I once went to a Berkshire Hathaway annual meeting. I met a guy who told me how in 1976 he bought 200 shares. “After a year the stock had doubled so I decided to take some profits off the table. I sold 100 shares and started a restaurant and ran that for the next 30 years,” he said. “Made a decent living.”
“The other 100 shares I did nothing with at all. Now it’s worth over $12 million.”
I admit it. I was jealous. I wanted to be him.
After that I got ahold of Warren Buffett’s letters. Not his Berkshire letters, which were available to the public. But his hedge fund letters, which at the time were private. Maybe they are public now. I have no idea.
I studied each one. Then I wrote a book, “Trade Like Warren Buffett” because when he was running his hedge fund in the 50s and 60s he was a much more active trader than he is now. Much more nimble.
Warren Buffett doesn’t look at P/E ratios. He’s not a value investor in the classic sense. He bets on demographic trends. The most important investing quote he’s ever said is, “If a company will be here in 20 years then it is probably a good investment now.” This is not always true. He said, “probably”.
So what companies will probably be here in 20 years? I have no clue. Nor does he. But I will bet on the companies that are returning cash to shareholders.
As TalkMarkets contributor and Shark Tank star, Mark Cuban told me the other day, “a company is only worth the money you get back from it.”
(he still lives in this house. I had a cab driver drive me passed it).
So let’s look at the companies Warren Buffett (or his team) added to this quarter, and highlight the ones that are returning money to cash holders. The ones paying dividends.
USB (US. Bancorp) – paying 2.2%. US Bancorp didn’t raise its dividend in 2009 but it raised its dividend for the 37 straight years before that and has raised its dividend since.
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