Warren Buffett’s Latest Stock Moves

Warren Buffett’s Latest Stock Moves

by | Nov 23, 2023 | Investing in stocks, Value investing

Many people scrutinize Warren Buffett’s moves on the stock market.

Why? Some want to copy his trades. Others simply want to understand the choices he makes and how he thinks, to emulate his entire style.

Fortunately, it’s easy to gain insight into what he’s investing in.

Every quarter, he has to disclose what stocks his company Berkshire Hathaway has bought or sold to the U.S. Securities and Exchange Commission (SEC).

It’s that time of year when those trades are being disclosed for the third quarter.

Let’s take a look…

Warren Buffett’s Stock Purchases

 

In the third quarter, Warren Buffett bought shares in:

– Media company Liberty Media Corp (LLYVK and LLYVA)

– Media company Sirius XM Holdings (SIRI)

– And baseball team Atlanta Braves Holdings (BATRK).

Before you rush out to buy shares in these three companies, you should know that he bought very small positions.

Together, these three companies make up less than 0.20% of his portfolio of publicly traded stocks.

This tells us that it’s probably not Warren Buffett himself making these investments, but one of his two managers, Ted Weschler or Todd Combs. They run their own portfolios that are small, relatively speaking.

It may be challenging to draw any meaningful conclusions from tiny purchases without looking at what Berkshire Hathaway is selling…

Warren Buffett’s Stock Sales

The Oracle of Omaha has spent the third semester doing some fall cleaning in his stock portfolio. He has completely sold out of seven companies and reduced his stock position in six others.

Completely out are:

– Shipping service company UPS

– Industrial conglomerate Procter & Gamble

– Food company Mondelez International (known for Toblerone, among other things)

– Medical, pharmaceutical and personal care company Johnson & Johnson

– Car manufacturer General Motors

– Gaming company Activision Blizzard

– Chemical company Celanese

He has trimmed and cut positions in:

– Insurance company Globe Life

– Insurance company Markel

– Software and IT company Hewlett Packard (HP Inc).

– Energy and oil company Chevron

– Consulting company Aon

– Retail giant Amazon

Warren Buffett’s company Berkshire Hathaway still owns shares in 45 publicly traded companies (as well as many companies where they own 100%).

You can see Warren Buffett’s portfolio of publicly traded stocks here and stock trades here, and the entire portfolio of subsidiaries here.

What Can We Conclude About Warren Buffett’s Stock Moves?

Berkshire Hathaway sold far more stocks in the third quarter of 2023 than they bought.

They sold approximately $7 billion USD (about 48 billion DKK) and bought for $1.7 billion USD (just under 12 billion DKK).

It may sound like a lot of money, but it’s not for Warren Buffett, who has a war chest of over $157 billion USD.

It’s an enormous amount of money to keep out of the market.

What is he doing? Either the 93-year-old investor has fallen asleep… or he’s reacting to the fact that…

…The Market is Overheated

 

Shiller’s P/E ratio – which is a measure of how expensive the market is – is now around 30, which is as high as it was just before the crash in 1929. You can see Shiller’s P/E ratio here. 

P/E relates the stock price to earnings (hence the name price/earnings).

A P/E of 30 essentially means that you are paying 30 dollars for one dollar of profit in the company. The historical average and reasonable level for stocks is a P/E of 15-16.

A P/E of 30 also means that you can expect a return of around 3% in the market. That’s below the interest rate of many bonds. So what is he doing? He is waiting for good opportunities and is probably frustrated that he isn’t finding any elephant-size opportunities.

In the next blog post, I will take a look at what other value investors are buying stocks in.

Not everyone is as restrained as Warren Buffett.

Make sure to get on the mailing list so you don’t miss out. You can sign up to receive emails at the bottom of this page.

If you want to learn how I invest in stocks without fearing a crash, you can download my free e-book Free Yourself here.

Five Reasons to Become Financially Independent

Five Reasons to Become Financially Independent

by | Sep 17, 2023 | Investing in stocks, Newbie, Your money

 

Why even bother to try to become financially independent?

Why postpone your spending so you can invest and have more money for spending in the future?

