Investing Warren Buffett Watch

  Wednesday, 25 Oct 2017 | 11:47 AM ET

Airbnb CEO isn’t rushing to IPO: Warren Buffett told me to ‘get rich slow’

Airbnb has raised almost $4.5 billion in 12 rounds of funding. The online travel platform has a lot of investors who are expecting a payout. That has made Airbnb's impending IPO one of the most hotly anticipated.

But Airbnb CEO Brain Chesky is taking the advice of legendary investor Warren Buffett, who told him "get rich slow," the co-founder tells Fortune.

So far, building Airbnb has been a start-up sprint. In the fall of 2008, Chesky owed about $25,000 in credit card debt, which he used to launch the business. ("You know those binders that you put baseball cards in? We put credit cards in them," he told LinkedIn co-founder Reid Hoffman, on his podcast, "Masters of Scale.") Just eight years later, the company became profitable (in the second quarter of 2016), and its most recent $1 billion round of funding valued the company at $31 billion.

"Nothing about Airbnb was slow. It's only 9 years old. But I do think that it's been helpful for us to be able to go a little slower and take a little bit of a breather and be a little more thoughtful," Chesky says to Fortune.

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  Tuesday, 24 Oct 2017 | 3:07 PM ET

Warren Buffett: Here's how much college and grad school matter

Posted ByAli Montag

When Warren Buffett is looking at hiring a new employee or finding a new company to invest in, he has a lot of criteria. But, one thing he isn't looking for are fancy university degrees.

"I don't care where someone went to school, and that never caused me to hire anyone or buy a business," Buffett says in a 2006 interview with the Wall Street Journal.

In fact, he didn't even want to attend college himself. "I didn't want to go to college," Buffett tells Bloomberg in a 2016 interview. He only applied because his dad, Howard H. Buffett, suggested an undergraduate program at The Wharton School at the University of Pennsylvania.

"After the first year [at Wharton] I wanted to quit and go into business," Buffett explains. "My dad said, 'Well, give it one more year.' So I went the second year, and I said 'I still want to quit.'"

Buffett transferred to the University of Nebraska so he could graduate in three years. And, higher education turned out to be a valuable experience for him.

"[T]here wasn't a class that disappointed me," he says of his time at Nebraska, where he earned an undergraduate degree in business administration. And his experiences during graduate school studying economics at Columbia University changed his life.

Still, Buffett doesn't believe success always requires a degree.

"I don't think college is for everyone," Buffett tells students of Ivey Business School at Western University in 2012, adding that none of his three children graduated from college. "The best education you can get is investing in yourself. But this doesn't always mean college or university."

Investing in yourself means tackling areas you aren't good at, and learning new skills. His advice: "Address whatever you feel your weaknesses are, and do it now." Buffett, for example, took a Dale Carnegie course to overcome his fear of public speaking.

He also suggests reading, thinking and learning.

"Read 500 pages like this every day," Buffett once reportedly told students, pointing toward a pile of reports and papers. "That's how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it."

Then, he takes time to understand what he learned.

"I insist on a lot of time being spent, almost every day, to just sit and think," he says. "That is very uncommon in American business. I read and think."

That is an investment that "supersedes all others," according to Buffett. Because when it comes down to it, skills and experience matter more than a piece of paper, says Buffett.

"If you are interested in business, or likely to be in business, an MBA is very useful," Buffett says in a 2001 article in Nebraska Business magazine "But, what is really important is what you bring to a class in terms of being interested in the subject. If you view a course like accounting as a drudge and a requirement, you are missing the whole game. Any course can be exciting. Mastering accounting is like mastering a new language, it can be so much fun."

As for his own two degrees, he isn't sure where he would find the diplomas if he looked for them. According to Buffett: "I don't have them on my wall, in fact I don't even know where they are."

Don't miss: Here's how much grad school cost when Warren Buffett graduated in 1951, compared to today

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  Wednesday, 18 Oct 2017 | 2:30 PM ET

Warren Buffett just made nearly $800 million in IBM, a stock he doesn’t even like that much

Posted ByTae Kim

Warren Buffett had a good day.

