Category Archives: warren buffett

Yes, the rumors are true. Warren Buffett is much more than the CEO and chairman of Berkshire Hathaway these days. He’s also now one of their head salesman.

Recently, Warren Buffett visited a Dairy Queen this past Monday evening. He did so in order to serve up the restaurant chain’s newest flavor, the S’mores Blizzard. Then he decided to even eat some ice cream for the cameras.

As you know, Berkshire Hathaway owns Dairy Queen. That’s why Mr. Buffett is always happy to talk about their tasty treats.

John Gainer, Dairy Queen CEO, gave Warren Buffett a jersey. The label read that he was the restaurant’s number one fan. Buffett also went to the store wearing his favorite Dairy Queen tie.

Berkshire Hathaway, led by investing billionaire Warren Buffett, recently had its credit rating dropped from AA+ to AA. Their rating was cut by Standard & Poor’s rating services.

S&P made a statement that tells us that even though Berkshire Hathaway maintains an “excellent business profile,” the lesser credit rating “better reflects our view of BRK’s dependence on its core insurance operations for most of its dividend income.” (Standard & Poor’s statement has been posted on their website, but you cannot view it unless you are registered.)

Standard & Poor’s also makes mention that “management succession” is a factor in the way that they are thinking. The Financial Times had this to say:

“Mr. Buffett has said he and Berkshire’s board have decided who will follow him as chief executive, but they have chosen not to make it public. The company intends to split the chairman and chief executive role that Mr. Buffett plays, with his son serving as non-executive chairman.”

Warren Buffett is 82 years old.

The Financial Times also makes mention that “Mr. Buffett has a history of clashing with S&P. He criticized the agency in August 2011, when the credit rating agency downgraded the US’s sovereign debt rating, saying it ‘doesn’t make sense.’ A few days afterwards, S&P reduced its outlook on Berkshire Hathaway from ‘stable’ to ‘negative.’”

If you’re wondering what all of this will mean for Berkshire Hathaway, the MoneyBeat blog of The Wall Street Journal tells us the downgrade “will have little effect” on the borrowing cost of the company. They also report that the downgrade news has not prompted any of the firms dealing with Berkshire Hathaway to demand a need for more collateral, reports MoneyBeat.

On Wednesday, Berkshire Hathaway revealed that it has taken up new investments in Starz and Chicago Bridge & Iron Co. They also decided to sell off some of their shares of Mondelez International Inc., a snack food maker.

There were a number of other adjustments made to the $85 billion US stock portfolio of Berkshire Hathaway during the first quarter of 2013. These changes were recently disclosed in documents that were filed with the Securities and Exchange Commission, or the SEC for short.

At the end of the first quarter, the company owned 6.5 million shares of construction and engineering firm Chicago Bridge & Iron, which has a main focus on energy products, and they also owned shares in the Starz movie network totaling 5.6 million

Chicago Bridge & Iron recently completed their purchase of The Shaw Group back in February of this year. They are the primary contractor at Plant Vogtle’s nuclear expansion. This deal is valued at $3.1 billion. The Shaw Group continues to remain the primary contractor of the Mixed Oxide Fuel Fabrication Facility at Savannah River Site.

It’s quite common for investors to closely watch the things that Berkshire Hathaway does when trading so they can copy what Warren Buffett does. But, many of the most recent investments are smaller than $500 million. So these investments are most likely coming from Ted Weschler and Todd Combs, Berkshire Hathaway’s investment managers.

We are unable to learn which investments were made by whom through the quarterly stock filing. We do know that Ted Weschler and Todd Combs each have $5 billion portfolios that they manage for Berkshire Hathaway. Although Warren Buffett continues to make the majority of the investment decisions for the conglomerate based out of Omaha, Nebraska.

The officials at Berkshire Hathaway do not often comment when making their required disclosures, and when left a message on Wednesday afternoon, no one responded immediately.

At the end of 2012, Berkshire owned 12.8 million shares of Mondelez International. It has now cut its stake to 7 million shares. The company also trimmed their shares of Kraft Foods to 1.6 million. It was previously 1.67 million shares.

