'I Probably Wouldn't Raise Interest Rates Right Now' – Warren Buffett

Berkshire Hathaway Chairman and CEO Warren Buffett discusses the U.S. economy, the housing market, the Fed and the markets.
Watch Liz Claman talk about Management, US Markets, and Wall Street on Closing Bell.

Top 8 Ways to Create Passive Income

Wouldn't it be great if you could have a continuous stream of income deposited into your savings and/or checking account? Think about it. You wouldn't have to worry about paying the bills on time or having money to buy groceries for your family. An extra $500, $1,000 or more in your bank account will reduce your money worries and stress.

While having multiple streams of income is ideal, you need to choose the right one for you. For example, if you want to earn money from a blog, you need to pay for web hosting, choose the right niche, design your website (or have someone design it for you), create a blogging schedule, share your posts, develop a community, guest blog, and choose the best affiliates for your blog niche. Blogging is work, but it is fun!

If you want to earn additional monthly income and start saving for retirement (or add to a fund), college, vacation, etc., check out the top eight ways to create passive income listed below. Some require more work than others. But all of them will put extra cash into your pocket.

8 Ways to Create Passive Income

1. Affiliate marketing.

Affiliate marketing means you sign up with a company and/or entrepreneur and sell their products. For example, if you start a tech website, you could become an affiliate of a web hosting or anti-virus software company. You can earn hundreds or even thousands of dollars each month if your website receives a decent amount of web traffic and you have thousands of email subscribers. Being an affiliate marketer takes dedication and time. You need to build traffic via your website, email marketing and social media. Is this for you? You be the judge.

2. Start a freelance business.

Have you always wanted to own your own business? You could start a side business while you work a full-time or part-time job. For example, if you're a graphic or web designer, you could start your own graphic or web design business on the side. If you like to make jewelry, you could sell at craft fairs and online. Starting a business may be daunting, but if you believe in you and your work, you could earn a decent living, maybe even quit your day job. Search out those who are doing what you want to do and interview them. Find out the mistakes they made and ask for guidance.

Buffett Still Buying Stocks, Sees 'Good Value'

Warren Buffett still sees "good value" in stocks, even as the Dow Jones Industrial Average approaches an all-time high.

On CNBC's Squawk Box, Buffett said Berkshire Hathaway is still buying stocks, even though prices have increased.

"Anything I bought at $80 I don't like as well at $100. But if you're asking me if stocks are cheaper than other forms of investment, in my view the answer is yes. We're buying stocks now. But not because we expect them to go up. We're buying them because we think we're getting good value for them."

He said stocks are not "as cheap as they were four years ago" but "you get more for your money" compared to other investments. He added, "The dumbest investment, in my view, is a long-term government bond."

Buffett revealed that a potential acquisition had been "mentioned" to him and he will be exploring the idea, no deal is imminent. "That's always a low probability. Whether it's a five percent or ten percent, who knows? But I get excited when I hear about possibilities." Asked what sector the company is in, he replied with a laugh that it is "in business."

(Read More: Buffett: How to Get 'Fair Shake' on Wall Street)

Buffett praised Berkshire's new portfolio managers, Todd Combs and Ted Weschler, and announced publicly for the first time that they'll soon be getting an additional $1 billion to work with. He joked they are making his decisions "look bad" by comparison. The new money will increase the size of their portfolios to $6 billion from $5 billion.

Buffett said it's "quite unlikely" he'll hire another portfolio manager, in part because he's so happy with Combs and Weschler. "We hit the jackpot with these two."

Buffett isn't too worried that the automatic government spending cuts known as the sequester will slow down the U.S. economy too much.

"We're continuing to see a slow recovery," he said. "It hasn't taken off, but it hasn't stopped either."

Buffett said that while the sequester will reduce the government's stimulus of the economy by cutting back on the deficit the remaining spending is still providing the economy a lot of "juice." 

"It's not galloping at all, but we are making progress bit by bit. Everybody would love to see it faster. But it's not going into reverse and I do not think the sequester will cause it to go into reverse."

Stock Market Crash: Is Your Asset Allocation Right?

If we have a stock market crash, is your asset allocation right to protect your portfolio from large losses? Many investors mistakenly believe that because they are “long term investors” they shouldn’t concern themselves with “short term” returns. They are wrong!

Stock Market Crashes

Stock market crashes and secular bear markets are a reality of investing in stocks. The result of either will be determined by your asset allocation. If you are not prepared by having the right asset allocation for the current circumstances and valuation; your portfolio can be destroyed for years to come.

If you have a 50% loss and a 50% gain you are not at break even. You have lost 25% of your portfolio! Volatility is one of the most underestimated killers of portfolio performance. If you don’t have a clear understanding of this concept read my post “Portfolio Volatility and the Impact on Performance”.

Get Your Asset Allocation Right!

Once you understand the importance of capital preservation; how do you get your asset allocation right? This is the secret only value investors seem to know: Price Matters!

The public has been taught by the financial media to choose a fixed strategic asset allocation. But does this make sense? Should you buy the same amount of an asset when its price is expensive as when the price is a bargain?

Purchasing investment assets at prices below their fundamental or intrinsic value greatly improves the probability of above average returns. When you require a margin of safety you have created a margin for errors in your analysis, or unforeseen events that could affect your investment.

