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Investing Warren Buffett Watch

  Tuesday, 27 Jun 2017 | 11:54 AM ET

Billionaire Warren Buffett says 'the real problem' with the US economy is people like him

Warren Buffett says people like him are the problem with the U.S. economy.

With a net worth of more than $75 billion, Buffett is currently the second richest man alive, according to Forbes. As the CEO of investing house Berkshire Hathaway, he is hallowed as the Oracle of Omaha. But for all his personal success, Buffett says the issue really is the 1 percent.

"The real problem, in my view, is — this has been — the prosperity has been unbelievable for the extremely rich people," says Buffett on PBS Newshour.

"If you go to 1982, when Forbes put on their first 400 list, those people had [a total of] $93 billion. They now have $2.4 trillion, [a multiple of] 25 for one," he says. "This has been a prosperity that's been disproportionately rewarding to the people on top."

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  Monday, 26 Jun 2017 | 11:33 AM ET

Buffett's Berkshire Hathaway studied this stock for three years before buying in

Posted ByTae Kim

Warren Buffett's Berkshire Hathaway eyed real estate investment trust Store Capital for three years before investing in the company.

"The investment was the result of Berkshire Hathaway contacting us. They became aware of STORE Capital in 2014 and have been following our progress closely since then," Store Capital CEO Christopher Volk wrote in a statement to CNBC, giving outsiders a rare look behind the scenes of how Berkshire does business.

"They became deeply familiar with the company, our strategy, business model, experienced management team and disclosure. They were prepared to take advantage of an attractive buying opportunity in the market and they did so. We are delighted [to] welcome Berkshire Hathaway as a shareholder," he added.

Store Capital announced on Monday that Berkshire invested $377 million in the company, which represents a 9.8 percent stake in the real estate investment trust.

The company issued 18.6 million shares of Store Capital in a private placement to a subsidiary of Berkshire Hathaway, National Indemnity Co., at $20.25 per share.

Berkshire Hathaway's investment makes the company the third largest holder in Store Capital, after Vanguard Group and Fidelity Management & Research, according to FactSet.

Store Capital has investments in over 1,750 properties in 48 states, according to the company. AMC Entertainment, Applebee's and Ashley Furniture are among its 10 biggest customers, according to an investor presentation.

Store describes itself as the leader in "Single Tenant Operational Real Estate" and says it is "dedicated to real estate net-lease profit-center property investments."

Berkshire Hathaway did not immediately respond to a request for comment. It is not clear who at the company is directly responsible for the Store Capital investment.

Store Capital shares rose more than 10 percent midday Monday after the news.

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  Monday, 26 Jun 2017 | 7:28 AM ET

Buffett's Berkshire Hathaway just became one of the largest shareholders in obscure real estate firm

Warren Buffett's Berkshire Hathaway is investing more money in the real estate business.

Store Capital announced on Monday that Berkshire invested $377 million in the company, which represents a 9.8 percent stake in the real estate investment trust.

The company issued 18.6 million shares of Store Capital shares in a private placement to a subsidiary of Berkshire Hathaway, National Indemnity Co., at $20.25 per share.

"Berkshire Hathaway's investment solidly positions STORE for continued growth, while adding measurably to our already strong financial position," Store Capital CEO Christopher Volk said in a statement. "An investment in our company from one of history's most admired investors represents a vote of confidence in our experienced leadership team and an affirmation of our profit-center real estate investment and management approach."

Berkshire Hathaway's investment makes the company the third largest holder in Store Capital, after Vanguard Group and Fidelity Management & Research, according to FactSet.

Store Capital has investments in over 1,750 properties in 48 states, according to the company. AMC Entertainment, Applebee's and Ashley Furniture are among its 10 biggest customers, according to an investor presentation.

Store describes itself as the leader in "Single Tenant Operational Real Estate" and says it is "dedicated to real estate net-lease profit-center property investments."

Berkshire Hathaway and Store Capital did not immediately respond to requests for comment.

