Investing Like Warren Buffett: Take Your Cue From the World’s Best Investor

by Alexander Green, Chairman, Investment U Investment Director, The Oxford Club Monday, December 8, 2008: Issue #897

Not long ago I excerpted a recent New York Times column by Warren Buffett explaining his take on the recent market sell-off.

Despite the dour economic outlook, Buffett expects U.S. companies to report record profits within five years. He is getting fully invested in stocks in his own personal account. Since Warren Buffett’s column originally ran on October 14th, however, the S&P 500 has dropped 13%.

Hardly a day goes by that I don’t get emails telling me that Buffett “blew it.” He was “too early.” Or he “failed to call the bottom.”

I beg to differ …

Warren Buffett’s Economic Outlook

For the record, here is part of

...

How to Beat Warren Buffett at His Own Game

This morning, Electricité de France (EPA: EDF) made another attempt to purchase Constellation Energy Group (NYSE: CEG). EDF’s new offer of $52 a share for half of the company is almost as much as MidAmerican Energy -Warren Buffett’s subsidiary of Berkshire Hathaway (NYSE: BRK.A) - paid for the entire company in September.

His $4.7 billion deal for Constellation - about what it cost to build one nuclear reactor - bought him three nuclear plants and 75 power-generating units. CEG jumped 12% this morning to over $28.

Buffett has been on a buying spree of U.S. equities over the past few months. And he even wrote an op-ed for the Wall Street Journal to support why. But before today, CEG was trading below his purchase price. And it’s not the only one.

A $3 billion investment in General Electric (NYSE: GE)

...

img src="http://photos1.blogger.com/img/43/5843/160/thinking.jpg"br /br /emfont color="#0000FF"(P.S: Sorry for any disturbances the advertisements above may have caused you)/font/embr /Let's review the various perspectives about the relationship between stock prices and "business fundamentals" as most people understand it. First, there is the advice given by the Sage of Omaha about Mr Market being manic-depressive and that the prices he/she/it quotes can have a disconnect with underlying fundamentals. Then there is the typical technician's/efficient market theorist's view that price reflects underlying fundamentals, even though it might not seem so at the time to the outsider. And then there is George Soros, who advocates that market prices can actually emactively influence/em fundamentals. The last view is known as reflexivity, a term coined by Soros.br /br /Despite Soros' celebrity fund manager status, reflexivity has never really caught on in popular investment literature, partly because it does not really have mathematical grounding. It is more of a ...

Addison Wiggin and Kate Incontrera look at the implications of America’s large and persistent trade deficit. The country is dependent on foreign products for its energy, food and leisure needs. Simply put: America is consuming more than it produces.  And as this imbalance continues to grow, the long-term risks to the economy become more severe.

This from Money Morning:

Although still seen as the world’s economic superpower, the United States has found itself with a myriad of problems: Skyrocketing federal debt, growing annual budget deficits, an almost nonexistent personal savings rate, and the dubious honor of being the country with the largest current account deficit, of which trade makes up the largest part.

A trade deficit occurs when you are importing more than you are exporting — in other words, you are consuming more than you are producing. So the next time you are at Wal–Mart (NYSE:

...

American Express Company (NYSE:AXP) shares are down 50% in the last 3 months and trading under $20 a share.  Why care?  First off, Berkshire Hathaway is its largest stockholder with 151 million, or 13%, of AXP shares. Barron's says "Berkshire's stake suggests the company's stock may be near a bottom". At Barron's: American Express: Nowhere Near Its Credit Limit By ANDREW BARY

..............

AmEx CEO Ken Chenault is considered among the best

...

Investors are now eagerly anticipating Obama’s cabinet selections with many hoping that billionaire investor Warren Buffett, known as The Oracle of Omaha, will be instated as Secretary of the Treasury. Both candidates had expressed a desire to consider Buffett for the key position. Buffett has refused to comment on the potentiality of the appointment, and many believe that he could refuse the position as well, if asked. Nonetheless, someone as fiscally-savvy as Buffett could certainly inspire confidence in the American people, something of which this country is in need of.

Let us hear your thoughts below:

Warren Buffett is shopping for railroad stocks again. The ‘Oracle of Omaha’ increased his stake in Burlington Northern (NYSE:BNI) to almost 20% last month. Fuel efficiency and road congestion are two key factors supporting a bullish outlook for the railroad industry, says Jason Simpkins.

More from Jason in Money Morning:

Last month, the iconic investing guru once again displayed his enthusiasm for railroad stocks by adding to his already sizeable stake in Burlington Northern Sante Fe Corp. (NYSE:BNI). After picking up 7.85 million shares of Burlington in early October, Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A, BRK.B) last week added another 825,000 shares to its holdings at a price of $79.65 apiece

Buffett has been bullish on railroad stocks for the past year. Buffett made his first move on Burlington Northern in April 2007, acquiring nearly 40 million shares – close to 11%

...

Individual investors will be getting their statements from October.  The news is not good. Most people react in the wrong way, looking backward rather than forward.  This is the main reason that the individual investor, attempting to time the market, gets about half of the average rate of stock market gains. Three Factoids Sometimes the picture can be captured in a snapshot.  Here are three facts to consider: Investors are bailing out of mutual funds.  The latest report is a massive sell of $21.9 billion. Warren Buffett is buying -- not just for Berkshire Hathaway, but for his own account.  Doug Kass highlighted the Buffett performance on market calls.  (Full disclosure:  We are fans of Doug Kass, writing for a paid site at TheStreet.com. We write there also.  We were paid subscribers, profiting from the advice, before we joined the team.)  We are ...

SIBORAP includes these ten specific sections: (1) Product Transparency, (2) Regulation and Education, (3) Protection from Speculators (4) Control of Hedge Funds, (5) Brokerage Account Statements, (6) Retirement Account Investments, (7) Executive Compensation, (8) Corporate Financial Statements, (9) Taxation of Investment and Retirement Income, and (10) Transactional Greed and Fear Controls.

Section Seven: Executive Compensation - continued from Part Three of the SIBORAP report.

Every dollar paid to corporate executives, directors, and employees (in any form whatsoever) in excess of two million dollars would be matched by a ten-cent per share extra dividend to all shareholders and a 10%-of-annual-pay bonus to all employees.

All golden parachutes, separate “non-qualified” retirement plans, stock option and deferred compensation programs, and others that do not benefit all employees and shareholders will be unwound over a three to five year period. Any employee who receives …

In the depths of a bear market that has carved between $500 billion and $2 trillion from U.S. retirement accounts so far this year, as many as two-thirds of all Americans have stopped contributing to their retirement plans, a new study shows. And that’s precisely the wrong decision to make at the wrong time. No matter how poorly the financial markets are performing, saving for retirement has to remain a top priority. “It’s not a time for people to stop contributing,” Diane Young, director of retirement and goal planning at TD Ameritrade Holding Corp. (AMTD), the Omaha, Neb.-based brokerage firm that conducted the retirement study, said in an interview with Bloomberg News. “Because time is money, it’s important to stay on track.” According to the Ameritrade study – released yesterday (Tuesday) – 63% of Americans have ...