The wit and wisdom of Warren Buffett

school of fools

Billionaire Warren Buffett publishes letters to shareholders every year that are always full of ideas about business and investing — and some about life. You will find decades of BerkshireHathaway.com. Here are some nuggets:

1992: “The only value of stock market forecasters is to make fortune tellers look good. Even now, [my partner] Charly [Munger] and I continue to believe that short-term market forecasts are poison and should be kept under lock and key away from children and also from adults who behave like children in the market. However, it is clear that equities cannot outperform their underlying business forever, as they have done so spectacularly for some time.

1994: “You don’t have to do extraordinary things to get extraordinary results.”

1997 : “If a CEO gets excited about a particularly dumb acquisition, his internal staff and external advisors will make all the necessary projections to justify his position. Only in fairy tales are emperors told that they are naked.

2002: “Charlie and I not only don’t know today what our companies will earn next year, we don’t even know what they will earn next quarter. Managers who always promise to “make numbers” will at some point be tempted to invent numbers. »

2010: “Look around and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932, and 1941, America’s best days lie ahead.

2017: “Our aversion to leverage has held back our returns over the years. But Charlie and I sleep well. We both think it’s foolish to risk what you have and need to get what you don’t.

2017: “You just don’t know how far stocks can drop in a short period of time. Even if your borrowings are minimal…your mind may well be shaken by scary headlines and breathless commentary. And an unsettled mind won’t take no good decisions.

The Motley Fool’s Take

Enterprise Products Partners has been an unstoppable dividend stock over the years, with its payout recently returning 7.8%. One of the largest midstream pipeline companies in North America, it recently declared another dividend increase, which it has done for 23 consecutive years

Enterprise’s stable midstream assets include approximately 50,000 miles of pipeline, 14 billion cubic feet of natural gas storage capacity and 260 million barrels of storage capacity for natural gas liquids, crude oil, refined products and petrochemicals. These pipelines generate stable and contractually guaranteed cash flows. The company’s financial profile is top-notch, with an investment-grade credit rating supported by low debt levels and a conservative dividend payout ratio.

The company recently added even more fuel to its future growth by agreeing to acquire Navitas Midstream Partners from a private equity fund for $3.25 billion in cash. The deal gives Enterprise entry into the energy-rich Midland Basin.

It’s likely that North America will eventually move away from fossil fuels, which will hurt Enterprise’s business, but that won’t happen anytime soon. Note that the company is a master limited partnership and these may require special treatment at tax time; learn about MLPs before you invest. (The Motley Fool recommended Enterprise Products Partners.)

ask the fool

From GC to Dell Rapids, SD: What are Roth IRAs?

The madman responds: Individual retirement accounts come in two varieties, traditional and Roth. With a traditional IRA, your contributions reduce your taxable income, thereby lowering your tax bill for the year. For example, if you earn $66,000 and contribute $6,000, your taxable income drops to $60,000. When you withdraw the money in retirement, it is taxed as ordinary income for you.

With a Roth IRA, you get no upfront tax relief for your contributions, but if you follow the rules, your eventual withdrawals can be completely tax-free. This can be a big problem: if you contribute heavily to your account for many years, and that money is invested efficiently, you could end up with hundreds of thousands of dollars in your account, available tax-free at retirement.

For 2021 and 2022, the contribution limits for traditional and Roth IRAs are $6,000, plus an additional $1,000 for ages 50 and older. Note that the contribution deadline for IRAs is not December 31, but the tax filing deadline for the year. This means that contributions for 2021 can be paid until mid-April 2022.

Also note that 401(k) accounts are also available in traditional and Roth varieties. Learn more about retirement-related topics in our “Manage your retirement” service at Fool.com/services.

From PR to Pearl, Mississippi: Where can I view historical stock prices for a company?

The madman responds: Try calling the company’s investor relations department and asking. Or go to a website that offers a lot of stock market data: on Finance.Yahoo.com, for example, you can enter the symbol of the company and, once on its quotation page, click on the link “Historical data”.

My dumbest investment

From SB, online: In 2019, I saw a recommendation from Motley Fool to invest in Zoom Video Communications. I bought $1,000 worth of stock for about $75 per share. A few months later, they were up about $2 a share. So I sold, investing the proceeds in Southwest Airlines, which I thought would be a good investment. Being new to investing, I hadn’t yet learned patience. I can say that the lesson has been learned.

The madman responds: Surely you missed a good ride with Zoom: it topped $100 per share 10 months after its stock market debut, $150 a few months later, and hasn’t come back — although it has been volatile. It topped $550 per share in October 2020 at the height of the pandemic, with many businesses, families, and friends meeting via Zoom video sessions, and has recently been close to $160 per share.

It is perfectly reasonable to sell one stock and buy another if you have much more confidence in the future of the new position or if you believe the old position is significantly overvalued.

Airline stocks fell to low levels after the pandemic curtailed travel, with some investors seeing them as bargains and others suspecting the pandemic and its effects could last a long time. Meanwhile, many see Zoom as an attractive price, while others think it could drop further.

Who am I?

My roots go back to 1958, when Bank of America launched the first general purpose credit card program in the United States – the BankAmericard. A debit card was introduced in 1975. I took my current name in 1976 and merged my regional businesses in 2007, becoming a global business. I went public in 2008, in the largest US initial public offering of the time. Today, based in California, I recently have a market value close to $460 billion; I am a global leader in digital payments, with 3.6 billion cards, over 70 million points of sale and over 200 billion transactions per year. Who am I?

Don’t remember last week’s question? Find it here.

Answer to last week’s quiz: Nautilus