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Investing Warren Buffett Watch

  Friday, 28 Apr 2017 | 2:21 PM ET

What it's like working for Warren Buffett: 'It's literally just reading about 12 hours a day'

Posted ByTae Kim

As Berkshire Hathaway's annual meeting approaches next week, Warren Buffett shared how hiring his two investment managers was "one of the best decisions" he ever made.

Yahoo Finance editor-in-chief Andy Serwer recently spoke with Buffett, Todd Combs and Ted Weschler in an interview in Omaha. Buffett hired Combs in 2010 and Weschler in 2011 to manage some of the company's funds. The two have rarely discussed their jobs in public.

"They're chosen for both ability and character," Buffett said. "Maybe seven or eight years ago, Charlie [Munger] and I talked about the desirability of bringing on somebody or maybe more than one somebody to both manage money now, but also in preparation for the day that Charlie and I won't be around."

The two proteges now manage $10 billion of capital versus the roughly $2 billion when they first started at Berkshire, according to the legendary value investor.

Hiring the two is "one of the best decisions that Charlie and I have ever made," Buffett added.

Combs also revealed what a typical day was like as a Buffett manager:

"I get in around 7 or 8 and I read until about 7 or 8 at night. And I go home and see my family and then I'll read for another hour or two in bed at night. And you know, there might only be three to four phone calls the entire week. So there are very, very few interruptions … But it's literally just reading about 12 hours a day."

Berkshire Hathaway's annual shareholder meeting will be held on May 6.

See here for the full Yahoo Finance report and the interview video.

»Read more
  Tuesday, 25 Apr 2017 | 10:34 AM ET

Coca-Cola's profit plunges 20 percent on bottling refranchising costs

Posted ByLauren Thomas

Coca-Cola reported first-quarter earnings on Tuesday that fell slightly short of Wall Street expectations, however, it was optimistic about the rest of the year, raising the low-end of its 2017 outlook and eyeing additional cost cuts.

The company reported a 20 percent drop in quarterly profit, which was driven lower because of higher costs related to its refranchising efforts in Coca-Cola's North America bottling operations.

In what Coke calls an "accelerated refranchising effort," the company has said it plans to sell the remainder of its Coca-Cola-owned "cold-fill" production facilities by the end of the year. These facilities produce sparkling beverages, such as Sprite, along with still brands like Dasani. Coke will maintain ownership of its "hot-fill" facilities, which produce brands such as Powerade and Minute Maid.

Aside from the expenses incurred from these efforts, Coke was further dragged down in the first quarter by weakness at its Latin American operations.

Here's what the company reported vs. what the Street was expecting:

  • Earnings per share: 43 cents adjusted vs. estimate of 44 cents expected, according to Thomson Reuters analysts' consensus.
  • Revenue: $9.118 billion vs. the $8.874 billion projection.

Shares of Coca-Cola initially dipped in premarket trading and then began to seesaw, trading down less than half a percent, following the company's earnings call.

Coca-Cola's total sales fell 11.3 percent for the quarter, marking its eighth-consecutive quarterly decline in revenue.

"As anticipated, revenues in the quarter were adversely impacted by two fewer days and the shift of the Easter holiday," CEO Muhtar Kent said in a statement. Though, he added, "[Coca-Cola] remain[s] on track to deliver our underlying revenue and profit targets for the full year."

Coke had warned earlier this year that its 2017 profit would drop as the company works to refranchise its bottling operations. Coke has said it expects to complete the refranchising efforts by the end of this year.

Coke now expects 2017 earnings per share on an adjusted basis to fall between 1 percent and 3 percent from the $1.91 a share it earned in 2016. Previously, the company was targeting a drop of 1 percent to 4 percent this year.

Kent is stepping aside as CEO on Monday, making way for James Quincey, who is currently chief operating officer. Kent will remain Coke's chairman.

In the latest period, Coca-Cola said its worldwide unit case volume was flat.

Case volume dropped 3 percent in Latin America, driven by double-digit declines in both Coca-Cola's Brazil and Latin Center business units amid "persistent macroeconomic challenges in those markets," the company said.

Unit case volume in Coca-Cola's Europe, Middle East & Africa segment grew by 2 percent for the quarter.

Meanwhile, the company said it's expanding its productivity and reinvestment program, while looking for an incremental $800 million in annualized savings by 2019. This added savings will boost its target for its six-year savings program to $3.8 billion.

Cost reductions are being made in its supply chain, in marketing expenses and by changing its operating model, Coke said. The bulk of these savings will be realized in 2018 and 2019.

Incoming CEO Quincey said on Tuesday's earnings conference call that part of Coke's cost-cutting plan will involve the elimination of 1,200 jobs, as the company focuses on creating a "lean corporate center."

