Here is a profile of Warren Buffett’s son, the man to take over as chairman of Berkshire Hathaway.

A lot of interesting thing

1. Non of his son’s graduated from university!
2. Warren made Howard pay rent and tied it to his weight
3. Howard does not believe that Bill Gates high tech agriculture methods for the poor is going to work.

So today we got this article on Berkshire Hathaway Inc, Warren Buffett’s main company investing $24 billion in third quarter.

Warren Buffett buying shares when stock market is down is not new information. But it’s the magnitude of it that is surprising.

The S&P 500 was not down a lot. certainly not down the 50% we seen in 2008 bear market.

So why did he invest the most in 15 years for a particular period?

The last time Buffett invested more than $20 billion in a period was 2008 when he did it in both the second and fourth quarters of the year. Buffett deployed more than $70 billion that year, including $10.1 billion on stocks, as the S&P 500 posted its biggest decline since 1937. This year, Berkshire bought $11.4 billion of stocks in the nine months ended in Sept. 30, while selling $885 million of equities.

Cash holdings dropped to $34.8 billion at the end of September from $47.9 billion on June 30. The hoard is replenished from maturing securities and profit from investments and the company’s more than 70 operating subsidiaries.

Now Buffett have shown in the past that he is comfortable in keeping a lot of cash when there is no good opportunity. What does he sees in a 14% drop in broad index valuation?

Unless against the historical low interest rate, stocks look very attractively value and the opportunity cost of staying in cash and losing purchasing power is too high.

In any case, you seldom go wrong with taking his queue but from past experience he never always bought at the lowest point. Still would you fancy a purchase of Berkshire B Shares at $76?

[Buffett Broadens Portfolio by Spending $23.9B >>]

I run a free Singapore Dividend Stock Tracker . It  contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly  here.

Whats seldom mentioned is that many of Buffett’s personal holdings do  give out dividends that have been raise for 20 – 30 years and their yield on cost can be rather astounding

From Bloomberg:

Payouts to Buffett peaked at an estimated $15.5 million a quarter, judging by his publicly disclosed stakes as of Sept. 30 and Dec. 31, 2008. Last year, they tumbled as much as 44 percent as U.S. Bancorp and Wells Fargo & Co., two of his holdings, cut dividends. The fourth-quarter figure was $10.8 million.

Buffett’s portfolio at the end of 2009 included shares of three companies — Exxon Mobil Corp., General Electric Co. and United Parcel Service Inc. — in which Berkshire and its units weren’t invested. Ingersoll-Rand PLC, Johnson & Johnson, Kraft Foods Inc., Procter & Gamble Co. and Wal-Mart Stores Inc. were also among his personal stakes. The filings don’t show his non- U.S. investments or holdings of securities besides stocks.

Dividend income helps explain why Buffett only receives $100,000 a year in salary at Berkshire, according to Robert P. Miles, the author of “Warren Buffett Wealth.” Miles wrote about him last week in an article on Morningstar Inc.’s Web site.

Dividends that rises do matter in the long run.

I run a free Singapore Dividend Stock Tracker available for everyone’s perusal. Do follow my Dividend Stock Tracker which is updated nightly  here.

A subsidiary of Warren Buffett’s Berkshire Hathaway has struck a deal to purchase Atlanta-based Empire Distributing, which has operations in Georgia and North Carolina. Empire is owned by brothers David and Michael Kahn. That subsidiary is grocery distributor McLane, worth $34 billion. Bill Anderson’s First Beverage Group, including ex-GE Capital executive Sean McLaren, advised Empire on the deal.

McLane provides grocery and foodservice supplies for thousands of c-stores, mass merchants, drug stores, military locations and chain restaurants, with 38 distribution centers nationwide. Berkshire Hathaway purchased McLane from Wal-Mart in 2003 for $1.45 billion.