This means you can lower your investment risk by implementing a tactical asset allocation strategy. You should never have an asset allocation that can wreck your portfolio for years to come. That may mean being less aggressive than you have been in the past. It also may mean putting more emphasis on cash in your portfolio.

Watch For Warning Signs

Watch for warning signs long before a stock market crash. Fundamental analysis of company financial statements and current market valuations should provide warnings of over valued securities. If you can’t find many stocks that meet your margin of safety requirement, that is a warning sign.

Also pay attention to sentiment indicators. Keep in mind the public usually hates stocks when they are bargains and loves them when they are over valued. Be a contrarian thinker when it comes to getting your asset allocation right.

You now have several investment concepts to help you avoid the next stock market crash. There are always warning signs; remember, price matters.

It’s critical to limit losses in a stock market crash because you can grow your capital from a higher base. Then, when most are panic selling you will be buying at prices you know favor above average returns.

From arborinvestmentplanner.com

Book Review: 'The Warren Buffett Way'

Books on Warren Buffett dominate the bookshelves at the investment section of bookstores. Among the sea of Warren Buffett books, Robert G. Hagstrom's name stands out. He has written three books: The "Warren Buffett Way," "The Warren Buffett Portfolio," and "The Essential Buffett."

According to Robert Hagstrom, his second book, "The Warren BuffettPortfolio," is meant to be a companion, not a sequel, to "The Warren Buffett Way." He claimed he unwittingly passed lightly over two important areas: portfolio management and intellectual fortitude in The Warren Buffett Way. It gives the reader tools to pick common stocks wisely, and The Warren Buffett Portfolio shows you how to organize them into a focus portfolio and provides the intellectual framework for managing it.

I introduce readers to Hagstrom's first book, The Warren Buffett Way.

Takeaways from The Warren Buffett Way

Business Tenets = basic characteristics of the business itself

1. Is the business simple and understandable?

- Understand the revenues, expenses, cash flow, labor relations, pricing flexibility, and capital allocation needs of every single one of your holdings.

- Investment success is not a matter of how much you know but how realistically you define what you don’t know.

2. Does the business have a consistent operating history?

- A steady track record is a relatively reliable indicator. When a company has demonstrated consistent results with the same type of products year after year, it is not unreasonable to assume that those results will continue.

- Avoid purchasing companies that are fundamentally changing direction because their previous plans were unsuccessful. Undergoing major business changes increases the likelihood of committing major business errors.

- Avoid businesses that are solving difficult problems. Turnarounds seldom turn.

3. Does the business have favorable long-term prospects?

- A franchise as a company whose product or service 1) is needed or desired, 2) has no close substitute and 3) is not regulated.

- A franchise that is the only source of a product people want can regularly increase prices without fear of losing market share or unit volume.

- A franchise has the ability to survive economic mishaps and still endure. A great company is one that will be great for 25 to 30 years

Management Tenets = important qualities that senior managers must display

4. Is management rational?

- The most important management act is allocation of the company’s capital.

- Deciding what to do with the company’s earnings — reinvest in the business, or return money to shareholders — is an exercise in logic and rationality.

- If the extra cash, reinvested internally, can produce an above-average return on equity — a return that is higher than the cost of capital — then the company should retain all its earnings and reinvest them.

- A company that provides average or below-average investment returns but generates cash in excess of its needs should return the money to shareholders.

- Dividends put reinvestment risk in the hands of shareholders.

- Repurchases are preferred as shareholders are rewarded twice, first from the initial open market purchase and then from the positive effect of investor interest on price.

5. Is management candid with its shareholders?

- Likes managers who report their companies’ financial performance fully and genuinely, who admit mistakes as well as share successes, and who are in all ways candid with shareholders.

- Data should be disclosed in a manner that helps the financially literate readers answer three key questions: 1) Approximately how much is this company worth? 2) what is the likelihood that it can meet its future obligations? and 3) how good a job are its managers doing, given the hand they have been dealt?

- Managers who confess mistakes publicly are more likely to correct them.

- The CEO who misleads others in public may eventually mislead himself in private.

6. Does management resist the institutional imperative?

- The institutional imperative is the lemming-like tendency of corporate management to imitate the behavior of other managers, no matter how silly or irrational that behavior may be.

Warren Buffett's Two Investing Rules For Dividend Investors

We all like things presented in their simplest terms. Headlines like "Two simple steps to lose that unwanted weight" always grabs our attention, even if it is just to smile and say I wish it were true. I enjoy reading inspiring quotes. They often put life's issues in their simplest terms and in doses that are easy to swallow. 

From an investing perspective, some of my favorite quotes come from Warren Buffett. Most are immediately intuitive, such as these:

It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

Price is what you pay. Value is what you get.
- Warren Buffett

However, a few have caused me to stop and ponder their true meaning, or meanings. None more so than the following quote:

Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
- Warren Buffett

My first reaction to anything I read is to take it literally as written. In this case, rule number one would prevent you from ever buying a stock. By definition, you buy stocks at market price, plus a commission, so the moment you buy the stock you have lost money (the cost of the commission). 

