Warren Buffett is an American businessman. investor and philanthropist. People consider him as one of the most successful investors in the World. He was born on August 30, 1930, in Omaha Nebraska which means that he is currently 90 years old. Buffett has a net worth of 100.6 billion dollars, which makes him the seventh richest man in the World. He is most commonly known for being the chairman and CEO of Berkshire Hathaway.
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The early life of Warren Buffett
Warren developed an interest in business and investing from a young age. He was born the second child of 3 children for his parents and the only son of Leila nee Stahl and former congressman Howard Buffett. Warren Buffett began his education at the Rose Hill Elementary School. His farther was elected to serve his first of what would become 4 terms in the United States congress. His father took him, his mother and his sisters and moved to Washington D.C. Warren finished elementary school and attending the Alice Deal Junior High school he then matriculated to and graduated from the Woodrow Wilson High school in 1947.
His Woodrow senior yearbook read “likes Math: a future stockbroker.” After he finished high school he found success with his side entrepreneurial and investment ventures . He wanted to skipped college and go directly into business but his father forbid him from doing so. Warren was very passionate about business and investing from a young age. A book he read from the Omaha public Library called “One Thousand Ways To Make $1000” sparked his interest in the business and investment field.
Most of the childhood years of Warren Buffett were filled with entrepreneurial ventures. Warren Buffett started his ventures by going door to door and selling items like chewing gum, weekly Magazines and Coca Cola bottles. He use to work in his Grandfather’s grocery store. While he was in high school, he made money by selling items like stamps and golf balls and delivering newspapers. Buffett took a deduction of $35 for use of his bicycle and watch during his paper rout, from his first tax return in 1944 . Buffett and a school friend spent $25 in 1945 and bought a pinball machine which they placed in a local barbershop and after a few months they were able to purchase more which they placed in barbershops across Omaha. Buffett and his friend would eventually sell the business to a U.S War veteran for 1,200.
The strong interests that Warren had in the Stock Market could be accredited to the time he had spent as a schoolboy in a regional stock brokerage lounge that was close to his father’s very own stock brokerage. When he went on a trip to New York City he made it his point of duty to visit the New York Stock Exchange. He was ten years old at the time. He bought 3 shares in Cities Service for himself and also bought 3 for his sister, Doris who was also a philanthropist.
By the age of 15 Warren was making $175 a month for delivering Washington Post News Papers. He also bought assets like farm land in his high school years. When Warren had finished college he had already accumulated a total of $9,800 in saving which is equivalent to $105,000 today.
The Investment career of Warren Buffett
Buffett worked at Buffett-Falk & Co. as and investment salesman from 1951-1954. He worked at Graham-Newman Corp from 1954-1956 as a securities analyst and would leave this job in 1956 to pursue 2 other jobs related to the field of investments and brokering until 1970. In the year 1951 Buffett realized that Graham was on the Board Of Directors of Geico insurance.
After taking the train to Washington D.C, on a Saturday he knocked the doors to the Geico Headquarters until a janitor allowed him to enter. While at Geico he met Lorimer Davidson who was the Vice President of Geico, at the time and they went on discussing the insurance business for hours. Davidson would eventually become the lifelong friend of Buffett. and influenced his life in many ways.
Warren wanted to work on Wall Street but both Graham and his father begged him not to. Graham would later refuse Buffett’s offer to work for him for free. Warren returned to Omaha and landed a job as a stockbroker which he did while taking a Dale Carnegie public speaking course. He was very confident that he could use what he had learnt during the public speaking course and he eventually decided to teach an “Investment Principles” night class at the University of Nebraska-Omaha. The average age of his students was more than twice that of his own. While he was doing all this he also purchased a Sinclair gas station as a side investment but his investment failed to produce any fruits.
Warren Buffett officially became a millionaire in 1962 due to the business partnerships he had made. In January of 1962 these partnerships were worth in excess of $7,178,500 and 1,025,000 belonged to Buffett. he merged all of his business partnerships into one. Warren invested in and eventually took control of the textile manufacturing firm Berkshire Hathaway. He bought the Berkshire shares from its owner, Seabury Stanton, who he would eventually fire.
In 1965 Buffett’s partnerships began aggressively purchasing Berkshire shares and Buffett would eventually take control of Berkshire at a board meeting where he also named a new president, Ken Chace. Ken would be the one in charge of running the day to day operations of the conglomerate. Buffett later claimed that the textile business was his worst trade and moved to the insurance sector. In 1985 the last mills that had been the core of the Berkshire Hathaway business were sold.
As Berkshire Hathaway begun to expand it began to purchase share in and buy a variety of companies in a variety of sectors. Buffett’s company acquired shares in Coca cola ( which is still one of its most profitable investments to this day). Buffett’s company also owns percentage shares or controlling shares in Geico, Fruit of the Loom, Buffalo Evening News, Burlington Northern Santa Fe Corp, Duracell, Darry Queen, Heinz and ABC Capital Cities to name a few. Warren continues to be a pioneer in the investment community.
Warren Buffet Portfolio
If you’ve ever wondered why Berkshire Hathaway CEO Warren Buffett’s name gets brought up so much on Wall Street, it’s because of his impressive investing track record. Buffett isn’t infallible, but he’s delivered an annual average return of 20% since the mid-1960s for his shareholders. In aggregate, we’re talking about a return of more than 2,800,000%!