Ironically, the beer industry believed not too long ago that McLane would make an entrance and bypass franchise beer distributors. Turns out they had their eye on wine and spirits. So what now? We can only speculate the impact this will have on the industry but it seems unlikely Buffett will stop with Empire Distributing. Recall that Berkshire Hathaway also has $11 billion stake in Coke and used to have a large stake in Anheuser-Busch.

We told you yesterday that Buffett likely paid top dollar since Georgia is a franchise state. A law in Georgia caps acquisition based market share at 25% so it would seem that he can’t buy too much more market share. However, there are indicators that the 25% law won’t always be in place.

This deal could have sweeping implications for the wholesale wine and spirits business. Clearly McLane was smart to obtain their beachhead in a franchise state, where the suppliers are not able to fly. From that established and well-protected base, McLane can move into other regions. This isn’t the last we’ve heard from them. What is unknown at press time is what the wine and spirits suppliers think of such a large public company buying into their distribution system.

What is also unclear is how much McLane, a logistics expert, will integrate Empire’s operation into their own. McLane has 38 distribution centers, including one in Georgia and NC. It already services many of the same off-premise accounts and a few on-premise accounts. Will we see wine and spirits on McLane trucks? Time will tell.

As you can see, there are many unanswered questions which we will attempt to answer for you in the coming weeks. Stay tuned…

WINE “ONE OF THE LARGEST” SPENDING CATEGORIES FOR SENIORS

Nielsen analyzed the shopping habits of four key generations – greatest generation (aged 64+), boomers (45-63), gen x (33-44) and millennials (15-32) – and gave a rundown on what marketers should expect when targeting these groups. Interestingly, wine is one of the largest spending categories for seniors at $124 per year. Boomers spend $125 per year on wine, while gen x spends $78 and millennials spend $61 annually.

In looking at other trends, the greatest generation is the most frequent shoppers and more deal prone than other age segments. Both the greatest generation and boomers shop club, dollar and convenience/gas channels more frequently. Millennials don’t like to waste much time in stores and shop less than other groups but buy more per trip. Along with gen x, millennials favor mass supercenters and mass merchandisers over more traditional formats like grocery or drug stores which remain a draw for the greatest generation and boomers, says Nielsen.

[Wine And Spirits Daily >>]

A glance of this table will show that most of them have a wide economic moat, that will enable them to earn above average profits compare to competitors.

Another unique features that most of them have is that they have very valuable brands, which enables them to earn above average profits.

Coca-Cola (KO)
There hasn’t been a meaningful change in the number of shares Berkshire holds in Coke in well over a decade and yet it remains the top holding by market value in the insurer’s stock portfolio. Morningstar analyst Phil Gorham sees the company facing a dichotomy of prospects between emerging and developed markets, with the former offering the potential for strong growth as per capita income (and consumption) increases and the latter creating challenges as consumer tastes shift away from carbonated soft drinks. Having struggled to maintain positive relationships with key bottlers like  Coca-Cola Enterprises (CCE), it was interesting to see Coke agree to buy CCE’s North American bottling operations this past week (a transaction Phil believes may have been prompted by  PepsiCo’s (PEP) move to consolidate its own North American bottlers last year). Given all the flack Buffett gave Kraft during its pursuit of  Cadbury (CBY) this past year, we were curious to see what he might say about this deal in his annual letter to shareholders, but it looks like we may have to wait for Buffett to weigh in on this transaction.

Wells Fargo (WFC)
Berkshire owns about the same dollar amount of Wells Fargo it did at the end of 2008, with the largely unchanged value a product of a modestly weaker stock price and an increased number of shares. Our analyst Jaime Peters thinks Wells Fargo is well-positioned after it took advantage of the credit crisis to expand its national footprint through the acquisition of Wachovia. With the merger on track and Wells Fargo starting to achieve some revenue synergies on top of the cost savings it was expecting from the deal, the acquisition is looking better every day. Jaime expects Wells Fargo to see a strong rebound in earnings during 2010 and believes that a dividend increase will likely occur before the year is out.

