Author: Darren Rickard

  • BIRMINGHAM BUSINESS JOURNAL: Burlington Northern buys 32 acres in Birmingham

    Birmingham Business Journal – by Lauren B. Cooper Staff

    Friday, February 19, 2010

    A Berkshire Hathaway-owned railroad has purchased a former pet food manufacturing facility in Birmingham and is sizing up the facility for future expansion.

    Burlington Northern Santa Fe Railway purchased the nearly 32-acre Mars Petcare facility on 16th Street North, adjacent to its Birmingham intermodal facility, for $3 million.

    Plans for the nearly 157,000-square-foot facility are not finalized, a company spokesman said, but the purchase came about from an increase of requests from businesses looking for opportunity to be rail served.

    “The idea is for us to better serve our existing and potential customers,” said spokesman Joe Faust.

    BNSF operates an intermodal facility off Finley Boulevard, between Interstate 65 and Highway 78. According to the company, Birmingham is the starting point for its 32,000-mile network into the Western U.S.

    The seller, Mars Petcare, announced the closure of its local manufacturing facility, along with others in Iowa, Tennessee and Missouri, in late 2008, according to media reports. Austin Blair, a broker with LAH Commercial Real Estate in Birmingham, represented Mars in the sale of the property, but he said he was unable to comment on the transaction.

    A considerable amount of railroad activity has taken place lately in the Birmingham market, beefing up freight capacity in the industry.

    Last year, Norfolk Southern announced plans to build a $112 million intermodal facility in McCalla, adjacent to Jefferson Metropolitan Park. It will be built on an existing Norfolk Southern line and transfer containers and trailers between trucks and trains. The railroad recently purchased the last piece of land for the new development and plans to start construction soon.

    The Federal Railroad Administration announced this week at the Jefferson County Courthouse that Norfolk Southern would receive $105 million in stimulus money for the intermodal facilities in Birmingham and Memphis, Tenn., a combined $224 million improvement to its Crescent Corridor.

    And CSX Transportation Inc. recently opened a $6 million railroad hub in Bessemer’s Interstate Industrial Park. Its primary customer is the Mercedes-Benz plant in Vance.

    Having these three Class A railroads operating out of the area, in addition to the intermodal facilities, has put Birmingham on a lot of companies’ radars, said Patrick Murphy, senior vice president of economic development for the Birmingham Business Alliance.

    Combined with direct routes to major Interstates and ports, “you have a natural advantage of transportation infrastructure not found in many communities,” he said.

    A lot of the current activity in the local industrial market has been railroad related, said Ogden Deaton, a broker with Graham & Co. And with gas prices rising and rail companies touting their services as “green,” more business will look to rail as a good alternative for shipping goods.

    “Any infrastructure we can get that opens up the lanes of industry is good,” he said.

    BNSF said that, in 2008, the majority of what it shipped from Alabama was industrial products, while the majority of products shipped into the state was coal. Overall, it moves nearly 356,000 carloads of freight in the state each year.

    BNSF employs about 270 in the state, with a combined payroll of nearly $17 million.

    Earlier this month, Warren Buffet’s Berkshire Hathaway finalized a $34 billion deal to purchase the Texas-based BNSF – Berkshire Hathaway’s biggest acquisition ever and a “bet” on Buffett’s hopes for the railroad industry being a leader in the economy.

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  • BEST CASH COW: Why is Buffett selling?

    Article Submitted by: Sean Riskowitz

    Warren Buffett’s Berkshire Hathaway has been selling shares in Johnson & Johnson, Proctor and Gamble and ConocoPhillips during the last quarter. Is Buffett bearish on the stock market

    ?

    Investors who pay attention to the moves of high profile companies like Berkshire Hathaway will note that the Warren Buffett run company sold as much as 26% of it’s stake in personal healthcare and products giant Johnson and Johnson (JNJ), as well as shares in consumer goods company Proctor and Gamble (PG). Berkshire also sold 34% of it’s holdings in oil behemoth ConocoPhillips (COP).
    The sales were disclosed as part of regulatory filings made by the company and available here. Companies with more than $100 million in investment funds (usually hedge funds but also companies such as Buffett’s) must disclose their investments on a quarterly basis to the SEC.
    Berkshire’s activity did not stop there. In what was one of the most active quarters for the company, positions were reduced in CarMax (KMX) , Exxon Mobil (XOM) (which he only bought in the second quarter of 2009), Gannett (GCI), Ingersoll Rand (IR), Moody’s (MCO), SunTrust Bank (STI), Unitedhealth Group (UNH) and Wellpoint (WLP).
    Additions and new positions to Buffett’s portfolio are always closely watched and he did add to existing positions in Becton Dickinson (BDX), Iron Mountain (IRM), Republic Services (RSG), Wal-Mart (WMT) and Wells Fargo (WFC). The West Coast based Wells is now one of Buffett’s largest positions, ahead of Bank of America (BAC), which he also holds.
    Berkshire espouses an investment approach of holding stocks for the long-term (“Our favorite holding period is forever“), so the recent sales and somewhat active quarter come as a bit of a surprise to followers of the company.
    The reason for the activity has nothing to do with Buffett being bearish on the stock market or the economy. Rather, the sales were made because the company needed to raise funds to complete the acquisition of railroad business Burlington Northern Santa Fe. The deal was announced some weeks back and will see Berkshire buying all of Burlington for $32 billion in a cash and stock deal, the largest Buffett has ever made.
    As a result of the acquisition, which includes Berkshire issuing $8 billion in debt, Buffett was also forced to sell positions in rival railroad companies Norfolk Southern (NSC) and Union Pacific (UNP).
    Buffett’s selling is therefore necessary in order to raise liquidity in the business and maintain ratings high enough for insurance purposes, the bulk of the company’s business. It’s by no means a sell sign and investors holding stocks in any of the above-mentioned companies should not panic and consider selling (unless they too are buying railroad companies).
    The keenly awaited Berkshire annual meeting, or “Woodstock for capitalists”, will take place this May and it is at that event that we can expect to hear more about why Buffett felt the Burlington Northern acquisition was necessary and his outlook on the US economy, which I suspect will remain very positive.

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  • CNBC STOCK BLOG: Strategist: Invest Like Buffett—With Garbage!

    Published: Thursday, 18 Feb 2010 | 5:58 PM ET
    By: JeeYeon Park
    CNBC News Associate

    Billionaire investor Warren Buffett has been adding to his position in waste-management firm Republic Services this past quarter. Should investors follow Buffett and bank on the trash-disposal stocks? James Altucher, managing director at Formula Capital, shared his insights.

    “Buffett is not a value investor—he has been a demographics investor,” Altucher told CNBC.

    “So if he thinks everyone in the world is going to shave with disposable razors, he buys Gillette; if he thinks everyone is going to use their credit cards, he buys American Express.”

    Altucher said both Warren Buffett and fellow billionaire Bill Gates are the largest shareholders of Republic Services [RSG 27.70 0.07 (+0.25%) ].

    “We’re going to [create] hundreds of millions of [pounds of] trash a year this year,” he explained.

    “Knowing that, Gates owns Waste Management [WM 32.90 UNCH (0) ] as well. These guys have been buying up all the garbage stocks.”

    Altucher said he favors the smaller waste management companies such as Stericycle [SRCL 53.65 0.15 (+0.28%) ] and American Ecology [ECOL 14.87 -0.12 (-0.8%) ].

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  • ENVIRONMENT NEWS SERVICE: Klamath Water Wars Settled With Agreements to Remove Four Dams

    SALEM, Oregon, February 18, 2010 (ENS) – Removal of four dams on the Klamath River and the largest river restoration project in U.S. history moved closer to accomplishment today with the signing of two agreements between federal, state, utility and tribal officials.

