What’s On Warren Buffett’s Mind? Two articles discuss the famed investor’s latest thoughts. And who’s gobbling up U.S. farmland?

MONDAY, FEBRUARY 24, 2014

What’s On Warren Buffett’s Mind?

By JOHN KIMELMAN | MORE ARTICLES BY AUTHOR

Two articles discuss the famed investor’s latest thoughts. And who’s gobbling up U.S. farmland?

Both Fortune and U.S.A. Today have articles that share the latest investment thinking of Warren Buffett, America’s most famous investor.

The Fortune article is getting most of the buzz because Buffett wrote it himself: it’s actually an exclusive excerpt of his upcoming letter to shareholders of his investment holding company, Berkshire Hathaway (BRKB).

One passage of the excerpt is getting plenty of attention: Buffett has endorsed an investment that one doesn’t normally associate with the value-seeking alpha chaser — a common index fund.

In discussing his will, Buffett writes that “one bequest provides that cash will be delivered to a trustee for my wife’s benefit. My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. I suggest Vanguard’s. ( VFINX ). I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions, or individuals — who employ high-fee managers.”

post on this site by funds blogger Brendan Conway follows up on this point.

Most of Buffett’s letter to Berkshire shareholders discusses two real estate investments he has made – the purchase of a 400-acre Nebraska farm and a downtown New York City retail property purchased in 1993 from the Resolution Trust Corp. – and the lessons he has learned from them.

Among those lessons: “Focus on the future productivity of the asset you are considering. If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on,” Buffett writes.

By contrast, “if you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so.”

Referring to these two real-estate investments, he concludes that “I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field — not by those whose eyes are glued to the scoreboard.”

Over the weekend, U.S.A. Today ran a story that provides a list of 10 of Buffett’s favorite stocks, as evidenced by the information he is required to file to the Securities and Exchange Commission every quarter.

The problem with the piece is that this information, contained in Buffett’s 13-F filings, was released about a week ago. So this article would have been more useful to investors if it came out then. Still, the piece gives a convenient single list of the kind of stocks that Buffett holds sizable amounts of or has added to lately. The list includes Wal-Mart Stores (WMT), Exxon Mobil(XOM), DaVita Healthcare Partners (DVA), DIRECTV (DTV), and U.S. Bancorp(USB).

I’ll move off the Buffett beat and close with a piece that discusses an investment trend that is rarely discussed by the mass-market financial press: the steady buying of U.S. farmland by private investment firms.

An article by investment blog Climateer reports that “an estimated 400 million acres of farmland in the United States will likely change hands over the coming two decades as older farmers retire” with much of this land “being strongly pursued by private-equity investors.”

The piece adds that “mirroring a trend being experienced across the globe, this strengthening focus on agriculture-related investment by the private sector is already leading to a spike in U.S. farmland prices.”

The blog post quotes a report from the Oakland Institute which states: “Today, enthusiasm for agriculture borders on speculative mania. Driven by everything from rising food prices to growing demand for biofuel, the financial sector is taking an interest in farmland as never before.”

According to the Oakland Institute, the firms investing in farmland include bank subsidiaries such as UBS Agrivest, pension funds like TIAA-CREF and other private equity interests such as HAIG, a subsidiary of Canada’s largest insurance group.

At this point, the amount of U.S. land owned by private investors is thought to be relatively low, writes Climateer. That suggests that this trend may have some room to play out and that could be a positive for investors – at least for now.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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