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3 Investing Ideas As Warren Buffett Gives Out Timeless Advice

Written by Chris Lau, Kapitall Contributor: Well-ahead of the annual general meeting for Berkshire Hathaway (BRK.B) on May 4, 2013, Warren Buffett and author Carol Loomis was interviewed by Charlie Rose. Berkshire shares closed at around $152,000 and surpassed the $150,00- level for the first time ever. The interview is well-worth watching for any investor looking for advice in finance or in succeeding in life.

To summarize the key points, Buffett said he liked to focus on management and on the competitive advantages of a company when he selects companies. Many investors forget that Buffett is an incredibly focused investor. He stays away from companies and sectors that he does not understand and prefers investment ideas whose outlook may be forecast ahead by 5 to 10 years. When asked about acquisitions, he said he wanted to buy a company that was around $20 billion in size. The market now knows that H. J. Heinz (HNZ) was probably the company he was referring too. Heinz is being acquired by Berkshire for $23 billion.

Outlook

Buffett said that Europe is still drifting downwards, and that Asia is coming down somewhat. Since the interview, economic figures from China are mixed. China’s iShares FTSE China (FXI) is down substantially since peaking in January:

Buffett thinks the United States is the strongest, relatively speaking. The housing sector is coming back big time.

In the next 5 to 10 years, Buffett thinks the markets will be better, citing the power of capital markets to drive the economy.

Business Section: Investing Ideas

Companies mentioned by Buffett include:

1. Wells Fargo & Company (WFC): Provides retail, commercial, and corporate banking services primarily in the United States. Market cap at $183.21B, most recent closing price at $34.79.

Wells Fargo is near a 52-week high, returning 19.16% to investors over a 1-year period. Buffett added 17.3M shares to his position very recently, and now owns 439.8M shares.
 

2. Deere & Company (DE): Provides products and services primarily for agriculture and forestry worldwide. Market cap at $33.2B, most recent closing price at $85.55.

This company is not a Buffett idea. Berkshire has other managers each managing around $4 billion in assets. Buffett does not know why his managers bought this company, and gives them the freedom to make their own decisions.
 

3. The Coca-Cola Company (KO): Distributes, and markets nonalcoholic beverages worldwide. Market cap at $169.18B, most recent closing price at $37.72.

Buffett joked that he had his first drink of Coke in the 1930’s and only started a position in the company in 1988. Shares rose sharply to $38.52 recently. In its last quarter, gross margins declined 50 bps to 59.6%.
 

(List compiled by Kapitall Contributor Chris Lau)

 

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