IBM shares surged 8.9 percent Wednesday after the company reported better-than-expected third-quarter earnings the previous evening.

The Oracle of Omaha's Berkshire Hathaway owns 54.1 million shares of IBM as of June quarter-end, according to FactSet. With Wednesday's more than 14 point rally in the shares, Buffett's company is up approximately $775 million on its position, assuming it hasn't sold shares since then.

Ironically Buffett told CNBC's Becky Quick in May that he was wrong on his initial appraisal of IBM as an investment.

"I was wrong … IBM is a big strong company, but they've got big strong competitors too," Buffett told CNBC. "I don't value IBM the same way that I did six years ago when I started buying ... I've revalued it somewhat downward."

SEC filings revealed Buffett's company sold 10.5 million shares of IBM in the June quarter, according to FactSet.

IBM shares are down 3.9 percent year to date through Wednesday's close versus the S&P 500's 14.4 percent return.

This was the biggest jump in the stock since Buffett has owned it. IBM last moved this high in one day in January 2009.

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  Wednesday, 18 Oct 2017 | 10:22 AM ET

Cramer: IBM is not a Warren Buffett story anymore but about 'reignition of earnings'

IBM has successfully managed to shift the story about its stock from billionaire investor Warren Buffett to earnings, CNBC's Jim Cramer said Wednesday.

Shares of IBM were up 9 percent midmorning Wednesday, lifting the Dow Jones industrial average after the tech giant reported better-than-expected quarterly results the day before.

Earlier this year, Buffett, chairman and CEO of Berkshire Hathaway, spoke about a decision to dump his IBM shares.

In an interview with CNBC, Buffett said: "I don't value IBM the same way that I did six years ago when I started buying ... I've revalued it somewhat downward."

"When it got above $180 we actually sold a reasonable amount of stock," the billionaire investor added.

But, after the company's earnings, Cramer says the talk surrounding Buffett is over and "the IBM story is back."

"It's not a discussion about Buffett anymore," Cramer said on "Squawk on the Street." "It's about a discussion of reignition of earnings."

Cramer was also particularly pleased with IBM's revenue growth. The company came close to stopping the drought of revenue growth that has lasted 21 quarters.

"The next quarter is going to have the revenue up. The streak is going to break," Cramer said. "[CFO Martin Schroeter] is underpromising. He's going to overdeliver. Next year is going to be terrific."

Programming note: IBM's chief financial officer, Martin Schroeter, will make an appearance Wednesday on CNBC's "Mad Money" at 6 p.m. ET.

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  Tuesday, 17 Oct 2017 | 8:00 AM ET

Trump's fortune drops to $3.1 billion, ties Snap's Evan Spiegel on new Forbes 400 rich list

Donald Trump's fortune fell by $600 million, and the president is now tied with Snap founder Evan Spiegel on Forbes' 2017 ranking of the 400 richest Americans.

Trump ranks No. 248 on the billionaires list this year with a net worth of $3.1 billion, according to Forbes, which released the rankings Tuesday.

Trump ranked No. 156 in 2016.

Forbes, which has tracked Trump since the list's debut in 1982, said the president's faltering net worth is due to weakening in the New York City real estate market.

Trump did not campaign with the magazine in an effort to boost his ranking as he's done in years past, said Luisa Kroll, Forbes magazine senior wealth editor.

"We'll see if he tweets today," Kroll told CNBC's "Squawk Box." "I know he cares a lot."

The president shares his spot on the list with the 27-year-old Spiegel, co-founder and CEO of the parent of Snapchat.

Spiegel was the youngest on the list, Kroll said. "And he's been the youngest for a number of years," she said. Spiegel took his ephemeral photo messaging company public on the New York Stock Exchange earlier this year.

Forbes used closing stock prices from Sept. 22, 2017, to compile the Forbes 400 list.

