Investing Warren Buffett Watch

  Thursday, 22 Jun 2017 | 9:10 AM ET

Warren Buffett: An overlooked target in Amazon's grocery war

The grocery war Jeff Bezos and Amazon have started with the planned acquisition of Whole Foods has some pretty obvious targets: Wal-Mart, Costco, Target, to name a few of the big retail storefronts.

Many of the large food conglomerates that line the shelves of grocery stores may face pressure if Bezos plans a full-throttle attack on supermarket pricing. Even real estate companies that have supermarkets as anchor tenants in shopping centers took a hit on the news. How fast and far do fears of Bezos' setting his focus on a new sector go? How about Amazon having the power to keep inflation down.

But one big fan of supermarkets and food companies that has been overlooked: Warren Buffett and his company Berkshire Hathaway.

Among Berkshire's relatively selective portfolio of publicly traded stocks is longtime holdings Wal-Mart and Costco, as well as Kraft Heinz (Buffett used to own tons of Kraft shares before engineering a deal to create the Kraft Heinz entity), Coca-Cola and Mondelēz, one of the world's largest snack companies. And buried inside of the many wholly-owned subsidiaries of Berkshire is McLane, a major food distribution company that Berkshire purchased in 2003 directly from Wal-Mart, the low-cost grocery company with which Amazon is now most seen as being on a "collision course."

Berkshire's exposure to the food sector may not seem as concentrated or as large a sector bet as bank stock holdings, which represent a financial company worth near-$50 billion dollars. But Buffett's Kraft Heinz stake (representing 26 percent of the company's shares) is valued at $29 billion, and his Coke stake (representing 9 percent of its shares) at $18 billion. Berkshire has another $100 million in Wal-Mart shares, which the company has reduced exposure to over time, and $700 million in Costco shares. It also has a very small $26 million holding in Mondelēz.

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  Thursday, 22 Jun 2017 | 8:57 AM ET

Qatar Airways interested in acquiring about a 10% stake in American Airlines

Posted ByLauren Thomas

American Airlines on Thursday said it recently received an unsolicited offer from Qatar Airways about the Middle Eastern airline's intention to acquire at least a 10 percent stake in American, a move that not many people could have predicted.

The notice advised that state-owned Qatar intends to purchase at least $808 million in the U.S.-based airline following a conversation between the two companies' CEOs, which was initiated by Qatar Airways' CEO, Akbar Al Baker, American said in a statement.

American Airlines has a market value of about $24 billion. Qatar has said it plans to make its stock purchase on the open market.

American said that it will respond to the notice "in due course" with the appropriate filings required under the Hart-Scott-Rodino (HSR) Act. Qatar Airways has submitted a filing under the HSR Act, with respect to its potential investment in American Airlines common stock, the companies have confirmed.

This news comes just weeks after Qatar was engulfed in a diplomatic row with neighbor Saudi Arabia, which led other nations including Egypt, the United Arab Emirates and Bahrain in cutting ties with Doha, Qatar's capital city. Qatar Airways is one of the Middle East's biggest airlines.

Shares of American Airlines jumped more than 5 percent on this news Thursday morning.

Meanwhile, other airline stocks, such as Southwest, Delta and JetBlue, also climbed higher following this announcement.

American has noted that there are foreign ownership laws that limit the total percentage of foreign voting interest in its business to 24.9 percent.

American also said the company prohibits anyone from acquiring 4.75 percent or more of its outstanding stock without advance approval from the board, following a written request. As of Thursday, American's board had not received any such request.

A representative from Qatar didn't immediately respond to a request for comment, and American declined to comment beyond what was in its Thursday press release.

This news might come as a surprise because American's CEO, Doug Parker, has been extremely vocal in blasting Gulf carriers, like Qatar, arguing they receive subsidies and have potentially hurt U.S. carriers as a result.

A deal like this, though, couldn't be stopped by Parker, so long as Qatar doesn't exceed the 24.9 percent ceiling.