What if you’re happy with your life and your job as it is?

I’ll tell you why.

Why Becoming Financially Independent is Important

It’s my firm conviction that everybody should invest purposefully to become financially free.

Everybody.

Including the person with a great career. 

Including the person who feels safe because her partner is providing for her.

Including the person who feels like the future is golden.

Why?

It’s called prevention.

It’s like eating fresh vegetables and working out even though you aren’t sick now.

Becoming financially independent is one of the steps in creating a wonderful life.

Here are five specific reasons why you should invest in stocks now in order to become free later:

Reason No. 1: Avoiding Adding a Crisis to a Crisis

Your life will take its own turns.

Surprises are part of life.

It could be sickness, a divorce, a dismissal, a global pandemic, or a sudden death in the family.

Yeah, we don’t really want to talk about that, and that’s why most people avoid planning for disasters like these.

It’s like facing the pictures of the starving children in Yemen. It makes you feel uncomfortable, and instinctively you want to scroll on.

Yes, it’s unpleasant thinking about how something can disrupt the path you’re on.

But that’s the nature of life.

We’ll be surprised, challenged, and we’ll overcome.

But we have to get through the difficulties, and that’s why you need to do some preventive work.

You need to make sure that a crisis doesn’t become bigger than it should be.

If you’re going through a divorce worrying about money, you’re adding one crisis on top of another crisis.

If you get laid off and worry about your finances, you’re adding one crisis on top of another.

If you get sick and have to worry about being able to keep your job while trying to recover, you’re adding one crisis on top of another – making it more difficult to focus on healing.

Being financially independent will make you stronger in life and better equipped to handle the challenges life throws at you.

Reason No. 2: Being Able to Choose From the Top Shelf

When you are financially independent, you have more freedom to build the life of your dreams.

I don’t mean just material stuff like adding another designer bag to your wardrobe.

I’m talking about the big decisions in life and the experiences you can have:

Like resigning impromptu if your boss is pestering you.

Like taking a year off to travel around the globe.

Like deciding to have a child without having to google the cost of daycare.

Like exploring a hobby, even if it’s a bit extravagant.

Like pursuing an infatuation even if the person lives in another state or country.

Those kinds of choices. The truly important choices.

Reason No. 3: Being Able to Spend Time With Your Loved Ones

If you’re dependent on a salary, there will be situations where you’ll be at your desk wishing you were with your family instead.

Maybe your family is gathering for a celebration, and you can’t be there because work is calling.

It can be something negative you need to handle, but can’t.

When my mother died, I was spending most of my time at work.

The doctors turned off the machines that were feeding her because they said it was her wish. She had had a stroke, was unable to move much, but was conscious. We knew she only had a week left. She was dying slowly in a hospital bed.

Most of that week, I was at work. I came after work when I could.

It’s a week I can never have back.

If I had been financially independent, I would have had a choice.

Maybe I didn’t have to resign from my job, but I would have had more leverage and bargaining courage, knowing that i had the money to make it possible to resign. 

Reason No. 4: To Prevent Stress

You’re more inclined to get stressed if you worry about your finances.

That’s a fact.

If you know that you can always provide for yourself and your family no matter what happens, it’s easier to shrug when things don’t go your way. That’s what being financially independent means. 

It won’t bother you as much if your boss is giving you a hard time.

Sometimes small things become huge when something else is worrying you.

Parents who don’t feel safe financially have all blurted out stuff at their children like “Money doesn’t grow on trees” or “Are you insane? Do you know what that costs?”

That stops when you know with certainty that there is always enough money for you.

Isn’t that a wonderful thought?

Try saying it out loud: “There is always enough money for me/us.”

How does that feel?

Reason No. 5: Being Able to Provide for Your Family for Generations

Investing in stocks isn’t only about you.

It’s about your family. It’s about all the people you care about and the ones who haven’t been born yet.

You’re building wealth, and while you’re doing that, you’re building their future too.

You can make your children, nieces and nephews financially independent too.

You can do that in several ways.

You’re your children’s most important role model. If they see and hear you talk about investing, there is a higher likelihood that they’ll be responsible with their money too.

