Buffett Watch

  Monday, 20 Aug 2018 | 12:07 PM ET

Manage your money like the super-wealthy—3 habits to steal from Warren Buffett, Mark Cuban

Posted BySarah Berger

Even if you aren't raking in millions, you can grow your wealth just by mimicking the financial habits and strategies of the ultra-rich. Here's how.

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  Sunday, 19 Aug 2018 | 10:00 AM ET

What Elon Musk could learn from Jeff Bezos and Warren Buffett

Posted ByRuth Umoh

To reach production targets for his electric car company Tesla, Elon Musk has said he's worked up to 120 hours a week. At times, he ignores emails and phone calls, has barely had time to shower and has been known to sleep on his factory floor. He's called this year both "excruciating" and "difficult."

In response, Tesla executives have reportedly amped up their search for a No. 2 person who can relieve some of Musk's day-to-day responsibilities — a claim the CEO disputes. Musk, though chronically exhausted, said in an emotional Thursday interview with the New York Times he doesn't plan on renouncing his roles as chairman and chief executive.

Musk's situation could highlight a classic problem facing many leaders: Reluctance to delegate. At best, that reluctance can lead to long nights and lost time. At worst, it can lead to a 'one-man show' management style experts say slows growth and keeps leaders from thinking about the big picture.

Leaders struggle with delegation for multiple reasons. Some are just perfectionists, says Carol Walker, the president of consulting firm Prepared to Lead, in a recent Harvard Business Review article. Leaders might also see their work as better or believe that relinquishing control will somehow detract from their own importance.

Founders like Elon Musk understandably feel a special sort of responsibility, says Peter Harms, a professor of management at the University of Alabama. He says entrepreneurs like Musk could feel indispensable because they often are one of the few in their business who do understand its intricacies. They can struggle the most with giving up power, since their company is like their baby and, says Harms, "you wouldn't give your child to a stranger."

Other leaders might simply lack confidence. Ironically, experts say that delegation of responsibility and not just tasks is a sign of a truly confident leader. "Giving up being 'the go-to expert' takes tremendous confidence and perspective even in the healthiest environments," Walker says in Harvard Business Review. "It's even more challenging in the average company, where being a good manager is seen as a 'nice to have,' but where producing the core deliverable is what is truly esteemed."

Musk, who runs both SpaceX and Tesla, might do well by studying examples set by Jeff Bezos and Warren Buffett. Buffet has CEOs in place for companies in his Berkshire Hathaway portfolio, and serves "as a kind of manager of managers," Barron's pointed out in a recent article. Buffett reportedly employs a hands-off approach with his managers, giving them a sense of autonomy while making them feel trusted.

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  Friday, 17 Aug 2018 | 7:35 AM ET

Trump pushes for an end to quarterly earnings reports as a way to help business do 'even better'

Posted ByJeff Cox

President Donald Trump on Friday advocated for a possible end to the long-held quarterly earnings reports for publicly traded companies, saying it would boost business and in turn help create jobs.

In a morning tweet, the president said he had spoken to "business leaders" for their ideas on growth and they believed filing earnings reports every three months was one obstacle for growth. One idea would be to report every six months.

The Securities and Exchange Commission said it continues to study issues affecting long-term decision make for companies. In a statement, SEC Chairman Jay Clayton said Trump had "highlighted a key consideration."

"The SEC's Division of Corporation Finance continues to study public company reporting requirements, including the frequency of reporting," Clayton said. "As always, the SEC welcomes input from companies, investors, and other market participants as our staff considers these important matters."

Addressing the issue later in the morning with reporters, Trump said, "I'd like to see twice" a year for reporting.

He said he spoke with the retiring CEO of PepsiCo — an apparent reference to Indra Nooyi — who had mentioned biannual reporting as a way to, in Trump's words, "make it even better."

