May 312019
 

The 2019 winning charity bid on eBay for lunch with Warren Buffett was $4,567,888.  This was the 2oth annual lunch with Warren Buffet to benefit the Glide Foundation and it set a new record, exceeding the previous highest bid of $3,456,789 in 2012. There were only 4 bidders who submitted a total of 17 bids in this year’s auction.  The winner was crypto pioneer Justin Sun.

The previous winning bids were:

2000    $25,000

2001    $18,000

2002    $25,000

2003   $250,100

2004   $202,100

2005   $351,100

2006   $620,100

2007   $650,100

2008   $2,110,100

2009   $1,680,300

2010   $2,626,311

2011   $2,626,411

2012  $3,456,789

2013  $1,00,100

2014  $2,166,766

2015  $2,345,678

2016  $3,456,789

2017  $2,679,001

2018  $3,300,100

 Posted by at 10:34 pm
May 292019
 

Kraft Heinz (KHC) is currently trading below Berkshire Hathaway’s (BRK.A, BRK.B) cost basis.

Berkshire Hathaway owns 26.7%, or 325,442,152 shares, of Kraft Heinz and in 2015 purchased its stake with a cost basis of $9.8 billion, or $30.11 per share.  At its current price of $28.60, Berkshire’s stake is valued at $9.3 billion, representing an unrealized loss of $500 million.

In 2017, at the peak price of $90 per share, Berkshire’s stake was worth $29.3 billion.  Thus, the value of  Berkshire’s stake has been reduced by $20 billion, or 68%, over the past two years.

 Posted by at 2:23 pm
May 152019
 

After the market closed today, Berkshire Hathaway filed its SEC Form 13F revealing its stock portfolio as of March 31, 2019.

There were several major changes (by at least $500 million):

Additions:

(1) Amazon (483,300 shares) (AMZN) currently valued at $900 million (initial investment) (Todd Combs or Ted Weschler)

(2) JP Morgan Chase (JPM) – stake increased by 19% or by about $900 million (Warren Buffett or Todd Combs)

 

Reductions:

(1) Phillips 66 (PSX) – stake reduced by 53% or by about $600 million (Warren Buffett or Todd Combs or Ted Weschler)

(2) Charter Communications (CHTR) – stake reduced by 19% or by about $500 million (Todd Combs or Ted Weschler)

 

 

 Posted by at 5:04 pm
May 112019
 

The 6 largest companies by market capitalization are:

(1) Microsoft (MSFT)  —      $974 billion

(2) Apple (AAPL)  —             $936 billion

(3) Amazon (AMZN) —        $931 billion

(4) Alphabet (GOOGL) –     $811 billion

(5) Facebook (FB)  —         $538 billion

(6) Berkshire Hathaway — $516 billion
(BRK.A) (BRK.B)

 Posted by at 2:04 pm
May 102019
 

I am quoted in this NBC News article on the Uber IPO:

“It’s the speculative attraction, the excitement, similar to going to Las Vegas to gamble for a big winning,” David Kass, a professor of finance at the University of Maryland, said. “But, like Las Vegas, the odds are against you.” 
 
 “Stock will be trading the next day, the next week, the next month,” said Kass. “What’s the urgency of buying today?”
 Posted by at 6:35 pm
May 092019
 

I am quoted in this University of Maryland (Robert H. Smith School of Business) article on Warren Buffett.

SMITH BRAIN TRUST – It turns out, even the Oracle of Omaha has investment regrets. Famed investor and Berkshire Hathaway CEO Warren Buffett says he wishes he had bought shares early in some of the giants of tech, the so-called FAANG companies whose stocks have consistently outperformed the S&P.

Appearing on CNBC ahead of Berkshire Hathaway’s annual shareholders meeting in Omaha, Nebraska, Buffett said he’d been “an idiot” for not buying shares of Amazon when they were cheap.

To be sure, Buffett is far from an idiot.

“Warren Buffett has said many times that he invests only within his circle of competence,” says David Kass, clinical professor of finance at the University of Maryland’s Robert H. Smith School of Business.

That circle, Kass says, covers about 20% of all listed securities, with much of it focused on the financial sector, food companies and consumer goods.

“Falling outside of this circle of competence are technology companies,” says Kass, who has studied Buffett’s investments and philosophy for more than 35 years. “Buffett acknowledges that he has no edge, no expertise, no reason why he would perform any better than anyone else in investing in technology companies.”

Those who do are likely to outperform the Oracle – at least in tech. And that’s why he has traditionally avoided tech stocks, with a few exceptions.

Both Buffett and Berkshire vice chairman Charlie Munger have expressed regret about not investing earlier in Google parent Alphabet, when shares could have been picked up for a sliver of the $1,170 they go for now. They both were aware of Google’s importance from its earliest days on the market, Kass says.

“I’ll give you an example,” Kass says. In 2005, less than a year after Google first went public, Kass traveled to Omaha with a group of Maryland Smith students, where they would have a private meeting with Buffett. Over the course of the conversation, Buffett would summarize Google’s economics and revenue sources.

Buffett did not feel comfortable investing in it then. And at the annual meeting, this past Saturday, Munger was asked again about this. His response? “We screwed up.”

Still, Kass notes, “they are not exactly running out to buy Google today.”

“With 20/20 hindsight, we can all look back at 2005 and say, ‘Gee, why didn’t we all invest in Google in 2005?’” Kass says. “But back then, there were other search engines and it wasn’t clear to everyone, though it likely was clear to some, that Google would not only dominate the search engine industry, but become a virtual monopoly in it.”

