WEB:The Oracle of Omaha- Warren Buffett

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Top 142. Mar 11, 2002 7:14 PM

» Sinewave - Some Wisdom From Buffett

Some Wisdom From Buffett
The annual Berkshire Hathaway report was issued recently and as usual it contained some words of wisdom from Warren Buffett. Since Buffett doesn’t speak too often we thought we would share some of his words with you. Some excerpts are as follows.
“…Charlie and I still like the basic businesses of all the companies we own. But we do not believe Berkshire’s equity holdings as a group are undervalued. Our restrained enthusiasm for these securities is matched by decidedly lukewarm feelings about prospects for stocks in general over the next decade or so… Charlie and I believe that American business will do fine over time but think that today’s equity prices presage only moderate returns for investors. The market outperformed business for a very long period, and that phenomenon had to end. A market that no more than parallels business progress, however, is likely to leave many investors disappointed, particularly those relatively new to the game…

“…Charlie and I are disgusted by the situation, so common in the last few years, in which shareholders have suffered billions in losses while the CEOs, promoters and other higher-ups who fathered these disasters have walked away with extraordinary wealth. Indeed, many of these people were urging investors to buy shares while concurrently dumping their own, sometimes using methods that hid their actions. To their shame, these business leaders view shareholders as patsies, not partners. Though Enron has become the symbol for shareholder abuse, there is no shortage of egregious conduct elsewhere in corporate America.”

-- posted by Sinewave

Top 143. Mar 24, 2002 8:37 AM

» Kirk - $100,000 Annual Salary

Author: lcha
Date: March 24, 2002 7:05 AM
Subject: More Buffett

March 23, 2002, 7:17PM

Buffett, taking a small salary, 'disgusted' by corporate greed
By BILL RIGBY
Reuters News Service

NEW YORK -- Warren Buffett, the canny billionaire known as the "Oracle of Omaha," took home just $100,000 in pay last year and once again spurned the idea of stock options and other popular CEO incentives, as he has for many years.

The 71-year-old investor, second only to friend and bridge partner Bill Gates on the world's rich list, paid himself $100,000 for running his Berkshire Hathaway conglomerate, which made $795 million profit last year.

The modest U.S. Midwesterner, worth about $35 billion, is a long-standing enemy of stock option accounting -- which he says dilutes value for shareholders -- and recently was critical of corporate greed in the modern era of worthless technology stocks and Enron-like accounting trickery.

"Charlie and I are disgusted by the situation," he said in his annual report earlier this month, referring to longtime business partner Charlie Munger. "Shareholders have suffered billions in losses while the CEOs, promoters and other higher-ups who fathered these disasters have walked away with extraordinary wealth."

On top of his $100,000 salary from Berkshire, Buffett also got $256,400 from his side jobs as a director at firms he holds a large stake in, including Coca-Cola Co., Gillette Co. and Washington Post Co., according to a filing with U.S. securities regulators.

Buffett, who lives simply in Omaha, Neb. -- walking to the newspaper shop and dining on steak and soda -- has never paid himself more than $100,000 in his 37 years running Berkshire, which now has a market value of $112 billion.

He has made millionaires of many shareholders, pushing Berkshire's stock to $73,000 each on the New York Stock Exchange on Wednesday, from around $12 when he took over in 1965.

Berkshire, which gets its money from insurance and long-term investments, has never paid dividends and does not give out stock options or grants to employees.

Kirk Comment:

Of course, he did make another $256,400 for being on the board of directors for companies his fund owned.. so shareholders really paid him more than $100K... but it is still a tiny amount compared to what other CEOs take for far less in performance.

-- posted by Kirk

Top 144. Apr 28, 2002 3:47 PM

» JenL_2 - Bershire Hathaway : BRK.A

from 4/29 Barron's:

Warren-ted Success

Buffett's Berkshire Hathaway is coming back after a few dormant years

By ANDREW BARY

After a poor 2001, when it reported a rare operating loss because of large insurance setbacks, Berkshire Hathaway is poised for a strong recovery this year, fueled by greatly improved insurance results and contributions from a bevy of housing-related businesses acquired by the company at attractive prices over the past two years.