    The four dams owned by the electric utility PacifiCorp – three in California and one in Oregon – produce enough power for 70,000 people, but they have blocked 350-mile-long salmon runs, preventing the fish from swimming upstream to spawn.

    The Klamath Basin Restoration Agreement outlines activities that would restore and sustain wild salmon populations to support in-river and ocean fishing industries and provide water supply certainty to communities and water users in the Basin.

    Signing the Klamath agreements, from left, PacifiCorp Chairman and CEO Greg Abel, Interior Secretary Ken Salazar, Governor Arnold Schwarzenegger and Governor Ted Kulongoski (Photo courtesy Office of Governor Schwarzenegger)

    The Klamath Basin Hydroelectric Agreement sets forth the process for studies and an environmental review to inform a decision by the Secretary of the Interior on whether or not the removal of the four dams is necessary for restoration of fish in the Klamath Basin and is in the public interest.

    The two agreements provide a framework for removal of the four dams beginning in 2020, provided that Congress approves.

    Secretary of the Interior Ken Salazar joined Oregon Governor Ted Kulongoski, California Governor Arnold Schwarzenegger, PacifiCorp Chairman and CEO Greg Abel and the chairmen of the Klamath, Yurok and Karuk Tribes in signing the two agreements in the Capitol Rotunda in Salem.

    “The Klamath River, which for years was synonymous with controversy, is now a stunning example of how cooperation and partnership can resolve difficult conflicts,” said Secretary Salazar. “The agreements provide a path forward to meet the needs of local communities, tribes, farmers, fishermen and other stakeholders while restoring a beautiful river and its historic salmon runs.”

    “Today we celebrate a thoughtful, collaborative approach that will bring certainty and stability to water issues to support agriculture and, at the same time, will restore the Klamath River to support wild salmon populations,” said Governor Kulongoski. “A restored basin will serve all Oregonians – from the basin to our coastal communities – who depend on the river and its resources for their social and economic livelihoods.”

    “Today’s historic agreement is testament to the great things we can achieve by working together. Everyone here cares about the magnificent Klamath River and we are taking action now to preserve this natural wonder for generations to come,” said Governor Schwarzenegger.

    “Our top priority at PacifiCorp has been and continues to be protecting our customers in terms of cost and liability, said Abel. “This is another significant milestone toward establishing the framework that ensures our customers’ best interests are front and center, no matter what the ultimate public policy decision is in terms of dam removal.” PacifiCorps’ parent company, MidAmerican Energy Holdings, is owned by American billionaire Warren Buffett.

    Iron Gate Dam on the Klamath River (Photo by Jim McCarthy)

    “These agreements will vastly improve habitat conditions for fish by re-establishing the connectivity between physical, chemical and biological processes within the basin that are essential to ecosystem health and the sustainability of the basin’s valuable natural resources,” said NOAA Administrator Dr. Jane Lubchenco.

    Conservation groups American Rivers and Trout Unlimited reaffirmed their “unwavering support” for the Klamath River restoration agreements. Both organizations have participated in the decade-long negotiations that resulted in the two agreements.

    “The agreements to restore the Klamath are the result of years of hard work by basin farmers, fishermen, conservationists, tribes, and federal, state and local governments,” said Steve Rothert, California director for American Rivers. “Our organizations count the agreements to remove four dams and restore this great river system as a major achievement.”

    The agreements have been criticized because dam removal is not guaranteed, but both groups say the Klamath Hydroelectric Settlement Agreement was “meticulously negotiated to provide the most expedient, science-based and practical route to dam removal.”

    Scientist Jack Williams with Trout Unlimited said, “We know there is some risk and uncertainty for fish restoration with these agreements; but after taking a hard look at all the provisions, we find far more risk and uncertainty with the status quo.”

    Trout Unlimited attorney Chuck Bonham said, “While there are scenarios under which removal would not occur, those scenarios have been minimized and address practical considerations like safety for downstream tribal and other communities.”

    Implementation of the Klamath Basin Restoration Agreement will cost about $1 billion over 10 years and will be financed by the federal government. More than 90 percent of the total costs will be targeted for fisheries restoration and reintroduction, and enhancing the quality and quantity of water for fish.

    The Hydroelectric Agreement calls for the accumulation of a $450 million fund, $200 million of which was authorized by the Oregon State Legislature through the passage of Senate Bill 76 during the 2009 regular legislative session.

    The legislation directs PacifiCorp and the Oregon Public Utility commission to work together to establish a trust that will hold funds from customers to cover the costs for dam removal. The bill also requires the Oregon Public Utilities Commission to hold a hearing to determine whether rates are fair, just, and reasonable.

    Klamath River fish kill between Klamath Falls and Midland, Oregon. July 22, 2005. (Photo by Jim McCarthy)

    California’s contribution to fund dam removal, the other $250 million, would come from a combination of surcharge on California ratepayers and general obligation bonds.

    The Klamath River arises in southeastern Oregon and flows about 263 miles southwest through California, through the southern Cascade Mountains to empty into the Pacific Ocean.

    Historically, the Klamath Basin was the third most productive salmon river system on the west coast, producing up to 1.1 million adult fish annually.

    But in 1907 the newly formed Bureau of Reclamation began to dike and drain wetlands and dam rivers to develop an upper basin lake water storage system for commercial agriculture. The Bureau offered settlers free homesteads and promises of unlimited federally subsidized water.

    Hydroelectric development was next. In 1917, the first dam was completed, blocking salmon passage to hundreds of miles of spawning habitat in the upper basin. By 1962 the final dam of the Klamath Hydroelectric Project, the 173-foot Iron Gate Dam, was completed with no fish passage. All runs of salmon and steelhead are now extinct above Iron Gate Dam near the Oregon-California border, now owned by PacifiCorp.

    In 2001, a record drought brought the simmering fish-versus-farms water conflict to a crisis point.

    When coho salmon were declared threatened in the Klamath River, flowing out of Upper Klamath Lake, a lawsuit brought by Pacific Coast Federation of Fishermen’s Associations under the Endangered Species Act forced water to be shut off to hundreds of farms and ranches.

    Desperate farmers surreptitiously opened water gates to irrigate their parched fields.

    In 2002, the Bush administration restored water to the farms, but the river level was too low and the water too warm to support salmon and year after year thousands of fish died of disease. Toxic green algae proliferated in the Iron Gate Reservoir and in Upper Klamath Lake.

    When PacifiCorp applied for a new 50-year federal operating license in 2004 and made no accommodation for fish passage, public demands for dam removal accelerated.

    The governors of California and Oregon have lobbyed for dam removal nearly every year since 2006, when the collapse of West Coast commercial salmon fisheries triggered the first of three disaster declarations. Congress appropriated $170 million in 2008 and $60 million in 2006 in aid for destitute salmon fishermen.

    Today, 30 representatives from all sides of the Klamath water wars gathered in the Oregon capital to sign the agreements that could restore a healthy river, return salmon to more than 350 miles of their spawning habitat, restore thousands of acres of wetlands, improve river flows and water quality, provide greater water security to the farming community, assure water supplies for the National Wildlife Refuges in the Basin, save PacifiCorp customers money, and restore part of the Klamath Tribes’ homeland.

