brk.a

This weeks Barron's (subscription required) talks about The Next Warren Buffett. Of course nobody believes that's going to happen. The headline is cast to grab attention and sell papers, just like mine, but it's not happening: no way, no how!

Barron's discusses in it's story the strong possibilty that David Sokol, 51, the curent chairman of MidAmerican Energy Holdings Company is the most likely to succeed Buffett. MidAmerican has $39 billion in assets and is a subsidiary of Berkshire Hathaway (NYSE: BRK.A). The headline should really have read "succeed" not be the "next".

Financial Stocks to Love
The subprime mortgage meltdown and resulting credit crisis have slammed financial stocks recently. But there are still some diamonds in the rough. They include Berkshire Hathaway, RBS, AFLAC, Raymond James and BOK.
Financial stocks we love - CNNMoney.com

Big Mac's Local Flavor
Once vilified for pushing America on the world, McDonald's lets countries invent their own buns, bags, and business practices. Now some ideas are making their way back home.
Big Mac's local flavor - FORTUNE

Investing guru Warren Buffett shocked the investing world exactly two years ago when he plunked down a cool $4 billion on an Israeli company, Iscar, that specializes in metal cutting tools. It was his largest international purchase by far, and investors were left wondering what he was thinking.

Well, flash forward to May '08 and once again Buffett appears to be a genius. As reported by Marketwatch: "Buffett said that he had very high expectations when Berkshire struck the deal, and that the metal-cutting-tool maker has "exceeded that in every way."

"It's been a dream acquisition," he said.

Since that acquisition, Israel has become a hot destination for foreigners to invest. The local stock market has been one of the best performers in the world and the Israeli currency, the Shekel, has surged to record highs and has been the second strongest currency in the world in '08.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 5/1/08

While researching GPS maker Garmin Ltd (NASDAQ: GRMN) -- whose stock has lost two-thirds of its value in the last six months -- I can't help but pity those long-term shareholders who reject trend following and technical analysis in favor of investing for the long term. To them, it seemed like only yesterday that GPS was one of the hottest technologies around and this industry leader could do no wrong.

Well, that's usually the time to sell, just as I posted on Apple Inc (NASDAQ: AAPL) in January this year and on Google Inc (NASDAQ: GOOG) in November last year, both before they each dropped 40% in just a few months. Because the truth is these popular technology stocks are all expectations. We're not talking Berkshire Hathaway (NYSE: BRK.A)-type value investing here.

Sure, GPS is still hot, somewhat, but due to intense competition, margins have been evaporating, forcing analysts to lower their earnings estimates. In their latest quarter, Garmin further strengthened the bear case with spiking inventories and accounts receivable. None of that looks to change anytime soon, and even though it's got a P/E of 10, book value is all the way down near $11 per share!

Avoid These Ugly, Risky Stocks
For the moment, the market seems to have settled. Does that mean the worst is over? It's unclear. You should still be cautious. The key to investing during a crisis is making sure that the stocks you're buying truly are isolated from the blow-up.
Avoid These Ugly, Risky Stocks - Motley Fool

10 Auto Brands in Trouble -- Which Auto Brands Should Go?
Should Ford Motor dump Mercury and Volvo? What will happen with GMC, Hummer, Jaguar and Linconl?There are too many brands and not enough buyers. Many auto-industry insiders agree weak ones should go, but it's not that easy.
Which Auto Brands Should Go? - BusinessWeek In Pictures: 10 Auto Brands in Trouble

Before the bell: Futures lower after Microsoft's Yahoo deal fails

Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) reported a 64% drop in quarterly profit late Friday. At the company's annual meeting this past weekend, the legendary investor said that while a Berkshire unit has bought portfolios of subprime mortgages (and has frozen resets that were due to send interest rates on those loans higher) he warned investors that housing-market weakness isn't over yet and predicted more losses for banks. At the same time, Buffett said Sunday he will consider investing in the insurance business of U.K. banking giant Royal Bank of Scotland (NYSE: RBS) and is close to buying a medium-sized company in the country.

Hovnanian Enterprises Inc. (NYSE: HOV) estimated on Monday it would take $225 million to $275 million of land-related charges for the that fiscal second-quarter and said that home deliveries dropped 21% to 2,494 homes in the period. The company also turned cash-flow positive faster than it expected and tripled its full-year estimate of cash flow.

After being rejected by Continental Airlines Inc. (NYSE: CAL) last month, United Airlines parent UAL Corp. (NYSE: UAUA) is intensifying merger talks with US Airways Group Inc. (NYSE: LCC), according to The Wall Street Journal. A deal is said could emerge in as soon as 10 days. In light of rising fuel costs, the more than $1.5 billion in potential cost savings and revenue enhancements the companies see from joining forces is no doubt appealing more and more.

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.

Cold Stone Creamery vs. Dairy Queen? This is Liston vs. Ali, American Idol vs. 60 Minutes, Sacha Baron Cohen vs. Woody Allen. The young, brash upstart vs. the wily veteran champion. With butterfat.

