Airline stocks: Buffett losses are made worse by impatience

Warren Buffett is widely quoted as saying: “The stock market is a device for transferring money from the impatient to the patient.” His investment in the four largest U.S. airlines through Berkshire Hathaway Inc. now appears to be one of those transfers. American Airlines Group Inc., Delta Air Lines Inc., Southwest Airlines Co. and United Airlines Holdings Inc. have doubled on average since Buffett disclosed last May that his company no longer owned shares. All of them except American are back above their price in mid-2016, just before Berkshire started building its stakes.

 

Buffett's Berkshire turns into `mediocracy' versus S&P 500

Warren Buffett is going through “the worst patch” of his investing career, Jim Bianco, president and founder of Bianco Research LLC, wrote Wednesday in a Twitter post. Bianco cited a total-return ratio, including dividends, between Buffett’s Berkshire Hathaway Inc. and the S&P 500 Index. The ratio closed Tuesday at its lowest level since November 2001 after dropping 23% from this year’s high, set March 16, according to data compiled by Bloomberg. The current reading was first reached in 1995, as cited by Bianco, who wrote that “Berkshire has turned into a mediocracy” for the past 25 years.

Buffett faces unusual burden as Berkshire shares stumble

Warren Buffett was saddled with an unusual burden after his company, Berkshire Hathaway Inc., held its annual meeting last weekend. Berkshire’s Class A stock fell to a six-year low relative to the S&P 500 Index on Monday, according to data compiled by Bloomberg. The shares hadn’t been so weak in relative terms since 2000, according to Bespoke Investment Group LLC, which cited the Berkshire-S&P 500 ratio in a blog post Monday. The ratio set another low Tuesday, when it was down 18% from a high on March 16.

Buffett scorecard shows holdings beating Berkshire's stock

Warren Buffett’s largest stock investments at Berkshire Hathaway Inc. have been more rewarding than his own company’s shares this year. Berkshire’s five holdings valued at more than $10 billion all surpassed the 11% advance in the company’s Class B stock through Tuesday, according to data compiled by Bloomberg. Apple Inc., the company’s most valuable holding, climbed 78% -- the second-biggest gain among U.S.-listed stocks that Berkshire has owned throughout the year. The largest was recorded by StoneCo Ltd., a Brazilian payment processor, which more than doubled.

Buffett's Berkshire trails S&P 500 by avoiding dividends

Berkshire Hathaway Inc.’s unwillingness to pay dividends has meant shareholders would have been better off with the S&P 500 Index during the past decade. A total-return version of the S&P 500 climbed 405 percent from the index’s March 2009 low through Thursday, according to data compiled by Bloomberg. Berkshire’s Class B shares, which are included in the index, rose 344 percent over the same period. Meanwhile, Warren Buffett’s company beat the S&P 500’s gain of 310 percent measured before payouts.

 

Buffett wins by losing as Bank of America shares surge

Warren Buffett ended up a winner after last year’s U.S. presidential election, even though the candidate he supported, Hillary Clinton, lost to Donald Trump. The victory came from a post-election surge in the shares of Bank of America Corp., in which Buffett’s Berkshire Hathaway Inc. owned warrants granted in August 2011 and exercised this week. The rally made Bank of America a far better performer for the six-year period than Wells Fargo & Co., Berkshire’s other top holding among the biggest U.S. banks.

 

Investor profile : Warren Buffett

Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is widely considered the most successful investor of the 20th century.

• Born: August 30, 1930 (age 85), Omaha, NE
• Buffett is the chairman, CEO and largest shareholder of Berkshire Hathaway and consistently ranked among the world's wealthiest people. He was ranked as the world's wealthiest person in 2008 and as the third wealthiest person in 2011. In 2012, American magazine Time named Buffett one of the most influential people in the world.
• Buffett is called the "Wizard of Omaha", "Oracle of Omaha", or the "Sage of Omaha" and is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth. Buffett is also a notable philanthropist, having pledged to give away 99% of his fortune to philanthropic causes, primarily via the Gates Foundation. 

Now in his eighties, Buffett has - for decades – held an unparalleled position in American finance. He is not only a legendary investor with an astounding success rate, and a billionaire forty times over; he is also – by far - the most respected businessman in America.