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  • REUTERS: Swiss Re capital boost to ease Buffett repayment

     * Swiss Re FY profit 506 mln Sfr vs forecast 534 mln
     * Shareholder equity rises to 26.2 bln Sfr
     * P&C combined ratio 88.3 pct beats forecast 90.4 pct
     * Raises dividend to 1.00 Sfr from 0.10 Sfr
     * Shares rise 2.3 pct, outperform European insurers

    (Recasts; adds CFO and analysts' comments, shares
     ZURICH, Feb 18 (Reuters) - The world's second-largest
    reinsurer, Swiss Re (RUKN.VX), was more confident it could repay
    a costly convertible loan from Warren Buffett after
    strengthening its capital and returning to the black in 2009.
     Net profit just missed expectations due to heavy losses on
    securitised products and corporate bond hedges, but capital
    bounced back from uncomfortable levels in the crisis to an
    excess of over 9 billion Swiss francs ($8.33 billion).
     "The balance sheet remains the key focus and in this regard
    Swiss Re's results are good," said Helvea analyst Tim Dawson.
      "Overall we believe that the good news from the balance
    sheet should help the shares to consolidate and extend their
    recent recovery."
     Swiss Re, which had to reach for support from Buffett-owned
    competitor Berkshire Hathaway (BRKa.N) last year after losses on
    risky assets depleted its capital, expressed renewed belief in
    its business by hiking its dividend and re-establishing targets.
     "Capital excess at that level increases our confidence that
    we can achieve some of most important goals and these include
    the redemption of the Berkshire security in 2011," Chief
    Financial Officer George Quinn said on Thursday.
     Shares in Swiss Re were 2.3 percent higher at 47.84 Swiss
    francs by 0930 GMT, outperforming a flat DJ Stoxx European
    insurance index .SXIP and 0.4 percent rise in bigger rival
    Munich Re (MUVGn.DE).
     The stock, battered by the financial crisis and risky
    investments, plummeted as low as 11.88 francs in March 2009 but
    has steadily regained ground since then, though it remains some
    way below a 2007 peak.
     Swiss Re would now target a 12 percent return on equity over
    the cycle, reflecting lower investment returns as the company
    shifts to safer investments, said Chief Executive Stefan Lippe.
     Lippe, appointed after the company turned to Buffett for a 3
    billion franc convertible loan, has said Swiss Re will only go
    after the most profitable business, even if this means missing
    out on some sales.
     His safety-first approach and low catastrophe payouts
    widened Swiss Re's operating margins, enabling it to reward
    shareholders with an improved dividend of 1.00 franc after it
    paid out only a nominal sum of 0.10 francs for 2008.

     SOVERIGN DEBT RISK
     Swiss Re increased its shareholder equity by 5.7 billion
    francs, giving it more breathing space as it targets a return to
    a coveted 'AA' credit rating lost in the crisis, and CFO Quinn
    said it had delivered on a promise to clients to boost capital.
     It had very small sovereign debt exposure, Quinn said, after
    worries about Greek debt risk recently caused a temporary dip in
    the company's shares.
     "We have almost no exposure to Portugal and Spain. We have
    minimal amounts of exposure to Italy and for Greece at the end
    of 2009 we had less than 500 million Swiss francs and that would
    be the largest of those particular countries," said Quinn.
     The bulk of the company's euro zone sovereign debt exposure
    was to Germany and France, he added.
     Restored industry capital and the absence of hurricanes
    partially delayed the marked rise in prices many had predicted
    in the crisis from extra demand for reinsurance from primary
    insurers trying to shore up flagging capital, the company said.
     Main competitor Munich Re beat expectations on Feb. 2 after
    a fortuitous combination of low disaster claims and a financial
    market revival boosted its earnings. [ID:nLDE6110SX]
     Swiss Re's property and casualty reinsurance combined ratio
    -- a measure of underwriting profitability -- improved to 88.3
    pct on lower catastrophe payouts, beating expectations, and the
    company said it would achieve a combined ratio of 93 percent in
    2010, given a return to normal level of natural disasters. A
    number below 100 percent indicates operating profitability.
     Impairments of 2 billion francs on securitised products and
    losses of 1.9 billion francs on corporate bond hedges hit full
    year profit, which came in at 506 million francs, against
    expectations for 534 million in a Reuters poll of analysts.
    ($1=1.081 Swiss Franc)
    (Editing by Hans Peters)

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  • THE STREET: Warren Buffett’s Latest Moves: Which Was Wisest?

    Eric Rosenbaum 02/17/10 – 04:55 PM EST

    Stock quotes in this article: BRK-B , COP , IRM , RSG , JNJ , PG , WMT , WFC

    OMAHA, Neb. (TheStreet) — Berkshire Hathaway(BRK.B Quote) revealed in a regulatory filing on Tuesday that as its all-in wager on Burlington Northern was nearing completion in the fourth quarter, Warren Buffett was doubling down on bets in the solid waste and information services sector.

    Tuesday was a banner day for famed investor cheat sheets, as Warren Buffett , along with hedge fund managers George Soros and John Paulson, filed his quarterly portfolio updates with the Securities and Exchange Commission.

    Notable in the Berkshire Hathaway quarterly portfolio update was an increased level of trading activity. Warren Buffett — Mr. Buy and Hold himself — was more active in the fourth quarter, in terms of sheer trading activity, than a typical Berkshire Hathaway quarter.

    However, some of the stocks that Buffett had already begun selling in the third quarter continued to be Berkshire dogs in the fourth quarter 2009, including ConocoPhillips(COP Quote) and Moody’s(MCO Quote).

    Buffett sold 7 million shares of Moody’s and 20 million shares of ConocoPhillips, or a little more than one-third of the shares Berkshire had owned in ConocoPhillips. The continued selling of Moody’s shares represented about one-fifth of Berkshire’s previous level of shares held in the rating agency – and that a good thing, as Moody’s underperformed throughout 2009.

    Buffett and Berkshire Hathaway may have been stripped of their illustrious AAA rating by Moody’s and the other rating agencies in the past year, but the Oracle of Omaha is exacting his quarter-by-quarter revenge on Moody’s shares.

    Some of the more notable moves by Buffett in the fourth quarter represent the smaller positions in which Berkshire Hathaway doubled it wagers.

    For example, Buffett more than doubled his holding in the information protection and storage services stock Iron Mountain(IRM Quote) — from 3.3 million shares in the third quarter to 7 million shares at the end of 2009.

    Berkshire raising its stake in Republic Services(RSG Quote) a solid waste management company, from 3.6 million shares to close to 8.3 million shares.

    Both Iron Mountain and Republic finished trading on Tuesday up between 3% and 4%. Iron Mountain was up 5% on Wednesday at mid-day and was trading at elevated levels, while Republic Services was up a more modest 2%.

    Among the underperforming stocks, Berkshire sold 2 million shares of Ingersoll-Rand, or a little more than 25% of its stake in the company. Ingersoll-Rand was unfazed by Buffett’s sell on Wednesday, up 2%, but in reality, shares of Ingersoll-Rand have fallen more than $5 since mid-January from a 52-week high – a high share price that Ingersoll-Rand shares had been trading near, as far back as November.

    Some big name, large-cap ampersand brands were also sold fairly heavily by Buffett, including Johnson & Johnson(JNJ Quote) and Procter & Gamble(PG Quote).

    Berkshire Hathaway sold more than 10 million shares of Johnson & Johnson, which had been trading near its 52-week high in the past two months. Berkshire Hathaway also sold close to 9 million shares of Procter & Gamble. Procter & Gamble had also been at a 52-week high in the fourth quarter 2009.

    Another sector falling out of favor with Buffett was managed care, where Berkshire was a seller of WellPoint(WLP Quote) and its peer UnitedHealth Group(UNH Quote), selling more than 2 million shares of each managed care stock.

    With all the buying and selling among the Berkshire Hathaway public securities portfolio, some long-time Buffett favorites continue to receive a vote of confidence from the Oracle of Omaha.

    Buffett favorites Wal-Mart(WMT Quote) and Wells Fargo(WFC Quote) were net buys in the fourth quarter of 2009. Berkshire Hathaway added 7 million additional shares of Wells Fargo, while increasing its Wal-Mart holding by a little more than 1 million shares.

    All this Warren Buffett/Berkshire Hathaway activity at the end of 2009 begs the question, which Buffett trading decision do you think was the wisest?

