Berkshire Hathaway Book Value Up 20% in 2009; Portfolio Shuffle

Berkshire Hathaway Book Value Up 20% in 2009; Portfolio Shuffle

February 27, 2010 - 9:37 am

Robert Lenzner writes the StreeetTalk column for Forbes.com and anchors the StreetTalk video show. 

Berkshire Hathaway's book value rose 20% last year, but still underperformed the S&P 500 stock index, according to Warren Buffett's 2009 letter to shareholders. This is only the seventh time in historyBuffett (above) has underperformed the broad market averages.


Berkshire's book value per share rose from $70,530 to $84,487 in a recovering stock market and as a result of the $23.6 billion acquisition of Burlington Northern railroad. Berkshire's investment portfolio, which was valued at $49 billion at the close of 2008, is worth $59 billion as of Dec. 31, 2009.

• Buffett increased his position in Wal-Mart from 19.9 million shares to 39 million shares and added to his ownership of Wells Fargo, a bank battered by the financial crisis, as well as U.S. Bancorp, drug giant Sanofi-Aventis and Tesco, a British retail chain. 
• However, he massively reduced Berkshire's position in Conoco-Phillips from 5.7% of the company to 2.5%. 
• Other adjustments included the addition of 9.9% of BYD Co., the Chinese electric car manufacturer, and the reduction in holdings of Johnson & Johnson, and Procter & Gamble, both multinational consumer-product companies. (Full list of Berkshire Hathaway's $1B+ investment shareholdings.)

Berkshire is unlikely to make another big acquisition soon as its cash position is only $30 billion. Buffett emphasized that the BNSF railroad deal, like electric utilities, "will require heavy investment that exceeds depreciation allowances for decades to come."

As is his custom, Buffett was transparent about the problems facing some Berkshire operations. In the housing industry, for example, Buffett disclosed that output of modular homes has fallen in a decade from 382,000 units to 60,000 units. "The industry is in shambles," he wrote. Jokingly he suggests solutions for the overhang of unsold homes to be "blow up a lot of houses ... speed up household formations by encouraging teenagers to cohabitate ... or reduce new housing starts to a number far below the rate of household formations."

Tags: berkshire hathaway, buffett, BYD, Conoco-Phillips, Wal-Mart

Read Buffett's full letter to shareholders here.
http://www.berkshirehathaway.com/letters/2009ltr.pdf

Warren Buffett Shareholder Letter: His Words on the Markets

Warren Buffett Shareholder Letter: His Words on the Markets


By Matt Phillips

Associated Press

Warren Buffett rarely if ever gives market predictions. But here are some of his musings on market conditions over the last couple of years and his take on the economy.

We’ve put a lot of money to work during the chaos of the last two years. It’s been an ideal period for investors: A climate of fear is their best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. In the end, what counts in investing is what you pay for a business – through the purchase of a small piece of it in the stock market – and what that business earns in the succeeding decade or two.

On opportunities:

We told you last year that very unusual conditions then existed in the corporate and municipal bondmarkets and that these securities were ridiculously cheap relative to U.S. Treasuries. We backed this view with some purchases, but I should have done far more. Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.

On his strategic investments:

We own positions in non-traded securities of Dow Chemical, General Electric, Goldman Sachs, Swiss Re and Wrigley with an aggregate cost of $21.1 billion and a carrying value of $26.0 billion. We purchased these five positions in the last 18 months. Setting aside the significant equity potential they provide us, these holdings deliver us an aggregate of $2.1 billion annually in dividends and interest.

On housing:

Within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious. Prices will remain far below “bubble” levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means because the bubble burst.

On shareholder pain:

It has not been shareholders who have botched the operations of some of our country’s largest financial institutions. Yet they have borne the burden, with 90% or more of the value of their holdings wiped out in most cases of failure. Collectively, they have lost more than $500 billion in just the four largest financial fiascos of the last two years. To say these owners have been “bailed-out” is to make a mockery of the term.

And the relative lack of it among CEOs and directors:

The CEOs and directors of the failed companies, however, have largely gone unscathed. Their fortunes may have been diminished by the disasters they oversaw, but they still live in grand style. It is the behavior of these CEOs and directors that needs to be changed: If their institutions and the country are harmed by their recklessness, they should pay a heavy price – one not reimbursable by the companies they’ve damaged nor by insurance. CEOs and, in many cases, directors have long benefitted from oversized financial carrots; some meaningful sticks now need to be part of their employment picture as well.

http://blogs.wsj.com/marketbeat/2010/02/27/buffett-on-the-markets-in-his-own-words/

Buffett: The Buck Stops Here

On Risk Management

A CEO must not delegate risk control.  It's simply too important.  At Berkshire, I both initiate and monitor every derivatives contract on our books, with the exception of operations-related contracts at a few of our subsidiaries.   ...If Berkshire ever gets in trouble, it will be my fault.  It will not be because of misjudgements made by a Risk Committee or Chief Risk Officer.

Buffett's Lesson to Merger: Don't give up more than you are getting

A Lesson From Warren Buffett
February 27, 2010


Paul Maidment is Editor, Forbes Media

A Warren Buffett letter to shareholders wouldn't be a Warren Buffett letter to shareholders without at least one self-depreciating but cautionary tale. This year's, which Berkshire Hathaway's chairman says is true but from long ago:


We owned stock in a large well-run bank that for decades had been statutorily prevented from acquisitions. Eventually, the law was changed and our bank immediately began looking for possible purchases. Its managers – fine people and able bankers – not unexpectedly began to behave like teenage boys who had just discovered girls.


They soon focused on a much smaller bank, also well-run and having similar financial characteristics in such areas as return on equity, interest margin, loan quality, etc. Our bank sold at a modest price (that’s why we had bought into it), hovering near book value and possessing a very low price/earnings ratio. Alongside, though, the small-bank owner was being wooed by other large banks in the state and was holding out for a price close to three times book value. Moreover, he wanted stock, not cash.