Warren Buffett with the late Katharine Graham of the Washington Post at his 50th-birthday party in 1980

Betting On Goldman Sachs and GE; September 2008

At the height of the financial crisis, and shortly after declining to help rescue Lehman Brothers, Buffett gave his stamp of approval to two reeling institutions. Brokerage firm Goldman Sachs and General Electric – dragged down by its finance unit – paid dearly for the Oracle of Omaha's backing, offering up preferred shares that paid off handsomely in the ensuing years.

Buying Burlington Northern; January 2009

Talk about timing. Buffett made his biggest-ever purchase less than two months before the market's March lows, spending $26 billion on the railroad operator that is now a centerpiece of Berkshire's bet on the U.S. economy.

Hiring Todd Combs; October 2010

Buffett tapped little-known hedge fund manager Todd Combs to help run Berkshire's massive investment portfolio.  A year later, Buffett tapped another hedge fund manager, Ted Weschler, to join Combs.

Buying Back Stock; September 2011

Berkshire announced it would repurchase a limited amount of shares at up to 110% of book value, a notable departure from a longstanding policy to hoard excess capital rather than returning it to shareholders. A year later the limit was raised to 120%, but the firm has only bought back a small slug of stock under the program.

Ketchup Catch; February 2013

Partnering with 3G Capital, Buffett pays $23 billion to acquire ketchup maker HJ Heinz, the latest in a series of acquisitions – including the $9 billion 2011 takeover of Lubrizol – that followed Buffett's 2010 shareholder letter, which said in part, "Our elephant gun has been reloaded, and my trigger finger is itchy."

Woodstock for Capitalists, the 50th anniversary annual meeting of Berkshire Hathaway.  (2015)

Barron's 7/27/15: Berkshire Hathaway's Bright Future

Buffett upbeat about future despite trailing S&P 500

• Buffett Speaks: Highlights From His Annual Letter

Investors eagerly await Warren Buffett's letter to Berkshire Hathaway Inc. shareholders each year for its plain-spoken insight into the billionaire's financial strategy and economic predictions. Buffett had plenty of good news to discuss Saturday as he recounted the performance of his Omaha, Neb., based company with humor and wit. He also dispensed some investing advice.

Here's some of what Buffett had to say:

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SWING BOTH WAYS WHEN IT COMES TO INVESTING

Buffett said Berkshire likes to buy businesses outright, but also will invest large sums in stock or partial ownership of a company, to increase its profit opportunities.

"Woody Allen stated the general idea when he said: 'The advantage of being bisexual is that it doubles your chances for a date on Saturday night.' Similarly, our appetite for either operating businesses or passive investments doubles our chances of finding sensible uses for our endless gusher of cash."

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KNOW YOUR LIMITATIONS

"You don't need to be an expert in order to achieve satisfactory investment returns. But if you aren't, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don't swing for the fences. When promised quick profits, respond with a quick 'no.'"

For investors who don't have the skills or time to estimate the value of investing, Buffett recommends making regular purchases of a low-cost stock index fund and resisting the urge to actively trade.

"So ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm."

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LONGEVITY

The 83-year-old Buffett devoted a section of his letter to praising Rose Blumkin and her Nebraska Furniture Mart home furnishings store, which Berkshire bought in 1983.

"Though the company's financial statements were unaudited, I had no worries. Mrs. B simply told me what was what, and her word was good enough for me," Buffett said. "Mrs. B was 89 at the time and worked until 103 — definitely my kind of woman."

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PENSION PROBLEMS

Buffett predicts that many cities and states will experience financial problems in the years ahead because they promised too much in their pension plans.

"Citizens and public officials typically underappreciated the gigantic financial tapeworm that was born when promises were made that conflicted with a willingness to fund them. Unfortunately, pension mathematics today remain a mystery to most Americans." He added that investment policies play an important role in these problems, as well.

Buffett has been predicting pension problems since 1975 when he wrote a memo to The Washington Post's publisher after Berkshire invested in that newspaper.

"During the next decade, you will read a lot of news — bad news — about public pension plans."

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BUFFETT'S RECORD

When reviewing the performance of Berkshire's manufacturing, service and retail businesses, Buffett acknowledged making mistakes in the past. Buffett said some of Berkshire's businesses deliver very poor returns.

"I was not misled: I simply was wrong in my evaluation of the economic dynamics of the company or the industry in which it operated," he said.

"Fortunately, my blunders usually involved relatively small acquisitions. Our large buys have generally worked out well and, in a few cases, more than well. I have not, however, made my last mistake in purchasing either businesses or stocks. Not everything works out as planned."