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We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Our articles, interactive tools, and hypothetical examples contain information to help you conduct research but are not intended to serve as investment advice, and we cannot guarantee that this information is applicable or accurate to your personal circumstances. Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional.
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
All reviews are prepared by our staff. Opinions expressed are solely those of the reviewer and have not been reviewed or approved by any advertiser. The information, including any rates, terms and fees associated with financial products, presented in the review is accurate as of the date of publication.
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Warren Buffett is arguably the greatest investor of all time and has compounded his money at such a high rate that he’s now the seventh richest person in the world with a net worth of nearly $100 billion, according to Bloomberg.
Buffett is unique among the world’s wealthy in that he amassed his fortune by investing and reinvesting his capital into a number of different businesses before ultimately taking control of Berkshire Hathaway, which serves as his primary investment vehicle today.
Thanks to his enormous success, integrity and willingness to speak publicly about his investment philosophy and other matters, Buffett’s fame has grown significantly over the years. Berkshire’s annual shareholder meeting was once held in a small cafeteria with just a dozen or so people in attendance, but today it attracts tens of thousands and is broadcast online.
Here’s what else you should know about Warren Buffett, his investment approach and a breakdown of his largest holdings right now.
Note: Shares and values are as of June 30, 2022. BYD stake is based on regulatory filing with the Hong Kong Stock Exchange on Sept. 2, 2022.
Buffett’s net worth has grown substantially over the course of his life, especially in the past 20 years as the effects of compounding took hold.
At a young age, Buffett became fascinated with money and getting rich, which led to his interest in investing. While still in his 20s, Buffett set up an investment partnership, which today would be considered a hedge fund, with money from friends and family. He worked out of a room in his home, pouring over company filings and trade periodicals in his search for mispriced investments he could buy at a bargain.
One of these investments was Sanborn Map, a company that created extremely detailed maps of cities in the U.S. and sold them mostly to the insurance industry. Sanborn had built up an investment portfolio that by itself was worth $65 per share, but the stock only traded for $45 in 1958. Buffett pounced, putting more than one-third of the partnership’s capital into Sanborn and earning a major profit for himself and his limited partners.
Over the 13 years Buffett managed the partnership, his investors earned annual returns of 23.8 percent after fees, according to Fortune magazine. This means that an investment of $10,000 in 1957 would have been worth more than $160,000 at the end of 1969.
When Buffett closed the partnership at the end of 1969, his net worth stood at $26.5 million, according to Buffett biographer Alice Schroeder. He wrote to the partners to explain what the partnership owned and gave them the option of receiving their share in cash or securities. He told them that he planned to keep his shares in the Massachusetts-based textile manufacturer Berkshire Hathaway, which Buffett had purchased for the partnership in the early 1960s and took control of in May 1965. Berkshire would become Buffett’s investment vehicle for the next 50-plus years.
When Buffett took control of Berkshire Hathaway, textile manufacturing was a business in decline, but it did experience occasional cyclical highs that generated profits. Rather than reinvesting those profits into the textile business or paying them out as dividends to shareholders, Buffett redirected the cash into new areas.
In 1967, he purchased – for Berkshire Hathaway – National Indemnity, an Omaha-based insurance company that specialized in unusual risks. Buffett was drawn to the insurance business because it generated float, money that could be invested until claims were paid out. If an insurance company could generate a profit or even just break even in its underwriting business, the float was free. Over the years, Berkshire’s insurance float has grown from $19 million in 1967 to $147 billion in 2021, according to Buffett’s 2022 letter to shareholders.
Buffett had total control over Berkshire’s capital allocation and he consistently tried to direct funds to the most profitable areas. He made purchases of businesses and securities that generated more cash for him to reinvest wherever he saw fit.
In 1972, Buffett agreed to acquire See’s Candy, a California candy company that would eventually be folded into Berkshire. Buffett paid $25 million for See’s and, through 2014, had generated $1.9 billion in pre-tax profits for Berkshire shareholders with only $40 million in additional investments. Buffett has often spoken of the importance of the See’s acquisition to Berkshire’s success because it showed them the power of great brand names and generated lots of cash that allowed them to buy other businesses.
Other notable Berkshire investments include:
In his 2019 letter to shareholders, Buffett laid out in simple terms the criteria he looks for when purchasing an entire business or a non-controlling stake via the stock market:
“We constantly seek to buy new businesses that meet three criteria. First, they must earn good returns on the net tangible capital required in their operation. Second, they must be run by able and honest managers. Finally, they must be available at a sensible price.”
Buffett’s first criteria involves the quality of the underlying business he’s looking to purchase or invest in. He wants businesses with strong economics, which means they earn good returns on capital and generate cash flow for their owners.
He also wants to find businesses that he understands. While Buffett is capable of understanding most businesses, he’s not able to accurately assess where each business will be five or 10 years into the future, which is important in investing because so much of an asset’s value comes from the future value of its cash flows. So, in addition to the quality of a business, he’ll also look at the durability of a business and its competitive advantage. If he can’t get his head around that, he’ll move on to the next potential investment.
Evaluating who is running a business is another key part of Buffett’s investment strategy. He’s often said that he can’t provide managerial expertise if it isn’t already in place, and he knows that a CEO has a major impact on how an organization is managed. He has used his annual shareholder letters to praise managers that he thinks are doing exceptional jobs, sometimes when he doesn’t even own a stake in their business. In the past, he has identified Amazon’s Jeff Bezos and JPMorgan Chase CEO Jamie Dimon as great CEOs.
“It’s difficult to overpay the truly extraordinary CEO of a giant enterprise. But this species is rare,” Buffett wrote in his 2005 letter.
The final criteria Buffett uses in evaluating a potential investment may be the most important: price. No business or manager is so good that they can provide a great investment no matter the price it was purchased at.
Buffett has long subscribed to the theory of “value investing,” though he and his partner Charlie Munger would say the term is redundant because all intelligent investing is value investing: getting more than you’re paying for.
Initially, Buffett purchased investments that had many issues but their prices were so low that they made up for the challenges the businesses faced. This method was known as the “cigar butt” approach, because it resembled finding an old cigar butt on the ground that had one or two puffs left in it for free.
As Berkshire has grown, it’s become more difficult for Buffett to find mispriced bargains, so he has gravitated toward paying fair prices for excellent businesses. With this approach, more of your investment return comes from the underlying business and less from the low price you initially paid.
Buffett has used his shareholder letters, annual meetings and media appearances to share his investment philosophy and common-sense approach to business. Here are some of his top pieces of advice:
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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