Portfolio Architect

Warren Buffett Inteview Videos

2009-03-26T17:26:00.000-07:00

US Economy and Merger Deals (at the Nebraska Furniture Mart)

Inflation and Money (at the Nebraska Furniture Mart)

A Few Strategies From World's Greatest Investor

2009-02-14T10:36:00.000-08:00

By ZOSIMO T. LITERATUS
Zeitgeber LC, Investments Division

Almost always you can judge an investor by his actions. Recently, world's richest man Warren Buffett revealed some strategies from the way his company Bershire Hathaway (BH) behaves.

BREAKUP FEE

Aborted weddings may have somehow brought some profit for the surprised party should "breakup fee" has practiced in relationships. MidAmerican Holdings, an energy subsidiary of BH, received 19,897,322 shares in mid-December last year from France's Constellation Energy (ECF) after a deal inked in September soured. The deal provided a breakup fee, which includes 10 percent of its common stock should either party backs out.

As of February 7, BH has sold 5,066,215 shares of ECF for an average price of $27.04, a running windfall of $136,969,137. BH stake with ECF went down to 7.45 percent from 9.99 percent, with 14,831,107 shares remaining.

DOUBLE BALLOONS

Jewelry retailer Tiffany announced on February 13 that it took a double-balloon debt worth $250 million to some BH subsidiaries. The loan pays 10 percent per annum, with the first half due in eight years (2017) and the remaining half in 10 years (2019).

CONVERTIBLE CORPORATE BONDS

BH increased this its position in Swiss Re by 3 billion francs (about $2.6 billion) as it bought the reinsurer's bonds that pay 12 percent a year. After three years, they bonds may be converted into Swiss Re common shares at 25 francs a share.

OPTIONS

An option is a kind of stock insurance that protects the buyer from falling shares to go beyond certain cut off price in the market but contracting with the option seller to buy the same number of shares at the exercise day.

On 3 December 2008, BH sold an option to buy 2,325,000 shares of freight railroad Burlington Northern (BN) by January 30 for whatever market price. The base price was $83.85 a share or a total of $165.4 million. BN closed that day at $77.50, making BH a premium profit of $14.76 million.

Last January 30, BH kept its promise and bought similar number of shares for $75, or a total of $174.4 million. It took a price loss of $2.4 per share for repurchased shares, or a total of $5.58 million.

PNB-ABC Merger Can Be Profitable to Equity Investors

2009-02-08T06:22:00.000-08:00

By Zosimo T. Literatus

Zeitgeber Investments Division

Under the merger plan approved by the respective boards of Philippine National Bank (PNB) and Allied Banking Corporation (ABC) last year, 140 shares in PNB are to be swapped for every single common share in ABC. Also approved was the exchange ratio of 30.73 PNB shares for every ABC preferred share. PNB shares are to be issued at P55 per share, making a total equity assumption of P 36.42 billion on its 2008 year-end equity level.

The stock however has fallen from a high of P38.50 in May last year to P13.75 as of January 30 in line with the drop in local share prices due to investor risk-averseness amid the global financial crisis.

Issued and outstanding ABC shares as of December 31, 2007 were 495,295 shares--50,000 preferred and 445,295 common. Its equivalent new PNB shares at swap rate of 140 PNB per ABC share would total to 69,341,300 shares.

The total ABC equity for 2007 year-end was reported at P 17.328 billion. This valued the ABC equity per share at P 34,985.21. A swap lot of 140 shares for PNB therefore must have an equity per share value of not more than P 249.89 to make sense. A lower PNB equity value would be to its shareholders advantage.

Within the same period, PNB has issued 662,245,916 shares at a par value of P 40. Its total equity was reported at P 30.12 billion. Its 2007 equity value per share stood at P 45.

Based on the 2007 figure alone, assuming that changes in their equities are about proportionate, PNB shareholders would be giving up P 7.700 worth of common shares (at P 55 per new PNB shares to be issued) for an ABC common share worth P 34,985.21. That's a windfall of paper profit for PNB shareholders and a loss for ABC shareholders.

This deal, which could increase the issued and outstanding common shares of PNB to a total of 731,587,216 shares, however dilutes the PNB shareholders by 10.47%. The dilution would plunge the PNB equity per share value to P 49.79, or 9.48 percent.