Qatar Airways has been seen scooping up stakes in several other airlines, including South America's LATAM Airlines Group and Italy's Meridiana.

"The proposed investment by Qatar Airways was not solicited by American Airlines and would in no way change the Company's Board composition, governance, management or strategic direction," American said in a statement.

"It also does not alter American Airlines' conviction on the need to enforce the Open Skies agreements with the United Arab Emirates and the nation of Qatar and ensure fair competition with Gulf carriers, including Qatar Airways. American Airlines continues to believe that the President and his administration will stand up to foreign governments to end massive carrier subsidies that threaten the U.S. aviation industry and that threaten American jobs."

American and Qatar share at least one thing in common already, both being members of the Oneworld marketing alliance. This partnership allows passengers of these airlines to earn and redeem points on each company's flights.

According to March and April filings with the Securities and Exchange Commission, American had five shareholders above the 4.75 percent threshold, including Warren Buffett's Berkshire Hathaway, which has a 10 percent stake.

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  Thursday, 22 Jun 2017 | 6:45 AM ET

Buffett's Berkshire Hathaway offers $1.5 billion lifeline to Canada's Home Capital

Warren Buffett at the Annual Berkshire Hathaway Shareholder's Meeting in Omaha, NE on May 6, 2017.
Lacy O'Toole | CNBC
Warren Buffett at the Annual Berkshire Hathaway Shareholder's Meeting in Omaha, NE on May 6, 2017.

Home Capital said billionaire Warren Buffett's Berkshire Hathaway will provide a new C$2 billion ($1.50 billion) line of credit to its unit Home Trust Co., ending the Canadian lender's strategic review process.

Berkshire will also indirectly buy C$400 million of Home Capital's common shares in a private placement through its unit Columbia Insurance Co., Home Capital said on Wednesday.

"Home Capital's strong assets, its ability to originate and underwrite well-performing mortgages, and its leading position in a growing market sector make this a very attractive investment," said Warren Buffett, Berkshire chairman and CEO.

Berkshire will hold an about 38.39 percent equity stake in Home Capital after buying 40 million shares at an average price of about C$10 per common share.

Berkshire will make an initial investment of C$153.2 million to buy 16 million common shares and an additional investment of C$246.8 million to purchase 24 million shares through a private placement.

The additional investment is subject to shareholder approval, while the initial investment will not require approval from shareholders.

Canada's biggest non-bank lender also said it will continue to explore further asset sales and financing deals over the next year, but has concluded its strategic review process that began in April.

"This investment from Berkshire not only addresses Home Capital's near-term requirements for additional liquidity and a lower-cost credit agreement, but also facilitates what the Board feels is the best available path to long-term success," Home Capital's Chair Brenda Eprile said.

Berkshire will not be granted any rights to nominate directors to Home Capital board or any governance rights as an equity holder, Home Capital said.

The C$2 billion loan facility, expected to be effective on June 29, will replace the existing one for a similar amount between Home Trust Co. and a major institutional investor.

On Tuesday, the company said it would sell a portfolio of commercial mortgage assets valued at C$1.2 billion to bolster its liquidity and trim outstanding debt on a C$2 billion emergency facility it agreed with the Healthcare of Ontario Pension Plan in April.

Last week, Home Capital reached a C$30.5 million settlement with the Ontario Securities Commission, settled a class action lawsuit and accepted responsibility for misleading investors about problems with its mortgage underwriting procedures.

The settlement is expected to help secure long-term financing at sustainable interest rates, investors and analysts said.

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  Tuesday, 13 Jun 2017 | 6:13 PM ET

Alex Rodriguez swings for the fences in the business world

Posted ByRachel Cao

Alex Rodriguez has always been interested in becoming a player in the business world. Now that he's retired from baseball, the former superstar is able to cash in on his interest.

"I'm very data driven and I like numbers. I always said that in business, numbers don't lie," Rodriguez told CNBC on Tuesday. "I started seeing a lot of athletes going bankrupt at a 70 percent rate within a few years of retirement. So I wanted to start my own investing."