Berkshire also added on to some of the other investments in their energy portfolio. They bought more shares of National Oilwell Varco Inc. which brings it to 7.5 million shares. They didn’t add to their shares of ConocoPhillips or Phillips 66.

It’s no surprise that Buffett also added onto his favorite bank stock, Wells Fargo & Co. The company now owns 458.2 million shares. This is up from 439.9 million shares.

Berkshire also added onto its investment in Walmart, and brought it up to 49.2 million shares at the end of March. They previously held 47.5 million.

Buffett also increased his company’s investment in Internet registry service VeriSign Inc. They previously held 3.7 million shares, and now own 8.2 million.

The company completely eliminated two of their smaller investments in General Dynamics Corp. and Archer Daniels Midland Co. Both were part of the Berkshire Hathaway portfolio at the end of 2012. Plus, Berkshire reduced its stake in Bank of New York Mellon from 19.6 million shares to 18.9 million shares.

Terry Branstad, Iowa Gov., stepped out on a ledge last year by bucking his party in order to lobby with Democrats. Why? To extend a key federal tax credit for wind power. After a major battle in Congress, the credit was eventually extended and Branstad’s gamble looks to have paid off big time. Warren Buffett announced that MidAmerican Energy, a Berkshire Hathaway subsidiary, is going to put $1.9 billion into new wind farms in Iowa.

Who loses out on this deal?

Other Fuels Are More Expensive Than Iowa Wind Power

When Buffett and company announced their latest investment, it provided full credit to extending the production tax credit and expanding wind generating capacity in Iowa.

In total, this new investment is going to put another 656 turbines into MidAmerican Energy’s wind portfolio. Since 2004, the company has already brought 1276 turbines into Iowa. Buffett is also bringing wind power into many other states as well.

Once they have the new turbines fully operational, MidAmerican believes that they will produce 39% of its retail generations strictly from wind power.

To make a comparison, by the year 2011, the energy mix of the company was predominantly coal at 47%, and wind was only about 26%. 20% more of their production was from natural gas and oil, with hydro, nuclear and “other” making up the last 7%.

MidAmerican believes that the rates are going to go down by $10 million each year when all the new turbines are in place by the year 2017. They believe an initial savings of $3.3 million is going to kick in much earlier. It makes sense that Iowa ratepayers are not going to be upset over the latest investment in Iowa wind power.

Green Jobs for Iowans

Over the next 30 years, MidAmerican Energy believes that the new wind projects will create 48 more permanent jobs, 460 part-time construction jobs and another $360 million worth of new property tax revenue.

To try and figure out what this new construction may mean for local economic development, let’s take a look at the Atchison County, Missouri wind farm. Ibderola Renewables, creators of this project, leased the property of 44 different landowners and gave them added revenue. The payments were around $365,000 each year. This project tax revenue ripple effect created about $1 million in taxes annually.

Atchison County believes that local fiscal stability is due to the wind tax base, as noted by the county official in 2010:

“Every county in the state of Missouri almost has experienced a decline in their sales tax revenue and Atchison County has not. We attribute that directly to the construction of the wind farms.”

Now moving back into Iowa, residents are not only going pick up a few dozen jobs, but wind production will provide a much broader ripple effect since the wide distribution of land leasing will also come in to play. This will provide the local governments with a much more sound fiscal footing, giving them the ability to tend to bridges, roads, schools and other civic duties.

The Wind Gamble Pays off for Branstad

Gov. Branstad ends up looking like a genius too, when all is said and done. Branstad did more than just sign his name to a letter when he lobbied for the extension of the production tax credit for wind power. Right after the November election, when the issue really began to heat up, he came out strong at a joint press conference along with Sam Brownback, fellow Republican governor of Kansas, as well as two other Democratic governors, John Hickenlooper of Colorado and John Kitzhaber of Oregon.

Here’s what Branstad had to say:

“My state has directly seen the negative impact related to the PTC not being extended earlier. For example, Siemens recently laid off 400 employees at its plant in Fort Madison, Iowa, and ClipperWind Power laid off 100 workers at its plant in Cedar Rapids, Iowa”

Now if we go forward to last week, after MidAmerican Energy announced the new wind farm investments, Branstad who is quite often referred to as “a champion for wind energy in Iowa,” had to say this about the state’s new prospects:

“MidAmerican Energy’s proposed project will be the largest economic development investment in the history of the state, bringing needed jobs to Iowa, as well as significant economic benefits.”