As of Friday, February 6, closing price for the PNB common was P 13.75. This would be an excellent BUY price for PNB on the basis of its equity alone. The company's long-term profitability prospects and other important valuation criteria are not factored in this computation.

Ailing US Firms Get Premium on Stocks

2009-02-06T22:01:00.000-08:00

The Congressional Oversight Panel uncovered on Friday, February 6, that the Bush administration overpaid its purchase of the stocks and other assets of the ailing Wall Street firms at the height of the American financial crisis last year. Looks like a windfall profit on security sales makes for managerial blunders. (Click here for details.)

Market chill makes dancing frenzy for the wise investor

2008-10-28T03:17:00.000-07:00

By ZOSIMO T. LITERATUS
Zeitgeber LC, Investments Division

The drop in the share prices yesterday might be an alarming one but such plunge in market value was concentrated to only a few companies traded in the Philippine Stock Exchange with more than half of the listed stocks were simply left out in the cold without bidding movements.

In the Financials, only 12 of 29 companies (about 41 percent) suffered price drops, almost equally spread among banks and other financial institutions. Fourteen out of 47 Industrials take price plunges, representing almost 30 percent of those listed in the group.

Only eight of 36 holding companies suffered the cut in market prices, while the Properties dipped almost 24 percent.

Listed Service companies neither suffered more with only nine out of 38 companies (23.7 percent) got bid downward. Mining and oil companies took the cut in six of 26 (23 percent).

The 12.3% price plunge was an average that indicated certain companies took a bigger spiral in market displeasure.

But for investors who know the better companies among the many of lesser make, the spiral should find them waiting with a lot of cash to buy in. A few select companies are simply priced right now almost for a song. And a wise investor should know that it is time to sing. If Warren Buffett knows about this, he could dance with frenzy.

Share prices plunge 12.3%; trading halted temporarily

2008-10-28T02:53:00.000-07:00

By KRISTINE JANE R. LIU

Business World

The Philippine stock market saw one of its worst days yesterday as share prices fell by a record 12.3%, triggered by investor fears that a global recession is inevitable.

The plunge — the biggest one-day percentage drop since the bourse was unified — forced officials to temporarily halt trading, also a first for the Philippine Stock Exchange (PSE).

The "circuit breaker rule" was imposed after the main index fell by 10%. The 15-minute breather did little to prevent further drops as the main index closed at 1,713.8, down 239.7 points. It was the biggest one-day point drop since February 2007.

The total value of all 241 firms listed on the PSE was P7.98 trillion at the start of the year. As of yesterday this was down to P4.75 trillion.

"Basically this is investor concern over the income of the country’s financial institutions. The effect of the global situation ... is being considered and [investors] are worried about our banking sector," said Harry G. Liu, president of Summit Securities, Inc. Check for details...

Central banks slashing rates as investors flee

2008-10-28T02:32:00.000-07:00

By ANTHONY FAIOLA & NEIL IRWIN

MSNBC

Central banks around the world are moving to further slash interest rates as they seek to contain the damage from the bursting of the biggest credit bubble in history.

The Federal Reserve is poised to cut its benchmark rate for the second time in two weeks at a pivotal meeting in Washington on Wednesday, and the European Central Bank yesterday suggested that it would do the same next week. South Korea announced a dramatic rate cut yesterday, by three-fourths of a percentage point.

Governments worldwide have already approved massive bailouts and stimulus packages to halt financial meltdowns. But the trouble spots in the United States and abroad continue to multiply. Yesterday, there were growing signs that the U.S. Treasury Department was close to extending its $700 billion rescue program to cover the ailing auto industry.

Analysts said governments are trying to manage what has become the biggest threat to the global financial system -- a massive pullout by panicked investors from any holding they see as remotely risky. From consumers to multibillion-dollar hedge funds, investors are cashing out to cover losses or guard against further damage by moving into safe havens such as U.S. Treasurys.

Rate cuts, however, are not packing their usual punch. Normally, when central banks cut rates, it becomes cheaper for businesses and consumers to borrow money. But now, with banks and other financial institutions experiencing a severe crisis, lenders have been reluctant to extend credit at any price.

The pullback by investors, known as deleveraging, is extending massive losses on global stock markets; the Hong Kong stock market on Monday had its biggest one-day percentage drop since 1989, and Tokyo's Nikkei fell to its lowest level in 26 years. Check for details...