Burlington Northern (BNI)
This was perhaps the most exciting story in the Berkshire portfolio this past year, in part because the stock is now off the market. Berkshire increased its stake in Burlington Northern early in 2009, and then made a bid for the entire business in November of last year (with the deal closing in early February 2010). While the move prompted the selling of both Union Pacific and Norfolk Southern from the portfolio, Berkshire will not be lacking for exposure to the railroad industry. Morningstar analyst Keith Schoonmaker believes Burlington Northern is well-positioned to thrive as a wholly-owned subsidiary in the Berkshire community.

American Express (AXP)
American Express was the top performing stock among Berkshire’s top-10 holdings last year, with its share price doubling during 2009 (albeit only after taking a drubbing during the collapse of the financial markets in 2007-2008). Our analyst Michael Kon believes American Express’s credit quality is on the mend, as losses on bad loans have been declining steadily since last April. While this should allow the firm to once again focus on growth, he expects it will be difficult for American Express to see a return to pre-recession spending volumes until cardholders start using their cards more frequently than they are currently. That said, the trend of replacing cash and checks with electronic payments should provide the firm with a tailwind in the years ahead.

Proctor & Gamble (PG)
While Proctor & Gamble’s shares rallied with the markets last year, Berkshire was selling the stock in the fourth quarter of 2009. Given that Berkshire was gathering liquidity for the Burlington Northern transaction, and the insurer had been trimming positions in both Proctor & Gamble and  Johnson & Johnson (JNJ) prior to the bear market to help fund other investment opportunities, we’re not going to read too much into this move. Morningstar analyst Lauren DeSanto believes that, despite a very challenging 2009, P&G remains focused on driving profitable market share growth in its categories. She expects new CEO Robert McDonald, who assumed the helm midway through last year, to continue to stress execution with retailers and customers, guiding P&G to operate like a smaller, more nimble company. Lauren thinks these initiatives, which augment increased brand investments and an improved new product pipeline, leave P&G well positioned coming into 2010.

Kraft Foods (KFT)
While Kraft is a relatively new addition to the portfolio, with Berkshire starting to build a stake in the packaged foods giant in 2007, it has been far from boring. Our analyst Erin Swanson thinks Kraft’s recent acquisition of Cadbury makes sense from a strategic perspective, but the integration of the global confectionery firm is not without risk. Beyond melding disparate corporate cultures, Cadbury’s public dismissal of Kraft’s business model and management team over the past several months increases the challenges of integration. The good news for Berkshire, though, is that Kraft consummated the deal without overly diluting its own shareholders (one of several points of contention Warren Buffett had with some of the moves Kraft was making in an attempt to get the deal done). Better yet, Erin believes that fourth-quarter and full-year results, which were aided by ongoing investments in product innovation and marketing support, have positioned Kraft to continue producing solid cash flows for shareholders.

Wal-Mart (WMT)
Berkshire was buying more of this stock than it was any of its other top ten holdings during 2009, nearly doubling the number of shares in the Wal-Mart portfolio. Morningstar analyst Joel Bloomer believes the firm, with $400 billion-plus in annual revenue, not only dominates the U.S. retail landscape but is also growing quickly internationally. Wal-Mart has been redirecting capital spending from the U.S. to faster growing parts of the world, like Latin America and China. The firm’s fiscal 2010 results benefitted from this commitment to international growth, which more than offset consumer trade down and mild deflation in the U.S. With the international segment contributing 25% of Wal-Mart’s total revenue, Joel anticipates more of the same over the next few years.

Wesco Financial (WSC)
Wesco is the majority-owned affiliate of Berkshire Hathaway headed by Buffet’s long-time partner Charlie Munger. The firm has developed significant reinsurance operations, but also folds in Berkshire-like operating subsidiaries such as furniture rental and steel servicing businesses. We think Wesco has garnered a narrow moat largely through the financial strength of its insurance operations, which is derived from a high level of capital, underwriting ability, and investment success. Given how well its investment portfolio has performed in recent years, the firm’s financial strength has only improved on a relative basis, further cementing its market position. Wesco’s respect in the marketplace and its position in the Berkshire umbrella help attract quality reinsurance business at good prices.

