Buffett Watch

  Monday, 18 Mar 2019 | 11:15 AM ET

Warren Buffett says US health care must be revamped or the government could make it worse

Posted ByLiz Moyer
Jeff Bezos, Warren Buffett and Jamie Dimon.
Jeff Bezos, Warren Buffett and Jamie Dimon.

Complacency will make fixing the nation's health-care system a daunting task, according to Warren Buffett, whose Berkshire Hathaway recently joined with J.P. Morgan Chase and Amazon to develop a new model for their 1 million employees.

Buffett along with Amazon's Jeff Bezos and J.P. Morgan's Jamie Dimon recently formed the health-care joint venture Haven to figure out how to deliver better health care at a lower cost. One of the problems with the current system, Buffett said in an interview for Yahoo Finance, is that health-care providers and others entrenched in the current model don't have any incentive to change things.

"We have a $3.4 trillion industry, which is as much as the federal government raises every year, that basically feels pretty good about the system," Buffett said. "There's enormous resistance to change while a similar acknowledgement that change will be needed. And of course if the private sector doesn't supply that over a period of time, people will say 'we give up, we've got to turn this over to the government,' which will probably be even worse."

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  Monday, 18 Mar 2019 | 9:43 AM ET

Want to make a great first impression at your new job? Here are 4 things every boss is dying to hear

Succeeding in the workplace is highly predicated upon communication. This is especially important when it comes to interactions with your boss.

If you want to make a first great impression (and get a promotion quickly), make it a priority to communicate the following—starting on day one:

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  Friday, 15 Mar 2019 | 6:46 PM ET

If you invested $1,000 in Boeing 10 years ago, here's how much you'd have now

Shares of aircraft-manufacturing company Boeing took a hit early this week, losing $26.6 billion in market value Monday and Tuesday, following a deadly crash of one of its 737 Max 8 airplanes in Ethiopia.

That model has since been grounded by the Federal Aviation Administration, as well as by aviation regulators around the world.

Still, if you invested in Boeing 10 years ago, that decision would have paid off: According to CNBC calculations, a $1,000 investment in 2009 would be worth more than $14,000 as of March 15, 2019, a total return over 1,000 percent. In the same time frame, the S&P 500 was up 270 percent. So, your $1,000 would be worth just over $3,700, by comparison.

Any individual stock can over- or under-perform, however, and past returns do not predict future results. Boeing paused delivery of 737 Max planes after the Ethiopia crash, which came less than five months after another deadly crash in Indonesia involving the same model.

This left several major airlines, including United, American and Southwest scrambling to rebook passengers and reassign planes. Those companies said they would waive ticket-change fees and fare differences for those affected by the FAA's grounding order.

Flight-booking site Kayak even introduced a new search feature that allows users to exclude specific plane models, according to co-founder and chief executive officer Steve Hafner.

CNBC: Boeing stock as of Mar. 15, 2019

Fortunately for Boeing, while shares plunged more than 10 percent early this week, they ticked back up by as much as 3 percent Friday. And the company announced plans to roll out a software fix in the next few weeks.

Though, Bank of America analyst Ronald Epstein said Thursday that the fix could take a lot longer: "Once Boeing identifies the issue … the most likely scenario is the company will take about 3-6 months to come up with and certify the fix," he said in a note.

Hafner says he expects the 737 models to be grounded only a few months and that travelers will likely be booking flights on them again soon: "They're out of service on a temporary basis," he said on CNBC's "Squawk Alley." "In reality, airlines are still planning on flying those planes in the summer. People want security and comfort when they fly."

In the meantime, Boeing said in a statement it will "continue to build 737 Max airplanes, while assessing how the situation, including potential capacity constraints, will impact our production system."

If you're looking to get into investing, expert investors like Warren Buffett and Mark Cuban suggest you start with index funds, which hold every stock in an index, offer low turnover rates, attendant fees and tax bills. They also fluctuate with the market to eliminate the risk of picking individual stocks.

Here's a snapshot of how the markets look now.

