Investing Warren Buffett Watch

  Tuesday, 7 Mar 2017 | 10:53 AM ET

A secretly powerful voice in business says hedge funds are ‘wolves’ that damage typical US investors

Posted ByLeslie Picker

The question posed was, "Who Bleeds When the Wolves Bite?"

It's the title of an evocative paper written by Leo Strine, the chief justice of the Delaware Supreme Court. By wolves, he means hedge funds, and his answer, found within a 113-page paper set to be published next month in the Yale Law Review, is that average American investors are the ones getting bit by the existing corporate-governance system.

While little known in circles outside the highest ranks of corporate America, Strine's voice is among one of the most powerful in the business community. That's because two-thirds of American companies are legally based in Delaware, meaning corporate litigation often takes place in that state, so his opinions on such topics can hold tremendous sway.

Strine's paper is one of the strongest repudiations to date of hedge-fund activism — or what critics of the industry describe as the practice of investors with major stock holdings aggressively forcing companies into changes that will quickly pump up stock prices, often without regard for those same companies' long-term health.

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  Monday, 6 Mar 2017 | 12:48 PM ET

Hedge fund managers think they should make more money even though most don't beat the market

Posted ByLeslie Picker

Hedge funds, as a group, have a lower return than straight-up market indexes do. But professionals in the industry surveyed late last year still expected to take home better pay in 2016 than they did in 2015 — and an even greater portion think they deserve more.

A majority — 53 percent — of those surveyed said they expected to produce higher overall earnings for themselves in 2016 compared with 2015, according to the 10th annual Hedge Fund Compensation Report. That proportion is slightly lower than the year before, where 56 percent said they were expecting an increase in total compensation.

And during a time where the industry has caught the ire of many investors — including Warren Buffett, who last week described the industry's fee structure as "obscene" — an even greater percentage of fund managers reported being unsatisfied with their compensation for the year. Sixty-one percent of respondents aren't happy with what they made.

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  Monday, 6 Mar 2017 | 10:19 AM ET

Here's why Warren Buffett thinks you should buy a home

When it comes to homeownership, there are people who think it's "an escalator to wealth" and others who claim it's "the American nightmare."

What does self-made billionaire Warren Buffett say? His advice is to buy.

Real estate is a valuable asset "for a great many people," particularly for families that plan on being in the same location for many years, he tells CNBC: "If you know you're going to live in a given area, or think it's very likely, for a considerable period of time and you've got a family, the home is terrific."

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  Sunday, 5 Mar 2017 | 11:00 AM ET

Warren Buffett's advice 'doesn't work anymore,' robo-advisor CEO says

Posted ByTom Anderson

Warren Buffett's advice for ordinary investors is simple: Invest your retirement portfolio in an S&P 500 index fund.

However, at least one financial advisor thinks the Oracle of Omaha is off base.

That strategy "doesn't work anymore. It's not actually making the most of your money. You can do a lot better than that," Jon Stein, CEO and founder of Betterment, a robo-advisor with more than $8 billion of assets under management, said in a recent CNBC "On The Money" interview.

Stein said that portfolios built by Betterment can beat an S&P 500 Index fund over time because Betterment optimizes taxes to enhance performance.

Betterment estimated its tax-loss harvesting service can add 0.77 percent to an average customer's after-tax returns annually. Also, by automatically coordinating where assets are located among taxable and tax-deferred accounts, the firm said it can produce another 0.10 percent to 0.82 percent each year.

Many robo-advisors, including Betterment, Charles Schwab and Wealthfront, offer automatic tax-loss harvesting, which means they sell an investment to generate a loss to offset capital gains.

"Tax-loss harvesting does nothing for you if your assets are in an IRA," said Scott Smith, a director at financial service research firm Cerulli Associates.

That is because IRAs and workplace retirement plans, like 401(k) plans, are tax-deferred, meaning investments grow tax-free until they are withdrawn from the account. For Roth IRAs and 401(k) plans, contributions are taxed so the withdrawals are tax-free.

More from Your Money Your Future:
Trump likes health savings accounts. Here's how they work
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Where to stash emergency cash when the average savings account yields 0.11%

Robo-advisors can create portfolios that are more diversified than an S&P 500 fund. Most of the automated services build their portfolios with low-cost index funds that invest in U.S. and international stocks and bonds as well as real estate and commodities.