Rodriguez, who won a World Series during his tenure with the New York Yankees, has continued his success off the field with his own businesses.

The baseball legend recounted how he started investing in a small duplex that grew into a large entity called ARod Corp., which manages more than 15,000 apartment units in 12 states.

"In business, we've been really fortunate. The market the last five years have been incredible," Rodriguez said. "We've been laser-focused in every sector we participate in. And now we're in real estate, auto dealership, and in fitness."

Rodriguez listed big name investors such as Barry Sternlicht, Marc Lasry and Warren Buffett as some of his mentors in the ways of finance and business, but he also acknowledged he needs to put in the work to succeed.

"You know, business is like a sport. You've gotta put in your 10,000 hours and it takes time," Rodriguez said. "And for me, my philosophy is slow and steady will win the race and there's no reason to be in a rush."

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  Friday, 9 Jun 2017 | 6:17 AM ET

Warren Buffett auctions off lunch to raise money for charity

Warren Buffett
David A. Grogan | CNBC
Warren Buffett

The winning bid for a private lunch with billionaire Warren Buffett may top several million dollars in an online auction to benefit a California homeless charity that wraps up Friday night.

For the 18th consecutive year, Buffett is auctioning off a lunch to raise money for the Glide Foundation, which helps homeless people in San Francisco. The chairman and CEO of Berkshire Hathaway has raised nearly $24 million through the auctions. Last year's winner paid $3,456,789, which tied the record set in 2012.

Buffett has praised the charity for the work it does helping people. Buffett became a believer in Glide's work after his first wife, Susie Buffett, showed him what the group was doing for the poor and homeless. Susie Buffett had volunteered for the San Francisco charity before her death in 2004.

"Everyone that has experienced Glide comes away a believer," said Buffett.

Glide provides meals, health care, job training, rehabilitation and housing support to the poor and homeless.

This year's eBay auction began Sunday and runs through Friday at 7:30 p.m. PDT.

Buffett says the only topic that's off limits in the lunch conversation is what Buffett might invest in next, and the 86-year-old says he usually gets a wide range of questions.

The winners of the lunch auction typically dine with Buffett at Smith and Wollensky steak house in New York City, which donates at least $10,000 to Glide each year to host the lunch. If the winner chooses to remain anonymous the lunch has sometimes been held elsewhere.

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  Thursday, 8 Jun 2017 | 12:55 PM ET

The investment strategy pioneered by Warren Buffett is in crisis

Posted ByTae Kim

Wall Street is questioning the value investing strategy espoused by legendary investors such as Warren Buffett after a decade of weak returns.

The value "strategy's poor performance has coincided with a swell of assets into passive equity investment strategies as well as quantitative and 'smart beta' funds," Goldman strategist Ben Snider wrote in a report Wednesday entitled "The death of value?"

"The disconnect has led investors to question the future viability of value investing, which has been embraced by the academic literature and espoused by investors including Benjamin Graham and Warren Buffett," he added.

Snider noted the value investing long/short strategy based on Eugene Fama's and Kenneth French's work generated an average annual return of 5 percent from 1940 to 2007.

"The simple strategy – buying stocks with the lowest valuations and selling those with the highest – realized a theoretical gain in seven out of every 10 years and never spent three full years below its previous high water mark," he wrote.

However, in recent years performance has faltered. The strategist said investors that used the same long/short value strategy generated a 15 percent cumulative loss in the past decade and negative returns in 6 out of the last 10 years.

Snider explained why the returns have suffered:

"Value has historically posted its strongest returns during periods of strong economic growth early in the economic cycle. The factor typically wanes late in the cycle as investors search for secular growth opportunities when economic growth slows. Concerns about the possibility of 'secular stagnation' in recent years have compounded the investor hunt for growth."

Goldman Sachs' chief U.S. equity strategist, David Kostin, also told CNBC on Tuesday why growth stocks outperform in sluggish economic environments.

"A modest growth environment means that growth is still relatively scarce. So the growth stocks … [where] tech is a prominent area, are likely to continue to do well and outperform," Kostin said on CNBC's "Squawk on the Street."