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Don't miss: If you invested $1,000 in IBM 10 years ago, here's how much you'd have now

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  Thursday, 14 Mar 2019 | 9:33 AM ET

The 1 question successful investors—like Warren Buffett—always ask themselves

Imagine taking a six-hour flight from New York to Los Angeles, but right before taking off you learn the airline has a new policy: Reclining your seat is negotiable.

This poses two questions: First, how much are you (the recliner) willing to pay the person behind you (the reclinee) in order to push your seat back four inches? Second, what does your legroom cost the reclinee?

Researchers ran an experiment and found that recliners were only willing to pay about $12 to recline, while reclinees weren't willing to sell their legroom for less than $39.

The difference can be explained by what behavioral economists call the "endowment effect," where a person places more value on what they have than what they don't have. So if you were the reclinee, your legroom is $27 more valuable than your neighbors, simply because it belongs to you.

In his book, "Stumbling on Happiness," the psychologist and author Daniel Gilbert explains how the endowment effect is woven throughout our lives. "Consumers evaluate kitchen appliances more positively after they buy them, job seekers evaluate jobs more positively after they accept them, and high school students evaluate colleges more positively after they get into them," he writes.

In other words, a toaster, a job and a university are all shiny and lovely. But once they become ours, they instantly become shinier and lovelier.

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  Wednesday, 13 Mar 2019 | 1:43 PM ET

If you invested $1,000 in IBM 10 years ago, here's how much you'd have now

IBM has proven to be an enduringly successful company. Originally founded as the Computing-Tabulating-Recording Company way back in 1911, it adopted its current name in 1924, and in 2018 it still ranked in the top 20 on Forbes' list of the world's most valuable brands, with a value of $32.1 billion.

If you invested in IBM 10 years ago, you would have made a profit, although not a very noteworthy one: According to CNBC calculations, a $1,000 investment in 2009 would be worth about $2,000 as of March 12, 2019.

IBM actually under-performed the S&P 500. Its total return since 2009 was just slightly above 102 percent. In the same 10-year time frame, the S&P was up more than 270 percent. Any individual stock can over- or under-perform, and past returns do not predict future results.

The company has been on an upswing in 2019: It started the year strong by beating earnings estimates and reporting better-than-expected full-year guidance. That's in part due to its largest business segment, Technology Services and Cloud Platforms, which brought in $8.9 billion in revenue at the end of 2018, followed by its next largest segments, Cognitive Solutions, and Global Business Services, which posted revenues of $5.5 billion and $4.15 billion, respectively.

CNBC: IBM stock as of Mar. 12, 2019

The company is looking to build on that success: For all of 2018, IBM generated $13.81 in earnings per share, excluding certain items. This year, it's looking to generate at least $13.90 in earnings per share.

Revenue did fall in 2018 compared with 2017, however, per a company statement. And there are some lingering concerns about the market in general after Federal Reserve Chairman Jerome Powell announced the agency would be "patient" in determining future interest rate hikes.

As the Fed adjusts monetary policy based on economic growth, some investors have been wary about how it might affect market prospects, IBM chief executive officer Ginni Rometty said last month on CNBC's "Squawk on the Street." While the markets did tick up a bit following the announcement, she said, confidence has remained mostly flat.

Overall, IBM's stock is up about 20 percent for the year so far in 2019, and some analysts are optimistic: "We believe the ongoing growth of the Strategic Imperatives unit will return IBM to organic growth in 2019 despite ... currency headwinds," read a note from markets firm Nomura Instinet from early this year. Strategic Imperatives are the company's key offerings, including social, mobile, analytics and cloud.

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  Tuesday, 12 Mar 2019 | 5:24 PM ET

Kraft Heinz weighs sale of its Breakstone's sour cream and cottage cheese business

Posted ByLauren Hirsch
Kraft Heinz Breakstone's brand cottage cheese packets are arranged for a photograph in Tiskilwa, Illinois.
Daniel Acker | Bloomberg | Getty Images
Kraft Heinz Breakstone's brand cottage cheese packets are arranged for a photograph in Tiskilwa, Illinois.