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  Friday, 23 Jun 2017 | 1:43 PM ET

Josh Brown: Here's the reason Wall Street hates the bull market in stocks so much

Enthusiasm about the stock market's rally is "absent" because active managers on Wall Street are worried they may not have a job soon, money manager and popular blogger Josh Brown told CNBC on Friday.

The more the bull market is led by indexing, "the less likely it will be that there'll be big bonuses, there'll be an expansion of business for these people," the CEO of Ritholtz Wealth Management said on "Halftime Report." "And I think if you can't get pros excited, it's tough to get euphoria amongst the amateurs."

The author of the widely read blog The Reformed Broker added that perhaps the negative sentiment has prolonged the bull cycle.

In the past decade, there's been a shift from active to passive management strategies, such as index funds, which replicate a stock index like the S&P 500, and ETFs that track the market.

Billionaire investor Warren Buffett has even said index funds make the best retirement sense "practically all the time."

Since the presidential election, the Dow Jones industrial average has risen more than 16 percent, the S&P 500 has gained more than 13 percent, and the Nasdaq composite has surged 20 percent as of Thursday's close.

Some analysts attributed the stock market's rally to proposed policies from the Trump administration, including looser regulations, infrastructure spending and tax reform.

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  Friday, 23 Jun 2017 | 9:55 AM ET

Buffett partner Charlie Munger says Al Gore is ‘an idiot’ but became rich with this strategy

Posted ByTae Kim

Warren Buffett's top lieutenant, Charlie Munger, told a small group of investors that the simple strategy of buying only service company stocks made former Vice President Al Gore very wealthy.

"Al Gore has come into you fellas business. ... He has made $3 or $400 million in your business. And he's not very smart," Munger said at the Daily Journal annual meeting on Feb. 15. "He had one obsessive idea that global warming was a terrible thing. … So his idea when he went into investment counseling is he was not going to put any CO2 in the air."

Though the comments were made more than four months ago, they went largely unnoticed and have not been widely reported on elsewhere.

Hedge fund manager Whitney Tilson in one of his email newsletters pointed to the YouTube videos of Munger's informal question-and-answer session held after the Journal meeting, and other investors have confirmed the subject matter of the talk.

Munger is one of the most celebrated investors in the world and was an essential partner in Buffett's success. Before becoming vice chairman of Berkshire Hathaway, the billionaire had quite the track record himself. From 1962 to 1975 Munger's investment partnership generated 20 percent annual returns versus the S&P 500's 5 percent.

He also shared more details on how Gore became successful in the money management business:

"So he found some partner to go into investment counseling with and says we're not going to have any (carbon dioxide). But this partner is a value investor and a good one. So what they did is, is Gore hired staff to find people who didn't put CO2 in the air. Of course that put him into services. Microsoft and all these service companies were just ideally located. And this value investor picked the best service companies. So all of a sudden the clients are making hundreds of millions of dollars and they are paying part of it to Al Gore. Al Gore has hundreds of millions dollars in your profession. And he's an idiot. It's an interesting story. And a true one."

Gore is co-founder and chairman of Generation Investment Management. The firm has more than $15 billion of assets under management and focuses on investing in low-carbon generating sustainable companies, according to its website.

One of its main funds beat the S&P 500's return by more than 6 percentage points per year during the last the five years, according to a March 2017 Barron's article.

Munger said the strategy of buying only service companies helps investors avoid capital-intensive firms, which have weaker business models and are less profitable.

"Inventories, receivables are all kinds of horrible things in business. If you just buy service companies, you can avoid them. And it's amazing how it has worked for this guy that does [leveraged buyouts] just the way it worked for Al Gore," he added.

Berkshire Hathaway did not immediately respond to a request for comment. Generation Investment Management declined to comment.

The YouTube video with Munger's service investing strategy comments had less than 3,000 views as of Friday morning.

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  Thursday, 22 Jun 2017 | 1:54 PM ET

Here's what didn't change in the Senate's health care bill: $1 trillion in tax cuts

Sen. Mitch McConnell.
Getty Images
Sen. Mitch McConnell.