The combination of better operating earnings and an upturn already evident this year in Omaha-based Berkshire's famed equity portfolio, which features holdings in Coca-Cola, American Express and Gillette, could lift Berkshire's Class A stock out of its 18-month trading range between $65,000 and $75,000 per share. Indeed, Berkshire stock hasn't moved in four years. Berkshire's Class A stock ended Thursday at 70,900, and the so-called "Baby Berkshire" Class B shares, equivalent to 1/30 of a Class A share, finished at $2,370.

"We wouldn't be surprised to see the stock trade at around $100,000 a share in 2003," says Bruce Berkowitz, president of Fairholme Capital, a Short Hills, N.J., investment manager that holds Berkshire stock. "The cash will be flowing into Omaha faster than Buffett can use it." Berkowitz's target may be aggressive. Alice Schroeder, the bullish Berkshire analyst at Morgan Stanley, has pegged fair value at around $90,000 a share.

Berkshire is run by its chairman and chief executive, the 71-year-old Warren Buffett, who took control of the then-dying shirt-maker in the mid-1960s. Through a combination of investment brilliance and savvy risk-taking in the insurance business, Buffett built one of country's largest companies, which now boasts a market value of about $110 billion. Berkshire stock is up 2,000-fold in the past 35 years, but Buffett won't split the A shares.

During the past two years Buffett has been on a $10 billion acquisition spree that has added about a dozen companies to Berkshire's fold. These include Shaw Industries, the No. 1 carpet maker in the U.S.; Benjamin Moore, the paint producer, and Johns Manville, the insulation manufacturer (see table: Buffet Buying Binge). Many purchases were shrewdly made before industrial stocks came back in vogue. Shaw, for instance, probably is worth 50% more than Berkshire's purchase price of $2.5 billion. More deals are likely as Berkshire redeploys some of its hoard of $42 billion in bonds and cash.

Schroeder, one of a handful of analysts who follows Berkshire, and the only one who is believed to have access to Street-shy Buffett, sees Berkshire's net income from operations rising to a record $2,450 per share, or $3.8 billion, in 2002, and hitting $3,700 a share, or $5.6 billion, in 2003. Berkshire's reported results could be even higher due to realized investment gains, which Buffett deems unimportant because of their discretionary nature. (Buffett declined to speak with Barron's.)

Berkshire had an operating loss of $30 a share in 2001, before investment gains, on revenues of $38 billion, owing largely to a huge operating setback of $3.7 billion at General Re, the big reinsurer the company purchased in late 1998 for $22 billion. Gen Re's red ink last year reflected nearly $2 billion in losses suffered from the Sept. 11 attack on the World Trade Center, and $775 million to strengthen its reserves.

Berkshire now trades for less than 20 times Schroeder's 2003 profits forecast, in line with the valuation on the Standard & Poor's 500 index. The effective multiple arguably is even lower because Berkshire gets no income other than dividends from its $32 billion equity portfolio.

The likely generation of significant profits in 2002 and 2003 could benefit Berkshire because it will allow investors to value the company based on earnings. It also may puncture the perception that Berkshire simply amounts to a closed-end investment fund dominated by Coke, Gillette and AmEx, combined with a bunch of longstanding businesses like the Buffalo News, See's Candies and Dexter Shoe that don't make a huge profit contribution.

"People don't appreciate the extent to which the operating side of the business is becoming a large and regular contributor to profits," says Keith Trauner, a Fairholme analyst. Adds Peter Russ, a principal at Value Architects, a New York investment firm: "People have gotten the idea that Berkshire is Buffett's plaything. It's actually a lot more like GE now." Indeed, Schroeder titled her most recent Berkshire note, "The Conglomerate Emerges," in which she observed that Berkshire's revenues nearly quadrupled from 1997 to 2001.

