Not even Warren Buffett was immune to the stock market’s rampant first-half gyrations, as Berkshire Hathaway Inc. notched its worst first half in 18 years, with the shares skidding more than 16%. But only a fool would count out the great Oracle of Omaha, who has spent the past several months restructuring his company’s portfolio and is now ready to come out swinging for the year’s second half.

As Money Morning’s Horacio Marquez noted in his most recent “Buy, Sell, or Hold” feature, Berkshire Hathaway has had a tough start for the year.

The company’s net earnings for the first half were $3.8 billion – a 33% decline from the $5.7 billion reported for the same period last year. But even though the second quarter was weak – especially by Buffett’s standards – it showed marked improvement from the first three months of the year.

Berkshire reported about $1.6 billion in unrealized losses from derivatives in the first quarter. But after warning that derivatives contracts will often “swing wildly,” the company posted $689 million in derivatives gains in the second quarter.

Berkshire’s revenue actually rose 10% to $30.09 billion for the quarter.

But that’s not enough for Buffett, who has set about restructuring his company’s holdings. In the past few months, Berkshire has reduced its investments in Anheuser Busch Cos. (NYSE:BUD) and Trane Inc., and added positions in NRG Energy Inc. (NYSE:NRG), Ingersoll-Rand Co. Ltd (NYSE:IR), and Sanofi-Aventis (ADR:SNY).

According to filings with the U.S. Securities Exchange Commission (SEC), Berkshire in June reduced its stake in Anheuser Busch to 13.85 million shares, less than half the 35.56 million shares it held as of March 31. It’s likely the company received a tidy sum for its shares, as earlier that month InBev SA (PINK: INBVF) offered $65 a share for the American icon. Buffett admits to bailing on the Bud brand before InBev raised its offer to $70 a share, but AB was trading at close to $62 a share on June 30, much higher than the $47 a share the company was valued at in late March.

Also in March, Berkshire dumped its 10.9 million shares of Trane Inc. That stake was valued at more than $500 million as of March 31.

After unloading in the spring, Buffett treated Berkshire Hathaway to a $4-billion shopping spree over the next several months. By the end of the second quarter, Berkshire’s stake in French drug maker Sanofi Aventis had shot up 317,200 shares to reach 3.9 million. Berkshire also added 5 million shares of Ingersoll-Rand, and announced new holdings in NRG Energy, the second-biggest power producer in Texas. Berkshire had 3.24 million NRG shares as of June 30.

Even more interesting, in a move that highlighted Buffett’s bullishness on railroad stocks, Berkshire doubled its stake in Union Pacific Corp. (NYSE:UNP), taking its holdings from 4.45 million shares at the end of March to 8.91 million shares as of June 30.

Last year, Buffett and Berkshire road the rails hard. Buffett made his first move on Burlington Northern Santa Fe Corp. (NYSE:BNI) last April, acquiring nearly 40 million shares – or close to 11% – of the railroad. He then moved on to snap up 10.5 million shares of Union Pacific Corp., and 6.4 million shares of Norfolk Southern Corp. (NYSE:NSC).

Later in August, Berkshire went shopping again, loading on an additional 3.3 million shares of Burlington and another 6,000 in September. But Buffett didn’t stop there: He added yet another 10,300 shares of Burlington over the two-week period ending Jan. 22, bringing Berkshire’s total stake in the company to 18.2%.

Berkshire’s second-quarter acquisitions, which were disclosed in an SEC filing last week, are only a fraction of the $3.98 billion Berkshire spent on stocks in the April-June period.

Even if Buffett bought the shares at their highest second-quarter prices, which he almost certainly did not, the total cost would only have been about $260 million. That means more than $3.5 billion went into smaller amounts of unnamed stocks the company was not required to disclose.

Where that money went is anybody’s guess, but Buffett indicated in a recent interview with CNBC that a portion of it went into one of two stocks: Wells Fargo & Co. (NYSE:WFC) or American Express Co. (NYSE:AXP).

Wells Fargo stock has plummeted 22% in the past year, while American Express is down more than 37% in that time. However there may be some clues as to which stock Buffett really believes will rebound in some earlier comments he made.

“We’ll say at American Express… they are experiencing credit deterioration and they’re experiencing it sort of in all segments,” Buffett said earlier on CNBC’s Squawk Box. “So they’re seeing the rich customers slow down in payments, slow down in purchases.

“And American Express can describe that rather than I,” he added, “but I pay a lot of attention to that sort of thing. And incidentally, it will get cured at some time in the future, but right now the situation is getting worse and I would say that I don’t see any early end to that.”

That assessment doesn’t seem particularly favorable, particularly compared with comments Buffett made with regards to Wells Fargo just a few months ago.

“Wells Fargo stock was down last year,” Buffett said, “I don’t think the intrinsic business value shrunk. In fact, I said I thought it probably increased a touch.”

Berkshire already owns considerable stakes in both companies.

Source: Buffett Reignites Berkshire Hathaway with a $4 Billion Spending Spree

Will Emerging Markets Topple the King of Beers?