"And I thought of it and it made sense to me, because you know we are not thinking far enough out," Trump said. "We've been accused of that for a long time, this country. So we're looking at that very, very seriously. We're looking at twice a year instead of four times a year."

Nooyi said she spoke in the larger context of allowing corporations, including those on the Business Roundtable in which she takes part, to be able to take a longer view of operations.

"Most agree that a short-term only view can inhibit long-term strategy, and thus long-term investment and value creation," Nooyi said in a statement. "My comments were made in that broader context, and included a suggestion to explore the harmonization of the European system and the U.S. system of financial reporting. In the end, all companies have to balance short-term and long-term performance."

The European Commission in 2014 dropped a requirement for companies to report on a quarterly basis, a model the U.S. could someday follow.

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  Thursday, 16 Aug 2018 | 4:22 PM ET

Warren Buffett’s warning on Walmart: There are better stocks than retailers

If you follow Warren Buffett's warning on Walmart stock, you might look past the retailer's earnings pop on Thursday and find better stocks for your money.

Buffett's Berkshire Hathaway is a long-time Walmart shareholder, but in 2016 it sold a large chunk of its stake, then valued around $3 billion. At that time, Buffett cited fellow billionaire Jeff Bezos, Amazon and the pressures ecommerce had created in the retail sector.

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  Monday, 6 Aug 2018 | 8:41 AM ET

Berkshire Hathaway shares jump after Buffett’s conglomerate reports soaring profits

Posted ByTae Kim

Berkshire Hathaway Class B shares are jumping after Warren Buffett's company reported better-than-expected profits for its second quarter.

The conglomerate posted June quarter operating profits of $4,190 per Class A share, up 67 percent year over year and higher than the analyst consensus of $3,387 per share, according to Thomson Reuters.

J.P. Morgan reiterated its overweight rating for Berkshire Hathaway shares, citing the company's strong performance across many of its businesses.

"Berkshire reported strong 2Q operating earnings that significantly exceeded our estimate and consensus, driven by better than expected earnings across nearly all segments, particularly insurance," analyst Sarah DeWitt said in a note to clients Monday. "Earnings at Burlington Northern, Manufacturing, Service, Retail and Financial Products also exceeded our outlook while utility earnings were lower than we expected. Strong 2Q results at Berkshire reinforce our positive outlook."

DeWitt reaffirmed her $235 price target for Berkshire Hathaway Class B shares, representing 17 percent upside to Friday's close.

The Class B shares closed up 2.9 percent Monday after the results.

The company's stock has underperformed the market this year. Its shares are up 1 percent for the year through Friday versus the S&P 500's 6.2 percent gain.

Each share of Berkshire Hathaway Class A stock is convertible, at the option of the holder, into 1,500 shares of Class B common stock.

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  Friday, 3 Aug 2018 | 4:11 PM ET

Buffett's Berkshire Hathaway could reveal share buy back plan Saturday with earnings report

Posted ByAlex Crippen
Warren Buffett
David A. Grogan | CNBC
Warren Buffett

Warren Buffett's Berkshire Hathaway may pull the trigger on a rare stock buyback Saturday morning.

Just over two weeks ago, Berkshire revealed its board had amended the company's share repurchase program to give Chairman and CEO Warren Buffett and Vice Chairman Charlie Munger authority to buy back shares any time they "believe that the repurchase price is below Berkshire's intrinsic value, conservatively determined."

That gives them more much more leeway than the previous requirement that shares couldn't be repurchased for more than a 20 percent premium over book value, creating an opportunity to use some of Berkshire's $106 billion in cash. It's been building well beyond Buffett's $20 billion minimum cash cushion amid his apparent inability to find anything else to buy at an attractive price.

In its July 17 news release, Berkshire said it wouldn't start buying back any stock under the new program until its second quarter earnings release, which was originally scheduled for Friday after the market close.

Now Berkshire says its earnings release and a quarterly 10-Q filing will be posted on its web site on Saturday morning at around 8 a.m. ET.

