Unfortunately, the most serious imperfection that Janjigian uncovers is right on the cover: Buffett's complexion is pasty, his eyebrows could use a good waxing, and he could stand to hit up Procter & Gamble for a couple boxes of Crest Whitestrips.
Like most books on Buffett, this one explains his methodology -- buy easy to understand business and hold forever -- and then, somewhat uniquely, tries to poke holes in some of his ideas. The problem is that most of those holes relate to Buffett's philosophies, but most have nothing to do with the way he manges Berkshire Hathaway (NYSE: BRK.A). There's a lengthy discussion of what the author thinks Buffett is wrong about the estate tax, and he also questions Buffett's insistence that stock options should be expensed upon issuance -- but are those really the ideas that people look to Buffett for?
Those pundits who think guru investor Warren Buffett's time has come and his magic faded away are bolstered by a Bloomberg report that says shares in Berkshire Hathaway (NYSE: BRK.A) slumped some 19% since mid-December. Buffett has been hurt by large investments in both insurance and banks, industries that have suffered tremendously.
Lest you think this short-term lack of performance has swayed investors into looking elsewhere to park their money, many investors are looking at the fall in Berkshire stock as a buying opportunity.
According to Bloomberg, Frank Betz, a partner at Warren, New Jersey-based Carret Zane Capital Management said he'd "put a new client in Berkshire right now. [...] It's probably the highest-quality collection of individual companies that's ever been assembled. Long slides are not in the Berkshire Hathaway lexicon."
With the stock market drop, many contrarian investors think that stocks have hit bottom and are very cheap. Buffett, who is sitting on such a large cash position, may be able to take large stakes in solidly profitable yet beaten up companies.
If he decides to put his cash to work, he has the ability to get deals that happen only once or twice in a lifetime. He may end up providing returns that make his previous track record look just average. For the Buffett investors, the best may is yet come.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 7/1/08.
Six months of 2008 are now behind us and the stock market has not been a friendly place to most investors. Stability that was once found in household names that were industry giants is gone, and they have now been brought to their knees.
Many of them were the stocks we might have looked to in the past for stability, so you can be sure I put forward my five candidates with a little trepidation, but forward I go anyway. First a little review is in order.
Citigroup Inc. (NYSE: C) dropped from around $53 per share last year to around $30 in January and we can buy it today for around $17. Even at that price Goldman Sachs (NYSE: GS) has downgraded it to a sell and thinks there is more bad news to come. Citigroup was the largest bank in the world. Not any more.
General Motors (NYSE: GM) was the largest car maker in the world. That was before the stock tumbled from $43 to its current $11 range. A crushing blow to long time investors hoping that someone in the company could stop the ship from sinking.
So far, we had InBev putting in the offer and Anheuser-Busch taking its sweet time to reply while trying to thwart the offer by talking to Groupo Modelo. If Anheuser can manage to buy the remaining 50% of Modelo, it would be too big for InBev to swallow. Thursday, though, Anheuser finally replied. Unanimously, no less. I wonder if somewhere around that boardroom full of directors, one at least represented the interests of BUD's second largest shareholder, Warren Buffett's Berkwhire Hathway (NYSE: BRK.A).
In response, InBev said it might ask Anheuser shareholders to unseat the whole board. InBev filed suit "seeking a judgment to confirm that shareholders acting by written consent could remove all of Anheuser's directors without cause." I'd say they might even have cause. The $65 per share offer represented a 35% premium at the time. What's so "financially inadequate" about that?
Well, as Anheuser Chairman Patrick Stokes said, the offer undervalues the Bud Light and Budweiser brands, which he calls iconic. Whatever he calls them, they are the top two selling beer brands in the world. He also said InBev undervalues BUD's growth prospects. Well, if Anheuser could restructure on its own, it should have done so by now and not wait until it was up against the wall with its shareholders. The plans it has and wants to put in place will take a while to bear fruits no doubt.
