myinvestingnotes.blogspot.my (Bullbear Buffett Stock Investing Notes)

Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.

Showing posts with label Warren Buffett portfolio. Show all posts

Wednesday, 13 May 2015

What Happened To Warren Buffett’s Top 10 Holdings Of 2006?

Summary:

Of Warren Buffett’s Top 10 holdings at the end of 2006, he currently still holds 6 (KO, AXP, WFC, MCO, JNJ, & Wesco Financial). He did not reduce his position in just 4 of the Top 10 (KO, AXP, WFC, and Wesco Financial).

Warren Buffett is a long-term investor, but only in a select few businesses. Otherwise, he tends to buy and sell like everyone else. It is interesting to note that many of his transactions are swaps and do not trigger tax payments. Examples include his Gillette for Procter & Gamble swap, the Procter & Gamble for Duracell swap, and the Graham Holdings Company for a major TV station swap.

A few notable mistakes also stand out. Selling a sizable chunk of Moody’s at the end of 2010 was not a good move. The partial sale of Anheuser-Busch just before a new buyout offer was puzzling as well. I expected Warren Buffett to have more ‘insider knowledge’ – especially in the Anheuser Busch deal – than he has demonstrated over the last decade. Warren Buffett is known to buy excellent stocks. His sell timing does not appear to be nearly as remarkable as his buy timing.

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Full article:

Warren Buffett has a reputation as a buy and hold investor. One of his most well known quotes is:“My Favorite Holding Period is Forever”

In practice, Warren Buffett does not always hold forever. This article shows what happened to the top 10 stock positions in Berkshire Hathaway’s (BRK-A, BRK-B) portfolio at the end of 2006. Warren Buffett has held fewer stocks than you may think for the long run. Berkshire Hathaway’s top 10 stocks in the 4th quarter of 2006 were:

Coca-Cola (KO)
American Express (AXP)
Wells Fargo (WFC)
Procter & Gamble (PG)
Moody’s (MCO)
Wesco Financial
Anheuser-Busch (BUD)
Johnson & Johnson (JNJ)
ConocoPhillips (COP)
Graham Holdings Company (GHC)

10. Graham Holding Company

Graham Holdings Company is better known by its previous name, The Washington Post. The company changed its name in 2013 when Jeff Bezos purchased The Washington Post paper for $250 million. The Graham Holdings Company owns Slate, education publisher Kaplan, several large market television stations, and internet service provider Cable One.

Warren Buffett has a long history with the Washington Post. He started purchasing shares in 1973. Warren Buffett held the stock over 40 years before finally exiting in 2014, after the paper was purchased by Jeff Bezos of Amazon (AMZN). Warren Buffett did not outright sell his shares, but instead exchanged them for WPLG, Miami’s ABC affiliated television station. In addition, Berkshire Hathaway received shares of itself that were owned by Graham Holdings Company, as well as cash.

9. ConocoPhillips

Warren Buffett recently sold Berkshire Hathaway’s ConocoPhillips stock completely. By the end of 2006, ConocoPhillips was Berkshire Hathaway’s 9th largest holding. Buffett continued to add shares as oil prices soared in 2007 and 2008. Warren Buffett purchased ConocoPhillips during the idea of ‘peak oil’.

Now, Warren Buffett has completely exited his position in ConocoPhillips (as well as his position in ExxonMobil, XOM) just as oil prices have fallen precipitously. Warren Buffett is obviously a fantastic investor; perhaps the greatest of all time. He is still fallible, however. Buying oil stocks during high oil prices, and selling during low oil price is not sound investing. I believe Warren Buffett’s poor timing in his ConocoPhillips and ExxonMobil trades could go down as one of the worst in his investment career. Only time will tell. In total, Warren Buffett held ConocoPhillips under 10 years.

8. Johnson & Johnson

Johnson & Johnson first appeared as one of Berkshire Hathaway’s top holdings in 2006. Warren Buffett has slowly sold off stock in Johnson & Johnson. He sold off shares during the Great Recession in 2008 and 2009 to fund other purchases. He purchased shares in 2010, then has continued selling in 2012, 2013, and 2014. It is interesting to see Warren Buffett add to and reduce his stake in Johnson & Johnson.

Johnson & Johnson stock was relatively flat from 2006 until 2012. From 2012 to now, the stock price has grown from $65 per share to $100 per share. Warren Buffett appears to be reducing his stake in the company as the share price rises.

7. Anheuser-Busch

Warren Buffett was squeezed out of his Anheuser-Busch position in 2008 as the company was acquired by InBev. Interestingly, Warren Buffett sold prematurely. He exited about half of his position on rumors of a takeover. The rumored acquisition price was $65 per share. Warren Buffett sold over half of his holdings between $61 and $62 a share. Shortly after, InBev acquired Anheuser-Bush for $70 a share.