By Irwin Greenstein

Budweiser (NYSE:BUD) and Busch are as American as camo seat covers in a F-150.

Yet a hostile offer by InBev SA (PINK:INBVF) on Anheuser-Busch is about to show us that the star-spangled King of Beers is up for play because it ignored emerging markets.

When you look at the dynamics behind the InBev (EBR:INB) bid, it’s important to see America as a diminished player. The headlines tell you that the economy is dismal. What Big Media rarely tells you is that smaller, developing economies are kicking our butt. American companies that count strictly on the U.S. for revenues are destined for the rustbelt of the future — or a foreign buyout.

Analysts have been badgering A-B for years that it relies too heavily on the U.S. — one of the slowest growing beer markets in the world. A-B has buried its head in the sand as InBev and other competitors have pushed into high-growth emerging markets.

While A-B claims nearly 50% the U.S. market, the company registers as a mere blip in Argentina, Brazil, Russia and Eastern Europe, which are In-Bev strongholds. The worldwide market-share numbers tell the story loud and clear…

InBev 16%
SAB Miller (LON:SAB) 12%
Anheuser Busch 9%

You would think that A-B is willing to look beyond the lower 48 simply based on the performance of beers it imports from InBev. A-B grew its volume last year by 2.9% from the previous year thanks to a successful U.S. distribution partnership that gave it InBev’s Stella Artois, Beck’s and Bass premium beers.

Of course, most American’s believe they’re carrying the day for A-B by buying 12-packs of Bud, Busch and Miller Lite. In its marketing campaigns, A-B gives credit to the Nascar and slacker crowd for its crowning achievement as the King of Beers.

A-B’s Yankee Doodle marketing trumpet has deluded many Americans into believing that the company is entitled to its success because it’s an American icon. It’s the same patriotic hogwash that we heard about the Big Three auto makers — a case study that clearly proves denial is not an a business strategy.

When the In-Bev bid became public, the governor of Missouri declared he would explore all options to keep the company in St.Louis: “I am strongly opposed to the sale of Anheuser-Busch and today’s offer to purchase the company is deeply troubling to me.”

Maybe A-B’s hometown of St. Louis is afraid of becoming the next Detroit.

Or maybe America is afraid of becoming the next France…

A “save Budweiser” petition has already attracted more than 32,000 signatures on the Internet. The site even has an anthem titled “Kiss My Glass, InBev” The Save Budweiser rallying cry is “Let’s band together as one voice and try to save more than just our beer. We don’t want another American icon turned over to a foreign company; we want the motto to remain…The Great American Lager.”

You have to wonder how many of these cowboys and cowgirls are A-B shareholders. The company’s stock price has grown less than 3% in the last year. Factor in inflation, and your A-B stock won’t even pay to fill up that F-150.

A-B’s American sense of entitlement is backfiring at the worst possible time for the company. A-B owns 50.2% of Modello, the Mexican brewer behind Corona and other major brands. The partnership took a nasty turn last month when Grupo Modelo Chief Executive Carlos Fernandez resigned from A-B’s board of directors after a 15-year clash between the Busch and Fernandez dynasties.

Fernandez could’ve been a key ally in fending off InBev. Now there’s speculation that Modelo could sell its half to InBev — potentially crippling A-B’s presence in a lucrative emerging market.

InBev is already big in Latin America. It was formed from the merger of Belgium’s Interbrew and Brazil’s AmBev in 2004. Add Modelo into the mix and A-B wouldn’t stand a chance south of the border.

Compared with A-B, InBev is a true multinational. From its headquarters in Leuven, Belgium, it sells more beer than any other company. Its operations encompass more than 130 countries. About 60% of its profits come from Latin America, giving it crucial experience in emerging markets.

While InBev savors 12% of the Chinese beer market, A-B may have wasted precious time setting up shop in what some experts say is the world’s biggest beer market.

A-B had acquired Harbin, China’s fourth-largest brewer at the time in 2004. Now Harbin has dropped to fifth place.

It may have bungled another China opportunity as well. A-B formed a strategic alliance in China with Tsingtao in 2002. Under the terms of the deal, A-B took a 27% interest in Tsingtao. At the time, Tsingtao held a 13% share. Five years later, Tsingtao reaches 14% of the market, according to Reuters. One percent in five years?

In March 2007, A-B finally got around to announcing it was expanding Chinese distribution. Yeah, sure, OK…

In the end, both A-B and InBev aren’t doing too well these days. Profit margins are squeezed by rising prices of aluminum and grains. But this story is about bigger things than a stock recommendation.

We are witnessing the decline of America’s economic might. InBev’s attempted U.S. invasion is just a harbinger of things to come.

American investors can’t ignore that companies focusing on emerging markets will land on our shores with boatloads of money ready to buy our cherished industrial-age icons of commerce. So instead giving you a stock pick, my investment advice to you is: Get used to it.

Emerging markets are leaving the shadow of the slouching American giant. Once you accept that, you’ll see the profit potential of emerging markets in a whole new light.

Source: Will Emerging Markets Topple the King of Beers?