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  • THE AUSTRALIAN: Buffett fan’s plan for Oracle fund

    Michael BennetFrom: The Australian
    February 17, 2010
    12:00AM


    BILLIONAIRE investor Warren Buffett has had no shortage of fund managers attempt to imitate his strategies.

    But why try to replicate when you can invest directly in the “Oracle of Omaha” via his company Berkshire Hathaway, argues JB Global chief executive Justin Beeton.

    Mr Beeton, a fan of Mr Buffett since the age of 14, will next week launch a new fund through his Sydney-based investment house to solely invest in the billionaire’s New York Stock Exchange-listed company.

    JB is looking to raise at least $40 million by the end of next month to cover costs after Mr Beeton and fellow staff kicked in the initial minimum of $10m.

    Mr Beeton expects the JB Global Berkshire Hathaway Income & Equity Accelerator fund to be more popular than the company’s other fund — an ASX 200 vehicle in its fourth series — that recently raised $120m.

    “I’ve spoken to a few financial planners that we deal with and they’re all extremely keen as it’s the first time their clients can gain exposure to Buffett without currency risk and — just in case the bloke dies — any capital risk,” Mr Beeton said.

    Berkshire’s A-class shares trade at about $US115,000 ($128,417) a share, but Mr Buffett late last month split the company’s B-class shares, also known as “Baby Bs”, 50 to one to make them more accessible to retail investors.

    It is these more liquid Baby B’s, which trade around $US75, that JB plans to invest in through tailored over-the-counter options.

    Mr Beeton, who formerly worked in capital protection at Macquarie, said the fund would give retail investors access to an investment normally out of reach and have capital protection measures built in.

    “In the past I’ve probably fallen victim, like the majority of fund managers who try to replicate Warren Buffett, but why try and replicate when I can buy his shares and get the same deals he does?” he said. “Berkshire Hathaway hasn’t gone up anywhere near as much as its portfolio has so I believe it’s trading well below its intrinsic value.”

    Investors can borrow 100 per cent of a minimum of $50,000 through a non-recourse loan facility provided by Royal Bank of Scotland, with $7500 in pre-paid interest to be paid up-front.

    Mr Beeton said the loans would be capital protected by Merrill Lynch, the fund would be re-weighted to cash when volatility was high and redemptions paid out in Australian dollars to reduce currency risk. “It’s huge leverage, you’re talking 100 per cent leverage, which gives you a lot of upside and because of the capital protection, you don’t get the negative,” he said.

    In return, JB will take a 1 per cent up-front fee of the total funds under management and a 10 per cent performance fee.

    “We don’t think our clients mind paying when we’re providing performance. With no real performance I can’t really justify any fees because I’ve added no value,” he said.

    JB plans to launch a similar fund to invest in Chinese infrastructure and property in June.

    “Throughout Asia I think the best allocation of capital is in that space,” he said.


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  • CNBC: Warren Buffett’s Berkshire Slashes Oil, P&G, J&J Stakes

    Published: Tuesday, 16 Feb 2010 | 4:54 PM ET

    By: Alex Crippen
    Executive Producer

    Warren Buffett’s Berkshire Hathaway dramatically cut its stakes last fall in two of the nation’s biggest oil companies.

    It also significantly reduced its holdings of Procter & Gamble and Johnson & Johnson.

    The sales were probably designed to help pay for Berkshire’s enormous $26 billion acquisition of Burlington Northern Santa Fe. That deal closed last Friday.

    In its fourth quarter portfolio snapshot just filed with the SEC, Berkshire reports holding 37.7 million shares of ConocoPhillips [COP 49.92 1.25 (+2.57%) ] as of December 31, 2009.

    That’s down 19.7 million shares, or 34.3 percent, from Berkshire’s holdings as of September 30.

    Berkshire’s stake in ExxonMobil [XOM 66.28 1.48 (+2.28%) ] fell even more on a percentage basis, dropping 67 percent to 421,800 shares as of Dec 31. Berkshire first reported holding about 854-thousand shares at the end of last year’s second quarter. It then added another 422-thousand shares in the third quarter for a total of almost 1.3 million shares. Now only those shares added in Q3 remain as of the end of Q4.

    Another significant decline: Johnson and Johnson [JNJ 63.61 0.89 (+1.42%) ]. Berkshire’s holdings fell 26.5 percent, or 9.8 million shares, to 27.1 million shares. That’s roughly the same amount Berkshire held at the end of 2008, following a big sale that fall to help finance Buffett’s credit-crisis investments in Goldman Sachs and General Electric.

    Berkshire cut its Procter and Gamble [PG 62.83 1.07 (+1.73%) ] holdings by 8.8 million shares, or 9.1 percent, to 87.5 million shares.

    Berkshire also reports smaller holdings as of December 31 vs September 30 for:

    • Carmax: 8 million shares, down 1 million from 9 million (-11.1%)
    • Gannett: 2.2 million shares, down 1.2 million from 3.4 million (-36.1%)
    • Ingersoll-Rand: 5.6 million shares, down 2.2 million from 7.8 million (-27.6%)
    • SunTrust Banks: 2.4 million shares, down 0.7 million from 3.1 million (-22.1%)
    • United Health Group: 1.2 million shares, down 2.2 million from 3.4 million (-65.4%)

    Berkshire’s sales of its entire holdings of Union Pacific and Norfolk Southern had been reported by Buffett himself in an interview with Charlie Rose just after the BNSF deal was announced.

    It wasn’t just selling. We did see some increases, including a few enormous percentage jumps.

    • Becton Dickinson: 1.5 million shares, up 0.3 million from 1.2 million (+25.0%)
    • Iron Mountain: 7.0 million shares, up 3.6 million from 3.4 million (+107.6%)
    • Republic Services: 8.3 million shares, up 4.7 million from 3.6 million (+128.7%)
    • Wal-Mart Stores: 39.0 million shares, up 1.2 million from 37.8 million (+3.2%)
    • Wells Fargo: 320.1 million shares, up 6.7 million from 313.4 million (+2.1%)

    Total market value of Berkshire’s reported holdings as of December 31: $57.9 billion, up $1.4 billion from $56.5 billion as of September 30. That’s an increase of 2.4 percent.

    Current Berkshire stock prices:

    Berkshire Portfolio

    Class A: [BRK.A 113964.00 -36.00 (-0.03%) ]

    Class B: [BRK.B 76.05 -0.85 (-1.11%) ]


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  • 24/7 WALL STREET: Buffett & Berkshire Hathaway 2010 Stock Holdings

    Posted: February 16, 2010 at 4:33 pm

    Berkshire Hathaway Inc. (NYSE: BRK-B, BRK-A) has shown its holdings as of the close of business for December 31, 2009, so that being said these are Warren Buffett’s most recent holdings going into 2010. We have already seen how some holdings have been trimmed, and some of these holdings will have been further cut even since the end of the year.