Naturally, our fellows caved in and agreed to this value-destroying deal. “We need to show that we are in the hunt. Besides, it’s only a small deal,” they said, as if only major harm to shareholders would have been a legitimate reason for holding back. Charlie’s reaction at the time: “Are we supposed to applaud because the dog that fouls our lawn is a Chihuahua rather than a Saint Bernard?”

The seller of the smaller bank – no fool – then delivered one final demand in his negotiations. “After the merger,” he in effect said, perhaps using words that were phrased more diplomatically than these, “I’m going to be a large shareholder of your bank, and it will represent a huge portion of my net worth. You have to promise me, therefore, that you’ll never again do a deal this dumb.”

Yes, the merger went through. The owner of the small bank became richer, we became poorer, and the managers of the big bank – newly bigger – lived happily ever after.

Lesson to merger mavens: Don't give up more than you are getting.


More wit and wisdom from Warren Buffett.
http://blogs.forbes.com/streettalk/2010/02/27/a-lesson-from-warren-buffett/

The Oracle's Tips for the Rest of Us

The Oracle's Tips for the Rest of Us

By BRETT ARENDS

Every few years, critics say Warren Buffett has lost his touch. He's too old and too old-fashioned, they claim. He doesn't get it anymore. This time he's wrong.

It happened during the dotcom bubble, when Mr. Buffett was mocked for refusing to join the party. And it happened again last year. As the Dow tumbled below 7,000, Mr. Buffett came under fire for having jumped into the crisis too early and too boldly, making big bets on Goldman Sachs and General Electric during the fall of 2008, and urging the public to plunge into shares.

Now it's time for those critics to sit down for their traditional three course meal: humble pie, their own words and crow.
STANDOUT INVESTMENTS

On Saturday, Mr. Buffett's Berkshire Hathaway reported that net earnings rocketed 61% last year to $5,193 per share, while book value jumped 20% to a record high. Berkshire's Class A shares, which slumped to nearly $70,000 last year, have rebounded to $120,000.

Those bets on GE and Goldman? They've made billions so far. And anyone who took Mr. Buffett's advice and invested in the stock market in October 2008, even through a simple index fund, is up about 25%.

This is nothing new, of course. Anyone who held a $10,000 stake in Berkshire Hathaway at the start of 1965 has about $80 million today.

How does he do it? Mr. Buffett explained his beliefs to new investors in his letter to stockholders Saturday:

Stay liquid. "We will never become dependent on the kindness of strangers," he wrote. "We will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity. Moreover, that liquidity will be constantly refreshed by a gusher of earnings from our many and diverse businesses."

Buy when everyone else is selling. "We've put a lot of money to work during the chaos of the last two years. It's been an ideal period for investors: A climate of fear is their best friend ... Big opportunities come infrequently. When it's raining gold, reach for a bucket, not a thimble."

Don't buy when everyone else is buying. "Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance," Mr. Buffett wrote. The obvious corollary is to be patient. You can only buy when everyone else is selling if you have held your fire when everyone was buying.

Value, value, value. "In the end, what counts in investing is what you pay for a business-through the purchase of a small piece of it in the stock market-and what that business earns in the succeeding decade or two."

Don't get suckered by big growth stories. Mr. Buffett reminded investors that he and Berkshire Vice Chairman Charlie Munger "avoid businesses whose futures we can't evaluate, no matter how exciting their products may be."

Most investors who bet on the auto industry in 1910, planes in 1930 or TV makers in 1950 ended up losing their shirts, even though the products really did change the world. "Dramatic growth" doesn't always lead to high profit margins and returns on capital. China, anyone?

Understand what you own. "Investors who buy and sell based upon media or analyst commentary are not for us," Mr. Buffett wrote.

"We want partners who join us at Berkshire because they wish to make a long-term investment in a business they themselves understand and because it's one that follows policies with which they concur."

Defense beats offense. "Though we have lagged the S&P in some years that were positive for the market, we have consistently done better than the S&P in the eleven years during which it delivered negative results. In other words, our defense has been better than our offense, and that's likely to continue." All timely advice from Mr. Buffett for turbulent times.


—Brett Arends writes R.O.I., or Return On Investment, on WSJ.com.

Write to Brett Arends at brett.arends@wsj.com

http://online.wsj.com/article/SB10001424052748704089904575093603081648166.html?mod=WSJ-earnings-LEFTTopHeadlines

Growing at 15% a year - what does this entail?

To achieve a 100% gain in your investment over 5 years, the initial capital has to grow at a compound rate of 15% per year. This means that an initial $100 investment will be worth:

$1.15 at end of year 1,
$1.33 at end of year 2,
$1.52 at end of year 3,
$1.75 at end of year 4, and
$2.01 at end of year 5.

Though the fund managers usually benchmark their fund performances to a certain index, most individual investors should look at the absolute return.

The return on your investment is unlikely to rise in a straight-line upwards. Volatility in the return is to be expected. The return spurts over certain times, declines over certain times, and remains unmoved over certain times.  However, the return over a long time is less volatile and generally relates to the earnings of the business of the invested stock.

What does 15% per year looks like in real-time? Excluding the dividend yield from the calculation, it is actually an average of 1.25% per month appreciation in the share price. The 15% may be returned in a consistent manner or there maybe periods of spurts delivering part or all the returns over many short periods. Do not get disheartened if a stock moves only 1% or 2% per month, it is the consistency in its return that adds to a big return. On the other hand, do not be overly excited by the big returns over a short period. For the long-term investors, it is more important that over a long time, the price of the stock reflects the improving earnings fundamentals of your selected stocks.

To double your initial investment in a stock in 5 years means also selecting a stock that will double its earnings in 5 years. For those who are directly in business, to grow a business consistently over many years is indeed very challenging. The matured large companies are less likely to deliver such growths. Therefore, for those investors seeking such growth rates in the earnings of their stocks, they will need to look at mid-cap stocks or smaller companies where growths can be faster in the early stages of their business life.

It is not difficult to make 7 or 8% returns yearly in your investment in stocks.  However, to grow at 15% or more, this can be very challenging indeed, but not impossible even for the non-professional investors.