At a time when Wall Street is worried about GE's earnings quality and transparency, investors can take comfort with Berkshire. The company 's financial statements may not be easy to understand but its results are about as clean as they come because of Buffett's insistence on financial integrity. His refusal to grant employee stock options means there's no understatement of Berkshire's expenses. Unlike financial companies such as GE Capital, Citigroup and J.P. Morgan Chase that rely on financial leverage, Berkshire has an asset-rich balance sheet with only $3 billion of debt and one of the few triple-A credit ratings in Corporate America.

In the past, Berkshire has been valued based on its book value or a more complex methodology based on expected returns on the company's enormous insurance reserves, or float, which totaled $35 billion at year-end 2001. Berkshire has tended to trade at just under twice book value in the past decade.

Year-end book stood at $38,000 per Class A share. Book has been little changed since year-end 1998, and tangible book, excluding goodwill arising from the Gen Re deal and other purchases, stands at $24,000 a share, unchanged since 1997. The stagnation is traceable in part to the poor performance of Coke, Gillette and other parts of Berkshire's equity investment portfolio, and helps explain why the stock has been dead money.

The equity portfolio, which totaled $36 billion at year-end 1997, was down to $28.6 billion at the end of 2001 (see table). Yet Berkshire's portfolio is estimated to have increased $3 billion so far this year as Coke, AmEx and Gillette have appreciated.

A near-term catalyst for Berkshire's thinly traded stock could come with the release of its first-quarter earnings, expected around May 10. That report should show evidence of an upturn in insurance, which accounts for half of Berkshire's revenues, and contributions from Berkshire's diverse group of other businesses. Berkshire's stock is down 5% this year, making it one of the worst performers in the insurance sector, while Allstate, Chubb, St. Paul and Progressive are all posting gains of around 10%.

One of the big earnings contributors in 2002 and 2003, barring major catastrophes, is likely to be Gen Re, which is expected to produce at least breakeven operating results based on sharply higher reinsurance pricing post Sept. 11. A swing just to breakeven from a $3.7 billion pretax loss last year would produce about $1,500 per share in net income to Berkshire. It's possible that Gen Re could turn an operating profit for the first time since Berkshire bought it. Gen Re also generates over $1 billion in investment income. Several reinsurers, including Renaissance Re, have reported strong first-quarter results.

Berkshire's large auto insurer, Geico, likely is benefiting from higher auto insurance prices. Progressive, a well-run auto insurer that resembles Geico because of an emphasis on direct sales of auto insurance, recently reported a doubling in first-quarter profits. Its stock, at 57, is up more than 50% in the past year. Progressive now is valued at $13 billion, and Geico probably is worth close to that amount.

Berkshire's stock also could be affected by Buffett's comments at what he calls the Capitalist Woodstock, Berkshire's annual meeting, which is expected to attract several thousand shareholders next Saturday in Omaha. As usual, Buffett has slated several hours for shareholder questions.

One of the big concerns about Berkshire remains Buffett himself. He may be a vigorous 71, and appears to have lost none of his verve for the job, but investors obviously are worried that Buffett mightn't be at the helm within a decade. He owns more than 30% of Berkshire's stock, worth $34 billion.

Buffett's will be enormous shoes to fill because of his talents as an investor, insurance underwriter and manager. Some investors say they'd be happy to buy Berkshire if Buffett were 10 years younger.

Buffett hasn't publicly revealed his succession plans, although some suspect that he may separate his job into two or three positions. The well-regarded Geico investment chief, Lou Simpson, who runs a separate $2 billion equity portfolio, is expected to head Berkshire's investments. Simpson, however, is 65, which possibly could make him an interim chief. The 57-year-old Richard Santulli, who heads NetJets, Berkshire's fractional-jet ownership business, is viewed as a top candidate to run the operating businesses. A critical job to fill will be capital allocator, at which Buffett excels.

Berkshire's stock could drop perhaps 10% on the day Buffett dies or is forced to retire for medical reasons. He appears unlikely to give up his job while healthy.