Ten Companies Failed the Free-Float Test

2008-10-11T23:19:00.000-07:00

By ZOSIMO T. LITERATUS

Morningsun Press Agency

Ten publicly-traded companies failed to pass the cut for the free float criteria set by the Philippine Stock Exchange, which is ten percent of the outstanding company’s stocks listed in the local bourse. The figures will be used to update the free float levels of all listed companies effective October 10. Free float refers to the issued and outstanding shares of a listed company that are not held by strategic partners and owners. Hence, it is an indicator of the tradability of the company, assuring investors sufficient volume of stocks that can be traded anytime.

Listed companies that failed the free-float cut are credit card provider Bankard (BKD: 8.0%), Canada-based life insurance providers Manulife Financial (MFC: 1.2%) and Sun Life Financial (SLF: 2.4%), cement manufacturer Republic Cement (RCM: 7.5%), residential property and industrial park developers Filinvest Land (LND: 5.6%) and its parent (holding) Filinvest Development (FDC: 7.8%), multi-use property developer Philippine Estates (PHES: 5.2%), plastic manufacturer Wellex Industries (WIN: 0.3%), third largest cellular phone provider Pilipino Telephone (PLTL: 7.8%), and airline operator PAL Holdings (PAL: 2.3%). The updated levels will figure out in the computation of free float shares of companies included in the PSE index (PSEi) and the sector indices.

Last week, the bourse announced the reconstitution of its indices based on the trading activity of listed companies from July 1, 2007 to June 30, 2008. Three companies in the PSEi will be replaced while eight companies join the sector indices after 17 others were removed. This new compositions of the PSE indices will take effect on November 14.

Broadcasting giant ABS-CBN Broadcasting, conglomerate Alliance Global Group, and oil-refining giant Petron join the 30-company PSEi to replace nation’s leading cement manufacturer Holcim Philippines, food and beverage giant JG Summit Holdings, and commercially licensed Philippine National Bank.

The Financial Index will drop in membership from 17 to 15 as three companies—Asia Trust Development Bank, Export and Industry Bank, and Manulife Financial Corporation—drop out and large global remittance provider I-Remit enters.

The Industrial Index will also reduce its roll from 23 to 22 with the exit of food and beverage standout Ginebra San Miguel, Republic Cement, steel fabricator TKC Steel, and paper producer PICOP Resources exit. The companies—newly listed Aboitiz Power, Davao-based oil business Phoenix Petroleum Philippines, and newly-listed cosmetics company Splash—take the open slots.

The Holding Firms Index is adding Lodestar Investment Holdings after the removal of A Soriano, House of Investments, Prime Orion Philippines, and Unioil Resources & Holdings.

The Services Index will roll in newly listed broadcaster GMA Network Inc. Three companies were removed at the same time: Asia Terminals, Boulevard Holdings, and PAL Holdings.

Getting A Millionaire's Mindset

2008-09-08T01:46:00.000-07:00

By GLENN CURTIS

Investopedia, Monday, 8 September 2008

Let's face it; we all don't make millions of dollars a year, and the odds are that most of us won't receive a large windfall inheritance either. However, that doesn't mean that we can't build sizeable wealth - it'll just take some time. If you're young, time is on your side and retiring a millionaire is achievable. Read on for some tips on how to increase your savings and work toward this goal.

Stop Senseless Spending Unfortunately: People have a habit of spending their hard-earned cash on goods and services that they don't need. Even relatively small expenses, such as indulging in a gourmet coffee from a premium coffee shop every morning, can really add up - and decrease the amount of money you can save. Larger expenses on luxury items also prevent many people from putting money into savings each month. (For related reading, see Squeeze A Greenback Out Of Your Latte.)That said, it's important to realize that it's usually not just one item or one habit that must be cut out in order to accumulate sizable wealth (although it may be). Usually, in order to become wealthy one must adopt a disciplined lifestyle and budget. Read More News...

Philippine Corporate Profits Fall – PSE Study

2008-09-08T01:10:00.000-07:00

By AGENCE FRANCE-PRESSE

Money, First Posted 12:25:00 09/02/2008

MANILA, Philippines -- Soaring inflation contributed to a 4.3-percent fall in profits at listed Philippine firms over the three months to March, a stock exchange study said Tuesday.

