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Sunday, April 3, 2011

Highlights from Warren Buffett Meeting Event And His Visit To India in Mar 2011

I am here sharing my brief notes and pictures taken at the Wit, Wisdom, Warren event taken place in New Delhi, India on March 25 2011. To make it more comprehensive, many news articles in this regard have been referred. Some other related news while Buffett visited India is also shared with references acknowledged. Also see attached PDF.
Contact for queries: century.partners03@gmail.com

The event started at 6pm IST on March 25 in a jam packed conference room at Taj Palace Hotel, New Delhi. Warren Buffett who was accompanied by Ajit Jain answered to questions from a panel and audience.

What do you look for before you decide to make an investment: Good businesses with capable and able management. India is in top 4 or 5 countries in the world in which he will like to conduct businesses. Business can be selling for any of the following reasons, tax issues, family reasons, internal arguments, etc.

India has a far faster growth rate than US. Economic growth is impressive. Yes, there are problems but growth is there. Human living conditions around the world has improved significantly in the last century. Though the rewards of capitalistic society are not divided equally. Living standards in US are six times better than it was in 1930. This has never happened in one person's lifetime in any period of history of mankind. Similar phenomenon is now happening in India. As the economic pie grows here everyone's share also grows.

Inflation is a concern in India growth story and what it means for the equity investors? Keynes called inflation an invisible tax. Faith in currency gets diminished when inflation eats up the purchasing power of currency. What one can do personally is to improve skills to demand more and increase his earnings power. Increase in one's talent can't be taken away by inflation. Become more useful to the society. In US value of dollar came down by 94% since 1930. Purchasing power came down significantly.

At this moment US Fixed dollar investment is not a good investment. No complaints about inflation as if someone told in 1930 that inflation will take away 94% of the dollar value doesn't stop to find good businesses in which one can invest and earn decent returns. Politicians have two ways to restart a halted economy, one is by printing more money through quantitative easing which leads to debasing the currency and other is to tax people. Consequences of QE are addictive, but the currency gets debased. Keynes said it penalizes those who believe in their government.

In US, we say in God we trust, where as it is in-fact the Federal Reserve in which we trust. They work to maintain the integrity of paper money. So if you take twenty dollar bill we get the change in ten and five dollars and not in wheat or cotton. Keeping the integrity of paper money is of utmost importance. Over supply of money is no good for the value of currency.

World's oldest investment saying was by aesop who told that a bird in hand is better than two in the bush. One needs to evaluate, if he wants to keep the bird in hand or find the discounted value of what he can make if he goes for the birds in the bush. If he can assure it is worth more than two then he can compare with another opportunity to see if he may get more value. Investors need to be reasonable while expecting returns and temperament is the number one trait in the investing business.

Opinion of a farm owner while buying a stock of a company. Ability to look at facts and stay independent while thinking is important, patience is a virtue in the investment business. When asked are you gutsy- no, decide only based upon rationale thinking and not on hitch. When a person buys a stock the owner thinks for a return the next day. Where as if one buys a farm he is looking for the wheat it is going to produce over the next coming years. If the value of land goes up and the crop is good then that is a good investment. Thinking otherwise is foolish for a stock investor.
While making an investment the rule is to follow the following rule every-time one buys a stock. Need to write down the reason, I am buying Microsoft at $26 because...
You are right because your data and reasoning is right. In the case of buying a farm, I am interested in the amount I get after selling the crop and then deduct the salary, taxes and focus on the profits. Discipline is the most important factor in investing.

Good business is one which earns more money next year and then pays you every year. When buying a business need to think do I still want to own this if the stock market closes for the next couple of years.

Reaction of children upon giving away his fortune. My children are in the upper quarter of the top 1% of this world even after giving major portion of his wealth.
I want to give them enough so that they can do anything but not so much that they do nothing. They have advantages in life which very few have so the children are satisfied with what they have got and are actively involved in his charity process.

What keeps you going at 80. In 1965, I started with a blank canvass, created a very big company out of a small textile company. This the job I love to do everyday. I jump out of bed every morning and gets excited on the new developments. I was very lucky to get to do this at an early age. I have stopped working for money many decades earlier. It has been terrific 60 years. Lucky to be wired in a way, lot of luck in life. Cut out to do good in investing.

I use to sell shirts at JC Penny for $3.98 and the job was not much fun as what I do in investing business.

About Japan. Unforeseen, unpredictable events will happen in the future as well. World will be doing better month over month. Business conditions will improve over the period of time. Asian growth strongest in the world.

Residential construction will be on slump for few years in US. One way to solve the residential housing problem will be to blowup the extra homes and start re building new homes. Another solution will be to ask 13 years old to start families and buy houses. Or the builders can follow supply and demand and produce only what is required.

What do you like equity, oil or gold as an investment. All the gold in the world is 165,000 metric tonnes worth $7trillion of assets. That amount of money if you consider US equity market worth $20 trillion will give you one third of the US businesses. So what will you prefer to own, one third of US businesses or gold which does nothing. Alternatively you can have all the farm land in US, 7 Exxon Mobil's and $1 Trillion in cash or you can have all the gold.

Good business characteristics: Improved earnings yoy, ROE, Increase in revenue yoy.
Coke was established in 1886,  It has now 1.6 billion, 8Oz servings/day. It has a share of mind of the customers. Five years from now more people will be drinking more of it. That makes it huge bargain. It cost minute of someones wages and can give someone refreshing, happy feelings. Inflation adjusted prices is one third of what it was selling decades ago. Simple kind of valuation of a business which I can understand. I can understand Coke, Chewing Gum business and can for-see the business 5, 10, 15 years from now. I can understand the business model, see what their competitors will be doing, understand their competitiveness etc.

I use to drink Pepsi earlier as they were giving 12Oz of the drink at the same price in which Coke use to give 6Oz only. Warren recites famous Pepsi Jingle.

Then Coke worked on position, price and quality and increased their market share.