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  Friday, 13 Oct 2017 | 10:15 AM ET

North Korea renews Guam threat: Only one market move to make when 'Rocket Man' launches a missile

From July to mid-September, North Korea launched five missile tests, including two intercontinental ballistic missiles. More recently, the North Korean threat has taken a backseat to hurricanes and tax reform as stock market triggers, and major indexes are touching new record highs.

But "Little Rocket Man" will be back, as will headlines attributing short-term volatility in the market to a potential geopolitical crisis. Ahead of planned joint naval exercises between the United States and South Korea next week, North Korea threatened on Friday to launch ballistic missiles near the U.S. territory of Guam.

During Kim Jong Un's six-year reign, he has tested more missiles than his father and grandfather combined, including 15 tests in 2017. Based on history, there's one piece of advice that may come in handy for investors (and the current president) when Kim Jong Un celebrates his next nuclear success: Don't overreact. In fact, for investors, don't do anything.

Consider the country stock market arguably facing the gravest existential threat from a nuclear crisis: South Korea. There is reason not to be complacent. U.S.-based investors may have more exposure to South Korea than they realize.

Financial advisors and retail investors have been piling into overseas stocks, primarily through exchange-traded funds based on the MSCI and FTSE developed (EAFE) and emerging markets (EM) indices. Those indexes have significant exposure to South Korea. MSCI defines South Korea as an emerging market, and its emerging markets index has between 14 percent to 15 percent exposure to South Korea. The iShares Core MSCI Emerging Markets ETF (IEMG) has taken in $13.5 billion from investors. FTSE defines South Korea as a developed market, and its EAFE index has between 4 percent to 5 percent exposure to South Korean stocks. The Vanguard FTSE Developed Markets ETF (VWO) has taken in more than $14 billion from investors this year.

But here is what the South Korean stock market returned between the July to mid-September periods, when missiles were flying: 1.37 percent. Year-to-date, the South Korean stock market is up roughly 30 percent.

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  Thursday, 12 Oct 2017 | 6:48 AM ET

October continues to buck bad reputation on Wall Street

Though futures were modestly lower this morning, the autumn months continue to defy their historical trends as the worst months of the year. »Read more
  Wednesday, 11 Oct 2017 | 3:34 PM ET

Warren Buffett decides not to do second wager against hedge funds, citing his age

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

Warren Buffett, 87, told fund manager Mark Yusko he will not do another bet that a simple S&P 500 index fund will beat a basket of hedge funds.

The "Oracle of Omaha" cited his age as reason not to go forward with a second 10-year wager against the hedge fund industry, in an email to Yusko Tuesday. Buffett is on track to beat the original wager this year by a blowout.

Wrote Buffett to Yusko:

"I think the Protege bet proved the point and has stimulated a re-evaluation of professional management. If I were to do another ten-year bet — and I regard that as the reasonable term for measurement — that would take me to 97 and not at the best point to write and talk about the results. There's no doubt in my mind, however, that the S&P 500 will do better than the great majority of professional managers achieve for their clients after fees."

Buffett told CNBC's Becky Quick last week that he was willing to do another bet on active versus passive as long as anybody wants to put up "a significant percentage of their net worth" on the wager.

Morgan Creek Capital's founder and chief investment officer, Mark Yusko, accepted Buffett's offer on the same day. His firm manages $1.8 billion.

The bet with Buffett "is definitely not happening. I'm surprised because he came on CNBC offering another bet. After talking to him last week I thought there was a good chance," said Yusko in a phone interview Wednesday.

But the Oracle must have changed his mind.

"I'm disappointed because his involvement would have kept the public interest on this very important topic [active versus passive] at the highest level," said Yusko.

The investor explained why he was so adamant over his advocacy for hedge funds last week.

"It's an important time in terms of the market cycle. I think it's important to be aware about the propensity of investors to chase hot returns at the peak of the cycle. It is a better time to get hedged," Yusko said on Oct. 3.