Obviously, Mr. Buffett didn't have such a literal view in mind when he made that statement. Like every investor, he has held stocks that have declined from where they were purchased. Instead, I think the true meaning of his statement are revealed in these quotes:

I. "I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.

- Warren Buffett

The more complex an investment, the more likely it is to fail. There is something to be said for understanding what you are investing in and knowing what differentiates the company from its competitors. I believe the term Buffett uses is "moat". 

II. "A public-opinion poll is no substitute for thought. "
- Warren Buffett

Selecting an investment is a long-term proposition. It shouldn't be a flippant decision based on what the talking heads saying on today's market report. 

III. "I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years."
- Warren Buffett

Focus on quality, it is the only thing that endures over time. It is very unlikely that you will lose money, over the long haul, with blue-chip quality stocks with a proven advantage.


From dividend-growth-stocks.com

Warren Buffett Dumps Intel, But Reveals Two New Energy Positions

Berkshire Hathaway's latest 13-F filing is out. It includes any investment moves during the second quarter.

New positions include National Oilwell Varco (2,841,200 shares) and Phillips 66 (27,163,918 shares).

National Oilwell Varco supplies equipment to oil and gas drillers.

Phllips 66 is an oil refiner.

During the reporting period, Berkshire sold off all of its position in Intel (7,745,000 shares).

Other major moves include Bank of New York (raised to 18,719,515 shares from 5,607,466 shares), Viacom (raised to 6,813,200 shares from 1,591,670 shares), Ingersoll-Rand (lowered to 20,400 shares from 636,000 shares), Johnson & Johnson (lowered to 10,333,128 shares from 29,018,127 shares), and Sanofi-Aventis (lowered to 261,900 shares from 1,429,200 shares).

Read more: businessinsider.com

Bought GENTING SINGAPORE PLC, 29 June 2012

GENTING SINGAPORE

I have bought GENTING SINGAPORE at price SG 1.39. 

Company Background

GENTING  SINGAPORE International is an integrated resorts development specialist with many years of international gaming expertise and global experience in developing, operating and/or marketing internationally acclaimed casinos and integrated resorts in different parts of the world, including Australia, the Americas, Malaysia, the Philippines and the United Kingdom (“UK”).  GENTING  SINGAPORE  International is a 54.8percent-owned member company of Genting Berhad and was incorporated in 1984 to invest in leisure and gaming-related businesses outside Malaysia.

Cash Just May Be Your Riskiest Investment

Quantitative easing (QE), it is such a benign sounding term. It is somewhat relaxing rolling off your lips. Unfortunately, this rose has thorns. QE in simple terms is the government printing money and buying financial assets (e.g. bonds, etc.) in an effort to stimulate the economy. A side effect of QE is higher prices of the financial assets bought, which in turn lowers their yield.

Stocks surged last Wednesday in anticipation that the Federal Reserve is considering a new economic stimulus in the form of quantitative easing. In addition to another round of QE (QE3?), some investors are speculating that the Fed could extend its program of swapping short-term bonds for long-term bonds in an effort to to hold down yields on 10-year and 30-year bonds.

Lower yields on debt instruments is not the only side effect of QE. Another and more serious side effect is the devaluation of our currency. Printing fake money to solve real problems has never succeed. Germany, Yugoslavia, and many others, have provided textbook examples of the futility of such an exercise - it always ends in a financial disaster!

If the the U.S. Government is monetizing the debt, the dollar will continue to fall against strong currencies and assets with real intrinsic value such as commodities. Two things you don't want to be holding when the government starts printing money are:

1. Debt (someone owing you)

2. Cash

As more dollars are created, the the ones already in circulation are worth less, and if you hold debt, you will be paid back with devalued dollars. As a side note, it is to your advantage to owe cash since you will be the one paying it back with dollars that are worth less. So what can you do?

If you believe it is just a bump in the road, then a more focused concentration on quality multinationals such as these may be the best solution:

The Coca-Cola Company (KO) | Yield: 2.7%

The Coca-Cola Company is the world's largest soft drink company with a sizable fruit juice business. The company has paid a cash dividend to shareholders every year since 1893 and has increased its dividend payments for 50 consecutive years. 

McDonald's Corporation (MCD) | Yield: 3.2%

McDonald's Corporation is the largest fast-food restaurant company in the world, with about 33,500 restaurants in 119 countries. The company has paid a cash dividend to shareholders every year since 1976 and has increased its dividend payments for 36 consecutive years. 

Abbott Laboratories (ABT) | Yield: 3.3%

Abbott Laboratories is a diversified life science company that is planning to split into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals. The company has paid a cash dividend to shareholders every year since 1926 and has increased its dividend payments for 40 consecutive years. 

Johnson & Johnson (JNJ) | Yield: 3.4%

Johnson & Johnson is a leader in the pharmaceutical, medical device and consumer products industries. The company has paid a cash dividend to shareholders every year since 1944 and has increased its dividend payments for 50 consecutive years. 

The Procter & Gamble Company (PG) | Yield: 3.6%

The Procter & Gamble Company is a leading consumer products company that markets household and personal care products in more than 180 countries. The company has paid a cash dividend to shareholders every year since 1891 and has increased its dividend payments for 55 consecutive years. 

Warren Buffett's Stock Buying Secret Revealed

The secret is out.