See's candies is doing the same thing as when we bought them in 1972. Satisfactory ROE, Not capital intensive, future is predictable. What one has to pay as the price is for the future income potential of a business. Not thinking about the business and betting doesn't produce anything and is not financially fattening and is considered speculation.

We can't eliminate people's propensity to go crazy every now and then. Leverage is always dangerous. Incentive system needs to be corrected to reward risk adjusted profits else may lead to future bubbles. People from time to time go crazy, there was Tulip mania in the seventeenth century. This time people saw that their neighbours can buy multiple houses and refinance then why can't they do it and went for it, house prices went up which created a massive bubble in the housing industry. When the music stops and just like Cinderella’s case everything turns into pumpkins and mice. Everyone thought they can time it but then there was no clock in the room.

When to Sell a business. When I was running the partnership in my earlier days, I use to have limited money, so I can find lot many opportunities which were better than the one that I owned. Now money outruns the number of ideas as the scope is narrowed down due to the size of investment. Over time to time, I look for the current confidence in the business model, management, types of products in future, future economics of the business. In 2008, invested $6.5Billion in Mars, $5Billion in Mars, $3Billion in GE. To maintain cash reserve sold J&J stock, to maintain cash position was the only reason to sell J&J else it was a great company.

Burlington Northern Railway BNSF, Business, efficiency has improved, Truck vs train cost etc. Railroad carries 3 times the tonne/mile with fewer employees.

Seek for great companies like Lubrizol where we invested $9billion. Oil additives, future economic prospects, Management, Price comparison, Bottom up approach.

Korean stocks were selling as a group very cheap which I found out using a manual. Very hard to find winners from Apple, Microsoft, Google, Amazon etc. Find companies which I can understand. I don't go to work thinking about sectors.

Felt like, I found a gold mine when first met Ajit Jain.



Relevant news articles:



Warren Buffett's Investing Tips in India 



By SHEFALI ANAND


Is this a good time to buy gold? Not according to the world's third-richest man, Warren Buffett. In fact, Mr. Buffett doesn't care for gold as an investment at all, he told an audience of around 500 people in New Delhi on Friday night, even though gold is the favored investment for millions of Indians. Mr. Buffett said that gold, oil and art are investments that don't produce any income or product. So, investors who buy these are counting on them becoming more attractive to other people in the future. "That's a whole different game" compared to investing, said Mr. Buffett. Mr. Buffett said he preferred to invest in productive assets like company stocks and farm land, rather than on gold, oil or art. He said if all the gold in the world could be condensed, it would be a cube which was 67 feet on all sides -- enough to fit a large auditorium. But what can you do with this cube? "You can fondle it," said Mr. Buffett, or stare at it, but it will not produce any returns. "You're betting on the price of the asset not on the productivity of the asset," said Mr. Buffett. He said he preferred to bet on assets that are productive, like stocks of companies or farm land which produces crops. These productive investments have helped the 80-year-old create vast wealth for himself, valued at nearly $50 billion, according to Forbes magazine.

Mr. Buffett shared some of his other investment mantras:

Picking the right stock

Mr. Buffett reiterated that he relies on principles taught by his guru, investor Benjamin Graham, who looked for stocks which were cheap compared to their worth. (Of course, the key is to figure out what the stock is worth, which is a subjective decision.) Mr. Buffett said he doesn't look at sectors to identify stocks. Instead, he looks for companies whose business he understands, and where he sees income and growth potential for the next five, 10 or 20 years. He gave the example of Coca-Cola, one of his holdings. What are the chances that Coca-Cola will be selling more products over the next several years? "It's almost a certainty," said Mr. Buffett. In comparison, he has stayed away from some technology and social media companies like Twitter or Facebook, which operate in a fast-changing world where the future is not clear to him. Some of these companies will be very big winners but "most of them will turn out to be overpriced," said Mr. Buffett. He said he doesn't have to be a part of all successful companies – he looks for only a few good investing ideas.

When to sell a stock?
This, he said, is a harder decision than buying a stock. Mr. Buffett typically holds on to stocks for years and years. "I don't feel like I have to grow rich in the next day or week," said Mr. Buffett. He said that investors who track stock prices daily are being "just foolish." If they had bought a farm or an apartment, they would not expect it to appreciate the next day but over a period of time. Why treat stocks differently? He added that while there's no law against speculating, those investors would "make more money if they don't trade as much." Mr. Buffett said he would sell a stock only if some better investment opportunity came about, or if something changed at the company, such as its management, which he didn't approve of.

Get the investing mindset
A good investor needs reasonable intelligence and a passion for investing, said Mr. Buffett. More important is the ability to look at the facts of an investment and evaluate them without getting influenced by what other people think. "You can't get excited because other people are excited," said Mr. Buffett. He said that humans are susceptible to believing that something that has happened in the recent past will continue to go on. So, every now and then, there's a craze to buy something even at very high, irrational prices. "Then all of a sudden, the music stops," said Mr. Buffett, and the investment comes crashing down. The key is to detach yourself from such a craze. Of course, that's easier said than done.

The importance of being comfortable
Mr. Buffett usually keeps a few billion dollars as a cash cushion or "margin of safety" at his company, Berkshire Hathaway Inc., in order to tide over any potential economic or other crises. That margin also allows him to buy businesses which may become attractive during a downturn, he said. Personally, he said, he doesn't keep much cash but says individuals should hold as much cash in their portfolio as would keep them comfortable during tough times. "Some people might do something very foolish if they didn't have cash around," said Mr. Buffett, presumably referring to selling stocks after they have lost a lot of value.