»Read more
  Friday, 21 Apr 2017 | 11:20 AM ET

The US wastes 62 million tons of food a year—this Howard Buffett-backed start-up has a solution

Warren Buffett's grandson, the former Secretary of the U.S. Department of Agriculture and the Prince of Monaco all have a shared interest in KDC Ag, a small but growing start-up in New Jersey that turns food waste into fertilizer.

They agree that food waste is a massive and expensive problem. The U.S. alone spends $218 billion a year growing, processing, transporting and throwing away 62 million tons of food that either ends up in a landfill or unharvested on farms, according to according to ReFED, an organization that raises awareness of the problem in the U.S.

Meanwhile, 15.8 million U.S. households (12.7 percent) were food insecure at some point during 2015, according to the most recent data available from USDA Economic Research Service.

And, at the same time, the farming industry is depleting the soil of necessary nutrients. Two years ago, the United Nations Food and Agriculture Organisation estimated the topsoil of the planet could only support about 60 more years of harvests.

»Read more
  Wednesday, 19 Apr 2017 | 10:42 AM ET

Buffett taking megamillion-dollar beating on IBM

Posted ByJeff Cox

Nobody is taking a bigger beating on the slide in IBM shares than Warren Buffett.

The billionaire Oracle of Omaha is the largest shareholder — through his Berkshire Hathaway — of the information technology behemoth, whose stock has been sliding since it recorded its 20th-straight quarterly revenue decline after the closing bell Tuesday.

With the loss of nearly $10 a share in morning trading Wednesday, Buffett's losses are around $812 million.

Of course, that's a paper calculation and could change depending on what Berkshire has done since the last regulatory filing period. However, the losses are still substantial.

Berkshire Hathaway's 81.2 million shares represent about 8.6 percent of total shares outstanding, according to CapitalIQ.

Don't weep too much for Buffett, though — when considering dividends, he's made out just fine. The payout so far this year has come to a healthy total of nearly $1.8 billion, assuming his ownership stake hasn't changed. Excluding dividends, the stock is about $10 below the $170 that is his current breakeven level.

IBM actually topped Wall Street expectations on the bottom line, earning $2.38 a share against estimates of $2.35. However, top-line revenue fell short at $18.16 billion compared with the $18.39 billion anticipated according to Thomson Reuters estimates.

"The portfolio will grow. I am confident that the IBM company will grow again," IBM Chief Financial Officer Martin Schroeter told CNBC.

—CNBC's Alex Crippen contributed to this report.

Watch: Bezos passes Buffett as 2nd richest man

»Read more
  Monday, 17 Apr 2017 | 2:29 PM ET

Buffett-follower Mohnish Pabrai says General Motors should scrap its dividend

Posted ByKelly Evans

If Warren Buffett could change his mind about investing in airlines, Mohnish Pabrai could change his mind about investing in autos.

Pabrai, who has modeled his investment career and fee structure after Buffett's original partnership, counts General Motors, Fiat Chrysler and Ferrari in his highly concentrated portfolio.

Pabrai Investment Funds is coming off a tough couple of years as the partnership approaches the two-decade mark. GM's stock has been roughly flat since Pabrai bought it five years ago, and a separate investment in a zinc manufacturer went to zero.

Pabrai said the experience has made him even more focused in finding companies today that "just gush cash without debt" – like Google parent Alphabet, which he purchased a few years back.

The partnership today has $535 million in assets under management, according to Pabrai, and has returned 14.8 percent annually after fees and expenses on average since it began in 1999.

With regard to his current portfolio, "I've always detested the automakers," Pabrai told CNBC in the latest "Value Spark" interview. "You know, unionized, very high [capital investment], subject to consumer taste" that can change by the time cars get to market.

But GM and Chrysler emerged from bankruptcy last decade as "completely different companies," Pabrai said. "And so Detroit went from being one of the worst places on the planet to build a car to one of the very best."

Equally significant, Chrysler was incredibly inexpensive five years ago, around the time of Pabrai's investment, trading at essentially just its earnings power with no growth multiple at all.

"Cheapness will let me get over some dislike," he added with a chuckle.

Pabrai also supported efforts by Chrysler to unlock value by spinning off assets like Ferrari, which it did in a public offering in 2015.

While acknowledging he hasn't "seen much of a return" in GM the past five years, Pabrai does not support current efforts by GM investor David Einhorn to unlock value by creating two separate classes of GM stock: one for the capital appreciation, and one for the dividend.

"I don't think it's a good idea," Pabrai said. "So I'm actually with GM management on that," adding he thinks GM chief executive Mary Barra "is fantastic."

In fact, he said, "a better approach is [for GM to] eventually eliminate the dividends," especially since the auto business is so cyclical.

GM instead could increase its pace of stock buybacks, which, "in any case are a better way to get money to shareholders because you don't have Uncle Sam in the middle," said Pabrai. He still thinks GM shares are worth 50 percent to 100 percent more than their current level of about $33.