Warren Buffett's Berkshire Hathaway held over 1.6 million shares of Lee Enterprises, about 3.2 percent of its outstanding shares, as of March 31, according to a filing with the SEC late today. On that date the stake was worth $2.1 million. The total market value of the company is around $60 million.

The stock is soaring in after-hours trading, up $0.29 to $1.44 as of 4:40p ET. That's an increase of more than 25 percent.

Current price: [LEE 1.15 --- UNCH ]

The Lee stake is tiny by Berkshire standards, but its particularly interesting because Buffett's company had wanted to keep it secret.

In its May 15 filing listing its U.S. stock portfolio as of the end of the first quarter, Berkshire had said some information was being kept confidential.

Usually, the SEC grants Berkshire's requests for secrecy, but this time it didn't.

Tonight's filing says the request for "confidential treatment" was denied on May 25.

It's a continuation of Buffett's local newspaper play. Lee owns 49 daily newspapers and 300 weekly newspapers. Most of them are in midsize markets, but it also publishes the St. Louis Post-Dispatch.

In November, Berkshire bought Buffett's home-town newspaper, the Omaha World-Herald.

More recently, Berkshire bought 63 newspaper from Media General for $142 million.

Buffett has said that the newspaper business overall is in trouble, but he's optimistic about small to mid-sized newspapers that provide local news and information available nowhere else.

In a letter to all of Berkshire's newspapers less than two months ago, Buffett wrote that he's looking for more papers to buy. "We will favor towns and cities with a strong sense of community, comparable to the 26 in which we will soon operate. If a citizenry cares little about its community, it will eventually care little about its newspaper... It's your job to make your paper indispensable to anyone who cares about what is going on in your city or town."

Buffett has promised not to interfere in any editorial decisions at the newspaper Berkshire owns.

From www.cnbc.com

Marc Faber : Warren Buffett was Right about Gold

Although he has long disagreed with Warren Buffett, Marc Faber conceded in an interview that Buffett’s view of gold is basically correct, and that there are certain disadvantages to holding gold.

Marc Faber : “Well, you see, I’m an advocate of investments that generate free cash flow. In other words, you invest in something and every year you get, after all expenditures, some money in the form of interest payments or in the form of dividends.

And that allows you a lot of flexibility because if you have all your money in physical gold or in exploration companies the problem is you have no cash flow.

So if let’s say your portfolio drops by 50 percent, you don’t have any money to add to your positions, whereas if you have cash flow, every year some money comes in and you have purchasing power to buy the assets that during that year fell the most or where you think some value is emerging. And I think it is very important to have always cash flow to invest in opportunities. And so I also advocate essentially a diversification.

You know, a few weeks ago Mr. Buffett came out and said that gold is unattractive and so forth and several studies will show that stocks over the long run have performed better than gold. I fully agree with this study. It should be clear that the company that generates and pays out dividends over time will perform better than a dead asset like gold.

However — and this is a big “However” — I once talked to Jeremy Siegel, he’s written many books about the performance of stocks, in 1800 and so forth. I [said], Jeremy, you start your book on the performance at 1800, are you actually aware that by 1841, the poor man’s recession, most of the canal companies and most of the banks were bankrupt.

So if you invested your money in 1800, by 1841 most of it was gone. And this is the point, in equities you have to rebalance your portfolio and in gold you don’t have to do that. It’s a totally different type of asset. You can’t compare it. And the other day, you know, Kodak went bankrupt. I remember in ’72 and ’73 among the 10 most popular stocks among institutions you had Polaroid and Eastman Kodak and both went bust over time and they were disastrous investments.

So it’s nice to say the market is going up in the long run by this and that, that I agree, but you have to rebalance the portfolio. And in gold you don’t have to do that. Gold is basically cash that doesn’t pay any interest.”

From warrenbuffettnews.com

Related Books

Rich Dad's Advisors: Guide to Investing In Gold and Silver: Protect Your Financial Future

Gold Bubble: Profiting From Gold's Impending Collapse

The Golden Revolution: How to Prepare for the Coming Global Gold Standard

5 Reliable Dividend Payers Boosting Payouts

Dividends still make quite a bit of sense in today’s market. The currently low interest rate environment makes most bonds work only for capital preservation rather than real capital growth. On the other side, while there are certainly some solid growth stocks around, I don’t think there are too many expectations out there about a broadly sustained bull market of growth anytime soon.

A workable solution continues to be shareholder friendly companies. Businesses that can grow sales volume of their products or services modestly year by year, can maintain or increase pricing power on that volume (due to an economic moat or some privileged position), have reasonable valuations, and return most of their free cash flows to shareholders as dividends (and share repurchases, with the remainder), are a solid medium-risk option for sustained income growth and long-term capital appreciation, in my view.

Here are five examples of solid dividend payers that recently increased dividends at a substantial rate.

Exxon Mobil (XOM)

At only 2.78%, XOM doesn’t boast the highest yield around, but much of that is due to its higher stock valuation than its oil peers. The good news, however, is that XOM recently increased their quarterly dividend payout by a whopping 21%.

Being a leading company in a cyclical business, Exxon Mobil maintains an excellent balance sheet with total debt/equity of only 10% and an extremely high interest coverage ratio. Free cash flow is only moderately strong, due to the immense capital expenditures required to operate in this industry. But with large scale and efficiency ratios that are top notch, XOM is approaching three decades of consistent annual dividend growth.