The other way is to invest for them.

I’ve opened savings accounts and retirement accounts for my two boys, and I actively invest the money on their behalf.

My boys are still small and there’s plenty of runway to make a modest amount of money become millions.

Their savings can really grow, and it will have a big impact on how their lives unfold.

Now what?

Are you ready to invest in stocks?

Are you ready to take charge and steer your finances towards becoming financially independent? Even really wealthy?

Sounds good.

Now you need more information about how to do it.

You’re in luck because next week I am hosting a free, live webinar called Five steps to financial freedom.

I only host a live webinar once or twice a year, so don’t miss out. Of course you can also download the e-book Free Yourself and learn more. A combination of the two is the best. You can download your free copy right here.

You can sign up for the webinar Five Steps to Financial Freedom which takes place Thursday September 21st at 6 pm UCT. You can sign up right here.

Five Steps You Can Take to Avoid the Biggest Mistakes in the Stock Market

Five Steps You Can Take to Avoid the Biggest Mistakes in the Stock Market

by | Aug 5, 2023 | Investing in stocks, Value investing

We have all made mistakes in the stock market – mistakes are a natural part of a learning process.

But that doesn’t mean you should just shrug off your mistakes and make them again.

You should examine them, and you should learn from them.

What are the typical mistakes that private investors make?

The Stock Market Is a School for Life

You never graduate as a stock investor. The stock market is a big playground where you can continue to learn new things and improve as an investor.

However, the typical mistakes that many make can be avoided right from the start – if you inform yourself.

The typical mistakes are:

– Investing without researching

– Selling stocks too early and missing out on a larger gain

– Selling in panic with losses

– The biggest mistake we all fear is investing in something that is declining or going bankrupt.

How do you avoid making mistakes?

Here are five concrete steps you can take:

1. Learn and Read

The best investors are constantly learning and keeping up to date.

Warren Buffett reads more than 5 hours a day. He says that knowledge accumulates, just like money does. The new things you learn are built on top of something else you’ve already learned, and over time, you have an exponential learning curve.

What should you read and learn?

You should make sure to stay updated on major societal and business news.

You should read newspapers like Wall Street Journal and New York times every day, listen to investment podcasts, read blog posts like this one, and read investment books.

If you want to be a good investor who buys shares in individual companies, you should also get used to opening and reading financial statements.

2. Research Your Company and Use a Checklist

If you invest randomly – maybe because someone mentions the company – you will make more investment mistakes than if you familiarize yourself with the company before investing.

You should look at the financial statements and research the product to be sure you understand what is going on in the company.

The best way to ensure that you answer the most important questions about the company and its products and services before investing is to follow a checklist.

Your checklist should ideally change over time as you gain more experience and discover your weaknesses.

You can use my checklist by clicking here.

3. Discuss Your Investments With a Good Partner

Every year, Warren Buffett holds an auction where you can win lunch with him and his partner Charlie Munger.

Guy Spier and Monish Pabrai won the auction in 2008 for $650,000. One of the best pieces of advice they received at that time was exactly this: to have a partner to bounce your ideas off of.

Warren Buffett has long bounced ideas off of Charlie Munger before investing in a company. Guy Spier and Monish Pabrai bounce ideas off of each other.

Do you have a person you discuss investment ideas with? Someone who can show you different sides of a company than the ones you’ve fallen in love with? Someone who can challenge you intellectually?

It doesn’t have to be just one person – it can be several. If you have a group of like-minded individuals to share your ideas with, this is invaluable.

At the Value Investor Academy, we discuss different cases selected by members.

Here, you can present a case and receive critical questions from multiple people at once – perhaps you’ll find your future investment partner there?

4. Argue Both Sides of the Case

Just like in a courtroom, you should hear both sides of the case when analyzing a company. That means you should act as both defense and prosecutor for the same company.

First, you should take a look at the company fairly neutrally to examine whether you would invest in it. If you arrive at a yes, it’s time to bring out the prosecutor.

Now, you should look for all the reasons you can think of why it’s not a good investment. Then you should come up with counterarguments to the negative accusations. If you need inspiration for the counterarguments, you can Google and find those who are shorting the company and see if you have argued for their case.

