Buffett Watch

  Thursday, 21 Mar 2019 | 12:26 PM ET

If you invested $1,000 in General Motors in 2012, here's how much you would have now

Shares of automaker General Motors fell more than 3 percent Wednesday after BMW warned of lower profits thanks to international trade tension and potential ripple effects from Brexit.

Still, if you invested in GM in 2012 — after the company officially came out of bankruptcy and began recovering from the major financial crisis that hit the auto industry — you would have made a profit, although a small one: According to CNBC calculations, a $1,000 investment made then would be worth just over $1,800 as of March 21, 2019, a total return over 80 percent. In the same time frame, by comparison, the S&P 500 was up more than 100 percent.

While the company's stock has trended slightly upward over the years, any individual stock can over- or under-perform and past returns do not predict future results.

Some analysts anticipate problems for the auto industry overall. Per BMW's annual report, "political and economic developments in Europe remain increasingly uncertain," and the "unforeseeable impact of Brexit" could elevate trade tensions with the European Union and China.

CNBC: GM stock as of Mar. 21, 2019

"A possible introduction of further trade barriers … could have a significantly adverse impact on the BMW Group's operations through less favorable conditions for importing vehicles," the report read. "Moreover, ountermeasures by the USA's trading partners could slow down global economic growth and have a greater-than-expected adverse impact on the export of vehicles."

In an email to CNBC last month, CFRA analyst Garrett Nelson said, "we are very concerned about GM's worsening vehicle sales trends," which were down more than 13 percent in the fourth quarter, "and the company's exposure to a slowing China market, which we think could challenge the company's ability to hit their full year earnings guidance."

President Donald Trump — who slammed GM in November after it announced plans to cut 14,000 U.S. and Canadian jobs and cancel some of its popular car models — could also impose tariffs on cars imported to the United States, an idea causing further investor anxiety.

At a rally in Ohio on Wednesday, Trump also put pressure on the company to reopen its plant in the state and reverse its plan to invest $2.65 billion in two of its Brazilian plants in Sao Paulo.

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  Thursday, 21 Mar 2019 | 10:06 AM ET

Warren Buffett: 'This $100 course gave me the most important degree I have'—and it's why I'm successful today

To say that Warren Buffett is a wealth of wisdom is an understatement.

A few years ago, I got the once-in-a-lifetime opportunity to interview him for my book, "Getting There: A Book of Mentors," which features essays and interviews from the some of the world's most successful people, as well as their indispensable career and life lessons.

In getting to know "The Oracle of Omaha," I learned something incredibly surprising: Up until the age of 20, he had a fear of public speaking. "Just the thought of it made me physically ill," the billionaire shares in his "Getting There" essay. "I would literally throw up."

Who would have thought that one of the most successful investors in the world once had a fear of public speaking?

The Berkshire Hathaway CEO divulges that he purposely selected courses in college where he didn't have to stand up in front of the class and arranged his life so that he would never find himself in front of a crowd. If he somehow found himself in that situation, he admits that he could 'hardly even say' his own name.

During Buffett's time at Columbia Business School, he saw an ad in the paper for a Dale Carnegie public speaking course for college students. "I figured it would serve me well," he recalls. "I went to Midtown, signed up and gave them a check. But after I left, I swiftly stopped payment. I just couldn't do it. I was that terrified."

After he graduated, Buffett returned to Omaha and got a job as a salesman of securities. But the problem still lingered: "I knew that I had to be able to speak in front of people," he writes. "So again, I saw the ad in the paper and went down to sign up; but this time, I handed the instructor $100 in cash. I knew if I gave him the cash I'd show up."

And he did show up.

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  Thursday, 21 Mar 2019 | 9:05 AM ET

The winner of Warren Buffett's March Madness office pool could get $1 million a year for life

Your office's March Madness pool most likely pales in comparison to what billionaire Warren Buffett is offering his employees if they can predict which teams make this year's Sweet 16 of the men's NCAA tournament.

The investor known as the "Oracle of Omaha" has a penchant for making multimillion-dollar bets that test his employees' predictive abilities, and this year's no different. Buffett is once again offering to pay $1 million a year for life to any of the employee of Berkshire Hathaway or its subsidiaries who accurately predicts the results of the first week of March Madness games.

Buffett confirmed that the multimillion-dollar challenge is back on this year in an interview with CNBC in February. Unfortunately for most basketball fans, the billionaire's offer is only available to the roughly 375,000 people who either work for Buffett's investment firm, Berkshire Hathaway, or one of that company's various subsidiaries (including insurance company Geico and fast-food chain Dairy Queen).

"All you have to do is get through the first bracket to win $1 million, assuming nobody else wins at the same time—then you split the million," Buffett told Becky Quick on CNBC's "Squawk Box."

If more than one employee manages to fill out a March Madness bracket that correctly picks the college teams that reach this year's Sweet 16, then those winners will split the $1 million prize each year for the rest of their lives, Buffett explained. And, if no one submits a perfect bracket for the first weekend of March Madness, then whoever lasts the longest into the tournament without missing a pick will win $100,000 (or split that amount in the case of multiple winners).

Buffett first offered a big March Madness prize in 2014, with a whopping $1 billion offer to the public (not just his employees) for anyone with a perfect bracket all the way through the NCAA tournament. Unsurprisingly, no one claimed that prize, since the odds of picking a perfect bracket are roughly one in 2.4 trillion, according to one estimate. (In fact, according to the NCAA, no one has ever officially picked a perfect bracket and the best anyone has ever done is to predict the first 39 games of the 67-game tournament, in 2017.)

However, in recent years, Buffett has tried to make his March Madness challenge a little bit easier (you only have to be perfect up to the Sweet 16, instead of the entire tournament) while limiting the contest to his many employees. Still, no one has yet claimed the big prize from Buffett.

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  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.
CNBC
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."

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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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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.