It's unusual for the company to put out earnings on a Saturday and for it to be so specific about the timing. That may be a sign Berkshire will also make some kind of announcement about a stock buyback and wants to give investors time to digest the news before markets reopen on Monday.

Berkshire hasn't bought its own shares since 2012.

Buffett has generally resisted buying back Berkshire stock. At the 2016 shareholder meeting, he described his "mixed emotions on the whole thing" because while it makes sense for the company and continuing shareholders to buy underpriced shares, he doesn't "enjoy the actual act of buying out people who are my partners at a price that is below — well below — what I think the stock is worth."

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  Thursday, 2 Aug 2018 | 2:01 PM ET

Apple at a trillion-dollar valuation isn’t crazy like the dot-com bubble

Posted ByTae Kim

This time really is different.

Apple shares reached the historic $1 trillion market value Thursday, hitting the $207.05 price that was needed to get to the milestone. The tech giant is the first publicly traded U.S. company to reach a $1 trillion market capitalization.

Some investors may worry the most valuable company reaching these new heights could portend a significant drop is ahead like during dot-com technology bubble.

It's possible it could cool off in the short term, but for long-term investors the stock's valuation is far from extreme and based on improving fundamentals.

The company's stock rose 2.9 percent Thursday, bringing its year-to-date return to 22 percent versus the S&P 500's 6 percent gain.

Apple is valued at just 15.7 times analysts' earnings estimates for its next 12 months, compared with a forward price-earnings ratio of 16.5 times for the S&P 500. The valuation disparity comes as the smartphone maker increased its sales by 17 percent year over year and its earnings by 40 percent year over year in its June quarter, versus the estimated 8 percent sale growth rate for the average S&P 500 company this year.

In comparison, during the dot-com bubble the top technology stocks were valued at much higher earnings multiples. Microsoft traded at 59 times earnings, Cisco at 179 times earnings, Intel at 126 times earnings and Oracle at 87 times earnings in 2000.

Wall Street's "dean of valuation," Aswath Damodaran, told CNBC on Wednesday that Apple is still "reasonably valued" and "not trading at that high a multiple of earnings" at these levels.

In addition to Apple's attractive valuation versus the market, investors also get the benefit of the company's increasing shareholder capital returns.

Apple returned about $25 billion per quarter to shareholders through stock buybacks and dividends this year versus the approximately $11 billion per quarter last year. Buybacks lower the company's shares outstanding, resulting in higher earnings per share.

The tech giant hinted even more is coming, which is helping its share price. Apple had a $129 billion net cash position or cash minus debt at the end of the June quarter. On Tuesday its management reiterated its previous guidance to bring down its large net cash position to near zero, signalling to investors that more buybacks and dividends are likely.

One well-known investor has endorsed Apple's stock buyback program as a big reason to own the company's shares.

In May, Warren Buffett explained to CNBC the dramatic benefit of Apple's capital return programs for shareholders.

"When I buy Apple, I know that Apple is going to repurchase a lot of shares," he said. "We own about 5 percent. But I know I don't have to do a thing and probably in a couple of years we'll own 6 percent without laying out another dollar. Well, I love the idea of having 5 percent go to 6 percent."

Buffett's Berkshire Hathaway is currently Apple's second-largest shareholder and added nearly 75 million shares to its stake in the smartphone maker during the first quarter.

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  Thursday, 2 Aug 2018 | 1:05 PM ET

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

Apple shares hit a historic $1 trillion market cap value on Thursday, becoming the first public U.S. company to ever reach the milestone. The stock briefly hit the $207.05 per share price that was needed to bring Apple to the $1 trillion mark before retreating, CNBC reports.

So if you invested in Apple a decade ago, you'd probably be feeling pretty good about it today. According to CNBC calculations, a $1,000 investment made in early August 2008 would be worth more than $9,222.50 as of August 2, 2018, or over nine times as much, including price appreciation and excluding dividends.

