Tag: Warren Buffett

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Lessons From Warren Buffett

Lessons From Warren Buffett: Investing Doesn’t Need to Be Complicated, but It Needs This Essential Element

You don’t have to be a genius to be an investor, is something that Warren Buffett has said many times. However, there are things that he thinks are core qualities of successful investors.

So, what is it that Warren Buffett thinks is essential? Discipline.

“What we do is not a complicated business.” Buffett explained at the 2018 Berkshire Hathaway Annual Meeting. “It’s got to be a disciplined business, but it doesn’t require a super IQ, or anything of that sort.”

Buffett’s full explanation on being a disciplined investor

See the complete Lessons From Warren Buffett series

© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Lessons From Warren Buffett

Lessons From Warren Buffett: If You Want to Be a Good Investor, Try Running a Lousy Business for a While

There is no one that wants to have a lousy business, but as Warren Buffett points out, you certainly learn a lot of lessons from it. Among the things you learn are “how awful it is, and how little you can do about it, and how IQ does not solve the problem. . . ”

As Buffett noted: “I really think if you want to be a good evaluator of businesses, an investor, you really ought to figure out a way, without too much personal damage, to run a lousy business for a while,” Buffett explained at the 2017 Berkshire Hathaway Annual Meeting. “I think you learn a whole lot more about business by actually struggling with a terrible business for a couple of years than you learn by getting into a very good one where the business itself is so good that you can’t mess it up.”

Buffett’s full explanation about learning from running a lousy business

See the complete Lessons From Warren Buffett series

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Lessons From Warren Buffett

Lessons From Warren Buffett: Here’s What to Pay Attention To

In the frenzied world of financial news, where the Dow can soar or plummet in the blink of an eye, it is the market’s capricious dance that captures the collective gaze. But should we, if we seek to walk in the footsteps of the legendary Warren Buffett, succumb to this tantalizing spectacle? The answer, resounds with a resolute “no.” For Warren Buffett, the stock market’s caprices hold little sway. To invest like Buffett is to look beyond the tumultuous fluctuations and fix one’s gaze upon the essence of individual businesses, where true value lies.

“Charlie and I don’t think about the market. And Ben (Graham) didn’t very much. I think he made a mistake to occasionally try and place a value on it,” Buffett explained at the 1999 Berkshire Hathaway annual meeting. “We look at individual businesses, and we don’t think of stocks as little items that wiggle around on the paper and have charts attached to them. We think of them as parts of businesses.”

Buffett’s full explanation on focusing on individual companies rather than the market

See the complete Lessons From Warren Buffett series

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Lessons From Warren Buffett

Lessons From Warren Buffett: You Can Go Broke Short Selling

A company’s stock price goes up and up, seemingly disassociated from any meaningful metrics of valuation. So, should you short it?

It may be tempting, but Warren Buffett advises against it.

“Short selling, it’s an interesting item to study because it’s, I mean, it’s ruined a lot of people. It’s the sort of thing that you can go broke doing,” Buffett explained at the 2001 Berkshire Hathaway Annual Meeting. “Being short where your loss is unlimited is quite different than being long something that you’ve already paid for. And it’s tempting. You see way more stocks that are dramatically overvalued in your career than you will see stocks that are dramatically undervalued.”

Buffett’s full explanation on short selling

See the complete Lessons From Warren Buffett series

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Lessons From Warren Buffett

Lessons From Warren Buffett: Hold a Stock Forever or Sell It?

Warren Buffett has said his favorite holding period to own a stock is forever, but often that gets misinterpreted as Buffett never sells. Nothing could be further from the truth. While it is true that Buffett’s massive positions in Coca Cola and American Express have been held for decades, he has sold numerous positions over the years, including his holdings in Phillips 66 and IBM, for example, and most recently he sold the large positions he built up in airline stocks, including American, Delta, United and Southwest, after COVID-19 impacted their prospects.

All things being equal, Buffett notes “It’s not their inclination to sell,” however, he sells stocks all the time.

What makes Buffett sell a stock rather than hold it forever?

One factor is whether the company has had a negative change in its competitive advantage.

“We probably had one view of the long-term competitive advantage of the company at the time we bought it, and we may have modified that,” Buffett explained at the 2002 Berkshire Hathaway Annual Meeting.

He went on to add: “That may mean that we were wrong when we made the decision originally. It may mean that we’re wrong now, and their strengths are every bit as what they were before. But, for one reason or another, we think that the strengths may have been eroded to some degree. A classic case on that would be the newspaper industry, generally, for example. I mean, in 1970, Charlie and I were looking at the newspaper business. We felt it was impregnable a franchise as could be found.”