But perhaps investors should heed history. The last time Wall Street questioned Buffett's favorite strategy it preceded a strong multiyear run for value investing.

During the height of the dot-com bubble in 1999, when technology growth investing was crushing the market, Buffett defended value investing in a classic column for Fortune magazine.

"At Berkshire we focus almost exclusively on the valuations of individual companies, looking only to a very limited extent at the valuation of the overall market. Even then, valuing the market has nothing to do with where it's going to go next week or next month or next year, a line of thought we never get into. The fact is that markets behave in ways, sometimes for a very long stretch, that are not linked to value. Sooner or later, though, value counts." - Warren Buffett, Fortune Nov. 1999

And to be sure, Buffett's value style differs from Goldman's simplistic study. The Oracle of Omaha says he looks for good companies with strong management and competitive advantages at a good price. And he never explicitly stated you need to sell a stock once the valuation got "high."

In the end, Goldman's Snider is not giving up on value investing.

"We believe that value will remain a good long-term strategy, although future returns will likely be lower than the historical average. Behavioral finance suggests that some value premium will persist even as changes in the investment landscape reduce its expected returns going forward," he wrote.

Watch: Inside Buffett's vacation home

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  Wednesday, 7 Jun 2017 | 1:22 PM ET

Billionaire BFFs Warren Buffett and Bill Gates went mattress shopping and discussed the key to success

Posted ByKathryn Dill

Billionaire best friends Warren Buffett and Bill Gates can't get enough of each other. They love the same books. They have the same definition of success. And, last month, at Berkshire Hathaway's annual shareholders weekend in Omaha, Nebraska, the two took a little field trip to Berkshire-owned "mega-store" Nebraska Furniture Mart.

In Gates' own words, they "tried out some lounge chairs, played with remote-controlled mattresses and somehow managed to get lost" in the cavernous store.

They also discussed passion, leadership and philanthropy (yes, really) and reflected on the history of their friendship.

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  Monday, 5 Jun 2017 | 1:59 PM ET

Warren Buffett lunch bidding quickly hits $1 million

Warren Buffett
David A. Grogan | CNBC
Warren Buffett

An auction for well-heeled fans of Warren Buffett to eat lunch with the billionaire in support of a San Francisco charity that helps the homeless and impoverished got off to a fast start, with bidding quickly hitting seven figures.

The top bid was $1 million as of 1 p.m. EDT (1700 GMT) on Monday, and had been made within two minutes of the auction's Sunday night launch.

Bids often surge near the end of the eBay auction, which concludes on Friday at 10:30 p.m. EDT (230 GMT Saturday).

Buffett, the chairman of Berkshire Hathaway Inc, has raised $23.6 million in 17 years of auctions for Glide.

That included $3,456,789 from last year's winner, a woman who chose to remain anonymous, tying a record set in 2012.

Other winners have included Ted Weschler, a hedge fund manager who paid $5.25 million to win two auctions and later became one of Buffett's investing deputies at Berkshire.

Glide uses its $18 million annual budget to provide more than 750,000 free meals, emergency shelter for 8,500 people, 2,600 HIV and Hepatitis C tests and day care and after school programs for nearly 450 children.

Located in San Francisco's Tenderloin district, Glide was co-founded and is led by the Rev. Cecil Williams, the 87-year-old pastor emeritus of the affiliated Glide Memorial United Methodist Church, and his wife Janice Mirikitani.

Buffett got involved with Glide after his first wife, Susan, became a volunteer, and continued after her 2004 death. He remarried in 2006.

He is also donating virtually all of his wealth to several charities. Forbes magazine on Monday estimated his net worth at $74.9 billion.

Buffett will dine with the auction winner and up to seven guests at the Smith & Wollensky steak house in Manhattan. He has said all topics are fair game except where he will invest next.

