Warren Buffett’s American Express Investment Loses Costco Exclusivity

Berkshire Hathaway owns 14.2% of American Express. Warren Buffett himself owns almost 5% of the entire credit card company. The Berkshire portion consists of 151,610,700 shares. Buffett’s story with American Express began early in his career—1963—and was Buffett’s first big investment in the aftermath of his father’s death.

What happened was this: A businessman named Tino de Angelis took out loans from American Express, Bank Leumi, and a predecessor to Bank of America. He posted barrels of salad oil inventories as collateral to offer the banks a security interest in exchange for the cash they sent his way, and de Angelis cleverly created fictitious salad oil reports to run one of the largest frauds in American history. He got his hands on $150 million that honest accounting would have rejected (to get a handle on the enormity of the figure, it would be the equivalent of $1.3 billion today and fueled robber baron public policy concerns about one man being able to get his hands on such immense wealth from inventory reports alone). American Express was responsible for $58 million to cover its error in judgment. The price fell almost 60%. Buffett entered.

Continue Reading!

People Buying Coca-Cola At $41 Today

Earlier this week, Coca-Cola (KO) reported its fourth quarter results for the end of 2014. Because many analysts were expecting results somewhere in the $0.41 or $0.42 range, the price of the stock has increased to $42.50 after Coca-Cola reported that it made $0.44 per share in profits during the fourth quarter. The sentiment surrounding the stock has witnessed an uptick in popularity following Coca-Cola’s favorable results in light of expectations.

There is a negative context, however, that needs to be kept in mind. Coca-Cola’s fourth quarter results of $0.44 per share is still less than the $0.46 per share that Coca-Cola made in the fourth quarter of 2013, and the results for the year come to $2.05 in comparison to $2.08 in 2014. That is not entirely—it’s been a while since I have studied Coca-Cola’s profit history, manually counting the results at Coca-Cola since the 1920 IPO—but I seem to remember the company having something like only 8 years in its corporate existence in which it did not report annual profit growth. The 2013-2014 comparison will be the 9th such year, and represents only the second time since the start of the millennium in which Coca-Cola did not record annual profit growth (the 2008-2009 period of $1.51 to $1.47 represents the other).

Continue Reading!