Buffett Watch

• Berkshire Hathaway Portfolio Tracker

Berkshire Hathaway's B-shares should be trading higher, but the market doesn't put enough value on the contribution of the conglomerate's massive $200 billion stock portfolio, according to analysts from J. P. Morgan.

Berkshire CEO Warren Buffett, also known as one of the most successful value-style investors, has talked about the concept of "look-through earnings." Companies pay investors dividends but they also retain some of their earnings. Over time, companies invest these retained earnings at a higher rate of return and that ultimately boosts their share prices, benefiting their investors.

When evaluating investments, Buffett not only looks at the operating earnings of the companies, but also calculates what Berkshire's share of their retained earnings would be, minus taxes.

On October 16, 1923, Walt and Roy Disney founded The Walt Disney Company and, nearly a century later, the company is one of the largest and most successful media conglomerates in the world. One of its next moves is to expand into the video streaming industry, challenging leading competitors such as Netflix.

Investing in either company 10 years ago would have been a good bet. But which would have made you richer? The answer is Netflix.

According to CNBC calculations, a $1,000 investment in Netflix in October 2008 would be worth more than $97,560 as of after the earning bell on Monday, or more than 96 times as much, including price appreciation and dividends reinvested.

If you put $1,000 in Disney at the same time, your investment would be worth $5,123 now, or more than four times as much. That's about $92,437 less than you would made betting on Netflix.

CNBC: Netflix stock as of October 2018.

Netflix and Disney's stock have performed well over the last decade, but any individual stock can over- or underperform and past returns do not predict future results.

Some analysts have concerns about Netflix. The company is going to report earnings Tuesday and there are fears the stock could dip. Morgan Stanley, Goldman Sachs and Raymond James all recently slashed their 12-month forecasts because of concerns the company's growth will slow as interest rates continue to rise.

Meanwhile, Disney recently was outbid for British satellite TV provider Sky by CNBC parent company Comcast.

Still, investors are generally optimistic about both companies.

"While broader market performance and rising rates have been more important factors for stock price performance," Goldman's analyst Heath Terry said of Netflix in a note to clients, "we believe that upside to consensus expectations and what the strength in subscriber net additions says about Netflix's business, beyond guidance for the next quarter, is likely to be a positive catalyst for the stock."

CNBC: Disney stock as of October 2018.

And Jim Cramer, host of CNBC's "Mad Money," places Disney at No. 1 in his power ranking of the top five communications services. "Now that all the deal-making distractions are behind them," he says, "I love the way things are set up for Disney. For ages, this stock had been held back by worries about subscriber losses in one of their marque properties, ESPN.

"But lately, Disney has made a push into subscription-based online streaming services, including ESPN Plus, which … already has over one million subscribers. And let's not forget," Cramer adds, "between Star Wars and Marvel Comics, they've got some incredibly lucrative film products."

In the same power ranking, Netflix lands at No. 5.

If you're looking to invest in Netflix, Disney or just the stock market in general, experienced investors like Warren Buffett, Mark Cuban and Tony Robbins 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.

Like this story? Like CNBC Make It on Facebook!

Don't miss: 3 things you should never do when the stock market tanks

Video by Andrea Kramar

Berkshire Hathaway chairman Warren Buffett, one of the most successful investors of all time, is worth an estimated $84.9 billion. And the 88-year-old is the first to admit that he wouldn't be where he is today without a bit of luck.

"The womb from which you emerge determines your fate to an enormous degree for most of the seven billion people in the world," Buffett told journalist Rebecca Jarvis in 2013. "Just in my own case: I was born in 1930, I had two sisters that have every bit the intelligence that I had, have every bit the drive, but they didn't have the same opportunities."

In short, "if I had been a female, my life would have been entirely different."

Buffett had made a similar point before. As he said at Berkshire Hathaway's Annual Shareholders Meeting in 1997, he knew he had won what he called the "ovarian lottery."

"You don't know whether you're going to be born black or white. You don't know whether you're going to be born male or female," he explained. "You don't know whether you're going to be born infirm or able-bodied. You don't know whether you're going to be born in the United States or Afghanistan."

The ovarian lottery is "the most important event in which you'll ever participate," Buffett continued. "It's going to determine way more than what school you go to, how hard you work, all kinds of things."

Research backs his claim that the circumstances you're born into strongly affect your success. Being born rich is far more helpful in life than being born gifted, the Washington Post reports: "Economists found genetic endowments are distributed almost equally among children in low-income and high-income families. Success is not."

For example, "the least-gifted children of high-income parents graduate from college at higher rates than the most-gifted children of low-income parents."