Dairy Queen is, of course, the veteran. At 4,500 readily recognizable locations throughout the U.S., the Berkshire Hathaway (NYSE: BRK.A) company serves up a time-tested menu of coney dogs, Dilly Bars, and Blizzards at prices that the average Joe can afford. So what if the décor is 1980s, and its ice cream is to cream as bologna is to steak?

Cold Stone is the brash upstart, starting in 1988 in Tempe, Arizona. Owned by the privately-held Kahala Corp., it has grown to over 1,400 outlets in strip malls across the country. The super-premium product it serves is hand-scooped, full of butterfat and bounteous flavor. The price is also bounteous, though; in my neighborhood, a single scoop of vanilla on a wafer cone sets me back $3.58.

Back in 2003, Warren Buffett said that derivatives posed a "mega-catastrophic risk" to the economy. In a shareholder letter, he compared derivatives to "hell... easy to enter and almost impossible to exit." Buffett has also called derivatives a fool's game and, most famously, likened the contracts to "weapons of mass destruction."

All of this makes it all the more fascinating that Berkshire Hathaway's (NYSE: BRK.A) first-quarter profits plummeted due to $1.7 billion in losses on, you guessed it, derivatives. Peter Cohan wrote that "This proves that George W. Bush was right and so was Warren Buffett."

It would be like anti-prostitution zealot Elliot Spitzer getting caught with a call-girl. Oh wait ...

So what happened? Here's one possibility: Even after an $9 billion plunge in the company's cash position, Berkshire still had $35.57 billion in cash on its balance sheet. Warren Buffett is the greatest investor of all-time, but it's difficult to find enough undervalued stocks in sleepy industries to put that much money to use.

Given that Buffett may not be at the helm for too many more decades, even value investing disciples -- I consider myself one -- may want to look elsewhere for investors employing a similar style with more manageable assets to deploy. One possibility is Leucadia National (NYSE: LUK), which Aaron Katsman recently compared favorably to Berkshire Hathaway. A year ago, Jim Cramer named Brookfield Asset Management Inc. (NYSE: BAM) as the next Berkshire Hathaway.

Berkshire Hathaway Inc. (NYSE: BRK.A) is holding its Buffett love-fest today in Omaha. Thanks to the SEC's web site, Berkshire's first quarter 2008 results are available for those of us who are not attending. And they raise five tough questions I'd ask Buffett if I could.

In February I guest-hosted CNBC's Squawk Box with Becky Quick who will no doubt be interviewing Buffett extensively. While I find her a bright person and a hard working professional, I view it as a challenge to balance the benefit of giving CNBC viewers access to Buffett while at the same time trying to maintain sufficient journalistic objectivity. So at the risk of leaning away from the worshipful, here are five tough questions I'd ask Buffett:

• $3.8 billion worth of Auction Rate Securities (ARSs). Are these ARSs really worth $3.8 billion? After all, most of the auctions have been failing since the beginning of the year and companies are taking big hits thanks to those frozen auctions. How has Berkshire managed to avoid this?
• $9.7 billion worth of derivatives. Why did Berkshire get involved with derivatives if you railed against them in 2003 as financial WMDs? And having overcome whatever qualms you might have had about using them, how did you end up reporting $1.7 billion worth of pretax losses on them? How much more are derivatives likely to cost Berkshire? What factors could swing those results?
• $42.9 billion worth of Level 2 and Level 3 securities. Both Level 2 and Level 3 are not actively traded -- although Level 3 securities -- of which Berkshire owns $9 billion -- appear to be the riskiest. But between the two categories, these thinly traded securities account for 35% of Berkshire's total. Is this too much risk? How does Berkshire value its Level 2 and Level 3 securities? What are the potential write-downs? What factors could drive up the risk? How are these risks being managed?

Just days after the fifth anniversary of George W. Bush's landing on an aircraft carrier in front of a "Mission Accomplished" banner, the Weapons of Mass Destruction (WMDs) have finally been located. But not in Iraq or Iran or Syria.

These WMDs are of the financial variety. The ones against which Berkshire Hathaway Inc.'s (NYSE: BRK.A) CEO Warren Buffett railed in his 2003 annual report. There he called derivatives "financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal." And Reuters reports that these are the very financial WMDs that cost Berkshire $1.7 billion in charges in the first quarter of 2008.

This proves that George W. Bush was right and so was Warren Buffett. But Berkshire shareholders are also smarting due to a 64% drop in its net income and a 24% tumble in its revenues.

7 Stocks for 7 Years
Undervalued, these shares should deliver outstanding returns according to Gene Marcial. They include Apple, Boeing, CVS Caremark, Genentech, JP Morgan Chase, Petroleo Brasileiro and Pfizer.
http://images.businessweek.com/ss/08/05/0501_7_stocks/index_01.htm?technology+slideshows


Regulators Zero in on Credit Card Reform
Federal regulators are pushing ahead to stop abuses by credit card issuers at a time when the $2 trillion industry has come under increasing scrutiny.
Regulators zero in on credit card reform - CNNmoney

This month saw great improvement after last month's disaster. Having to conclude my findings on a specific month end day, or any day, depending on the news, sometimes distorts results. For example news on March 31 sent the market down and on April first my picks shot up an unusual amount; hopefully the trend will continue.