Kraft Heinz, as part of a broad overhaul, continues to put long-time brands on the block. One of the latest is its Breakstone's business, which sells cottage cheese, butter and sour cream.

Kraft Heinz has hired Royal Bank of Canada to review options for its Breakstone's business, which could include a sale, people familiar with the situation tell CNBC. The move is understood to be part of a broader review of the company's dairy business, which also includes its natural cheese business, the people said.

It comes as Kraft Heinz also weighs selling its Maxwell House coffee business, CNBC previously reported.

Breakstone's, which has roughly $400 million in revenue and $50 million in earnings before interest, taxes, depreciation and amortization, could fetch a valuation of roughly $400 million, the people said. It could appeal to dairy companies like Dean Foods, Saputo or national milk cooperative, Dairy Farmers of America, one of the people said.

Shares of Kraft Heinz moved up more than 1 percent on the news in after hours trading, giving it a market capitalization of $39 billion.

Kraft Heinz last year announced the sale of its Canadian natural cheese business to Italian dairy group Parmalat for C$1.62 billion ($1.23 billion). The sale, along with lowered sales growth expectations for its cheese business, led the company to take a $4.1 billion impairment charge on the Kraft brand in February.

Dairy sales have slowed in recent years as U.S. diners increasingly eschew dairy products or look to non-dairy alternatives like oat, soy and almond milk. Those challenges are exacerbated by a multi-year period of weak milk prices.

The U.S. has a $1.4 billion cheese surplus, according to the U.S. Department of Agriculture. Sales of cottage cheese, meantime, have steadily declined since the days when it was a dieting favorite in the 1970's. At that time, Americans were eating an average of 5 pounds of cottage cheese a year, according to the USDA.

Shares of leading U.S. dairy producer Dean Foods, owner of brands like Organic Valley milk, DairyPure sour cream and TruMoo milk, have fallen 68 percent over the past year. The company, which has a market capitalization of $263 million, said it was exploring a sale earlier this month. It reported a net loss from continuing operations of $3.63 a share for 2018 and sales slipped 0.5 percent from the year prior.

The challenges in dairy are only one of the multiple issues Kraft Heinz is currently facing. Its shares are down 25 percent after the company delivered a triple whammy of bad news in late February — a significant earnings miss, dividend reduction and a $15 billion write-down that, in addition to Kraft, also included its Oscar Mayer brand.

Kraft Heinz was created by 3G Capital and Berkshire Hathaway, which bought H.J. Heinz in 2013 and merged it with Kraft two years later. 3G Capital developed a reputation in the U.S. for its "zero-based budgeting" process in which managers much justify every cost, every year. That approach to cost management was initially prized in the U.S. food industry, where industry executives acknowledged expenses had become bloated with extravagances like private planes and other costs.

But critics have argued 3G took its cost-cutting to an extreme, particularly in areas like research and development. That forced Kraft Heinz's brands to play defense at a time start-ups and retailers hawking their own brands were playing offense. At natural food convention Expo West last week, there were nearly 5,000 food companies vying for investor and consumer attention. Of those, there were 203 exhibitors promoting new cheese products, like Kite Hill nut milk cheese and Cypress Grove fresh goat milk cheese with lavender and fennel.

All of Big Food, from General Mills to Kellogg, has felt the squeeze as sales growth has slowed. But Kraft Heinz suffered a public fall from grace when Unilever rebuffed its acquisition approach two years ago, dinging its reputation and putting pressure on its stock price. In the interim, savings from its budgeting approach have stalled.

Adding to the pressure are rising commodity prices, which 3G critics have said the company prepared insufficiently for by focusing too much on cost-cutting and eventual dealmaking.

Now, Kraft Heinz is slimming its portfolio as it looks to bring leverage down to three times EBITDA, rather than the four times at which analysts say it is currently pegged. Analysts note it has $3 billion of debt coming due in 2020, which may have to be refinanced.

A prime focus for Kraft Heinz as it prunes its business are brands it views as commodities and no longer hold sway over consumers. Both coffee and dairy face immense competition from cheaper private label products or higher-end niche products. The Heinz brand, by contrast, has grown 26 percent over the past six years, according to Nielsen. One of Kraft Heinz's newest launches, Ore-Ida Just Crack An Egg breakfast, crossed $50 million in sales in less than 12 months.