Sears Holdings filed for bankruptcy protection early Monday after years of staying afloat through financial maneuvering and relying on billions of CEO Eddie Lampert's own money. Lampert, who has served as CEO for the past five years, will step down from that post, effective immediately, but remain chairman.

The 125-year-old retailer, once the nation's largest, said Monday it was appointing Mohsin Meghji, managing partner of M-III Partners, as its chief restructuring officer.

As part of the bankruptcy, Sears will shutter 142 stores toward the end of the year. It expects to begin liquidation sales shortly.

The bankruptcy filing comes more than a decade after Lampert merged Sears and Kmart, hoping that forging together the two struggling discounters would create a more formidable competitor.

Over the years, Lampert shed Sears assets and spun out real estate to pay down the debt. The company still has roughly 700 stores, which have at times been barren, unstocked by vendors who have lost their trust. Many of the stores have never been visited by younger generations of shoppers.

Also see: Here is a map of the 142 Sears and Kmart stores set to close

Lampert, who has a controlling ownership stake in Sears, personally holds some 31 percent of its shares outstanding, according to FactSet. His hedge fund ESL Investments owns about 19 percent.

But even with the bankruptcy filing, Lampert continues to invest in Sears. The retailer said Monday morning ESL is negotiating a $300 million debtor-in-possession loan to support it through its bankruptcy. That loan comes on top of an additional $300 million it has secured from investment banks.

The Dow Jones Industrial Average plunged a whopping 800 points Wednesday. On Thursday, it closed over 500 points lower for a two-day loss of more than 1,300 points.

If you're invested in the stock market, or are thinking about investing, you don't need to freak out, experts say, though you can always take some basic steps to make sure you're being smart with your money.

Here are three things not to do when the market's being volatile:

Warren Buffett believes interest rates are critical in determining stock valuations.

The Dow Jones Industrial Average plunged more than 1,300 points in two days as investors worried about the negative effects from the rising interest rate environment.

In a 2017 interview video clip found using CNBC's Warren Buffett Archive, the investor explained why rates matter so much for investors.

"The most important item over time in valuation is obviously interest rates," Buffett said last year. "If interest rates are destined to be at very low levels. … It makes any stream of earnings from investments worth more money."

Chip stocks are plunging this month as investors react to surging interest rates and concerns over weakening business trends in the semiconductor industry.

The iShares PHLX Semiconductor ETF has declined nearly 5 percent this month through Tuesday versus a 1 percent fall for the S&P 500. The chip sector ETF closed down another 4.4 percent Wednesday.

Several chip stocks are down much more than the sector. Shares of AMD are down about 17 percent month to date, while Nvidia's stock is down nearly 10 percent.

Earlier this week, Raymond James reduced its 2019 earnings estimates for eight chip stocks, predicting companies will announce weakness in business activity. After spending a week in Asia talking to chip supply chain companies, the firm also downgraded several semiconductor stocks in late September, saying the sector has entered a "cyclical downturn."

The Department of Justice gave preliminary approval Wednesday for CVS Health's acquisition of insurer Aetna, cementing a deal that could transform how U.S. consumers access health care.

The two companies cleared their path to merge when Aetna announced Sept. 27 that it reached an agreement to sell its Medicare Part D drug plan business to WellCare Health Plans for an undisclosed amount. Regulators were concerned about the overlap between CVS' and Aetna's Medicare Part D plans. The Justice Department said that the divestiture was a condition to winning final approval.

"The divestitures required here allow for the creation of an integrated pharmacy and health benefits company that has the potential to generate benefits by improving the quality and lowering the costs of the healthcare services that American consumers can obtain," Assistant Attorney General Makan Delrahim said in a statement.

Looking back on the past few decades, Suze Orman has one major money-related regret: Buying around $5,000 worth of Amazon stock in 1997 — and selling it just a few years later.

"If I had kept the number of shares that I had originally purchased for Amazon, oh my God, I can't even imagine what that would be worth today," the personal finance expert and best-selling author of "Women & Money" tells CNBC Make It. "It makes me sick to even tabulate it."

Orman first purchased shares of Amazon because she liked the branding. "I thought it was such a cool name for a stock," she says. "I could identify with the idea of me being a woman that wanted to be an Amazon."

She sold those shares when the company started taking off and, although she estimates that she quadrupled her money at the time, her shares would be worth millions today.

A $1,000 investment made at the time of Amazon's IPO in May 1997 would be worth around $1.2 million as of October 9, according to CNBC calculations. If Orman had invested her $5,000 around the same time and kept them, her shares would be worth more than $6 million.

Sears Holdings has contacted banks in recent days to arrange the financing necessary to file for bankruptcy after 125 years in business, people familiar with the situation told CNBC.

The stock plummeted 32 percent, to 40 cents a share, in Wednesday's premarket trading after the report.