    • American Express Co. (NYSE: AXP) over 151.6 million shares, same as last quarter.
    • Bank of America Corp. (NYSE: BAC) 5 million shares; same as last quarter.
    • Becton Dickinson & Co. (NYSE: BDX) is a raised position 1.5 million shares, was only 1.2 million in prior quarter.
    • Carmax Inc. (NYSE: KMX) is a decreased position of 8 million shares, down from 9 million one quarter ago.
    • Coca Cola Co. (NYSE: KO) right at 200 million shares, still same as before.
    • Comcast (NASDAQ: CMCSA) 12 million shares, same as before.
    • Comdisco Holdings (NASDAQ: CDCO) roughly 1.5 million shares, same as before.
    • ConocoPhillips (NYSE: COP) is a decreased position of 37.7 million, was 57.43 million shares before and down from 62.485 million at the end of June.
    • Costco Wholesale (NASDAQ: COST) 5.254 million shares, same as before.
    • Exxon Mobil Corp. (NYSE: XOM) is a decreased holding of only 421,800 shares, this was a new holding last quarter and was 1.276 million shares
    • Gannett Co. (NYSE: GCI) is a decreased holding of 2.202 million shares, down from 3.447 million last quarter.
    • General Electric Corp. (NYSE: GE) 7.777 million shares is the same as before, but does not include the huge preferred investment from late 2008.
    • Goldman Sachs Group Inc. (NYSE: GS) is NOT a common stock… but Buffett still holds the preferred shares and warrants.
    • GlaxoSmithKline (NYSE: GSK) 1.51 million shares, same as before.
    • Harley-Davidson, Inc. (NYSE: HOG) is NOT a common stock… but Buffett still holds the preferred shares and warrants.
    • Home Depot Inc. (NYSE: HD) 2.757 million, same as last quarter.
    • Ingersoll-Rand (NYSE: IR) 636,600 shares; same as last quarter but way down from the 7.78 million two quarters ago.
    • Iron Mountain (NYSE: IRM) is a raised holding of 7 million shares versus 3.3722 million shares a quarter ago.
    • Johnson & Johnson (NYSE: JNJ) is a decreased position of just over 27 million shares; this is down from just over 36.91 million shares before and still well under the 62 million shares at one point in 2008.
    • Kraft Foods (NYSE: KFT) over 138 million; same as last quarter.
    • Lowe’s Companies (NYSE: LOW) 6.5 million shares, same as last quarter.
    • M&T Bank Corp. (NYSE: MTB) 6.71 million shares, same as before.
    • Moody’s (NYSE: MCO) is decreased again to 31.8 million shares versus 39.2 million shares a quarter before and under the 48 million the quarter before that.
    • Nalco Holding (NYSE: NLC) 9.0 million shares, same as last quarter.
    • Nestle ADR is 3.4 million shares, same as before.
    • Nike Inc. (NYSE: NKE) 7.641 million shares, same as before.
    • Procter & Gamble (NYSE: PG) is a decreased position of approximately 87.5 million shares, down from 96.3 million.
    • Republic Services Inc. (NYSE: RSG) is a raised holding of 8.29 million shares after he started the position the prior quarter in his move to invest with (or behind) Bill Gates.
    • Sanofi Aventis (NYSE: SNY) more than 3.9 million shares, same as before.
    • Sun Trust Bank (NYSE: STI) is a decreased position of almost 2.4 million shares, down from 3.079 million shares a quarter ago and down from 3.2+ million two quarters ago.
    • Tiffany & Co. (NYSE: TIF) is NOT a common stock… but Buffett still holds the preferred shares and warrants.
    • Torchmark Corp. (NYSE: TMK) roughly 2.82 million, same as before.
    • Travelers Cos (NYSE: TRV) is the same as 27,336 shares, a tiny holding.
    • US Bancorp (NYSE: USB) roughly 69 million; Same as quarter before.
    • USG Corp. (NYSE: USG) 17.072 million shares, same as before.
    • United Health Group (NYSE: UNH) is a decreased holding of 1.175 million shares, down from 3.4 million shares a quarter ago and marks the third consecutive decline in holdings here.
    • United Parcel Service (NYSE: UPS) 1.429 million shares, same as before.
    • Wal-Mart Stores Inc. (NYSE: WMT) is an increased position at just over 39 million shares versus 37.8 million a quarter ago and well above the 19.9+ million shares two quarters ago.
    • Washington Post (NYSE: WPO) over 1.72 million shares, same as before.
    • Wells Fargo & Co. (NYSE: WFC) was an increased position of close to 319.5 million shares versus 313.3 million shares a quarter ago and above the 302 million two quarters ago and even above the 290+ million shares three quarters ago.
    • Wellpoint Inc. (NYSE: WLP) is a decreased position of 1.343 million shares, down from 3.394 million shares a quarter ago and down 3 quarters in a row.
    • Wesco Financial Corp. (NYSE: WSC) 5.703 million shares, same as before.

    Burlington Northern Santa Fe (NYSE: BNI) was of course still a holding, but this no longer matters as it has been acquired in a deal which was completed Friday.

    Norfolk Southern (NYSE: NSC) has been eliminated in the quarter as Buffett already had his all-in bet on America with BNSF.

    NRG Energy (NYSE: NRG) has been eliminated as a position entirely, down from 7.2 million last quarter.

    Union Pacific Corp. (NYSE: UNP) was eliminated as a holding as Buffett already had his all-in bet on America with BNSF.

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  • BUSINESSWEEK: Berkshire Ends Annual Buffett Reception With Non-U.S. Investors

    By Jamie McGee

    Feb. 17 (Bloomberg) — Warren Buffett, who bought a Texas- based railroad last week in his biggest takeover, ended the tradition of hosting an event for non-U.S. investors at the annual shareholders weekend of his Berkshire Hathaway Inc.

    Buffett used the session in prior years to scout for acquisitions outside the U.S. He said after the 2007 meeting that he asked investors from South Africa to call him collect with ideas. He said in a 2009 interview, after prices dropped for U.S. assets, that more buying opportunities became available in his home country, and in November he struck the deal to buy Burlington Northern Santa Fe Corp. for about $27 billion.

    Buffett, 79, will again field shareholders questions at Omaha, Nebraska’s Qwest Center arena for more than five hours on May 1. Last year’s meeting attracted a record 35,000 people, and shareholders asked questions through journalists who were instructed by Buffett to pick the most challenging issues. There will also be a company movie and barbecue for investors.

    “Regrettably the International Shareholders Meet & Greet Reception is being discontinued due to escalating attendance and time constraints,” Omaha-based Berkshire said yesterday in an agenda for the May 1 events posted on its Web site.

    Buffett has held the event for investors from outside the U.S. and Canada since at least 2004. Buffett said in a letter that year that he and Vice Chairman Charles Munger would meet separately with international shareholders.

    “Every year our meeting draws many people from around the globe,” Buffett wrote. “Charlie and I want to be sure we personally meet those who have come so far.”

    ‘Outgrown Its Original Purpose’

    When Buffett started the international meeting, the non- U.S. investor group was smaller, said Jeff Matthews, the author of “Pilgrimage to Warren Buffett’s Omaha” and founder of the hedge fund Ram Partners LP. “Now the amount of people who come from around the world is vast,” Matthews said. “It’s gotten to the point where it’s sort of outgrown its original purpose.”

    The 2008 reception included more than 700 international investors, according to the annual report for that year. Shareholders from 43 countries applied for passes to last year’s meeting.

    Buffett visited Europe in May 2008 to look for acquisition targets in a tour organized by Angelo Moratti, vice chairman of Milan-based Saras SpA, and Eitan Wertheimer, president of Israel-based Iscar Metalworking Cos., which was acquired by Berkshire in 2006 in Buffett’s first non-U.S. acquisition. He met with owners of European businesses and said there were “dozens” of companies in Italy that may be candidates to join Berkshire.

    Buffett didn’t return a message left with his assistant, Carrie Kizer.

    –Editors: Dan Kraut, Dan Reichl

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  • BUSINESSWEEK: Berkshire Cut Stakes in J&J, Proctor & Gamble as Deal Neared

    By Andrew Frye

    February 17, 2010, 12:02 AM EST

    Feb. 17 (Bloomberg) — Berkshire Hathaway Inc. cut stakes in Johnson & Johnson, the world’s largest maker of health-care products, and Procter & Gamble Co., the No. 1 consumer-products company, as Chairman Warren Buffett raised cash for the biggest acquisition of his career.

    Buffett’s company sold 26 percent of its stake in Johnson & Johnson, 9 percent of its Procter & Gamble, and 34 percent of oil producer ConocoPhillips, the Omaha, Nebraska-based company said yesterday in a regulatory filing. The stocks were the same ones Buffett sold a year earlier to fund investments in Goldman Sachs Group Inc. and General Electric Co. at the height of the credit crisis in 2008.