Why stocks matter?
To fight inflation. "Inflation is a very cruel tax," said Mr. Buffett, because it lowers the worth of your paper money. He said one of the best ways to keep the value of your money growing is to invest in good businesses and companies which keep growing. That helps investors "maintain purchasing power no matter what happens to the currency," said Mr. Buffett. He advised against buying long-term bonds of any government, because both inflation and printing of new currency lowers the value of these investments. The only better way to beat inflation, he said, is when individuals improve their earning power through further education and skills. "Maximize your talent," said Mr. Buffett. ==



== http://articles.economictimes.indiatimes.com/2011-03-25/news/29188729_1_warren-buffett-berkshire-insurance-insurance-market
One of the world's richest investors, Warren Buffett, today termed inflation as "a cruel tax on people" and said that improving one's earnings is the best protection against price rise. In a nearly-two hour interaction with investors, policyholders and panelists here, witty Buffett fielded a slew of queries on various topics, including business, stock markets, investments and philanthropy. "The best investment against inflation is to improve your own earnings... whatever may be, that is the best protection against a currency that decline at a rapid rate and the best investment passive investment I think is a good business," Buffett said. Emphasising that he has had a "lot of luck" in life, Buffett said, "I am not ashamed or enormously proud about it (being lucky)". Expressing optimism over opening up of the insurance sector, Buffett noted that his impression is "the government would continue to open up as they have done in the recent years to benefit more open investment and more broader investment that become obvious". Buffett-led conglomerate Berkshire Hathaway recently entered the non-life insurance market as a corporate agent for Bajaj Allianz General. Berkshire insurance online has sold about 200 policies of the insurance company. "... certainly India is in the top four or five countries in the world would have sort of businesses we are looking for," he said. On a query about stock markets, the billionaire investor quipped that a person need not be really smart to make money out of it. "(There needs to be) reasonable intelligence and a passion for activity ... An important ingredient (to deal with stock market) is temperament," he said.  On governments worldwide, especially in the US, printing money to boost their economies, Buffet said that it is much easier to print money than raise taxes. According to him, politicians have the temptation to go for printing money and the whole thing is addictive to the "point where currency (of a particular nation) is devalued rapidly..." "... Governments need to ensure that integrity of paper money is (maintained) at a high level... but unfortunately we are going the other way," Buffett said. ==
== http://www.gurufocus.com/forum/read.php?1,127486

Capitalism is like Cinderella, the Berkshire billionaire says in an exclusive interview with TheMarker. "She knew at midnight that everything was going to turn into pumpkins and mice, but it was just so much damn fun, dancing there." The United States is moving toward plutocracy— government of the rich, not by the people, says Warren Buffett, in an exclusive interview with TheMarker at Iscar's TaeguTec plant ==

==  http://www.mydigitalfc.com/stock-market/i-do-not-look-sectors-i-look-individual-companies-buffett-229

Warren Buffett was greeted with a jam-packed audience of Berkshire Insurance policyholders. The hall was mostly filled with fund managers from Mumbai. Buffett, as usual, passionately articulated his investment style and his role models in life. He was also positive about India’s growth story. The audience raised questions regarding which sectors he finds attractive for investment at the moment. Buffett explained that he did not look at sectors for investment; that was not his style. He looked at individual companies and he invested for the long term – 15-20 years. Buffett said he had more ideas when he started (investing) and less of capital. Now it was the reverse: He had more capital and fewer ideas. He said any investment that guaranteed three to four times returns in the next 40-50 years, should be considered good. Of course, there are possibilities that we might see irrationality of the kind we saw in 2007 (the housing bubble in the US), he said. Buffett cautioned that investors should not lose faith whenever that happened as long as they believed in their particular investment. Buffett named his dad as his role model as he was a big influence during his early days. His dad had a big role in shaping his early thinking. Buffett also looked to the godfather of value investing Benjamin Graham as a role model for investment philosophy. He told the gathering that during his early years he was a looking for a book on investing. In fact, at the age of 12 he had read all the books on investing at the Omaha library, yet he was not satisfied. He finally read Benjamin Graham’s `The Intelligent Investor’, when he was about 19 years old. It turned to be the book he was looking for. He told us that even after so many years it remained the best investment book ever written. Buffett felt The Intelligent Investor, first published in 1949, does not require any improvement. He also told us that he felt he could not do further improvement on the book. Asked on his views on gold, Buffett explained that he would prefer investing in something that brought more value to everyone. He said he would not be comfortable sitting in front of a huge cube of gold and watch its value grow. In India, perhaps, people are buying more gold and real estate because they may want to pass it on to their children just the way they inherited gold and real estate from their parents. He said it would take some time before investors here got comfortable investing in stocks. On the United States, Buffett said despite all the recent problems, the average living standard in his home country was much better than it was 50-60 years ago. Similarly, in India, where the economy was growing at 8-9 per cent, the outlook was bright. India’s living standards had improved tremendously in the last 25 years. The next 25 years would see further improvements.==

== "If I were not doing what I am doing, I would probably be a journalist. I think there is nothing more interesting than probing on somebody, then trying to put your thought down on a paper..." ==

== http://www.moneycontrol.com/news/business/let-goldman-sachs-try-to-find-me-warren-buffett_530792.html

Let Goldman Sachs try to find me: Buffett's Berkshire Hathaway owns $5 billion in preferred shares of Goldman as part of the investment he made in the bank during the financial crisis back in 2008. "That preferred has been paying us $15 a second," he says. "Tick ... Tick ... Tick." ==

== A collapse of the euro is not unthinkable. ==

== http://www.moneycontrol.com/news/current-affairs/buffett-hopes-monday-will-ringnew-businessindia_532068.html

Q: Which countries are you looking at investing in and where does India rank among your list of countries to invest in?

A: We are looking to make big investments anywhere in the world, if we can find really good businesses run by people we admire and trust and where we understand the business. Certainly, India is in the top four-five countries in the world that have the sort of business that we are looking for. So, I have been dropping my phone number around as I have covered the city and I hope that it rings on Monday morning with good news.

Q: The best case scenario for inflation in India next year is projected between 5% and 6%. We are going end this fiscal, that’s March 31, 2011 at about 8%. I know you have often said that inflation dwindles the equity investor and it is perhaps the best alternative amongst other alternatives as a hedge against inflation. But given the fact that we are dealing with fairly high levels of inflation in India, what would your advice be to people who are investing what should they change, what should they do?

