Quote of the Day

The greatness of Warren Buffet will live on forever on his writings and speaches. I will start posting a quote of the day as I read more and more of his stuff to be 100% ready for the shareholders' meeting.

March 30, 2007: “I always knew I was going to be rich. I don't think I ever doubted it for a minute.” -Warren Buffett

......and almost there

Well today was a hectic day as far as my dream goes. I finally received my account number with Monex via Pershing so that I could deposit the money and buy my share of Berkshire. I asked my mother to deposit the money in my checking account so that I could draw it and deposit it in the JP Morgan Chase account that was given to me. However, it turns out that my information was wrong and I had to call all these people to figure out which bank account I needed to put the money in. Finally, I have the correct information and I will be wire transfering the money to the Bank Of New York (how niceeeeee) tomorrow.

Article - How to trade like Buffett

The Complete User's Guide to Warren Buffett's Portfolio

By James Altucher
Stockpickr.com

Let’s face it. If you're going to blindly piggyback Warren Buffett's portfolio, you're going to probably lose money. By "piggyback" I mean, simply buying all his positions, closing your eyes, and hoping for the best.

That said, Buffett has been, and will continue to be, the most successful investor ever as long as he is at the helm of Berkshire Hathaway (BRK-B). Taking a disciplined approach to studying Buffett's portfolio as well as the portfolios of his close associates, can be very lucrative.

There are several keys:

Understand which positions are Buffett's old "generals" that he won't sell but nevertheless he is not excited about. Look at the prices which Buffett has purchased his most recent stocks. Understand the long-term demographic reasons for Buffett's more recent purchases. Look at the portfolios of other Buffett-like investors and funds or investors that Buffett is affiliated with. Buy the New Positions Don’t buy the old positions, the ones Buffett bought 10, 20, even 30 years ago. For instance, Buffett owns the Washington Post (WPO), which he bought in the early 70s when it was trading below its liquidation value. Don’t do it. Let’s follow Buffett’s current advice on this one. From his latest letter to shareholders: "Eventually [..] eroding fundamentals will overwhelm managerial brilliance. […] And fundamentals are definitely eroding in the newspaper industry." And even stalwart position, Coca-Cola (KO), which Buffett bought in the 80s and has had a significant gain on, I would avoid. Buffett recently left the board of directors and I would take his cue on that one. However, let’s take a close look at the new positions. USG Corp. (USG), for instance, makes building materials such as gypsum wallboards, sheetrock, ceiling materials, etc. Look at your walls and ceilings right now. Chances are USG made some of the materials in those walls. The company has been around since 1901. Buffett likes long-term players. Although Buffett purchased the bulk of his shares at prices much lower than the current price of $48, his most recent purchases occurred over the past year whenever the stock dipped below $46. Although there are no guarantees, clearly Buffett thinks USG is a strong buy at $46. USG trades at a forward P/E of 15 with revenues expected to grow double digits over the next year. The stock has suffered because of concerns about housing but over half of USG's revenues are non-residential and Buffett, a master at demographic-based investing, clearly sees that any housing slowdown won’t last forever. Next in line is Buffett's greatly increased position in US Bancorp (USB). His stake went from 6.11 million shares in March, 2006 to 23.31 million shares by December 31. US Bancorp is a perfect example of Wall Street throwing out the baby with the bath water. Because of the subprime mortgage lending disaster, people have been flushing the regional banks out of their portfolios in order to avoid any future potential explosions like New Century or Accredited Homelenders. The problem these companies have is that they lent out money to people who never borrowed money before. They did not reserve enough in anticipation of delinquencies and now the delinquencies are coming in much higher than expected. Additionally, all banks have suffered from the inverted yield curve which affects the spread they make between the money they lend out, and the money they pay depositors. However, Buffett has been buying regional banks since he first started his initial investment partnership in the 50s. There's probably no greater expert in the world on regional banks. So when we look deeper we see what Buffett likes and what Wall Street is missing as they sell off the stock: credit quality of USB's loans has actually gone up over the past quarter and management has stated that it expects credit quality will continue to rise. It turns out that they never got into the subprime lending game. Additionally, although the inverted yield curve has affected their margins, their return on equity is 23% versus an average of 10% for the banking industry as a whole. USB, which is almost 5% off of its recent lows, and is flat with Buffett's recent purchases, is probably a strong buy here. Demographics and the Retiring Baby Boomers Buffett shines when it comes to making long-term macro predictions. When energy was at a low he started buying pipeline companies and energy companies right around the fallout of the Enron mess. Before housing made its big move he started buying carpet companies and furniture companies. Now Buffett is making perhaps his biggest demographic bet ever. Retiring baby boomers are going to need healthcare. Buffett doesn't bet on the speculative biotechs though but the consistent earners that are relatively cheap, exhibiting growing earnings, and are well-positioned to take advantage of the explosion in demand that’s going to occur over the next 30 years. Johnson & Johnson (JNJ) is our first pick here. Buffett recently disclosed he owns 21.6 million shares of the company. Again, JNJ is a perfect example of Wall Street overreacting to what is otherwise small news. The stock began faltering after JNJ disclosed that there were improper sales practices in two "small market" countries. Payments were made. Cash was exchanged. Who knows? It’s being investigated. The company has stated that it won't affect earnings at all. Executives have been fired and it’s all business as usual. But now we have the pleasant circumstance of being able to buy the company at 14 times earnings, the cheapest level it’s been at in over ten years. And we get this bargain price right at the beginning of a boom in health care that will probably rival the dot-com boom in terms of the explosion in prices once people realize the extent to which the boomers are going to require the products of health care companies. Buffett bought 21 million shares of JNJ in 2006 to make it a brand new core holding for Berkshire. Also in the healthcare category is Buffett's new purchase of UnitedHealthcare (UNH). UNH stock has been floundering because of a backdating options scandal. But the company has $2.3 billion in cash to deal with any fines related to the scandal and with $6 billion in cash flows is ready and able to start buying back its own shares. Which they announced they would start doing 2 weeks ago, to the tune of a $6 billion share buyback program. The company trades at a forward P/E of 13 and is expected to grow revenues and earnings by double digits. One More Trend: China (But Through the Back Door) Buffett has often stated that he doesn't have expertise in foreign companies and that there are plenty of good investments among the 8000 public companies in the US. Well, perhaps he's taking that statement back as he starts looking abroad. In his most recent filing he revealed a position in Korean steel company Posco (PKX). It’s unlikely we can get Posco at Buffett's prices as the stock has been steadily gaining: But profits have been gaining as well. The company has a monopoly on steel in Korea, with 75% of the country's production coming from Posco. Which also means that it dominates the sale of steel to China. Although the company trades at just 10x cash flows this is a case where I would just wait for a pullback. Buffett's gotten in at good prices and with the uncertainty currently hanging over the Asian markets and, in particular, China, there might be future opportunity to get in at lower prices. That said, this is a demographic trend that Buffett is clearly moving in on. Get by With a Little Help From Buffett's Friends Another problem with piggybacking Buffett's portfolio is that he has too much money to put to work. He can't make smaller investments or buy into smallcaps and midcaps the way we can. So sometimes it’s worth it to not only follow Buffett's portfolio but also the portfolios of various FoBs, Friends of Buffett, who follow very similar investing principles to Buffett. Tweedy, Browne: once Buffett's stockbroker in the 60s, and also the managers of the eponymous enormously successful Tweedy, Browne Global Value (TBGVX) fund, they greatly increased their positions in their latest filing in Lloyd's TSB Group (LYG) and SK Telecom (SKM) and took a new position in Con-Way Inc. (CNW). Ruane Cuniff a.k.a. The Sequoia Fund (SEQUX): The fund Buffett directed investors to when he shut down his own fund in 1969 in order to become an operator at little-known Berkshire Hathaway. Since its inception the Sequoia Fund has returned an average of 15.68% per year. An interesting new position for Sequoia is eBay (EBAY) as the online auctioneer has fallen into value territory when investors lost their faith in the company after the Skype acquisition. Also worth noting, Sequoia reduced its position in Berkshire Hathaway by 10% in its most recent filing. Bill Gates: Bill Gates' personal money is invested through Cascade Investments. Gates sits on the board of Berkshire, plays bridge on a regular basis with Buffett and in recent years has become one of Buffett's best friends. So it’s natural that his stock holdings show a distinctly value bent despite his success as a tech entrepreneur. There's no need to reinvent the wheel. Buffett, the smartest investor ever, has done a lot of work for us when he buys a position and then discloses his holdings. Studying in the footsteps of the master and his disciples, but using that as a starting point for your own research, will end up being a very lucrative practice. James Altucher is founder and CEO of Stockpickr.com, author of the book, "Trade Like Warren Buffett", and partner at Formula Capital

still $5k short

I got a call from Mr Onsi (the Monex advisor) today asking me about funding the account. I am still 5 thousand dollars short. I have about $7K invested in cars (bought at auction, sold in Mexico) but they havent sold yet. I also have some money in my Scottrade account, I did really good in my ALTI experience, especially riding that surge to 3.91 a couple of weeks ago, but I do not want to get out of the market for two months (although technically I would be putting it into BRK.B which still is in the market). Anyways, I got to come up with it. 2 real estate deals went sour this week, one because the condo that the client was purchasing is not "warrantable" or something like that, therefore the loan did not get approved. The other deal died because the client is not relocating to San Antonio after all. I really need to sell a car and just cash out a little bit off Scottrade.