The so-called "debtor-in-possession" loan, which companies need to have enough liquidity to keep running the business during bankruptcy, is the clearest sign yet that the department store chain may finally file after years of losses. Sears has a $134 million debt payment due Monday that it previously said it may not be able to cover.

A bankruptcy filing is not yet definite and still could be averted. Sears' CEO, Eddie Lampert, has kept the company afloat through financial maneuvering and pouring his own money into the company. He may again choose to do so.

His hedge fund, ESL Investments, has also proposed a restructuring, and he has offered to buy some of Sears' remaining key assets through his hedge fund. It is unclear whether Sears' lenders will agree to it.

Lampert, who has a controlling ownership stake in Sears, personally owns some 31 percent of the retailer's shares outstanding, according to FactSet. His hedge fund ESL Investments owns about 19 percent.

As it weighs bankruptcy, Sears has been working with advisors including Lazard and M-III Partners, according to the people who asked not to be identified because the discussions are private. It has been working with M-III for more than two years, the sources said.

The Wall Street Journal reported Tuesday that Sears hired M-III Partners to prepare for a bankruptcy filing that could come as soon as this week.

Representatives from Sears and M-III did not respond to CNBC's request for comment.

Lampert, a hedge fund manager called "the next Warren Buffett," bought Kmart in 2004. A year later, he merged it with Sears, in which he had a controlling stake.

Both department stores were already struggling with the rise of new competition, but Lampert believed he could revive the business in part by taking advantage of its lucrative real estate.

The challenges though, proved greater than expected. And the timing was bad — a few years before the Great Recession — which drove down sales of new home products like washers and dryers. The rise of the online shopping brought it a new giant with which it struggled to compete. Sears' 140,000-square-foot stores were monstrous as foot traffic declined.

The retailer's last profitable year was in 2010. Analysts say Sears would need to generate more than $1 billion a year to keep running, as its sales continue to erode. It has fewer than 900 stores still running across the U.S. today with under 90,000 employees, compared with what used to amount to more than 3,500 Sears and Kmart locations combined, and hundreds of thousands of workers. Layoffs have been steady as store closures mount.

Sears has been in survival mode for more than a decade. Since its merger with Kmart, Sears has spun off Lands' End, sold the Craftsman tool brand to Stanley Black & Decker and closed hundreds of stores, 250 of which he put into a real estate investment trust offshoot known as Seritage.

Efforts to keep the company alive by selling its best assets to pay down debt have left it with little money to reinvest in its stores. They have also left shelves progressively barren, as key vendors, wary of Sears' future, have demanded tighter payment terms.

"That failure has manifested itself in lost customers, lost market share, and a brand that has become tarnished and increasingly irrelevant," GlobalData Retail Managing Director Neil Saunders told CNBC late Tuesday. "The firm simply has no reason to exist."

It is also grappling with an underfunded pension. In 2015, it reached a final agreement with PBGC a federal government oversight organization that guarantees individuals' pension that acts as a parachute if a company goes bankrupt. As part of the deal, Sears gave the PBGC a lien on many of its most valuable remaining assets. That deal also thereby lessened Sears' ability to pour all of its proceeds back into reviving the company.

Sears lost $508 million during the second quarter as sales tumbled at a double-digit pace. Its adjusted loss before interest, taxes, depreciation and amortization widened to $112 million, compared with a loss of $66 million during the same quarter a year earlier. Sales at stores open at least 12 months also fell 3.9 percent during the second quarter, which ended Aug. 4.

ESL in August made a bid to buy the storied Kenmore appliance brand and home improvement division, as one more attempt to put money into the company. Sears appointed a special committee earlier this year to balance out the potential conflict of interest inherent in ESL's bid.

The committee has frustrated Lampert with its slow pace, sources familiar with the situation have told CNBC. It has refused to approve Lampert's rescue plan, worried about opening the company up to litigation, Reuters reported on Wednesday. Industry experts have suggested Sears may have made itself vulnerable to lawsuits by its strategy of selling its valuable assets to pay down its debt, instead of putting more money towards rehabilitating the company or paying down its pension.

When those efforts stalled, ESL last month asked Sears' creditors to agree to restructure their debt in a detailed presentation that highlighted the risks it was facing. With so few key assets left, however, the retailer has little to offer its lenders by way of collateral.

Lampert sounded the alarms in a Sept. 13 blog post, saying Sears needed to restructure its debt or sell off some assets if it wanted to continue as a "going concern."

"It is imperative that the company reduce debt, adjust its debt maturity profile and eliminate the associated cash interest obligations," he wrote. "We continue to believe that it is in the best interests of all our stakeholders to accomplish this as a going concern, rather than alternatives that could result in significant reductions in value."