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  Wednesday, 1 Aug 2018 | 1:33 PM ET

Apple investors should thank Trump’s tax cuts for the stock's record high

Posted ByTae Kim
President Donald Trump, right, speaks as Tim Cook, chief executive officer of Apple Inc., listens during the American Technology Council roundtable hosted at the White House in Washington, D.C.
Zach Gibson | Bloomberg | Getty Images
President Donald Trump, right, speaks as Tim Cook, chief executive officer of Apple Inc., listens during the American Technology Council roundtable hosted at the White House in Washington, D.C.

Wall Street is buzzing over Apple's strong earnings results, driving its shares to a new all-time high.

But in addition to the smartphone maker's premium pricing for its latest iPhone, Apple shareholders should credit President Donald Trump's tax reform for their gains this year.

Apple shares rose 5.9 percent Wednesday, a day after the company posted better-than-expected fiscal third-quarter earnings per share of $2.34, beating the $2.18 Thomson Reuters consensus. The company's stock is now up about 19 percent so far this year versus the S&P 500's 5 percent return.

The gains come even as Apple has slightly missed Wall Street's iPhone unit sales estimates in each quarter this year, reporting unit sales growth of 1 percent year over year in its June quarter and 3 percent year over year in its March quarter.

This may be confusing to some market veterans because in the past Apple's stock traded primarily on whether its iPhone unit sales beat or missed Wall Street expectations. Estimates that were already lowered from a year ago, when analysts predicted the iPhone X would drive a "super cycle" of double-digit unit growth.

Apple was able to offset slower unit growth by charging higher prices with the iPhone X, which starts at $999. The average selling price of the iPhone rose about 20 percent year over year to $724 in the June quarter, though some investors don't believe the company will able to sustain such pricing in the future.

But the other difference maker for Apple this year was Trump's tax reform.

The president signed the Republican tax overhaul in December, which lowered the corporate tax rate to 21 percent from 35 percent. The bill also taxed overseas profits at a lower 15.5 percent repatriation tax rate, allowing companies to use foreign cash balances to invest in domestic projects or increase shareholder capital returns.

As a result, Apple was able to unleash its balance sheet of more than $200 billion in cash overseas and report higher earnings growth.

For example, the company's June quarter earnings per share rose by 40 percent year over year, while operating profits grew 17 percent. The difference in growth rates is due to a lower tax rate and increased shareholder capital returns (buybacks) versus the prior year.

Apple's June quarter tax rate dropped to 13.3 percent from 22.9 percent last year.

And the company returned about $25 billion per quarter to shareholders through stock buybacks and dividends this year versus the approximately $11 billion per quarter last year. Buybacks lower Apple's shares outstanding, resulting in a higher earnings per share.

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  Wednesday, 1 Aug 2018 | 2:46 PM ET

Warren Buffett just made more than $2 billion in Apple 

Posted ByTae Kim
Warren Buffett
David A. Grogan | CNBC
Warren Buffett

Warren Buffett had a good day.

Apple shares rose 5.9 percent Wednesday, a day after it posted better-than-expected fiscal third-quarter earnings per share of $2.34, beating the $2.18 Thomson Reuters consensus. The company also gave sales guidance above Wall Street expectations for its September quarter.

The Oracle of Omaha's Berkshire Hathaway owned 239.6 million shares of Apple as of the end of March, according to FactSet. With Wednesday's more than 11 point rally in the shares, Buffett's company is up approximately $2.7 billion on its position, assuming it hasn't sold shares since then.

In May, Buffett told CNBC why he favors Apple so much as an investment.

"I clearly like Apple. We buy them to hold," Buffett said on CNBC's "Squawk Box." "We bought about 5 percent of the company. I'd love to own 100 percent of it. ... We like very much the economics of their activities. We like very much the management and the way they think."

Apple shares are up 19 percent year to date through Wednesday versus the S&P 500's 5 percent gain.

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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.