As InBev has stated, it'd rather take over BUD under friendly terms (a bit of an oxymoron there, but that's the business world). Otherwise, it could either take the tender offer directly to shareholders or get into a fight similar to that Icahn has on his hands with Yahoo! Inc. (NASDAQ: YHOO)'s board, which may not be pretty. Replacing a whole board for a new slate can, and will, get ugly. Or it can do both.
If InBev decides to play nice after all, it may have to raise its bid. Maybe they should all chill and drink a Molson (NYSE: TAP). Things will look better after a few...
InBev, the Belgian mega brewer, has told the King of Beers that it won't wait forever for it to make up its mind about whether to accept its unsolicited $46.3 billion offer. In the third and probably not the last letter to Anheuser-Busch CEO August Busch IV, InBev CEO Carlos Brito points out that his company's offer, which represents an 18% premium on its all-time high in 2002, is a generous one.
"The market reaction to our proposal has been extremely positive," Brito writes. "We believe this confirms our view that our proposal is the best way to achieve this transformational combination for all constituents."
InBev has already lined up financing for its $65 per share offer and has even paid about $50 million in commitment fees to its bankers. Budweiser's long-time headquarters in St. Louis will be maintained as will its senior management team. It does not get any better than this for a company about to be acquired.
On Friday, the board of Anheuser-Busch Cos. Inc. (NYSE: BUD) met and discussed the $46.3 billion unsolicited bid from rival InBev NV. However, there was nothing announced to its eager shareholders.
But, hey, why speed things up? Might as well keep InBev guessing, right?
And, there's much for the rumor mill to chomp on. For example, Carlos Fernandez said he has resigned from Anheuser's board. He is the CEO of Grupo Modelo, which is half-owned by Anheuser.
One possibility is that Anheuser will buy the rest of Grupo, making it tougher for InBev to pull off its buyout. So, does the resignation mean that Anheuser and Grupo are talking about such an arrangement?
It's really tough to tell. Perhaps Grupo is actually talking to InBev? After all, it looks like Grupo wants to remain independent.
Yet, all this stuff seems more of a sideshow. The fact remains that Anheuser can't ignore InBev and is under lots of pressure to sell out (especially in light of its sluggish operating performance over the past few years).
Actually, Adolphus A. Busch IV sent a letter to Anheuser's board urging negotiation with InBev to get a deal done. He's the uncle of the CEO, August A. Busch IV.
Finally, there is another interesting dynamic: Warren Buffett. His company, Berkshire Hathaway (NYSE: BRK.A), owns 5% of Anheuser's shares. No doubt, it should be interesting to get his views on the matter.
It's no secret that InBev's $46.3 billion bid for Anheuser-Busch (NYSE: BUD) was aimed so that it could get its hands on the Budweiser and Bud Light brands, two of the top four selling beers in the world. Carlos Brito, Chief Executive of Belgium's InBev, said so quite clearly. Not only that, he also promised Bud would go on to be made in the same breweries, and that none in the U.S. would be shut down should the merger occurs. He also promised to keep most of management in place.
Well, for me the big question has always been why? What is this Belgian-Brazilian company fascination with beer brands that are so American -- in recognition and in taste. Well, it turns out that this is only partly true. While it is true that it is mostly Americans who drink light beers, Budweiser has actually captured sizable market share outside the U.S., like 13% in Ireland and 11.5% in Canada in 2006.
The stock market was down today and the financial sector was hit as hard as anything else. These are the days you want to have your watch-list ready or perhaps your stock alerts triggered. I have been watching Wells Fargo (NYSE: WFC) for quite some time. Today at $27.00 I received an alert and decided to buy some.
As a value investor I am seeking not to just make a profit but to have as large a margin of safety as possible. That means I do not want to just buy a discounted stock but I want to "steal it". Patience is always in order, and usually is rewarded. That was the case when we watched Tiffany & Co. (NYSE: TIF) go from the low $40's to $57 per share and think we had missed the train, only to keep our eyes open as it fell back down to $36 where we pulled the trigger.
Last week TIF did us proud (see: Chasing Value: Tiffany's -- all that glitters) and although I am wrong way too often, I would be greatly surprised to see TIF anywhere near $36 ever again. It has reached $50 since we purchased it in April. The following chart illustrates the recent path of Wells Fargo.