Singapore: Property developers, Wilmar, UOB, Cerebos, Raffles Medical, Midas

March 1: Property developers, Wilmar, UOB, Cerebos, Raffles Medical, Midas


Written by The Edge
Monday, 01 March 2010 08:46


Wilmar International (WLIL.SI), the world’s largest palm oil planter, is likely to be in the spotlight on Monday after reporting a better-than-expected 18% rise in its fourth-quarter results.

Benchmark Straits Times Index (.FTSTI) inched 0.06% higher to end at 2,750.86 points last Friday.

US stocks rose last Friday, capping their best monthly advance since November as data showed the economy grew a tad better than expected in the fourth quarter.

Property developers: The government said it will raise the cost of residential land development starting March 1. Non-landed residential charges will rise 8% on average, while charges for landed homes will increase 12% on average, it said in an e-mailed statement today. Charges for commercial land development will decline an average of 2%.

Wilmar International (WLIL.SI), the world’s largest palm oil planter reported on Sunday a better-than-expected 18% rise in fourth-quarter net profit as a global economic recovery drove commodities prices higher. It also said it would continue to seek attractive investment opportunities to support future growth.

United Overseas Bank (UOBH.SI) , Singapore’s third-biggest bank, expects high single-digit loan growth in 2010 and is trying to maintain loan margins for corporate customers, CEO Wee Ee Cheong told a news conference.

Singapore-listed health supplement manufacturer Cerebos Pacific (CERE.SI) said last week it is aiming for a 10–20% revenue growth over the next three years as it steps up its presence in China, Indonesia and Vietnam.

Raffles Medical Group, the private healthcare provider in Singapore and the region, says profit after tax for the group increased 20.1% from $31.7 million in 2008 to $38 million in 2009.

Midas Holdings, the manufacturer of aluminium alloy extrusion products for China’s railway sector, announced a 14.9% rise in net profit to $37.5 million for the financial year ended December 31, 2009 (FY2009).

Abterra, the supply chain manager of resources and minerals, managed to swing back into the black with a net profit of $13.3 million for the financial year ended 31 December 2009 (FY2009) largely due to a gain from the revaluation of a mining asset.

Yongnam Holdings, the structural steel contractor and specialist civil engineering solutions provider, announced a record profit before tax of $48.8 million for its full year ended December 31, 2009 (FY2009) on the back of a 2.7% increase in revenue to $346.8 million.

China Sports International, the sports fashion footwear and apparel company based in China, reported net profit decreased by 33.7% to RMB122.6 million ($25.3 million) for the full year ended 31 December 2009 (FY09) from RMB184.9 million in FY08 as the result of lower average selling prices for footwear products.

Delong Holdings, the manufacturer of hot-rolled steel coils (HRC) in China, says it posted a net profit after tax of RMB 248.4 million and RMB 416.9 million ($86 million) for the fourth quarter (4Q2009) and full year (FY2009) respectively, reversing net losses of RMB 637 million and RMB 370.4 million recorded in 4Q2008 and FY2008 respectively.

Synear Food Holdings, the China-based producer of quick freeze food, today posted a more than two-fold surge in net profit to RMB40.7 million ($8.4 million) for the three months ended December 31, 2009 (4Q09), due mainly to lower selling and distribution expenses and lower income tax expense. Revenue for the quarter rose 1.1% to RMB507.1 million.

Food Empire Holdings, the manufacturer of instant beverage products, frozen convenience food, confectionery and snack food, says profit before tax fell 86.2% to US$3.2 million ($4.5 million) while revenue fell 39.3% to US$134 million and for the year ended 31 December 2009.

Apex-Pal International, which operates the global chain of Sakae Sushi restaurants, today reported a net profit before tax of $3.3 million for the fiscal full year ending on 31 December 2009.

Techcomp (Holdings), the China manufacturer and distributor for analytical and life science instruments, posted a 139.4% year-on-year rise in net profit attributable to shareholders to US$7.4 million ($10.4 million) for the 12 months ended 31 December 2009 (FY2009). Revenue increased 29.3% to US$104.8 million fuelled by Asia’s increasing demand for analytical and life science equipment.

http://www.theedgesingapore.com/the-daily-edge/business/13008-march-1-property-developers-wilmar-uob-cerebos-raffles-medical-midas.html

Wilmar says Q4 net profit up 18% to US$442m

Wilmar says Q4 net profit up 18% to US$442m

Tags: Wilmar | Wilmar International
Written by Thomson Reuters
Sunday, 28 February 2010 18:05


Wilmar International (WLIL.SI), the world’s largest palm oil producer, reported today a better-than-expected 18 percent rise in fourth quarter net profit as a global economic recovery drove commodities prices higher.

The company, which has a presence in 20 countries across Southeast Asia, China, India, Europe and Africa, said it would continue to seek attractive investment opportunities to support future growth.

Malaysia’s benchmark palm oil price (KPOc3) rose nearly 60% in the quarter compared with the previous year.

The firm derives about half of its total sales from China, and owns oil palm plantations and runs crushing and refining plants in Indonesia and Malaysia.

“We will persist with on-going efforts to further improve our operational efficiency through greater integration and economies of scale, and seek attractive investment opportunities to continue growing our group,” said Chief Executive Kuok Khoon Hong in a statement.

The company did not elaborate on its future investment plans, but it has previously said it was planning to invest at least US$1 billion ($1.4 billion) in Indonesia, China, and Africa.

Wilmar posted a net profit of US$442 million, up from US$373.6 million a year earlier, ahead analysts forecasts of US$333.5 million.

The quarterly results took the full year net profit to US$1.88 billion, higher than ThomsonReuters I/B/E/S estimates of US$1.65 billion.

On the outlook, Wilmar, which has a market capitalisation of $41.5 billion, said that although economic recovery appeared to have started, the global business environment is expected to be volatile.

However, the company said Asian economic activity would continue to remain robust, especially in China, India and Indonesia.

