Buffett Watch

  Sunday, 23 Jun 2019 | 8:30 AM ET

Value investing might be dead — and here's what killed it

Posted ByYun Li
Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., May 30, 2019.
Brendan McDermid | Reuters
Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., May 30, 2019.

Value investing might have lost its value.

The classic factor investing strategy of picking stocks with cheap book valuation, embraced by the legendary Warren Buffett, has become increasingly irrelevant thanks to central banks and technology, according to AB Bernstein.

The long period of low interest rates is the first to blame for the demise of value investing, Bernstein said. The Federal Reserve started its quantitative easing program to salvage the economy from the 2008 recession. But at the same time, an easier monetary policy lifted valuations across the board, leaving a smaller premium on cheap stocks, hence the long stretch of underperformance of value names.

Take iShares S&P 500 Value ETF, an exchange-traded fund that tracks the undervalued stocks in the S&P 500. It has been consistently lagging the market in the last five years.

"Duration has been bid up as rates are so low," Inigo Fraser-Jenkins, Bernstein's head of European quantitative strategy, said in a note on Wednesday. "Thus, the outperformance of value might require higher interest rates, which could be structurally difficult to achieve in the foreseeable future. In this sense one could say that QE could have stopped the mean-reversion process that usually occurs over the economic cycle."

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  Thursday, 20 Jun 2019 | 8:35 AM ET

Bernie Sanders 'doesn't have a clue' — Leon Cooperman says a lurch left in 2020 could hurt stocks

Billionaire investor Leon Cooperman told CNBC on Thursday the stock market could get hurt if a far-left candidate were to win the presidency in 2020.

"One of the risks for the market is if there's a movement to the left," Cooperman said in a "Squawk Box" interview. "Bernie Sanders, in my opinion, doesn't have a clue."

"We have the best economy in the world. Capitalism works," Cooperman said in a knock against Sanders, who describes himself as a democratic socialist. The Vermont senator, a champion of progressives, is one of nearly two dozen candidates seeking the 2020 Democratic president nomination. He ran in 2016, but the party nomination went to Hillary Clinton.

As a platform, Sanders and some other Democratic presidential candidates, including Sen. Elizabeth Warren of Massachusetts, are looking to increase taxes on the wealthy to pay for expanded government social programs.

"All in all, I'm not in favor of raising taxes. Taxes are high enough," Cooperman said. "I think it's counterproductive to look to the wealthy people across the board."

However, Cooperman said he personally could afford to pay higher taxes. "I can live with a 50% tax rate."

Cooperman, whose Omega Advisors is now a family office, said he plans to give all his money away through the Giving Pledge, created by Bill Gates and Melinda Gates, and Warren Buffett. Cooperman said he gave his children their inheritance years ago.

While generally supportive of President Donald Trump's business friendly policies, Cooperman has been critical at times of the president for the way he conducts himself and communicates.

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  Tuesday, 11 Jun 2019 | 8:17 PM ET

Elon Musk says Tesla still plans to offer insurance, but is waiting for an acquisition to close

Posted ByLora Kolodny
Elon Musk
Jim Watson | AFP | Getty Images
Elon Musk

On Tuesday, during Tesla's annual shareholder meeting, CEO Elon Musk said an insurance offering that he expected his car company to launch in May this year is actually still in the works.

Musk said, "We're pretty close to being able to release that. We have a small acquisition that we need to complete and a bit of software to write."

Back in April, Musk said on an earnings conference call that Tesla would be launching its own insurance product in about a month. He said that Tesla has an advantage in insurance, because it has "direct knowledge" of a person's risk profile "based on the car," which gives Tesla an "information arbitrage opportunity."

In 2017, Automotive News reported that Tesla clashed with auto-insurance providers AAA The Autoclub Group when they raised premiums for Tesla drivers, based on research by the Highway Loss Data Institute and others. They had said the Model S and Model X had high claim frequencies and high costs of insurance claims.

The idea behind Tesla offering its own insurance would be to lower rates for drivers, leveraging internal data from Tesla's AutoPilot systems to justify that.

Berkshire Hathaway's Warren Buffet predicted that Tesla will struggle if it goes into the insurance business. "I'd bet against any company in the auto business" getting into insurance, he said. "I worry much more about Progressive." About one third of Berkshire Hathaway's business is in the insurance space and that includes Geico.

-- CNBC's Fred Imbert contributed to this story.

Follow @CNBCTech on Twitter for the latest tech industry news .

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  Tuesday, 4 Jun 2019 | 6:54 AM ET

Crypto founder paying $4.57 million for lunch with Buffett wants to change his hatred of bitcoin

Justin Sun, the blockchain entrepreneur who paid a record $4.57 million for lunch with Warren Buffett, told CNBC on Tuesday he wants to change the billionaire investor's mind on hating bitcoin.

Sun, founder of cryptocurrency Tron and CEO of file-sharing company BitTorrent, had the highest bid in the 20 years of the charity auction. Proceeds go to the Glide Foundation to help the homeless in San Francisco, where BitTorrent is located.

