Warren Watch: A televised tour - Omaha.com
Published Sunday, February 12, 2012 at 1:00 am / Updated at 5:47 pm
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Warren Watch: A televised tour

You had to listen carefully to the investing advice that Warren Buffett gave journalists Lara Logan and Charlie Rose during an episode of CBS's "Person to Person" last week.

In the course of guiding cameras around Berkshire Hathaway Inc.'s "world headquarters" at Kiewit Plaza in Omaha, Buffett mentioned that people should invest in companies "as though" they were going to hold those investments for the rest of their lives.

Note that he didn't say you should never sell stocks.

Berkshire itself, under Buffett's guidance, sells stocks all the time, although it keeps many of them for extended periods. Buffett bought Berkshire's first shares of American Express in 1964 and now has shares worth $6.5 billion. But in the past year Berkshire also has sold shares in Moody's, Becton-Dickinson, Carmax, Comcast, Home Depot, Lowe's, Nestle, Nike and UnitedHealth Group, among others.

Buffett's point is that people should not try to make money by jumping in and out of investments as they go up and down in price, choosing stocks only because they think the price will go up quickly.

Rather, an investor should buy stock in a company — maybe as infrequently as once a year — that he or she would be comfortable owning forever. If something happens later that makes selling more attractive than holding, Buffett has no argument with that.

During the "Person to Person" show, a revival of Edward R. Murrow's classic video interview series, Buffett also explained that he loves his office, loves Kiewit Plaza and loves Omaha.

"I'm a happy guy here," he said, holding up a baseball autographed by Willie Mays, Ted Williams and Joe DiMaggio and pointing out his his Presidential Medal of Freedom and his certificate from the Dale Carnegie course he took to get over stage fright.

Before taking the public speaking course in 1951, he said, "I couldn't get in front of an audience and give you my name. Now I can't stop talking in front of people."


Tax-fairness talk

Speaking of which, Buffett was the featured speaker when Senate Democrats held a closed-door meeting last week, Reuters reported. He talked about tax fairness.

Buffett made "very compelling arguments for the need to make our tax code an instrument of fairness for middle-class families instead of being rigged to help the rich get richer," one unidentified aide said.

Buffett has argued that while most Americans suffered during the financial crisis and poor economy, wealthy people like him have avoided a "shared sacrifice" because their tax rates are much lower than average wage earners. His ideas prompted President Barack Obama to propose a "Buffett rule" tax that would ensure high wage-earners pay at least a 30 percent federal tax.

So when does Buffett speak to a meeting of Republicans?


Pointers for investors

Buffett surprised some by publishing an excerpt of this year's annual letter to shareholders, more than two weeks before the official letter is to go online.

Fortune magazine printed Buffett's warning about buying bonds and outlining his general philosophy of investing.

"Investing is forgoing consumption now in order to have the ability to consume more at a later date," he wrote, starting simple and building to more complex ideas.

Overall, it's a lesson that would help novice investors, but even sophisticated investors could do well to follow some of Buffett's pointers. He revels in the role of teacher, and printing his ideas in a general circulation magazine like Fortune reaches a wider audience than the shareholders who receive the annual Berkshire report.

The article has a few of the parables that Buffett likes to cite, including: "What the wise man does in the beginning, the fool does in the end."

But there's little in the way of Buffett's characteristic humor, because the topic is serious: Buying stocks is the best investment, and you can end up losing money in many other ways.


'Exceptional deal'

Berkshire's purchase of Burlington Northern Santa Fe looks like "nothing short of an exceptional deal" two years afterward, according to Josh Zachariah's analysis on GuruFocus.com.

Called "crazy" and "an energy play" at the time by value-investing advocate Bruce Greenwald of Columbia University, the purchase yielded Berkshire a $3.5 billion dividend from BNSF, and the railroad had enough cash left to spend nearly that much on improvements to its rail system.

If U.S. manufacturing rebounds as some predict, Zachariah wrote, railroads stand to gain. U.S. automakers are recovering, which means more shipments for railroads. Both Omaha-based Union Pacific Corp. and BNSF are "thriving and pushing profit margins that are the highest in years if not decades."

With oil prices rising, the fuel efficiency of railroads over trucking also will boost rail earnings, Zachariah said.


The age of money

One way to measure the ability to generate wealth would be to show how much money you accumulate per year.

The Economist ranks Facebook founder Mark Zuckerberg as No. 1 at an estimated $1 billion for each of his 27 years. Buffett, at $600 million per year at 81, is just behind Bernard Arnauld, CEO of the French luxury firm Moët Hennessy Louis Vuitton, and well behind Microsoft co-founder Bill Gates and Mexican telecommunications magnate Carlos Slim.


DQ strong in China

The strongest market for Berkshire's Dairy Queen division is China, where the Minneapolis-based restaurant chain now has 500 stores and plans to open 100 more this year.

Dairy Queen CEO John Gainor was at the grand opening of the 500th location, in the Hu Dong finance district in Shanghai. The operator, Shanghai Shida Catering Management Co., has more than 350 locations in southern and eastern China.

The first DQ in China opened in 1991 in Beijing. Last year, 131 of the 271 new locations worldwide were in China. The company has more than 5,900 Dairy Queen and Orange Julius locations in the United States and 20 other countries.

The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.

Contact the writer:

402-444-1080, steve.jordon@owh.com

twitter.com/buffettOWH

Contact the writer: Steve Jordon

steve.jordon@owh.com    |   402-444-1080    |  

Steve covers banking, insurance, the economy and other topics, including Berkshire Hathaway, Mutual of Omaha and other businesses.

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