Wednesday, November 18, 2009

BAGAKOAA November 18, 2009 Shopping with Cramer and Buffet


November 18, 2009 Shopping with Cramer and Buffet

A few days ago I shared a list of stocks that were recently bought or added to the portfolio of one Mr. Warren Buffet, according to his recent 13F Filing with the SEC, with one of our readers. (He hates it when I say that, huh Ted?)

• Added 17.9 million shares of Wal-Mart (NYSE: WMT) to 37,836,642 shares

• Added 10.75 million shares of Wells Fargo (NYSE: WFC) to 313,355,657 shares

• Added 421,800 shares of Exxon Mobil (NYSE: XOM) to 1,276,290 shares (first disclosed today after confidential treatment with SEC expired)

• Cut 7.06 million shares of ConocoPhillips (NYSE: COP) to 57,430,168 shares

• New 3,400,000 share stake in Nestle (OTC: NSRGY)

• New 3,625,000 share stake in Republic Services (NYSE: RSG)

• Maintained 200,000,000 share stake in Coca-Cola (NYSE: KO)

• Maintained 151,610,700 share stake in America Express (NYSE: AXP)

• Maintained 96,316,010 share stake in Procter & Gamble (NYSE: PG)

• Maintained 138,272,500 share stake in Kraft (NYSE: KFT)

Anyway Ted did make a good observation.

“All these stocks are recession stocks. He must be anticipating huge interest rates increase and an adjustment in the market. These are mostly consumer products that do well in recessions. Doesn’t Cramer’s book say if a slowdown is evident in GDP then buy retail stocks? Next we should see a drop in housing. I recently spoke to a retailer friend who said they are anticipating a second wave of foreclosures because the banks have been hanging on to so much inventory.


OK some of these are cyclical, “recessionary” stock and some are not. Ted is referring to the chart in Cramer’s Real Money showing cyclical stock trades driven by the direction and momentum of the GDP.

What we have are two different investment strategies. Buffet is a value purist. He looks for an under valued company with great management and long long long term growth possibilities. I won’t bore you with the basic criteria, but if you read the blog, you see very quickly what they are. Remember my comment about Buffet after reading the 867 page biography “Snowball”? His two characteristics that have made him successful are Focus and Patience.

Cramer is a value investor at heart, but he has a buy and homework philosophy. He has no aversion in selling on a significant dip, taking a profit when appropriate, and adding to a position on weakness, especially a sector drop on an equity he feels is undervalued. Cramer spends a lot of time on his show and in his books explaining the difference between investing and trading.

Buffet is not a trader. (Maybe a few exceptions like some investments he has made in Vietnam, China and the like.) He buys and buys and buys until he owns. Usually at an extremely good value (except for the Burlington Deal which I still can’t completely figure out?), or under terms that are extremely sided in his favor (GE and AIG).

In the long run, you don’t usually do too bad following Buffet if you can wait. Let’s face you don’t accumulate personal wealth in excess of 60 Billion making a lot of mistakes.

Regarding real estate, yeah I think there is more of a down side because of inventory, a less than stable consumer confidence, and credit squeezes. I think Buffet looks beyond this noise and sees companies that will shine after the housing market recovers, after inflation goes up, after the commercial real estate bubble bursts, and after he is dead and gone. These are solid quality value based stocks that 5 to 20 years from now will be generating more cash for Berkshire Hathaway.

Good observation Ted.

Salve Lucrum


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