warren buffett – Hudson Berkshire Experience http://hudsonberkshireexperience.com/ Tue, 29 Mar 2022 10:20:18 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://hudsonberkshireexperience.com/wp-content/uploads/2021/05/cropped-icon-32x32.png warren buffett – Hudson Berkshire Experience http://hudsonberkshireexperience.com/ 32 32 Seritage Growth still owes Berkshire Hathaway $1.44 billion https://hudsonberkshireexperience.com/seritage-growth-still-owes-berkshire-hathaway-1-44-billion/ Thu, 17 Feb 2022 13:10:00 +0000 https://hudsonberkshireexperience.com/seritage-growth-still-owes-berkshire-hathaway-1-44-billion/

Serage growth properties (NYSE: SRG) began life when it was spun off from Sears Holdings, a now-bankrupt retailer that owns iconic Sears and Kmart brands. It was a rough start that only got worse. And as the company grows stronger, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) still has a claim of $1.44 billion on the real estate investment trust (REIT).

What a start!

Sears and Kmart were struggling to resuscitate their businesses, fix their merchandise lineup, and attract customers. To free up cash for this effort, Sears Holdings created Seritage Growth Properties, which purchased a collection of stores from the retailer.

It’s not a strange start at all, and there are plenty of REITs that were formed in the same way. Four cornersfor example, was derived from Dard Restaurants not so long ago.

Image source: Getty Images.

That said, there is a notable discrepancy here. Darden is a reasonably strong restaurant operator, so even if Four Corners wants to diversify its business, there’s no particular rush for it to do so. In fact, Darden brands still make up around 60% of its portfolio. Olive Garden alone represents 45% of the portfolio, but it is a strong brand. Four Corners largely buys new assets to increase diversification.

Sears and Kmart, on the other hand, were in deep trouble and were closing stores when Seritage bought the assets. So, from the start, Seritage’s goal was to take over the big empty boxes from Sears and Kmart, refurbish them, and lease them to new tenants at (hopefully) higher rates.

Redevelopment is an expensive and time-consuming undertaking. While the structures were repaired, Seritage collected no rent even though the money for the redevelopment came out. At first it was kind of a race to get away from Sears and Kmart before Sears Holdings imploded. Seritage lost, with the retailer stumbling long before Seritage pulled away completely.

A hand

That said, in 2018 Warren Buffett and Berkshire Hathaway saw the value potential in Seritage’s portfolio and stepped in to help with a loan that could help the REIT bridge the gap between its redevelopment costs and improving its performance. income once he could rent out his updated retail space. It was a welcome help, given that a few months later Sears Holdings declared bankruptcy.

Things were moving forward until the coronavirus hit in 2020 and set the REIT back. Retail was one of the hardest hit real estate sectors at the start of the pandemic.

Things started to look up in 2021, and in early 2022 Seritage was able to repay $160 million on the term loan provided by Berkshire Hathaway. That sounds like a lot, but the term loan had a balance of $1.6 billion. So, he still has $1.44 billion left and little time to pay it back, given that it matures in July 2023.

But the two companies have agreed to an extension until July 2025. However, Seritage must repay the $800 million loan for it to take effect. So Seritage really has until July 2023 to pay another $640 million, which seems pretty reasonable. In fact, that’s a lot more reasonable than $1.44 billion.

For Berkshire Hathaway, which boasts a massive market capitalization of $707 billion, this is actually a very small deal, so it can afford to be patient. That’s a good thing, because without this loan, Seritage, with a market capitalization of $500 million, could have faced a life-or-death situation when Sears Holdings sought court protection.

SSR Chart

SSR data by YCharts

But there’s more good news here, since Seritage is completely out of its former parent. In the third quarter of 2021, it only had 23% of its rent locked in “signed not occupied” (SNO) contracts.

As these come into service and the costs associated with redevelopment of the assets decrease, Seritage’s business should begin to take a turn. It’s not just out of the woods, but as long as Berkshire Hathaway is willing to work with Seritage, there’s still potential for a turnaround here.

Not for the faint of heart

Seritage, from day one, has been a play. The road he has traveled since his beginnings has not been easy, with the bankruptcy of Sears Holdings and the pandemic representing two strong headwinds. Now, the next big issue to watch for investors in special situations seems to be the repayment of the $800 million loan. If the REIT manages to meet the conditions necessary to extend Berkshire Hathaway’s loan, the future looks much brighter.

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Reuben Gregg Brewer has no position in the stocks mentioned. The Motley Fool owns and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Seritage Growth Properties (Class A) and recommends the following options: long calls of $200 in January 2023 on Berkshire Hathaway (B shares), short longs of $200 in January 2023 on Berkshire Hathaway (B shares) and calls short $265 in January 2023 on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

3 TSX Dividend Stocks Hit 52-Week Highs https://hudsonberkshireexperience.com/3-tsx-dividend-stocks-hit-52-week-highs/ Fri, 11 Feb 2022 15:00:00 +0000 https://hudsonberkshireexperience.com/3-tsx-dividend-stocks-hit-52-week-highs/

Image source: Getty Images

Investors who have these three TSX dividend-paying stocks in their investment portfolios are likely to be happy campers. They recently hit 52-week highs! Should we buy them, keep them or sell them? Here are some insights from analysts to help you in your decision making.

Fairfax Financial Holdings

Fairfax Financial Holdings (TSX:FFH) is sometimes called a smaller version of Berkshire Hathaway. Like Berkshire, it is a holding company that has an insurance business. FFH also aims for a high rate of return on invested capital to create long-term shareholder value.

The beta of the stock roughly matches the beta of the market. Like most stocks in the market, it took a hit during the pandemic crash. However, it has roughly doubled since the bottom of the stock market crash in early 2020. Over the past year, its returns have also been comparable to those of Berkshire Hathaway. FFH stock is currently yielding around 1.9%.