This is going to look really great on campaign literature during the next election cycle, especially since the governor only has a less than perfect 45% approval rating according to the poll in February 2013.

As a matter of fact, it appears that the only potential loser is the candidate that will be offered up by the Democrats to run against him as governor of Iowa next year. Even though the Iowa voters have mixed reviews; the poll also showed that Branstad has a wide margin lead over all of his potential opponents.

Larry Page, CEO of Google Inc. certainly idolized Apple cofounder and former CEO, Steve Jobs, but he is not going to emulate the way Jobs acted secretly about his health issues.

On Tuesday, in a very lengthy post on Google +, one day before Google’s big developer conference, Google I/O, told the world he has a paralyzed vocal cord and the other one is also suffering from nerve damage, which is why he has been having trouble with his voice over the last year.

Throughout the last year, Page has missed one of Google’s earnings conference calls, Google I/O and a shareholder meeting. This problem doesn’t allow Larry Page to speak for long periods of time. Many might believe that this situation could seriously hamper a CEOs career, but it’s not holding back Page from doing his job at all.

Page wrote that Sergey Brin, Google cofounder “says I’m probably a better CEO because I choose my words more carefully.” He also mentioned that the vocal cord nerve issues can negatively affect one’s breathing, “so my ability to exercise at peak aerobic capacity is somewhat reduced,” wrote Page. “That said, my friends still think I have way more stamina than them when we go kitesurfing!”

Being so open about this situation is very different from the way that Steve Jobs handled his situation when he had surgery for a rare form of pancreatic cancer. Jobs chose not to disclose the information to the shareholders at Apple until afterwards. A few years later he even misled investors with his explanation as being vague in regards to his weight loss. This raised a lot of eyebrows on Wall Street.

Warren Buffett, CEO and chairman of Berkshire Hathaway, was much more open in his approach last year, when he mentioned to his investors that he was diagnosed with stage I prostate cancer. He told investors that his prognosis was good, but he also let everyone know that he would inform them if his health changed in the negative. Buffett was critical of the way Steve Jobs handled his health disclosures, when he told CNBC in 2009 that “it’s a material fact.”

In the end, it falls on the shoulders of Sergey Brin, Chairman Eric Schmidt and Larry Page himself to figure out whether or not his limited voice is dampening his ability to work as Google CEO. With the structure of Google’s dual class stock, the three individuals just mentioned ultimately have control of voting rights that dictate Google’s destiny.

But investors were glad that the voice issues were explained. Many feel that it is better late than never.

Looking for an excuse to eat more cupcakes? Krissa Hillman, 11-year-old Maryland native, has a good one.

Hailing from Bollman Bridge elementary school in Jessup, the fifth-grader is the creative genius behind Cupcakes for Literacy. It’s a business that was created to sell baked goods in order to benefit reading programs, libraries and local schools.

“Literacy is a big part of life. You have to read everything,” Hillman said. “So what better way to help people understand than though something everyone likes?”

Hillman’s wonderful idea provided her a spot as a finalist in Warren Buffett’s Secret Millionaires Club “Grow Your Own Business Challenge.” This is a national competition looking to help young entrepreneurs cultivate smart habits financially. It also wants them to come up with unique and fresh new business concepts. About 4000 contestants between the ages of 7 to 16 entered into the competition this year.

Helen is going to fly to Omaha, Nebraska, this weekend with four more individual finalists, as well as three teams. They are going to personally present their business ideas to Warren Buffett himself. The winner of the competition will receive $5000. This is a business dream come true for Hillman.

“Everything about this has been exciting. I get to actually meet Warren Buffett,” she said. “It all sounds like something only someone high up in the business world would get to do.”

Last fall, when Ms. Hillman saw a cupcake recipe book that she wanted to buy at a book sale at school, helped inspire the idea for Cupcakes for Literacy. It was an expensive book, so her mother told her that she’d only buy it if she promised to put the book to good use. Hillman enjoys reading just as much a she really enjoys baking, so she came up with ways that she could combine both of these loves. Everything started to fall into place from there

“Six years ago I made a website called Storytime with Krissa to upload videos of her reading aloud,” said Hillman’s mother Sabrina Wilson. “When she got the cupcake book, we decided to put a new spin on it.”