Omission vs. commission

Buffett has always said there are two types of investment errors that he has made – errors of omission and errors of commission.

“Google was an error of omission. He should have bought Google, but didn’t,” Kass says. “An error of commission, which did not come up during this annual meeting, came when he dabbled in technology in 2011, investing billions in IBM, and eventually selling at a loss.”

For an investor like Buffett, the loss is twofold. There’s the loss that’s realized with the decline of the share price. And there’s the bigger loss, says Kass, the opportunity cost of that capital. “Had he taken that same amount of money – about $10 billion – and invested it in the S&P 500, he would have doubled his money over the same time period.”

Win some, lose far fewer

“Most portfolio managers would be considered successful if they were right 70% of the time. Buffett is right 90% of the time. And that’s what makes him so unique – and rich,” Kass says.

Perhaps what also makes him unique, Kass says, is that he knows he can’t see and know everything in the market, and he nonetheless seems content with that.

“Once, in a letter to shareholders, he included a very interesting quote from Henry David Thoreau, which really does sum up investing very well. I love this quote and it has stayed with me for many years. The quote is: ‘It’s not what you look at that matters; it’s what you see.’ ”

 Posted by at 1:11 pm
May 062019
 

Warren Buffett, Charlie Munger, and Bill Gates were guests on CNBC this morning from 6 a.m. – 9 a.m. ET.

The highlights were:

(1)   Buffett: A trade war is bad for the world. It is easier to start than stop. Negotiations are a dangerous game. Cannot shake your fist first then shake your finger later. DJIA futures down 485, S&P 500 futures down 1.8%.

(2) Kraft Heinz to restate earnings for 2016 and 2017 (a reduction of less than 2%).  Buffett: Kraft Heinz has my confidence.

(3) Buffett: The value of oil stocks depend on oil prices over the long term.

(4)  Buffett: Doesn’t think there will be a trade war with China long term, but probability is not zero. A trade war will lead to a recession.

(5) Buffett: In favor of Apple’s share buyback program. The lower the price, the more shares that can be bought

(6) Buffett: If you have extra cash, you should want lower prices to buy stocks.

(7) Buffett: Companies should buy back their shares only if they are undervalued.  Berkshire will buy back its shares if they are below intrinsic value which Buffett estimates within a band of 10%.

(8) Munger: Expects trade agreement between U.S. and China

(9) Munger: Wells Fargo was an honest mistake with a bad incentive plan that was a blind spot to its CEOs.

(10) Buffett: Never bought an IPO. Inconceivable that heavily promoted IPO is best investment relative to thousands of stocks.

(11) Buffett: Private equity uses other people’s money and leverage providing only an upside with no downside and provide competition for taking over companies.

(12) Buffett, Munger, Gates: (Capitalism vs. Socialism) – Higher taxes on high incomes to assist those with lower incomes are desirable. Socialism today in U.S. does not refer to government control of production.

(13) Gates: Since interest rates are like gravity to stock prices, and they are very low now, the outlook over the next few years is for modest performance for stock prices.

(14) Buffett: If current interest rates prevail over the next few years, then stocks are “ridiculously cheap”.

(15) Buffett: Health care spending in the U.S. approximates total federal government receipts (each represents about 18% of GDP).  Munger: Lots of unnecessary health care procedures.

 Posted by at 9:00 am
May 052019
 

These are 5 highlights of the Berkshire Hathaway annual meeting:

(1) Apple – Both Warren Buffett and Charlie Munger are very bullish on Apple.  “We like the fact that it is our largest holding” ($54 billion).  They would buy more shares at a lower price.

(2) Amazon – The recent investment by Todd Combs or Ted Weschler is an example that all investing is “value investing”.

(3) Google – Both Buffett and Munger regret not investing in Google at an earlier stage when they were observing the large payments Geico was making to Google for each click as part of its advertising.

(4) Kraft Heinz – Berkshire paid an appropriate price for Heinz but too high a price for Kraft.

(5) Todd and Ted’s portfolios are outperforming Buffett’s portfolio.  In addition, Todd oversaw the launch of Berkshire’s joint project with Amazon and J.P.Morgan Chase to lower their health care costs.  Ted managed Berkshire’s investment in Home Capital Group in 2017.

 Posted by at 8:17 am
May 042019
 

I am quoted in this Channel News Asia article on the Berkshire Hathaway annual meeting.

David Kass, finance professor at University of Maryland, has made the trip each year for the past decade, sometimes with MBA students – a number of whom were granted private meetings with Buffett.

“It’s pretty much a hobby,” said Kass, a Berkshire shareholder since 1985 and the author of a blog on Buffett.

This year he invited 200 of his students to follow the proceedings along with him, broadcast live in one of the university’s auditoriums.

 

 Posted by at 7:44 am
May 032019
 

I am quoted in this article:

“Most portfolio managers would be considered successful when they are right 70% of the time. Warren Buffet is right 90% of the time,” said David Kass, a finance professor at the University of Maryland and the author of a blog on Buffett and Berkshire Hathaway.

“This is what differentiates him.”

“He is a plain vanilla investor,” Kass said. “He does not use exotic financial instruments, he does not borrow too much.”

Despite all these hits, a critic could find fault with Buffett for missing the boat on a host of technology giants, including Amazon, Facebook and Google.

“He does not have an expertise there,” explained Kass. “He does not see any reason he could outperform the market.”

 Posted by at 12:21 am