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Investing Warren Buffett Watch

  Sunday, 27 Feb 2011 | 2:10 PM ET

Buffett Letter Headlines: Elephant Guns and Economic Optimism

Posted ByAlex Crippen
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Warren Buffett's itchy trigger fingers gets most of the attention in the day-after headlines about his latest annual letter to shareholders , but his long-term optimism about the United States' economic future also gets some mentions.

Here's a sampling:

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  Saturday, 26 Feb 2011 | 11:55 AM ET

Warren Buffett: 'My Trigger Finger is Itchy' for Major Acquisitions

Posted ByAlex Crippen
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In his annual letter to Berkshire Hathaway shareholders released this morning, Warren Buffett says more "major" acquisitions are needed to maintain growth in the company's non-insurance businesses at a "decent rate."

Buffett writes: "We will need both good performance from our current businesses and more major acquisitions. We're prepared. Our elephant gun has been reloaded, and my trigger finger is itchy."

At the end of 2010, Berkshire had a lot of ammunition for that elephant gun: $38 billion in cash.

In the letter, Buffett also updates the derivatives contracts written by Berkshire that have caused concern among some investors.

He compares them to selling insurance, as Berkshire gets "premiums for assuming risk that others wish to shed" with no counterparty risk.

One category involves mostly 5-year contracts written between 2004 and 2008 that guaranteed against bond defaults by companies "included in certain high-yield indicies." Premiums totaled $3.4 billion for that 'insurance,' while the financial crisis required Berkshire to pay out $2.5 billion. That gave Berkshire "the use of an interest free float that averaged $2 billion over the life of the contracts." Buffett also reports that "our exposure is largely behind us because most of our higher-risk contracts have expired."

As a result, "It appears almost certain that we will earn an underwriting profit as we originally intended."

Berkshire has also written contracts protecting the buyers from long-term losses in several global equity indexes. Buffett says that late last year, at the request of the buyer, eight contracts were unwound, with a net gain for Berkshire of $222 million.

That left 39 equity put options remaining at the end of 2010, for which Berkshire received $4.2 billion in premiums, another source of money to help fuel acquisitions.

BNSF PURCHASE

Buffett says the "highlight" of 2010 was Berkshire's acquisition of the Burlington Northern Santa Fe railroad , "a purchase that's working out even better than I expected."

He's expecting that owning the railroad will increase Berkshire's "normal" earnings power by almost 40 percent pre-tax and "well over" 30 percent after-tax. He also writes that Berkshire "quickly replenished" the $22 billion in cash used to buy BNSF, so "the economics of this transaction have turned out very well."

LAGGING THE S&P

For the year, however, Berkshire's corporate performance lagged behind the S&P 500, as measured by per-share book value, a metric that Buffett calls an "understated proxy" for intrinsic value, which is hard to pin down.

Berkshire's per-share book value increased by 13.0 percent last year, 2.1 percent points behind the S&P's 15.1 percent gain, including dividends.

Berkshire's compounded annual gain from 1965 through 2010 of 20.2 percent is more than double the S&P's 9.4 percent advance. (Buffett started running things at Berkshire in 1965.)

'MEANINGLESS' NET INCOME

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  Friday, 25 Feb 2011 | 5:53 PM ET

Speed Is Key for Railroads, Ports in 'Post-Panamax' Era

Posted ByMia Lamar

Nearly 100 years ago, the Panama Canal hosted its first passage, a watershed event that has influenced the landscape of shipping and transportation ever since. Now, the canal is due to rattle international trade once more, potentially reshaping the way sea-borne shipping and rail lines tackle business in the world’s largest consumer nation .

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  Friday, 25 Feb 2011 | 2:37 PM ET

Waking Up with Warren

Posted ByAlex Crippen
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Set your alarm clocks. No sleeping late this Saturday.

Warren Buffett's Berkshire Hathaway will post its 2010 Annual Report and Q4 earnings on www.berkshirehathaway.com tomorrow morning "at approximately " 8 AM ET.

Along with extensive information on Berkshire's financials, the Annual Report also includes Buffett's very popular and widely-read annual letter to shareholders.

With some assistance from Fortune's Carol Loomis as editor, the letter is a straight-forward, folksy and funny, review of Berkshire's wins and losses over the previous year.

Buffett also uses the letter to discuss his investment strategies and to explain, and sometimes criticize, trends in the financial world and the economy.

(His famous "financial weapons of mass destruction" description of derivatives appeared in his 2002 letter . The Berkshire site includes an archive of the letters going back to 1977.)

This time around, some investors will be looking for "insights on who will run the company after the 80-year-old billionaire is gone ."

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  Tuesday, 22 Feb 2011 | 10:55 PM ET

'Ask Warren Buffett' on Squawk Box: Send Us Your Questions Here

Posted ByAlex Crippen
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For the fourth straight year, Warren Buffett will be answering your questions during a special three-hour live appearance starting at 6a ET, Wednesday, March 2 on CNBC's Squawk Box . Our Becky Quick will be in Omaha for the event.

Use the form above to tell us what you want to know.

We're especially interested in questions prompted by Buffett's annual letter to Berkshire Hathaway shareholders.

Last year's letter included a new Buffett aphorism: "When It's Raining Gold, Reach For a Bucket ."

This year's letter will be released Saturday morning, February 26, along with Berkshire's Q4 and 2010 results. (Full coverage here on Warren Buffett Watch .)

Sorry, but we won't be able to respond to questions that aren't selected to be asked during the program.