Another risk is the aging demographics of Berkshire's shareholders. Given the stock's huge appreciation over the years, many of them could face hefty estate taxes, which may force sales of their shares. Institutional ownership is light because the stock isn't in the S&P 500 and is thinly traded. Ironically, Janus Capital, whose tech-heavy investment style was the antithesis of Buffett's approach, now is one of the Berkshire's largest holders.

The Buffett factor clearly is a risk. But Berkshire's fans say that one of the benefits of the bevy of acquisitions in the past five years is that Buffett has built a formidable conglomerate whose fortunes won't hinge on his genius.

Subscribe to WSJ & Barron's Online @ http://www.wsj.com

<img src="http://pvcharts.quicken.com/bin/icenter....">
BRK.A, S&P500, DJIA, Nasdaq 5 YR Chart

....Jen

-- posted by JenL_2

Top 145. May 5, 2002 8:49 PM

» oneputt - Billionaire Predicts Nuclear Attack

He could be right, but, I thought that this was a bit odd.
http://story.news.yahoo.com/news?tmpl=st...

Billionaire Predicts Nuclear Attack
Sun May 5,10:28 PM ET
By JOE RUFF, Associated Press Writer

OMAHA, Neb. (AP) - Investment guru Warren Buffett (news - web sites) offered a bleak prediction for the nation's national security, saying a terrorist attack on American soil is "virtually a certainty."

Envy and dislike of the United States have fueled rage against the country even as the ability to build a nuclear device has spread, Buffett said Sunday at the final day of Berkshire Hathaway Inc.'s annual meeting.

"We're going to have something in the way of a major nuclear event in this country," said Buffett, the firm's chief operating officer. "It will happen. Whether it will happen in 10 years or 10 minutes, or 50 years ... it's virtually a certainty."

Washington and New York would be the top two targets because terrorists want to traumatize the country and kill as many people as possible, Buffett said.

Chemical or biological attacks are similarly high risks, Buffett said.

Buffett is the second-richest man in the world with holdings in Coca-Cola Co., American Express and The Washington Post, but his main business is insurance.

Berkshire Hathaway's insurance companies — particularly General Re Corp. — took a $2.4 billion underwriting loss because of the Sept. 11 terrorist attacks in New York and Washington.

The companies are now writing policies on terrorism but limiting their liability in any nuclear, biological or chemical attack. Only the federal government can ultimately insure property and other damage from a major terrorist attack, Buffett said.

The 71-year-old Buffett and vice chairman Charlie Munger met with the news media the day after they spent six hours answering questions from some of the more than 10,000 Berkshire shareholders gathered for the annual meeting.

___

-- posted by oneputt

Top 146. May 5, 2002 9:41 PM

» oneputt - "coming years will see poorer investment return"

http://news.independent.co.uk/business/n...
Buffett blasts corporate America's crooks and their Wall Street allies
By Chris Hughes, Financial Editor
06 May 2002
Warren Buffett, the legendary US investor, has launched a blistering attack on sloppy accounting, corporate greed and Wall Street investment banks, while warning that coming years will see poorer investment returns.

The chairman of Berkshire Hathaway, aged 71, supported by his deputy and long-standing business partner Charlie Munger, told the US investment group's annual meeting in Omaha that fraud was rife in US businesses.

The actions of Enron were "grotesque" Mr Buffett said, with Mr Munger, describing the collapsed US energy trader as "the most disgusting example of a business culture gone wrong".

Wall Street and the accountancy profession should share in the blame, the pair went on. Investment banks had no concern for investors, and the only question they asked when dealing with stocks and shares was "can it be sold?". Auditors had been too pliant to their clients' demands, and had succumbed to "dubious accounting".

"Many of the crooks look like crooks," said Mr Buffett. "Wall Street loves them as long as they are pushing out securities." Mr Buffett, known affectionately as the Sage of Omaha, said a good way to spot possible frauds was to keep a close eye on those companies that reported results using Ebitda (earnings before interest, tax, depreciation and amortisation).

