Updated from 10:19 a.m. EDT
Warren Buffett has a challenging problem. He has too much money.
has $50 billion cash in the bank. In order to show improving earnings, Buffett has to put that money to work and have it make more money for him.
He needs to buy stocks that go up and companies that improve their book value and cash flows. He needs to take in insurance premiums that he never gives back as payments (in other words, the insurance company should be conservative on the risks it takes, something Buffett has been notoriously good at for 40 years). And all of his current businesses, such as MidAmerican, NetJets, Fruit of the Loom, Dairy Queen, etc. need to do well.
Buffett has so much cash, though, that it's hard to find a suitable investment to satisfy his voracious appetite. He can't just make tiny investments, like buying 1% of a company, and hope it does well on the stock market. He has to swallow companies whole and trust that he's paying a cheap enough price for a good enough management, that the company satisfies his desires for growth.
Some things he won't do, however.
- He'll stay out of China (no Baidu (BIDU) - Get Report for him).
- He loves health care; his recent investments in Sanofi-Aventis (SNY) - Get Report and Johnson & Johnson (JNJ) - Get Report are examples, but I don't think he'll buy those companies outright.
- He'll stay out of Internet tech (despite once owning bonds on both Amazon.com (AMZN) - Get Report and Level 3 Communications (LVLT) , I can't see him making an extensive foray into this arena).
- He'll probably not swallow up any of his bank investments (Wells Fargo (WFC) - Get Report, US Bancorp (USB) - Get Report or Bank of America (BAC) - Get Report are all underwater this year but represent good investments).
- And while I'm sure he's a big fan of his bridge partner Bill Gates' company, Microsoft (MSFT) - Get Report, he'll probably leave that one alone also. (Note: Gates is on the Berkshire board.)
Stockpickr has come up with two investment ideas for Buffett.
Hint: Think food and real estate.
OK, fine. They're
First Industrial Realty
A note from James Altucher:Every weekend I send an email to Jim Cramer and several hedge fund managers about the most interesting portfolios posted on Stockpickr that week. Usually those portfolios not only list stocks according to atheme but also offer significant analysis as to why the stocks are cheap.Here are some examples: Here's the challenge: Build a portfolio at Stockpickr.com with greatanalysis, and send me the link. Each great portfolio (with analysis)will get posted on TheStreet.com with your byline (as a "StockpickrGuest Columnist") and will be included in my email I send to Jim and the otherhedge fund managers on my list.
- Stocksrelated to drilling the Marcellus Shale
- MLPSwith yields above 7%
- Microcapstrading for less than tangible book
- Stocksthat do well after Hurricanes
At the time of publication, Altucher and/or his fund was long Bank of America, although positions may change at any time.
James Altucher is president of
LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for the
and the author of
Trade Like a Hedge Fund
Trade Like Warren Buffett
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
to send him an email.
TheStreet.com has a revenue-sharing relationship with Trader's Library under which it receives a portion of the revenue from purchases by customers directed there from TheStreet.com.