The heterogeneous fool to take
Do you want to invest like Warren Buffett? Consider buying Berkshire Hathaway stock. Led by Buffett, co-chairman Charlie Munger and seasoned managers, Berkshire Hathaway has outperformed the market for decades and owning the shares gives you a piece of the famously successful conglomerate.
Berkshire Hathaway’s wholly owned subsidiaries include huge railway, insurance and energy companies, along with big names like Fruit of the Loom, Duracell, See’s Candies and Dairy Queen. It also has a powerful equity portfolio, recently valued close to $ 300 billion, including 20% of American Express and more than 5.5% of Apple, among many other holdings.
Over the past few years Buffett has spent tens of billions of dollars to buy back (and essentially retire) a lot of Berkshire stock. This reduction in the share count leaves each remaining share with a larger stake in the company, to the benefit of the shareholders. Meanwhile, Berkshire still had $ 105.4 billion in cash at the end of the second quarter, which it can use to invest in troubled companies or to make new acquisitions.
Berkshire Hathaway is a well-managed company with a solid foundation and the stock stands out as a relatively low-risk investment capable of delivering returns that will satisfy, if not beat, the general market in the coming years. He also notes that Buffett is 92 and there is a succession plan in place. (The Motley Fool owns stock in Berkshire Hathaway and has recommended stock and options in Berkshire Hathaway.)
Ask the Fool
From SC to Columbus, Ohio: Is it too late to refinance my mortgage?
The Fool replies: It could be, as interest rates are higher than they have been in a long time. Refinancing often makes sense when prevailing rates are at least one percentage point below the current loan rate. It also depends on how long you plan to stay home – it will take several years of interest savings to cover the costs of closing the refinance.
Learn more at Fool.com/mortgages and Bankrate.com and find out if refinancing makes sense for you.
From DB in Cadillac, Michigan: I’m 26 and I’m wondering: should I invest some money in CDs?
The Fool replies: Certificates of deposit are solid choices for your short-term investments and are more attractive than they have been in recent years, thanks to rising interest rates.
But young people should also consider saving and investing for retirement, and unless interest rates are pretty high, CDs won’t do you any good for it. Money you won’t need for at least five years (or, to be more cautious, 10 years) is likely to grow faster in stocks, which have outperformed bonds, cash and even gold over many years.
Consider that many three- and five-year-old CDs have recently yielded around 3.5%. You can overcome that with some dividend-paying stocks. Walgreens Boots Alliance recently gained 5.75%, for example, while Intel returned 5.6%, 3M 5.2% and Citigroup 4.7%. Those payments aren’t guaranteed, but many companies have paid them – and increased them – regularly, over the course of decades.
In addition, the share prices of healthy and growing companies are expected to increase over time. CDs are good for short-term money, emergency funding, and when you need security rather than growth.
The school of the fool
In your investing life, and in life in general, you need to be an expert in numbers, because some are not as good or bad as they may seem. Here are some tips to keep in mind when evaluating news, earnings reports, or press releases.
For example, imagine that a company you are considering investing in has “record earnings” announcements for the last quarter. It sure sounds great, but maybe it set a record last quarter with earnings per share of $ 2.50 and last quarter posted EPS of $ 2.52. It’s less impressive, right? Look for significant, ideally long-term growth rates rather than record highs.
Look closely at robust growth rates as well – imagine Home Surgery Kits Co. posted a 100% revenue increase in the last quarter, a doubling. Check what his actual income was. If it’s only gone from $ 200,000 to $ 400,000, that’s pretty insignificant and such a small business isn’t ideal for most stock investors.
Meanwhile, if a company has grown tremendously, earning $ 100 billion a year, know that it’s reasonable for its growth rate to slow down. After all, it can be more difficult to go from $ 100 billion in revenue to $ 200 billion than from $ 100 million to $ 200 million.
“Annualized” growth rates, which show how much a company (or mutual fund) has earned, on average, per year can also be difficult. It is smart to check exactly what period of growth is reflected and look for a single unusually large number that may have skewed the average. For example, if a mutual fund has an unusually high average annual growth rate of 29% over five years, it could be due to just one year in which it earned, say, 86%, a return that probably won’t will be able to get repeat.
Look beyond the numbers too. A company may have experienced strong growth, but there could be problems if a new rival is stealing some of its market share.
My smartest investment
From MA, online: My smartest investment was buying Nvidia stock. It was the first title I bought to be a winner and it really got me started on my investment adventure.
The Fool replies: You did well, really! Shares of semiconductor specialist Nvidia have recently risen nearly 17,000% over the past 20 years, with an annual average of over 29%. This is enough to turn a $ 10,000 investment into $ 1.7 million. Even more impressive, those numbers are after the stock’s 65% decline from its peak over the past year. Its recent market value was close to $ 300 billion.
You were lucky to have such a winner early in your investing life, as this definitely helps new investors see what’s possible and can help them hold it over time.
With any great action, however, it is important to remember these things: the stock will not go up in a straight line; there will be snaps and falls. And the company may not remain a strong player with a bright future, so you should keep up with its progress and developments, just in case things change.
Shares of Nvidia are down this year partly due to the collapse of the tech market, but also due to the downturn in cryptocurrencies, as cryptocurrency miners use the company’s graphics processing units. Many still see its future as promising, however, as it introduces new offerings and continues to lead the way in gaming chips.
Who I am?
My origins date back to 1906, when MH Kuhn Co. became Haloid Photographic Co., with the aim of producing photographic paper, and when Chester Carlson, inventor of an electrostatic dry copying process, was born. I introduced the first commercial automatic plain paper duplicator in 1959 and acquired the name you know in 1961. I launched my Palo Alto Research Center in 1970. Its innovations included the graphical user interface, laser printer, technology computer network network and the Alto, one of the first personal computers. Today, headquartered in Norwalk, Connecticut, they are leaders in office and manufacturing printing technology. Who I am?
Don’t you remember last week’s question? Find it here.
Last week’s curiosity response: Exxon Mobile