Mr Munger, 78, also sounded a warning over companies involved in derivatives, saying. "To say derivative accounting in America is in the sewer is an insult to sewage," he fumed.

Mr Buffett also backed a call made last week by Alan Greenspan, the chairman of the US Federal Reserve Board, to clamp down on the "shameful" way that companies inflated their profits by excluding employee share options from the main body of their accounts.

He did not expect regulators to heed Mr Greenspan's call, however, because chief executives were lobbying hard in Washington and "get what they want every year".

Despite his displeasure with corporate America, Mr Buffett said he could not recall ever having had more fun than he was at the present time.

The pair took questions for six hours after completing the formal business in 15 minutes. One investor among the 14,000 gathered called Mr Buffett "a hero", a sentiment echoed in the auditorium's applause.

Some shareholders were less adoring. Two questioned whether Berkshire's continuing investment in Coca-Cola – one of its largest holdings alongside American Express and Gillette – was sensible, given stiffening competition from Pepsi. Mr Buffett countered that he would be surprised if Coca-Cola surrendered market share in the next five or 10 years.

Mr Buffett admitted the performance of Berkshire's core insurance operations during 2001 had suffered due to the mispricing of policies for terrorist attacks, but he expected the group to benefit from strengthening premiums hereon. He warned that it was hard to find suitable investment opportunities. In the present low interest-rate environment, investors should not expect returns to exceed 6 or 7 per cent.

Areas of interest were companies bankrupted by asbestos claims, but only if it was possible to insulate Berkshire Hathaway from all liabilities.

-- posted by oneputt

Top 147. May 6, 2002 7:29 AM

» Kirk - Buffett likes H&R Block, Moody's

From http://www.siliconinvestor.com/stocktalk...

To:Jacob Snyder who wrote (475)
From: Fallope Monday, May 6, 2002 12:37 AM
Respond to of 486

Buffett likes H&R Block, Moody's
Billionaire predicts future U.S. terror attack with nukes

By CBS.MarketWatch.com
Last Update: 12:24 AM ET May 6, 2002

OMAHA, Neb. (CBS.MW) - Warren Buffett is giving hints on what's he's buying.

The taciturn billionaire said at a conference that two companies he likes are ratings agency Moody's and tax preparer H&R Block (HRB: news, chart, profile).

"They are both very good franchises," Reuters quoted Buffett as saying. "They require little or no capital and earn good returns on capital employed," he said.

Buffett, who bought minority stakes in those two companies over the past year, also said he liked the fact that Moody's and H&R Block have competitive advantages and face little threat to their businesses.

At his annual Berkshire Hathaway meeting, Buffett said his insurance holdings took a hit in the terrorist attacks last September, but he told investors that they're coming back strong.

But on the issue of security, Buffett predicted another terrorist attack against the United States in the future -- possibly with a nuclear device.

"We're going to have something in the way of a major nuclear event in this country," the Associated Press quoted Buffett as saying. "Whether it will happen in 10 years or 10 minutes, or 50 years ... it's virtually a certainty."

He said Washington and New York would be the likely targets because the terrorists would try to traumatize and kill as many people as possible.

Aside from more unexpected assaults, though, the world's second richest man said there's a threat from legal sieges against companies that can be linked to asbestos.

Buffett, chairman of Berkshire Hathaway (BRKA: news, chart, profile) (BRKB: news, chart, profile), addressed his annual meeting at the Omaha Civic Auditorium along with Vice Chairman Charles Munger. They stressed the strength of Berkshire's General Reinsurance and Geico despite catastrophic results following the Sept. 11 attacks -- losses that lopped $3.8 billion off Berkshire's worth and knocked Buffett's wealth down to $35 billion, according to this years Forbes list of wealthy people.

According to a Dow Jones account, Buffett likened asbestos liability to "a cancer on the American corporate world" and Munger forecast "more of a mess than we have now" in the next five years. Companies have faced increasing liabilities as legal assaults go after companies that can be linked to the carcinogen. See listing of potential asbestos legal targets.