Wilmar’s shares have risen around 1% since the start of the year, outpacing a 5% drop in the broader Straits Times index (.FTSTI).

http://www.theedgesingapore.com/the-daily-edge/business/13007-wilmar-says-q4-net-profit-up-18-to-us442m.html

Golden Agri-Resources price target raised

Golden Agri-Resources price target raised to 68 cents by OSK

Tags: Golden Agri-Resources
Written by The Edge
Monday, 01 March 2010 17:03

OSK has raised Golden Agri-Resources’ (E5H.SG) target price to 68 cents from 63.5 cents, based on 15x FY10 P/E, after increasing FY10 earnings forecast 8.3% to assume higher palm oil prices on back of lower fertiliser costs.

The broker says the change to bottomline estimate also reflects lower corporate tax rate of 25% vs 30% previously. Cites high fertiliser cost as one key factor weighing on FY09 profitability (earnings down 56.1% at US$607 million ($854 million)), but notes highly-priced fertiliser has since been used up.

It adds that production is also back on track, rising 13% last year after being hit by adverse weather in previous three years.

Tips production to grow 10% in 2010 on back of improving age profile.

Keeps “trading buy” call.

Shares +1.9% at 54 cents.


http://www.theedgesingapore.com/the-daily-edge/business/13045-golden-agri-resources-price-target-raised-to-68-cents-by-osk.html

Warren Buffett: A climate of fear is their best friend. When it's raining gold, reach for a bucket, not a thimble.

Buffett’s Bargain Shopping Spree


By GRAHAM BOWLEY
Published: February 27, 2010

America’s most famous investor, Warren E. Buffett, struck a confident note in his annual letter to the shareholders of his holding company on Saturday, as he described in characteristically colorful terms how his businesses had largely ridden out the calamity of the financial crisis.

Warren Buffett told investors, “When it's raining gold, reach for a bucket, not a thimble.”


The tone of the letter contrasted sharply with Mr. Buffett’s report last year, in which he took himself to task for the company’s decline in book value, only the second such decline since he took control in 1965. This time he described how he had used the last 18 months to scoop up a string of assets — a buying spree that culminated at the end of last year with the agreement to buy the Burlington Northern Santa Fe Railway, his biggest bet yet.

Mr. Buffett wrote that his company, Berkshire Hathaway, had net income of $8.1 billion last year, or about $5,200 a share, 61 percent higher than in 2008. The company also reported a 19.8 percent rise in book value.

The crisis of 2007-8 led to the company’s first operating loss in the first quarter of last year, raising questions about Mr. Buffett’s exposure to consumer spending and the housing market. The company recovered strongly later in the year, however, helped by the rebound in the stock market, which strengthened his derivatives holdings.

In his letter, which accompanied the company’s annual report, Mr. Buffett laid out in detail how many of his holdings still depended on the vagaries of housing demand and consumer spending. But shares of the company, which peaked late in 2007 around $148,220 and fell to lows of around $73,195, have since rallied to close at $119,800 on Friday.

“We’ve put a lot of money to work during the chaos of the last two years,” he wrote. “It’s been an ideal period for investors: A climate of fear is their best friend.”

Mr. Buffett used his letter to crack jokes and issue more of his trademark aphorisms. The so-called Sage of Omaha, he is America’s most listened-to investor, and his annual letter is watched closely by investors for his assessment of his businesses and of the economy.

It has, however, taken on somewhat less importance in recent years as Mr. Buffett, 79, has raised his profile with more public speaking and interviews.

In characteristically blunt terms, he had harsh words for unnamed chief executives and directors who oversaw disasters at their companies during the crisis but “still live in a grand style.”

He said, “They should pay a heavy price,” and that there must be a reform of the way executives are rewarded for their performance. “C.E.O.’s, and in many cases, directors, have long benefited from oversized financial carrots; some meaningful sticks now need to be part of their employment picture as well.”

He also admitted mistakes of his own, saying he had closed a troubled credit card business, which had been his idea, and had given too much time to turn around the NetJets business, long a burden.

But he dwelt also on the lucrative positions he took in a string of companies over the last year and a half, pouring $15.5 billion into shares of companies like Goldman Sachs, General Electric and Wm. Wrigley Jr. Wishing he had taken greater advantage of the opportunities offered, he said, “When it’s raining gold, reach for a bucket, not a thimble.”

Burlington Northern Santa Fe was Mr. Buffett’s biggest purchase to date. Addressing that company’s 65,000 shareholders, he offered them a primer in his investment rules. But he warned all shareholders that the bigger size of Berkshire Hathaway would probably mean slower growth in the future.

“Huge sums forge their own anchor and our future advantage, if any, will be a small fraction of our historical edge,” he said.

Justin Fuller, the author of a blog about Mr. Buffett and a principal at Midway Capital Research in Chicago, said this company size was an important theme of the letter: “There was a lot of talk about size and maintaining a business and how size and bureaucracy can really hurt a business over time.”

Mr. Fuller said Mr. Buffett had also given insights into his investing strategy — many of his businesses are now in monopoly or near-monopoly industries like railroads and utilities.

Mr. Buffett told a long story about the wisdom of using a company’s own shares to buy another company — which was a veiled criticism of Kraft’s takeover of Cadbury, Mr. Fuller said, but also a justification of Mr. Buffett’s decision to issue shares to buy Burlington Northern Santa Fe. Mr. Buffett is a major investor in Kraft but has opposed its pending acquisition of Cadbury.

Mr. Buffett’s letter is watched closely for hints about when he may retire, but this year’s offered none. Talking of a time when he would be long gone, he said he was still tap-dancing to work at the end of his eighth decade.

He said he had sold shares in ConocoPhillips, Moody’s, Procter & Gamble and Johnson & Johnson, mainly to finance his railroad purchase. The shares of these companies were still likely to trade higher, he said.

Closing the letter, Mr. Buffett, ever the cheeky salesman, invited shareholders to his company’s annual meeting on May 1 in Omaha — promising to play table tennis for spectators and urging them to buy goods and services from his companies, and ending, “P.S. Come by rail.”


http://www.nytimes.com/2010/02/28/business/economy/28buffett.html?em

Your Money

Preparing for the Inevitable Bursting Bubble

By RON LIEBER

Published: February 26, 2010

Financial bubbles are a way of life now. They can upend your industry, send your portfolio into spasms and leave you with whiplash. And then, once you’ve recovered, the next one will hit.