6. Wesco Financial

In 2011, Berkshire Hathaway acquired 100% of Wesco Financial. The company had owned about 80% of Wesco for over 30 years before completing the final purchase of the company. Wesco Financial is an example of a ‘forever’ Warren Buffett stock.

5. Moody’s

Berkshire Hathaway first acquired Moody’s in 2001. Berkshire Hathaway built up a 20% stake in the company. Moody’s operates in the oligopolistic ratings market, along with Standard & Poor’s rating service and Fitch rating services.

Warren Buffett reduced his holdings from 20% of the company down to 12% in 2010. The timing could not have been worse. From the end of 2010 to now, Moody’s stock has more than tripled. In addition, the company has paid dividends through that time as well. Warren Buffett continued to trim his Moody’s position in 2013.

4. Procter & Gamble

Warren Buffett did not directly buy shares in Procter & Gamble. He purchased shares of Gillette in 1989. In 2005, Gillette was acquired by Procter & Gamble. In the process, Warren Buffett acquired about 100 million shares of Procter & Gamble. He reduced his holdings by about 50% in 2009 in Procter & Gamble to free up cash for other investments.

At the end of 2014, Warren Buffett decided to exchange his shares of Procter & Gamble for the company’s Duracell division. In the move, Procter & Gamble ‘recapitalized’ Duracell with over $1 billion in cash.

The Top 3:
Wells Fargo, American Express, & Coca-Cola

Warren Buffett first purchased American Express in 1964. He has now held the stock for over 50 years. If that is not a long-term investment, I don’t know what is.

Warren Buffett first invested in Coca-Cola in 1988. He has continued to hold and invest in the soda company over the last 26 years.

Wells Fargo shares were first purchased by Warren Buffett in 1989. Since then, he has continued to load up on the bank as it has expanded across the U.S.

These 3 investments currently make up Berkshire Hathaway’s core holdings. Together, American Express, Wells Fargo, and Coca-Cola account for over 50% of his portfolio. His other large holding is IBM (11%+ of total portfolio), which was purchased more recently, during the Great Recession.

Final Thoughts

By Ben Reynolds of Sure Dividend

Saturday, February 21, 2015

http://www.talkmarkets.com/content/stocks--equities/what-happened-to-warren-buffetts-top-10-holdings-of-2006?post=59343

Saturday, 27 March 2010

Warren Buffett's hidden portfolio

We make no bones about our admiration for Warren Buffett. Truth be told, it springs from a purely selfish motive. The fact that there is a lot one can learn about investing from him. But people sometimes ask us how relevant he is for individual investors. After all, as the head of a gigantic company, isn't he in a different league? He gets deals nobody else can. Our answer is yes and no.

True, the financial might of Berkshire Hathaway does help Buffett bag unusually attractive deals. As we saw during the height of the financial meltdown. But a large portion of his investment style is extremely relevant for small investor even here in India. Take Buffett's investing method in his personal portfolio. That's right, he maintains a personal portfolio. At US$ 1.8 bn, that's a huge fund by most standards (but not by Buffett's). Hence, he has to periodically disclose it to the US regulators.

So, what does Buffett's personal portfolio look like?

It is a concentrated portfolio of about 10 stocks.
Just 5 stocks make 75% of the portfolio value.
Most of them in 'old economy' sectors like banking, FMCG, retail, oil & gas and logistics.
Almost all of these companies are really old - founded at least a century back.
Most of them have diversified very little from their core area.
They are all recognized brand names and have a sustainable competitive advantage.
The portfolio generates a dividend yield of 2.3%.

This does fly against the notion of hot-shot investing, doesn't it? But really, Buffett's portfolio is not beyond the reach of individual investors willing to do their homework and exercise discipline.

http://www.equitymaster.com/5MinWrapUp/detail.asp?date=3/26/2010&story=1

Lessons from Warren Buffett

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My 18 points guide to Successfully compounding your money in Stocks

Be a good stock picker.
Think as a business owner.
Always look at value rather than the price. Do the homework.
Buy and hold is alright for selected stocks.
Compounding is your friend, get this to work its magic.
Mr. Market is there to be taken advantage of. Do not be the sucker instead. BFS;STS.
Always buy a lot when the price is low.
Never buy when the stock is overpriced.
It is alright to buy when the selected stock is at a fair price.
Phasing in or dollar cost averaging is safe for such stocks during a downtrend, unless the price is still obviously too high.
Do not time the market for such or any stocks.
By keeping to the above strategy, the returns will be delivered through the growth of the company's business.
So, when do you sell the stock? Almost never, as long as the fundamentals remain sound and the future prospects intact.
The downside risk is protected through only buying when the price is low or fairly priced.
Tactical dynamic asset allocation or rebalancing based on valuation can be employed but this sounds easier than is practical, except in extreme market situations.
Sell urgently when the company business fundamental has deteriorated irreversibly.
You may also wish to sell should the growth of the company has obviously slowed and you can reinvest into another company with greater growth potential of similar quality. However, unlike point 16, you can do so leisurely.
In conclusion, a critical key to successful investing is in your stock picking ability.