After five months of tracking my 2008 picks, it is rewarding to finally have a breakthrough -- topping the three major stock indices and Berkshire Hathaway (NYSE: BRK.B) too. It has been painful to have to report each month that I was being bested. However, since I have not seen anything contradicting my original rationale for my eight picks I stood my ground.
Moving into positive territory by pennies was Loews Corporation (NYSE: LTR). Among its holdings is a 51% stake in Diamond Offshore Drilling, Inc. (NYSE: DO) that has been doing well as the world remains desperate for more oil and natural gas.
Bunge Limited (NYSE: BG) was the other stock to cross the line into the black, while Valero Energy Corp. (NYSE: VLO), although improving, remains my worst performer. It is still down almost 28% after five months.
A story yesterday in Business Week, A Mideast Valley of Peace discussed how the development of a $3 billion canal from the Red Sea to the Dead Sea is gaining some traction. There is both Arab and Israeli support for the idea which would bring industry, tourism, and most importantly water through desalination plants to a very thirsty location.
According to the report the ambitious project is being energized by 60-year-old billionaire Itzhak Tshuva, who was born into a poor family of 11 who crammed into a single room after immigrating to Israel from Libya in the 1940s. He went on to build a global real estate empire that includes New York's Plaza Hotel, as well as a recently announced $8 billion luxury hotel, retail, residential, and casino complex on the Las Vegas Strip.
Equally important, the project is getting a warm reception in parts of the Arab world. This so-called Valley of Peace is part of a 520-kilometer (323-mile) corridor being proposed by Israeli President Shimon Peres for regional economic development. Peres says he has received letters of support from both Palestinian President Mahmoud Abbas and Jordan's King Abdullah II. And according to Israeli press reports, Saudi Prince Alwaleed bin Talal -- known for his investments in Western icons such as Apple (NASDAQ: AAPL) -- recently told Tshuva that he will support the project through Jordan.
The financial press is trumpeting the latest pronouncement from the Oracle of Omaha: "I believe that we are already in a recession. Perhaps not in the sense as defined by economists. ... But people are already feeling the effects of a recession. It will be deeper and longer than what many think."
I'm a huge fan of Warren Buffett for a multitude of reasons; I've read just about every book in print about his methodology and I would list him among my top three heroes (Gabe Kapler and Perry Como being the other two). But I can say with confidence -- and Buffett would agree -- that he has not become the greatest investor in the world ever on the strength of his macroeconomic forecasts. He applies a bottom-up approach to his investments, looking for strong businesses at reasonable prices. In his shareholder letters he's written frequently about the difficulty of predicting the future for the broad economy, and also emphasized that successful investing does not require such prescience.
He's a smart guy and his prediction could turn out to be right, but going to Buffett for macro predictions is a little like going to Albert Einstein for fashion tips. Brilliance in one area may or may not equate to brilliance in others.
Even if you agree with Buffett's prediction, borrow a line from his playbook: Don't run scared. Focus on investing in companies with competitive advantages at good values.
Last December Chemtura Corporation (NYSE: CEM), a specialty chemicals company with a market cap of about $1.9B, said it might sell itself, and now The Blackstone Group LP (NYSE: BX) and Apollo Management are in talks to buy the company, the Wall Street Journal reported.
In part one of a series to help explain the reasons why The Bear Stearns Companies (NYSE: BSC) collapsed, the Wall Street Journal said that the troubled firm was torn apart by executives who couldn't agree on what course to take, including raising capital and slicing mortgage and related bonds from its inventory. And each of about six attempts to raise capital fell part.
OTHER PAPERS:
The American investor and Berkshire Hathaway Inc (NYSE: BRK.A) chief Warren Buffett said the United States is already in a recession that is deeper and will last longer than the public expects, the Economic Times reported.