 
How are you preparing for the next bubble?

Or so you might think, as a veteran of two gut-wrenching market declines and a housing bubble over the last decade. 


There’s plenty of reason to expect more surprises, given the number of hedge funds moving large amounts of money quickly around the world and the big banks making their own trades. 


Individuals, as always, may be tempted to make their own financial bets, too. Last time, they bought overpriced homes with too much borrowed money. Next time, who knows what the bubble will be? And that’s the problem, as it always is. How do you identify the next thing that will pop? Is it China? Or Greece? Or Treasury bonds? It is difficult to predict and make the right defensive (or offensive) moves at the correct moment to save or make money.


Still, if you want to better insulate yourself from bubbles — however often they may inflate — there are plenty of things you can do. Your debt levels matter, and you may want to consider a more flexible investment strategy. But perhaps most important, this is a mental exercise that begins and ends with an honest assessment of your long-term goals and how you handle the emotional jolts that come from the bubbles that burst along the way.


FIXED EXPENSES
Start with the basics. The less you have to pay toward monthly obligations, the better off you are, and that’s especially true at a time of economic disruption. You certainly wouldn’t want any bills increasing, so now’s a good time to refinance to a fixed-rate mortgage.


Whittle down student loan and credit card debt, too, and pay cash for your car if possible. “Flexibility is priceless in a time of panic,” said Lucas Hail, a financial planner with Foster & Motley in Cincinnati.


SELF-RELIANCE 
Then take a hard look at how much you should rely on promises from the government. Social Security and Medicare may not fit the traditional definition of bubbles, but that hasn’t stopped Rick Brooks from advising his financial planning clients to expect less from both programs. “Something that is not sustainable will not continue. It just can’t,” he said of Medicare.


Mr. Brooks, the vice president for investment management with Blankinship & Foster in Solana Beach, Calif., said anyone under 50 should assume that Medicare will look nothing like it does now and examine private health insurance premiums for guidance as to what may need to be spent on health care in retirement. Meanwhile, the firm advises current retirees to assume a 20 percent cut in Social Security benefits at some point.


Bedda D’Angelo, president of Fiduciary Solutions in Durham, N.C., has an equally stark outlook on long-term employment risk. If there are two adults in the household, your goal should probably be to have two incomes instead of one. “I do believe that unemployment is inevitable,” she said, adding that people who think they are going to retire at 65 should save for retirement as if they will be forced out of the work force in their mid-50s.


PORTFOLIO TACTICS
Perhaps you did what you thought you were supposed to during the last decade. You got religion and stopped trading stocks. Then, you split your assets among various low-cost mutual funds and added money regularly. And the results weren’t quite what you hoped.


Tempted to make big bets on emerging markets or short Treasury bills? You’ve landed in the middle of the debate between those who favor a more passive asset allocation and those who prefer something called tactical allocation.
The first camp sets up a practical mix of investments, according to a target level of risk, and then readjusts back to that mix every year or so.

• They frown on the hubris of the tactical practitioners. To make a tactical approach work, they note, you need to know what the right signals will be to buy and sell everything from stocks to gold, during every future market cycle. Then, these tacticians need to have the discipline to act each and every time. This is extraordinarily hard.

The tacticians, however, believe they have no choice. 

• “What consumers need to know is that no matter how comforting it is to believe a formulaic approach or prepackaged investment product will allow them to put their financial future on autopilot, our current and future financial environment will require advice, diligence, education and responsiveness, which takes into account strategic consideration of geopolitical and economic relationships,” as Ryan Darwish, a financial planner in Eugene, Ore., put it to me this week.

Mr. Darwish scoffed at the notion of mere bubbles and said he thought that more fundamental and far-reaching shifts were under way, like the transfer of economic power from the United States to China and other nations.

A growing number of financial planners are embracing a middle, more measured approach: If diversification across stocks, bonds and other asset classes has proved to be a good thing in most investing environments, why not diversification around investment approaches?

“I am not a financial genius, but the geniuses are even worse off because they’re anchored on one philosophy,” said David O’Brien, a financial planner in Midlothian, Va. So he and a growing number of his peers have added some strategies to their baseline portfolios aimed at losing less during bubbles while still gaining in better times. “We’re not trying to shoot for the moon,” he added.

These tactics can include managed futures, absolute return funds, merger arbitrage and other approaches that will get their own column someday.

The embrace of all this even led one investment professional I spoke with this week to express the ultimate sacrilege: It really is different this time.

Thomas C. Meyer of Meyer Capital Group in Marlton, N.J., noted that many of these alternative strategies were not even available in mutual-fund form three to four years ago. So that’s different. He’s now putting 30 percent of his clients’ equity portfolios into such investments.

The big change, however, is that the baby boomer money is getting older. People are further along in their careers than they were during the market crash in 1987, and they can’t rely on pensions as so many more near retirees could in the 1980s (while shrugging off stock market volatility). And the boomers don’t have as much time to make up lost ground, especially if they’re already retired.

“Losing less means a lot right now,” Mr. Meyer said. “So we want to suck volatility out where we can.”

MATTER OF THE MIND  
But can you live with less volatility — and the permanent end of occasional portfoliowide returns in the teens or higher? Markets run on greed and fear; bubbles expand and deflate thanks to outsize versions of each. One of the few things you can predict about bubbles is that they will test your conviction on where you sit along the fear-greed continuum. 

And once they pop, you’ll know a bit more about how your mind works than you did before.

This last downturn was severe enough that about 10 percent of Steven A. Weydert’s clients realized that they had overestimated their own risk tolerance. “Ideally, with an asset allocation, you never want to look back and say you’re sorry,” said Mr. Weydert of Bowyer, Weydert Wealth Planning Partners in Park Ridge, Ill.