The health-care bill the GOP rolled out on Thursday morning will retain the nearly $1 trillion in tax cuts previously proposed, with few minor differences.

This means the Senate health-care bill's tax breaks would go primarily to the wealthy, with 40 percent of savings going to the top 1 percent of earners and 64 percent of savings going to the top 20 percent of earners.

"The tax provisions are pretty much unchanged, except for some implementation dates," Gordon Mermin, senior research associate at the Urban-Brookings Tax Policy Center, told CNBC. "Substantively it's the same as what's passed the House."

In March, the Tax Policy Center modeled the distribution results of the American Health Care Act's tax provisions to find where the $992 billion in tax cuts would end up. There are only "minor exceptions," Mermin said, as the Republican bill proposed Thursday retains the same provisions as the version proposed earlier this year.

The result of the Senate's bill is a time delay for some tax cuts, at most. The Tax Policy Center's table, which can be viewed on their website, is valid for the new bill when analyzed as showing results from 2023 onward.

Warren Buffett said in May the Republican health-care bill would slash his taxes.

"It was huge what they did on cutting taxes for the rich" in the GOP's measure to replace Obamacare, Buffett said on CNBC's "Squawk Box," at that time. "If there's one clear-cut message that comes out of that bill it is we're going to cut the hell out of income taxes for the rich on investment income."

The tax cuts include a repeal of a 3.8 percent investment tax — such as capital gains — and a 0.9 percent Medicare payroll tax. Both of those apply to individuals earning $200,000 or more a year and couples earning more than $250,000.

Buffett said his personal tax bill would be 17 percent lower under the GOP health measure — about $680,000 on his tax bill of a "little less than $4 million."

"I've had years when it's been a lot more than $680,000. But I'm $680,000 better off if everything else is equal just because of what happened last week," Buffett added.

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  Thursday, 22 Jun 2017 | 11:41 AM ET

Here's how much Berkshire Hathaway made on its airline investments Thursday morning

James D. Morgan | Getty Images

Berkshire Hathaway's big bet on airlines has paid off.

The conglomerate's holdings of four major airlines gained $174 million on Thursday morning from their closing prices on Wednesday, based on stock holding disclosures from recent filings with the Securities and Exchange Commission.

An SEC filing in May showed Warren Buffett's conglomerate owned tens of millions of shares of American Airlines, Delta Air Lines, United Continental and Southwest Airlines. Berkshire Hathaway added millions of additional shares of American and Southwest stock between filings in February and May.

The value of Berkshire's American Airlines shares rose $71.5 million on Thursday morning, opening more than $1.40 above the close price on Wednesday. American shares spiked after the company disclosed that Qatar Airways has signaled its intention to acquire a 10 percent stake.

As of its disclosure in May, Berkshire Hathaway held 49.3 million shares of American Airlines stock. It added 3.7 million shares since the beginning of the year.

Berkshire's Delta holding rose $39 million since the market close on Wednesday. Berkshire owned 55 million shares as of the end of the first quarter. Its 28.9 million United shares rose $23 million. And its 47 million Southwest shares rose $40.9 million.

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  Thursday, 22 Jun 2017 | 9:10 AM ET

Warren Buffett — the 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 obvious targets, including Wal-Mart, Costco and Target. One not-so-obvious quarry is also huge: Warren Buffett.

Buffett's Berkshire Hathaway is a big holder of supermarket and food company stocks.

Among Berkshire's relatively selective portfolio of publicly traded stocks are 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 Kraft Heinz), Coca-Cola and Mondelez, one of the world's largest snack companies.

Berkshire also owns McLane Co., a major food distributor it 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."

Buffett's Kraft Heinz stake — 26 percent of the company's shares — is valued at $29 billion, and his Coke stake, representing 9 percent of its shares, is valued at $18 billion. Berkshire also has $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 Mondelez.

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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.

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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

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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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.