Winning the auction allows Sun to invite seven guests, and he said he's going to bring other cryptocurrency industry leaders to the lunch in New York. But he told CNBC he's not sure who he's going to be bring yet.

Sun said he's a believer and a fan of Buffett and his "long-term value investing strategy." He added that he wants to pay Buffett "back for his inspiration."

However, the Berkshire Hathaway chairman and CEO is not a fan of bitcoin. In the past, he's called it "rat poison squared."

When asked for comment on the lunch, Buffett laughed and told CNBC's Becky Quick that he was looking forward to it. The date for the lunch isn't set.

Sun admitted on "Squawk Box" he knows he won't change Buffett's mind in a three-hour lunch, but he hopes to offer him a different opinion and show him "how much progress we've made" in the past 10 years in the cryptocurrency industry. "I want him to learn what the younger generations are doing," Sun added.

While some past winners have chosen to stay anonymous, Ted Weschler — later hired as a Berkshire investment manager — and Greenlight Capital's David Einhorn were winners of the auction in previous years.

— CNBC's Kate Rooney contributed to this report.

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  Monday, 3 Jun 2019 | 2:12 PM ET

Mark Cuban: Workers paid by the hour will 'always...fall behind,' making wealth inequality worse

Billionaire tech entrepreneur Mark Cuban has proposed a solution for income inequality that doesn't involve dismantling capitalism: Business owners should give all their employees equity.

"The biggest issue for entrepreneurs, for capitalists, for those of us who are successful is, if someone is only going to be paid by the hour...they're always going to fall behind," Cuban told Recode Decode with Kara Swisher at the 2019 SALT Conference in Las Vegas. "And income distribution is … [the] disparity is going to get wider and wider."

So, said Cuban, "We as entrepreneurs have got to make a point to give stock to everybody that works for us. Period. End of story. No exceptions, because that's the only way people are going to get any type of equity appreciation."

If entrepreneurs give their employees an ownership stake in the company, then employees can reap the benefits of its success as the value of the stake grows, said Cuban, often substantially.

Uber's first employee, Ryan Graves, for example, is now worth more than a billion dollars thanks to the company stock he got as part of his employment. And many of Cuban's former employees became millionaires, he tells CNBC Make It.

Cuban says that he gave all his employees stock at the two companies he founded — Microsolutions, a computer consulting service he sold to Compuserve in 1990, and Broadcast.com, an online streaming service he sold to Yahoo in 1999 for almost $6 billion in stock.

"300 out of 330 [Broadcast.com] employees became millionaires" at the time of its sale, Cuban tells CNBC Make It.

Giving employees a stake in the company they work for is feasible for small companies as well as larger companies, Cuban tweeted Monday. "Small business are the ones best situated to offer equity. They are more like families."

According to Cuban, "capitalism isn't bad. It's when capitalists don't pay attention" that bad things can happen," he told Swisher. "Our country is a lot like running a business...you can't just look at the short term in the immediate aspect, you've got to look at the long term," he said.

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  Sunday, 19 May 2019 | 9:30 AM ET

Want to invest like Warren Buffett? Here are the ins and outs of buying preferred stock

Posted ByMichelle Fox
Warren Buffett
Gerard Miller | CNBC
Warren Buffett

Billionaire Warren Buffett is a master when it comes to investing.

The Berkshire Hathaway CEO is famous for buying and holding stock — and not giving in to the volatility of the market.

He's also well-known for taking big stakes in companies, such as the $900 million worth of shares he has in Amazon.

His latest play: a $10 billion investment to back Occidental Petroleum's bid for Anadarko Petroleum. Berkshire Hathaway will make the investment by purchasing 100,000 shares of preferred stock, which pays out an 8% annual dividend.

Preferred shares are different from common stock, the one most people are familiar with. Both are equity in a company, but preferred stock typically pays a higher dividend. And that may be attractive in this current low-interest rate environment.

"Think of it as a hybrid security," said certified financial planner Colin Gerrety, client advisor at Glassman Wealth Services.

"It has some aspects similar to ordinary common stock," he added. "It also has some aspects of it that are more similar to a bond."

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  Friday, 17 May 2019 | 2:02 AM ET

Networking is pointless — unless you follow this important rule, relationship expert says

Networking. For some it's a pleasure, for others it's a chore, but for the vast majority it's a total waste of time.

That's because far too many of us ignore the most important part — the follow-up.

In fact, according to relationship strategist Zvi Band, those initial networking events are a pointless exercise if you don't see them as part of a longer, more strategic relationship building process.

"People going to networking events are seeking the same outcome as you — to meet people," Band told CNBC Make It.

"But remember, the hard work is not in the initial meeting or LinkedIn connection. It's recording your notes, following through on any action items, and keeping that relationship warm."

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  Wednesday, 15 May 2019 | 4:31 PM ET

Warren Buffett's Berkshire Hathaway reveals $900 million Amazon stake

Posted ByThomas Franck

Warren Buffett's Berkshire Hathaway on Wednesday revealed in a government filing the size of its stake in e-commerce giant Amazon.

Berkshire's stake in Amazon was 483,300 shares at the end of the quarter ended March 31, according to a filing at the Securities and Exchange Commission. The value of that stake was $904 million by the closing bell Wednesday.

