The Berkshire Hathaway of The Internet

Now let’s look at Warren Buffett’s process for buying a business:

  1. 😀 The Letter (1 day)
    He asks the seller to send him a simple letter explaining why he should buy their company, sharing some key financials and their asking price.
  2. 😁 Analysis (2–5 days)
    If he likes the business, the management, and the price, he digs in.
  3. 😆 The Offer (1 day)
    He calls or writes the owner and makes a fair offer.
  4. 😊 The Handshake (2–3 days)
    If the buyer agrees to the price, they agree to the details, and he sends over as short contract devoid of legal jargon.
  5. 😎 Closing (4–8 weeks)
    They work through all the usual legal stuff and get the deal done. If the owner is stuck on any minor details like working capital or sentimental items, he lets them win because he knows that, in the big picture, they aren’t worth haggling over.

Warren Buffett’s $5 Billion Bank of America Bonanza: Thank You, President Trump

The ‘Oracle of Omaha,’ often critical of the 45th president, has made hay in the past few months

Financial shares have been among the best stock-market performers since the surprise election victory on Nov. 8. Among those, Bank of America has been the standout: the stock’s more-than-40% rise since Election Day is the best among the biggest U.S. banks and is 15 percentage points higher than the gain for the KBW Nasdaq Bank index.

.. The Bank of America windfall is thanks to a savvy investment Mr. Buffett’s Berkshire Hathaway Inc.made in the bank in August 2011. At the time, the bank’s shares were foundering and markets were questioning whether Bank of America would have to raise additional capital lest it sink under what some feared was a looming deluge of mortgage-related legal claims.

 .. The terms were expensive for Bank of America: The preferred stock paid a chunky 6% annual dividend, or $300 million a year, and if the bank wanted to repurchase the shares it would have to pay Mr. Buffett a 5% premium.
.. The real sweetener, though, was that Mr. Buffett also received warrants to purchase 700 million shares of common stock at $7.14 apiece at any time over the next 10 years. Although this was roughly where the stock was trading at the time, some investors groused this was overly generous to Mr. Buffett
.. The halo effect of Mr. Buffett’s investment helped to quell some concerns around the stock, which rose.

Buffett Assails Money-Manager Fees as Berkshire Reports Profit Rise

Billionaire also declares victory in his $1 million bet with another asset manager that low-cost index funds would out earn hedge funds over a decade

 Warren Buffett intensified his attacks on Wall Street money managers Saturday, saying that investors wasted more than $100 billion over the last decade on expensive advice.
.. “The bottom line,” Mr. Buffett wrote, is that “when trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients.”
.. Book value, a measure of assets minus liabilities that is Mr. Buffett’s preferred yardstick for measuring net worth, rose 10.7% in 2016, compared with a 12% total return in the S&P 500, including dividends.

.. Berkshire’s BNSF railroad subsidiary. Net earnings at Berkshire’s railroad fell 16% in 2016 due largely to a drop in coal demand.
.. Ajit Jain, widely considered to be one of the leading candidates to take the Berkshire CEO job when Mr. Buffett is no longer on the scene
.. Berkshire, he said, is still willing to buy back its shares if prices fall below 120% of book value.
.. Mr. Buffett praised some companies, including Bank of America Corp., for buying back shares. “Some people have come close to calling [buybacks] un-American—characterizing them as corporate misdeeds that divert funds needed for productive endeavors,” Mr. Buffett said. “That simply isn’t the case.”
.. Berkshire has warrants to buy 700 million shares of Bank of America at $7.14 apiece. The stock closed Friday at $24.23, so Mr. Buffett is looking at a paper gain of about $12 billion.
.. He attributed America’s “miraculous” economic growth to “human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law.”
.. He instead saved his sharpest comments for pricey money managers who pledge to beat the market, saying that in his lifetime he has identified “ten or so professionals” who can do so successfully.
.. “If 1,000 managers make a market prediction at the beginning of a year, it’s very likely that the calls of at least one will be correct for nine consecutive years,” he wrote.
.. In 2007 Mr. Buffett bet $1 million that his chosen index fund, the Vanguard 500 Index Fund Admiral Shares, would outperform hedge funds over the next decade.
.. Mr. Buffett in his letter Saturday praised Vanguard founder Jack Bogle as a “hero.”
.. “If a statue is ever erected to honor the person who has done the most for American investors, the handsdown choice should be Jack Bogle.”