The 'Ask Warren' Squawk specials in the last three years covered a wide variety of topics, including Buffett's current assessment of the state of the U.S. economy.

Check out the summaries and transcripts:

Current Berkshire stock prices:

Class A:

Class B:

For more Buffett Watch updates follow alexcrippen on Twitter .

Email comments to buffettwatch@cnbc.com

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  Thursday, 17 Feb 2011 | 6:23 PM ET

Warren Buffett's White House 'Words of Wisdom'

Posted ByAlex Crippen
Warren Buffett receives the Presidential Medal of Honor from Barack Obama at a White House ceremony on February 15, 2011.
AP
Warren Buffett receives the Presidential Medal of Honor from Barack Obama at a White House ceremony on February 15, 2011.

Luck is a recurring theme in Warren Buffett's White House "Words of Wisdom" video clip.

The official White House site features brief snippets from 15 recipients of the 2010 Presidential Medal of Freedom, including Buffett.

When President Obama presented the awards at Wednesday's ceremony, he recounted a story about Buffett buying some stock when he was 11 years old.

In Buffett's video clip, the 80-year-old billionaire doesn't talk about stocks.

He does talk about his good fortune.

Buffett says he feels lucky to have been born in the United States, lucky to have found what he loves doing very early in life, and "extremely lucky in that the two most important people to me in my life, my dad and my wife ... they both extended to me unconditional love. And there's no power on earth in my view like unconditional love ."

Current Berkshire stock prices:

Class B:

Class A:

For more Buffett Watch updates follow alexcrippen on Twitter .

Email comments to buffettwatch@cnbc.com

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  Thursday, 17 Feb 2011 | 5:58 PM ET

J&J Recalled Products Back on Shelves This Year: CEO

William C. Weldon, CEO of Johnson & Johnson
Source: jnj.com
William C. Weldon, CEO of Johnson & Johnson

The world’s largest medical device company, Johnson & Johnson, expects to have all the products recalled last year on the shelves again by the end of this year, William Weldon, CEO of Johnson and Johnson, told CNBC Thursday.

“We’ve come into 2011 much stronger than we left 2010,” said Weldon, whose company had 17 recalls last year that spanned across all its businesses and included host of over-the-counter medicines. The company's stock declined 5 percent in the last 12 months.

In April 2010, J&J recalled a number of products made at its McNeil Consumer Healthcare division and shut down production. Over-the-counter children's medicines, such as Tylenol, Motrin, Zyrtec and Benadryl, were made at the Pennsylvania facility.

Weldon said the children’s drugs are taking longer to return to the stores than he’d like. By the end of last year, Weldon said, working with the FDA, the company has tested all of the recalled products to ensure their safety for the consumer.

Much of the company’s performance last year was overshadowed by the recalls, said Weldon, even though there was strength in a number of areas. Among them is the pipeline for new drugs, which include four different ones—for AIDS, bleeding disorders, hepatitis C and prostate cancer—that have been submitted for approval. He added that the company's medical devices, diagnostics and pharmaceutical units are doing well.

Weldon also said that J&J hope to close the deal this year with Crucell , a biotech company that focuses on developing vaccines, proteins and antibodies to fight infectious diseases.

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  Tuesday, 15 Feb 2011 | 6:51 PM ET

Smiles, and a Serious Investing Lesson, As Warren Buffett Is Honored at the White House

Posted ByAlex Crippen
Warren Buffett receives the Presidential Medal of Honor from Barack Obama at a White House ceremony on February 15, 2011.
AP
Warren Buffett receives the Presidential Medal of Honor from Barack Obama at a White House ceremony on February 15, 2011.

Warren Buffett was smiling today at the White House as Barack Obama presented him with the nation's highest civilian honor, the Presidential Medal of Freedom.

And the audience laughed as President Obama recounted recounted one of Buffett's earliest investing mistakes:

In 1942, an 11-year-old boy from Omaha, Nebraska, invested his entire fortune in six shares of Cities Service Preferred at $38 per share. The stock soon dropped sharply, devastating his holdings. (Laughter.) But true to form, the boy did not panic. He held those shares until the stock rebounded, earning himself a small profit. Things got a little bit better after that. (Laughter.)

But that story also has a more serious side.

In The Snowball , biographer Alice Schroeder writes that the young stockpicker sold for a small profit at $40 per share, in part due to pressure from Doris, his sister and partner in the deal. It then soared to $202 a share.

Warren learned three lessons and would call this episode one of the most important of his life. One lesson was not to overly fixate on what he had paid for a stock. The second was not to rush unthinkingly to grab a small profit...

And there was a third lesson, which was about investing other people's money. If he made a mistake, it might get somebody upset at him. So he didn't want to have responsibility for anyone else's money unless he was sure he could succeed.

You can watch all of Mr. Obama's comments, as well as the presentation of the medal, in this video clip.

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  Tuesday, 15 Feb 2011 | 2:18 PM ET

These Big-Name Investors Like Apple and Sprint

If you look beyond the headlines with the new 13F filings, there are some interesting moves from some big-time investors not named Warren Buffett.

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  Tuesday, 15 Feb 2011 | 1:03 PM ET

Whale Watch: Will Warren Top Tepper? And Other Storylines

Posted ByJeff Cox
Warren Buffett
Getty Images
Warren Buffett

The most recent whale-watch filings at the SEC become more interesting when you contemplate not merely who is betting on what but who is betting against whom.

Looked at one way, the quarterly 13f documents at the Securities and Exchange Commission tell you who dumped financials, who bet on retail, who still is using metals to hedge against the ever-nearing threat of inflation.

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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.