Hillman wants her website storytimewithkrissa.com to run in conjunction with Cupcakes for Literacy. The website will be a place where people can listen to stories and also pursue other opportunities for literacy. Her friends are even involved in the project, and they have formed a Board of Directors consisting of students.

The business venture has been very successful so far. She had a bake sale during a parent-teacher conference and was able to raise $258 during the six hours that it took. The money was given to the school’s library.

“It was neat to see an idea that sparked from a book turn into something that was able to give back to the school,” said Bollman Bridge’s media specialist Sandy Sneeringer. “The money she raised is going towards purchasing more books that our students like to read.”

Hillman’s great success is all due to her business practices, according to her mother.

“Krissa has learned to go where the people are, sell the best products and treat the customer’s great. That’s exactly what she’s doing with this,” Wilson said.

Hillman is putting together another bake sale that will take place over the summer, but at this time she is focused on her presentation to Warren Buffett.

“I have a script I’m going over,” said Hillman. “Part of the competition is an exhibit where we can explore each other’s business ideas, so I’m also practicing communication and how to shake hands.”

If Hillman does win the grand prize and earns the $5000, she is going to put the money toward purchasing business licenses. That way she’ll be able to operate Cupcakes for Literacy on a much broader scale. It’s her goal to eventually partner with grocery stores and farmers markets so she can bring her cupcakes to a much wider audience.

Even though it’s tough to run a business, Hillman says that it’s simple for someone her age as long a she’s doing something that she loves, just like baking cupcakes.

“You just have to be really into whatever you’re doing,” she said. “Find programs to get involved with and talk to other people with businesses to get help. Just try it out and see what happens!”

Last week, Warren Buffett acted as a mentor to young women from the Levo League, a career advice and networking website.

He was part of a live stream web chat, where he told the women to “stop holding yourself back” and he also shared some of his own personal stories – talking about how he overcame his fear of public speaking – among other lessons that he shared with the young women.

Here’s a list of the main takeaways during the Berkshire Hathaway Chairman and CEO’s interview:

Study People and Develop Their Healthy Habits

“Pick the person that has the right habits, that is cheerful, generous, gives other people credit for what they do. Look at all of the qualities that you admire in other people … and say to yourself, ‘Which of those qualities can’t I have myself?’ Because you determine whether you have them. And the truth is you can have all of them.”

Learn Effective Communication

While Buffett was in Columbia University getting his MBA, he mentions that he was “terrified of public speaking,” so he signed up for a Dale Carnegie class then changed his mind at the last moment. Once he graduated, Buffett noticed the courses and again but this time gave it a second chance.

“I became associated with the 30 other people in the class. We couldn’t stand up in front of a group and say our own name. I mean it was — we were — it was pathetic.  But that class changed my life in a big way.”

Learn All That You Can about Your Entire Industry

Buffett told the women of the Levo League that he reads six hours each day. He says that you’ll be able to solve any future problems that come about if you grow your intellectual perspective in relation to your business.

“I knew a lot about what I did when I was 20. I had read a lot, and I aspired to learn everything I could about the subject. ”

Get Involved with a Growing Business

“I mean, you want to get on a train that’s going to go 90 miles an hour and not one that’s gonna go 30 miles an hour and you’re gonna try to figure out how to, you know, push it along a little faster. So it really does make a huge difference. And there are some businesses that inherently [have] far more opportunities than others.”

Young Women Should Look for Male Mentors

Buffett mentions that women need to find male mentors, mostly because today’s workplace leaders are still men.

“These [mentoring] relationships all just evolve. I never set out to become a mentor … It’s amazing … how the person that really wants to do a terrific job just jumps out. There aren’t that many. You will be perceived as exceptional and as a worthy person for a superior to spend some extra time with if you just do something extra all the time. It seems elementary, but it’s true.”