    Buffett later told shareholders he “very much liked” the Goldman Sachs and GE investments, while confessing he “would have preferred to keep” the stocks as well. This time, Berkshire raised cash as it prepared for the $27 billion buyout of Burlington Northern Santa Fe Corp. Buffett also issued equity and sold $8 billion of debt in support of the railroad deal.

    “It is basically raising extra liquidity for Burlington Northern,” said Glenn Tongue, a partner at T2 Partners LLC, which owns Berkshire shares. Buffett “always said he was willing to sell stocks to buy whole businesses.”

    Berkshire also disclosed reduced stakes in Exxon Mobil Corp., SunTrust Banks Inc., Ingersoll-Rand Plc, UnitedHealth Group Inc., WellPoint Inc., Gannett Co. and CarMax Inc.

    Buffett’s company now holds 27.1 million shares of Johnson & Johnson, reducing its stake below 1 percent of the New Brunswick, New Jersey-based company’s outstanding stock. The holding of Cincinnati-based Procter & Gamble fell to 87.5 million, making Berkshire the fourth-largest shareholder with 3 percent of the stock, according to Bloomberg data.

    Copycats

    Berkshire’s quarterly disclosure of its $57.9 billion U.S. portfolio is studied by mutual funds and individuals looking for clues about Buffett’s investment strategy. Buffett, the second- richest American, makes most of the investment decisions, while Lou Simpson manages the portfolio for car insurance unit Geico Corp. Berkshire is the largest shareholder of Coca-Cola Co., American Express Co. and Wells Fargo & Co.

    Berkshire yesterday revealed an increased stake in Wells Fargo, Wal-Mart Stores Inc., Becton Dickinson & Co., Iron Mountain Inc. and Republic Services Inc. It listed about 320 million shares of San Francisco-based Wells Fargo at year-end, a 2.1 percent increase from three months earlier.

    “He’s buying companies that are more leveraged to the economy by going into Wells Fargo and selling names like J&J and Procter & Gamble,” said Michael Yoshikami, chief investment strategist at Berkshire shareholder YCMNet Advisors. While the stock sales were tied to the Burlington deal, “there’s a rejiggering of the portfolio” away from stocks that do well when the economy is in recession, he said.

    Picking One Stock

    Wells Fargo, the biggest bank on the U.S. West Coast, has more than tripled from lows in March. Buffett has said he told students that month that if he had to put all his net worth into one stock, Wells Fargo “would be the stock.” His firm also increased its stake in the bank in the first and third quarters of 2009, and now owns 6.2 percent of the company.

    The ConocoPhillips sale was its fifth consecutive decrease, leaving Berkshire with shares valued at $1.88 billion based on yesterday’s closing price. Buffett called the investment in the Houston-based oil company a “major mistake” after buying shares with oil prices near their peak in 2008. The Exxon Mobil stake fell by 67 percent to 421,800 shares and is valued at $28 million.

    Health-Care Stocks

    Berkshire reduced holdings in Minnetonka, Minnesota-based UnitedHealth, the biggest U.S. health insurer by revenue, by 65 percent, and cut Indianapolis-based rival WellPoint by 60 percent as the U.S. Congress debated health-care reform in the last three months of 2009. The UnitedHealth stake is valued at $37.2 million based on yesterday’s closing price, while the WellPoint stock is valued at $78.6 million.

    “These stocks had become quite cheap during the height of health-care reform and they’ve gone up a tremendous amount,” said Steven Shubitz, an analyst with Edward Jones & Co. in Des Peres, Missouri. “The reality now is that we again have a period of uncertainty, since we don’t have any imminent health- care reform, and now we’re just in a waiting situation to see if health-care reform really is dead.”

    Buffett, 79, built Berkshire into a $180 billion company through takeovers and the purchase of stock in companies he believes have lasting competitive advantages and superior management. He built a stake of more than 20 percent in Burlington Northern over two years before announcing a buyout of the Forth Worth, Texas-based railroad in November. Berkshire completed the deal last week.

    Confidentiality

    The filing omits information about some transactions because Buffett is permitted to keep them confidential for now. The U.S. Securities and Exchange Commission sometimes allows companies to withhold data from the public to limit copycat investing while a firm is building or cutting a position. Buffett didn’t respond to a request for comment sent to an assistant after normal business hours yesterday.

    –With assistance from Jamie McGee, Joel Schectman, Linda Shen and Meg Tirrell in New York. Editors: Erik Holm, Dan Reichl.

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  • BLOOMBERG UTV: Buffett continues selling energy stakes

    Bloomberg UTV News Desk

    Published on Wed, Feb 17, 2010 at 11:38 IST

    NEW YORK: Warren Buffett continued to pare his investments in energy companies during the fourth quarter, while boosting his stake in a waste management provider, a regulatory filing showed Tuesday.

    Buffett’s Omaha, Neb.-based holding company, Berkshire Hathaway, sold 19.6 million shares of ConocoPhillips (COP, Fortune 500) and cut its already diminished holdings of Exxon Mobil (XOM, Fortune 500) by about half, according to documents filed with the Securities and Exchange Commission.

    Meanwhile, the widely respected investor bought 4.6 million shares of Republic Services, Inc., (RSG) a Phoenix-based waste management company, bringing his stake to nearly 8.3 million shares.

    Buffett, the world’s second richest man, also bought 300,000 shares of medical device maker Becton Dickinson. In the third quarter, he bought 1.2 million shares of BD (BDX, Fortune 500) stock.

    However, he trimmed his holdings of Johnson & Johnson (JNJ, Fortune 500) and Procter & Gamble (PNG).

    Buffett increased his stake in Wal-Mart (WMT, Fortune 500) by 1.2 million shares to about 39 million, and bought nearly 700,000 shares of Wells Fargo (WFC, Fortune 500).

    As part of the company’s $26 billion takeover of Burlington Northern Santa Fe, Berkshire sold its holdings in rival railroad companies Norfolk Southern Corp. (NSC, Fortune 500) and Union Pacific Corp. (UNP, Fortune 500).

    All told, Buffett’s portfolio increased in value during the fourth quarter to more than $57.9 billion from $56.5 billion in the previous quarter.

    Berkshire Hathaway joined the S&P 500 index last week after shareholders approved a 50-for-1 split of Class B common stock last month. The newly issued Class B shares (BRK.B) rose more than 1% to close at $76.05 on Tuesday.

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  • MARKETWATCH: Kraft profit surges on cost cuts


    Feb. 16, 2010, 10:48 a.m. EST

    By Matt Andrejczak, MarketWatch

    SAN FRANCISCO (MarketWatch) — Kraft Foods, the world’s No. 2 food company, reported Tuesday fourth-quarter profit almost quadrupled from the year-ago period, mostly on cost cuts stemming from the completion of a three-year restructuring.

    Net income was $710 million, or 48 cents a share, compared to net income of $178 million, or 12 cents a share, in the year-earlier quarter. Analysts had forecast Kraft /quotes/comstock/13*!kft/quotes/nls/kft (KFT 28.54, -0.55, -1.89%) to earn 45 cents on sales of $11 billion, according to FactSet Research.

    The dollar is rallying as the euro strengthens amid lingering concerns over Greece. The News Hub panel discusses why countries may not always desire strong currencies.

    Sales rose 3.2% to $11 billion. Gross profit margin increased to 37.5% of sales from 31.6%. At the end of 2009, Kraft wrapped up a three-year cost-cutting program that included shedding less-profitable brands, discontinuing product lines, and cutting jobs.

    Volume rose 1.6% for the quarter ended Dec. 31. Kraft has been focused on growing volume after its U.S. market share stumbled last year, hurt by consumers trading down to cheaper items in the grocery store and retailer cutting inventories.