So rather than trying to predict the number and type of bubbles, it may make more sense to look inward when trying to predict the future. Bob Goldman, a financial planner in Sausalito, Calif., said that clients often looked at him blankly when he asked them what it was they imagined for themselves in the future. Sometimes, they need to go home and figure out what sort of life it is that they’re saving for — and how much (or little) it might cost.

“People come in and talk about how we all know that inflation is going to explode next year,” Mr. Goldman said. “Well, we don’t all know that. We don’t know anything. But we can know something about our own lives, and there is a person we can talk to about that. A person in the mirror.”

• STRATEGIES; What The Past Can't Tell Investors (January 3, 2010)

****Select A Good Stock Market Strategy For Good Returns

Select A Good Stock Market Strategy For Good Returns

Sunday, February 28th, 2010

Stock market can be a good money maker if you know how to play the stock market correctly. A lot of people get into the stock market thinking they can make big money but then lose money by making some rash decisions.

These decisions most often are based on gut feel and not on solid research. Stock market research is the key to making money in the stock market. There are two types of stock market research that can be done in the stock market. Each of the types of research can lead to good amount of money if proper investing discipline is followed.

The two types of research that can be done is

• the fundamental research and 
• the technical analysis research. 

 Both of these styles are very different and require different kind of discipline and methodology while buying the stocks.
In fundamental research you research a stock which has a long term potential and then keep on accumulating this stock for future gains.

• The time horizon for this type of investment strategy can be really long like say two years to four five years. 
• This type of style requires the art of stock picking to be perfected in terms of their fundamental strengths. 
• Also the attributes of this kind of a stock trader are that they are patient and have immense amount of perseverance. 
• They know the art of stock picking and can wait for some time to pick a good stock.

In the Technical research the main emphasis is on trending and the traders thrive on the volatility of the market.

• Based on the trending they buy and sell stocks. 
• Stock quality is important but not to the extent as in fundamental research. 
• Also the main aim here is to make money on a short term basis and do not hold the stock for long. 
• They exploit the inefficiencies in the system as a tool for buying and then selling or offloading the stock once they reach a threshold profit percentage or the stock reaches a particular trend. 
• These traders can also make money in a bearish market.

So if you are investing in the market you will need to enough discipline to follow any approach. There is no middle path and the middle path will not make you enough of profits. So make sure that you follow one strategy and make money from it. Remember patience is a virtue in any business.

New stock market for beginners need to learn about trading strategies. The author recommends stock market for beginners strategies for getting to know how to select a good stock.

More Often Than Not, the Insiders Get It Right

Strategies
More Often Than Not, the Insiders Get It Right

By MARK HULBERT
Published: February 27, 2010

CORPORATE insiders are sending fairly positive signals about the market.

When stocks began to fall in mid-January, insiders cut back on sales of their companies’ shares and increased their purchases, according to David Coleman, editor of the Vickers Weekly Insider Report.

That adds up to at least a “neutral” stance, he wrote to clients, and implies that the recent decline won’t turn into a full-blown bear market.

But, as a market indicator, how reliable are the sell-and-buy decisions of insiders like corporate officers, directors and big shareholders?

While these insiders have a long history of correctly anticipating the market’s direction, they haven’t done all that well in the last few years. As a group, insiders failed to recognize the top of the bull market in October 2007, and didn’t anticipate the depth of the decline that followed.

After these missteps, have insiders’ trades outlived their usefulness as a basis for market timing?

Probably not, says H. Nejat Seyhun, a finance professor at the Stephen M. Ross School of Business at the University of Michigan, who has studied the behavior of corporate insiders for many years. In an interview, Professor Seyhun said that insiders were not infallible, and that their recent failures were hardly their first misreading of the market’s direction.

But since 1975, the earliest year he has studied, insiders have been correct far more often than they’ve been wrong, and this is still likely to be the case, he said.

And there is no evidence, he added, that insiders have lost their ability to tell when their own companies’ stocks are undervalued. In the late 1970s and early ’80s, for example, he found that the average stock bought by an insider outperformed the overall market by three percentage points in the 50 days after the purchase.

For the most recent 10-year period in his sample, through 2008, the comparable 50-day advantage for the insiders was 3.3 percentage points. That’s striking because it includes the bulk of the 2007-9 bear market.

Given the variability of the year-by-year results, Professor Seyhun cautions that it’s not clear whether insider purchases are more profitable today than they were 30 years ago. But, he argues, his results show that insiders by no means are losing their touch.

Though the professor’s analysis extends only through 2008, data collected by the Vickers Weekly Insider Report show that even though the insiders missed the bear market, they can nevertheless take credit for anticipating the market rebound that began a year ago. Leading up to the market’s low in March 2009, for example, insiders as a group behaved more bullishly than they had in more than a decade.

Consider an indicator that Vickers calculates each week, representing the ratio of the number of shares that insiders sold over the previous eight weeks to the number they bought. That ratio dropped to as low as 0.45 to 1 in the weeks just before the bear market ended. That was the ratio’s lowest level since December 1990, at the beginning of the great ’90s bull market.

The more recent low, of course, was followed by a 10-month rally in which the Standard & Poor’s 500-stock index gained some 70 percent.

By November, in contrast, this sell-to-buy ratio had risen as high as 5.21 to 1, according to Vickers, more than double its long-term average of around 2.5 to 1. That signaled to Mr. Coleman that the market was vulnerable to a decline — and, indeed, the market did start to fall in mid-January. At its lowest point, the S.& P. 500 was down nearly 9 percent from the mid-January high.

But in recent weeks, insiders have been cutting back on sales and increasing their purchases. As a result, the sell-to-buy ratio has fallen back to 3.52 to 1, according to Vickers.

Though that is still higher than the long-term average, the trend suggests to Mr. Coleman that the recent downturn is likely to be “only a near-term correction.” He said that his firm was “increasingly optimistic about the future performance of the overall markets.”

Had the sell-to-buy ratio increased in the wake of the market’s pullback, Professor Seyhun added, we would have had reason for worry. It would have meant that insiders had no confidence that their shares would be recovering anytime soon, he said.

“Fortunately, and at least for now,” he said, “insiders are not exhibiting such eagerness” to sell.