Full XOM Analysis

Chevron Corporation (CVX)

Chevron has a larger dividend yield than XOM, at 3.64%. Although XOM and CVX have similar dividend payout ratios from earnings, since XOM has the higher valuation, Chevron has the higher yield.

Chevron’s recent increase was a solid 11%, but they already had a mild dividend increase in the midst of the year. So the dividend increase compared to the same quarter last year is over 15%.

The company has an even stronger tie to oil than its peers, as it has focused on deep sea drilling. Still, the company also does have natural gas investments, including at the Marcellus shale. The company maintains a meticulous balance sheet, with total debt/equity at only around 7%, an extremely high interest coverage ratio, and very little goodwill. The company has nearly tripled the book value of the shares over the past 7 years.

Full CVX Analysis

Baidu: Seriously Undervalued?

Baidu (BIDU) is making a controversial expansion into the smartphone market. But given the search engine’s dominance in mainland China and imminent iPhone integration, analysts argue Baidu stock is largely undervalued.

Baidu's plan to launch an economic smartphone with its own operating system, Baidu Cloud, is an ambitious strategy to exploit the rising mobile market in China - “a big future,” remarks internet expert Liu Xingliang.

Releasing the ¥899 phone ($142) targeting lower-end customers is arguably a crucial step for the company to help carve market share from companies like Tencent (TCEHY.PK), who enjoy early entry advantage.

“It is both a defense and an offense strategy,” says technology critic Jia Jinghua. Most mobile users now access Baidu through third-party internet browsers or applications. Both Apple (AAPL) and Android (GOOG) smartphones use Google as a default search engine - a big threat to Baidu stock, says Jia.

Internet growth in China has reached a ceiling with netizen increases slowing. This makes the search for new profit growth one of the company’s priorities.

While Baidu essentially monopolizes Chinese internet search with a market share of nearly 80%, its mobile market share is only around 37%. This is not far ahead of runner-ups easou.com and SOSO.com with roughly 22% and 20% respectively, according to iResearch.

A proprietary smartphone with Baidu’s own mapping, search, and keyword input baked-in will give mobile users more access to Baidu’s services and products - and most importantly, its ads.

Fast-food dividend stock fight: McDonald’s vs. Tim Hortons

You can debate all you want about who has the better coffee or breakfast sandwich – McDonald’s (MCD-N90.11-0.79-0.87%)or Tim Hortons (THI-T54.35-0.80-1.45%). But today we’re tackling a more pressing question: Which fast-food chain has the more appetizing stock?

Certainly, Tims and Mickey D’s have plenty of things in common. Both companies pay dividends. Both have a track record of raising their dividends. And, unless consumers develop a sudden preference for tofu and Brussels sprouts, both will be hiking their dividends for years to come.

What’s more, because they sell inexpensive food, both companies should hold up relatively well even if the economy goes into the deep fryer.

But there are also some key differences that investors need to consider before they fork over their cash. Let’s see how the two stocks stack up on a range of measures.

Dividend history

Since declaring its first dividend in 1976, McDonald’s has increased its payment for 35 consecutive years. Just as customers know what to expect when they order a Big Mac, investors know they’ll get a dividend increase from McDonald’s every September. Tim Hortons has only been paying dividends since 2006, when it went public, although it, too, raises its dividend annually.Advantage: McDonald’s

Dividend growth

McDonald’s dividend has increased at a compound annual rate of 15 per cent over the past five years. That’s good, but not as good as Tim Hortons, which has raised its dividend by about 22 per cent annually over the same period. Tim Hortons may also have more capacity for future dividend growth, given that its payout ratio was a conservative 29 per cent of earnings in 2011, compared with 48 per cent for McDonald’s.Advantage: Tim Hortons

Dividend yield

No contest here. McDonald’s yields 3.1 per cent, which is more than double Tim Hortons’ yield of 1.5 per cent. So, although Tims is growing its divvy at a faster rate, if you’re looking for current income, the Golden Arches is your best bet. Advantage: McDonald’s.

Currency

For Canadian investors, owning a U.S. stock introduces volatility in the form of currency fluctuations. Exchange rates can work for you, or against you, but if you stick to Canadian stocks (or hedge your U.S. positions), you won’t have the extra volatility to worry about. Advantage: Tim Hortons.

Earnings growth

Based on analyst estimates compiled by Globeinvestor.com, McDonald’s earnings per share are expected to grow at a compound annual rate of about 9.1 per cent over the next two years. As impressive as that is, Tims’ earnings are expected to grow at an even faster 13.4 per cent.Advantage: Tim Hortons.

Brand strength

Tim Hortons is a powerhouse in Canada, where the coffee and doughnut chain is part of the cultural fabric. But outside of our borders it doesn’t have nearly the same resonance, as evidenced by its cautious U.S. expansion. McDonald’s, on the other hand, is a formidable global brand operating in 119 countries. In fact, it now generates more revenue from Europe than from North America, and income from Asia-Pacific, Middle East and Africa has doubled over the past six years. Advantage: McDonald’s.

