Does Warren Buffett use Berkshire’s Board of Directors $BRK.A $BRK.B

Warren Buffett is clearly one of the most successful investors since time immemorial. Berkshire Hathaway (NYSE:BRK.A) has made many investors rich and happy.

Because Berkshire is a publicly traded company they need a Board of Directors. In this case the investors most likely do not rely on the board. you rely on Warren Buffett. But the guy is getting old and feels good but had this prostate cancer thing and who knows what little time he has left.

A successor has been arranged. But unlike the Vatican no smoke up the chimney because it’s still a secret. So lets take a look at the board of Berkshire Hathaway.

Total of 13 individuals. Warren Buffett and Charles Munger are iconic members but very old. Howard Buffett 58 is the son of Warren and not considered an independent.

Four independent directors are over the age of 80. They are

David Keough 86. Ten years on the board. He is former Chairman of Allen & Company.

Thomas Murphy 87 Ten years on the board. Officially retired but was former chairman and CEO of capital cities/ABC.

Walter Scott 81 Twenty-Five years experience on the board. Was Chairman of LeveL 3 Communications.

David Gottesman 86 9 years experience on the board. Currently principal of First Manhattan & Co.

Charles Rotblut CFA and Editor of AAII Journal and vice President of American Association of Individual Investors recently interviewed David Laibson who is a professor of economics at Harvard University Cambridge for an article entitled “Aging and Investing”. Not surprisingly as you age there exists the growing risk of cognitive impairment. In addition to Warren Buffett and Charlie Munger this board has unmitigated risk in this calculation.

So there you have seven out of thirteen members who are very old and entrenched as they say. Governance experts will tell you that this is a very big negative.

For $253 Billion in market cap the risks are not very well covered. It all depends on the torch being passed effectively to someone new. Therefore you are investing or following stars and hoping for the best.

Risky way to make a buck if you ask me.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter at twitter.com/financialskepti

 

JM Smuckers might see some sugar $SJM

English: Smuckers sign

English: Smuckers sign (Photo credit: Wikipedia)

JM Smuckers (NYSE:SJM) is getting some respect out in the market place. Basically they manufacture near commodity level jams and coffees relying on a century old brand name. They just became the focus stock of the week for the American Association of Individual Investors. www.aaii.com You know those small guys who do their home work because they are working their own money.

The AAII has a stong buy expecting the stock to give a 14% return including the dividend. That’s pretty good in this market. Food staples are considered to be neutral. So why Smuckers. Commodity costs are moving their way. Too many peanuts on the farm drives the price down. Other commodities look attractive from this processors point of view.

Maybe with the fiscal cliff problem their will be more peanut butter and jam sandwiches and less fancy expense account lunches in Washington DC [Dream on]

To help matters along Wells Fargo has resumed coverage with a market perform. Hilliard Lyons issues a neutral. But just by issuing a recommendation drives a certain amount of attention which translates into buys. Hilliard Lyons operates in the mid west and south where the Smuckers brand and business are well known.

The short position is about 2.68% of the float and it just shrunk ever so little. Uptick/downtick ratio comes in at 1.35. The stock goes ex-dividend tomorrow but is up some 2% today.

The company is a commodity driven food processor with brands that are somewhat tired. I’m waiting for someone to get the diabetes epidemic and do something clever with peanut butter and sugar laden jams. Right now I’m thinking it will not be Smuckers.

So if you’re an AAII member 14% well yeah maybe but like anything watch like a hawk. Smuckers does not have the Warren Buffett moat around it.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti

#AAII High Valuations = Greater Expectations = More Downside Risk

American Association for Individual Investors www.aaii.com just released their latest weekly newsletter. Leading off Charles Rotblut, CFA AAII Journal Editor included this bit of common sense which is not common enough 

“High Valuations = Greater Expectations = More Downside Risk “

The risk of error is much higher with high PE stocks with high expectations. Eventually management has a problem and everyone heads for the exits. Not enough caveat emptor within the market psyche.

Disclosure: George Gutowski writes from a caveat emptor perspective. I climb the wall of worry.

#AAII comments on #Buffett deal with $BAC It’s so nice to be rich

American Association of Individual Investors www.aaii.com had an interesting commentary on the Warren Buffett Bank of America (NYSE:BAC) preferred share deal. The press is full of stories as to how Warren Buffett is under water. Charles Rotblut, CFA AAII Journal Editor patiently explains the advantages that Warren Buffett has and by extension why he does not care what happens on a day to day basis.

Value investing is all about buy ugly and sell pretty. Buffett is powerful enough to construct his own investments and create the perfect scenario. The merely rich still need to buy off the shelf.

Disclosure: George Gutowski writes from a caveat emptor perspective. Warren Buffett did not cut me in for a piece of the deal. I do not hold positions in stocks mentioned in this post. I do not have plans to initiate new positions within the next 72 hours.

American Association of Individual Investors #AAII cautions on S&P #Deathcross #technicaltrading #charts

Death Crossing

Image by stunned via Flickr

The American Association of Individual Investors noted the S&P death cross. This as they explained is when the 50 day moving average goes below the 200 day moving average. Normally viewed as a sell signal.

But Charles Rotblut, CFA , AAII Journal Editor points out the death cross is not a guarantee of a loss. He refers to a July 2010 comment,where Mark Hulbert looked at the historical performance of the death cross and found that it has not been reliable over the past two decades. Hulbert commented “Overall, in fact, there has been no statistically significant difference since 1990 between the average performance following death crosses and all other market sessions,” 

AAII is cautioning investors to avoid market timing tools and stay in properly diversified portfolios. They didn’t come out and say it but basically it’s the KISS formula. Keep it simple shareholders.  

American Association of Individual Investors sentiment survey points bearish #AAII

A plot of a normal distribution (or bell curve...

Image via Wikipedia

The American Association of Individual Investors {AAII} said Bullish sentiment rebounded 6.3%. Survey says that even with the improvement there is a bearish undertone. The weekly email reported “…optimism that stock prices will rise over the next six months remained below its historical average of 39% for the 14th time in the last 17 weeks. ”

Is the individual investor capitulating? With 9.2% unemployment it’s hard for mom and pop investors to be enthused. The email went on to say

” bearish sentiment remains at high, though not excessive, levels. Pessimism is more than one standard deviation above its historical average, which makes it unusual, but not extraordinary. ”

Just remember this is all in aug with thin trading. Everything needs a grain of salt.

Disclosure: George Gutowski writes from a caveat emptor perspective.

Investor sentiment #AAII Little guy freaked out

Lincoln on U.S. one cent

Image via Wikipedia

The AAII or American Association of Individual Investors www.aaii.org publishes a weekly investor sentiment survey. Last week the individual investor was a tad freaked out. Here are the stats

 Bullish: 27.2%, down 10.7 points
Neutral: 23.0%, down 7.8 points
Bearish: 49.9%, up 18.4 points

Long-term averages:
Bullish: 39%
Neutral: 31%
Bearish: 30%

Wondering what the numbers will reflect this week. There is a school of thought that views this indicator as contrarian because individual investors are not as savvy as say the hedge fund guys. We shall see.

Disclosure: George Gutowski writes from a caveat emptor perspective. I support any cause or organization that assists investors in managing their hard earned assets.