FFH Total Return Level Chart

FFH and BRK.B Total Return Level Data by YCharts

John O’Connell’s comment on FFH in October 2021 was not kind, however:

“Prem Watsa engages in market timing, unlike Warren Buffett. Fairfax is a black box in what it owns. Tough business. Stuck in the mud for a while. If you want to look for good capital allocators in the [property and casualty insurance] company, look at BRK.B, which he owns.

John O’Connell, Chairman and CEO of Davis Rea

Royal Bank Stocks

Quality companies are meant to recover from market corrections. Stocks of major Canadian banks made a big comeback after the pandemic crash. As a leading bank with leading positions in a range of financial services in Canada, Royal Bank of Canada (TSX:RY)(NYSE:RY) is no exception.

It has appreciated about 120% since the bottom of the stock market crash and now has the largest market capitalization of the major Canadian banks. Its market capitalization is $208 billion.

Over the past 52 weeks, the stock dividend has returned almost 43%! Bank stocks have long been a staple in dividend portfolios. Currently, it offers a respectable yield of 3.3%.

RY Total Return Level Chart

RY Total Yield Level Data by YCharts

Here are David Driscoll’s comments on RBC stocks this month:

Rising interest rates will improve net interest margins (the spread between mortgages issued and deposits received). Dividend increases have taken place across the industry. Well-diversified company with operations in the United States and internationally. Avoid buying too many bank stocks as this exposes investors to sector risk.

David Driscoll, President and CEO of Liberty International

Brookfield Infrastructure

While Royal Bank shares may be staple banking stocks for many, Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP) could be a core utility holding company. Since BIP was separated from Brookfield Asset Managementit increased its cash distribution every year for more than a decade.

Based on the way he runs his business, investors can expect more dividend increases for many decades to come. Its cash flow is sustainable – around 90% is regulated and contractual and 70% is indexed to inflation. Currently, it gives about 3.5%.

Here is a comment on Varun Anand’s utility as of November 2021:

“A diversified large-cap infrastructure play, led by one of the top asset managers [Brookfield Asset Management]. Excellent construction work on a global scale. Better ways to play infrastructure by owning individual names versus a conglomerate. Good candidate if you want to sleep at night and collect the dividend.

Varun Anand, Vice President and Senior Portfolio Manager at Starlight Capital

This is the type of mortgage that Warren Buffett recommends https://hudsonberkshireexperience.com/this-is-the-type-of-mortgage-that-warren-buffett-recommends/ Sun, 23 Jan 2022 13:00:24 +0000 https://hudsonberkshireexperience.com/this-is-the-type-of-mortgage-that-warren-buffett-recommends/

Image source: Getty Images

Should you listen to the billionaire finance enthusiast about your home loan?

Key points

  • Buffett recommends taking out a 30-year mortgage.
  • Buffett thinks a 30-year mortgage is the “best tool in the world.”
  • With a 30-year mortgage, banks assume the risk of higher interest rates.

Chances are you’ve heard of Warren Buffett. He is a billionaire, a world-renowned investor and a well-known financial expert who has provided a wealth of financial advice.

Although Buffett has plenty of investment advice to pay attention to, given that he has amassed a fortune through strategic investing, he also has other financial advice. Specifically, Buffett recommended a particular type of home loan for people wanting to buy their own property. Here is what it is.

It’s Buffett’s favorite mortgage option

Buffett believes home ownership is a solid investment for individuals and families who intend to stay in one place for many years. And the investment expert said one of the main reasons homeownership is such a great investment is the 30-year mortgage.

Buffett called the 30-year mortgage “the best instrument in the world because if you mess it up and rates go up to 2%, which I don’t think they will, you pay it back,” he said. he declares. “It’s a one-sided renegotiation. I mean, it’s an incredibly attractive instrument for the owner and you have a one-sided bet.”

Essentially, this means that a 30-year mortgage works well for homeowners because they get a low-rate loan while the bank takes on the risk of rising interest rates. And if interest rates continue to fall, homeowners can simply refinance to a new loan with an even lower rate and pay off their existing debt. On the other hand, if rates go up, they can continue to pay at the low rate they got (assuming they got a fixed rate loan) and their principal and interest payments won’t become more expensive over time.

Buffett himself got a 30-year mortgage when he bought his Laguna Beach vacation home in 1971, and he said he borrowed most of the $150,000 price tag and didn’t have than about $30,000 of equity.

Here’s why Buffett is right about the best type of mortgage

Buffett’s advice on mortgages is perfect. As he pointed out, mortgage rates are affordable debt that borrowers can easily renegotiate if they need to.

But there’s an even better reason to go with a 30-year loan, besides the fact that it puts all the risk of a rate hike on the lender: you can do other things with your money while borrowing the most of the cost of your home to the bank.

As Buffett explained, he only invested a small amount of money on his home because he “thought I could probably do better with the money than make an equity purchase of it. the House”. He ended up buying shares of Berkshire Hathaway with her, which are now worth $750 million.

While the typical owner probably won’t earn as much on their investments, the same rule still applies. Buyers can probably get a better return by taking out a 30-year mortgage to cover most of their home’s costs, then investing all the extra money they could have put on the house (or they might have paid higher monthly payments if they had opted for a shorter loan term).

If you’re buying your own property, consider following Buffett’s advice, putting a reasonable down payment on your home, and opting for a 30-year loan that leaves you enough money for other investments.

A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage

Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.

Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.

Here’s why Warren Buffett is right and Dave Ramsey is wrong about mortgages https://hudsonberkshireexperience.com/heres-why-warren-buffett-is-right-and-dave-ramsey-is-wrong-about-mortgages/ Sun, 09 Jan 2022 11:32:19 +0000 https://hudsonberkshireexperience.com/heres-why-warren-buffett-is-right-and-dave-ramsey-is-wrong-about-mortgages/

Image source: Getty Images

The decisions you make about a mortgage could have a profound impact on your finances. If you’re borrowing to buy a home, chances are your mortgage will be your biggest monthly payment and the biggest debt you’ll incur in your lifetime. You also agree to make payments for a long time.