A: Inflation, someone said many years ago that it is an invisible tax that only one man in a million really understands. It is a tax on people that have had faith in their currency, the governments issued it. The best investment against inflation is to improve your own earning power, your own talent. Very few people maximize their talent. If you increase your talent, they can’t tax it or they can’t take it away from you.

So, if you become more useful in your activities, your profession, doctor or whatever may be, that is the best protection against a currency that might decline at a rapid rate and the best passive investment is a good business. If you own an interest in a good business, you are very likely to maintain purchasing power no matter what happens with the currency. It’s interesting that in the United States, the value of the dollar since I was born has declined by 94% to 6 cents.

Inflation is a very cruel tax on people who believe in fixed dollars but things can work out pretty well even during inflationary times. If somebody told me when I was born that the dollar bill is going to go to 6 cents I might have said let me go back. I am not interested in emerging into that kind of a world. But actually it has worked out pretty well. I have no complaints.

Q: An article that you wrote in 1977 said that companies should be doing one of five things - hiking turnover, cheaper leverage, more leverage, lower income taxes, wider operating margins on sales. What would you now say to companies who are looking at bettering their return on equity?

Buffet: I do look at those qualities in terms of businesses. When I look at something like a Coca-Cola which has been around since 1886, I say to myself ‘They are now selling 1.6 billion eight ounce servings of Coca-Cola products everyday throughout the world.’ Everybody in this room has something in their mind about Coca-Cola and I hope it’s good incidentally.

What are the chances that Coca-Cola will be selling more products five or 10 years from now than presently? I would say it’s almost a certainty. There will be more people, they will have more purchasing power; this product is a huge bargain.

If you buy it on weekend specials like I do, this product sells at about twice the price that it sold at about 100 years ago. There aren’t many products like that. The cost of this represents for the average person maybe a minute or two of their earning power and it provides a moment of refreshment, happy memories and all kinds of things.

Will they be selling more Coca-Cola few years from now than they are right now? Almost certainly, they are Coca-Cola products. Will they be able to price their products so as to counteract the effects of inflation? Sure. It’s a simple type of evaluation. I stick with products where I can really see what’s likely to happen over 5-20 years and then those variables that we talk about in terms of return on equity enter into my calculations.

The important thing is to be in the right business and with the right people. If you are in the right business, you don’t go crazy in terms of what you pay for it. It’s just like my buying the farm. I didn’t go crazy in terms of what I paid for the farm; I had an honest guy running it. It happened to be my son. Now corn is selling for over twice the price it was in the mid 80’s, soybeans are selling at three times the price.

So, the farm is worth more money than before and over the years it’s just kept delivering a cheque to me every year. That’s what investment is about. It’s really looking at the future income potential of the business and comparing it to what you have to lay out now to get that income potential.

When you get into buying something where you just betting on whether people will pay a little more for it next year but it doesn’t produce anything, there is nothing illegal about it. It is not illegal, it’s not immoral and probably it isn’t financial fattening either but you are betting on investor attitude or speculator attitude rather than betting on the asset itself.               

Q: Since we are talking about money, I want to talk to you about your decision to give yours away. That makes you a selfless man to the world, it makes you the ambassador of philanthropy. But what about your family, does your family sees you as a selfless man as well? How did you get them to buy into your decision, to give away 99% of your wealth?

A: They haven’t talked to me for quite a while. My family is going to be in the upper quarter of 1% or something like that of humanity in terms of the funds that they have at their disposal. My goal originally was to leave my children enough so that they could do anything, but not enough so that they could do nothing. I have gotten a little more frivolous as time has passed so they are even getting a little more than that.

Q: You are in India. This is the land of Karma and spirituality, do you believe in god, in a higher being, in a higher consciousness? This is also the land that believes in the concept and idea of rebirth. If you were to be reborn, what would you like to be reborn as? If you could do anything differently then what would it be?

A: Probably I could be reborn as Sophia Loren’s boyfriend. ==

==  http://www.business-standard.com/india/news/buffett-has-more-compliments-for-india/429865/

Buffett, who met Prime Minister Manmohan Singh earlier in the day and also the insurance regulaotry chief, J Harinarayan, told a gathering of policy holders of his company in India (it has an agency business with Bajaj Allianz ) that as India saw the obvious results of more open investment, it would open up further.

“I met a number of people in the government. My impression is that they will continue to open up as they have been in recent years, as the benefits of more open investment and broader investments become obvious. I don’t know the exact speed at which this will happen, but I will expect there will be more (opening up),” he said.

The remarks assume importance, since a bill to raise the foreign investment cap from the current 26 per cent to 49 per cent in private insurance has been tabled and is with a Standing Committee of Parliament. Sensing the delay in these decisions, the Government had yesterday kept foreign investment out of the pension reforms bill tabled in the Lok Sabha.

At the meeting with policyholders, Buffett said his company is looking to make investments anywhere in the world where it found really good businesses run by people “we admire and trust and we understand the business and certainly India is in the top four or five countries in the world that has the sort of businesses we are looking for”.

He said India was going to have far faster growth rate than the United States. As to a query about contradictions like high growth rate and governance deficit, Buffett quipped as to whether the question was about the US or India. He said there would always be tensions and problems once an economy grows, but on balance, human conditions improve.

With a yearly growth rate of eight to nine per cent and population growth of 1 to 1.5 per cent, one could easily see improvement in per capita income in India.