Mark Hulbert is editor of The Hulbert Financial Digest, a service of MarketWatch. E-mail: strategy@nytimes.com.

http://www.nytimes.com/2010/02/28/your-money/28stra.html

You don't have to be a genius to make money in the market

NAVIGATE INTERVIEW

With four sons about to enter college, Ellis Traub lost everything.  Today, he's a widely respected author, spokesman for the NAIC, and CEO of Investware.  Learn how you can avoid the same mistakes he did - and save your pocketbook a lot of trouble.
 

• Part 1:A Walk: Ellis' Story
• Part 2:You Can Do It
• Part 3: Buy from a Sucker
• Part 4: Reader Questions

The Five Rules for Successful Stock Investing

The Five Rules for Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market

02.28.2010 · Posted in Stock Market

Product Description
The Five Rules for Successful Stock Investing

“By resisting both the popular tendency to use gimmicks that oversimplify securities analysis and the academic tendency to use jargon that obfuscates common sense, Pat Dorsey has written a substantial and useful book. His methodology is sound, his examples clear, and his approach timeless.”

–Christopher C. Davis Portfolio Manager and Chairman, Davis Advisors

Over the years, people from around the world have turned to Morningstar for strong, independent, and reliable advice. The Five Rules for Successful Stock Investing provides the kind of savvy financial guidance only a company like Morningstar could offer. Based on the philosophy that “investing should be fun, but not a game,” this comprehensive guide will put even the most cautious investors back on the right track by helping them pick the right stocks, find great companies, and understand the driving forces behind different industries–without paying too much for their investments.

Written by Morningstar’s Director of Stock Analysis, Pat Dorsey, The Five Rules for Successful Stock Investing includes unparalleled stock research and investment strategies covering a wide range of stock-related topics. Investors will profit from such tips as:
* How to dig into a financial statement and find hidden gold . . . and deception
* How to find great companies that will create shareholder wealth
* How to analyze every corner of the market, from banks to health care

Informative and highly accessible, The Five Rules for Successful Stock Investing should be required reading for anyone looking for the right investment opportunities in today’s ever-changing market.

• ISBN13: 9780471686170

Never Get Started Investing – 5 Tips To Ignore Your Financial Future

Never Get Started Investing – 5 Tips To Ignore Your Financial Future
February 27th, 2010 | Author: admin


Try to be Warren Buffet(Pick Individual Stocks)

Warren Buffet can do it so darnit you can too. NOT! To do it profitably, stock picking requires that you understand complex accounting. You have to be able to pore through long corporate financial statements, analyze what you see and then decide whether the company is worth its current stock price. Sounds easy right?

There is no reason to do this. There are so many exchange-trade-funds(ETFs) and index mutual funds to choose from that allow you to avoid this complextiy. A single ETF alone can provide you with exposure to an entire sector, country, region of the world, or even a commodity or foreign currency. Why waste time trying to decipher boring financial statements. Yuck!

Listen to the Media

Go ahead,.. just try to factor in every single thing you hear or read about the economy, interest rates, or some company’s fancy new product into your portfolio. You are guaranteed to earn yourself a trip to the local looney bin. Investing doesn’t have to be complicated. Stay focused on the big picture. Choose a mix of asset classes that is right for your age and desired level of risk. Next, implement it using low cost index ETFs or index mutual funds.

Follow Stock Tips

That hot stock tip from your buddy at work. That unknown pennystock your cousin told you is going to triple in a few weeks. All aboard! You’re going to be rich soon, right? WRONG! There are many places on the web to get objective research on ETFs and mutual fund options. Try Morningstar or Yahoo! Finance, just to name a few. Avoid message boards, forums, and tips from friends and family like the plague. it’s a recipe for hurt feelings and portfolio pain.

Ignore Your 401(k) Match

Who needs free money for retirement anyway? It’s so far away. You’re young, and you’d rather spend the money on a new sports car, a leather jacket, and some hot threads for the cllub. That is oh so stupid! If you employer offers matching contributions in your 401(k) plan, get it! Make whatever the minimum contribution is to get those matching funds. It’s literally free money. No one in their right mind should say no to that.

Don’t Have a Strategy

Why have a strategy? Investing is easy, just buy-and-hold forever and you’ll be okay, right? Nope. What will you do one day when you open your account statement to find that half(or more) of your nest egg is gone. Everyone has an buying strategy. Very few people have an exit strategy. You need to have an exit strategy so that you don’t get crushed during bear markets. Having a robust trend-following strategy and the discipline to stick with it will help you keep your emotions in check. You’ll be well on your way to becoming a successful investor.

http://investmentguideblog.com/2010/02/never-get-started-investing-5-tips-to-ignore-your-financial-future/

Tips On How To Buy Stocks That Should Double And More!

Tips On How To Buy Stocks That Should Double And More!

Do you think you’re prepared to buy stocks, but you are uncertain where to start?

Nowadays it is less difficult to buy stocks that will double, triple, or more! Nevertheless, the potential for loss are still there. If you wish to buy stocks with no chance, you’ll have to continue step-by-step, and plan your investments before taking the dive.

Discover ways to pick and buy stocks without getting caught into dangerous schemes and invest in winning stocks. Here are a few no- risk tips on how to proceed.

Determine a secure strategy before you start buying stocks:

• Choose what stock you need to invest in by researching the market completely. Read stock market newspapers carefully, such as the Wall Street Journal, or browse through financial marketplace sites.

• Keep up with customer trends. If you are going to buy stocks, you will need to follow corporations and firms that are likely to influence the stock market.

• Evaluate the marketplace before buying stocks to choose winning stock picks. It’s not that difficult to find out the rate at which your stock is anticipated to mature. The trouble lies in determining whether the stock will really grow. To do this, you must find the industry’s rate of growth. Next, find out if the company you want to buy stocks from can grow up at the same rate.

• Only buy stocks from industrial sectors you’ve thoroughly investigated.

• When buying stocks, it is better to acquire low and sell high in order to invest. Prevent buying high to try and speculate, by selling higher.