This is why it can be frustrating to see a lot of conflicting mortgage advice.

Warren Buffett and Dave Ramsey disagree on mortgages

Some financial experts, like Dave Ramsey, are urging people to take the smallest loan possible for the shortest time possible – or even avoid borrowing altogether and pay cash for a house.

Others, however, take the opposite approach. In fact, billionaire investor Warren Buffett called a 30-year mortgage “the world’s best instrument.” He personally took out a 30-year mortgage when he bought his home, although he could easily have avoided doing so, and advises most homebuyers to do the same. Here’s why he’s right.

Buffett’s approach to mortgages is better than Ramsey’s

Buffett’s mortgage advice makes a lot more sense than Ramsey’s. That’s because Buffett fully understands that there’s an opportunity cost associated with paying cash for a house – or even taking out a short-term mortgage with higher monthly payments. Ramsey seems to ignore this fact when he warns buyers to avoid a 30-year mortgage, opting instead for a shorter repayment term with higher monthly payments or no loan at all.

When Buffett bought his house for $ 150,000 in 1971, he indicated that he put about $ 30,000 on the property and borrowed the rest. The reason: “I thought I could probably do better with the money than making an entire house purchase. “

Buffett ended up buying Berkshire Hathaway shares with the money he could have used to buy the house. As a result, he ended up turning the $ 110,000 or $ 120,000 he allegedly paid in cash for the house into $ 750 million because Berkshire shares rose in value so much.

You don’t have to be Buffett to get great feedback

Now, most people are unlikely to see the kind of return on investment Buffett made by buying Berkshire stocks. But it’s safe to assume that most people could get a better return on investing than paying cash for a house, even if they aren’t expert investors. Investing in an S&P 500 index fund could produce average annual returns of around 10% over time, which is far higher even than an expensive 4-5% mortgage.

By locking your money in a house, as Ramsey suggests, you are missing out on the chance to do other things with it that could have a bigger impact on your equity. It’s true whether you’re making a large down payment, paying cash for a house, or opting for a 15-year loan with much higher monthly payments.

And, as Buffett points out, you also have the option of making your mortgage even cheaper by refinancing it if rates drop. “It’s a one-sided renegotiation. It’s an incredibly attractive instrument for the owner, and you’ve got a one-sided bet.”

For all of these reasons, you should listen to Buffett rather than Ramsey. If you are buying a home, a 30 year mortgage is the best way to go.

A historic opportunity to potentially save thousands on your mortgage

There is a good chance that interest rates will not stay at multi-decade lows any longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger to buy a new home.

Our expert recommends this company for a low rate – and in fact he used it himself for refi (twice!).

Read our free review

We strongly believe in the Golden Rule, which is why the editorial opinions are our own and have not been previously reviewed, endorsed or endorsed by the included advertisers. The Ascent does not cover all the offers on the market. The editorial content of The Ascent is separate from the editorial content of The Motley Fool and is created by a different team of analysts. Christy Bieber has no position in the stocks mentioned. The Motley Fool owns and recommends Berkshire Hathaway (B shares). The Motley Fool recommends the following options: $ 200 long calls in January 2023 on Berkshire Hathaway (B shares), $ 200 short buys in January 2023 on Berkshire Hathaway (B shares), and $ 265 short calls in January 2023 on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

How to Buy Berkshire Hathaway (BRK.B) Stock – Forbes Advisor https://hudsonberkshireexperience.com/how-to-buy-berkshire-hathaway-brk-b-stock-forbes-advisor/ Mon, 03 Jan 2022 08:00:00 +0000 https://hudsonberkshireexperience.com/how-to-buy-berkshire-hathaway-brk-b-stock-forbes-advisor/ Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.

It’s not hard to see why Warren Buffett’s Berkshire Hathaway is one of the most famous public companies in the world. In the third quarter of 2021, Berkshire reported operating income of $6.5 billion, up 18% from a year earlier. Shares of the company have gained almost 30% in 2021.

If you want to own a share of a company whose shares could be more expensive than your mortgage, look no further than Class A shares of Berkshire Hathaway (BRK.A). For those who prefer a more economical option, Berkshire Hathaway Class B shares (BRK.B) are very affordable.

How to Buy Berkshire Hathaway

Evaluating Berkshire Hathaway’s finances

With a market capitalization of over $600 billion, Berkshire is among the ten largest U.S. public companies. If it were a mutual fund, it would be the biggest fund in the world.

Berkshire holds stakes in countless companies, including Coca Cola, American Express and Bank of America, and operates a number of major subsidiaries, such as GEICO, Dairy Queen and Clayton Homes.

But just because it has plenty of big names doesn’t mean you shouldn’t do your due diligence to make sure a potential investment in Berkshire is right for your portfolio.

When you buy a stock like Berkshire Hathaway, you should always start by evaluating its financial records, starting with its annual reports (Form 10-K) and quarterly reports (Form 10-Q). These reports, usually referred to as earnings reports or quarterly results in the financial media, detail the company’s most recent performance.

You can find them on Berkshire Hathaway’s Investor Relations site or in the SEC’s EDGAR database. Be sure to seek out expert analysis, such as you might find on Fidelity, Morningstar, or Forbes, for more information on these financial documents.

Decide on your investment goals

Before you start buying Berkshire Hathaway stock, you need to make sure that investing in the company is in line with your overall investment goals.

For example, is your primary reason for investing to generate capital appreciation in your portfolio? If so, Berkshire may be a good choice. Since 1965, the company has delivered average annual returns of 20%, nearly double the annual returns of the S&P 500. While past performance is no guarantee of future success, that fact alone could make BRK a great choice for investors. long-term purchases. hold investors.

