BUFFETT WARNS TRADING NEWS CAN BE DELAYED.Byline: Miles Weiss Bloomberg News Warren Buffett Warren Buffett Known as "the Oracle of Omaha," Buffett is Chairman of Berkshire Hathaway and arguably the greatest investor of all time. His wealth fluctuates with the performance of the market, but for the last few years he has been reported to be worth over $30 billion, making , whose stock-picking skills made him the world's second-richest man, has some advice for investors who want to piggyback piggyback 1. A broker trading in his or her personal account after trading in the same security for a customer. The broker may believe the customer has access to privileged information that will cause the transaction to be profitable. 2. on his strategies: Don't jump on every word about his trading moves. News organizations routinely report on regulatory filings that list Buffett's holdings, and markets often move for stocks that are mentioned. The problem? Buffett's Berkshire Hathaway Berkshire Hathaway (NYSE: BRKA, NYSE: BRKB) is a conglomerate holding company headquartered in Omaha, Nebraska, U.S., that oversees and manages a number of subsidiary companies. Inc. takes advantage of rules that let the company keep some of those filings secret for at least 12 months. So, by the time the world learns about Berkshire's holdings, Buffett may have long since changed course. Berkshire says it's concerned when trading jumps on the outdated news. ``This has occurred in circumstances in which Berkshire either no longer owned the security in question, or otherwise had changed its position,'' Berkshire said in a letter to the U.S. Securities and Exchange Commission. Berkshire's more concerned that investor enthusiasm for Buffett's picks could hurt its own trading profits Trading profit The profit earned on short-term trades of securities held for less than one year, subject to tax at normal income tax rates. trading profit if the company disclosed its holdings more quickly. Berkshire said it seeks to delay public disclosure only for stocks that are part of ``an active trading strategy In finance, a trading strategy (see also trading system) is a predefined set of rules to apply. Usually, this refers to a means used to replicate an option in order to give it an arbitrage free value in the sense that the cost of buying some financial assets to give the same ,'' when more timely reports could influence the price of shares Buffett may want to buy or sell. Berkshire's letter, obtained from the SEC through the Freedom of Information Act, is the latest official word to the SEC on reasons for the company's secrecy. It was written in August 1997 to tell the agency why Buffett's Omaha, Neb., insurance holding company wanted confidential filing status for some investments. The letter explicitly spells out for the first time that Berkshire may be trading stocks listed in the confidential reports if prices hit certain levels. Berkshire officials didn't return calls late last week seeking comment. Like other money managers who handle more than $100 million of stock, Berkshire must file quarterly reports with the SEC that list its holdings. Those public filings generally are available within about 45 days after the end of each quarter. The SEC, though, lets money managers submit a second, confidential report if disclosure of some holdings would reveal a proprietary trading Proprietary Trading When a firm trades for direct gain instead of commission dollars. Essentially, the firm has decided to profit from the market rather than commissions from processing trades. strategy or threaten an arbitrage bet on the outcome of a merger. Those reports are kept secret for a year. Dozens of other big money managers use the confidential process, including Soros Fund Management The introduction to this article provides insufficient context for those unfamiliar with the subject matter. Please help [ improve the introduction] to meet Wikipedia's layout standards. You can discuss the issue on the talk page. , Goldman, Sachs & Co., and Long-Term Capital Management Long-Term Capital Management (LTCM) was a hedge fund founded in 1994 by John Meriwether (the former vice-chairman and head of bond trading at Salomon Brothers). On its board of directors were Myron Scholes and Robert C. LP - the hedge fund hedge fund, in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds "hedge" by offsetting "short" positions (borrowing a security and then selling it at a higher price before repaying the lender) against "long" that nearly collapsed last year. Few, if any, see their moves scrutinized as closely as Buffett. Berkshire's three-page letter to the SEC lays out the dilemmas of being perhaps the world's most celebrated and most emulated investor. To keep Buffett's strategies under wraps, Berkshire said it buys or sells stocks in ``fairly numerous and relatively small transactions'' that may ``extend over a fairly lengthy period.'' If it used the public filing to describe all its holdings every three months, the company said, other investors are sure to follow Buffett's lead, driving up shares that Berkshire wants to buy or setting off a decline in stocks it hopes to sell. Mirroring Buffett's moves wouldn't be a bad idea. A $10,000 investment in Berkshire in May 1985 would be worth almost $391,000 today. During that time, Berkshire shares have risen more than five times as much as the Standard & Poor's 500 or the Dow Jones industrial average Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. . Buffett's Berkshire holdings, as reported in the company's most recent proxy filing, are worth almost $34.6 billion. That kind of investment success means even year-old disclosures about Berkshire's holdings can spur investors keen to glean glean v. gleaned, glean·ing, gleans v.intr. To gather grain left behind by reapers. v.tr. 1. To gather (grain) left behind by reapers. 2. any information they can about stock picks by the tight-lipped tight·lipped also tight-lipped adj. 1. Having the lips pressed together. 2. Loath to speak; close-mouthed. See Synonyms at silent. billionaire. ``There are a lot of people out there who are just dying to know what Mr. Buffett is buying,'' said George Morgan George Morgan may refer to:
The market reaction to Berkshire's disclosures may be fueled by the presumption that the billionaire always invests for the long term. Buffett made his reputation buying stock in companies he thinks were undervalued Undervalued A stock or other security that is trading below its true value. Notes: The difficulty is knowing what the "true" value actually is. Analysts will usually recommend an undervalued stock with a strong buy rating. and holding on for years. Berkshire has long held stakes in Coca-Cola Co., Gillette Co., and Washington Post Co., among others. As far as stocks in the confidential filing are concerned, though, Berkshire said it does not consider its positions ``to be anything near `permanent.' '' Berkshire complained to the SEC about the impact of news stories on the release of its year-old confidential filings: ``The reports - rarely explaining in any great degree the staleness of the information - were almost certainly not helpful to potential investors.'' A look at Berkshire's confidential filings over time shows the challenges facing investors who want to follow Buffett's lead. On March 28, 1995, for example, investors got their first look at a filing that said Berkshire - in the last quarter of 1993 - bought 955,000 shares of First Interstate Bancorp First Interstate Bancorp was a bank based in the United States that was taken over in 1996 by Wells Fargo. It was headquartered in Los Angeles. The name has continued to be used in the banking world by used after the merger by First Interstate Bank who had been using the . Trading volume Trading volume The number of shares transacted every day. As there is a seller for every buyer, one can think of the trading volume as half of the number of shares transacted. That is, if A sells 100 shares to B, the volume is 100 shares. in First Interstate stock jumped 80 percent from the previous day, and shares rose $1.25 to $79.50. By the time the 1993 report was released to the public, though, Berkshire no longer held shares of First Interstate, which later was acquired by Wells Fargo Wells Fargo armored carriers of bullion. [Am. Hist.: Brewer Dictionary, 1147] See : Protectiveness Wells Fargo company that handled express service to western states; often robbed. [Am. Hist. & Co. In a confidential filing released in May 1996, Berkshire reported the purchase of 2.18 million Sears, Roebuck & Co. shares during the first quarter of 1995. By that time, Berkshire had already divested the stake. ``The information that comes out of confidential filings are not particularly useful because they are so old,'' said Fred Hult, a research analyst at the Carson Group, a New York-based firm that tracks SEC filings by institutions. ``By the time they read about the holding, most of the time it is significantly different.'' Berkshire's letter, signed by Berkshire Vice President Marc Hamburg Hamburg, city, Germany Hamburg (häm`b  rkh), officially Freie und Hansestadt Hamburg (Free and Hanseatic City of Hamburg), city (1994 pop. , makes clear that the company's long-term holdings are listed in its public filings. The confidential listing, on the other hand, is justified because Berkshire ``is prepared to trade, whether buying or selling, should price levels change.'' The risks to Buffett of more timely disclosure were illustrated on May 19, 1997, when shares of Wells Fargo fell 5 percent after Berkshire revealed in its public filing that it had sold 300,000 shares, or about 4 percent of its holdings in the bank. ``That was kind of an eye opener even to Buffett,'' said Phil McCaull, a private investor who holds shares in Berkshire Hathaway. ``If he is going to be in a position to acquire and get rid of small pieces of stock, he really needs to do it confidentially.'' Wells Fargo, though, also showed the dangers of the confidential process. On Aug. 21, 1997, Wells Fargo shares again dropped almost 5 percent on reports that Berkshire's latest public filing listed no shares in the San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden bank - suggesting Buffett had sold it all. In fact, Buffett had moved Wells Fargo from the public to the confidential filing. In its letter, Berkshire acknowledges a company could try to manipulate the market by moving shares between public and confidential filings. ``This is not what Berkshire wants to do nor what it believes to be appropriate corporate behavior,'' the letter said. For that reason, Berkshire said, it tries to use confidential filings whenever it might trade ``in the forseeable future.'' Still, while Berkshire avoids creating waves in the market, use of the confidential process makes the report less useful when released to investors. Those who tried to follow Buffett's moves on McDonald's Corp. stock, for example, would have been way behind Berkshire's trades. On August 15, 1997, the SEC released Berkshire's confidential report for the second quarter of 1996, showing Buffett had almost doubled his stake in the restaurant chain, to almost 22 million shares. By the time investors saw that report, though, Buffett had started to sell. After initially increasing his stake to more than 30 million shares by the end of 1996, Buffett sold more than 14 million shares during the first nine months of 1997. ``If you are not aware of how the filing rule works, you certainly can misread mis·read tr.v. mis·read , mis·read·ing, mis·reads 1. To read inaccurately. 2. To misinterpret or misunderstand: misread our friendly concern as prying. it as something that is current when its not,'' said Hult of the Carson Group. CAPTION(S): Photo PHOTO (Color) Warren Buffett Tight-lipped billionaire |
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