5. Get Educated About the Stock Market

When we learn to drive a car, we take driving lessons. When we learn to sail, we go to sailing school and tie knots endlessly.

When you’re going to invest in the stock market, it’s also a great idea to get education that equips you to make fewer mistakes and become faster at making money. If you really want to elevate yourself to a new level, it’s a good idea to follow a structured program and perhaps even get a coach.

I run the Value Investor Academy 1-2 times a year, and you’re welcome to join. If you want to secure a spot in the next class this fall, you can send me an email at info@moneyandfreedom.com.

The Biggest Mistake of All

Now we’ve talked about blunders you make when you invest. But there’s a much more serious mistake than those… and that’s not getting started at all.

If you don’t start investing, you’re not only missing out on the opportunities that could have arisen if you had started. You’re also missing out on all the learning.

When you make mistakes as an investor by investing in something you regret, you at least learn something from it.

You learn nothing from not getting started.

Learn something today. You can download your free investing e-book Free Yourself here.

 

How to Change Your Money Identity to Stock Market Investor

How to Change Your Money Identity to Stock Market Investor

by | Jan 10, 2023 | Investing in stocks

The other day I spoke with a former student who bought her first stock because she wanted to change her money identity.

She called it an “identity investment”.

A what?

Yes, you see…

She came from a family where security was valued and stocks were considered risky.

When she started my eight-week Value Investor course, she quickly bought some shares in a company – without even going through the checklist to define it as a wonderful company as I had taught her.

When I asked during a recent strategy call why she had invested in that company, she said, “Well, that one. It was an identity investment.”

She bought the stock with the sole purpose of changing her identity. She wanted to move from being someone who doesn’t have the courage to buy shares to someone who identifies as a shareholder. 

I actually think the concept is brilliant.

Your Money Identity Rules Your World

Why is this a good concept?

Maybe you haven’t been aware of it until now, but there’s a lot of identity built around money.

Many of the decisions you automatically make are not rational decisions, but emotional decisions that originate from a deeper place within yourself.

Maybe it’s something you were brought up not to do (like buying stocks because it’s “gambling”). Maybe you think you belong to a group that is against investing (who call wealthy people “filthy rich” and think stockowners are capitalists who exploit the world).

You wonder why you get sick to your stomach every time you think about investing or learn something about it, and you don’t quite understand why. Maybe it’s because you feel it’s dangerous or wrong? Maybe it’s contradictory to your identity?

What is Your Money Identity?

When we think about it, it’s obvious that identity tends to have a money element. Consumption and identity are closely linked. Why else would so many companies spend so much money on brand building?

Some people are willing to spend fortunes to buy a Porsche or dress in Louis Vuitton. Why? Because they want to possess the identity that the brand promises them.

Of course, there is also an identity built around how we do NOT spend or invest our money. There are some things that we CAN’T buy or invest in because it doesn’t match the way we think about ourselves.

If you think about money and start a sentence with:

“I’m the kind of person who….”

What comes to mind next?

Or if you’re thinking about stocks and need to finish the sentence:

“In my family…”

What comes to mind next?

You Can Break Away from This by Making an “Identity Investment”

To break free from your image and your social heritage, you can throw yourself into making an identity investment.

But what is it, really?

Let’s try to define it.

1. It can be buying stocks for the first time

It’s an investment that you make because you want to break out of a limitation that has bothered you in the past.

It may be the first share you buy. With the purchase of your first share, you actually change your identity. Now you can call yourself a shareholder.

2. It can be a change in what kind of shares you buy

If you’ve always invested in funds, it might be time to buy shares in a company, so you know that option is open to you too.

3. It can make you go beyond national borders

If you have always only invested in American companies, it may be time for you to buy a few shares in a foreign company today to establish that this is also an option for you.

4. It can be a large or a small investment

It doesn’t have to be a big investment. It can be a single share.

But if your pattern is to only buy stocks for small amounts even if you have a lot of cash savings, you may need to test your identity by making a slightly larger investment.