According to the Telegraph, Barclays Plc (NYSE: BCS) is planning to sell Barclays Life Assurance Company, its life assurance arm, which has over GBP7B of funds under management. Sources believe potential bidders for the unit may include Pearl, Swiss Reinsurance Company (OTC: SWCEY), General Re, Canada Life and XL Re. Market commentators believe that on an embedded value basis, the unit is currently valued at around GBP1B.
Warren Buffett continued his tour of Europe, leaving media excitement in his wake. Earlier this week he said the U.S. recession would be deep and long.
To keep the daily excitement going, he made a statement that U.S. banks were to blame for the current credit crisis. According to Reuters, "The banks exposed themselves too much, they took on too much risk .... It's their fault. There's no need to blame anyone else," he said.
While this may be true, it is odd that Buffett uses his search for investments in Europe, which is almost certainly combined with a little vacation time, to give his opinions on the state of the economic world.
If anything, Buffett's view of the current conditions is marked by pessimism. He was not as negative at the Berkshire Hathaway (NYSE: BRK.A) annual meeting just a few weeks ago. Either he has too much time on his hands as he travels or he believes that the financial world is falling apart fast.
Douglas A. McIntyre is an editor at 247wallst.com.
Just last week I moped about the lack of new developments in the reported talks between Anheuser-Busch and InBev, saying that as the industry is showing signs of consolidation, BUD seems a little lonely. Well, I may have spoken too soon considering today's reports.
According to Alphaville, the Financial Times' blog, InBev, the maker of Stella Artois, is working on a $46 billion bid, worth $65 a share, for Anheuser-Busch. The sources were not identified, but they indicated "that while extensive work had been carried out on the transaction, InBev was 'not about to push the button.'" There were no official comments.
If the deal is carried out, the second-largest shareholder, Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A), could stand to profit from its 5% stake. Buffett, profit? Nah! Barclay's, by the way, is the biggest stakeholder.
If the companies indeed join forces, they would cover the globe between them, pump out around 350 million hectolitres of beer and other beverages annually. Annual revenues would be around $20 billion and have a market capitalization close to $100 billion.
Since the first approach last October, InBev believes Mr Busch would be more willing to deal as pressure from shareholders have been increasing. And financing, you may ask, in this climate? Well, about $50 billion has been provisionally arranged with JPMorgan Chase & Co. and Banco Santander SA.
Now the question is, do we buy BUD shares at $57, hoping to cash in at $65?
Reuters reports that Warren Buffett, whose Berkshire Hathaway (NYSE: BRK.A) controls 19.6% of Moody's Corp. (NYSE: MCO), is saying that he thinks Moody's will be around a long time. Even though Berkshire Hathaway's $188 billion market capitalization is more than 20 times that of Moody's -- Buffett's $1.8 billion loss -- the 50% drop in the value of his 19.6% Moody's stake from its February 9, 2007 peak -- has to sting.
Moody's was already under fire over the U.S. mortgage market crisis when it took a fresh blow on Wednesday -- launching an investigation into a report that it had wrongly assigned triple-A ratings to about $4 billion of complex European debt products -- Constant Proportion Debt Obligations (CPDOs), funds that used borrowed money to bet on credit-default swaps -- and had then not downgraded them. Buffett's comment: "I don't think one day will permanently change the franchise value of Moody's."
As I posted, the ratings agencies competed for lucrative fees from investment banks that created and sold these asset-backed securities. Moody's took in $3 billion for such structured finance ratings between 2002 through 2006. The agencies that offered the best ratings won the business.
With all the books that have been written about Warren Buffett, Vahan Janjigian's Even Buffett Isn't Perfect: What You Can -- and Can't -- Learn from the World's Greatest Investor seems like the only one left that could generate any interest. Suggesting that Buffett isn't perfect is similar to accusing Mother Teresa of war crimes.
Six months of 2008 are now behind us and the stock market has not been a friendly place to most investors. Stability that was once found in household names that were industry giants is gone, and they have now been brought to their knees. 
This Bud may not be for 
On Friday, the board of 
and 
. He also operates 
After five months of tracking my 2008 picks, it is rewarding to finally have a breakthrough -- topping the three major stock indices and 
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Reuters
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