If, on the other hand, you are looking to generate passive income through dividends, you may want to find another investment. Berkshire hasn’t paid a dividend since 1967, opting instead to reinvest earnings to grow its holdings.

Decide if you want BRK.B vs BRK.A

As mentioned above, the Berkshire Hathaway stock comes in two versions: BRK.A and BRK.B. You will need to determine what you want in your wallet.

BRK.A was Berkshire Hathaway’s first common stock offering (originally it was just BRK). In December 2021, BRK.A was trading around a stratospheric $429,000 per share.

Back in the 1990s, when shares were priced at a relatively paltry $30,000 or so, Warren Buffett opted to create a second class of shares rather than do a stock split to create more shares and reduce the Entrance fees to the Berkshire Hathaway property.

In most cases, BRK.A and BRK.B are the same except for the huge price difference. BRK.B comes in at a much more affordable price of $284 per share. This distinction was perhaps the most important before fractional stock investing became more common and potential investors had to shell out for full shares of BRK.A or BRK.B.

It’s also important to note that BRK.A shares come with significantly higher voting rights, which makes sense given their much higher price and the ability to convert them into class B shares at any time. You cannot convert class B shares into class A shares.

Choose a brokerage platform

Once you know what kind of stocks you want, then you need to settle on a place to buy them. If you already have a brokerage account, the easiest way is probably to just use your current provider.

But if you don’t have an account outside of an employer pension plan, check out our list of the best online brokers.

When checking out the options, just make sure the platform offers the type of account you want, whether it’s an Individual Retirement Account (IRA) or a taxable investment account.

You’ll also want to make sure that it offers commission-free trading in US stocks – most major brokerages do this now – and that it has offers that will help you achieve any other financial or investment goals, like split stock investing or tools to help you save and invest. better.

Calculate how much you want to invest

Even Warren Buffett doesn’t have an unlimited amount of money to spend on Berkshire. To determine how much to invest in BRK.A or BRK.B, ask yourself these four questions:

  • What is your budget ? You should never invest the money you need to cover your expenses. After setting aside money for these and an emergency fund, if you don’t already have one, you can invest whatever is left to achieve your wealth building goals.
  • What is the current price of BRK.A or BRK.B? With fractional shares, of course, BRK’s price may be less of a determining factor, but if your brokerage doesn’t allow you to buy whole share portions, you’ll probably want to aim for BRK.B shares. .
  • What is your investment strategy? People generally invest in one of two main ways: they deposit a large initial amount or invest smaller amounts regularly over months and years. This second process, called averaging, can help you pay an overall lower average price per share and can also reduce the level of risk you are taking on at any given time.
  • What about your other investments? Chances are BRK won’t be your first or only investment purchase. You will want to assess how this fits in with your other investments and strategies.

Determine your order type and place your order

Once you’ve opened a brokerage account and decided when to invest, it’s time to create your buy order. If you want to simplify things, you can use a market order to buy your shares at the current price each time you place your order.

If you are a more sophisticated investor or only want to invest if you can buy stocks at a certain price, you might consider using a limit or stop-limit order, which only execute trades when specific price conditions are met. Just be aware that when you do this, it’s possible that the action will move away from the price you set as your limit, which means that you may end up with no action.

Assessing Berkshire Hathaway’s performance

Investing is not a single activity. You’ll want to check the performance of your Berkshire Hathaway investment over time to make sure you’re on track to meet your goals and determine whether you want to buy, sell, or hold steady with BRK.

First, find its annual rate of return. This way you will have a data point that you can compare to other stocks and benchmarks like the S&P 500 and the Nasdaq Composite Index. You can also revisit the fundamental data you looked at earlier to see how these numbers are changing over time.

How to Sell Berkshire Hathaway Stock

If you decide you’re ready to exit your position in Berkshire, selling your shares is as easy as buying them. Again, you will have the option of selling at the market price or using stop or limit orders if you only want to sell at or above a certain price.

Most important when selling, however, is the need to consider taxes. If you bought your shares in a retirement account, you don’t have to worry about that. But if you bought your shares through a normal brokerage account and are making a profit, you may have to pay capital gains tax. (If you sell at a loss, on the other hand, you may be able to claim it for tax purposes.)

If you are likely to make large gains, be sure to speak with an accountant so you are aware of any tax consequences you may incur.

Other ways to invest in Berkshire Hathaway

Berkshire Hathaway is a very large company. On its own, it’s the ninth-largest component of the S&P 500, meaning just about any large-cap index fund or exchange-traded fund (ETF) will have some exposure to BRK.

For long-term passive investors, such as those saving for retirement, these funds can be prime investment opportunities. Not only do they give you the potential to grow hundreds of businesses, but they also minimize the risk of you losing money on a single investment.

This is why Warren Buffett wants you to refinance your mortgage now https://hudsonberkshireexperience.com/this-is-why-warren-buffett-wants-you-to-refinance-your-mortgage-now/ Fri, 31 Dec 2021 19:00:00 +0000 https://hudsonberkshireexperience.com/this-is-why-warren-buffett-wants-you-to-refinance-your-mortgage-now/

This is why Warren Buffett wants you to refinance your mortgage now

With 30-year fixed mortgage rates still hovering around 3%, homeowners who have yet to refinance during the pandemic could be missing out on big savings.

Ninety-one-year-old investment sage Warren Buffett would wonder why you waited.

He told shareholders at the last annual meeting of his Berkshire Hathaway company that there are still great opportunities for borrowers, thanks to the Federal Reserve’s commitment to keep its key interest rate close to zero.

“The economy fell off a cliff in March [2020]Buffett said. “He was resuscitated in an extraordinarily effective way by the actions of the Federal Reserve.”

Mortgage rates have fluctuated over the past few months, but they’re still low enough that you can save hundreds of dollars a month by refinancing your mortgage.