I also posted links in Facebook because I would like to get some readers. I believe that I am doing something worth attention and if people like to follow stupid things online then why not follow my dream? Anyways, I will start working to put together a good young-business-investor site at visitingtheoracle.com. maybe somebody out there has ideas or wants to collaborate with me. If you do, just send me a comment with your info.

On the trip, I did post an ad on Omaha's Craigslist requesting cheap or free lodging, and I did get some replies. I will be keeping in touch with them and see whats up and if they are for real. Funny thing is that the first guy to reply asked me if I was "str8" because he is bi! Needless to say that went directly to the trash bin.

Spring day and nothing new

Today was a regular day in the life of me!! Nothing new happened as far as the trip goes. I am about todays away from booking a seat on an airplane from San Antonio to Omaha!! I believe Northwest has the best fares and they will be the lucky ones! I hope that one day I can travel via NetJets (a Berkshire Company) or on my own plane. Anyways, here is a look at the different "deals" that I found online.

Southwest.com $143 + $279 + tax = ~$460 total
Continental.com $232.60 total
Northwest.com $230.59 total
AA.com (American Airlines) $459.60 total
Delta.com has a $213 ticket but it doesnt meet my schedule requirements

Now that I posted all this I am pondering whether to go the extra 2 dollars and fly Continental since they have flown me without problems to Europe in the past and Northwest is a smaller airline. I also have a frequent flier account with Continental and this might get me god points since I am flying around 2000 mi.

I will have to sleep on this.....

building the site...

I cant seem to be able to figure this thing out. I am great at math and finance but this simple website building process is something that I havent been able to master.

Back in 9th grade I started to play around with HTML but I never picked it up. The librarian at school was always kicking me off the computers because she taught I was playing, and internet back at home was really slow (Telmex dial-up) so that made it boring. I really wish I had tried harder.

So I made the blog go to blog.visitingtheoracle.com because I did not know how to put it under the dot com only. I also added a technorati search box and this was my first incursion into placing code in html, it took about 5 tries before I could post it in the right place.

Today, I will be funding my trade account with Monex Securities Inc and hopefully I will have my share of Berkshire stock by the end of the week.

New Domain!

I decided to buy www.visitingtheoracle.com and post this blog under that name. I think that I can attract some curious traffic and maybe generate some buzz.

The main two reasons for doing this is that first I can get a couple of bucks from AdSense to be used towards funding the trip. The second reason is that if I can get some media coverage I would be delighted, who doesn't want to have their 5 minutes of fame?

If none of these 2 things happen, I will still have a place online where I can share my progress with family + friends while learn a lot about developing ideas online. Web2.0 is among us and those who fail to see the great opportunities will get left behind. I am amazed by the power of creation of the human mind, and the social revolution online. More os this discussion can be read on my other blog .

About to purchase...

I have come to Mexico in order to find me a good broker that will allow me to invest in the NYSE with little money (10,000 USD).

I used to work for Monex (www.monex.com.mx) in Monterrey, so I decided to talk to them. Turns out that the manager from Matamoros is willing to let me invest 15, 000 and play with them, the usual minimum is 50,000USD but he kind of liked me. Now I have to come up with another 5,000 dollars. I will be pouring my heart and soul into Inverhomes, the best company to buy real estate in mexico
stay connected....

Start: A dream

I have a wish of attending the Berkshire Hathaway shareholders meeting in order to listen to Warren Buffet and meet many millionaires from all over the country and the world. This is where I will be posting my daily progress to achieve that dream.

The event is in 2 months and my I have my plan ready. I have asked my mother for $3600 dlls so that I can buy a share of b-class stock, this will entitle me to go to the meeting. I have yet to ask if I can go even though I would be a 2 month old shareholder, but I dont think there will be a problem with that. Now my real challenge is to buy it as a mexican citizen, this would entitle me to attend the international shareholders event to which only 400 people attended last year. This is my biggest shot to actually meet Mr Buffet. The goal is to take a picture with him.

I have contacted Scottrade and am waiting on their reply as to how I could open an account as a foreign national, if this is impossible I would just try to use my regular corporate brokerage statement and my passport to get a pass to the event. I will also try to contact the company (Berkshire) to see how I would go about that. Meanwhile I have my calendar marked for April 1st which is the date to make reservations to have dinner at Warren's favorite restaurant.

For the trip itself I need to look for a place to stay and a way to get there. Since the meeting is the weekend after my bday I plan on just giving myself this as a gift.

To be continued.....