    “Our top line reflected our resolve to avoid chasing unsustainable, promoted volume,” Chief Executive Irene Rosenfeld said in a statement.

    Kraft now faces the big task of folding Cadbury’s chocolate and gum business into its operations. It took Kraft almost five months to win over Cadbury’s board.

    After increasing its unsolicited offer last month, Kraft acquired U.K.-based Cadbury Feb. 2 in a deal worth $19 billion in cash and stock.

    On Tuesday, Kraft reiterated its long-term forecast for the combined companies, pegging organic sales growth at 5% or more and earnings growth of 9% to 11%.

    Kraft shares fell 2.8% to $28.42 in early morning trading.

    Matt Andrejczak is a reporter for MarketWatch in San FranciscO

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  • FINANCIAL TIMES: The Real Deal

    By Lina Saigol

    Published: February 15 2010 02:00 | Last updated: February 15 2010 02:00

    Hedge funds have always liked playing with train sets. After all, the genesis of many hedge fund strategies was the reorganisation of US railways in the 1930s.

    Then there was the “Burlington Arbitrage” of 1988. When Burlington Northern Railroad Company spun off its energy and lumber group, Burlington Resources, arbs simultaneously bought one stock while selling short the other.

    Now, the arbs are playing the $26bn (£16.5bn) takeover of Burlington Northern Santa Fe by Warren Buffett’s Berkshire Hathaway.

    It’s one of the biggest opportunities in decades for index arbitrage.

    Under the terms of the deal, Berkshire is buying Burlington with $10.5bn in Berkshire stock and $15.8bn in cash.

    Crucially, however, the stock portion will come from Berkshire’s existing B-class shares which Mr Buffett split 50-for-1.

    The minute the deal was announced in November, arbs started betting that Berkshire Hathaway’s stock would rise. This was because the newly split B-class shares became eligible for inclusion in the S&P 500 index.

    By rights, with a market capitalisation of $170bn, Berkshire should always have been in the index, but, based on its tiny freefloat, S&P had long reasoned that the company was too illiquid to include.

    The split changed that by lowering the price of the Berkshire shares and opening it to a wider investor base.

    The arbs were quick to realise the significance of the inclusion: unlike most new index entrants who enter at the bottom, Berkshire would go straight in as the 19th largest company in the S&P 500.

    That would force index funds tracking the S&P 500 to acquire shares in Berkshire on a large scale, potentially driving a big increase in its share price.

    Since the stock split was approved in late January, the expectation of such a situation has seen Berkshire’s shares rise 15 per cent, while the S&P 500 is down 5.45 per cent during the same period.

    For arbitrageurs who have managed to hedge the downside by shorting the S&P 500, the deal will pay handsomely.

    For Mr Buffett, the benefits are even better. The rising share price of Berkshire means he will pay far less for Burlington than originally expected.

    Now that’s class M&A.

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  • Berkshire Hathaway letters to shareholders 1977 – 2009

    The complete list of Warren Buffett’s Berkshire Hathaway letters to shareholders available for download 1977 – 2009.

    You can get them at Share Investor Forum.

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  • BUSINESSWEEK: Buffett’s New CEO Shows Analysts, Hedge-Fund Managers to Door

    February 13, 2010, 11:47 AM EST

    By Andrew Frye

    Feb. 13 (Bloomberg) — Matthew Rose, chief executive officer of railroad Burlington Northern Santa Fe Corp., welcomed Warren Buffett as his company’s new owner while showing analysts and hedge-fund managers the door.

    Buffett’s Berkshire Hathaway Inc. completed the buyout yesterday after winning the approval of Burlington Northern investors. The deal, valued at $100 a share, allows Rose to hand out returns of nearly 300 percent, plus dividends, to investors who bought stock the day he was named CEO in 2000. The problem, he said, is that shareholders with that length of commitment are dwindling in number and influence.

    “When I started as CEO 10 years ago, the typical investor had a time frame of three to five to seven years,” Rose said in an interview. “Year-by-year, that’s gotten shorter.”

    The increased focus on short-term results, fueled by real- time media and quarterly analyst calls, can be a distraction for a railroad executive who needs to buy locomotives that run for 20 years and put down tracks that last for 40, Rose said. Burlington Northern said last month it would commit $2.4 billion this year to capital projects, including track, signal systems and locomotives, about $240 million less than in 2009.

    “The money I spend this year really won’t pay off for three, four, five or seven years down the road,” said Rose, 50. “There’s the advent of the hedge fund which has changed the time horizon of what satisfies the institutional investor.”

    In Buffett, the second-richest American, Rose reports to a boss renowned for his buy-and-hold strategy. Berkshire is the biggest investor in Coca-Cola Co. and American Express Co., and Buffett has held those stocks for more than two decades even as both trade below their top prices in the 1990s. Berkshire also owns insurance subsidiaries like Geico, manufacturers such as Clayton Homes, and energy firms like MidAmerican.

    ‘Same Wavelength’

    “I think that Rose and Warren Buffett are on the same wavelength,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business. “Buffett expects his managers to take a long-term perspective, maximizing profit long-term rather than setting short-term targets.”

    The Burlington Northern deal, for about $26.7 billion, is an “all-in wager” on the U.S. economy and will produce profits for Omaha, Nebraska-based Berkshire for the next century, Buffett has said since announcing the deal in November. It’s the biggest takeover of the 79-year-old Berkshire CEO’s career, and brings about 35,000 railroad employees, 6,700 locomotives and more than 200,000 freight cars to haul coal, grain and consumer goods.

    Union Pacific

    Railroad revenue is sliding as the recession curbs shipping demand. Burlington Northern, based in Fort Worth, Texas, slipped to second among U.S. railroads last year after sales dropped 22 percent to $14 billion. Publicly held Union Pacific Corp. of Omaha posted a 21 percent revenue decline to end 2009 with $14.1 billion in 2009.

    “The speed of the news today I think has harmed, quite frankly, investors looking at long-term assets,” Rose told reporters in a news conference this week. A long-term perspective is “one thing that our country has kind of lost sight of, not just for the railroad equity investor but for a lot of investors.”

    Being part of Berkshire takes pressure off Burlington Northern to meet short-term expectations, said Tony Hatch, a self-employed railroad analyst based in New York. “You can argue that not having to deal with quarter-to-quarter numbers is a very positive thing,” Hatch said.

    Buffett’s company will pay Burlington Northern shareholders about $15.9 billion in cash and issue about 80,932 shares of Class A stock and 21 million Class B shares, Berkshire said in a statement.

    The cost for the 77.4 percent of the railroad the Berkshire didn’t already own is $26.7 billion, based on a price of $114,000 for the Class A and $76.90 for the Class B. That values all of Burlington Northern at $34.5 billion. Berkshire is also assuming about $10 billion of the railroad’s debt, the company said Nov. 3.

    –With assistance from Angela Greiling Keane in Washington. Editors: Dan Reichl, Erik Holm

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  • CNBC: Jim Cramer – Berkshire Hathaway’s Best Business?

    Published: Friday, 12 Feb 2010 | 3:21 PM ET

    By: Tom Brennan
    Web Editor, Mad Money

    The S&P 500 slipped slightly lower as investors dumped some holdings to make way for Berkshire Hathaway, which will join the index after Friday’s closing bell. Cramer recommended that people give the stock a serious look when the market reopens after the President’s Day holiday.

    “I’m a buyer of the guy’s company,” Cramer said, referring to Berkshire [BRKB 76.90 0.21 (+0.27%) ] chief Warren Buffett.

    Cramer said that he has been bullish on the rails since Mad Money first launched in 2005, and Berkshire’s exposure to the industry was one reason he likes the stock so much.