On addressing inflation, as high as 8.31 per cent in February, the legendary investor said the best way was to improve your earnings. “The best protection against inflation is to improve your own earning power, your own talents. Very few people maximise their talents, and if you increase your talents, if you become useful in your productivity, in your profession, that is the best protection.” ==

== http://www.google.com/hostednews/afp/article/ALeqM5jjf7iFUYNCKQsA2zg30Px4c1eFIQ?docId=CNG.a233f5c76ed3a7a1686451adf8f8c38a.491

"When I give away my Berkshire Hathaway shares, they have no utility to me and great utility to others (who are poorer)." "Mr Buffett is a man with a great humanity and puts the human face far above business considerations," said Analjit Singh, managing director of the Max India conglomerate, after attending a meeting with Buffett. Buffett, who made his billions by buying stocks at bargain prices, also handed out some tips to eager Indian investors. "My advice is to invest in what you understand -- and when you're not paying the right price don't buy," said Buffett, who got wall-to-wall Indian TV coverage. "The economy of America, United States and others around the world are improving month-by-month," he said. "It might not be quite as fast as everybody would like but it is happening." Buffett added that he thought global economies would only be "slightly affected" by the deadly earthquake and tsunami in Japan. He said the Japanese disaster will set the country "back for a while" but "they will come back." The investment guru praised fast-growing India, a country of 1.2 billion people, as a "dream market." "The number of people, the buying power they are gaining, the ability to produce things, everything is getting better," he said. Buffett said he pleaded "guilty to being late in visiting India." "I should have come sooner but I've been a sort of stay-at-home fellow for most of my life," he said. "We hope to spend some money here," added Buffett, who has declared he is ready for some big acquisitions. ==

"I would recommend against buying long-term fixed-dollar investments," Buffett said at a news conference during his recent trip to India, Bloomberg reports. "If you ask me if the US dollar is going to hold its purchasing power fully at the level of 2011, 5 years, 10 years or 20 years from now, I would tell you it will not. : I would much rather own businesses. It's very easy to take away the value of fixed-dollar investments."

more by Warren Buffett - Mar 28, 2011 - The Guru Investor ==


Upon social networking sites valuation bubble: ==
== http://online.wsj.com/article/SB10001424052748703921204576217600625060840.html
Berkshire Hathaway Inc. Chairman Warren Buffett said Tuesday the U.S. economy is improving steadily month by month, but added his company is also looking beyond its home turf to countries such as India, which offer attractive investment opportunities.

Warren Buffett, Chairman and Chief Executive Officer of Berkshire Hathaway, addressed a news conference in Bangalore on March 22, 2011.

The 80-year billionaire investor is in India as part of a joint initiative termed, "Giving Pledge," with software pioneer Bill Gates to promote philanthropy. But Mr. Buffett--popularly known as the "Oracle of Omaha" for his sharp investment sense—is also seeking opportunities to make deals in India, one of the fastest-growing economies in the world. "In recent years, we see more opportunities outside the United States. We need a large country like India...a logical place to look at. I hope I spend some money here," Mr. Buffett told reporters at a news conference.

He added that Berkshire Hathaway has had about 85%-95% of its investments in the U.S. over the years. "The U.S. economy has been improving very steady, but not at a great rate," Mr. Buffett said. "You talk about the monetary policy. That's important. You talk about fiscal policy. That's important. But I believe the most important factor is the underlying resilience of capital," he said, adding that President Barack Obama has followed policies that are in the "right direction."

In its annual report, released last month, Berkshire had said it anticipates that "general economic conditions will continue to gradually improve, albeit unevenly, over time." Mr. Buffett, in a letter to shareholders accompanying the report, said a "normal" year for Berkshire would be one with a general business climate better than last year's, but weaker than 2005 or 2006.

In contrast, India's economy has survived the global downturn largely unscathed. The government estimates economic growth will rise to 8.6% in the fiscal year ending March 31, from 8.0% last year. Mr. Buffett said that he sees India as a large country, rather than an emerging market, and a promising investment destination. He added, though, that it would be more attractive for his company to invest in the local insurance sector if limits on foreign ownership of insurers are raised beyond the current level of 26%. Mr. Buffett is also in India to meet employees at Berkshire's local insurance-distribution unit, which was announced this month. Berkshire India will be a corporate agent of Bajaj Allianz General Insurance Co. and sell insurance products online and through telemarketing, initially focusing on motor insurance. "I would say that for the time being, and perhaps for some time, our activities in insurance here will be at the agency level rather than at the underwriting level," Mr. Buffett said. ==

== http://economictimes.indiatimes.com/quickiearticleshow/7805051.cms
Stocks that Warren Buffett would buy in India
Warren Buffett's knack of spotting potential early is legendary. It has made him one of the most successful stock investors of all times. How does he manage to identify multibaggers? What is the secret mantra that he follows to pick winners? Actually, it's no secret. Buffett's stock picking is based on a strict conservative philosophy that he has followed for decades. He prefers to invest in businesses, which manufacture products that people can't or don't want to live without, such as toothpastes, soaps, soft drinks, cars and computers. The companies that are given to speculation or hype are often disregarded. Buffett's primary concerns include a company's financial stability, quality of management and simplicity of business. He also checks whether the company has the ability to pass on its costs to its customers.  He believes that a company should be able to adjust its prices to inflation because it enables it to make profits in varying economic climates.
There is another critical quality that Buffett looks for in a company, the enduring moat. This is the USP of a company, the one quality that makes it almost impossible for its competitors to overtake it regardless of how much money they are willing to spend. Coca-Cola, whose stock is a long-time holding of Buffett's company, Berkshire Hathaway Investments, is a good example of the enduring moat. Coca-Cola is such a recognisable brand that it is difficult to imagine a new company being able to dislodge the market leader regardless of how much money it might be willing to spend on advertising and brand building. The oracle of Omaha is now on the prowl in the Indian markets. Last week, he told reporters in Bangalore that he was "a retard to have come to India so late".

Even as he trawls the markets for winners, we decided to run the very filters that are used by the guru to find out which Indian companies can pass his muster. Let us look at the seven fundamental parameters Buffett uses to zero in on potential stocks in the US. We will then use the same to identify the Indian companies that are worth investing in.