The people asked not to be named because the information is confidential. A spokesperson for Kraft Heinz declined to comment. RBC didn't immediately respond to a request for comment.

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  Tuesday, 12 Mar 2019 | 3:05 PM ET

Fire Warren Buffett? Investors obsessed with quarterly performance probably would

Posted ByJeff Cox

If Warren Buffett wasn't the head of Berskshire Hathaway and instead worked as a financial advisor for investors, he'd probably have a tough time holding a job these days.

That's because the man known as one of the greatest investors of all-time often underperforms the market, according to an analysis by Michael Crook, head of Americas investment strategy at UBS.

Crook this week updated a chart he first presented in 2015 that showed over daily, monthly and even on a five-year basis, Buffett's Nebraska-based conglomerate often falls short of the S&P 500.

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  Monday, 11 Mar 2019 | 10:26 AM ET

Highly successful millionaires all play brain games—here are 3 science-backed exercises to try today

Neuroplasticity is the brain's ability to change and adapt by learning new things, and you have the power to increase your brain's growth at any stage of your life.

Some of the world's richest and most successful people recognize the incredible value of neuroplasticity and play brain games to harness this incredible power. Here are three science-approved exercises to try out today:

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  Friday, 8 Mar 2019 | 9:22 AM ET

This is how many of the 280,000 homes in Austin Jeff Bezos can afford to buy

Forget a dream home, the world's richest billionaires can essentially afford to buy entire cities.

Jeff Bezos spent much of his childhood in Texas, and it turns out the Amazon CEO is now wealthy enough to buy every home in state capital Austin, which would cost about $129.9 billion, according to real estate site Redfin. That's approximately 280,000 single-family homes, condos and townhouses, according to the company.

He could also afford the Washington, D.C.'s 200,000 homes, worth a total of $131.5 billion, according to Redfin.

Of course, a billionaire's net worth isn't isn't comprised of cash alone. Bezos, the richest person in modern history, who is currently worth $134.4 billion, would have to liquidate his roughly 80 million shares of Amazon stock, which accounted for more than 90 percent of his wealth as of October. And he might have to sell his handful of multimillion-dollar properties around the country.

Redfin calculated the aggregate value of homes in US cities with more than 1,000 homes in order to determine which of the world's richest people could hypothetically afford to buy every single home in the city. Aggregate values are based on Redfin's own estimates for each home's value and exclude properties like apartment buildings with rental units.

Ironically, Bezos doesn't have enough wealth to buy every home in Seattle, where Amazon is headquartered. Redfin estimates that Seattle's roughly 230,000 homes are worth a total of $182.9 billion.

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  Wednesday, 6 Mar 2019 | 4:05 PM ET

Amazon's joint health-care venture finally has a name: Haven

Jeff Bezos, Warren Buffett and Jamie Dimon.
Getty Images (l) | CNBC (c-r)
Jeff Bezos, Warren Buffett and Jamie Dimon.

The joint health-care venture between Amazon, J.P. Morgan and Berkshire Hathaway finally has a name: "Haven."

Amazon CEO Jeff Bezos, J.P. Morgan CEO Jamie Dimon and Berkshire Hathaway CEO Warren Buffett last January announced they were teaming up to tackle rising health-care costs. They formed a nonprofit company and named renowned surgeon, author and speaker Dr. Atul Gawande as CEO in June.

"We want to change the way people experience health care so that it is simpler, better, and lower cost," Gawande said in a statement on Wednesday. "We'll start small, learn from the experience of patients, and continue to expand to meet their needs."

Prior to the big reveal, many industry insiders referred to the venture as "ABC" or "ABJ." The company said the name choice of "Haven" lines up with its mission to be a "partner" to care providers and to focus on the health-care needs of the 1.2 million Amazon, Berkshire Hathaway and J.P Morgan workers. Since his appointment, Gawande has been meeting with employees at these three companies to understand their health-care experiences.

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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.