Even though Buffett said no to Yusko, the investor is hopeful perhaps another person will take the wager.

A decade ago, Buffett made a million-dollar bet with Seides, a former co-manager of Protege Partners, that the S&P 500 will beat a basket of fund of hedge funds over the next 10 years, ending this year. The Berkshire Hathaway chairman and CEO will likely win that bet by a large margin.

Seides conceded he lost the bet earlier this year.

Buffett still won the original wager even after a vicious bear market occurred as a result of the housing crisis. The new bull market began in March 2009.

Hedge funds lost out to simple index funds as an economic recovery and extraordinary Federal Reserve stimulus lifted the majority of stocks and assets during this latest run.

The S&P 500 "will absolutely kill every one of the fund of funds," Buffett said on CNBC's "Squawk Box" last week. "Passive investment in aggregate is going to beat active investment because of fees."

Berkshire Hathaway did not immediately respond to a request for comment.

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  Thursday, 5 Oct 2017 | 1:42 PM ET

The 3 traits Warren Buffett looks for in an employee

Posted ByEmmie Martin

Warren Buffett's workdays no longer include dealing with much of the minutiae of running Berkshire Hathaway. In place of conducting interviews and managing teams, he makes big picture decisions and spends 80 percent of his time reading. But what the legendary investor looks for in quality employees still speaks volumes.

"You look for three things: You look for intelligence, you look for energy and you look for integrity," he told Nebraska Business magazine, an alumni publication for Buffett's alma mater, the University of Nebraska at Lincoln's College of Business Administration, in a 2001 interview.

Out of these three traits, Buffett says it's most important to cultivate integrity.

"Every business student you have has the requisite intelligence and requisite energy," he says. "Integrity is not hard-wired into your DNA."

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  Wednesday, 4 Oct 2017 | 1:49 PM ET

Hedge fund manager some call the next Warren Buffett owns nearly $1 billion of Puerto Rico's bonds

Posted ByTae Kim

Seth Klarman, the value investing giant who draws comparisons to Warren Buffett, has a very large position in Puerto Rico's controversial debt.

Klarman's hedge fund, Baupost, owns $911 million of the island's bonds through Decagon Holdings entities, according to a July public court filing.

"The Baupost Group is a holder of COFINA bonds through the Decagon entities. Baupost regularly makes investments through subsidiary holding entities," Baupost spokeswoman Diana DeSocio wrote in an email.

COFINA stands for the Puerto Rico Sales Tax Financing Corp. that issues bonds.

The Intercept on Tuesday was first to report the hedge fund's large stake. It was previously known that Baupost had a holding in COFINA bonds, but the size was not.

Puerto Rico's bonds plunged Wednesday after President Donald Trump pledged to wipe out its debt in an interview with Fox News. The island's general obligation bonds fell to 36 cents on the dollar versus 56 cents on the dollar last month.

The fund declined to comment specifically on the plunge in the debt Wednesday.

Two weeks ago, the island was hit by Hurricane Maria, a Category 4 storm that left most of the population without electric power.

Puerto Rico currently has more than $70 billion in debt. Cate Long, founder of Puerto Rico Clearinghouse, told CNBC in an email retail investors own about 75 percent of the island's debt.

Baupost has $30 billion of assets under management as of March 2017, according to the firm.

Klarman's fund has generated annual returns of 16.4 percent and $22.6 billion in net profit for clients since inception through 2015, according to a Morgan Creek Capital letter. Baupost's main fund posted a 'high single-digit' return last year.

The hedge fund manager has largely avoided controversy over his career and is often compared with Buffett for his disciplined investing philosophy and solid returns. As the political rhetoric heats up around what Wall Street is owed as Puerto Rico tries to recover from this tragedy, a negative spotlight could fall on owners of the controversial debt like Baupost.

That is likely something Klarman would not welcome since he is notoriously reclusive. He rarely appears publicly and used copies of his "Margin of Safety" investment book still sell for more than $700 online.

— CNBC's Fred Imbert contributed to this report.

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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.