Stability of earnings: This can be checked by considering the earnings per share (EPS) for the past 10 years. EPS is derived from the residual profit left after payment of all expenses, taxes, depreciation, interest, preference dividends and belongs entirely to equity shareholders. A company should not have a negative EPS in the past 10 years. If the EPS is lower than that in the previous year, the dip should not be more than 45%.
Debt to earnings ratio: The second variable is the level of long-term debt to earnings ratio. Buffett likes conservatively financed companies. He prefers the long-term debt of a company to have been paid off from its net earnings in less than five years. This implies that the long-term debt to earnings ratio should be less than or equal to five.
Return on equity (ROE): The third variable measures how much money a company earns on its equity. The ratio is generally expressed as a percentage. For a company to figure on Buffett's radar, its 10-year average ROE should be greater than or equal to 15%.
Return on total capital (ROTC): This variable can sometimes give an incorrect picture. It's because some companies have a high debt content in their capital structure in relation to their equity. Still, they will show a high ROE because of the low equity base. However, a high debt content makes the company risky as the debt needs to be serviced, irrespective of the company being profitable or not. ROTC overcomes the limitation of ROE. Buffett prefers the companies whose 10-year average ROTC is greater than or equal to 12%.
Free cash flow: Buffett does not pick stocks of companies that indulge in major capital expenditure. Free cash flow is the difference between operating cash and capital expenditure. Therefore, free cash flow should be a positive. A company with a positive free cash flow is generating more cash than it is consuming and this is a good sign.
Return on retained earnings: The next variable is the return on retained earnings. Buffett uses this to assess the management's performance. The variable gives an indication of the ability of the management to use retained earnings for shareholders' wealth creation. To be eligible for investment by Buffett, a company's 10-year return on retained earnings should be greater than or equal to 12%.
The Warren Buffet stock selection guide: Look for companies with commanding market shares. Make sure that the company has a long history of increasing EPS. Ensure that the company has been conservatively financed. Assess the management performance by evaluating ROE, ROTC and return on retained earnings. From the book titled The Guru Investor by John P. Reese, published by John Wiley & Sons, Inc. ==

== http://www.fool.com/investing/general/2011/03/07/buffett-sets-up-shop-in-india.aspx
Billionaire investor Warren Buffett is finally setting up shop in India -- a country where the billionaire investor is yet to make substantial investments. Berkshire India, a wholly owned subsidiary of Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) , has received approval from India's insurance regulator to sell auto insurance products as a corporate agent of Bajaj Allianz General Insurance. And that's not all. Berkshire also has plans to enter the Indian reinsurance market.
The $214-billion company is in talks with a domestic general insurance company for a 26% stake. Indian rules allow only a 26% foreign direct investment (FDI) in the country's insurance sector, with a domestic company holding the majority 74% stake. In its budget proposals in February, the Indian government said it plans to increase the FDI ceiling in insurance to 49% from 26%. Buffett, eager to draw first blood as the industry opens up, clearly wants to have the first mover advantage. The reason is simple: At present, there is only one reinsurer in the domestic segment -- the government-owned General Insurance Corporation.
My intuition says that it won't end with insurance. In fact, this is a very modest way to enter India -- minus the fanfare. Buffett might be eyeing the retail market -- the industry which is slated to grow from $392.6 billion in 2011 to $674.4 billion by 2014. That sums it up; do I really need to explain more?
So, what's behind such a quiet entry into the second-fastest growing economy in the world? ==

==
http://www.fool.com/investing/international/2011/03/31/buffetts-bet-on-india.aspx?source=ihpsitth0000001

Buffett's Bet on India

By Tim Hanson | More Articles
March 31, 2011 | Comments (9)
Master investor Warren Buffett delivered a speech this past Friday that was as predictable as it was profound. The seminal value investor again advised his audience to buy what they understand, avoid overpriced stocks, and be rational and think for the long term. Why, then, do I mention it? Because while the content of Buffett's speech wasn't all that remarkable, the context was: Buffett delivered the speech in New Delhi.
Buffett was in India with fellow billionaire Bill Gates to encourage India's billionaires to give more to charity. But Buffett was also there on business.
Berkshire's first bet on India
That's because Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) recently launched Berkshireinsurance.com there, an agent set to sell auto insurance to India's growing legion of (relatively unsafe) drivers. And just as Chinese auto manufacturer and Berkshire investment BYD has leveraged Buffett's celebrity to try to sell more cars in the Middle Kingdom, reportedly hanging giant pictures of the famously folksy investor in its showrooms, Berkshireinsurance.com is also playing the Buffett card to attract customers. The company's website proclaims that "The legendary Warren Buffett's company, Berkshire Hathaway, has just set foot in India" and is adorned with well-known Buffett quotes. Couple that ability to build credibility with a low-cost sales and marketing model that seeks to replicate Geico's success here in the states, and you get the potential for a very interesting success story.
Yet Berkshireinsurance.com will not be Buffett's last bet on India. The billionaire said in Bangalore at an earlier speech that he expects to make one investment each year in the country -- noting as well that he was daft for not looking at opportunities in the country sooner.
Is India worth Buffett's time?
Why is a man who has been so successful and so adamant about staying within his circle of competence suddenly looking to branch out into new -- and volatile -- markets? The answer is that India, like China, gives Buffett the opportunity to invest in high-growth businesses againwithout requiring that he learn about sectors, such as high-tech stocks, that he has generally considered "too hard." That's a compelling proposition for a man who recently wrote to his shareholders that Berkshire's "bountiful years ... will never return."
Yet if Buffett can succeed as an investor in India, where despite what Buffett says, it's still early in the game, that warning may not turn out to be true.
The reason is that India, with more than 1 billion people, is a massive market. Furthermore, it's poor, with GDP per capita of just $1,134 versus $45,989 in the U.S., and massively underpenetrated by basic products and services such as water, electricity, and insurance. If Buffett really can find or build another Geico or See's Candies or Borsheim's in the country, they will grow rapidly along with the country. And while Buffett is invested in several blue chips, including Wal-Mart (NYSE: WMT  ) and Coca-Cola (NYSE: KO  ) , that are targeting India as a source for growth, it's these direct investments that have the most potential to accelerate Berkshire's returns.
But it's not easy money
Yet Buffett is also cognizant of the realities that could limit his returns in India. Foremost among those are the capital controls that restrict foreign investment in Indian stocks as well as foreign ownership in Indian companies. Consider that while more than 3,300 Indian companies are listed in India, just 14 trade on the major exchanges in the United States. And unless you're a nonresident Indian, there's no convenient way for you as an investor to get at those India-based investment opportunities.
Similarly, insurers like Berkshire are restricted to 26% ownership of Indian assets, while multibrand retailers such as Wal-Mart must have an Indian joint-venture partner and can't actually sell anything to consumers (only to other retailers). Even megabrands such as Nike(NYSE: NKE  ) -- another Berkshire holding -- must give up a 49% stake in their Indian business in order to enter the country.
These regulations deprive India of foreign capital and investment -- capital that the country needs to continue its growth. And while food inflation is forcing the Indian government to consider letting retailers like Wal-Mart bring lower prices and greater efficiency into the market, there has been no action on that front. The longer India waits, the longer India's development will take.
The global view
What's clear to Buffett, however, and I agree, is that the potential long-term rewards from investing in India outweigh the risks by several orders of magnitude. That's particularly true for any investor who shares Buffett's long-term outlook and is loath to sell his ownership stakes in great companies. Although emerging markets are guaranteed to be volatile, they will be the world's fastest-growing markets for the next few decades -- places that will undoubtedly be larger, more important economies in the next 10 to 20 years than they are today. That fact may not be true for developed economies in Europe and the U.S., making emerging markets among the few market sectors left where time really is on the investor's side.
Get Tim Hanson's top global stock picks by joining Motley Fool Global Gains. Tim's "Global View" column appears every Thursday on Fool.com. ==