    “Now that he’s clearly overweighted in rails,” Cramer said, again mentioning Buffet, “I want to buy them even more.”

    The Mad Money host called the rails “a great oligopoly,” saying they can raise prices virtually without impunity. But the service is “such an efficient way to be able to ship goods that they can take the rates up.” Congress might try to pass legislation to keep this practice is check, Cramer said, but he doubted it would work.

    The Mad Money host praised Norfolk Southern [NSC 48.48 -0.10 (-0.21%) ] and said he also counted Union Pacific [UNP 63.41 -0.20 (-0.31%) ] among his favorites.

    “I like every single one of the rails,” Cramer said, adding, “Union Pacific’s got a lot of upside from here.”

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  • CNBC: Berkshire Hathaway Goes Into S&P 500 With Trading Surge At the Close

    Published: Friday, 12 Feb 2010 | 4:57 PM ET

    By: Alex Crippen
    Executive Producer

    Warren Buffett’s Berkshire Hathaway has been welcomed into the benchmark S&P 500 index with a surge of trading just before today’s close at the New York Stock Exchange.

    CNBC’s Maria Bartiromo reports there was an enormous crowd around the Berkshire post on the floor of the NYSE.

    Index mutual funds that mimic the performance of the S&P had to buy Berkshire Class B shares because the stock is being added to the index after today’s close.

    Today’s Wall Street Journal notes that over $1 trillion of investors’ money “directly tracks” the S&P.

    Berkshire B shares fell to a low of $74.57 around 1p ET today, and then rebounded to end the day at $76.90, a gain of $0.21, or 0.27 percent. That’s 13.1 percent above the $68 close on January 26, the day S&P announced Buffett would join the S&P.

    Some of the buying of B shares may have been the result of investors moving out of the much higher priced A shares. They closed down $950 at $114,000 on enormous (for the stock) volume of over 18,000 shares. CNBC producer Robert Hum at the NYSE reports there was a huge imbalance of sell orders that kept trading open until almost one hour after the closing bell.

    In one especially large trade at 4:41p ET, just over 8-thousand shares went for $114,000 each.

    Berkshire is replacing Burlington Northern in the S&P, now that the railroad is officially a Berkshire subsidiary following today’s closing of Buffett’s $26 billion “bet on America.”

    A 50-for-1 stock split of the B shares, prompted by the Burlington deal, cleared the way for Buffett & Co. to join the elite S&P 500. Before the split, the stock’s four-digit price limited liquidity.

    Current Berkshire stock prices:

    Class B: [BRK.B 76.90 0.21 (+0.27%) ]

    Class A: [BRK.A 114000.00 -950.00 (-0.83%) ]

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    Berkshire Portfolio

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  • CNBC: Burlington Northern Officially Joins the Warren Buffett Family

    Published: Friday, 12 Feb 2010 | 2:54 PM ET

    By: Alex Crippen
    Executive Producer

    Warren Buffett’s $26 billion “bet on America” is now official.

    Berkshire Hathaway has just issued a news release announcing the “closing of the merger of Burlington Northern Santa Fe Corporation (‘BNSF’) with and into a subsidiary of Berkshire.”

    As a subsidiary, Burlington shares will no longer be publicly traded.

    BNSF shareholders approved Berkshire’s acquisition of the railroad at a special meeting held yesterday (Thursday.)

    Burlington Northern shareholders were given the choice of being paid for their shares in cash, Berkshire stock, or a combination of the two.

    Final results of those elections:

    Cash 40.85%
    Stock 43.36%
    No Election 15.79%

    The release says BNSF shareholders choosing cash or failing to make an election will get $100/share cash. Those choosing stock will get 92.25% of their $100/share in Berkshire stock and the remainder in cash.

    In total, Berkshire will pay about $15.87 billion in cash and issue approximately 80,932 shares of Class A stock, along with approximately 21 million shares of Class B.

    Next stop for the Berkshire Bs will be their addition to the widely followed benchmark S&P 500 stock index, replacing Burlington Northern.

    That happens after tonight’s closing bell at 4p ET, giving the many investors in S&P index funds a piece of Warren Buffett and Berkshire.

    Current Berkshire stock prices:

    Berkshire Portfolio

    Class A: [BRK.A 114000.00 -950.00 (-0.83%) ]

    Class B: [BRK.B 76.90 0.21 (+0.27%) ]


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  • FORBES: Another Feather In Buffett’s Cap

    Steve Schaefer, 02.12.10, 05:00 PM EST



    Berkshire Hathaway joins the S&P 500.

    Berkshire Hathaway inc.

    02/12/2010 7:59PM ET
    • $76.90
    • $0.21
    • 0.27%

    Warren Buffet’s legendary career got a new wrinkle Friday, when the Class B shares of his investment firm Berkshire Hathaway were added to the S&P 500 index after the closing bell.

    To the casual observer it would seem surprising that Berkshire Hathaway ( BRK news people ) was never listed in the 500-stock index, given the Oracle of Omaha’s legendary track record and its $180 billion market cap. Dig a little deeper though, and the reason becomes clear.

    Until a recent 50-for-1 stock split — executed to smooth the acquisition of Burlington Northern Santa Fe — Berkshire’s B shares traded for over $3,000 apiece, and fewer than five million changed hands on an average day. And forget about the A shares, which still cost more than $100,000 and see volume below one million most days. (See “Berkshire’s B-Shares Split.”)

    That lack of liquidity is what kept Berkshire out of the S&P 500 to this point, says S&P spokesperson David Guarino. “Berkshire is a very large company and a leader in its industry,” he said. After the stock split, with daily trading volumes considerably higher, it was a no-brainer to add the company to the index.

    Buffett, the world’s second-richest man according to the latest Forbes list of the world’s billionaires, had long-opposed a stock split, positioning his firm’s shares as a place for long-term investors and not short-term speculators looking to turn a quick profit. But when the Burlington Northern deal came along, the share split provided a way to compensate the railroad operator’s smaller shareholders who had positions that wouldn’t add up to the price of a single Berkshire share.

    While the split makes Buffett’s firm a much more liquid investment opportunity, it may also attract the kind of quick-buck traders that the firm’s sky-high stock price previously kept at arm’s length.

    Berkshire’s B shares will be added to the S&P 500 after Friday’s closing bell. The stock bounced around the unchanged mark most of the session, but as traders swarmed around the Berkshire post on the floor of the New York Stock Exchange late in the trading day, shares jumped to a gain of 1.3% before closing at $76.90 with a 0.3% gain.

    Typically, stocks get a short-term bump when they are added to an index, since index-mirroring funds like State Street’s SPDR S&P 500 ( SPY news people ) exchange-traded fund or BlackRock’s iShares S&P 500 Index ( IVV news people ) ETF need to establish a position in the stock.

    That short-term boost is fleeting though and does little to boost a stock price in the absence of a solid growth story and strong performance. Of the last 11 stocks added to the S&P 500, seven showed a gain the day after they were added to the index. Two of those have fallen since, but the factors that go into those moves are wide-ranging.

    Gas distributor Airgas ( ARG news people ) has shot up 33.7% since its Sept. 8 addition to the S&P 500, but the bulk of that move has come in recent days after rival Air Products & Chemicals launched a takeover offer for the company at $60 a share, nearly a 40% premium at the time.

    The story has been an opposite one for First Solar ( FSLR news people ). Its shares have tumbled 26.8% since being added to the index on a series of analyst downgrades that expressed concern about the solar module maker’s earnings potential.

    Berkshire’s B shares might get a bump on Monday as indexers add the stock to their portfolios, but in the long run investments like the Burlington Northern acquisition and the stakes the firm took in Goldman Sachs ( GS news people ) and General Electric ( GE news people )at the height of the financial crisis will be the driving force behind the stock’s movement. (See “Buffett Bets On GE.”)

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