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March 5th, 2004

Buffett may be catching Gates

Fortune has just published its list of the wealthiest people in the world, with Bill Gates at 46.6 billion dollars, not all that far in front of Buffett with 42.9 billion dollars, a substantial lessening of the margins over the past year. The third place getter, Karl Albrect of Germany is a long way behind at 23 billion dollars. The wealthiest woman is Alice Walton, of the store-owning Walton family which is substantially represented.

Newcomers include J K Rowlings, of Harry Potter fame, and the two Google creators, Sergey Brin and Larry Page, and also Michael Ying, the Esprit man.

There has been a rapid increase in billionaires from Russia, which shows either the value of market economies or loose trading restraints; draw your own conclusions on this.

The top 10 are

1. William Gates III
2. Warren Buffett
3. Karl Albrecht
4. Prince Alwaleed Bin Talal Alsaud
5. Paul Allen
6. Alice Walton
7. Helen Walton
8. Jim Walton
9. John Walton
10. S Robson Walton You can get the full list here

Berkshire Hathaway share changes

Berkshire Hathaway has reportedly sold its holdings in in Duke Energy Corp, Dun & Bradstreet Corp, Great Lakes Chemical Corp and Level 3 Communications Inc and reduced its holdings in HCA Inc and H and R Block.

Author turned Fund Manager

Or is it vice versa? Robert J Hagstrom Jr, author of The Warren Buffett Way, and whose book Investing: the Last Liberal Art, we recently reviewed, is the manager of a fund, Legg Mason Focus, that has investments in InterActive Corp, which he likens to the Berkshire Hathaway of the new economy. According to a report on MS Money, Hagstrom likes the way that company collects ‘outstanding businesses’ that generate lots of cash and are intelligently managed.

For the full report, go here.

Purchase at Amazon.com
Investing: The Last Liberal Art
The Warren Buffett Way

A conflict of tastes for Warren Buffett

We all know that Buffett enthusiastically patronizes products in companies in which he has an interest – for example, Cherry Coke. However, he may find a conflict in his candy consumption.

Berkshire Hathaway wholly owns See’s Candies but it has now bought a stake in Cadbury-Schweppes, the maker of a whole range of chocolates and candies. Will Buffett stick with See’s or will he divide any sweets consumption in proportion to the values of Berkshire Hathaway holdings?

Costco a challenge for Walmart

Fortune has an interesting story about Costco, a merchandise discounter that has presented problems for Walmart.

The story can be read in full here.

As the story tells us, Berkshire Hathaway’s Charlie Munger, a Shopco customer, is reputed to have said that he likes buying bargain securities, so why wouldn’t he like buying bargain golf balls?

Another stake in gas

The Oil and Natural Gas Corporation has just floated in India and Warren Buffett is rumored to have taken up a 1 billion dollar stake in the company which is the largest public offering in the history of the sub-continent.

The issue was oversubscribed in 10 minutes, the high price putting the issue out of the reach of the average retail investor.

Buffett’s annual letter to stockholders

This is due out within the next few days and can be viewed on the Berkshire Hathaway website at http://www.berkshirehathaway.com/.

In any event, we will be posting a summary on Warren Buffett Secrets.

Benjamin Graham analysis

There is an interesting perspective on Graham’s investment principles posted on the website of Walletwatch.

Buffett for President?

Well, Forbes readers think that would be a good idea. In a poll of readers conducted by the magazine as to which American billionaire would make the best President, the winner was Warren Buffett with 25 per cent of the vote, ahead of Bill Gates with 15 per cent and Oprah (13 per cent). 1996 loser Ross Perot came in with only 7 per cent, and New York Mayor Michael Bloomfield got just 4 per cent. The Donald got a creditable 9 per cent of the vote.

Incidentally, Forbes ran an interesting article a while back, calculating the wealth of past presidents. Top of the list was George Washington, followed by Jefferson, Jackson, Taylor and Teddy Roosevelt. JFK was 8th on the list, followed by Lyndon Johnson (known wealth) and the present incumbent of the Oval Office George W Bush. Go here for the full story

However, in a subsequent story identifying John Kerry, if he is elected, as Number 3, Fortune has a different order of wealthy presidents. Washington still tops the list, but JFK is Number 2. You work it out!

The more recent story is here.


One of our subscribers has passed on to us that there have been substantial lay-offs at GEICO, a Berkshire Hathaway subsidiary. The retrenchments were apparently a surprise to the unlucky workers. We have had no corroboration of this item and will try to find out more.

Book Review

We have recently had the opportunity of reading a very interesting book by an Australian investment adviser called: A Wonderful Company at a Fair Price.

The author takes up the investment principles of Benjamin Graham and Warren Buffett and applies them to specific topics that impact on investment decisions such as the impact of dividends on investment analysis, price earnings ratios, economic erosion and real profitability.

Having informed the reader in these areas, the author in the second part of the book demonstrates how they can be used to identify a ‘wonderful company’. He places, as do both Buffett and Graham, great importance on capable and honest managers and shows how these traits can be evaluated.

Now, it is probably not all that difficult to find wonderful companies, the magic is in determining what is a fair price, or better still, what is a bargain price. The author in the third part of the book, looks at, with practical examples, things such as the relationship of price to business performance, and the basics of stock valuation.

For example, in chapter 20, he gives the lie to a whole range of so-called ‘Buffett type valuations’, demonstrating how they simply do not stack up. The mathematics that he uses takes a little time to get used to, but, when the moment of epiphany comes, it makes a ton of sense.

This is really a very practical book and readers should not be put off by the fact that the author is an Aussie and sometimes uses examples from the Australian market. There is plenty there for international readers too.

We found that the simplicity of the author’s language and syntax, and his conversational style of writing, opened up new windows for us in the difficult business of investment analysis. HIGHLY RECOMMENDED

Purchase at Amazon.com
A Wonderful Company at a Fair Price

Warren Buffett Secrets

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