4 lessons for investors on the example of Warren Buffett's portfolio (5)

4. Do not ignore dividends
What is common to 80% of Berkshire's investments in public companies? As you can guess from the subtitle, each of them pays dividends. Yields ranged between 1.59% of the number of shares of 9 Delta Airlines and 3.56% of the number of shares of Coca Cola. However, this principle applies to the majority of Buffett's acquisitions: companies need to return incomes to shareholders, and dividends are one of the best ways to do this.
Buffett's investment style - an everlasting possession - also allows him to take the crop growing dividends. For example, Buffett began investing in CocaCola after the fall of the market in 1987, when the company's shares were at $2.2-2.5 per share. Today, CocaCola, whose shares on Friday at the end of the trading day costed $41.78, annually pay a nominal dividend of $1.38. The company's annual dividend is now giving 26% yield of the shares acquired in the late 1980s, which is an excellent result.
Paradoxically, despite Buffett's love to the dividend itself, BerkshireHathaway do not pay them. Buffett explains it simply: he prefers profits to continue to work in the business, contributing to the growth of the company, giving the ability to make acquisitions and increasing equity of Berkshire. Buffett believes that the long term growth of Berkshire will bring shareholders more revenue than the quarterly dividend.
Warren Buffett himself once said: "When I say that I've learned from experience, I say that the trick is to learn from the experience of others". No doubt, all of us can learn from uncle Buffett.

4 lessons for investors on the example of Warren Buffett's portfolio (4)

3. Do not be ashamed to change the point of view or your preferences
For a long time, Buffett did not hide hostility to airlines after the bad experience of purchase of bonds of US Airways in 1989. He called the airline industry "black spot for investors", and in 2002 gave a brief analysis of the sector:
We have fixed monstrous costs, powerful unions and commodity pricing. This is not the best recipe for success.
However, last September (! Suddenly) Berkshire invested not in one, but in four major US airlines: Delta (NYSE: DAL), Southwest (NYSE: LUV)), American (NASDAQ: AAL) and UnitedContinentalHoldings (NYSE: UAL). Then Berkshire doubled the rate in the last quarter, and now it is investing in the airline industry more than $9 billion, a little more than 6% of the portfolio. Times are changing, and it is natural that as circumstances change, and opinions. Do not be afraid to reconsider your views on the company or on the industry on the basis of new data.

4 lessons for investors on the example of Warren Buffett's portfolio (3)

2. Set rules, but break them if necessary
It is known saying of Warren Buffett, that his favorite holding period is for good, and if you are worried about the idea that you hold shares for 10 years, do not hold them even for 10 minutes. Of course, it is entirely consistent with his personal doctrine to buy good companies and hold them for a long time.
However, Buffett did not hesitate to violate this rule if necessary. In contrast, shares of CocaCola and AmericanExpress (NYSE: AXP), located in Berkshire's portfolio from 1987 and 1964 respectively, the holding has invested in company Deere & Company (NYSE: DE) only for four years - 2012-2016, and then sold the asset, possibly in connection with the decline in agriculture. The holding owned shares in KinderMorgan (NYSE: KMI) only for one year, in 2015-2016, the shares were acquired by Buffett's managers, not by the Oracle of Omaha himself. The Company from time to time from 2009 to 2014. owned shares of ExxonMobil (NYSE: XOM).
Of course, getting rid of the assets - it is rather an exception to Buffett's portfolio, not the rule, but also during tough investment strategy you should be flexible enough to admit mistakes or receive benefit from an unexpected opportunity.

4 lessons for investors on the example of Warren Buffett's portfolio (2)

Here are four lessons to be learned from Berkshire's assets:
1. Diversify carefully
Diversification is considered to be one of the most important components of a reasonable investment strategy that minimizes the overall risk of the portfolio. However, excessive diversification can often harm the portfolio, reducing potential revenue. Although Berkshire Hathaway holding company owns shares in 43 public companies in various sectors of its portfolio is not as diversified as one might think.
In the three major assets: BRK - Heinz (NASDAQ: KHC), WellsFargo (NYSE: WFC) and CocaCola (NYSE: KO) - there is 48% of total assets in public companies, or $71 billion. Ten major public assets make 81% of the portfolio value and twenty - 93%, or $147 billion.
The list of sectors in which BerkshireHathaway is investing, is also limited. Slightly more than one third of the portfolio - 34%, are located in the financial sector, and 31% are producers of consumer goods. Almost two-thirds of the portfolio is invested only in these two sectors. Other sectors with significant participation include technology companies (recently acquired shares of Apple (NASDAQ: AAPL) - 6% of the portfolio - and industry - 5% of the portfolio.
Of course, diversification of assets remains the best way to protect the overall value of the portfolio. However, it is important not to allocate funds too thinly. Probably, the best option to diversify is 15-20 packets in 3-5 sectors.

4 lessons for investors on the example of Warren Buffett's portfolio (1)

On Saturday, Warren Buffett, the head of the investment holding company Berkshire Hathaway ((NYSE: BRKa) and (NYSE: BRKb)) and one of the most touted and successful investors of the XXI century, published eagerly anticipated annual address to shareholders.
 Currently, the market capitalization of the company Berkshire Hathaway, which was originally engaged in textiles, and now is a holding company that operates in the finance and insurance sector for accidents, worth $416 billion. Buffett's personal assets are estimated at more than $75 billion, making it one of the most richest people in the world.
Published on the last Saturday of February or the first Saturday of March annually message from Buffett to shareholders is an important event for the market. These letters, written in typical laid-back Buffett's style, are read by all those interested in shares, investments or business in general.
Usually Buffett gives an overview of the various businesses, owned by Berkshire, he is making a deep overview of investments of the holding and uses this platform as a way to share his opinion on all financial issues. This year, in a letter written in simple language with a fair amount of humor, Buffett expresses his thoughts about the repurchase of shares, income on the "corrected» GAAP standards and hedge funds. And once again he confirms his faith in America, in spite of the recent political changes. As in previous years, this is a very fascinating read.

The US economy grew surprisingly weak in the second quarter

The US economy grew surprisingly weak in the second quarter after anemic growth at the beginning of the year. The cause were weak business investment, which largely offset fairly solid increase in consumer spending. This shows a preliminary assessment.
Gross Domestic Product of the US, which is the most common measure of the production of goods and services, increased in the second quarter by 1.2% with an average forecast of accelerating growth to 2.6 percent. Meanwhile, the final data for GDP growth in the first quarter fell to 0.8% from 1.1%.
Consumer spending, a key engine of the economy, rose in the second quarter by 4.2% following weak growth of 1.6% at the beginning of the year. It should be kept in mind, that the domestic consumption forms more than two-thirds of the growth of the world's leading economy. Although expectations were for an even better growth of 4.4%, the increase in consumer spending of 4.2% was the best since the end of 2014, the cost of purchases of goods increased by 6.8%, while those for services - by 3%.
On the other side are business investments, which shrank in the second quarter by 2.2% after falling by 3.4% at the beginning of the year.
Meanwhile, exports in the second quarter rose by 1.4% while imports fell by 0.4%, which means that international trade has added 0.23% to the growth of the US economy.