Use Buffett as a template

Child with superhero shadow

lassedesignen / Shutterstock

To protect the economy from the coronavirus crisis, the Fed has kept a key interest rate close to zero since March 2020. In recent weeks, Fed officials have signaled that they could keep rates nearing zero. void for at least a few more months.

“It’s a fascinating time [for borrowers]Buffett told shareholders at the May meeting. He added that the low rate environment “is extremely pleasant.”

While Buffett couldn’t find a way to borrow at 0% interest (at least not yet), his holding company Berkshire Hathaway (BRK.A, BRK.B) got close, with help from the Fed’s low interest rate environment.

In April 2020, Berkshire said that, thanks to a Japanese yen-denominated bond offering, it was taking on the equivalent of more than $ 1.8 billion in debt – at rates ranging from 2% to a mere 0.674%.

You won’t find 30-year mortgage rates this low, but 30-year fixed-rate mortgages are currently averaging 3.11%, according to the latest data from mortgage giant Freddie Mac.

Although rates are still historically low, they are expected to increase soon. Freddie Mac predicted that 30-year rates would average 3.8% by the end of 2022, while the Mortgage Bankers Association says 4% will be the norm at that time.

Refinancing Can Save Hundreds Per Month, Survey Finds

Close up on signing loan agreement, couple sitting on sofa, male hand with pen signing, taking out bank loan with easy payment terms and low interest rate for buying money 'a property

fizkes / Shutterstock

In an interview with CNBC in 2017, Buffett called the 30-year mortgage “the world’s best instrument” – because of your ability to refinance when you find a lower rate.

“If you’re wrong and the rates go up to 2%, which I don’t think they will, you pay it back,” he said at the time. “It’s a one-sided renegotiation. It’s an incredibly attractive instrument for the owner, and you’ve got a one-sided bet.”

Despite the potential for big savings, many American households have been slow to get on the refinancing train. In the year of ultra-low mortgage rates that ended in April, less than a quarter of homeowners refinanced their loans, according to a Zillow survey.

Of those who refi, almost half (47%) are now saving $ 300 or more each month, according to the same study.

Still on the fence about a refi? You’re in a good position to take out a new loan if you currently have a 30-year mortgage of around 3.75% or more and your credit rating is exceptional (800 or more) or very good (740-799).

When Buffett says it’s a good time to borrow money. So maybe it is time for you to lower the cost of your mortgage.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Companies Warren Buffett Says You Should Invest In During Inflation https://hudsonberkshireexperience.com/companies-warren-buffett-says-you-should-invest-in-during-inflation/ Wed, 15 Dec 2021 08:00:00 +0000 https://hudsonberkshireexperience.com/companies-warren-buffett-says-you-should-invest-in-during-inflation/

Warren buffett

johannes eisele / Agence France-Presse / Getty Images

Consumer prices rose 6.8% in November, compared with the same month in 2020, according to Labor Department data released in December. US inflation is now at its highest level in 39 years, and November marked the fifth consecutive month that inflation exceeded 5%. These numbers no doubt lead many investors to ask: How can I protect myself against inflation? In general, many experts recommend investing smartly to protect against inflation. Suze Orman recently wrote on her site that “keep investing in stocks” to protect against rising costs, and Ramit Sethi noted that, “Investing is the most effective way to get rich. Inflation can be bad for people when you just keep your money in a bank account and do nothing else with it. But what types of businesses should you invest in? Here’s what Warren Buffett has said over the decades.

Berkshire Hathaway Chairman and CEO, at a 2015 shareholder meeting, noted that: “The best companies during inflation are the companies you buy once and you don’t have to keep doing capital investments afterwards ”, whereas you should avoid“ ”any company with high capital investment. It emphasizes real estate as being good during inflation, which you can buy once and get an increase in value as well; meanwhile, he calls businesses like utilities and railroads bad investments in times of inflation.

And at a shareholder meeting in 2009, Buffett noted that the first best thing you can do to protect yourself against inflation is to invest in yourself and your skills: “If you’re the best teacher , if you are the best surgeon, if you are the best lawyer, you will get your share of the national economic pie whatever the value of the currency, whatever it is, ”he said. After that, he says, “the second best protection is a wonderful business,” which means a business in which the products are in demand even though the business has to raise the prices.

And in a 1981 letter to shareholders, Buffett perhaps explained all this as clearly as ever, writing that companies that tend to resist an inflationary environment “must have two characteristics: (1) an ability to raise prices quite easily (even when product demand is flat and capacity is not fully utilized) without fear of significant loss in market share or unit volume, and (2) an ability to cope with large increases in volume (often produced more by inflation than by real growth) with only additional investment of capital.

That said, perhaps the best thing many individual investors remember about Buffett is that instead of trying to pick individual stocks, whether we’re in a time of inflation or not, you should go for this proven method. : fund index, hold and hold. In 2021, at a shareholders’ meeting, Buffett said that “I don’t think the average person can pick stocks,” and noted that he recommended that the S&P 500 index fund “have for a very, a very long time to people ”.

Four smarter ways to achieve high yield https://hudsonberkshireexperience.com/four-smarter-ways-to-achieve-high-yield/ Wed, 08 Dec 2021 17:00:36 +0000 https://hudsonberkshireexperience.com/four-smarter-ways-to-achieve-high-yield/

Are you drawn to exorbitant earnings? If you have to aim for yield, at least be reasonably smart about it.

“Achieving return is really stupid,” Warren Buffett said in an interview with CNBC in 2020. “If you need to get 3% and you only get 1%, the answer is [give up on] the 3%, so as not to try to get the 1 to 3. “

Three percent? This is for the biters. How about reaching 6%, 7% or 9% or – hold your horses – 16%? Below is an overview of four very high yielding investments. For each, I will suggest a substitute investment, something comparable risky but with better terms or information. If you just can’t resist, buy the substitutes and buy in small quantities.