When customers sign up with a robo-advisor, they are usually asked a series of questions to determine their risk tolerance. Based on how people answer those questions, a portfolio of funds is constructed. Returns for those portfolios can vary widely, depending on the robo-advisor's investment strategy and the funds they use.

These services have low investment minimums. For example, Betterment has no account minimum while you will need at least $3,000 to invest directly in an S&P 500 index fund at Vanguard.

Robo-advisors generally charge an annual fee between 0.25 percent and 0.50 percent of assets on top of the expenses of the underlying investments.

While those fees are lower than the 1 percent annual fee most financial advisors traditionally charge, you will be probably paying less if you simply invested in an S&P 500 index fund. For example, iShares Core S&P 500 ETF charges just 0.04 percent annually.

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  Saturday, 4 Mar 2017 | 2:04 PM ET

Why one of the world's richest people took out a mortgage

Posted ByErin Barry

Berkshire Hathaway Chairman and CEO Warren Buffett recently listed his Laguna Beach, California vacation home for $11 million. If gets anything near what he's asking, he'll make a decent return on his investment.

He paid $150,000 for the property back in 1971, which is about $900,000 in today's dollars.

What you may be surprised to find out is that Buffet, one of the world's richest people, took out a 30-year mortgage when he bought the 6 bedroom, 7 bathroom seaside spot.

"When I bought it for $150,000, I borrowed some money from Great Western Savings and Loans. So I probably only had $30,000 of equity in it or something like that – it's the only mortgage I've had for fifty years," Buffett said.

He added, "I thought I could probably do better with the money than have it be an all equity purchase of the house."

And indeed he did.

"That $110 or $120 thousand I borrowed, I was buying Berkshire then," says Buffett.

The businessman says he was constantly buying Berkshire in the early '70s, when the stock was around $40 a share.

"I might have bought 3,000 shares of Berkshire or something like that from the proceeds of the loan — so that's [worth] $750 million [today]."

For most people, the home is the most expensive investment they will ever make, and Buffett believes it's a great investment for a family if they plan to be in the same locale for many years. What makes it so attractive, he said, is the 30-year mortgage.

"If you get a 30-year mortgage it's the best instrument in the world, because if you're wrong and rates go to 2 percent, which I don't think they will, you pay it off," he said. "It's a one-way renegotiation. I mean it is an incredibly attractive instrument for the homeowner and you've got a one-way bet."

As for Buffett's main house in Omaha, Nebraska – don't expect to see that on the market anytime soon.

"The home I live in now I bought in 1958 and I wouldn't trade it for anything," he said.

On the Money airs on CNBC Saturdays at 5:30 a.m. ET, or check listings for air times in local markets.

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  Friday, 3 Mar 2017 | 9:08 AM ET

Warren Buffett’s hero says Trump’s growth target would be impossible to achieve

Posted ByDavid Reid

Jack Bogle, a hero of Warren Buffett and a lifetime Republican, has told the BBC that President Donald Trump's plan to grow the U.S. economy by 4 percent a year is probably "not even possible for anybody."

The founder and retired CEO of The Vanguard Group critiqued several strands of Trump's policy mix during a wide-ranging BBC interview this week. Most notably, he said the president's campaign promise for the American economy seemed fanciful.

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  Thursday, 2 Mar 2017 | 8:20 AM ET

Morgan Stanley and Goldman Sachs should ‘hang heads in shame’ over Snap IPO: Analyst

Posted ByDavid Reid

Top investment banks behind the Snap Inc public listing are being slammed for the lack of voting rights that investors in the stock will receive.

Snap Inc priced its initial public offering above its target range at $17 per share on Wednesday, valuing the company at $24 billion when staff stock and deal bonuses are included.

The holding company, which owns social media phenomenon Snapchat, will debut on the New York Stock Exchange Thursday but investors have bought shares with no voting power.

Stephen Isaacs, chairman of the investment committee at Alvine Capital, says the major investment banks behind Snap's public debut are pushing through an unusual move that takes liberties with investors' rights.

"Morgan Stanley and Goldman should hang their heads in shame here. I mean not about the valuation but non-voting shares?

"Isn't that the ultimate example of bubble trouble? So I say we are in a bubble, there is no value and investors should take a lot of risk off the table," he said Thursday.

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  Tuesday, 28 Feb 2017 | 1:27 PM ET

Apple CEO Tim Cook predicts tons of revenue from 'future stuff I can't talk about'

Apple has some products other than the iPhone on the horizon that are "essential to Apple's growth," CEO Tim Cook said at the company's annual shareholder meeting.

