The Motley Fool’s Take
Do you want to invest like Warren Buffett? Consider buying Berkshire Hathaway stock. Led by Buffett, co-chairman Charlie Munger and capable managers, Berkshire Hathaway has beaten the market for decades, and owning the shares gives you a piece of the famously successful conglomerate.
Berkshire Hathaway’s wholly owned subsidiaries include massive rail, insurance and energy businesses, along with big names like Fruit of the Loom, Duracell, See’s Candies and Dairy Queen. He also has a powerful stock portfolio, recently valued at close to $300 billion, which includes 20% of American Express and more than 5.5% of Apple, among many other holdings.
In recent years, Buffett has spent tens of billions of dollars buying back (and essentially withdrawing) many Berkshire shares. That reduction in share count leaves each remaining share with a larger stake in the company, which benefits shareholders. Berkshire, meanwhile, still had $105.4 billion in cash at the end of the second quarter, which it can use to invest in battered companies or make new acquisitions.
Berkshire Hathaway is a well-managed company with a strong foundation, and the stock stands out as a relatively low-risk investment capable of generating returns that can match, if not exceed, the broader market for years to come. Note also that Buffett is 92 years old and there is a succession plan. (The Motley Fool owns Berkshire Hathaway stock and has recommended Berkshire Hathaway stock and options.)
ask the fool
From South Carolina to Columbus, Ohio: Is it too late to refinance my mortgage?
The Fool replies: It may be, since 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 lower than your current loan rate. It also depends on how long you plan to stay in the house: It will take several years of interest savings to cover the closing costs of refinancing.
Learn more at Fool.com/mortgages and Bankrate.com, and see if refinancing makes sense for you.
From DB in Cadillac, Michigan: I am 26 years old and I am wondering: Should I invest some money in CDs?
The Fool replies: Certificates of Deposit are solid options for your short-term investments and are more attractive than they have been in recent years, thanks to rising interest rates.
But even young people should consider saving and investing for retirement, and unless interest rates are high enough, CDs won’t do that for you. Money you won’t need for at least five years (or, to be more conservative, 10 years), is likely to grow faster in stocks, which for many years have outperformed bonds, cash and even gold.
Consider that many three-year and five-year CDs recently yielded around 3.5%. You can beat that with some stocks that pay dividends. Walgreens Boots Alliance recently returned 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 been paying them — and increasing them — regularly for decades.
Also, the share prices of healthy, growing companies should rise over time. CDs are good for short-term money, for emergency funds, and when you need security more than growth.
school for fools
In your investing life, and in life in general, you have to be smart with numbers, because some are not as good or as bad as they seem. Here are some tips to keep in mind when evaluating news, earnings reports, or press releases.
Imagine, for example, that a company you’re considering investing in announces “record earnings” for its latest quarter. It sure sounds great, but maybe it set a record last quarter with earnings per share of $2.50, and this last quarter it reported EPS of $2.52. That’s less impressive, right? Look for significant growth rates, ideally over the long term, rather than all-time highs.
Look closely at the strong growth rates, too: imagine that Home Surgery Kits Co. reported a 100% increase in revenue over the last quarter, a doubling. Check what your actual income was. If you only went from $200,000 to $400,000, that’s pretty insignificant, and such a small company isn’t ideal for most stock investors.
Meanwhile, if a company has grown tremendously, grossing $100 billion annually, know that it’s reasonable for its growth rate to slow. After all, it can be harder 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) earned, on average, per year can also be misleading. It’s smart to check exactly which growth period is reflected and look for any unusually large numbers that may have skewed the average. For example, if a mutual fund has an unusually steep average annual growth rate of 29% over five years, it could be due to a single year in which it earned, say, 86%, a return you probably won’t be able to earn. repeat.
Look beyond the numbers, too. A company may have posted strong growth, but there could be trouble down the road 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 is the first stock I bought that was a winner, and it really helped me start my investment adventure.
The Fool replies: You did well, really! Shares of semiconductor specialist Nvidia have recently risen nearly 17,000% over the last 20 years, representing an annual average of more than 29%. That’s enough to turn a $10,000 investment into $1.7 million. Even more impressive, those numbers follow the stock’s 65% plunge from its peak over the past year. Its recent market value was close to $300 billion.
You were lucky to have a winner like that early in your trading life, because that definitely helps new investors see what’s possible and can help them stick with it over time.
However, with any great stock, it’s important to remember these things: The stock won’t go up in a straight line; there will be pops and drops. And the company may not remain a strong player with a promising future, so you need to keep up with its progress and development, in case things change.
Nvidia shares are down this year in part due to the tech market slump, but also due to the cryptocurrency slump as crypto miners use the company’s graphics processing units. However, many still see its future as promising as it introduces new offerings and continues to lead in gaming chips.
Who I am?
My roots go back to 1906, when MH Kuhn Co. became Haloid Photographic Co., with the goal 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 got the name you know by 1961. I launched my Palo Alto Research Center in 1970. Its innovations included the graphical user interface, laser printer, computer network technology Ethernet and the Alto, one of the first personal computers. Today, based in Norwalk, Conn, I am a leader in production and office printing technology. Who I am?
Don’t you remember the question from last week? Find it here.
Last week’s trivia answer: exxonmobile