Combine Your Investments with Knowledge

It’s best to pair your identity investment with investment books or even a course.

Warren Buffett says that knowledge is the best way to manage risk.

It’s essentially the same as everything else. It’s also safer for you in traffic if you know the traffic rules and have taken driving lessons. It’s safer for your child in the swimming pool if they receive swimming lessons first.

That’s why I really recommend you read my investment book (which you can download below) before you jump into changing your identity through shares.

In my e-book Free Yourself, you can learn much more about building wealth by holding stocks. You can download it here.

What are your goals for 2023? What qualities do you need to be successful in your goal? Do you have an inner type that you can put to work?

To learn more about my style of investing, you can download my e-book Free Yourself here. 

How to Reduce Taxes on Stocks 2022

How to Reduce Taxes on Stocks 2022

by | Dec 1, 2022 | Investing in stocks, Your money

Taxes can eat up a big chunk of your capital gains, and they really affect the long-term effect of compounding. 

The good news is that there are steps you can take to minimize the taxes you pay on stock gains. The tax regulations are different from country to country, and I’m trying to generalize, but most of the examples that I use are from the US tax system.

Let’s get cracking. Here are a few things you can do.  

1. Maximize Your Contribution to Accounts that Offer Tax Advantages

In most countries, there are some kind of savings accounts that give you tax advantages.

These could be 401(k) plans where you can contribute a part of your paycheck before taxes, thereby reducing the amount you have to pay taxes on (if you are self-employed, the equivalent is a SEP IRA).

This could also be a Roth IRA that lets you contribute money you already paid taxes on, where your money can grow tax-free. In other words, putting money into an Roth IRA doesn’t reduce your taxable income the year you make the contribution, but you get a tax benefit on the back end.

The UK equivalent would be an ISA account.

These types of accounts have a different name in every country, so you should research your options and take advantage of them. You might want to call an accountant or call your local tax authorities to learn what accounts that offer tax advantages are available to you. 

2. Invest Long-Term

If you don’t sell your stocks, you don’t pay taxes on them. 

Did you know that Warren Buffett pays a lower tax rate than his secretary? How come one of the richest men in the world doesn’t pay a lot in taxes?

That’s because Warren Buffett doesn’t sell shares.

Warren Buffett’s income is actually very modest. His annual salary from his company Berkshire Hathaway is just $100,000 a year, and his secretary is rumored to make at least $200,000.

Warren Buffett’s wealth comes from holding just one stock: Berkshire Hathaway, and he doesn’t sell it – which means he pays no taxes on his accumulating personal wealth.

Some countries give you a more favorable treatment if you are a long-term stockholder. In the US, you pay regular income tax on a stock you hold for less than one year. If you hold it for one year and a day or more, you pay capital gains taxes, which are lower than regular income taxes. 

3. Combine Gains and Losses Strategically 

If you have an investment that has gone bad, you can sell it off strategically to offset capital gains.

If you sell shares with a loss in your taxable brokerage account, that loss can help offset other short-term or long-term gains. 

How does that work? In most countries, you only pay taxes on your net gain (the amount you have realized in gains minus your losses). So if you know you have some realized gain, you have an opportunity to realize some losses too to offset that gain. This is called tax harvesting.  

Of course, you don’t want to have any losing position on purpose just to avoid taxes, but if you happen to have an investment that didn’t go as planned, you can be strategic about when you sell it.

4. Structure Your Investment for Tax Efficiency

On some accounts, you don’t pay taxes, and on others you do.

You can position your investments so you get the best of each system. 

Why not place the very long-term investments in your taxable brokerage account where you only pay taxes when you sell them?

Why not place dividend paying stocks or short-term investments in your Roth IRA, where you don’t pay taxes? 

Don’t Let Taxes Overshadow Your Investment Strategy

You should buy or sell investments based on your belief that they will gain or lose value over the long term. Don’t make investment decisions just to reduce your tax burden.

Taxes are a luxury problem. If you pay taxes, it means you’ve made money. Don’t forget that. Be grateful for it.

Also remember all the things you contribute to with your taxes: roads, hospitals, schools, universities, police and security.

