{"id":361280,"date":"2010-02-24T21:58:00","date_gmt":"2010-02-25T02:58:00","guid":{"rendered":"tag:blogger.com,1999:blog-3087194156628161158.post-1517698903045820368"},"modified":"2010-02-24T22:02:55","modified_gmt":"2010-02-25T03:02:55","slug":"wall-street-journal-warren-buffett-is-going-to-waste","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/361280","title":{"rendered":"WALL STREET JOURNAL: Warren Buffett Is Going to Waste"},"content":{"rendered":"<p><a onblur=\"try {parent.deselectBloggerImageGracefully();} catch(e) {}\" href=\"http:\/\/3.bp.blogspot.com\/_I4PjsLyIz-M\/S4Xnyum5WNI\/AAAAAAAABKA\/IDDNcxKa8Bk\/s1600-h\/FA_2_24_Trash_D_20100223165531.jpg\"><img decoding=\"async\" style=\"margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 262px; height: 174px;\" src=\"http:\/\/3.bp.blogspot.com\/_I4PjsLyIz-M\/S4Xnyum5WNI\/AAAAAAAABKA\/IDDNcxKa8Bk\/s400\/FA_2_24_Trash_D_20100223165531.jpg\" alt=\"\" id=\"BLOGGER_PHOTO_ID_5442010583437760722\" border=\"0\" \/><\/a><span style=\"font-weight: bold;\">By James Altucher<\/span><\/p>\n<ul class=\"cMetadata metadataType-articleStamp \">\n<li class=\"dateStamp first\"><small>February 24, 2010, 3:05 PM ET<\/small><\/li>\n<\/ul>\n<p>Warren Buffett is mistakenly called a \u201cvalue investor.\u201d He isn\u2019t \u2014 or at least he hasn\u2019t been since the early 1960s.<\/p>\n<p>To me, a value investor is someone who buys an asset because it is worth less than an easily measurable way of determining value. A basic example is the stock of a company that has $100 million of cash in the bank, no debt, and a $50 million market cap (a situation which happens often during market downturns). Then it is probably a good value. Eventually it will be at least worth its cash levels of $100 million as long as its not losing money.<\/p>\n<p>Another metric that value investors use is the P\/E ratio. If a stock is trading at only five times its earnings (e.g. if it earns $10 million and its market capitalization is $50 million) then it is usually a good buy.<\/p>\n<p>There is more to it, but that is value investing at its most basic.<\/p>\n<p>Buffett is more of a demographic investor. His long-term nature means he generally doesn\u2019t do what value guys do: buy when stock that is worth less than its value; sell when it hits its value. He\u2019s got too much money to work with and so takes a much longer term view.<\/p>\n<p><strong>Examples<\/strong>:<\/p>\n<p><strong>Demographic stance:<\/strong> Everyone in the world will eventually drink flavored fizzy drinks<br \/>I<strong>nvestment stance:<\/strong> When other investors were down on Coca-Cola (KO), Buffett was a buyer<\/p>\n<p><strong>Demographic stance:<\/strong> Everyone in the world will eventually use a credit card.<br \/><strong>Investment stance:<\/strong> Buy American Express (AXP). When Buffett first bought AXP in the early 60s it was when they were in the midst of the famous (at that time) \u201csalad oil scandal.\u201d Investors were fleeing the stock. Buffett stood behind the cashier at his favorite restaurant, saw how many people were using the card, and decided this was a trend that was not going away.<\/p>\n<p><strong>Demographic stance:<\/strong> Everyone in the world will eventually shave with disposable razors (well, at least the men in the world would).<br \/><strong>Investment stance:<\/strong> Gillette was having issues and vultures were circling. Buffett came in as a white knight and bought a chunk of preferred stock which he converted to common a few years later and continued to hold through its acquisition by Procter &amp; Gamble.<\/p>\n<p><strong>Demographic stance:<\/strong> China will continue to be a voracious consumer of U.S. commodities.<br \/><strong>Investment:<\/strong> Buy the railroad that transports those commodities from the Midwest to the shipping lanes of the West Coast \u2013 Burlington Northern (BNI)<\/p>\n<p>So what\u2019s the new demographic stance right now?<\/p>\n<p>The average American creates more solid waste than ever before and that trend will never stop.