Despite the sizable headline figure, the position doesn't put Berkshire near the top of Amazon's biggest shareholder list. The stake represents about 0.1% of Amazon's outstanding equity.

Buffett first disclosed the new investment in Amazon to CNBC on May 2, a day before Berkshire's annual shareholder meeting in Omaha, Nebraska. The size of the position, however, had not previously been reported to the public.

The renowned value investor — though a fan of Amazon and its CEO, Jeff Bezos — also told CNBC earlier this month that he isn't responsible for Berkshire's investment.

"One of the fellows in the office that manage money ... bought some Amazon, so it will show up in the 13F," Buffett said on May 2. Buffett was likely referring to one of his two lieutenants, Todd Combs or Ted Weschler, who each manage portfolios of more than $13 billion in equities for Berkshire.

"Yeah, I've been a fan, and I've been an idiot for not buying" Amazon shares, Buffett said at the time. "But I want you to know it's no personality changes taking place."

Amazon shares rose 0.1% in after-hours trading following the SEC filing.

Berkshire Hathaway's report also showed an 18% increase in its J.P. Morgan Chase stake to 59.5 million shares and a 22% increase to its Red Hat holdings to 5.1 million shares.

— CNBC's Becky Quick contributed to this report.

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  Wednesday, 15 May 2019 | 1:15 PM ET

Billionaire Mark Cuban: One of the 'most patriotic' things you can do is get 'obnoxiously rich'

Tuesday, Mark Cuban spoke with CNBC's Scott Wapner and left open the possibility that he would run for President.

"It would take the perfect storm for me to do it. There's some things that could open the door, but I'm not projecting or predicting it right now," the billionaire entrepreneur told CNBC.

Yet whether or not he runs, by his own calculation, Cuban has already been of great service to his country — by creating and amassing wealth.

Mark Cuban grew up working class in Pittsburgh, but the tech entrepreneur is now worth $4.1 billion, according to Forbes. He's gotten rich, and that, he says, this is one of the most patriotic things anyone can do.

On Monday, Cuban shared a link to a blog post he wrote in 2011 called, "The Most Patriotic Thing You Can Do."

"Bust your a-- and get rich," reads the first line of the post.

"Make a boatload of money. Pay your taxes. Lots of taxes. Hire people. Train people. Pay people. Spend money on rent, equipment, services. Pay more taxes," Cuban writes.

"When you make a sh--load of money, do something positive with it. If you are smart enough to make it, you will be smart enough to know where to put it to work," he says.

Cuban, who sold his company Broadcast.com to Yahoo in 1999 for $5.7 billion in stock, now owns the Dallas Mavericks NBA team. The billionaire tweeted a link to his 2011 blog post in response to a tweet asking if the billionaire was "scared of paying higher taxes?"

He is not.

"Profits equal tax money. While some people might find it distasteful to pay taxes. I don't. I find it Patriotic," Cuban writes in the 2011 post. "Get out there and make a boatload of money. Enjoy the sh-- out your money. Pay your taxes. It's the most Patriotic thing you can do." (Cuban has since said that "after military service" paying taxes is the most patriotic thing you can do if you're wealthy.)

Cuban urges people to get so "obnoxiously rich that when that tax bill comes, your first thought will be to choke on how big a check you have to write. Your 2nd thought will be 'what a great problem to have,' and your 3rd should be a recognition that in paying your taxes you are helping to support millions of Americans that are not as fortunate as you."

Cuban's tweet comes at a time when wealth inequality is frequent topic of discussion.

The combined fortunes of Amazon'sJeff Bezos, Microsoft's Bill Gates and Berkshire Hathaway chairman Warren Buffett equals more money than the entire poorest half of the population in the United States has, according to an October report from progressive Washington, D.C.-based think tank Institute for Policy Studies.

And other billionaires have weighed in: Bridgewater Associates founder Ray Dalio has said that capitalism is no longer working for most people. Gates and Buffett, on the other hand, see capitalism as the best system but believe the super rich should pay higher tax rates.

As for Cuban, he writes in 2011: "I don't care what anyone says. Being rich is a good thing. Not just in the obvious sense of benefiting you and your family, but in the broader sense. Profits are not a zero sum game. The more you make the more of a financial impact you can have."

See also:

Warren Buffett: This is the best way to put cash in the pockets of people who need it

Billionaire 'Shark Tank' star Mark Cuban: This is how to know if a business will be successful

Mark Cuban, Scott Galloway, Mike Rowe all agree 'following your passion' is totally bogus advice

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  Friday, 4 May 2018 | 8:22 AM ET

Warren Buffett says Berkshire Hathaway has sold completely out of IBM

Billionaire Warren Buffett's Berkshire Hathaway has ended a difficult chapter in its investment in IBM while ramping up its stake in Apple.

CNBC's Becky Quick, in an interview from Omaha that aired Friday, asked him if Berkshire owns any IBM shares.

He said, "No."

"I think we have zero," he said.

"The answer is almost certain, yes," on Berkshire owning no more IBM shares, he said.

»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.