And while Tesla has just surpassed GM in market capitalization, Pabrai, a fan of chief executive Elon Musk, said, "I don't think it's a smart idea to be buying Tesla stock at present prices."

He added that he thinks "we are never going to see oil over $60 [again] for any sustainable period of time," thanks to the U.S. fracking revolution. That is key support for his investment in the gasoline-fueled automakers and for Southwest Airlines.

As for self-driving cars, Pabrai doesn't see them as a disruptive threat to the auto industry.

"We will see self-driving [freight] trucks," he said. But, "there isn't going to be any self-driving cars as we think about it for at least a couple of decades," said Pabrai.

—By CNBC's Kelly Evans.

For more, including Pabrai's views on President Trump, Jeff Bezos of Amazon, Alphabet's prospects and on Buffett's Berkshire Hathaway, please see the full interview at CNBC Pro.

»Read more
  Monday, 17 Apr 2017 | 10:12 AM ET

You may actually want to reject this investing advice from Bogle and Buffett

Posted By Elizabeth MacBride, special to CNBC.com
Billionaire investor Warren Buffett flips over a Dairy Queen Blizzard treat, the most successful product ever released in the history of Dairy Queen.
Frederic Brown | AFP | Getty Images

Investment legends Jack Bogle and Warren Buffet have a few things in common: They embrace low fees and index investing, and millions of people look to them for investing wisdom. One other thing: When it comes to investing, both are homebodies.

Bogle dismisses international diversification. Buffett, meanwhile, says an index fund portfolio of 90 percent S&P 500 and 10 percent Treasurys is probably good enough for most investors — that's how he is recommending his wife invest. But the anti-international stance is the rare piece of investment advice over which many people dare to disagree with Bogle and Buffett.

"I would tend to disagree," said Omar Aguilar, chief investment officer of equities for Charles Schwab Investment Management, who hews to the basic idea that the more diversification, the better. "Maybe I am not a great investing mind!" he added with a laugh.

Bogle and Buffett don't cast this advice as stone-cold or research-driven. In fact, both say it is more a preference and perhaps geared for investors who need to keep it simple rather than those who want to generate the absolute highest returns for the lowest risk. Diversification is crucial for long-term investors because it tamps down risk, and Nobel Prize-winning science says the more, the better — if you don't pay too much for it.

The crux of the case for not worrying about international diversification has always been that the multinationals that make up the S&P 500 generate a signification portion of their revenue from international markets. Holding an S&P index fund, where multinationals like Coca-Cola or Google are generating plenty of money from international sales, is a sort of shortcut to international diversification. Because an S&P 500 index fund is one of the cheapest investments around in terms of fees — the expense ratio on those funds is often under 0.1 percent — it's also a cheap way to diversify internationally.

But is that enough in a changing world? If you've been relying on the S&P to capture much of the globe's economic growth as you can over the long term, it could be time to rethink, say a growing number of experts and evidence.

The long-term fundamentals in international markets, especially in emerging markets, look good. Growing middle-class populations in Africa, Latin America, the Middle East and Asia are likely to propel some markets — most likely those with sound governance — to greater annual GDP growth than the United States.

After the eight-year run-up in U.S. stocks, international developed and emerging markets look like relative bargains and are currently among the world's hottest trades.

»Read more
  Monday, 17 Apr 2017 | 9:53 AM ET

Tony Robbins interviewed the world's best investors and says they share these 4 qualities

As self-made millionaire and professional life coach Tony Robbins compiled the lessons he learned from investors such as Carl Icahn, Warren Buffett, Ray Dalio and John Bogle into the personal finance book "Money: Master the Game," he noticed that the very best investors have four qualities in common.

Entrepreneur and author Tim Ferriss writes about Robbins' conclusions in his new book, "Tools of Titans."

Here are the four traits Robbins says top investors have in common.

1. They hate losing money

"Every single one of these [people] is obsessed with not losing money. I mean, a level of obsession that's mind boggling," says Robbins.

»Read more
  Thursday, 13 Apr 2017 | 8:42 AM ET

Wells Fargo shares slide 2% after earnings come in mixed

Wells Fargo on Thursday reported first-quarter earnings that topped analysts' expectation, but revenue came in light.

The third-largest U.S. bank by assets reported essentially a flat profit, due to in part higher costs and weaker mortgage banking revenue.

The bank's shares were down more than 2 percent in premarket trading following the announcement. In early trading the stock was down less than 1 percent.

Here's what the Street was expecting:

  • EPS: $1 versus 97 cents expected by Thomson Reuters analysts' consensus.
  • Revenue: $22 billion versus $22.32 billion expected by Thomson Reuters analysts' consensus, a nearly 1 percent decline.

The bank earned 99 cents per share in the same period last year.