1. Get 6% Bitcoin!

The effervescent world of virtual currency creates many opportunities for savvy traders to attract yield hungry. The problem isn’t stuff like Ponzi schemes, although there have been some notable scams that cost a few billion dollars. The problem is what’s legal.

You put in capital that is loaned to a bitcoin speculator. If the coins go up in value, you get some interest. If they break down, your principal is in danger.

Not a good deal, says Bill Singer, securities lawyer and former stock broker. This is how he describes the crypto loan: “Beggars outside the casino” taking your money inside.

Consider BitcoinIRA, a company that wants to help you invest your retirement savings in virtual coins and / or a bitcoin player loan called Genesis. With the latter choice, you deposit dollars and earn 6% interest.

Legitimate? Obviously, yes. The singer takes his hat off to BitcoinIRA’s lawyers, who have carefully structured the arrangement so that the entity taking your money is only a middleman, and not an investment advisor, broker, bank, or company. investment. Thus, BitcoinIRA does not have to register with the Securities & Exchange Commission or publish a prospectus.

BitcoinIRA sends your money to Genesis Global Trading, which describes itself as “the world’s largest lender of digital assets”. Genesis talks about its multibillion dollar loan program, attention to guarantees, and risk management. It is part of a digital conglomerate that includes the very successful Grayscale Bitcoin Trust.

But wait. Surely it would be easier for Genesis to borrow 6% money from the institutional market, a few hundred million dollars all at once, than to mess with BitcoinIRA and its $ 10,000 retail clients. What is happening?

One could perhaps deduce that the institutions are reluctant to lend money to Genesis at 6%. Whatever hesitation comes with a glance at Genesis’ track record, one can only guess. If Genesis publishes a balance sheet for the benefit of potential customers of BitcoinIRA, it is very difficult to find.

Do you want to achieve a 6% return while taking risks in bitcoin? Here’s a better way to take that risk.

Deposit $ 100,000 into a brokerage account and write a June 2022 put option, with a strike price of $ 240, against Coinbase. Coinbase is an exchange whose fortunes are closely tied to the prices of digital currencies. Coinbase shares recently closed at $ 286, so the selling buyer is unlikely to force you to buy 100 shares for $ 24,000, but it could happen by June.

To write this option you will be paid something like $ 3,000. Repeat in six months, writing a second option with an appropriately adjusted strike price. You will earn an additional $ 3,000. You will also earn a small amount of interest on the portion of your $ 100,000 that is not used as collateral for your put options. In total, you will earn 6% on your $ 100,000.

With these knockouts, you are making a modestly bullish bet on the future of digital currency, just as you would if you let Genesis borrow $ 100,000 from you. If bitcoin is successful, you will pocket 6%. If not, you could end up owning 100 or maybe 200 Coinbase stocks that you don’t particularly want. But the maximum you can lose from your $ 100,000 stake is $ 48,000, and only if Coinbase shares reach $ 0.

With Coinbase, you get an SEC registered company with elaborate public financial statements; when you sell options on this one, you are trading in a very informed market with knowledgeable investors on both the long side and the demand side. With BitcoinIRA, you send money to an obscured pool.

2. Get 7% old common stocks and bonds!

Hot spot on Wall Street: the ETF Strategy Shares Nasdaq 7 Handl. In the past six months, its assets have tripled to $ 1.4 billion.

What is the attraction? A huge gain. The 7% payout yield looks formidable in a world of meager dividends and bond coupons. Sounds great, that is, to people in the lower half of the investor intelligence spectrum drawn by Buffett.

Where does this 7% come from? Not dividends and bond coupons. The portfolio, a collection of other exchange traded funds, only returns 2%. The remaining 5% of the payment represents a liquidation of assets.

It costs a pretty penny to have this fund of funds liquidate assets for you. The underlying ETFs have a composite expense ratio of 0.2%, but buyers of Strategy Shares fund pay five times as much as Strategy adds its own fee of 0.8%.

Here is the alternative investment: buy the underlying funds, which are mostly excellent choices from Schwab, Vanguard and BlackRock. Earn dividends. Also, every year sell 5% of what you just bought. You now have your 7% payout and save a bundle on fees.

3. Get 9% of a mortgage portfolio!

The Vanguard Ginnie Mae fund reports 1%. So a mortgage investment with a 9% return catches your eye.

This fine return is promised on Aspen Income Fund, managed by Aspen Properties Group in Overland Park, Kansas. Payment comes from a portfolio of distressed residential mortgages (primarily second mortgages) purchased at a price below the mortgage balance.

Two factors increase the portfolio’s return above what you see on Vanguard’s very secure Ginnie Maes. The first is that second mortgages have high interest rates. The other is that when things work out, a discounted mortgage generates capital appreciation. The Aspen Fund gets a bargain when a homeowner refinances or sells the property at a decent price.

Minimum investment: $ 50,000. You can’t buy unless you cross a hurdle for equity ($ 1 million) or income ($ 200,000). Aspen is candid about the risks. The right of redemption depends on available liquidity and is only on the basis of best efforts. The 9% payout is ‘preferred’ but is not guaranteed. A 2019 audit, the latest available, shows the fund has mortgages worth $ 14.5 million funded in part by a $ 2.3 million line of credit.

Aspen’s website features flattering podcasts, testimonials about the mortgage-buying skills of the two men who started the fund eight years ago, a graph projecting what 9% can do for you if you let it dial for 15 years and a statement that the fund has never missed a preferred payment. What it doesn’t publish for potential investors is a coverage ratio.

Coverage is the first thing a bond analyst or mortgage loan officer asks for. It compares the income available for debt service to the payment owed. It would be nice to know that Aspen’s payment is from interest and capital gains, not mortgage liquidations, the sale of fund shares or that line of credit.