Conoco Phillips (COP)
Oops. We’re all human and this looks like it could be Berkshire’s biggest error in recent memory. Buffett acknowledged as much in his letter to shareholders last year, when he apologized for the poor timing involved in building a stake in this firm (which occurred just as oil and gas prices started to collapse in the second half of 2008). Berkshire has spent the last year and a half unwinding this position, and even started selling a big chunk of its stake in ExxonMobil during the fourth quarter (which the insurer only started building in the third quarter of last year). Bad or unlucky timing wasn’t unique to Berkshire regarding ConocoPhillips in recent years, as our analyst Allen Good notes the firm has made aggressive capital investments itself (including acquisitions) at inflated prices in recent years. He believes that while ConocoPhillips is leveraged to natural gas production and refining in the U.S.–and, as such, dependent on a recovery in natural gas prices and refining margins–management is taking steps to improve returns even if a recovery does not transpire. The company is also in the process of divesting $10 billion of underperforming and non-strategic assets, with the proceeds going towards debt reduction.

Johnson & Johnson (JNJ)
Rounding out the top-10 holdings is the only stock on the list currently trading at a 5-Star price. Berkshire’s stake in Johnson & Johnson has ebbed and flowed over the years, with the company likely trimming its stake in the fourth quarter of last year to help raise funds for its purchase of Burlington Northern. Morningstar analyst Damien Conover likes the firm’s reliable, and significant, long-term growth prospects. Having already gone though a majority of its own patent expirations, Johnson & Johnson is not being as severely impacted by the patent expiration shock currently affecting the rest of the pharmaceutical industry. With the company in the midst of launching four new potentially blockbuster drugs, and the firm maintaining brand and quality leadership in medical devices and consumer products, Damien feels that Johnson & Johnson is well-positioned for long-term growth.

Stay liquid. “We will never become dependent on the kindness of strangers,” he wrote. “We will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity. Moreover, that liquidity will be constantly refreshed by a gusher of earnings from our many and diverse businesses.”

Buy when everyone else is selling. “We’ve put a lot of money to work during the chaos of the last two years. It’s been an ideal period for investors: A climate of fear is their best friend … Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”

Don’t buy when everyone else is buying. “Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance,” Mr. Buffett wrote. The obvious corollary is to be patient. You can only buy when everyone else is selling if you have held your fire when everyone was buying.

Value, value, value. “In the end, what counts in investing is what you pay for a business-through the purchase of a small piece of it in the stock market-and what that business earns in the succeeding decade or two.”

Don’t get suckered by big growth stories. Mr. Buffett reminded investors that he and Berkshire Vice Chairman Charlie Munger “avoid businesses whose futures we can’t evaluate, no matter how exciting their products may be.”

Most investors who bet on the auto industry in 1910, planes in 1930 or TV makers in 1950 ended up losing their shirts, even though the products really did change the world. “Dramatic growth” doesn’t always lead to high profit margins and returns on capital. China, anyone?

Understand what you own. “Investors who buy and sell based upon media or analyst commentary are not for us,” Mr. Buffett wrote.

“We want partners who join us at Berkshire because they wish to make a long-term investment in a business they themselves understand and because it’s one that follows policies with which they concur.”

Defense beats offense. “Though we have lagged the S&P in some years that were positive for the market, we have consistently done better than the S&P in the eleven years during which it delivered negative results. In other words, our defense has been better than our offense, and that’s likely to continue.” All timely advice from Mr. Buffett for turbulent times.

Mr. Buffett continued reducing his stake in ConocoPhillips Co., an investment he has called a mistake. This time he shaved almost 20 million shares, to 37.7 million shares at the end of December from the end of the third quarter.

Mr. Buffett also reversed direction on his holdings of Exxon Mobil Corp., cutting his stake to 421,800 shares at December 31 from the 1.23 million he reported at the end of September. Mr. Buffett reported that he had first owned shares of Exxon Mobil as of June 30.