Like my uncle used to say, “I pay my taxes with gratitude.” 

Try to pay your taxes with a sense of gratitude and think of how you contribute to society.  

Don’t forget the e-book Free Yourself.  It’ll teach you how to calculate how much a company is worth. You can get it for free here. 

Five Types of Companies You Should Avoid in a Recession

Five Types of Companies You Should Avoid in a Recession

by | Oct 23, 2022 | Investing in stocks

Warren Buffett says there are only two rules in investing:

  1. Never lose money.
  2. Never forget rule number 1.

It sounds so simple.

But how do you avoid losing money?

The most important thing is to avoid investing in companies that go bankrupt.

In a recession, more companies will fold. This means you have to be extra careful on the edge of a recession.

So what should you avoid?

There are five types of companies that you have to steer clear of.

1. Companies Without Turnover

Avoiding companies that don’t sell anything at all might sound like a no-brainer to most… but you’d be surprised how many people throw their money at companies that don’t even have a product yet.

Those could be biotech, fintech or even blockchain companies. A lot of private investors hear the story about what the company wants to change in the world, they get seduced by the idea of eradicating bone cancer or revolutionizing banking in the third world – and they never look at the numbers or the annual report to see that it’s a fantasy or a product that doesn’t exist yet.

Some of the things that get the most hype turn into hot IPOs without revenue. If the company has no revenue, they have no product on the market yet.

The hard truth is that credit lines dry up really quickly in a recession, and you need to get something on the market to survive that.

2. Companies That Lose Money

Then there are all the companies that might sell something, but actually lose money on selling their product.

They simply don’t make any profit yet.

There are plenty of companies like that.

Some may defer profits by investing heavily in new business ventures (as Amazon did for many years), but as a private investor it’s difficult to discern whether they are deferring profits as a strategy or if they’re just plain lousy at making money.

If the company is continuously losing money, you have to steer away from them.

3. Cyclical Companies

Cyclical companies experience drastic dips in sales – and stock prices – when we enter a recession.

What is a typical cyclical company?

It’s all the companies in transport and property development.

This means car manufacturers (and anything related to the mobility industry – batteries, tires, you name it), airlines, logistics companies, construction, and property development.

Avoid these companies before a recession, but feel free to buy them when we are on our way out of a recession. At this point, their share price will begin to bounce back – if they survived the recession, that is.

4. Companies With a Lot of Debt

Companies burdened by a high level of debt are also at a high risk of folding during a crisis because they are weighed down by their debt. Maybe they can’t honor their creditors as the market and sales dip.

It makes sense, right? It’s the same with people. Let’s say two people lose all or part of their income. Maybe they or a spouse get fired. The one with a lot of debt – car debt, credit card debt, a mortgage on the house and the country cottage, some old student loans – is at a higher risk of having to sell their house to avoid foreclosure than the one who has no debt.

As a rule of thumb, the company should be able to repay the long-term debt within three years with their free cash flow.

You will find the long-term debt on the balance sheet. Free cash flow is often calculated in the 10K too.

5. Companies Whose Product You Don’t Understand

You need to be able to understand and perhaps even test the company’s product.

If you don’t know what the company sells, you’re in danger of investing in something that, in the worst-case scenario, turns out to be a pure sham.

This happened in Denmark with a company called IT Factory. The CEO was making everything up, and intelligent people invested with him. Afterwards, everyone asked how the investors could be so stupid. It’s simple. Did they ever look at the product or test it? Of course not. They took his word for it.

Warren Buffett says always to invest inside your zone of competence – and you should. Only if you really understand the product – and test it – can you evaluate whether it has a competitive edge… and a future.

What Else?

Obviously, there are other things that you should keep an eye out for before you invest.

You should research the company in detail and find out whether you believe in the product, trust the management, and can vouch for the company’s values.

Then you figure out whether you believe that the company will be bigger in 10 years. You can only estimate the growth if you analyze their competitive advantages.

If you want to learn more about the road forward – how to actually invest, you should attend my free webinar that takes place oct. 25th and 26th. You can sign up right here. 

You can also read more about how to find good companies in my free e-book that you can get here.