According to Glide, these bidders won its past auctions:
2000: Pete Budlong, $25,000
2001: Jim Halperin and Scott Tilson, $20,000
2002: Jim Halperin and Scott Tilson, $25,000
2003: David Einhorn, Greenlight Capital, $250,100
2004: Jason Choo, Singapore, $202,100
2005: Anonymous, $351,100
2006: Yongping Duan, California, $620,100
2007: Mohnish Pabrai, Guy Spier, Harina Kapoor, $650,100
2008: Zhao Danyang, Pure Heart Asset Management, China, $2,110,100
2009: Courtenay Wolfe, Salida Capital, Canada, $1,680,300
2010: Ted Weschler, $2,626,311
2011: Ted Weschler, $2,626,411
2012: Anonymous, $3,456,789
2013: Anonymous, $1,000,100
2014: Andy Chua, Singapore, $2,166,766
2015: Zhu Ye, Dalian Zeus Entertainment Co, China, $2,345,678
2016: Anonymous, $3,456,789

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  Friday, 2 Jun 2017 | 8:00 AM ET

A data scientist in his 20s explains the secret to Warren Buffett’s optimism

Posted ByZameena Mejia

Self-made billionaire and Berkshire Hathaway CEO Warren Buffett, 86, has long been revered as a legendary investor. His annual shareholders' meetings, deemed the "Woodstock for capitalists," bring together tens of thousands of attendees each year to Nebraska.

For the last few months, the business world has dissected Buffett's annual letter for his views on how the market is performing, his advice on investing, the current state of the economy and management tips, among other topics. It's also widely known that the self-made billionaire offers some of the most prized advice around.

Earlier this year, Bill and Melinda Gates even addressed their own annual letter to Buffett, attributing the secret to his success to his unrelenting optimism.

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  Wednesday, 31 May 2017 | 2:28 PM ET

14 billionaires promised to give away more than half their money like Bill Gates and Warren Buffett

Fourteen billionaires announced they have signed the Giving Pledge, formally joining the 154 other billionaires who have promised to give away at least half of their vast wealth to philanthropic causes.

Started in 2010 by Bill and Melinda Gates, worth $88.5 billion, and Warren Buffett, worth $74.2 billion, the Giving Pledge is a commitment by wealthy individuals and families to give away more than half of their wealth to causes including including poverty alleviation, refugee aid, disaster relief, global health, education, women and girls' empowerment, medical research, arts and culture, criminal justice reform and environmental sustainability.

Signatories of the Giving Pledge must be billionaires, if not for the money they are giving away. The goal of making a public pledge is to encourage others to consider philanthropy, too, even if they aren't billionaires.

Here's the newest class of Giving Pledge signatories, their countries of origin, their net worths (when publicly available) and lines from their public pledge letters indicating their reasons for donating.

1. Leonard H. Ainsworth
Chairman Emeritus and Executive Director of Ainsworth Game Technology Limited, pioneer in the gaming industry for more than 60 years
Net worth: $1.18 billion
Excerpt from Giving Pledge letter:
"It is my great pleasure to provide this Giving Pledge commitment wherein I pledge to give at least 50% of my wealth to charitable causes both during my present life and beyond. As a private person, I prefer to minimize publicity of my philanthropic activities but at the same time realize that setting a positive example is the best way to encourage others to give back."

2. Mohammed Dewji
President and CEO of MeTL Group, a Tanzanian conglomerate operating in 11 African countries, former politician
Net worth: $1.39 billion
Excerpt from Giving Pledge letter:
"From day one, my parents have been instrumental in instilling the ethos of philanthropy, particularly my responsibility as a Muslim to give and care for the less fortunate in our society.

"By signing this pledge, I hope to inspire my peers, fellow Africans and citizens of the world to take a close look at the funds they truly need to maintain their families verses their ability to give. In retrospect, many of us have well-above what we need while constantly accruing a list of what we want in this life. We all have a moral obligation as the more affluent in society to give back as best we know how. I'll leave you with a few words I share with many of my comrades: 'When God blesses you financially, don't raise your standard of living. Raise your standard of giving.'"

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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.