Aspen co-founder Robert Fraser assures me that the preferred payout has always been covered by profits, not other sources of money. If Aspen Income were registered with the SEC, you might have documents to do so before you send in your $ 50,000. You can view the income statement and calculate the coverage ratio. Unfortunately, it is exempt from registration.

I’m inclined to assume the guys at Aspen are good at what they do. But there are a lot of fish in the sea. Why buy something that is not registered when there is so much to buy that is registered?

Here’s my replacement for the investor keen to hit the moon with mortgages: Chimera Investment Corp. common stocks. Chimera is a $ 16 billion (asset) mortgage buyer and seller with an 8% dividend yield that is amply covered by net income. Its very detailed financial statements are filed with the SEC.

4. Get 16%!

A Forbes reader wrote to me asking for my opinion on his investment idea. He would take out a 4.5% home equity loan and invest the proceeds in Icahn Enterprises, a limited partnership with a dividend of $ 8 per annum at 16% of the share price. This reader, presumably the shrewd CEO of an industrial company, seems to think he has found a way to make money. All he has to do is borrow at 4.5% and invest at 16%.

In addition to being organized as a partnership rather than a taxable corporation, Icahn Enterprises is a bit like Berkshire Hathaway. They’re both a mix of operating companies (in Icahn’s case, some bizarre businesses like fertilizer manufacturing and auto repair) with a passive investment portfolio.

There are big differences. Warren Buffett’s portfolio is doing pretty well; Carl Icahn has been a disaster in recent years. Berkshire Hathaway is trading at a not too high premium to its liquidation value; Icahn Enterprises is trading at 2.5 times its value. Berkshire is profitable; the Icahn company is losing money. So don’t even ask where that $ 8 dividend came from.

My replacement idea, if you are tempted from a distance to buy Icahn Enterprises for its dividend, is to acquire a position in Berkshire Hathaway and then sell 16% of the shares each year.

My opinion of the potential arbitrageur who wrote is the same as what Buffett applies to people looking for yield.

One of Warren Buffett’s favorite stocks is up 50% this year. Can he continue to climb? https://hudsonberkshireexperience.com/one-of-warren-buffetts-favorite-stocks-is-up-50-this-year-can-he-continue-to-climb/ Sun, 21 Nov 2021 12:50:00 +0000 https://hudsonberkshireexperience.com/one-of-warren-buffetts-favorite-stocks-is-up-50-this-year-can-he-continue-to-climb/

The payment processor and credit card issuer American Express (NYSE: AXP) has long been one of Warren Buffett’s favorite stocks. Just last year, Buffett called the brand special, and American Express is currently one of the Berkshire Hathaway‘s (NYSE: BRK.A)(NYSE: BRK.B) main holdings in its equity portfolio. The stock has spent much of 2021 hitting new highs and is currently trading up more than 50% this year. Can it continue? We will take a look.

The case rebounded

With many activities in the travel and entertainment (T&E) and retail industries, American Express has certainly been hit by the pandemic, which has hit many of these industries hard. But for the first time since the start of the pandemic, spending on American Express cards is up from the third quarter of 2019. This has generated remittance revenue (the transaction fees that American Express collects from merchants that accept its cards and one of the main drivers of corporate revenue) to nearly $ 6.7 billion, up slightly from 2019.

Image source: Getty Images.

This is very good considering that T&E spending on American Express cards is still down 29% from 2019 levels. Management expects travel and commuting spending to return to 80% of 2019 levels by year end. To pick up the slack, spending on goods and services increased 19% from 2019. Americans are clearly spending again, and the costs of many goods and services have increased over the past year and compared to 2019. .

Another cool part of the rebound is that it is fueled by young people. Millennials and Gen Z spent 38% more on American Express cards in the third quarter compared to the same quarter in 2019. In comparison, Gen X spending only increased 9%, while spending of baby boomers were down 6% from 2019.

On the lending front, the company saw signs of a rebound, with total credit card lending volume increasing around 2% sequentially, but still down around 10% from the third quarter of 2019. Management attributed the moderate loan growth to the client’s financial strength, which resulted in higher liquidity levels and the repayment of loan balances at higher rates.

The flip side of moderate loan growth has been strong credit quality. For the third quarter in a row, American Express was able to free up previously stored capital for loan losses, which helped juice profits. Additionally, the company recently increased the annual membership fee on its platinum card from $ 550 to $ 695 per year and is increasing net card fees as well as the number of new cardholders.

The rebound enabled American Express to generate diluted earnings per share of $ 2.27 on total sales of nearly $ 11 billion. Revenues were the highest in five quarters, but pre-tax and pre-provision income, which suppresses the noise of reserve releases, declined slightly from each of the first two quarters of the year.

Promote American Express

American Express is unique in that it is a payment processor and has established a rail network like Visa (NYSE: V) and MasterCard (NYSE: MA), but it also grants loans and exposes itself as A capital letter (NYSE: COF) and Synchrony Financial (NYSE: SYF). It is most similar to Discover financial services (NYSE: DFS), although considered a much better company.

Chart comparing American Express PE ratio to those of several other credit card companies.

AXP PE Ratio data by YCharts

As a result, American Express trades at a multiple between processors and card issuers. In 2022, management expects earnings per share to be near the high end of their initial projections for 2020 before the coronavirus hits. This range of EPS was $ 8.85 to $ 9.25. If you take American Express’ current multiple of 18.8 and multiply it by the top of the range ($ 9.25), you would end up with a share price of around $ 174, which American Express has. already outdated.

However, if you give American Express a roughly multiple between the two business groups, it is the most similar, which I will do by taking the average of the multiples between the highest card issuer (Discover) and the lowest payment processor (Mastercard), American Express would have a multiple of 21.65. That would imply a share price of around $ 200, an 11% rise from current levels if management can meet their earnings guidance for 2022.