<\/p>\n<p>Since 1960, the amount of solid waste  we create per year has tripled (to 400 million tons)while population has gone up less than 100%. Every year we create more trash than the year before.<\/p>\n<p>Buffett tends to piggyback his bridge partner, a young former software engineer named Bill Gates. Gates invests through his personal investment vehicle (like most other former software engineers), Cascade Investments. Cascade was the largest shareholder of Allied Waste, which has since merged with Republic Service Group (RSG). Gates is now the largest shareholder of RSG. He also owns a stake in Waste Management (WM). <\/p>\n<p>Gates also bought railroads (specifically Canadian National Railroad (CNI) ) long before Buffett.  (Buffett has said, \u201cI wish I had started buying railroads when Bill first got into them\u201d).<\/p>\n<p>Gates owns 57 million shares of RSG. Now Buffett has raised his stake from 3.6 million shares to 8.3 million shares, according to the most recent filings.<\/p>\n<p>Buffett also added to his position in Iron Mountain (IRM) which, among other services in information management, provides \u201cSecure shredding services\u201d to their clients. Gates also owns shares of Waste Management (WM) through his foundation.<\/p>\n<p>I like to look at not only what Buffett is doing but the funds that tend to follow what Buffett is doing.<\/p>\n<p>It turns out that other hedge funds that typically piggyback Buffett are buying in the waste space.  Bridger Management, with $4bb in assets, in addition to owning Berkshire Hathaway and Republic has also been buying positions in Casella Waste (CWST) and Waste Connections (WCN)<\/p>\n<p>The trash sector is perhaps the biggest demographic trend since the Internet bubble and following in the footsteps of the greats like Buffett and Gates (and their followers) is the best way to play the sector.<\/p>\n<p><em>James Altucher is a managing partner of Formula Capital, an alternative asset management firm, and an author on investment strategies. Unlike Dow Jones reporters, he may have positions in the stocks he writes about.<\/em><\/p>\n<p class=\"textBodyBlack\"><a name=\"comments\"><span style=\"font-weight: bold;\">Share Investor Links<\/span><\/a><a name=\"comments\"><\/a><\/p>\n<p><a href=\"http:\/\/www.shareinvestorblog.com\/\">Share Investor Blog<\/a> &#8211; Stockmarket &amp; Business commentary<br \/><a href=\"http:\/\/shareinvestornz.blogspot.com\/2007\/02\/new-zealand-business-news.html\">Share Investor New Zealand Business News<\/a>&#8211; Get more business news<br \/>Discuss this topic @<a href=\"http:\/\/www.shareinvestorforum.com\/\"> Share Investor Forum<\/a> &#8211; <a href=\"http:\/\/shareinvestorforum.com\/ucp.php?mode=register&amp;sid=450a61250472e03fa25c205c9c1723f1\"><strong>Register<strong><\/strong><\/strong><\/a> free<br \/><a href=\"http:\/\/www.currency-market.blogspot.com\/\">Share Investor&#8217;s Daily Forex Updates<\/a><\/p>\n<p><span style=\"font-weight: bold;\">Recommended Amazon Reading<\/span><\/p>\n<p><script type=\"text\/javascript\">var addthis_pub=\"shareinvestor\";<\/script><\/p>\n<table id=\"searchResults\" cellspacing=\"0\">\n<tbody>\n<tr class=\"clsOdd\">\n<td class=\"tdimage\"><a href=\"http:\/\/astore.amazon.com\/shareinvestorbookstore-20\/detail\/0966446127\"><img decoding=\"async\" src=\"http:\/\/ecx.images-amazon.com\/images\/I\/315%2BfrL4YuL._SL75_.jpg\" alt=\"The Essays of Warren Buffett: Lessons for Corporate America, Second Edition\" \/><\/a><\/td>\n<td class=\"tddescription\"><a href=\"http:\/\/astore.amazon.com\/shareinvestorbookstore-20\/detail\/0966446127\">The Essays of Warren Buffett: Lessons for Corporate America, Second Edition<\/a> by <span class=\"by\">Warren E. Buffett<\/span><br \/>    Buy new:        $25.91       \/ Used from:        $20.00<br \/><span class=\"availability\">Usually ships in 24 hours<\/span><\/td>\n<\/tr>\n<tr class=\"clsEven\">\n<td class=\"tdimage\"><a href=\"http:\/\/astore.amazon.com\/shareinvestorbookstore-20\/detail\/0553384619\"><img decoding=\"async\" src=\"http:\/\/ecx.images-amazon.com\/images\/I\/51hlhRX908L._SL75_.jpg\" alt=\"The Snowball: