Latest Investment Activity: Buffett, Grantham, Mobius, And Rogers
Here are the latest plays by legendary investors Warren Buffett, Jeremy Grantham, Mark Mobius, and Jim Rogers:
Warren Buffett
Equities:
(GurusFocus.com, October 13)
Warren Buffett has been one of the most notable buyers. After cutting an amazing deal with Goldman Sachs and watching shares of Berkshire Hathaway (NYSE:BRK-A) fall about 30% in the last month, he’s making plenty of other moves. Berkshire was perfectly positioned as it entered September with a $40 billion cash.
The bid to take over Constellation Energy Group (CEG) still stands. Berkshire has also agreed to put $3 billion into 10% preferred shares of General Electric (GE). Also, $6.5 of Berkshire’s dollars were committed as part of the Wrigley (WWY) LBO led by Mars.
His latest move is probably the timeliest. In order to capitalize on the Bull Market in Volatility, Berkshire is starting to write put options more aggressively. This week Berkshire disclosed it has written put options on Burlington Northern Sante Fe (BNI).
Berkshire sold put options that will force it to purchase 1.95 million BNI shares between $77 and $80 per share. The contracts were sold for a total value of $12.76 million and will just defray the costs of buying more BNI…which they were probably going to buy anyway. Berkshire also sold put options for 1.3 million shares of BNI earlier in the week.
Jeremy Grantham
Equities:
(Barron’s, Lawrence C. Strauss, October 13)
(Grantham speaking) In a nutshell, we are as conservative as we can possibly get. One bet that has been very successful for us, touch wood, has been long high-quality, blue-chip stocks, particularly in the U.S., and short risky companies. We have been screaming against risk-taking for a long time, and in recent weeks, it has paid off enormously…
Going forward, you can think about slowly moving back into the cheapest pockets of global equities. So the next move that we make will be back to moderate neutral in emerging-market equities and small-cap international value. I can’t say we are going to be in a great hurry, but that will be our next move. We had finished selling almost everything except emerging markets two years ago. We finished selling emerging market equities three months ago.
But the next move will be buying, and we are encouraged that there are a few pockets that are cheap on an absolute basis. We are not encouraged that they will rally immediately. But we will be looking to buy the cheap pockets of global equities as our next move some time in the next several months.
(Morningstar.com, Russel Kinnel, October 14)
Nonetheless he’s now more constructive about equities because he believes they are trading at severely depressed prices. He said that at the end of Friday, global equities were trading as cheaply as they had been since the 1980s. In fact, the U.S. had traded below GMO’s fair value estimate–though as we spoke Monday morning a rally had brought it back to around fair value. Specifically, he prefers blue chips to small caps or highly leveraged companies.
“We’re buying carefully and slowly,” Grantham notes. Why slowly? “When bubbles correct, they usually overcorrect so that the market is selling well below fair value.”
Interestingly Grantham also says he’s now neutral on financials–a sector he has long disliked. He notes that most of the credit crisis is likely behind us and that the newest plan of worldwide governments to inject capital into banks in exchange for shares is a big improvement on past plans.
Commodities:
(Barron’s, Lawrence C. Strauss, October 13)
(Grantham speaking) Commodities have a great long-term future, now that the long-term trend has shifted from falling commodity prices to rising commodity prices. Having said that, the next couple of years will be quite different. We are in a global slowdown, which I think will be worse than expected even today, and it will be longer than expected — so this is not a healthy environment for commodities. Over a shorter horizon, I would be getting out of the way of commodities or I would be short commodities. I’m personally short oil; the firm is short copper.
(Morningstar.com, Russel Kinnel, October 14)
Grantham expects that slowing growth will also keep commodity prices falling. “I would keep out of commodities for the near term,” he said.
Currencies:
(Barron’s, Lawrence C. Strauss, October 13)
(Grantham speaking) I’m speaking for the asset-allocation unit at the firm. We have been substantially long the safe-haven currencies. We have been very long the yen and somewhat long the Swiss franc and short sterling, which is one of our favorite bets. We have been short the euro for three months, and slightly long the U.S. dollar. One of the paradoxes is, if the world is worse than people expect, the U.S. dollar will outperform.
Mark Mobius
Equities:
(Reuters, George Georgiopoulos, October 13)
“We are buying stocks with single-digit price-to-earnings ratios, price-to-book little more than one, dividend yields of around 5 percent. Tupras refiner in Turkey, for example, now has a dividend yield of around 20 percent,” Mobius said. Templeton’s favourite emerging markets include China, India, Russia, Turkey and South Africa. Its funds also invest in Greek companies that have a lot of their earnings in emerging markets, such as National Bank and Hellenic Bottling.
Jim Rogers
Bonds:
(Bloomberg, October 14, Wes Goodman, Anchalee Worrachate)
“The U.S. government is taking on gigantic amounts of debt,” Rogers said in an interview in Singapore, where he lives. “They’re printing gigantic amounts of money. Printing money has always led to more inflation. The last bubble in the world that I can find is long-term U.S. government bonds.”
Rogers said he is “shorting” 30-year debt, or betting prices will fall.
Sources:
“What The Smartest Money Is Doing Now”
GuruFocus.com, October 13, 2008
“Still Holding Back”
Lawrence C. Strauss
Barron’s, October 13, 2008
“Grantham: Stocks Haven’t Been This Cheap since 1987”
Russel Kinnel
Morningstar, October 14, 2008
“UPDATE 1-Mobius sees markets close to bottoming”
George Georgiopoulos
Reuters, October 13, 2008
“’Long Bond’ Favored as Investors See Waning Inflation (Update1)”
Wes Goodman, Anchalee Worrachate
Bloomberg, October 14, 2008