The tech giant is investing a "fair amount" into research and development, including "future stuff [he] can't talk about," the executive told shareholders. Cook didn't go into details, but lauded investors for thinking long term, especially Warren Buffett's Berkshire Hathaway.

Buffett more than doubled his holdings in Apple in January.

Despite being one of the world's richest public companies, Apple's dearth of new blockbuster products has led some to wonder whether it is still innovative. Still, many on Wall Street say the company is investing heavily. UBS on Tuesday wrote that Apple "may have over 1,000 engineers working on a project in Israel that could be related to AR [augmented reality] ... the next major innovation from Apple."

The annual meeting gathered representatives of its 26,000 shareholders for mostly routine tasks like re-electing its board of directors, approving its accounting firm and signing off on Cook's $8.75 million annual compensation for 2016.

Also on the agenda were a series of proposals from shareholders who hold $2,000 of Apple's stock, which must be approved by a form of majority vote.

Shareholders like Rev. Jesse Jackson also pressed executives to speak up on current events affecting the technology industry. One example? The government's push to bring back manufacturing from overseas.

"We know that this company could never have thrived somewhere else, we love this country," Cook said, noting that two-thirds of Apple employees are in the U.S., and many components are built domestically.

But Cook said that focusing just on building the final product in the U.S. "discounts the reality" of the situation. He said Apple is not a big lobbying company, and doesn't "like politics," but playing a role in policy discussion is important.

(Apple's spending on lobbying has ticked up considerably under Cook's leadership, according to Opensecrets.org. Former Vice President Al Gore sits on the board.)

Another political issue that could affect Apple's burgeoning software and services business is net neutrality — the concept that internet providers can't discriminate between, or charge more for, more intensive types of content. The Trump administration may decide to let companies decide what to charge, which could make some of Apple's content more expensive to deliver.

Apple thinks content should be treated the same, and there should be no unfair advantage for one group over another, Cook said.

Other issues on the table Tuesday were the environment, privacy, diversity, human rights and the environment.

Cook said the company is working on "greening" its supply chain and is a "staunch defender" of privacy. Jackson said at the meeting he was grateful for Apple's stance on privacy, but pushed it on social "obligations" to minority groups.

Still, shareholders shot down proposals to alter diversity hiring practices or ramp up disclosure on charitable giving.

— Reporting by CNBC's Josh Lipton and Megan Hawkins

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  Tuesday, 28 Feb 2017 | 1:24 PM ET

Top analyst explains how to profitably trade Apple, why Buffett owns it

Posted ByTae Kim

Sanford C. Bernstein technology analyst Toni Sacconaghi shared his views on Apple in an interview Tuesday on CNBC's "Halftime Report."

On how to trade Apple: "Our analysis suggests that the stock is highly anticipatory of new product announcements," Sacconaghi said. "We found that the stock appreciates [and] outperforms the market by an average of 1,600 basis points in the six months prior to an iPhone product launch."

On why Warren Buffett owns the iPhone maker: "He loves great consumer franchises, which obviously Apple has. He loves recurring revenue. He likes disciplined capital deployment," Sacconaghi said. "Apple fits the bill on all of those things."

Sacconaghi's picks have a 21.5 percent one-year average return with a 70 percent success rate, according to analyst ranking service TipRanks, placing him in the top 3 percent of all Wall Street analysts covering any industry.

He also discusses:

  • Apple shareholder meeting
  • Cash repatriation
  • Replacement cycle risk

To watch the broadcast interview in its entirety, you must be a CNBC PRO subscriber.

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  Tuesday, 28 Feb 2017 | 1:01 PM ET

Bill Gates and Warren Buffett have the same definition of success—and it has nothing to do with money

Though Bill Gates and Warren Buffett are worth $86.4 billion and $76.8 billion respectively, the two friends have the same definition of success, and it's one that has nothing to do with wealth.

In a Reddit Ask Me Anything session on Monday, Gates replies to the question, "What is your idea of success?" by citing his friend: "Warren Buffett has always said the measure is whether the people close to you are happy and love you."

At 61, Gates has not shown any signs of slowing down. He remains actively involved in running The Bill & Melinda Gates Foundation. But he prioritizes making time for family.

"I just went on a trip with my 17-year-old son to see six colleges," says Gates. "He is a junior in high school and trying to figure out where he should go. Trips like that have been a great way to spend time together."

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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.