If the stock you are holding has strong revenues, is cranking out dividends, and has a bright future, there is no need to set an arbitrary selling price. As Buffett once said, “The real thing to do with a great business is just hang on for dear life.”

However, if the company’s prospects are deteriorating, there is no need to hold it forever.

Buffett’s full explanation on when he sells a stock

See the complete Lessons From Warren Buffett series

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Lessons From Warren Buffett

Lessons From Warren Buffett: Don’t Pass Up a Good Investment Because of Negative External Factors

The trade deficit is up, unemployment is sky high, and Coronovirus is taking thousands of lives a day. Negative news with sweeping impact is coming out daily.

Should you integrate macroeconomic news into your investing strategy?

Warren Buffett says no.

“We don’t really pay attention to that sort of thing,” Buffett said at the 2004 Berkshire Hathaway Annual Meeting.

He went on to point out that “You could’ve sat down in 1974, when stocks were screaming bargains, and you could’ve written down all kinds of things that would have caused you to say, you know, the future is going to be terrible.”

As Buffett noted, the stock market has survived wars, pandemics, and all kinds of negative news.

“You know, the Dow went from 66 to 10,000-plus in the hundred years of the 20th century, Buffett explained. “And we had two world wars . . . . There‘s always problems in the future, there’s always opportunities in the future. And in this country the opportunities have always won out over the problems over time.”

So, don’t let the size of the federal deficit scare you out of making a well-researched investment in an individual stock.

Buffett’s full explanation of macroeconomic factors and investing

See the complete Lessons From Warren Buffett series

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Warren Buffett

Berkshire Hathaway Cancels “Woodstock for Capitalists” for 2021

(BRK.A), (BRK.B)

The 2021 Berkshire Hathaway Inc. Annual Meeting of Shareholders will be held on May 1, 2021. Unfortunately, we do not currently believe it will be safe at that time to hold a meeting with nearly 40,000 attendees as we last did in 2019. Therefore, the format for the 2021 meeting will be very similar to the virtual meeting that we held earlier this year including worldwide streaming provided by Yahoo.

Additional information regarding the 2021 meeting will be included in Berkshire’s 2020 Annual Report currently scheduled to be posted to the Internet on February 27, 2021 and in its proxy statement which will be posted on the internet in mid-March 2021.

We hope that the 2021 meeting will be the last time that shareholders are unable to attend in person. We look forward to 2022 when we expect to again host shareholders in Omaha at our usual large gala aka “Woodstock for Capitalists”.

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Lessons From Warren Buffett

Lessons From Warren Buffett: Don’t Let This Error Take You Out of the Game

Warren Buffett is fond of baseball analogies. He’s often spoken about an investor being like a baseball batter waiting for the right pitch. He notes that the advantage the investor has over the batter is that there are no called strikes. You can wait for just the right pitch before swinging your bat. It is a straightforward concept, and speaks to the patience and discipline that good investors should have. However, there is a flipside to waiting for a great deal, and it is an error that Buffett warned about at the 2011 Berkshire Hathaway Annual Meeting. The flipside is thinking that every investment you make, every stock that you buy, has to be an absolute home run. You don’t want to let the search for the perfect investment be the enemy of the good investment.

“One of the things, one of the errors people make in business, and sometimes it can be a huge error, is that they try and measure every deal against the best deal they’ve ever made,” Buffet said. “So they say, you know, I made this wonderful deal for, maybe, an insurance policy written, or it might be a company bought, it might be a stock bought, and they’re determined that they’re never going to make a deal that isn’t that attractive in the future. So, they in effect, sometimes take themselves out of the game.”

For Buffett, it is all about the opportunities that are available to the investor at a particular time.

As Buffett noted, opportunity costs are different for every investment.

“The goal is not to make a better deal than you’ve ever made before. The goal is to make a satisfactory deal that’s the best deal you can make at the time,” Buffett explained.

See Buffett’s full explanation of opportunity costs as it related to five different Berkshire Hathaway investments.

See the complete Lessons From Warren Buffett series

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Acquisitions Berkshire Hathaway Energy Commentary Warren Buffett

Commentary: Buffett Casts His Vote with Dominion Energy Assets Acquisition

(BRK.A), (BRK.B)

With Berkshire Hathaway’s $9.7 billion agreement to acquire Dominion Energy’s natural gas transmission and storage business, Warren Buffett has engaged in a strategy that is familiar to Buffet watchers—the choice between owning a part of a company through equities, or the acquisition of whole companies. It’s a choice that Buffett that has made for almost six decades based on which valuation he judges to be cheaper.