The fall against the same quarter last year pushed profits among the 221 companies down to P66.68 billion ($1.46 billion), according to research by the Philippine Stock Exchange.

Inflation, slowing economic growth and the impact of stock market losses -- shares dropped 17.6 percent over the quarter -- accounted for the fall, said bourse president Francis Lim.
He said the figures created "an unsettling implication" that he described as "like the proverbial calm before the storm."

Firms in the finance, mining, oil and property sectors, together with holding companies, suffered double-digit percentage drops in profits, but overall revenues rose 10.4 percent to P589.71 billion, the study said. Read More News...

Inflation at New Near-17 Year High

2008-09-05T21:50:00.000-07:00

by BUSINESS WORLD ONLINE

Saturday, September 6, 2008 MANILA, PHILIPPINES

Inflation hit a new near-17 year high in August but the results, up slightly from a month earlier, could be the peak for 2008.

The rise in consumer prices was 12.5% last month, up from July’s 12.3% due to what the National Statistics Office said were higher prices in a number of commodity groups. The result was the highest since December 1991, when inflation topped 13%.

The Bangko Sentral ng Pilipinas (BSP) called it a "positive development", and predicted a further slowdown if food and oil prices continue to drop. "These developments are positive for the inflation outlook and the BSP will watch these closely to see if the slowdown would continue and be more generalized," central bank governor Amando M. Tetangco, Jr. said in a text message.

"If [the positive developments in prices of food and oil] continue, the pace of inflation will slow down further," he added.

Food prices went down in August but costs of other important commodity groups such as fuel, light, water and clothing still grew faster during the month. Read Full Story...

Warren Buffett's Humorous Threat

2008-09-04T22:45:00.000-07:00

By BILL BARKER
The Motley Fool, September 2, 2008

Along with being the world's greatest living investor, Warren Buffett is an outstanding writer, a generous educator, and a reliable wit. His annual letters to shareholders, replete with investing insights both timely and timeless, nearly always include a number of well-delivered jokes.

In one letter, he wrote:

"We show below our common stock investments. With two exceptions, those that had a market value of more than $700 million at the end of 2006 are itemized. We don't itemize the two securities referred to, which have a market value of $1.9 billion, because we continue to buy them. I could, of course, tell you their names. But then I would have to kill you."

Now, when I first read that, I laughed. The notion that Buffett might need to off one or more of his readers is just good comedy. Then I thought, "Was it Freud or an embittered ex-girlfriend of mine who said that there really is no such thing as an innocent joke?" (I know that one smoked a lot of cigars, and one needs to get over my remark about her haircut.) Read Full Story...

Quick Hits: Berkshire Hathaway Won't Bet Against Dollar

2008-09-01T02:28:00.000-07:00

By SCOTT REEVES
Minyanville, Aug 22, 2008

The sour US economy is unlikely to rebound before 2009, billionaire investor Warren Buffett said Friday. He said the credit crunch will continue to worsen, and noted that Federal Reserve Chairman Ben Bernake doesn’t have a “magic wand” to strengthen the economy and tame inflation.

“You always find out who’s been swimming naked when the tide goes out,” Buffett told CNBC. “We found out that Wall Street has been kind of a nudist beach.” Read Full Story...

The Oracle of Omaha's Latest Riddle

2008-09-01T01:48:00.000-07:00

By TIMOTHY L. O'BRIEN

The New York Times, April 10, 2005

WHEN Berkshire Hathaway shareholders gather here in three weeks for their annual meeting, they will be treated to another homespun video starring the company's chairman, Warren E. Buffett. This year's plot is still a secret, but Mr. Buffett's co-star in last year's video was Arnold Schwarzenegger, the governor of California. Read Full Story...

A Deal Maker With a Hot Hand Opens His Wallet

2008-09-01T01:13:00.000-07:00

By VIKAS BAJAJ
The New York Times, December 29, 2007

Warren E. Buffett is in no mood to quit.

At 77, Mr. Buffett, the country’s most famous investor, is in the midst of his hottest streak in almost a decade. And he is capping his run with a flurry of deal-making.

On Friday, Mr. Buffett stunned Wall Street by announcing that he would enter the troubled bond insurance business. He also spent about $440 million for a unit of ING Groep, the Dutch financial giant. Read Full Story...