Don’t Work for People Who Aren’t Going to Pay You Fairly

“I do very little negotiation with people. And they do little with me, in terms of it … if I was a woman and I thought I was getting paid considerably less than somebody else that was equal coming in, that would bother me a lot. I probably wouldn’t even want to work there.  I mean, [if] somebody’s gonna be unfair with you, in salary, they’re probably being unfair with you in a hundred other ways.”

Discover Your Passion

“Never give up searching for the job that you’re passionate about,” he says. “Try to find the job you’d have if you were independently rich. … Forget about the pay. When you’re associating with the people that you love, doing what you love, it doesn’t get any better than that.”

You Must Learn to Say No

“You won’t keep control of your time, unless you can say ‘no.’ You can’t let other people set your agenda in life.”

Be Careful of Those You Look up to

“If you tell me who your heroes are, I’ll tell you how you’re gonna turn out. It’s really important in life to have the right heroes. I’ve been very lucky in that I’ve probably had a dozen or so major heroes. And none of them have ever let me down. You want to hang around with people that are better than you are. You will move in the direction of the crowd that you associate with.”

As the office hour was coming to a close, Buffett mentioned that “the world isn’t over,” even if you don’t succeed at times along the way because “you are healthy, and bright and have decades ahead of you.”

Since Warren Buffett is a billionaire investor, people listen to him when he has something to say. Let’s take a look at what thousands heard him speak about at his annual Berkshire Hathaway meeting last weekend:

Yes, Berkshire Hathaway held its annual meeting last weekend in Omaha, Nebraska. Charlie Munger, Berkshire Hathaway vice chairman, and Warren Buffett, chairman and CEO had plenty of advice to dispense.

Josh Funk, of the AP, shares some of their views on what it takes to lead to investment success.

Munger and Buffett both spoke with shareholders and mention that successful investors need to learn as much as they can about the business of which they plan to buy shares. They also need to stick to industries that they know and understand, and they mention that the right temperament is important.

Buffett: “You just have to avoid getting excited when other people are excited.”

Munger: “We’ve always tried to stay sane when other people like to go crazy. That’s a competitive advantage.”

The Motley Fool also shared two other classically Buffett quotes. They are:

“If they try to time their purchases they will do very well for their broker and not very well for themselves.”

“We’re not looking at the aspects of the stock, we’re looking at the aspects of the business.”

Even though Buffett is now 82 years old, his passion and intensity hasn’t diminished whatsoever. He claims that he is just as passionate about running Berkshire Hathaway today as he was when he was a much younger man. He still enjoys hunting for acquisitions, and he finds it quite enjoyable.

“You have to love something to do well at it. There’s nothing more fun for me than finding something new to add to Berkshire.”

A 30-year-old asked the investing duo about advice they would give themselves if they were 50 years younger. Here’s what they had to say:

Munger: We’re basically so old-fashioned that we’re boringly trite. We think you ought to keep plugging along, and stay rational, and stay energetic. Just all the old virtues still work.

Buffett: But find what turns you on.

Munger: Yeah, you have to work where you’re turned on. I don’t know about Warren, but I’ve never succeeded to any great extent in something I didn’t like doing.

Buffett: Charlie and I both started in the same grocery store and neither one of us are in the grocery business.

During the financial crisis in 2009, Buffett and Berkshire Hathaway backed iconic motorcycle maker Harley-Davidson and bought $300 million worth of debt. The company needed to raise cash, so they offered bonds with a 15%  return. Those bonds mature in 2014. Here’s what Warren Buffett had to say about this transaction:

“We did not think Harley-Davidson was going bankrupt.  Any company that gets customers to tattoo ads on their chests can’t be all that bad.”

The most pressing question from shareholders is who would replace Buffett when he finally retires as chairman and CEO of Berkshire Hathaway.

Buffett was quoted by BRW as saying, “The key is preserving a culture and having a successor, a CEO that will have more brains, more energy, more passion for it than even I have… We’re solidly in agreement as to who that individual should be.”

Buffett did not disclose his eventual successor.

The Wall Street Journal brought up the issue of whether or not Warren Buffett’s son Howard would be the one to take over. Buffett responded by saying, “The probability of a mistake being made is one in a hundred. It’s not his job to run a business… He only has to think about whether the board and himself may need to change the CEO.”