http://myinvestingnotes.blogspot.com/2012/07/my-18-points-guide-to-successfully.html

11 Lessons From Peter Lynch

Peter Lynch taught me:

1. Behind every stock is a company. Find out what it’s doing.
2. Never invest in any idea you can’t illustrate with a crayon.
3. Over the short term, there may be no correlation between the success of a company’s operations and the success of its stock. Over the long term, there’s a 100% correlation.
4. Buying stocks without studying the companies is the same as playing poker – and never looking at your cards.
5. Time is on your side when you own shares of superior companies.
6. Owning stock is like having children. Don’t get involved with more than you can handle.
7. When the insiders are buying, it’s a good sign.
8. Unless you’re a short seller, it never pays to be pessimistic.
9. A stock market decline is as predictable as a January blizzard in Colorado. If you’re prepared, it can’t hurt you.
10. Everyone has the brainpower to make money in stocks. Not everyone has the stomach.
11. Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.

Lynch’s advice had a profound effect on my stock market approach. He taught me that investment success isn’t the result of developing the right macro-economic view or deciding when to jump in or out of the market. Success is about researching companies to identify those that are likely to report positive surprises.

Capital Expenditure

A great company with a Durable Competitive Advantage will have a ratio of Capital Expenditures to Net Income of less than 25%. Less is better.

Capital Expenditures are expenses on:
- fixed assets such as equipment, property, or industrial buildings
- fixing problems with an asset
- preparing an asset to be used in business
- restoring property
- starting new businesses

A good company will have a ratio of Capital Expenditures to Net Income of less than 50%.

A great company with a Durable Competitive Advantage will have a ratio of less than 25%.

Less is better.

Benjamin Graham's 113 Wise Words

The true investor scarcely ever is forced to sell his shares, and at all times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgement."

Philip Fisher's Wise Words

"The refusal to sell at a loss, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process.

More money has probably been lost by investors holding a stock they really did not want until they could 'at least come out even' than from any other single reason. If to these actual losses are added the profits that might have been made through the proper reinvestment of these funds if such reinvestment had been made when the mistake was first realized, the cost of self-indulgence becomes truly tremendous."

(Common Stocks and Uncommon Profits)

The Ultimate Hold-versus-Sell Test

Here is the overriding primary test, followed by observations on why it is so critically important:

Knowing all that you now know and expect about the company and its stock (not what you originally believed or hoped at time of purchase), and assuming that you had available capital, and assuming that it would not cause a portfolio imbalance to do so, would you buy this stock today, at today's price?

No equivocation. Yes or no?

Answers such as maybe or probably are not acceptable since they are ways of dodging the issue. No investor probably buys a stock; they either place an order or do not.

Here is the implication of your answer to that critical test: if you did not answer with a clear affirmative, you should sell; only if you said a strong yes, are you justified to hold.

Some thoughts on Analysing Stocks (KISS)

Ideally a stock you plan to purchase should have all of the following charateristics:

• A rising trend of earnings dividends and book value per share.
• A balance sheet with less debt than other companies in its particular industry.
• A P/E ratio no higher than average.
• A dividend yield that suits your particular needs.
• A below-average dividend pay-out ratio.
• A history of earnings and dividends not pockmarked by erratic ups and downs.
• Companies whose ROE is 15 or better.
• A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.

Margin of Safety Concept: Stocks should be bought like groceries, not like perfume

The high CAGR in the early years of the investing period, due to buying at a discount, tended to decline and approach that of the intrinsic EPS GR of the companies over a longer investment time-frame.

Chapter 20 - “Margin of Safety” as the Central Concept of Investment

A single quote by Graham on page 516 struck me:

Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.

Basically, Graham is saying that most stock investors lose money because they invest in companies that seem good at a particular point in time, but are lacking the fundamentals of a long-lasting stable company.

This seems obvious on the surface, but it’s actually a great argument for thinking more carefully about your individual stock investments. If most of your losses come from buying companies that seem healthy but really aren’t, isn’t that a profound argument for carefully studying any company you might invest in?

myinvestingnotes.blogspot.my (Bullbear Buffett Stock Investing Notes)

Wednesday, 13 May 2015