked the product. One feature I like is TurboTax kept all the filings for previous years. A minor thing: I am going to save some money without using the State filing from Turbo Tax, because the calculation of State tax is fairly straightforward in my case (once the federal is done).
Buffett released his annual letter to shareholder last Friday, which I will discuss in next few days. First let me lay out my 5 year observations about Buffett and many other money managers.
1) Buffett will tell you his stock Berkshire Hathaway (BRK.A and BRK.B) is expensive all the time (don’t buy it); while money managers will say anything you want to hear to manage your money (and earn the fees). They will do seminars, show their cool technologies, send you advertisement (Mail, TV, Internet), etc. All this reminds me of the promoters of stock trading software on Shanghai street 🙂
2) Buffett does not think too much of stock daily price, quote him “if you care about the daily fluctuations of a stock, you should not buy the stock at first place”; some money managers watched the market every day, every hour, every minute. This reminds me one thing: if somebody/something needs constant attention, and it’s not your baby, then something is wrong (notice Britney Spears getting media attention lately).
(Update March 15) Remove Bill Miller from the Masters list. His holding Countrywide Financials, Sprint, Bear Stern blew up one after another. Although his 15 years streak to beat S&P is admirable, but 3 strikes in a row, not that impressive. I gave him a rating of 4.5, between good fund managers and masters 🙂
It also shows how tough to be a fund manager. I think it’s wise for Lynch to retire after 14 some years.
(Original)
1) Yahoo Message Board, many other stock bbs (the world renown mit for one).
2) Many articles on Seekingalpha etc.; many articles written by bloggers and financial journalists (people who make a living on writing or talking, not on investing). Jim Cramer and guys on Fast Money (blog dedicated to them) should also fall into this category. Sometimes I found we can almost use those as a reverse indicator: for instance, if Cramer says buy, take it as a sell 🙂
Shui Pi, the famous financial journalist and chief editor of ChinaTimes probablly should get 2.5.
3) Sell side analysts; Management with lots of stock options. Sell side analyst makes a living by help selling stocks. Management with stocks options tend to focus on stock price in the short term.
Peter Lynch once described our human’s psychology about stock market during different cycles, in his book One Up on Wall Street. I remember he used a party as an example, and he looked at the number of people approached him (people know he is a fund manager), and the amount of conversations about stocks, as an unofficial indicator about the market. So, for instance, in a red hot market, almost everyone came up to him and recommended his/her stock pick; while in a bear market, people will talked about “how is the weather”, and pretty much regard him as a dentist.
According to my observation, we are somewhere in between at this time. I mean, people think the stocks are risky, if not toxic 🙂
I would really be interested in learn how this plays out in the gatherings of Chinese New Year back home.