== http://www.gurufocus.com/news.php?id=127110

Highlights From Warren Buffett’s Trip To “Dream Market”—India

  • Warren Buffett met with Indian industry leaders, insurance policy holders, reporters and heads of state.
  • Buffett is branching out to large countries such as India to find investments large enough to make money for Berkshire Hathaway.
  • Says he does not know how soon it will be before he invests in India. He met many people during his stay, but does not know where the next big idea is going to come from. “I love the idea of a market that’s getting more prosperous by the day the buying power that they’re gaining and ability to produce things getting better all the time.”
  • “Usually the businesses we would like to buy are not for sale, have to have a large canvas to find something I’m interested in.”
  • “[The world economy] is getting stronger month by month. I’m sure everyone would like to see it go at a faster rate. We have over 70 businesses, 4 or 5 in residential construction area that are not getting better. The other 60 are getting better at different rates, some are setting new records, but close to 90 percent of our businesses are getting better month by month.”
  • “Lots of Indian companies are going to do well.”
  • “The world 20 years from now and 50 years from now will see far far more trade between countries and we’ll all be more prosperous because of it.”
  • “Growth is continuing, it’s going to be tough in Japan for a significant country and Japan is a very important country. The Japan tragedy obviously interrupts it in Japan for a period although that will come back strong.
  • “I would predict that the world a year from now, output will be up significantly from what it is now on a per capita basis. It’s been happening for two years, and it will continue.” ==

http://www.moneycontrol.com/news/business/highlights-warren-buffetts-india-visit_531235.html

  • US economy is improving.
  • The more India and China prosper, the better for US.
  • Do not consider India as emerging Market. India is much bigger.
  • If I get one good idea a year, I feel very good about it
  • Business goes on despite events such as Japan calamity.
  • Have made plenty of mistakes in US
Old Man Who Charmed
  • Want to be remembered as an old man.
  • Ajit Jain has made more money for Berkshire than I have.
http://www.moneycontrol.com/news/world-news/buffett-interestedacquisitionsindia_531556.html

Buffett interested in acquisitions in India

"This is a country (India) on the move"
India offers "all kinds of opportunities," he said. Buffett noted that when some large Indian entity looks for a new permanent home, they do not forget him.
At some point in the next six months or two years or five years, when some large Indian corporation looks for a "permanent new home" and believes that Berkshire Hathaway is "best place in the world", they "don''t forget me", he said.
Berkshire Hathaway has most of its investments in the US. The conglomerate had recently forayed into the Indian non-life insurance sector as a corporate agent of Bajaj Allianz General.
Buffett, often called the "Oracle of Omaha", said India is a very big country with a large number of significant businesses.
Praising India and China, he said both the countries were "exploding" in terms of opening up human potential. It''s not as if the two countries are working harder than before; it''s just that they are working smarter, and responding to the needs of their societies, he added.
On Tuesday, Buffett said his company continued to look at large countries like India because it needs to make "large commitments". "India is the logical place to look (to make large commitments). So, I hope I spend some money here (India)," he had said.
Terming his company''s entry into India as "better late than never"
==

== http://www.moneycontrol.com/news/business/buffett-charms-india-says-this-isdream-market-for-investors_531481.html

Buffett charms India, says this is a dream market for investors

Q: What's happening as far as the global financial markets and global economies are concerned. Morgan Stanley's Stephen Roach recently said, "With the post-crisis world getting hit by one shot after another and with central banks having no latitude to cut interest rates, it's not hard to envision a scenario of open-ended monetary expansion that will end in tears". Do you share that view?

A: I don’t think monetary expansion will happen and I don’t think it is needed. I think that the economy of America, United States and others around the world are improving month-by-month. It might not be quite as fast as everybody would like but it is happening. And we do not need to flood the world with money in order to keep the expansion going.

Q: You don't really see large doses of liquidity coming into the market?

A: I hope it does not happen. The problem is not liquidity or the functioning of markets and capitals. The economic world is getting better day-by-day. The tragedy in Japan will set them for a while, but it won’t set them back for years; they will come back. And the rest of the world will be very slightly affected by that. I hope they respond to the needs of the Japanese people during this period.

Q: What is your own assessment of the strength of the recovery that we are currently seeing in the US because there is mix economic data that we contend with week after week, the markets are doing very well?