At this year’s annual meeting, Buffett revealed that he had bought relatively few stocks at a time when the market’s plunge had many seeing a rare buying opportunity. Buffett thought differently, and his sale of Berkshire’s entire commercial airline portfolio due to what he felt would be long term profitability issues for United, Delta, American, and Southwest, reflected that perspective.

Now, Buffett has found something he likes. It is an acquisition that makes Berkshire Hathaway a giant in natural gas distribution, vaulting it from carrying 8% of the nation’s natural gas to 18%.

The acquisition adds to one of Berkshire’s core businesses, Berkshire Hathaway Energy, which will acquire 100% of Dominion Energy Transmission, Questar Pipeline and Carolina Gas Transmission; and 50% of Iroquois Gas Transmission System. Additionally, Berkshire will acquire 25% of Cove Point LNG – an LNG export, import and storage facility in Maryland.

The acquisition includes over 7,700 miles of natural gas transmission lines, with approximately 20.8 billion cubic feet per day of transportation capacity and 900 billion cubic feet of operated natural gas storage with 364 billion cubic feet of company-owned working storage capacity, and partial ownership of a liquefied natural gas export, import and storage facility.

Demand for natural gas has risen from 4,917,152 million cubic feet in 1949 to 31,014,345 million cubic feet in 2019, according to the U.S. Energy Information Administration. And with the retirement of more and more coal-fired generating plants, natural gas is a key replacement. Even with the enormous growth of wind and solar, new gas-fired plants are being constructed as backup generation for when the winds are calm and the skies are cloudy.

By making this acquisition, Buffett adds key assets to Berkshire Hathaway Energy that will guarantee a pay-off not just in the short term, but for decades to come. And that’s exactly what Buffet likes, putting money to work for decades to come.

This is not to say that Buffett won’t return to buying equities, but for now, he has voted with his dollars that the better deal in the near term is the acquisition of a whole company.

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Acquisitions Berkshire Hathaway Energy Warren Buffett

Warren Buffett Nabs Natural Gas Assets from Dominion Energy

(BRK.A), (BRK.B)

Warren Buffett has finally used his famed “elephant gun” on a key addition to Berkshire Hathaway Energy.

Berkshire Hathaway Energy has executed a definitive agreement to acquire Dominion Energy’s natural gas transmission and storage business.

The assets include over 7,700 miles of natural gas transmission lines, with approximately 20.8 billion cubic feet per day of transportation capacity and 900 billion cubic feet of operated natural gas storage with 364 billion cubic feet of company-owned working storage capacity, and partial ownership of a liquefied natural gas export, import and storage facility.

The transaction has an enterprise value of approximately $9.7 billion.

“I admire Tom Farrell for his exceptional leadership across the energy industry as well as within Dominion Energy,” said Warren Buffett, chairman of Berkshire Hathaway. “We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business.”

As part of the transaction, Berkshire Hathaway Energy will acquire 100% of Dominion Energy Transmission, Questar Pipeline and Carolina Gas Transmission; and 50% of Iroquois Gas Transmission System.

The agreement does not include acquisition of the Atlantic Coast Pipeline.

Additionally, the company will acquire 25% of Cove Point LNG – an LNG export, import and storage facility in Maryland. Dominion Energy will continue to own 50% of Cove Point, with Brookfield Asset Management continuing to own the remaining 25% share. Berkshire Hathaway Energy will operate the Cove Point facility once the transaction closes.

The Cove Point export terminal is one of only six LNG export facilities in the U.S.

“This premier natural gas transmission and storage business has been operated and managed in a best-in-class manner,” said Bill Fehrman, Berkshire Hathaway Energy’s president and CEO. “Acquiring this portfolio of natural gas assets considerably expands our company’s footprint in several Eastern and Western states as well as globally, increasing the market reach and diversity of Berkshire Hathaway Energy.”

“We are honored to be gaining a wonderful group of employees with a wealth of experience that will continue to provide high-quality service for our customers and partners. We look forward to welcoming them to the team,” said Greg Abel, Berkshire Hathaway’s vice chairman, non-insurance operations, and Berkshire Hathaway Energy chairman.

“We are fortunate Dominion Energy has entrusted us to preserve and build upon such a remarkable business that will allow Berkshire Hathaway Energy to add $9.7 billion in asset value to the portfolio that currently exceeds $100 billion.”

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.