How to define winning stock picks:

Getting stocks has become much easier now, as you have more choices than before. You are able to choose to buy stocks as a small investor with easy study. The thing is right now there is simply too much to pick from!

Before you purchase stocks, stop, watch and understand. In no way believe in virtually any advice until you’re certain it will work. Never allow your feelings overcome your own judgment when you’re buying stocks.

 http://www.assetinvesting.com/?p=4961

Singapore’s Wilmar says Q4 net profit up 18pc

SINGAPORE, Feb 28 – Wilmar International, the World's largest palm oil producer, reported on Sunday a better-than-expected 18 per cent rise in fourth quarter net profit as a global economic recovery drove commodities prices higher.

The company, which has a presence in 20 countries across Southeast Asia, China, India, Europe and Africa, said it would continue to seek attractive investment opportunities to support future growth.

Wilmar posted a net profit of $442 million, up from $373.6 million a year earlier, ahead analysts forecasts of $333.5 million.

The quarterly results took the full year net profit to $1.88 billion, higher than ThomsonReuters I/B/E/S estimates of $1.65 billion. – Reuters

People all over the world lost huge amounts of money in the stock exchange business.

Stock Market Strategy
25.02.2010

What do you know about the stock market business? Do you find yourself accounted enough with the information related to the stock market to start gambling? In the case, you are, we might only give you our congratulations and wish good luck and nice profit there. However, if you find it would be important for you to account yourself with some interesting facts related the stock market business we might be helpful for you. Any way, we consider it is significant to understand the fact that disproves some unauthentic information. People all over the world are talking about the great risk that we are under when we involve our assets into the stock market gambling. There were gossips that people all over the world lost huge amounts of money in the stock exchange business. It means that the people who have heard this resist involve money at the stock market. To be honest, the great deal of potential investors keeps their assets in the bank account thinking that it is the most safety place for them. Moreover, we would not dispute as for the fact that the stock market business is the risky one. Nevertheless, you should remember the fact that your bank account would never bring as much money as the stock market might do. Any way, you should also be well accounted with the information that the lost as well as wins at the stock market gambling depends on the proper organization the speculations. What might you do for it? The only thing that depends on you is to make the proper investment. In the other words, you should observe and discover all possible information that characterizes the stock exchange you are going to deal with. Whatever, you think it would be of great value for you to account yourself with the portfolio of the definite stock market. The portfolio of the stock exchange, you are going to deal with as the any other portfolio, includes all needed information that might be helpful for you to make the final decision. Nevertheless, there are the plenty of additional particularities of the stock market, which are common for the every single stock exchange. We are talking about the stability, dividends, visibility and the international exposure of the definite stock exchange. However, you might take into consideration the fact that relate the education and experience of brokers that are gambling at the very stock exchange before you would invest your money in it. Frankly speaking, the brokers are the person directly responsible for the profit and benefit of the stock market. The only broker might deal with the speculations at the stock exchange and make you win or lose additional funds.

The beauty of the stock market is that it can be used for various purposes. Even the people who are involved into retirement investing use the investing into the stock market to be a great investment tool.

So, people who are without any jokes interested in getting income with the stock market – please check out the latest stock market news.

Strategy during crisis investment: Revisiting the recent 2008 bear market

Although we may not know where the bear bottom is, buying in a down market may still lead to losing money. This is definitely true. As long as the purchase is not at market bottom, it may still result in losses for the time being. This is likely to be a short-term loss but compensated by a probable long-term gain. Even if we cannot time the market perfectly, we are definitely better off to “buy low and sell high” then to “buy high and sell low”.

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Prices fell but value intact

Presently stock prices have fallen sharply. 

• Banks are trading at 1x book value, 
• property stocks sold at 50% discount from net asset value, 
• utility stocks trading at single-digit price-earnings ratio providing an earnings yield of more than 10% net of tax and 
• there are many good stocks trading at dividend yield of 2x bank interest rates. 

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Warren Buffett, the second richest man in the world who makes his fortune from stock investment, is busy buying undervalued companies. He sees the value and he also sees prices detaching away from the intrinsic values. He said: “I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turn up.”  

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Catching a falling knife

Some may argue that buying now is like catching a falling knife. If you are not careful, you may be hurt and suffer more losses from falling stock prices. There is no doubt that we may incur short-term losses as long as we do not buy at the bottom. On the other hand, who can determine where and when is the bottom. As long as there are still unknown events or hidden problems, an apparent bottom now may not be the eventual bottom. Since we do not have all the information in the market, it is almost impossible to guess where the bottom will be.

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In most cases, we only realise the bottom after it is over and by that time stock prices are running high with much improved market confidence. Market bottom could be there only for a short period. In most cases, market did not stay at the bottom waiting for investors. It will just move on.

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Since market moves ahead of the economy by about six months, the market bottoms out when the economy is still gloomy, news are still negative, analysts are still calling underweights and most investors are staying at the sidelines. 

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Handling something we know is definitely much easier than dealing with the unknown risks, something which hits from behind without warning. When we invest during a crisis we actually go in with our eyes open. We know it is definitely risky but we also know it could also be very profitable. If we can handle the risk, the risk-reward trade-off will be very rewarding.

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Emphasise strategies

What we need is to buy near the bottom, not right at the bottom. Investors’ frequent question now is when to buy, that is where is the bottom? Perhaps it is more intelligent to ask how much to buy now since nobody will be able to guess where is the market bottom.

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Staggered buying is preferred over bullet purchase which is taking the risk of timing the market bottom. In staggered buying, a pre-determined amount will be set aside for investment over time, say in 10 equal portions.

One common method of staggered investment is dollar cost averaging, an investment scheme made in equal portions periodically, either by a small amount monthly or larger amount quarterly. There are also several variations of staggered investment.

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Anyway, staggered purchase is a preferred method to avoid the anxiety of market timing and the mixed feeling of fear of further downside and worry of missing the market rebound. As long as the market is undervalued, the strategy of staggered investment ensures that investors are in and are benefiting from the undervalued market. 

http://klsecounters.blogspot.com/2008/11/strategy-during-crisis-investment.html