Warren Buffett and the Business of Life\" \/><\/a><\/td>\n<td class=\"tddescription\"><a href=\"http:\/\/astore.amazon.com\/shareinvestorbookstore-20\/detail\/0553384619\">The Snowball: Warren Buffett and the Business of Life<\/a> by <span class=\"by\">Alice Schroeder<\/span><br \/>    Buy new:        $13.60       \/ Used from:        $10.34<br \/><span class=\"availability\">Usually ships in 24 hours<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><iframe loading=\"lazy\" border=\"0\" marginheight=\"0\" marginwidth=\"0\" src=\"http:\/\/rcm.amazon.com\/e\/cm?t=sharinve-20&amp;o=1&amp;p=7&amp;l=ez&amp;f=ifr&amp;f=ifr\" style=\"border: medium none ;\" frameborder=\"0\" height=\"40\" scrolling=\"no\" width=\"260\"><\/iframe>              <script type=\"text\/javascript\">var addthis_pub=\"shareinvestor\";<\/script><script type=\"text\/javascript\">var addthis_pub=\"shareinvestor\";<\/script><script type=\"text\/javascript\">var addthis_pub=\"shareinvesto<\/script><br \/><script type=\"text\/javascript\">var addthis_pub=\"shareinves<\/script><br \/><script type=\"text\/javascript\">var addthis_pub=\"shareinvestor\";<\/script><\/p>\n<div><script type=\"text\/javascript\">var addthis_pub=\"shareinvestor\";<\/script><br \/><a name=\"data:post.title\" id=\"data:post.url\" onmouseover=\"'return\" onmouseout=\"addthis_close()\" onclick=\"return addthis_sendto()\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/s7.addthis.com\/static\/btn\/lg-share-en.gif\" alt=\"Bookmark and Share\" style=\"border: 0pt none ;\" height=\"16\" width=\"125\" \/><\/a><script type=\"text\/javascript\" src=\"http:\/\/s7.addthis.com\/js\/200\/addthis_widget.js\"><\/script><\/div>\n<p><!-- AddThis Button END --><\/p>\n<div class=\"blogger-post-footer\"><script type=\"text\/javascript\"><!--\ngoogle_ad_client = \"pub-1811166043296468\";\ngoogle_ad_width = 468;\ngoogle_ad_height = 60;\ngoogle_ad_format = \"468x60_as\";\ngoogle_ad_type = \"image\";\ngoogle_ad_channel =\"\";\n\/\/--><\/script><br \/>\n<script type=\"text\/javascript\"\n  src=\"http:\/\/pagead2.googlesyndication.com\/pagead\/show_ads.js\">\n<\/script><img width='1' height='1' src='https:\/\/blogger.googleusercontent.com\/tracker\/3087194156628161158-1517698903045820368?l=everythingwarrenbuffett.blogspot.com' alt='' \/><\/div>\n<p><a href=\"http:\/\/feedads.g.doubleclick.net\/~a\/uFbIlx4jCGvDuXoc-mUJfgWAD0o\/0\/da\"><img decoding=\"async\" src=\"http:\/\/feedads.g.doubleclick.net\/~a\/uFbIlx4jCGvDuXoc-mUJfgWAD0o\/0\/di\" border=\"0\" ismap=\"true\"><\/img><\/a><br \/>\n<a href=\"http:\/\/feedads.g.doubleclick.net\/~a\/uFbIlx4jCGvDuXoc-mUJfgWAD0o\/1\/da\"><img decoding=\"async\" src=\"http:\/\/feedads.g.doubleclick.net\/~a\/uFbIlx4jCGvDuXoc-mUJfgWAD0o\/1\/di\" border=\"0\" ismap=\"true\"><\/img><\/a><\/p>\n<div class=\"feedflare\">\n<a href=\"http:\/\/feeds.feedburner.com\/~ff\/EverythingWarrenBuffett?a=lrrx6JdINcs:rk96PMOYJKw:yIl2AUoC8zA\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/EverythingWarrenBuffett?d=yIl2AUoC8zA\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/EverythingWarrenBuffett\/~4\/lrrx6JdINcs\" height=\"1\" width=\"1\"\/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By James Altucher February 24, 2010, 3:05 PM ET Warren Buffett is mistakenly called a \u201cvalue investor.\u201d He isn\u2019t \u2014 or at least he hasn\u2019t been since the early 1960s. To me, a value investor is someone who buys an asset because it is worth less than an easily measurable way of determining value. A [&hellip;]<\/p>\n","protected":false},"author":833,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-361280","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/361280","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/833"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=361280"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/361280\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=361280"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=361280"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=361280"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}