What’s even more amazing is that Buffett hasn’t done anything the average investors couldn’t do to net these huge gains. He focuses on a few sectors and industries that interest him, buys companies with clear-cut competitive advantages, and most importantly hangs onto those stakes for a very long time.
Another source of Buffett’s success is concentration. The Oracle of Omaha doesn’t believe diversification is necessary if you know what you’re doing. This is readily apparent in Berkshire Hathaway’s $302.6 billion investment portfolio. As of this past weekend, 85% of Berkshire’s invested assets ($257.3 billion) were tied up in only 10 stocks.
- Apple: $115.6 billion
Tech kingpin Apple makes up about 38% of Warren Buffett’s portfolio by itself and has been dubbed “Berkshire’s third business” by the Oracle of Omaha. Apple offers some of the strongest branding in the world, is the clear leader in smartphones in the U.S., and has been pivoting to higher-margin services under the leadership of CEO Tim Cook. Though iPhone sales remain Apple’s top product, services becoming a larger percentage of total sales will help remove the revenue lumpiness associated with new product launches.
- Bank of America: $43.2 billion
Bank stocks have long been Buffett’s favorite place to put Berkshire’s money work. Bank of America is Berkshire’s unquestioned largest bank holding, with more than 14% of invested assets. Bank of America has done an excellent job of controlling its noninterest expenses by consolidating branches and emphasizing digital banking. It’s also in line to benefit more than any other money-center bank from an eventual rise in interest rates.
- American Express: $24.9 billion
Payment processor and lender American Express is Buffett’s third-largest and third-longest-held stock. After 28 years of holding AmEx, Berkshire Hathaway’s position has grown to almost $25 billion in value. This is a cyclical company that benefits from long periods of economic expansion, as well as its ability to attract affluent clientele. These well-to-do clients are less likely to change their spending habits when economic hiccups arise, which often means less worry about credit delinquencies for AmEx.
- Coca-Cola: $22.5 billion
Speaking of long-tenured holdings, beverage behemoth Coca-Cola is the longest-held stock in Buffett’s portfolio (33 years). Coca-Cola operates in all but two countries worldwide (North Korea and Cuba) and has more than 20 brands generating at least $1 billion in annual sales. Thanks to its top-notch marketing team, it’s also the best-known consumer goods brand. Coke has holiday tie-ins, has allied itself with well-known brand ambassadors, and is embracing digital advertising and social media as a way to get its message to a younger generation.
- Kraft Heinz: $14.1 billion
There’s little question that Kraft Heinz is the oddball holding in Buffett’s top 10. That’s because Buffett admits to Heinz overpaying for Kraft Foods, and the combined company largely underperforming in recent years. This includes a greater than $15 billion goodwill writedown in 2019. While the pandemic has helped boost demand for packaged foods, Kraft Heinz’s balance sheet is still bogged down by high debt levels and goodwill. In short, Berkshire Hathaway is sort of stuck with its 325.6 million shares.
- Verizon Communications: $9.1 billion
Telecommunications giant Verizon is a fairly recent addition to Berkshire Hathaway’s portfolio, although it’s been bought hand over fist in the previous two quarters by Buffett and his team. The lure of Verizon is likely its 4.4% dividend yield, which is arguably one of the safest high-yield payouts on the planet. What’s more, Verizon should benefit immensely from the rollout of 5G infrastructure. It’s been a decade since the last major upgrade to download speeds, which suggests that a multiyear tech upgrade cycle will lead to higher-margin data consumption.
- U.S. Bancorp: $8.7 billion
Next to BofA, U.S. Bancorp is Buffett’s favorite bank stock. It’s a company that regularly trades at a premium to its book value — and for good reason. U.S. Bancorp has seen its users embrace technology, with the percentage of consumer loans completed digitally skyrocketing over the past two years. Being able to consolidate its physical branches, while also avoiding riskier derivative investments that have gotten U.S. money-center banks in trouble, has helped U.S. Bancorp to some of the highest return on assets among big banks.
- Moody’s: $8.5 billion
Credit agency and analytics company Moody’s is yet another top-10 holding that’s been held for longer than two decades. With an initial cost basis of just over $10, Berkshire Hathaway is sitting on an unrealized gain of better than 3,300% and this isn’t accounting for dividends. Historically low lending rates have kept Moody’s credit rating segment busy, while volatile trading markets are boosting demand for Moody’s analytics. It’s hard to envision Buffett ever selling this stake.
- BYD: $6.2 billion
Back in 2008, Buffett acquired 225 million shares of China-based electric-vehicle (EV) manufacturer BYD for $1.03 a share (it closed this past week at $27.65 a share). In March, BYD sold 16,301 EVs, which is more than higher-profile competitors NIO and XPeng delivered on a combined basis in the same month. With the Society of Automotive Engineers of China forecasting that half of all new vehicles sales in 2035 will be powered by alternative energy, BYD is in pole position to disrupt the largest auto market in the
- DaVita: $4.4 billion
Rounding out the top 10 is kidney dialysis services company DaVita ( Buffett’s fascination with the company is likely a numbers play. Over time, an aging U.S. population is going to become more reliant on kidney dialysis services for maintenance purposes. As the clear leader in providing these services, DaVita should see a steady uptick in demand and reimbursement for its services. This patient long-term thesis perfectly embodies the Buffett investing ethos.
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