"Wells Fargo continued to make meaningful progress in the first quarter in rebuilding trust with customers and other important stakeholders, while producing solid financial results," Wells Fargo CEO Tim Sloan said in a statement.

The bank said total average loans were $963.6 billion in the quarter, down $502 million from the fourth quarter. Mortgage banking revenue fell 23 percent to $1.23 billion.

The earnings report came three days after the bank's independent directors decided to initiate corporate pay clawbacks, following a six-month investigation into the scrutinized institution's retail banking sales practices.

The board review indicated that former Wells Fargo Chairman and CEO John Stumpf acknowledged that he made significant mistakes and helped create a culture at the bank that resulted in abuses.

"The findings are valuable to us and beneficial in helping to identify areas for further improvement. While we have more work to do, I am pleased with all we have accomplished thus far," Sloan said in the earnings release Thursday.

On Wednesday, Warren Buffett's Berkshire Hathaway said it is selling 9 million shares of Wells Fargo due to possible Federal Reserve regulations.

Wells Fargo directors are likely to receive the support of Berkshire Hathaway, according to The Wall Street Journal.

Citigroup also reported earnings on Thursday, beating expectations on the top and bottom line. Earlier in the day, JPMorgan Chase reported first-quarter earnings that easily beat Wall Street's expectations.

— CNBC's Wilfred Frost and Reuters contributed to this report.

»Read more
  Thursday, 13 Apr 2017 | 6:30 AM ET

Warren Buffett is selling some Wells Fargo shares to dodge Fed regulations

Warren Buffett
David A. Grogan | CNBC
Warren Buffett

Warren Buffett's company is selling a chunk of its Wells Fargo stock to avoid some federal regulations.

Berkshire Hathaway says the sale isn't tied to the scandal about Wells Fargo's sales practices that led to the CEO's departure last year.

The company says it's selling to keep its stake of the bank below 10 percent to avoid additional Federal Reserve regulations. It will continue selling shares as needed to remain below that threshold.

Berkshire's holdings crept above 10 percent last year because of Wells Fargo's stock repurchases.

Berkshire says it has already sold 7.1 million shares and will sell about 1.9 million more. That will bring its holding to around 491 million shares

»Read more
  Tuesday, 11 Apr 2017 | 10:06 AM ET

Reports that firm with ties to Buffett is considering Panera bid are untrue, sources say

Posted ByLauren Thomas
Warren Buffett
David A. Grogan | CNBC
Warren Buffett

Private equity giant 3G Capital is not looking to outbid JAB Holdings for Panera Bread, sources told CNBC on Tuesday.

Panera shares pared back earlier gains following CNBC's report, trading up less than 0.5 percent shortly after market open.

Panera did not immediately respond to request for comment.

A report surfaced Monday that JAB's buyout deal of Panera Bread might not be sealed just yet, with sources telling the New York Post there could be other options on the table for Panera to consider. Brazilian-based 3G Capital, which owns Burger King and Tim Hortons, was said to be weighing a rival bid for the fast-casual chain, the paper reported late Monday, citing unidentified sources close to the situation.

Earlier this month, JAB — the owner of Caribou Coffee and Peet's Coffee & Tea — offered Panera Chief Executive Ron Shaich $315 in cash per share for the company, representing a more than 20 percent premium to the stock's closing price on March 31, the last trading day before media began reporting on the potential deal.

If 3G were to decide to top JAB's $7.5 billion offer, it would put two of the world's largest private equity firms in direct competition for Panera's more than 2,000 U.S. bakery cafes. Both firms have been making lots of deals as of late, and in February 3G's $143 billion approach for Unilever was rejected.

St. Louis-based Panera has reportedly agreed to pay JAB a termination fee of $215 million, or 3 percent, if it accepts a greater offer.

3G Capital did not immediately respond to a request for comment, and Lazard declined commenting to CNBC.

Further, the Post headline said: "Buffett-backed firm interested in bid for Panera Bread: sources," although there was no indication in the Post's report that Warren Buffett would be involved in the potential bidding for Panera. The Brazilian PE firm has teamed up with the billionaire investor for deals in the past.

Buffett's Berkshire Hathaway did not immediately respond to CNBC's request for comment.

With many acquisition rumors swirling of late, shares of Panera have risen more than 45 percent over the past three months.

»Read more

About Buffett Watch

  • Warren Buffett is arguably America’s most-admired and most-followed investor. Buffett is the largest shareholder and CEO of Berkshire Hathaway and one of the world’s most famous and most generous philanthropists. Legions of investors - from all walks of life - follow Buffett's homespun investment philosophy: invest in what you know, invest in value. Here on CNBC.com's Warren Buffett Watch, we’ll keep you up to date on what the “Oracle of Omaha” is doing by following Buffett's trades, words and deeds.