Valuation

McDonald’s was the top-performing stock on the Dow Jones industrial average in 2011. But the shares are down more than 10 per cent from their 52-week high, hurt by April same-store sales growth that was slightly weaker than expected. Mickey D’s now trades at a reasonable multiple of about 16 times estimated 2012 earnings and 14.5 times 2013 estimates. Tim Hortons shares are up more than 11 per cent this year, and trade at a significantly higher multiple of 20 times 2012 estimated earnings and 18 times 2013 estimates. The rich P/E makes the shares vulnerable to a selloff if results disappoint. Advantage: McDonald’s.

The verdict

McDonald’s and Tim Hortons are both excellent fast-food operators that will likely reward shareholders with solid long-term total returns, both from capital gains and growing dividends. However, McDonald’s juicier current yield, more attractive valuation and proven global expansion record give it the edge in Yield Hog’s books. Disclosure: I eat far too frequently at both chains, own McDonald’s shares and would consider purchasing Tim Hortons if it dropped below $50.

From theglobeandmail.com

Warren Buffett's $50 Billion Decision

This article, by Warren Buffett, as told to Randall Lane, appears in the upcoming April issue of ForbesLife magazine, as part of its “When I Was 25″ series.

By Warren Buffett

Benjamin Graham had been my idol ever since I read his book The Intelligent Investor. I had wanted to go to Columbia Business School because he was a professor there, and after I got out of Columbia, returned to Omaha, and started selling securities, I didn’t forget about him. Between 1951 and 1954, I made a pest of myself, sending him frequent securities ideas. Then I got a letter back: “Next time you’re in New York, come and see me.”

So there I went, and he offered me a job at Graham-Newman Corp., which he ran with Jerry Newman. Everyone says that A.W. Jones started the hedge fund industry, but Graham-Newman’s sister partnership, Newman and Graham, was actually an earlier fund. I moved to White Plains, New York, with my wife, Susie, who was four months pregnant, and my daughter. Every morning, I got on a train to Grand Central and went to work.

It was a short-lived position: The next year, when I was 25, Mr. Graham—that’s what I called him then—gave me a heads-up that he was going to retire. Actually, he did more than that: He offered me the chance to replace him, with Jerry’s son Mickey as the new senior partner and me as the new junior partner. It was a very tiny fund—$6 million or $7 million—but it was a famous fund.

This was a traumatic decision. Here was my chance to step into the shoes of my hero—I even named my first son Howard Graham Buffett. (Howard was for my father.) But I also wanted to come back to Omaha. I probably went to work for a month thinking every morning that I would tell Mr. Graham I was going to leave. But it was hard to do.

The thing is, when I got out of college, I had $9,800, but by the end of 1955, I was up to $127,000. I thought, I’ll go back to Omaha, take some college classes, and read a lot—I was going to retire! I figured we could live on $12,000 a year, and off my $127,000 asset base, I could easily make that. I told my wife, “Compound interest guarantees I’m going to get rich.”

My wife and kids went back to Omaha just ahead of me. I got in the car, and on my way west checked out companies I was interested in investing in. It was due diligence. I stopped in Hazleton, Pennsylvania, to visit the Jeddo-Highland Coal Company. I visited the Kalamazoo Stove & Furnace Company in Michigan, which was being liquidated. I went to see what the building looked like, what they had for sale. I went to Delaware, Ohio, to check out Greif Bros. Cooperage. (Who knows anything about cooperage anymore?) Its chairman met with me. I didn’t have appointments; I would just drop in. I found that people always talked to me. All these people helped me.

In Omaha, I rented a house at 5202 Underwood for $175 a month. I told my wife, “I’d be glad to buy a house, but that’s like a carpenter selling his toolkit.” I didn’t want to use up my capital.

I had no plans to start a partnership, or even have a job. I had no worries as long as I could operate on my own. I certainly did not want to sell securities to other people again. But by pure accident, seven people, including a few of my relatives, said to me, “You used to sell stocks, and we want you to tell us what to do with our money.” I replied, “I’m not going to do that again, but I’ll form a partnership like Ben and Jerry had, and if you want to join me, you can.” My father-in-law, my college roommate, his mother, my aunt Alice, my sister, my brother-in-law, and my lawyer all signed on. I also had my hundred dollars. That was the beginning—totally accidental.

When I formed that partnership, we had dinner, the seven of them plus me—I’m 99 percent sure it was at the Omaha Club. I bought a ledger for 49 cents, and they brought their checks. Before I took their money, I gave them a half sheet of paper that I had made carbons of—something I called the ground rules. I said, “There are two or four pages of partnership legal documents. Don’t worry about that. I’ll tell you what’s in it, and you won’t get any surprises.

“But these ground rules are the philosophy. If you are in tune with me, then let’s go. If you aren’t, I understand. I’m not going to tell you what we own or anything like that. I want to get bouquets when I deserve bouquets, and I want to get soft fruit thrown at me when I deserve it. But I don’t want fruit thrown at me if I’m down 5 percent, and the market’s down 15 percent—I’m going to think I deserve a bouquet for that.” We made everything clear, and they gave me their checks.

I did no solicitation, but more checks began coming from people I didn’t know. Back in New York, Graham-Newman was being liquidated. There was a college president up in Vermont, Homer Dodge, who had been invested with Graham, and he asked, “Ben, what should I do with my money?” Ben said, “Well, there’s this kid who used to work for me.…” So Dodge drove out to Omaha, to this rented house I lived in. I was 25, looked about 17, and acted like 12. He said, “What are you doing?” I said, “Here’s what I’m doing with my family, and I’ll do it with you.”