My riskiest stock pick Newcastle Investment Corp (NYSE: NCT) was down the most in March but recovered about 35% of the loss in April leaving Valero Energy Corp. (NYSE: VLO) the dubious honor of being my worst performer, down over 30% in the first four months of the year.

April showed improvement as many companies reported positive earnings reports or beat expectations.

The Dow Jones Industrial Average gained some ground in April as did the Standard & Poor's 500 Index, and the technology heavy NASDAQ Composite Index was up with stocks like Apple, Inc (NASDAQ: AAPL) and Google Inc. (NASDAQ: GOOG) improving significantly on very strong reports. Google is up over 25%.

Most of my picks improved. Higher food prices no doubt helped Bunge Limited (NYSE: BG) which recaptured losses moving up 23% from its recent bottom. My two winners Raytheon Co. (NYSE: RTN), the high tech defense contractor, and Reliance Steel & Aluminum (NYSE: RS) were joined by a third, Anglo American plc (ADR) (NASDAQ: AAUK) which had a 10% swing entering positive territory.

Stocks futures were lower early Tuesday morning ahead of the Federal Reserve Open Committee two-day meeting set to start today. On Wednesday, Fed chairman Bernanke will announce the policy decided, and while most investors expect a quarter point rate cut, they also expect the Fed to announce a pause in the cuts following some inflationary pressures.

On Monday, stocks finished the day little change ahead of the Fed meeting and despite some big deal news involving candy maker Mars and Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) buying chewing gum maker Wrigley (NYSE: WWY) for some $22 billion. Also, Kirk Kerkorian's Tracinda Corp. announced its intention to purchase 20 million of Ford (NYSE: F)'s shares at $8.50 per share. With that, the Dow industrials ended the day down 20 points, or 0.16%, the S&P 500 fell 1 point, or 0.11%, while the Nasdaq rose 1 point, or 0.06%.

Not many economic releases today. Still, already RealtyTrac reported that foreclosures soared 112% in the first quarter, compared to a year earlier. And still in the housing sector that doesn't seem to be able to find a bottom yet, before the bell, the S&P/Case-Shiller home price index is due for release.
Also today at 10 a.m. EDT, April consumer confidence index will be reported and economists are expecting the index will slide from the previous month. With higher food and energy prices, along with the troubles in the housing sector and the increasing troubles in the labor market, this is far from surprising.

Shares of Hershey Co. (NYSE: HSY) have jumped more than 6% on the news of the $23 billion takeover of Wm. J. Wrigley Co. (NYSE: WWY) by Mars Inc. and Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A) as investors bet that the maker of the eponymous chocolate bar won't stay independent for long.

Hershey, though, is a basket case thanks to soaring commodity costs and hopefully the growing interest in healthier eating. That will heighten the pressure on Hershey management to do a deal with Cadbury Schweppes Plc. or find another sugar daddy (pun intended).

The case for a merger between Cadbury and Hershey are pretty compelling as Reuters notes.

"The deal would have clear strategic logic, as Cadbury, the world's biggest confectionery group, lacks presence in the U.S. chocolate market, while Hershey is looking to expand overseas," according to the news service.

During the first quarter earnings conference call, Chief Executive David West sounded upbeat, saying the company was "making progress, while it is slower than we would like, we do see the initial signs of improving marketplace trends." He has high hopes for new products such as the Hershey Bliss. Investors, though, may not be patient.

The Hershey Trust Co., the chocolate company's largest shareholder, has resisted buyout offers in the past from Wrigley and has vowed to keep the company independent. You have to figure that the trust's board will change its tune at the right price.

On CNBC today, Warren Buffett talked about politics, foreign currency – and oh, his financing of Mars's $23 billion deal for Wrigley (NYSE: WWY). He likes the deal for a variety of core reasons: a sustainable long-term business, strong management and the fact that the business is something that's easy to understand (chewing gum is fairly basic, right?)

Yes, this is vintage Buffett.

As usual, the deal started with a phone call to the oracle of Omaha, and he wasted little time in getting things moving.

Wrigley is the largest maker of gum and Mars is a large maker of candies, with Snickers, M&Ms and so on in its arsenal of products. In all likelihood, this deal will spur further M&A activity in the global sector. Such deals will help companies deal with spiking commodities' prices as well as the difficulties in creating new brands.

What's more, both Wrigley and Mars are family dynasties. The former got its start in 1891 and the latter was launched in 1911. Basically, for such firms to link up, it's important that the principals understand the complexities of family dynamics. And, for the most part, Buffett seems to understand such things. In other words, he is a value-added investor who takes the long view. More importantly, he has a war chest of over $40 billion. So as time goes by – and more family businesses look to consolidate -- I'm sure Buffett will get more phone calls.

Tom Taulli is the author of various books, including The Complete M&A Handbook (www.mergerbook.com) and is also a principal in Averiware, which provides an ERP system to small and midsize businesses.