A: It is getting stronger month-by-month. Sure everybody would love to see it go at a faster rate but we have over 70 businesses, of which perhaps four or five in a residential construction area, and they are not getting better. But the other 60 plus are getting better at different rates. Some of them are setting new records but the 60, which is close to 90% of our businesses are getting better by the month and that was true a year ago, that is true today.

Q: Jeff Immelt was here just about a week ago and he was talking about how businesses in America are getting a lot more competitive. He is of course the head of the Jobs and Competiveness Council in the US and said that the arbitrage between a US BPO and a similar venture in India has narrowed down to about 10%. If India doesn't enjoy the cost arbitrage advantage anymore then what are investors like you looking at in India?

A: Lot of Indian companies are going to do well. And, I am sure Jeff is going to do lot the business here as well. You want to improve competitiveness in every place of the world. That is how our children will live better that we learn to produce more goods and services do with lesser things. That is going to happen in India, in United States, in China and throughout the world. The fact that productivity is improving in the United States is not bad for India just as improvement in productivity in India is not bad for United States. People often react that way but what we want is a more productive world. We want more goods and services to spread among seven billion people. We are going in that direction.

Q: So what is it that attracts you to India at this point in time? Is it the size of the market? I know you don't have an India master plan as of now, but what is it that attracts you to India at this point?

A: The market is growing, getting more prosperous by the day, where businesses are flourishing. This is a dream market in a sense. The number of people, the buying power that they are gaining, the ability to produce things, everything is getting better everyday.

Q: What was holding you back all this while?

A: You have to find the right thing. Usually the businesses we would like to buy are not for sale— overwhelmingly that is true. Every now and then something happens, it could happen in India or United States or at some place else, I just don’t know. I have to have a huge campus in order to buying just on occasional opportunity.

Q: One of the concerns that governments and central banks across the world are dealing with is an exit strategy from the stimulus measures taken post 2008. While to avoid financial collapse central banks & governments had worked together. There seem to be more challenges for a co-ordinated exit strategy. Do you think coming up with co-ordinated exit strategy is more complicated?

A: It is more complicated. When there is an emergency, all the fire trucks come out but when the emergency is over and different countries are looking at different situations in their own country, it will be harder to getting out than it was getting in. Everybody knew what medicine was needed a couple of years ago when the panic happened. Withdrawing the medicine from the patients, who are in different conditions, in different countries, Central Banks have different ideas and so do the governments.

Q: And national interests are now very different as well?

A: Yes. But we all have interest in the world economy getting better. But yes the interests aren’t so clear to us. The interest in September-October 2008 everybody knew that governments had to act and that too in a huge and unprecedented way in many cases. So it was easier. And there was a lot of co-operation that we had normally seen among the governments. There will be more disagreements on the way out. But that is impossible. It will work.

Q: Do you think that the regulatory changes in America post 2008 will change the cosy Wall Street-Washington relationship that has existed so far?

A: I think the markets will go excesses in the future just like they have in the past.

Q: You don't believe that we have learnt a lesson from the 2008 crisis?

A: We always learnt a little bit of a lesson but then there is some other lesson that comes. People will occasionally go crazy in terms of optimism and pessimism but the world is still progressing in spite of that; don’t carve out everybody behaving rationally in the future.

Q: The former RBI governor in India YV Reddy he said we should not blindly believe in the efficiency of global financial market because it does not exist. You agree with him?

A: Yes I agree with that but that does not mean that I don’t believe in the market and follow market signals. Market can get very inefficient and capitalism and markets lead to access particularly borrowed money is available and all that. When people have favourable experience in markets they tend to do things that eventually becomes stupid. Somebody said that there are the innovators, the imitators and then idiots; sometimes they follow in that progression.

Q: What are you most worried about? You seem to be in the optimistic camp, you believe that the recovery that we are seeing is a sustainable recovery and we are getting stronger everyday. What are you most worried about at this point in time?

A: The world has to learn how to deal with the problems of weapons of mass destruction, nuclear chemical and biology, that is the threat to the world. We have weapons of almost incomprehensible strength and so far, we have been reasonably good since 1945. The danger to the world is not that we produced everything we are going to produce or we will come up with all good ideas. Humanity is going to make significant progress but there is this threat of the nuclear chemical and biological capabilities of either world nations or groups of one sort that could cause enormous damage and disruption. It is a common enemy that they should work together to at least minimize the problem.

Q: A lot of businesses in India are family owned, family promoted businesses. As a consequence, a lot of them have put in professional managements in place; have family councils and so on. The priority still seems to be one of inheritance, passing down the business from one generation to another generation. Sometimes we've seen wealth being squandered & destroyed on account of that. What would your advice be to family owned businesses?

A: It is nothing better than a family business if one works or does not work. When the family is producing talent in the next generation where they work in harmony, it is wonderful. There is nothing like a family putting together in that respect.

On the other hand, sometimes next generation does not have the same abilities. It is tough sometimes for people to recognize it. There is no one answer. We are involved with some businesses where they are in fourth generation and they are wonderful businesses. I have seen other businesses fall apart when they get handed to the next generation so there is no one size answer. You have to look at the capabilities of the next generation. Once, it works it is wonderful.

Q: You are 80 you still tap down your work every morning. You have no plans to retire at this point of time. Don’t you think a succession plans would make all your investors feel a lot more comfortable?

A: We have a succession plan. If I die at night the board of directors has somebody. It is going to happen some night and the next morning they know who will be in charge. Now that may change five years from now because of age, because if somebody new joins us. Hence, it would not make sense to name that person today. So, we have a clear succession plan, we have not just announced the successor.

Q: You are not going to be pushed into announcing that either?

A: You have almost got a lot of it. ==

== http://www.rediff.com/business/slide-show/slide-show-1-warren-buffett-in-india/20110323.htm

"I am just overwhelmed by the welcome I have received from the moment we got here. They treat me much better in India than they do in the United States"== 

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2 comments:

  1. The topic is explained very well and makes us aware about the investment psychology of greed, fear and hope.

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