Although I had no idea, age 25 was a turning point. I was changing my life, setting up something that would turn into a fairly good-size partnership called Berkshire Hathaway. I wasn’t scared. I was doing something I liked, and I’m still doing it.

From forbes.com

Related Books

The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)

The Warren Buffett Stock Portfolio: Warren Buffett Stock Picks: Why and When He Is Investing in Them

Creating a Portfolio like Warren Buffett: A High Return Investment Strategy

The Warren Buffett of….

Here is the Santangel’s Review of how many “Warren Buffett ofs” we can find in the world.

• Warren Buffett of Asia – Lee Shau-kee
• Warren Buffett of Australia – Kerr Neilson
• Warren Buffett of Belgium – Albert Frere
• Warren Buffett of Brazil – Eike Batista
• Warren Buffett of Canada – Prem Watsa
• Warren Buffett of Canada – Stephen A. Jarislowsky
• Warren Buffett of Canada – Eric Sprott
• Warren Buffett of Canada - Bruce Flatt
• Warren Buffett of China – Guo Guangchang
• Warren Buffett of the East – Li Ka-shing
• Warren Buffett of the East – Cheah Cheng Hye
• Warren Buffett of the East – Tony Measor
• Warren Buffett of India – Rakesh Jhunjhunwala
• Warren Buffett of India – Chandrakant Sampat
• Warren Buffett of Japan – Takeda Wahei
• Warren Buffett of Japan – Kyu Eikan
• Warren Buffett of Kentucky – Pete Mahurin
• Warren Buffett of Mexico – Carlos Slim
• Warren Buffett of Spain – Francisco Garcia Parames
• Warren Buffett of Saudi Arabia – Prince Al-Waleed bin Talal
• Warren Buffett of the Southwest – Shelby Davis
• Warren Buffett of South Africa – Brian Joffe
• Warren Buffett of Thailand – [Subscription Required]
• Warren Buffett of Turkey – Jak Kamhi
• Warren Buffett of Turkey – Coskun Ulusoy
• Warren Buffett of the West – Warren Hellman

 From santangelsreview.com

10 Best US Stocks To Make A Fortune On The Emerging Market Consumer

Bank of America Merrill Lynch's global equity strategy team think the best way to play growth in emerging markets is to invest in developed market stocks with high percentages of international sales.

Emerging markets (EM) consumers have higher rates of savings growth and consumption growth than their developed markets (DM) counterparts, making the EM consumer a compelling investment thesis.

DM stocks are a good way to play the EM consumer story, according to BAML, because they are much more liquid in trading and the companies have better diversified sales portfolios with exposure to multiple markets.

Here's how the screen works: it only looks at the Consumer Discretionary and Consumer Staples sectors, and it only screens for stocks with greater than $10bn in market cap and at least 30% of 2011 sales generated from emerging markets.

The team found 29 stocks, 10 of which are based in the U.S.

#1: Wynn Resorts (WYNN)

Industry: Hotels, Restaurants & Leisure

% of sales from EM: 72%

12-month forward P/E: 15.9

Description: Wynn Resorts develops and operates luxury casinos and hotels in the U.S. and Macau.

#2: Mead Johnson (MJN)

Industry: Food Products

% of sales from EM: 65%

12-month forward P/E: 24.5

Description: Mead Johnson is a global supplier of baby food products.

10 Most Popular Stocks Among Hedge Funds – Q1 2012

By Meena Krishnamsetty

Insider Monkey tracks nearly 400 hedge funds and prominent investors like Warren Buffett. Last week hedge funds disclosed their 13F holdings and we finished compiling and analyzing the data. At the end of 2011 Apple (AAPL) was the most popular stock among hedge funds, followed by Google (GOOG) and Microsoft (MSFT). Apple returned 38.6% since the end of last year. Google lost 4.9% and Microsoft returned 16.1%. On average these three stocks returned 16.6% vs. a gain of 5.6% for the S&P 500 ETF (SPY). During the first quarter the number of hedge funds with Apple, Google, and Microsoft positions kept going up. These three stocks are still the top three holdings in our hedge fund universe. 

Here are the 10 most popular stocks among hedge funds:

1. Apple (AAPL): The number of hedge funds with Apple positions increased to 134 from 130 at the end of 2011. Billionaires Ken Griffin and David E. Shaw had the largest positions in the stock at the end of March.

2. Google (GOOG): There were 115 hedge funds with Google positions vs. 110 at the end of previous quarter. Billionaire Stephen Mandel had $838 million invested in Google.

3. Microsoft (MSFT): David Einhorn cut his stake in Microsoft but hedge funds in general poured more money into Microsoft. The number of hedge funds with Microsoft positions increased from 99 to 103 at the end of March. Boykin Curry had $700 million invested in the stock.

4. Citigroup (C): There were 97 hedge funds with Citigroup positions at the end of March, vs. 95 in December. Bill Ackman had $955 million invested in this financial giant.

5. Bank of America (BAC): Bank of America isn’t as popular as Citigroup but there were still 87 hedge funds with bullish Citigroup bets. Bruce Berkowitz is the most bullish fund manager with a nearly $1 billion position in the stock.

