Skip to comments.Listening to ‘Uncle' Warren Buffett Pays off Handsomely
Posted on 03/08/2014 7:25:18 AM PST by Kaslin
Earlier this week, we were hit with yet another winter storm here outside of the Washington, D.C., area, and, true to form, many things came to a girding halt. We can add this to the other winter storms that have taken their toll on the economy in the current quarter, but as I shared with subscribers to my PowerTrend Profits investing newsletter, most of that will be temporary. As we have seen in the past, this slowdown likely will create a burst of pent-up demand once the warmer weather rolls around.
During my snowed-in time, I was fortunate enough to have some interesting reading. One key data point I gleaned was a very robust purchasing managers' index (PMI) reading for the U.S. economy. The February reading from Markit Economics showed a significant month-over-month jump in output, new orders, backlogs and new export orders. All told, it was the strongest month for manufacturing since May 2010, despite the impact of the winter storms. I continue to see signs of pent-up demand in the short term that should give a boost to domestic manufacturing.
At the same time, the euro zone continues to recover as its pace of manufacturing has continued to expand, with February marking the eighth consecutive month of expansion for manufacturing output, new orders and new export business. An even broader view of global manufacturing offered by JP Morgan came in at a reading of 53.3, a 34-month record and higher than the 53.0 January figure. On that global basis, JP Morgan found that global output remained on track, but new order activity rose in February compared to January.
That tells me the global manufacturing economy is doing better than is being talked about by all the pundits and talking heads on TV.
We also had the annual treat that is "Uncle" Warren Buffett's annual letter to shareholders of Berkshire Hathaway (BRK.A). I've read and re-read many of his letters over the years for both insight and entertainment, and if you've missed them, you can find them on Berkshire Hathaway's website or pick up Mike Olson's book "Berkshire Hathaway Letters to Shareholders." This year's letter was once again filled with wit, wisdom and humor. If you have not yet seen it, I highly recommend that you read it.
Uncle Warren and his team have achieved this by being value investors who look for businesses and securities with prices trading below their intrinsic value. That value is determined by analyzing a company's business fundamentals. More than just determining whether an opportunity is underpriced by the market, Buffett and his team also look at the overall potential of the company and how well that company can make money as a business. As such, these investments tend to be longer-term in nature, and Buffett has been rather open about his views on what the stock market may or may not think about his team's investments.
Subscribers to my investment newsletter PowerTrend Profits will say this sounds very familiar.
Is this the only style of investing? No. Is it for everyone? No. It takes many different investors and traders to make a market, but given the performance by Buffett and his team, I think many would be hard pressed to argue that when Warren Buffett talks, it makes sense to ponder what he says.
Some of my favorite quotes by Buffett include:
"The stock market is a no-called-strike game. You don't have to swing at everything -- you can wait for your pitch."
"'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."
"The best thing that happens to us is when a great company gets into temporary trouble... We want to buy them when they're on the operating table."
"When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever."
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
There are many other pearls of wisdom from Uncle Warren and more than a few humorous ones along the way. Those quotes above are my favorite because they reflect my mindset when picking recommendations in PowerTrend Profits, where we will buy the right company at the right time and not before, but we will hold it as long as the investment rationale continues to make sense.
How's that working for us? As I write this to you, subscribers to PowerTrend Profits are up in 11 of 13 positions, with eight double-digit percentage returns and one that is up nearly 90%.
It seems to me that Uncle Warren is onto something.
There, fixed it.
As a person I find Buffett at times hypocritical. He is just another limousine liberal Democrat. He also benefits from many “special deals” that are not available to the rest of the investing public. He is less than candid about that.
As an investor, however, he is very savvy and is generous with his sage advice. Unlike his personal political views, he has no reservations about admitting when his investment picks do not pan out.
For anyone who would like more insights into his investing philosophy and methodology, check out the book Buffett - Beyond Value (by Prem C. Jain). Good read that is well worth the time and money.
Right. And Uncle Warren lives in a little house in Omaha.
The Dems have a very effective plan.
Crony capitalists to provide the money.
Entitlement army to provide the votes.
Meanwhile said crony capitalists shelter their income in tax exempt charitable foundations with which to drop a dime on activist groups to go to court with complicit federal agencies to get the regulations to put their competitors out of business.
Actually most of their income is either capital gains or “carried interest” so they can legally pay quite minimal taxes.
unrealized capital gains.
combined federal, state, and local tax rate of 0%.
I'm not speaking off the top of my head. The vast bulk of activist donations, to environmental groups for example, are from tax exempt foundations. I suggest you spend a little time at ActivistCash.com.
When the .1 percent are Democrat donors, they receive immunity from MSM criticism.
Amazing isn’t it?
People often can make a short term profit by listening to Satan too.
I’m sure that’s true, but those amounts are pocket money to these guys.
What Buffett's empire has learned over the years is that if you own a town, all its businesses and you hire all its employees and all the employees shop at stores you own in the town, then you control the game.
But Buffett's generals and lieutenants have finessed their game play over the years. They have realized one doesn't need to own everything, just have enough shares to control it. For example, the Buffett empire owns only 26% of Moody's Investment Services yet 26% is all that is needed to control it. If another player tries to buy a controlling stake, Buffett's people will bring overwhelming cash to the table and raise the ante on the upstart trying a hostile takeover.
Meanwhile Buffett's hedge funds buy short term call options before driving the stock price through the roof and just before capitulation of their opponent they buy put options to profit on the stock resettling to its former price before the hostile takeover attempt.
So there it is, Buffett's people control the game with cash, hedge funds, political smackdowns/favors and NY media support. All of these tools are available to his empire because they are the controllers. Incidentally this is why he is a democrat or why the people that are his tools are democrats. Because republican belief in free markets and competition are child-like fantasies to the likes of Buffett. He does not believe in competition. He believes in control; absolute control.
Ask yourself if there is one 'unique' thing in life that Buffett or his people have created that you could not do without. Notice I write "have created". There is nothing that Buffett has brought to life that he and his people "have created" that is unique and indispensable. If Buffett had never existed or had never risen up to being just another hired hand, life in America would not have noticed.
So should we invest our time reading his folksy letters? Only if you have time to waste.
But they still shelter it as suggested.
True, they are paying at most 15%.
Let’s just say 30 years ago you had a choice: either participate in Social Security or give up your right to social security but you had to invest the same funds in Berkshire Hathaway.
That is privatization and I’d take it.
A (bogus) choice between Berkshire Hathaway and a government program is fascism, and you'd take it.
‘Price is what you pay; value is what you get.
Only if the voters could understand that the country would be in far better shape.
Buffet hardly preaches for us to chase short-term profits, but he will take advantage of those who do.
Both Satan and Buffet play the long game, but fortunately for us, God plays the longest game of all. :)
No, it's not.
While Buffett has an excellent track record, the investment philosophy of value investing did not originate with him. The father of value investing is Benjamin Graham.
Oh please. It's open contempt for a crooked globalist, not "bottled up hatred." What he did in his handling of Arnold Schwarzenegger to screw up the construction of the new east span of the San Franciso-Oakland Bay Bridge just so his interests in Peter Kiewitt could pad his profits was enough to prove to me what a crook he is.