Using the accumulated money from its insurance holdings, Berkshire takes stakes in companies that Buffett considers well-run. Dow Jones put that kitty this year at $1.8 billion.

Yet, according to Bloomberg News, Buffett is wary of the asbestos risks as he lines up future deals.

Buffett bought Johns Manville several years ago, a company that manufactured asbestos and filed for bankruptcy to limit its liability. That shield made it an acceptable risk, Buffett said, according to Bloomberg.

Regarding Enron-like accounting scandals, Buffett said he stays away from companies that talk about EBITDA (earnings before interest, taxes, depreciation and amortization), according to Dow Jones, suggesting that the number can be used to mask financial problems.

Thousands of Berkshire shareholders flocked to the meeting, which has been dubbed "Woodstock for Capitalists," to hear Buffett, known as "the Oracle of Omaha." Besides the meeting and receptions, the gathering descends on a minor-league baseball game and gets special deals at an Omaha jewelry shop and furniture store owned by Berkshire.

"In the shadow of Enron, people will find it refreshing to have a CEO who is honest and forthright," Robert P. Miles, a Berkshire stockholder and author of "The Warren Buffett CEO: Secrets from the Berkshire Hathaway Managers," told Associated Press.

Buffett turned Berkshire over 37 years from a textile company worth about $7 per share to the conglomerate empire that traded for $74,300 a share Friday for Class A stock.

-- posted by Kirk

HRB Yahoo Charts & News

Top 148. May 6, 2002 9:27 AM

» JenL_2 - Re: Buffett likes H&R Block, Moody's

In response to message posted by Kirk:

H&R Block (HRB)?

<img src="http://chart.neural.com/servlet/GIFChart..." width=450 height=350>
HRB, S&P500 3 YR Chart

Yeah the HRB chart looks good compared with the S&P500. Yeah - "They require little or no capital and earn good returns on capital employed,"....a friend worked for H&R Block....to get hired she had to pay for all her own training and then there was no guarantee of work hours after she completed the training. But it seems to me that TurboTax or TaxCut software would give increasing competition to H&R Block.....but their chart sure doesn't show it!.....Jen

-- posted by JenL_2

Top 149. May 6, 2002 9:45 AM

» Kirk - Re: Re: Buffett likes H&R Block, Moody's

In response to message posted by JenL_2:

Warren is a smart old coot (is that how you spell it???)

Notice he told us what he was buying AFTER he bought it and AFTER it went up. I'd check to see how much of his buying pressure boosted the stocks and then got added volume by the momentum investors jumping on his bandwagon. Long term HRB could be a fine investment but I'd sure want to know what WEB's average price paid for the stock was before I'd consider buying just because he liked it.

A longer term chart http://stockcharts.com/def/servlet/SC.we...
Shows that WEB COULD have been buying HRB at $14 to $18 last year… which is a whole bunch different than the current $45 price.

From the Chart and understanding WEB, my guess he was a buying under $22.50

-- posted by Kirk

Top 150. May 6, 2002 1:43 PM

» mitelo - Pessimism?

------
Would predicting a nuclear attack as a certainty qualify as a pessimistic viewpoint?

Could such a prediction from Mr. Buffett influence the market?

It sure as heck didn't help. Thanks, WB.

Why not liquidate that stock now, retire, and buy that villa or yacht?
------
Does anyone remember the fallout shelters of the 60's? They sold them on lots like used cars. There were trampoline centers and fallout shelter lots all over the place. The lawyers got rid of the trampoline places. I think people just got tired of worrying about nuclear war and went on with their lives. Actually, the in ground fallout shelters never were big sellers. They were like big in-ground tin cans. We looked inside one one night after a trip to the tramoline place. I'd rather risk a broken neck and have fun than spend a lot of money to survive an event when there probably won't be much fun to have if and when it were to happen.

We'll get there...back to sanity and fun, that is,

-- posted by mitelo