6. General Motors (GM): Who would have guessed that General Motors is one of the most popular stocks among hedge funds. Even Warren Buffett‘s Berkshire initiated a position in the stock during the first quarter. Overall, there were 82 hedge funds with total investment of $3 billion in the stock. Billioanire David Einhorn had $379 million in the stock.

7. Wells Fargo (WFC): Warren Buffett was adding to his already gigantic holdings in WFC during the first quarter. There were 81 hedge funds (up from 70 at the end of December) in Wells Fargo at the end of March.

8. JP Morgan (JPM): JP Morgan was the only stock in our top 10 that showed a decline in hedge fund interest. At the end of March there were 78 hedge funds with JPM positions. This number stood at 81 at the end of December. Matthew Halbower, Jeffrey Tannenbaum, Jim Simons, and Eric Mindich are the fund managers who sold out of JP Morgan before the banks trading losses were revealed.

9.Qualcomm (QCOM): Qualcomm saw a jump in hedge fund interest during the quarter. There were 78 hedge funds with Qualcomm positions at the end of March, vs. 66 at the end of 2011. Billionaire Ken Fisher had nearly $400 million invested in QCOM.

10. Pfizer (PFE): Pfizer is the only healthcare stock in this list. There were 74 hedge funds with Pfizer positions vs. 72 at the end of 2011.

From insidermonkey.com

5 Higher-Yielding, Income Growing Tech Stocks

When you hear the names Cisco (CSCO), Oracle (ORCL), Apple (AAPL), Microsoft (MSFT) and Intel (INTC), "dividend stocks" is probably not the first thought to enter your mind. It wasn't that long ago that tech companies simply didn't pay dividends. Every penny earned was plowed back into the business. The entire focus was on growth, and investors were looking for capital gains.

Long-considered the domain of momentum or growth investors, many tech stocks have matured and begun paying a reasonable dividend. Granted, the tech sector hasn't garnered the same following from income investors as traditional higher-yielding sectors such as consumer defensive, healthcare and financial services. However, there are several valid tech options to consider that will pay us a growing income stream while diversifying our portfolios.

This week week, I screened my dividend growth stocks database for Technology companies with a yield at or above 2.5% and that have increased their dividends for at least 9 consecutive years. The results are presented below:

Microsoft Corporation (MSFT) the world's largest software company, develops PC software, including the Windows operating system and the Office application suite. The company has paid a cash dividend to shareholders every year since 2003 and has increased its dividend payments for 9 consecutive years. Yield: 2.7%

Intel Corporation (INTC) is the world's largest manufacturer of microprocessors, the central processing units of PCs, and also produces other semiconductor products. The company has paid a cash dividend to shareholders every year since 1992 and has increased its dividend payments for 9 consecutive years. Yield: 3.2%

9 Agriculture Stocks to Profit from Global Food Shortage

The inflation in the food prices is set to continue globally. The demand is rising faster than the supply can keep pace and in 2007 and 2008 there were riots in 60 countries due to run up in the prices of corn, wheat and soybeans. There are many drivers behind the rising food prices. Primary among them being the increased demand from China and diversion of agricultural resources to produce biofuels.

The result is a changing industry dynamic as established players continue to jockey to lock in supplies of essential grains and position themselves as a supplier to China. For example, the recent bid from the Japanese trading house Marubeni to acquire the US based grains merchant Gavilon (a spinoff from Conagra Foods), is squarely aimed at getting a footing in the Chinese supply channel. On the other hand, we have global giants such as Bunge investing heavily in Sugar production in Brazil for the Ethanol market.

Agriculture has the potential to be one of the most promising investment themes for the coming decade (sorry Facebook investors!). Here are some of the selected stocks that you can use to play the agriculture theme.

Fertilizers

Nitrogen based fertilizer companies are benefitting from a glut of natural gas, that makes their input costs low, and increased fertilizer demand rising out of a good season of corn plantings in 2012 and solid projections for 2013. In addition to the food applications, corn is also being increasingly used for corn based ethanol projects.

CF Industries: One of the largest US company in this space is CF Industries (CF). The company also makes phosphate based fertilizers. The stock is currently cheaply valued at 7.55 forward P/E and 0.63 PEG. The company has a 25% profit margin and pays a 1% dividend yield.

Terra Nitrogen LP: Terra Nitrogen LP (TNH) is a subsidiary of CF Industries and operates as a MLP. If you want a pure play in the Nitrogen based fertilizers to get a direct exposure to low natural gas prices, TNH is a good option. As an MLP, it pays out 8.1% distribution yield. Please note that this income is not a dividend but a partnership income and the tax treatment is generally more advantageous but could be troublesome if held in a tax deferred account. The trailing P/E is 11.21 and its profit margins are about 36%

Rentech Nitrogen Partners LP: Rentech Nitrogen Partners (RNF) is another nitrogen based fertilizer producer that recently came public in Nov 2011 and could be worth a look. It is a smaller company, with market cap of $861 million. Its distribution history is not long enough yet, but it has paid out $1.06 in May this year and has forecasted a total distribution of $2.86 for the year, which if met, gives an yield of 12.7%. The PE is a respectable 9.5 on a forward basis