What to consider

American Express business continues to recover and could recover further in 2022 if T&E spending continues to rebound. I’ll also be looking at how American Express fares with acquiring new cardholders, given that spending has been high lately and the company has increased annual subscription fees for members. In the end, the share price rose a lot and there doesn’t seem to be a ton of upside in the short term. But Buffett is certainly right when he says that the American Express brand is special, and I think in the long run the stock can continue to produce good returns for investors.

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American Express is an advertising partner of The Ascent, a Motley Fool company. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Synchrony Financial is an advertising partner of The Ascent, a Motley Fool company. Bram Berkowitz has no position in the mentioned stocks. The Motley Fool owns shares and recommends Berkshire Hathaway (B shares), Mastercard and Visa. The Motley Fool recommends Discover Financial Services and recommends the following options: $ 200 long calls in January 2023 on Berkshire Hathaway (B shares), short $ 200 buys in January 2023 on Berkshire Hathaway (B shares), and short calls in January 2023 of $ 265 on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

House prices are soaring. Manufactured home industry sees an opening https://hudsonberkshireexperience.com/house-prices-are-soaring-manufactured-home-industry-sees-an-opening/ Sun, 21 Nov 2021 12:41:17 +0000 https://hudsonberkshireexperience.com/house-prices-are-soaring-manufactured-home-industry-sees-an-opening/

At the end of last year, they went to see a house they found on Zillow and were surprised to learn that it had been built in a factory. They liked the large backyard and the fact that it was in a new 21-house subdivision in the San Antonio de Seguin suburb. First-time buyers closed in February.

“We were very impressed that it was a prefabricated house,” said Ms. Guerra, a housewife. She lives in the three bedroom house with her 18 month old daughter. Mr. Guerra, a welder, died of Covid-19 in August.

Real estate lenders, developers and advocates believe they have found a winning formula by building homes in factories that look like homes built in place but cost less. Other developments like Seguin’s could help ease the housing affordability crisis in the United States, they say.

“We have a lot of teachers, first-time home buyers, and people downsizing after they retire,” said Dustin Arp, managing partner of Spark Homes LLC. He developed Cordell Oaks, where the Guerras bought their home. “Maybe they used to qualify for homes built on site, but they don’t.”

A new, on-site single-family home sold on average for about $ 392,000 in 2020, or about $ 309,000 excluding the cost of the underlying land, according to government data. The new manufactured homes cost $ 87,000, not including the land.

The industry is on track to deliver more than 100,000 new manufactured homes this year for the first time since 2006, according to the Census Bureau. The Biden administration has indicated that prefabricated housing is a solution to the affordable housing shortage.

Yet manufacturers of manufactured homes must struggle to convince potential buyers that their homes have solid construction and secure financing options. The industry boomed in the 1990s, when dealers boosted sales by offering unrealistic loan terms to people who couldn’t afford it. Home deliveries have reached nearly 400,000 per year. Many borrowers have defaulted and lost their homes, and many lenders have closed their doors.

During the pandemic, households living in manufactured homes of all types were about twice as likely to fall behind on rent or mortgage payments as the general population, according to an analysis of census data by Alexander Hermann , senior research analyst at the Harvard University Joint Center. for housing studies. About 19% were late in the third quarter of this year.

People living in manufactured homes were also more likely to report loss of income during the pandemic than other households, Hermann said.

In many ways, manufactured homes remain a world apart from the built-in-place home market. Houses are built in factories and shipped to their destinations. They are traditionally sold in dealerships which may offer limited financing options. In these cases, a person may buy a manufactured home as personal property, like a car, rather than getting a mortgage that attaches the house to the underlying land.

According to the Consumer Financial Protection Bureau, 42% of manufactured homes are purchased with loans secured by the home but not by the land. These loans usually have much higher interest rates. Homeowners may also be at greater risk of losing their home if they do not own the land.

In recent years, Fannie Mae and Freddie Mac have made it easier for lenders to extend conventional mortgages on some manufactured homes with features like porches or on-site garages. Cordell Oaks buyers get mortgages like these, secured by both home and land.

Missy and Mike Campbell moved to Ms. Guerra Street this spring. They had camped in their RV for months as they searched for a new home. They got a loan guaranteed by Fannie Mae through Guild Mortgage Co., where Mr. Arp is also the manager of the local branch.

The Campbells paid about $ 238,000 for their house, and the mortgage has an interest rate of less than 3%, Ms. Campbell said. The two families have a friendly fight over the best holiday decorations.

Skyline Champion Corp., the builder that supplies the Cordell Oaks homes, is also working on subdivision projects in California and Colorado for these high-end manufactured homes eligible for conventional mortgages, according to Dave Busche, director of business development for the company. . Spark Homes, the developer of Cordell Oaks, is starting another nearby 51-unit subdivision called Clara Ridge Ranch. Clayton Homes Inc., a unit of Warren Buffett’s Berkshire Hathaway Inc. and the nation’s largest manufactured home maker, said it was working with seven developers on similar subdivision projects.

These high-end homes still represent a tiny fraction of the new manufactured homes. And manufactured homes have long accounted for about 9% of new single-family construction, according to the National Association of Home Builders. Manufacturers say many local zoning codes do not allow manufactured homes and local authorities may misinterpret them as trailer parks. Supply chain bottlenecks and labor shortages have also slowed production across the industry.

Builders and developers say they are helping people who might otherwise be excluded from homeownership. New starting houses are rare. According to the Census Bureau, only about 21% of new built-in-place homes sold in September were for less than $ 300,000, up from 35% of sales a year earlier.

Guild Mortgage, a large prefabricated housing lender, recently purchased four plots of land in Paradise, Calif., Which is rebuilding itself after wildfires.

The company plans to install prefabricated houses built by Clayton. Then it will open them to residents and policy makers to visit. Eventually, Guild will sell them to the residents of Paradise.

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